<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRANSKARYOTIC THERAPIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2836 04-3027191
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 349-0200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
RICHARD F SELDEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRANSKARYOTIC THERAPIES, INC.
195 ALBANY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 349-0200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
PETER WIRTH, ESQ. BRUCE K. DALLAS, ESQ.
PALMER & DODGE LLP DAVIS POLK & WARDWELL
One Beacon Street 450 Lexington Avenue
Boston, Massachusetts 02108 New York, New York 10017
(617) 573-0100 (212) 450-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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- ----------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per
share........................... 2,875,000 $15.00 $43,125,000.00 $14,870.69
- ----------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 375,000 shares which the Underwriters may purchase to cover
overallotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Issued August 27, 1996
2,500,000 Shares
Transkaryotic Therapies, Inc.
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK
OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC
OFFERING PRICE PER SHARE WILL BE BETWEEN $13 AND $15. SEE
"UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS CONSIDERED IN
DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
HOECHST MARION ROUSSEL, INC. WILL PURCHASE AN ADDITIONAL $5 MILLION OF SHARES OF
COMMON STOCK AT THE PRICE TO
PUBLIC SET FORTH BELOW PURSUANT TO ITS COLLABORATION WITH THE COMPANY. SEE
"CERTAIN TRANSACTIONS."
APPLICATION HAS BEEN MADE FOR QUOTATION OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "TKTX."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 8 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A
SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total(3)...................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting expenses payable by the Company estimated at $680,000.
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
375,000 additional shares of Common Stock at the price to public less
underwriting discounts and commissions for the purpose of covering
overallotments, if any. If the Underwriters exercise such option in
full, the total price to public, underwriting discounts and commissions
and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriters."
------------------------
The shares are offered, subject to prior sale, when, as and if received and
accepted by the Underwriters named herein and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the shares will be made on or about , 1996
at the offices of Morgan Stanley & Co. Incorporated, New York, N.Y. against
payment therefor in immediately available funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
UBS SECURITIES
PACIFIC GROWTH EQUITIES, INC.
, 1996
<PAGE> 3
[The figure shows a flowchart diagram of TKT's Gene Activation technology. A
human cell containing an inactive erythropoietin gene is modified by the
introduction of new regulatory DNA sequences. This process results in the
activation of the erythropoietin gene and production of Gene Activated
erythropoietin ("GA-EPO").]
2
<PAGE> 4
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN
CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
The Company intends to furnish to its stockholders annual reports
containing audited consolidated financial statements certified by independent
auditors and quarterly reports containing unaudited consolidated financial data
for the first three quarters of each fiscal year following the end of each such
quarter.
------------------------
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.................................................................... 4
Risk Factors.......................................................................... 8
Use of Proceeds....................................................................... 15
Dividend Policy....................................................................... 15
Dilution.............................................................................. 16
Capitalization........................................................................ 17
Selected Financial Data............................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 19
Business.............................................................................. 23
Management............................................................................ 41
Certain Transactions.................................................................. 48
Principal Stockholders................................................................ 50
Description of Capital Stock.......................................................... 52
Shares Eligible for Future Sale....................................................... 55
Underwriters.......................................................................... 57
Legal Matters......................................................................... 59
Experts............................................................................... 59
Additional Information................................................................ 59
Index to Financial Statements......................................................... F-1
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors," and financial statements appearing
elsewhere in this Prospectus. All references herein, unless the context
otherwise requires, to the "Company" or "TKT" refer to Transkaryotic Therapies,
Inc. Except as otherwise noted herein, information in this Prospectus (i)
assumes no exercise of the Underwriters overallotment option, and (ii) reflects
the automatic conversion upon the closing of this offering of all outstanding
shares of Class A Redeemable Convertible, Class A, Class B, Class C, Class D,
Class E, Class F and Class G Convertible Preferred Stock of the Company into an
aggregate of 8,613,792 shares of Common Stock and (iii) gives effect to a
1.285714 for 1 stock split of Common Stock effected in the form of a stock
dividend. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements.
THE COMPANY
Transkaryotic Therapies, Inc. ("TKT" or the "Company") has developed two
proprietary technology platforms, Gene Activation and gene therapy. The
Company's Gene Activation technology is a proprietary approach to the large
scale production of therapeutic proteins which does not require the cloning of
genes and their subsequent insertion into non-human cell lines. Consequently,
the Company believes its Gene Activation technology avoids using patented
approaches to protein production associated with such conventional genetic
engineering which have served as effective barriers to competition in the $11
billion therapeutic protein market. As a result, the Company believes it will be
able to develop and successfully commercialize a broad range of gene activated
versions of proteins which have proven medical utility, received marketing
approval from regulatory authorities and generated significant revenues in major
markets. The Company's most advanced Gene Activation development program is for
the production of Gene Activated erythropoietin ("GA-EPO") with clinical trials
expected to commence in the first half of 1997. The Company's gene therapy
technology ("Transkaryotic Therapy") is a non-viral, ex vivo system based on the
genetic modification of patients' cells to produce and deliver therapeutic
proteins for extended periods of time. The Company's Transkaryotic Therapy
system has produced target proteins at therapeutic levels for the lifetime of
animals without any side effects and preliminary clinical testing suggests that
the system appears to be well-tolerated.
TKT believes that its proprietary Gene Activation technology represents a
new wave in the evolution of protein production technology. Gene Activation is
based on the observation that essentially all human cells contain genes encoding
commercially valuable proteins, but that these genes are generally "turned off"
in most cells. As opposed to conventional protein production technology based on
the cloning of human genes and their subsequent insertion into bacteria, yeast
or mammalian cells, Gene Activation bypasses the genetic "off switch" in the
human cell with DNA sequences including an "on switch" that allows the human
gene to express the desired protein in its natural setting. These Gene Activated
human cells are then grown in large numbers and the protein of interest is
harvested, purified and readied for administration. The Company has successfully
applied its Gene Activation technology to the production of GA-EPO and has
demonstrated that the properties of cells generated by Gene Activation are
predictable and sufficient for scale-up to commercial production levels and that
the protein produced by these cells has the expected structural and functional
characteristics based on naturally produced erythropoietin.
In order to rapidly develop and exploit its Gene Activation technology, TKT
has entered into two strategic alliances with Hoechst Marion Roussel, Inc.
("HMRI"), the first in May 1994 and the second in March 1995. HMRI and its
pharmaceutical affiliates are the third largest pharmaceutical group in the
world based on revenues, with significant distribution capabilities in all major
markets. The alliances are focused on the development of two products, GA-EPO, a
protein hormone which is expected to compete in the $2.9 billion (1995)
worldwide market for erythropoietin and a second, undisclosed protein. TKT has
the potential to receive up to $125 million in license fees, equity investments,
milestone payments and research funding in connection with the development of
these two products, of which $42 million has been received from HMRI to date.
Under the terms of the agreements, HMRI is responsible for all worldwide
development, manufacturing and marketing. TKT has the potential to receive a
royalty based on net sales of these two products
4
<PAGE> 6
worldwide. The Company believes that working with Gene Activated proteins having
conventional counterparts that are well known to regulatory authorities may
allow their clinical development to be accomplished in a focused and timely
manner.
The Company's gene therapy technology is focused on the commercialization
of non-viral gene therapy products for the long-term treatment of a broad range
of human diseases. In Transkaryotic Therapy, a small sample of the patient's
cells are removed in an out-patient procedure and sent to the Company's pilot
manufacturing facility where the cells are genetically engineered to produce the
desired therapeutic protein. In Transkaryotic Therapy, DNA is inserted into
cells using physical or chemical techniques rather than viruses or other
infectious agents. After the cells and the protein have been tested by TKT to
ensure both safety and functionality, an appropriate number of the
genetically-engineered cells are returned to the physician and injected back
into the patient. TKT believes that the entire process will require
approximately six weeks to complete, after which the patient should be capable
of producing his or her own supply of the therapeutic protein for an extended
period of time. TKT believes that its Transkaryotic Therapy gene therapy system
is broadly enabling and well-suited to the treatment of chronic protein
deficiency states such as hemophilia, diabetes, and hypercholesterolemia. The
potential benefits of Transkaryotic Therapy include improved therapeutic
outcomes, the elimination of frequent and painful injections and attendant
patient compliance problems, a reduction in side effects associated with over
and underdosing of proteins, and significant reductions in the total cost of
therapy. Preliminary data from an initial Phase I safety study of genetically
modified cells indicate that the therapy appears to be well-tolerated.
The Company has successfully applied its gene therapy approach in a variety
of model systems, using a number of different cell types to express a variety of
therapeutically useful proteins. Cells engineered by the Company retain their
normal properties, are stably transfected at efficiencies adequate for
commercial application, express the proteins of interest at therapeutic levels
and have delivered the therapeutic protein of interest for the lifetime of
experimental animals. The Company is conducting two preclinical programs of its
Transkaryotic Therapy products, one for the treatment of Fabry disease, a
lysosomal storage disorder, based on the production and delivery of the enzyme
- -galactosidase, and a second for the treatment of Hemophilia A based on the
production and delivery of coagulation Factor VIII. The Company anticipates that
it will initiate a Phase I clinical trial to study protein replacement in Fabry
disease in 1996 and gene therapy clinical trials for both Fabry disease and
Hemophilia A in 1997.
The Company's initial business strategy is to apply its Gene Activation
technology to the development and commercialization of several currently
marketed proteins. The Company's two strategic alliances with HMRI are the
primary focus of its Gene Activation activities, and TKT is actively pursuing
other Gene Activation product candidates for commercialization either with
pharmaceutical partners or independently. In parallel, the Company plans to
continue research and development of its Transkaryotic Therapy system to develop
a novel class of gene therapy treatments for a variety of protein deficiency
diseases. Taken together, the Company believes its Gene Activation and gene
therapy platforms are complementary opportunities that offer the potential for
the development of powerful product pipelines that may have a significant impact
in addressing society's healthcare needs.
TKT was incorporated in Delaware in 1988. The Company's principal executive
offices are located at 195 Albany Street, Cambridge, Massachusetts 02139, and
its telephone number is (617) 349-0200.
5
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................................ 2,500,000 shares(1)
Common Stock to be purchased by HMRI................ 357,143 shares(2)
Common Stock to be outstanding after the offering... 16,668,560 shares(3)
Use of Proceeds..................................... Research, preclinical and clinical
product development, and general
corporate purposes
Proposed Nasdaq Symbol.............................. TKTX
</TABLE>
- ---------------
(1) Excludes 375,000 shares subject to the Underwriters overallotment option.
See "Underwriters."
(2) Under its existing collaboration with the Company, at the closing of this
offering, HMRI will purchase an additional $5 million of Common Stock at the
initial public offering price (the "HMRI New Investment"). The number of
shares set forth above assumes an initial public offering price of $14.00
per share (the mid-point of the filing range). The actual number of shares
will be determined by dividing $5 million by the initial public offering
price.
(3) Excludes (i) 817,093 shares issuable upon exercise of warrants outstanding
as of August 15, 1996 (at a weighted average exercise price of $7.53 per
share); (ii) 2,250,000 shares of Common Stock reserved for issuance under
the Company's 1993 Long-Term Incentive Plan, of which options to purchase
875,243 shares were outstanding as of August 15, 1996; and (iii) 231,429
shares of Common Stock reserved for issuance under the Company's 1993
Non-Employee Directors' Stock Option Plan, none of which have been granted
as of August 15, 1996. See "Description of Capital Stock -- Warrants" and
"Management -- 1993 Long-Term Incentive Plan" and Note 11 of Notes to
Financial Statements. The number of shares issuable upon conversion of the
outstanding Class A Redeemable Convertible Preferred Stock, which will be
determined based on the initial public offering price, is based on an
assumed initial public offering price of $14.00 per share. See "Description
of Capital Stock -- Preferred Stock" and "Capitalization."
6
<PAGE> 8
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
SIX
MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------- -------------------
1993 1994 1995 1995 1996
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
License and contract fee revenues..... $ -- $10,000 $15,400 $11,700 $ 1,975
Costs and expenses:
Research and development........... 6,253 9,126 10,067 5,205 6,839
General and administrative......... 2,998 4,690 4,290 1,737 1,911
------- ------- ------- ------- -------
Total costs and expenses.............. 9,251 13,816 14,357 6,942 8,750
Interest income, net.................. 168 394 1,116 432 788
Provision for income taxes............ -- -- 85 85 --
------- ------- ------- ------- -------
Net income (loss)..................... $ (9,083) $(3,422) $ 2,074 $ 5,105 $(5,987)
======= ======= ======= ======= =======
Pro forma net income (loss)
per share(1)....................... $ .14 $ .35 $ (.42)
======= ======= =======
Shares used in computing pro forma net
income (loss) per share(1)......... 14,633 14,640 14,255
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
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BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities..................................... $ 28,774 $ 57,244 $ 89,114
Working capital................................... 27,958 56,428 88,298
Total assets...................................... 33,626 62,096 93,966
Class A redeemable preferred stock................ 4,545 -- --
Deficit accumulated during the development
stage.......................................... (31,131) (31,131) (31,131)
Total stockholders' equity........................ 27,887 60,902 92,772
</TABLE>
- ---------------
(1) Computed on the basis described in Note 2 of Notes to Financial Statements.
(2) Gives effect to (i) the sale of 909,091 shares of Class G Convertible
Preferred Stock at a price of $22.00 per share to BB Biotech AG and an
additional 224,498 shares to certain stockholders of the Company pursuant to
pre-emptive rights subsequent to June 30, 1996, all of which shares will
convert into an aggregate of 1,457,460 shares of Common Stock upon the
closing of this offering, (ii) the conversion of all outstanding shares of
Preferred Stock (including Class G) into an aggregate of 8,613,792 shares of
Common Stock upon the closing of this offering and (iii) 357,143 shares of
Common Stock to be sold in the HMRI New Investment.
(3) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
hereby after deduction of underwriting discounts and commissions and
estimated offering expenses payable by the Company.
7
<PAGE> 9
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should carefully
consider the following risk factors in addition to the other information set
forth in this Prospectus.
EARLY STAGE OF DEVELOPMENT; COMMERCIAL UNCERTAINTY
TKT is at an early stage of development. All of the Company's potential
Gene Activation products are in research or preclinical development. No revenues
have been generated from product sales and no such revenues are expected for at
least several years. The Gene Activation products currently under development by
the Company will require significant additional development efforts, including
extensive preclinical and clinical testing and regulatory approval, prior to
commercial use. There can be no assurance that any Gene Activation products will
ultimately be developed by the Company and its corporate partners, or that, even
if developed, these products will receive regulatory approval. If approved,
these products will compete with established products of proven safety and
efficacy. There can be no assurance that the Company's Gene Activation products,
if any, will be accepted by medical centers, hospitals, physicians or patients
in lieu of existing treatments. Accordingly, there can be no assurance that
these products can be successfully manufactured and marketed at prices that
would permit the Company and its corporate partners to operate profitably. The
Company's potential gene therapy products may be even further from commercial
introduction. Due to the early stage of development of the Company's potential
gene therapy products and the extensive research, development, preclinical and
clinical testing, and regulatory review process required before marketing
approval can be obtained, the Company cannot predict with certainty when it will
be able to commercialize any of its potential gene therapy products, if at all.
TECHNOLOGICAL UNCERTAINTY
Gene Activation and gene therapy are new and rapidly evolving technologies.
Existing preclinical data on the safety and efficacy of proteins produced by the
Company's Gene Activation technology are limited, and the Company's Gene
Activation products have not yet been tested in humans. The Company's potential
gene therapy products are even further from commercial introduction. While many
approaches to gene therapy are being pursued by pharmaceutical and biotechnology
companies and academic institutions, there are currently no marketed gene
therapy products, and existing clinical data on the safety and efficacy of
potential gene therapy products are limited. The potential gene therapy products
currently under development by the Company will require substantial additional
development efforts, including extensive preclinical and clinical testing and
the receipt of regulatory approvals prior to commercial introduction. For any
given disease, gene therapy generally, as well as the Company's specific
approach to gene therapy, may not be efficacious or may prove to have
undesirable and unintended side effects, toxicities or other characteristics
that may prevent or limit commercial use. There can be no assurance that the
Company's products will obtain approval from the U.S. Food and Drug
Administration (the "FDA") or equivalent foreign regulatory authorities for any
indication.
UNCERTAINTY ASSOCIATED WITH CLINICAL TRIALS
Subject to compliance with FDA regulations, TKT and its corporate partners
plan to undertake extensive clinical testing in humans to evaluate the safety
and efficacy of its Gene Activation and gene therapy products in development.
None of the Company's Gene Activation products has entered clinical trials. The
rate of completion of clinical trials is dependent upon, among other factors,
the enrollment of patients. Patient accrual is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites, the eligibility criteria for the study and the existence of
competitive clinical trials. Delays in planned patient enrollment in the
anticipated Gene Activation clinical trials may result in program delays, which
could have a material adverse effect on TKT. Even if clinical trials are
completed, there can be no assurance that the Company or its partners will be
able to submit a Product License Application ("PLA") to the FDA or comparable
regulatory agencies in foreign countries on the schedule anticipated or that
such applications will be reviewed and approved by such regulatory agencies in a
timely manner. Of the gene therapy products under development at the Company,
only one is in Phase I human clinical trials. The Company currently intends to
seek a collaborative partner prior to proceeding with further clinical
development of this product. There can be
8
<PAGE> 10
no assurance that the Company will be able to obtain authorization from the FDA
for additional human clinical testing of any of its gene therapy products
currently in research or preclinical development. There can be no assurance that
any authorized clinical testing will be completed successfully within any
specified time period, if at all, with respect to any potential product. There
also can be no assurance that such testing will show any potential product to be
safe or efficacious or that any such product will be approved by the FDA for any
indication. Furthermore, the Company or the FDA may suspend clinical trials at
any time if the subjects or patients participating in such trials are being
exposed to unacceptable health risks. There can be no assurance that the Company
will not encounter problems in clinical trials which will cause the Company or
the FDA to delay or suspend clinical trials.
PATENTS AND PROPRIETARY RIGHTS
The Company's success may depend in large part on its ability to obtain
patent protection for its Gene Activation and gene therapy processes and
potential products in the U.S. and other countries and to obtain the right to
use in its potential products genes or other technology that have been or may be
patented by others. Currently, the Company has 19 pending patent applications in
the U.S. to protect its proprietary methods and processes; it has also filed
foreign patent applications corresponding to certain of these U.S. patent
applications. In addition, the Company has entered into several agreements to
license proprietary rights from other parties. However, the patent situation in
the field of biotechnology generally is highly uncertain and involves complex
legal, scientific and factual questions. To date there has emerged no consistent
policy regarding the breadth of claims allowed in biotechnology patents.
Accordingly, there can be no assurance that patent applications relating to the
technology used by the Company will result in patents being issued or that, if
issued, the patents will not be challenged, invalidated or circumvented or will
afford protection against competitors with similar technology.
Many biotechnology and pharmaceutical companies, universities and research
institutions, including competitors with substantial resources, have filed
patent applications and have been issued patents potentially relating to the
Company's Gene Activation and gene therapy technologies. In addition, certain
competitors have filed patent applications and have been issued patents relating
to certain methods of producing therapeutic proteins that the Company
anticipates producing using its Gene Activation technology. The Company's Gene
Activation and gene therapy technologies and potential products may be found to
conflict or be alleged to conflict with patents which have been or may be
granted to competitors, universities or others. There are a substantial number
of biotechnology patent applications under review at the U.S. Patent and
Trademark Office (the "PTO"). Because patent applications in the U.S. are
maintained in secrecy until patents issue, the Company cannot be certain that
others have not filed or maintained patent applications for technology used by
the Company or covered by the Company's pending patent applications or that the
Company was the first to file patent applications for such technology.
Competitors may have filed applications for, or may have received patents and
may obtain additional patents and proprietary rights relating to, compositions
of matter or processes that block or compete with those of the Company.
Furthermore, as is the case with any pending patent application, competitors may
attempt to amend existing applications to claim rights to compositions of matter
or processes that may block the Company. No assurance can be given that the
Company's products or processes may not infringe patents that may issue under
pending patent applications. With respect to gene therapy technology, the
Company is currently involved in one interference proceeding declared by the PTO
in order to determine the patentability of the technology and the priority of
invention and, thus, the right to a patent for such technology in the U.S. See
"Business -- Patents, Proprietary Rights and Licenses." Should any of its
competitors have filed additional patent applications in the U.S. that claim
technology also invented by the Company, the Company may have to participate in
additional interference proceedings declared by the PTO, all of which could
result in substantial cost to the Company to determine its rights or potential
loss of rights.
The biotechnology industry has been characterized by significant litigation
and interference proceedings regarding patents, patent applications and other
intellectual property rights, and many companies in the biotechnology industry
have attempted to employ intellectual property litigation to gain or preserve a
competitive advantage. For example, there has been substantial intellectual
property litigation between suppliers of erythropoietin throughout the world.
There can be no assurance that the Company will not in the
9
<PAGE> 11
future become subject to patent infringement claims, interferences and other
litigation. The defense and prosecution of intellectual property suits and
related legal and administrative proceedings can be both costly and time
consuming. Litigation and interference proceedings could result in substantial
expense to the Company or its corporate partner and significant diversion of
effort by the Company's technical and management personnel. An adverse
determination in litigation to which the Company may become a party could
subject the Company to significant liabilities to third parties or require the
Company to seek licenses from third parties. Although a number of patent and
intellectual property disputes in the biotechnology area have been settled
through licensing or similar arrangements, costs associated with any such
arrangement may be substantial and could include ongoing royalties. Furthermore,
there can be no assurance that necessary licenses would be available to the
Company or its corporate partner or would be available on acceptable terms.
Adverse determinations in a judicial or administrative proceeding or failure to
obtain necessary licenses could prevent the Company or its corporate partner
from manufacturing and selling some or all of its products, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Although the Company has licensed proprietary rights to certain genes (for
example, for Factor VIII and Factor IX) to be used in its gene therapy products,
the Company presently has no proprietary rights to certain other genes that it
may later seek to use in its products and which may be the subject of issued
third party patents or pending patent applications. As a result, the Company may
be required to obtain licenses under third party patents in order to market
certain of its products. If such licenses are not made available to the Company
on acceptable terms, the Company will not be able to market such products. In
addition, under the Company's license and sublicense agreements, the licensors
and sublicensors may terminate these agreements upon the Company's failure to
meet certain specified milestones. Any such termination of an existing license
or sublicense by any such licensor or sublicensor, or any inability by the
Company to obtain any required license, could have a material adverse effect on
the Company's business.
The Company also relies upon unpatented proprietary technology, processes
and know-how, which the Company protects in part by confidentiality agreements
with its employees, consultants and certain contractors. There can be no
assurance that these agreements will not be breached, that the Company will have
adequate remedies for any breach, or that the Company's trade secrets will not
otherwise become known or be independently developed by competitors.
UNCERTAINTY OF GOVERNMENT REGULATORY REQUIREMENTS; LENGTHY APPROVAL PROCESS
The Company's research and development, preclinical testing, clinical
trials, facilities and manufacturing and marketing of its products will be
subject to extensive regulation by numerous governmental authorities in the U.S.
and other countries. The regulatory process for new therapeutic products, which
includes preclinical and clinical testing of each product to establish its
safety and efficacy, can take many years and require the expenditure of
substantial resources. Data obtained from preclinical and clinical activities
are susceptible to varying interpretations which could delay, limit or prevent
FDA regulatory approval. In addition, delays or rejections may be encountered
based upon changes in FDA policy during the period of product development and
FDA regulatory review of each submitted License Application. Similar delays may
also be encountered and substantial resources expended in foreign countries.
There can be no assurance that even after such time and expenditures, regulatory
approval will be obtained for any Gene Activation or gene therapy products
developed by the Company. Moreover, if regulatory approval of a product is
granted, such approval may entail limitations on the indicated uses for which it
may be marketed and contain requirements for post-marketing follow-up studies.
Because gene therapy is a relatively new technology and products for gene
therapy have not been extensively tested in humans, the regulatory requirements
governing gene therapy products may be subject to substantial additional review
by various regulatory authorities in the U.S. and abroad. These requirements may
result in extensive delays in initiating clinical trials of gene therapy
products and in the regulatory approval process in general.
Any of the foregoing effects of government regulation, as well as of
comparable foreign regulation, could delay the marketing of the Company's Gene
Activation and gene therapy products for a considerable or indefinite period of
time, materially increase the cost involved in developing, manufacturing and
marketing the
10
<PAGE> 12
Company's products, diminish or eliminate any competitive advantage the Company
may enjoy, or otherwise adversely affect the Company's ability to conduct its
business. Compliance with applicable government regulations governing each of
the Company's potential Gene Activation and gene therapy products will require a
significant commitment of time, money and effort by the Company and its
corporate partners with no assurances that any approval will ultimately be
granted on a timely basis, if at all.
HISTORY OF OPERATING LOSSES; FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL
FUNDING
The Company has experienced significant operating losses since its
inception in 1988. As of June 30, 1996, the Company had an accumulated deficit
of $31,131,049. The Company expects that it will continue to incur substantial
losses for at least several years and expects cumulative losses to increase as
the Company's research and development efforts expand. The Company expects that
such losses will fluctuate from quarter to quarter and that such fluctuations
may be substantial. There can be no assurance that the Company will ever achieve
sales or profitability.
The Company will require substantial funds to conduct research and
development (including preclinical and clinical testing) of its potential
products and to manufacture and market any products that are approved for
commercial sale. The Company's future capital requirements will depend on many
factors, including continued progress in its research and development programs,
the magnitude of these programs, the scope and results of clinical trials, the
timing and receipt of milestone payments, the time and costs involved in
obtaining regulatory approvals, the costs involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims and other patent-related
costs, competing technological and market developments, the ability of the
Company to establish and maintain collaborative arrangements, and the cost of
manufacturing and commercialization activities. To date, the Company has not
received any revenues from product sales. The Company intends to seek additional
funding through collaborative arrangements or through public or private
financings. There can be no assurance that additional financing will be
available on acceptable terms, if at all.
COMPETITION
The field of biotechnology is new and evolving, and it is expected to
continue to undergo significant and rapid technological change. Technological
developments could result in the Company's potential products becoming obsolete.
The Company's products and technologies will be subject to substantial
competition, both from other companies in the field of Gene Activation and gene
therapy and from companies which have other forms of treatment of the diseases
targeted by the Company.
The Company is initially focusing its Gene Activation efforts on
established products with proven safety and efficacy. The Company anticipates
that companies selling such products will compete vigorously. There can be no
assurance that the Company's Gene Activation products will be accepted by
medical centers, hospitals, physicians or patients in lieu of existing products,
or as to the effect of such competition on the market prices of the Company's
products.
Although the Company has a major corporate partner, many of the Company's
existing or potential competitors have substantially greater product development
capabilities and financial, scientific, marketing or human resources than the
Company. Similarly, other competitors of the Company may enter into
collaborative relationships with other companies having such greater resources.
In addition, certain of these competitors have significantly greater experience
than the Company in undertaking human clinical trials of new therapeutic
products. Accordingly, other companies may succeed in developing products
earlier than the Company, obtaining FDA approvals for such products more rapidly
than the Company, or developing products that are more effective or less costly
than those proposed to be developed by the Company. Furthermore, if the Company
is permitted to commence commercial sales of products, it may also be competing
with respect to commercial manufacturing and marketing capabilities, areas in
which it has no experience.
NO MANUFACTURING, DISTRIBUTION OR MARKETING CAPABILITY
Although the Company has a pilot gene therapy manufacturing facility and
believes it will be able to manufacture its potential products on a large scale,
the feasibility of large-scale manufacturing of such
11
<PAGE> 13
products has not been demonstrated. If the Company is unable to develop or
contract for manufacturing capabilities on acceptable terms, the Company's
ability to commercialize its potential products would be materially adversely
affected. If the Company is delayed in establishing suitable manufacturing
capabilities, the Company's ability to conduct human clinical testing may be
adversely affected, resulting in the delay of submission of potential products
for regulatory approval and initiation of new development programs, which in
turn could impair materially the Company's competitive position and the
possibility of the Company achieving profitability. In addition, although the
Company believes that its potential products will be cost-effective, there can
be no assurance that the Company will be able to manufacture and distribute such
products at a reasonable cost, that the Company will be able to price such
products competitively or, if priced competitively, that the Company will be
able to achieve margins sufficient to allow it to achieve profitability.
The Company plans to provide its gene therapy products through central
manufacturing facilities. The establishment of these facilities will require
substantial additional funds and personnel and will require compliance with
extensive regulations applicable to such facilities. There can be no assurance
that such funds and personnel will be available on acceptable terms, if at all,
or that the Company will be able to comply with such regulations at acceptable
cost, if at all. In addition, in managing this expansion the Company may
encounter unforeseen regulatory, logistical or management problems or incur
unexpected operating costs. Failure or delays in establishing these facilities,
or the incurrence of unexpected operating costs, could adversely affect the
ability of the Company to manufacture and market its gene therapy products.
Furthermore, the Company has no experience in sales, marketing or distribution.
In order to market any of its gene therapy products, the Company must develop a
marketing and sales capability, either on its own or in conjunction with others.
There can be no assurance that the Company will be able to enter into any
arrangements for the marketing of its products, that such arrangements will be
successful, or that the Company will be able to obtain additional capital and
expertise to conduct such activities independently.
The Company has no manufacturing, sales, marketing or distribution
capabilities for its Gene Activation products. The Company's collaborative
partner, HMRI, is responsible for the manufacture, sales, marketing and
distribution of GA-EPO and the undisclosed second protein. With respect to
future Gene Activation products, the Company may seek collaborative partners or
may manufacture and commercialize the products on its own. There can be no
assurance that the Company will be successful in establishing such future
collaborative relationships or that the Company will be able to conduct such
activities independently. See "-- Dependence on Collaborative Partners."
DEPENDENCE ON KEY PERSONNEL
The Company's success is highly dependent on the retention of principal
members of its scientific and management staff. Furthermore, the Company's
future growth will require the hiring of significant numbers of qualified
scientific and management personnel. Accordingly, recruiting and retaining such
personnel in the future will be critical to the Company's success. There is
intense competition from other companies and research and academic institutions
for qualified personnel in the areas of the Company's activities, and there can
be no assurance that the Company will be able to continue to attract and retain
on acceptable terms the qualified personnel necessary for the development of its
business.
DEPENDENCE ON COLLABORATIVE PARTNERS
The Company has entered into arrangements with HMRI on two of its Gene
Activation development programs and with another corporate partner on one of its
gene therapy development programs. HMRI is responsible for the worldwide
development, manufacturing and marketing of GA-EPO and the undisclosed second
protein. The Company's strategy for the research, development and
commercialization of certain of its potential products includes the possibility
that it will enter into various additional arrangements with corporate partners,
licensors, licensees and others. There can be no assurance that any further
arrangements will be effected in the future. Although the Company believes
parties to any existing and future arrangements, if entered into, would have
economic and other motivations to perform their contractual responsibilities in
full, the amount and timing of resources which they would devote to these
activities would not be within the control
12
<PAGE> 14
of the Company. There can be no assurance that such parties would perform their
obligations as expected or that any revenue would be derived by the Company from
such arrangements.
PRODUCT LIABILITY AND INSURANCE
The Company's business will in the future expose it to potential product
liability risks which are inherent in the testing, manufacturing and marketing
of human therapeutic products. Although the Company has clinical trial liability
insurance for trials conducted in the U.S., the Company does not currently have
any product liability insurance, and there can be no assurance that it will be
able to obtain or maintain such insurance on acceptable terms, if at all, or
that any insurance obtained will provide adequate protection against potential
liabilities. An inability to obtain insurance at acceptable cost or otherwise
protect against potential product liability claims, in addition to exposing the
Company to significant liabilities, could prevent or inhibit the
commercialization of products developed by the Company.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various
means. For example, in certain foreign markets, pricing and profitability of
prescription pharmaceuticals is subject to government control. In particular,
individual pricing negotiations are often required in each country of the
European Community, even if approval to market the drug is obtained. In the U.S.
there have been, and the Company expects that there will continue to be, a
number of federal and state proposals to implement similar government control.
In addition, an increasing emphasis on managed care in the U.S. has and will
continue to increase the pressure on pharmaceutical pricing. While the Company
cannot predict whether any such legislative or regulatory proposals will be
adopted or the effect such proposals or managed care efforts may have on its
business, the announcement of such proposals or efforts could have a material
adverse effect on the Company's ability to raise capital, and the adoption of
such proposals or efforts could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, to the extent
that such proposals or efforts have a material adverse effect on other
pharmaceutical companies that are prospective corporate partners for the
Company, the Company's ability to establish corporate collaborations may be
adversely affected. In addition, in both domestic and foreign markets, sales of
the Company's products, if any, will be dependent in part on the availability of
reimbursement from third party payors, such as government and private insurance
plans. Third party payors are increasingly challenging the prices charged for
medical products and services. If the Company succeeds in commercializing
products, there can be no assurance that these products will be considered cost
effective, that reimbursement will be available, or if available, that the
payor's reimbursement policies will be adequate to permit the Company to realize
a reasonable return on its investment.
CONCENTRATION OF OWNERSHIP
Following this offering, the present officers, directors and holders of
more than 5% of the Company's stock will beneficially own approximately 60.8% of
the outstanding shares of the capital stock of the Company, assuming the
exercise of warrants outstanding as of the date of this Prospectus. Accordingly,
such persons will have the ability to exercise significant influence over the
management and policies of the Company and to control the election of the
Company's Board of Directors and most other stockholder actions.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of this offering, the 13,811,417 shares of Common Stock
outstanding as of August 15, 1996 (after giving effect to the conversion of all
shares of preferred stock into Common Stock upon the closing of this offering)
will be "restricted securities" as that term is defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), and under certain
circumstances may be sold without registration pursuant to Rule 144. In addition
to the 2,500,000 shares offered hereby, approximately 1,646,315 shares of
outstanding Common Stock will be eligible for sale in the public market pursuant
to Rule 144(k) under the Securities Act immediately after this offering
(excluding approximately 6,863,930 outstanding shares that
13
<PAGE> 15
would be eligible for sale in the public market immediately after the offering
were they not subject to the lock-up agreements described below). An additional
520,942 shares of outstanding Common Stock will become eligible for sale
pursuant to Rules 144 and 701 under the Securities Act beginning 90 days after
the effective date of this offering (excluding an additional 2,037,593
outstanding shares that would be eligible for sale in such time were they not
subject to the lock-up agreements described below). Holders of 8,901,523 shares
of Common Stock are expected to enter into lock-up agreements pursuant to which
they will agree not to publicly offer, sell or otherwise dispose of such shares
without the consent of the Representatives of the Underwriters for 180 days
after the effective date of this offering. The Company is unable to predict the
effect that sales made under Rule 144, or otherwise, may have on the then
prevailing market price of the Common Stock. As of August 15, 1996, the holders
of approximately 8,613,792 shares of Common Stock are entitled to certain
piggyback and demand registration rights with respect to such shares. In
addition, in connection with the sale of 357,143 shares of Common Stock in the
HMRI New Investment, the Company intends to grant to HMRI one demand
registration right with respect to such shares exercisable after the expiration
of the lock-up agreement. By exercising their registration rights, subject to
certain limitations, such holders could cause a large number of shares to be
registered and sold in the public market commencing 180 days after the date of
this Prospectus. Such sales may have an adverse effect on the market price for
the Common Stock and could impair the Company's ability to raise capital through
an offering of its equity securities. See "Description of Capital Stock,"
"Shares Eligible for Future Sale" and "Underwriters."
DILUTION; ABSENCE OF DIVIDENDS
Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution in net tangible book value per share. In
addition, investors purchasing shares of Common Stock in this offering will
incur additional dilution to the extent outstanding options and warrants are
exercised. See "Dilution," "Management -- 1993 Long-Term Incentive Plan" and
"Management -- 1993 Non-Employee Directors' Stock Option Plan" and "Description
of Capital Stock -- Warrants."
The Company has never paid dividends and does not intend to pay any
dividends in the foreseeable future. See "Dividend Policy."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and By-laws could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Company's Common Stock.
Certain of such provisions allow the Company to issue preferred stock with
rights senior to those of the Common Stock and impose various procedural and
other requirements which could make it more difficult for stockholders to effect
certain corporate actions. See "Description of Capital Stock -- Preferred Stock"
and "Description of Capital Stock -- Delaware Law and Certain Charter and By-Law
Provisions."
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop or,
if one does develop, that it will be maintained. The public offering price of
the Common Stock will be established by negotiations between the Company and the
Representatives of the Underwriters. See "Underwriters."
The market price of the shares of Common Stock, like that of the common
stock of many other early-stage biotechnology companies, may be highly volatile.
Factors such as announcements of technological innovations or new commercial
products by the Company or its competitors, disclosure of results of clinical
testing or regulatory proceedings, governmental regulation and approvals,
developments in patent or other proprietary rights, public concern as to the
safety of products developed by the Company and general market conditions may
have a significant effect on the market price of the Common Stock. In addition,
the stock market has experienced extreme price and volume fluctuations. This
volatility has significantly affected the market prices of securities of many
biotechnology and pharmaceutical companies for reasons frequently unrelated to
or disproportionate to the operating performance of the specific companies.
These broad market fluctuations may adversely affect the market price of the
Company's Common Stock.
14
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $31,870,000 ($36,752,500 if the Underwriters
exercise the overallotment option in full) at an assumed initial public offering
price of $14.00 per share (the mid-point of the filing range) and after
deduction of underwriting discounts and commissions and estimated offering
expenses payable by the Company.
The Company intends to use the net proceeds of this offering along with the
$5 million to be received from the HMRI New Investment for research, preclinical
and clinical product development and other general corporate purposes. The
amounts actually expended for each purpose may vary significantly based upon
numerous factors including the results of clinical trials, the timing of
regulatory approvals, technological advances, determinations concerning
commercial potential of particular products, the status of competitive products,
the progress of the Company's research and development programs, establishment
of collaborative arrangements with other companies and research institutions and
the availability of financing. Pending application of the net proceeds of this
offering as described above, the Company intends to invest such net proceeds in
investment grade, interest-bearing securities or in interest-bearing accounts.
Based upon its current operating plan, the Company believes that its
available cash, together with the proceeds of this offering and interest income,
will be adequate to satisfy its capital needs through 1999. The Company will
require substantial funds to conduct research and development and preclinical
and clinical testing of its potential products and to manufacture and market any
products that are approved for commercial sale. The Company intends to seek
additional funding through collaborative arrangements or through public or
private financings, but there can be no assurance that additional financing will
be available on acceptable terms or at all. See "Risk Factors -- History of
Operating Losses; Future Capital Needs; Uncertainty of Additional Funding."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock.
The Company currently intends to retain all of its earnings, if any, for use in
its business and therefore does not anticipate paying any cash dividends in the
foreseeable future.
15
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company, as of June 30, 1996,
was $60,545,535 or $4.27 per share. Pro forma "net tangible book value per
share" is equal to the Company's pro forma total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding, after
giving effect to (i) the sale of 1,133,589 shares of Class G Convertible
Preferred Stock subsequent to June 30, 1996, (ii) the conversion of all
outstanding shares of Preferred Stock (including Class G) into an aggregate of
8,613,792 shares of Common Stock upon the closing of this offering and (iii) the
purchase by HMRI of $5 million of Common Stock in the HMRI New Investment. After
giving effect to the sale of 2,500,000 shares of Common Stock offered hereby at
an assumed initial public offering price of $14.00 per share (the mid-point of
the filing range), and after deduction of underwriting discounts and commissions
and estimated offering expenses payable by the Company, the pro forma net
tangible book value of the Company as of June 30, 1996 would have been
$92,415,535 or $5.54 per share. This represents an immediate increase of $1.27
per share to existing stockholders and an immediate dilution of $8.46 per share
to new investors (the "New Investors"). The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $14.00
Pro forma net tangible book value per share as of June 30, 1996..... $4.27
Increase per share attributable to New Investors.................... 1.27
-----
Pro forma net tangible book value per share as of June 30, 1996 as
adjusted for the offering......................................... 5.54
------
Dilution per share to New Investors................................. $ 8.46
======
</TABLE>
Using the foregoing assumptions, the following table summarizes on a pro
forma basis at June 30, 1996 the difference between existing stockholders, HMRI
and New Investors with respect to the number of shares purchased from the
Company, the total consideration paid to the Company and the average
consideration paid per share at an assumed initial public offering price of
$14.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 13,811,417 82.9% $ 88,804,856 68.9% $ 6.43
New Investors.................... 2,500,000 15.0 35,000,000 27.2 14.00
HMRI New Investment(1)........... 357,143 2.1 5,000,002 3.9 14.00
---------- ------- ------------ -------
Total.................. 16,668,560 100.0% $128,804,858 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Reflects the sale to HMRI of 357,143 shares of Common Stock at an assumed
initial public offering price of $14.00 pursuant to the HMRI New
Investment.
The foregoing tables assume no exercise of the Underwriters' overallotment
option and no exercise of outstanding options or warrants to purchase Common
Stock. At August 15, 1996, there were outstanding options to purchase an
aggregate of 875,243 shares of Common Stock for nominal consideration and
outstanding warrants to purchase an aggregate of 817,093 shares of Common Stock
at exercise prices ranging from $6.22 to $7.78 per share. To the extent these
options or warrants are exercised, there will be further dilution to existing
stockholders and New Investors. At August 15, 1996, 2,250,000 shares of Common
Stock were reserved for issuance under the Company's 1993 Long-Term Incentive
Plan and 231,429 shares were reserved for issuance under the Company's 1993
Non-Employee Directors' Stock Option Plan. See "Management -- 1993 Long-Term
Incentive Plan" and "Management -- 1993 Non-Employee Directors' Stock Option
Plan" and Note 11 of Notes to Financial Statements.
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<PAGE> 18
CAPITALIZATION
The following table sets forth (i) the total capitalization of the Company
at June 30, 1996, (ii) pro forma capitalization as of such date to give effect
to the sale of 1,133,589 shares of Class G Convertible Preferred Stock at a
price per share of $22.00 which shares will convert into an aggregate of
1,457,460 shares of Common Stock upon the closing of this offering and give
effect to the sale of 357,143 shares of Common Stock in the HMRI New Investment
and (iii) as adjusted to reflect the sale by the Company of 2,500,000 shares of
Common Stock pursuant to this offering after deduction of underwriting discounts
and commissions and estimated expenses payable by the Company as described
herein under "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
------------ ------------ --------------
<S> <C> <C> <C>
Redeemable preferred stock:
Class A redeemable convertible preferred stock, $1.00 par value,
3,000 shares authorized; 3,000 shares issued and outstanding; none
outstanding pro forma and as adjusted............................. $ 4,545,273 $ -- $ --
Stockholders' equity:
Class A convertible preferred stock, $1.00 par value, 3,000 shares
authorized; 3,000 issued and outstanding; none outstanding pro
forma and as adjusted............................................. 3,000 -- --
Class B convertible preferred stock, $1.00 par value, 60,000 shares
authorized; 49,339 issued and outstanding; none outstanding pro
forma and as adjusted............................................. 49,339 -- --
Class C convertible preferred stock, $1.00 par value, 1,875,000
shares authorized; 1,015,974 issued and outstanding; none
outstanding pro forma and as adjusted............................. 1,015,974 -- --
Class D convertible preferred stock, $1.00 par value, 280,367 shares
authorized; 280,367 issued and outstanding; none outstanding pro
forma and as adjusted............................................. 280,367 -- --
Class E convertible preferred stock, $1.00 par value, 523,560 shares
authorized; 523,560 issued and outstanding; none outstanding pro
forma and as adjusted............................................. 523,560 -- --
Class F convertible preferred stock, $1.00 par value, 1,071,429
shares authorized; 1,071,429 issued and outstanding; none
outstanding pro forma and as adjusted............................. 1,071,429 -- --
Class G convertible preferred stock, $1.00 par value, 1,136,364
shares authorized; 1,133,589 issued and outstanding; none
outstanding pro forma and as adjusted............................. -- -- --
Common stock, $.01 par value, 15,000,000 shares authorized;
30,000,000 shares authorized as adjusted; 5,197,662 shares issued
and outstanding; 14,168,560 shares issued and outstanding pro
forma; 16,668,560 shares issued and outstanding as adjusted(3).... 51,977 141,686 166,686
Undesignated preferred stock, $0.01 par value, none authorized;
10,000,000 shares authorized as adjusted; none issued and
outstanding; none issued and outstanding pro forma and as
adjusted.......................................................... -- -- --
Additional paid-in capital.......................................... 57,567,805 91,891,767 123,736,767
Accretion of redeemable preferred stock dividends................... (1,545,273) -- --
Deficit accumulated during development stage........................ (31,131,049) (31,131,049) (31,131,049)
------------ ------------ ------------
Total stockholders' equity................................... 27,887,129 60,902,404 92,772,404
------------ ------------ ------------
Total capitalization.................................... $ 32,432,402 $ 60,902,404 $ 92,772,404
============ ============ ============
<FN>
- ---------------
(1) Gives effect to (i) the sale of 1,133,589 shares of Class G Convertible
Preferred Stock at a price per share of $22.00 subsequent to June 30, 1996,
which shares will convert into an aggregate of 1,457,460 shares of Common
Stock upon the closing of this offering, (ii) the conversion of all
outstanding shares of Preferred Stock (including Class G) into an aggregate
of 8,613,792 shares of Common Stock upon the closing of this offering and
(iii) the sale of 357,143 shares of Common Stock in the HMRI New Investment.
(2) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $14.00 per share (the
mid-point of the filing range) after deduction of underwriting discounts and
commissions and estimated offering expenses payable by the Company.
(3) Excludes 817,093 shares of Common Stock issuable upon exercise of warrants
outstanding as of August 15, 1996, 2,250,000 shares of Common Stock reserved
for issuance under the Company's 1993 Long-Term Incentive Plan, of which
875,243 shares have been granted as of August 15, 1996, and 231,429 shares
of Common Stock reserved for issuance under the Company's 1993 Non-Employee
Directors' Stock Option Plan, none of which have been granted as of August
15, 1996. See "Description of Capital Stock -- Warrants" and
"Management -- 1993 Long-Term Incentive Plan" and Note 11 of Notes to
Financial Statements.
</TABLE>
17
<PAGE> 19
SELECTED FINANCIAL DATA
The following selected financial data of the Company for the five years
ended December 31, 1995 are derived from the financial statements of the Company
which have been audited by Ernst & Young LLP, independent auditors. The
financial statements as of December 31, 1994 and 1995 and for each of the three
years in the period ended December 31, 1995, and the report of Ernst & Young LLP
relating thereto are included elsewhere herein. The financial data for the
six-month periods ended June 30, 1995 and 1996 are derived from unaudited
financial statements included elsewhere herein. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the financial
position and results of operations for these periods. Operating results for the
six months ended June 30, 1996 are not necessarily indicative of results to be
expected for the entire year ended December 31, 1996. The following data should
be read in conjunction with the Company's Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included herein.
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED JULY 7, 1988
YEAR ENDED DECEMBER 31, JUNE 30, (INCEPTION)
--------------------------------------------------- ------------------ THROUGH
1991 1992 1993 1994 1995 1995 1996 JUNE 30, 1996
------- ------- ------- ------- ------- ------- ------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
License and contract fee
revenues.................. $ -- $ -- $ -- $10,000 $15,400 $11,700 $ 1,975 $ 27,375
Costs and expenses:
Research and
development............ 3,200 4,604 6,253 9,126 10,067 5,205 6,839 43,567
General and
administrative......... 1,123 2,043 2,998 4,690 4,290 1,737 1,911 17,793
------- ------- ------- ------- ------- ------ ------- --------
Total costs and expenses.... 4,323 6,647 9,251 13,816 14,357 6,942 8,750 61,360
Interest income (expense),
net....................... (67) 247 168 394 1,116 432 788 2,939
Provision for income
taxes..................... -- -- -- -- 85 85 -- 85
------- ------- ------- ------- ------- ------ ------- --------
Net income (loss)........... $(4,390) $(6,400) $(9,083) $(3,422) $ 2,074 $ 5,105 $(5,987) $ (31,131)
======= ======= ======= ======= ======= ====== ======= ========
Pro forma net income (loss)
per share(1).............. $ .14 $ .35 $ (.42)
======= ====== =======
Shares used in computing pro
forma net income (loss)
per share(1).............. 14,633 14,640 14,255
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------- AS OF JUNE 30,
1991 1992 1993 1994 1995 1996(2)
------- -------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities............................. $ 1,566 $ 4,594 $ 6,753 $ 7,579 $ 34,485 $ 28,774
Working capital.......................... 1,228 4,264 5,565 5,948 33,525 27,958
Total assets............................. 3,442 7,129 11,409 13,472 39,218 33,626
Class A redeemable convertible preferred
stock.................................. 3,600 3,810 4,020 4,230 4,440 4,545
Deficit accumulated during the
development stage...................... (8,314) (14,714) (23,797) (27,218) (25,144) (31,131)
Total stockholders' equity (deficit)..... (5,913) 2,776 5,724 7,073 33,541 27,887
</TABLE>
- ---------------
(1) Computed on the basis described in Note 2 of Notes to Financial Statements.
(2) Excludes an aggregate of $24,938,958 of gross proceeds received from the
sale of 1,133,589 shares of Class G Convertible Preferred Stock of the
Company subsequent to June 30, 1996.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is engaged in the development and commercialization of
therapeutic human proteins produced with the Company's proprietary Gene
Activation technology. Initially, 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. The Company also is engaged
in the development and commercialization of gene therapy products designed 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 June 30, 1996 of approximately
$31,131,000. See "Risk Factors -- History of Operating Losses; Future Capital
Needs; Uncertainty of Additional Funding." These losses result principally from
expenditures under its research and development programs and the Company expects
to incur significant operating losses over the next several years due primarily
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. See
"Risk Factors -- Patents and Proprietary Rights." 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 ultimately be granted on a timely basis, if at all. See "Risk Factors --
Uncertainty of Government Regulatory Requirements; Lengthy Approval Process." It
is not possible to predict the amount of time that will pass before the Company
receives revenues from the sale of its products.
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.
Collaborative Arrangements to Date. In May 1994, the Company and HMRI
(formerly named Marion Merrell Dow Inc.) entered into an agreement to
commercialize the Company's GA-EPO. Under the terms of the agreement, HMRI is
obligated to pay the Company up to $58 million, as well as royalties based on
net sales, if any, of GA-EPO. Pursuant to this agreement, the Company recognized
$10 million of license fees in the second quarter of 1994 for a license to the
Gene Activation technology for GA-EPO and received $5 million in that quarter
from the sale of 280,367 shares of the Company's Series D Preferred Stock to
HMRI. In November 1995, the Company recognized $2 million of collaborative
research revenues upon HMRI's acceptance of a cell line suitable for the
large-scale manufacture of GA-EPO. The remaining milestones are based on HMRI's
achievement of certain stages in clinical development. The Company anticipates
that HMRI will commence clinical trials for GA-EPO during the first half of
1997. HMRI is responsible for the worldwide development, manufacturing and
marketing of GA-EPO, and the Company will receive a royalty based on net sales,
if any. Pursuant to the provisions of the agreement, HMRI will purchase $5
million of
19
<PAGE> 21
Common Stock at the initial public offering price (357,143 shares assuming a
public offering price of $14.00 per share, the mid-point of the filing range)
upon the closing of this offering in the HMRI New Investment.
In March 1995, the Company entered into a second agreement with HMRI to
commercialize an undisclosed Gene Activation product. Under the terms of this
agreement, HMRI is obligated to pay the Company up to $67 million, as well as
royalties based on net sales, if any, of the undisclosed Gene Activation
product. Pursuant to this agreement, the Company recognized $10 million of
license fees in the first quarter of 1995 for a license to the Gene Activation
technology for the second protein and received $10 million from the sale of
523,560 shares of the Company's Series E Preferred Stock to HMRI. As part of the
agreement, HMRI agreed to fund basic research at the Company for two years at a
rate of $3 million per year. The Company is responsible for delivering a cell
line sufficient for scale-up to commercial production levels, and upon its
acceptance, will be entitled to receive a milestone payment of $2.5 million. The
remaining milestones are based on HMRI's achievement of certain stages in
clinical development. HMRI is responsible for the worldwide development,
manufacturing and marketing of the product and the Company will receive a
royalty based on net sales, if any.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
The Company's total revenues decreased to $1,975,000 in the six months
ended June 30, 1996 from $11,700,000 in the six months ended June 30, 1995. In
the six months ended June 30, 1996, the Company's revenues consisted primarily
of an additional $475,000 in collaborative research revenues relating to the
Company's GA-EPO collaboration with HMRI and $1,500,000 in collaborative
research revenues earned under its March 1995 collaboration with HMRI. In the
six months ended June 30, 1995 the Company's revenues consisted of $10,000,000
in up-front license fees and $1,700,000 primarily in collaborative research
revenues earned under the Company's collaborations with HMRI.
The Company's total costs and expenses increased to $8,750,000 in the six
months ended June 30, 1996 from $6,943,000 in the six months ended June 30,
1995. Research and development expenses increased 31% to $6,839,000 in the six
months ended June 30, 1996 from $5,205,000 in the six months ended June 30,
1995, reflecting growth principally in the Company's Gene Activation and gene
therapy programs. Significant contributors to the Company's increased research
and development expenses during the first half of fiscal 1996 included an
increase in the number of employees engaged in research and development
activities, increased purchases of laboratory supplies and increases in
equipment depreciation expense. General and administrative expenses increased
10% to $1,911,000 in the six months ended June 30, 1996 from $1,737,000 in the
six months ended June 30, 1995, reflecting primarily increased staffing levels.
Total compensation and benefits expense of $3,524,000 for the Company, including
$481,000 expense from amortization of deferred compensation, was recognized in
the six months ended June 30, 1996. In the six months ended June 30, 1995, the
Company's total compensation and benefits expense was $2,877,000, including
$238,000 from amortization of deferred compensation.
Interest income increased to $788,000 in the six months ended June 30, 1996
from $446,000 in the six months ended June 30, 1995, due primarily to higher
average cash balances during the 1996 period as compared with the corresponding
1995 period. Interest expense was zero in 1996 as compared to $13,000 for the
six months ended June 30, 1995. Interest expense was incurred on a bank loan to
finance the purchase of laboratory equipment and supplies and an equipment lease
line of credit, both of which were repaid in full in the first quarter of 1995.
The Company incurred a net loss of $5,987,000 in the six months ended June
30, 1996 compared to a net income of $5,105,000 in the six months ended June 30,
1995, primarily due to the receipt of up-front license fee revenues in 1995.
20
<PAGE> 22
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
The Company had total revenues of $15,400,000, $10,000,000 and zero in the
years ended December 31, 1995, 1994 and 1993, respectively. In 1995, the
Company's revenues consisted primarily of $10,000,000 in up-front license fees
received and $5,400,000 in collaborative research revenues earned under the two
collaborations with HMRI. In 1994, the Company's revenues consisted of
$10,000,000 in up-front license fees received under the GA-EPO collaboration
with HMRI.
The Company's total costs and expenses were $14,357,000, $13,816,000 and
$9,251,000 in the years ended December 31, 1995, 1994 and 1993, respectively.
Research and development expenses increased 10% to $10,067,000 in 1995 from
$9,126,000 in 1994, and increased 46% in 1994 from $6,255,000 in 1993,
reflecting growth principally in the Company's Gene Activation and gene therapy
programs. Significant contributors to the Company's increased research and
development expenses during 1995 and 1994 included an increase in the number of
employees engaged in research and development activities to 75 at December 31,
1995 from 65 at December 31, 1994 and 46 at December 31, 1993; increased
purchases of laboratory supplies, the expansion of laboratory facilities and
increases in equipment depreciation expense. General and administrative expenses
decreased 9% in 1995 to $4,290,000 from $4,690,000 in 1994 and increased 56% in
1994 from $2,998,000 in 1993, reflecting primarily increases in staffing levels
and certain one-time severance payment expenses incurred in 1994.
Interest income was $1,129,000, $471,000 and $169,000 in 1995, 1994 and
1993, respectively, reflecting primarily increasing average cash balances during
these periods. Interest expense was $13,000 and $76,000 in 1995 and 1994,
respectively, and negligible in 1993. Interest expense was incurred on a bank
loan to finance the purchase of laboratory equipment and supplies and an
equipment lease line of credit, which was fully repaid in 1995.
The Company had net income of $2,074,000 in 1995, and incurred a net loss
of $3,422,000 and $9,083,000 in 1994 and 1993, respectively, reflecting
primarily the timing and receipt of up-front license fees from HMRI.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1996, the Company financed its operations
primarily through private placements of equity securities totaling $56,936,000,
up-front license fees and milestone payments totaling $22,000,000 and
collaborative research revenues totaling $5,400,000. As of June 30, 1996, the
Company had cash, cash equivalents and marketable securities totaling
$28,773,000. In July and August 1996, the Company sold shares of its Class G
Convertible Preferred Stock in a private placement for $24,939,000. As of August
15, 1996, the Company had cash, cash equivalents and marketable securities
totalling $50,423,000.
The Company has entered into licensing agreements with various corporations
and universities. These licenses provide for the payment of royalties by the
Company on net sales of products covered by the licensed technology, certain
milestone payments and minimum annual royalty payments under certain
circumstances. In 1995, the Company incurred license fees of $122,000 under
these agreements.
From inception through June 30, 1996, the Company acquired an aggregate of
$3,795,000 of laboratory, manufacturing and office equipment. In addition, the
Company leases its office, manufacturing and laboratory facilities under
operating leases. Through June 30, 1996, the Company expended $5,040,000 for
leasehold improvements to those leased facilities. The Company had no material
commitments for the acquisition of property and equipment at June 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.
The Company anticipates that its available cash (aggregating $50,423,000 at
August 15, 1996), together with the estimated proceeds of this offering will be
adequate to satisfy its operating expenses and capital requirements as planned
through 1999. The Company will require substantial funds to conduct research and
development and preclinical and clinical testing of its potential products and
to manufacture and market any
21
<PAGE> 23
products that are approved for commercial sale. The Company intends to seek
additional funding through collaborative arrangements or through public or
private financings, but there can be no assurance that additional financing will
be available on acceptable terms or at all. See "Risk Factors -- History of
Operating Losses; Future Capital Needs; Uncertainty of Additional Funding." The
Company's future capital requirements will depend on many factors, including
continued scientific progress in its research and development programs, the
magnitude of these programs, the scope and results of preclinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims, competing technological and market developments, the ability of
the Company to establish development arrangements, the cost of manufacturing
facilities and effective commercialization activities and arrangements.
22
<PAGE> 24
BUSINESS
SUMMARY
Transkaryotic Therapies, Inc. ("TKT" or the "Company") has developed two
proprietary technology platforms, Gene Activation and gene therapy. The
Company's Gene Activation technology is a proprietary approach to the large
scale production of therapeutic proteins which does not require the cloning of
genes and their subsequent insertion into non-human cell lines. Consequently,
the Company believes its Gene Activation technology avoids using patented
approaches to protein production associated with such conventional genetic
engineering techniques which have served as effective barriers to competition in
the $11 billion therapeutic protein market. As a result, the Company believes it
will be able to develop and successfully commercialize a broad range of gene
activated versions of proteins which have proven medical utility, received
marketing approval from regulatory authorities and generated significant
revenues in major markets. The Company's most advanced Gene Activation
development program is for the production of Gene Activated erythropoietin
("GA-EPO") with clinical trials expected to commence in the first half of 1997.
The Company's gene therapy technology ("Transkaryotic Therapy") is a non-viral,
ex vivo system based on genetically modifying patients' cells to produce and
deliver therapeutic proteins for extended periods of time. In preclinical animal
studies, the Company's Transkaryotic Therapy system has produced target proteins
at therapeutic levels for the lifetime of the animal without any side effects.
The Company's initial business strategy is to apply its Gene Activation
technology to the development and commercialization of several currently
marketed proteins. The Company's two strategic alliances with HMRI are the
primary focus of its Gene Activation activities, and TKT is actively pursuing
other Gene Activation product candidates for commercialization either with
pharmaceutical partners or independently. In parallel, the Company plans to
continue research and development of its Transkaryotic Therapy system to develop
a novel class of gene therapy treatments for a variety of protein deficiency
diseases. Taken together, the Company believes its Gene Activation and gene
therapy platforms are complementary opportunities that offer the potential for
the development of powerful product pipelines that may have a significant impact
in addressing society's healthcare needs.
GENE ACTIVATION: TECHNOLOGY BACKGROUND
Protein Production: Three Technological Waves. The therapeutic value of
certain proteins produced by the human body has been known for decades. One of
the major advances in 20th-century medicine was the development of systems for
the large-scale production of therapeutic proteins outside the body. For
example, prior to the development of a manufacturing process for insulin more
than seventy years ago, patients with Type I (juvenile onset) diabetes were
offered no effective treatment and generally died of starvation at an early age.
Following the development of pharmaceutical insulin preparations for injection,
Type I diabetics could live long and relatively normal lives. During this first
wave of protein production technology, proteins were generally purified from
human or animal tissue. Insulin, for example, was isolated from the pancreas of
pigs and cattle, and growth hormone, for the treatment of short stature, was
isolated from the pituitaries of cadavers. During the second wave of protein
production technology, based on the cloning of human genes, proteins were
manufactured using conventional genetic engineering techniques. As a result, by
the mid-1980's it became routine to engineer cells to produce therapeutic
proteins at levels that were substantially in excess of what could be obtained
by purification from tissue. However, since many of the proteins produced by
conventional genetic engineering techniques had previously been purified, the
patent protection afforded to this second wave of protein production technology
tended to focus on the genes encoding therapeutic proteins. Accordingly, many
patents have been issued covering isolated and purified DNA sequences encoding
such proteins, various vectors used to insert such DNA sequences into production
cell lines, and cell lines modified by the insertion of such DNA sequences. See
"Patents, Proprietary Rights and Licenses." TKT believes its proprietary Gene
Activation technology represents the third wave in the evolution of protein
production technology in that it is based on the activation of genes encoding
therapeutic proteins in human cells rather than the cloning and transfer of
these genes. TKT's Gene Activation technology avoids using the approach to
23
<PAGE> 25
protein production associated with the second wave, and the Company believes
this will allow it to develop and commercialize a large number of therapeutic
proteins, including many that are currently marketed.
Gene Structure and Regulation of Gene Expression. Recent advances in
molecular biology, cell biology, and genomics have led to a much better
understanding of the structure and function of human genes than was possible
only a few years ago. It is now generally accepted that virtually all genes
contain certain DNA sequences that provide information necessary for the cell to
assemble a specific sequence of amino acids that make up a protein ("coding DNA
sequences"). Thus each gene can be viewed as the blueprint for a particular
protein, and "gene expression" is the process which leads to the synthesis of
the protein it encodes. Gene expression is controlled by certain DNA sequences
which function as switches that "turn on" the gene and trigger the synthesis of
the protein ("regulatory DNA sequences"). See Figure 1. Despite the staggering
variety of proteins synthesized by the cells of the body, this process is
universal.
Figure 1 Gene Structure, the Regulation of Gene Expression and TKT's Gene
Activation Technology
[The figure shows the regulatory DNA sequences that control gene expression and
coding DNA sequences that provide information necessary for the cell to assemble
a protein.]
Essentially every human cell contains the same set of approximately 100,000
genes, but each cell type actually produces only a subset of the 100,000
proteins possible. For example, although essentially all human cells contain the
insulin gene, only certain cells of the pancreas actually produce insulin. The
regulatory switches that turn on gene expression in the appropriate cell type
also turn off gene expression in all other cell types. For this reason, only
pancreatic cells express insulin -- the regulatory DNA sequences normally
associated with the insulin gene prevent expression elsewhere in the body. TKT's
Gene Activation technology is based on activating previously silent genes by
bypassing regulatory DNA sequences set in the "off position" with regulatory DNA
sequences set in the "on position."
Conventional Recombinant Protein Production. By the 1970's, the clinical
benefits of several proteins were well-known and the potential benefit of many
others was envisioned. Based on a series of basic discoveries in the 1960's and
1970's, scientists learned to clone and manipulate genes of therapeutic
interest, leading directly to the birth of the biotechnology industry and the
large scale production of therapeutic proteins. To produce large quantities of a
therapeutic protein using conventional genetic engineering techniques (see
Figure 2A), scientists first clone the relevant human gene by isolating the
coding DNA sequences for the gene from the human cell and transferring them to
bacteria, where large quantities of the gene are copied. The cloned gene is then
isolated from the bacteria and placed in a test tube. In this test tube, the
cloned gene is then fused to appropriate regulatory DNA sequences, and the
resulting DNA fragment containing both the regulatory DNA sequences and the
coding DNA sequences is inserted into a non-human (mammalian, yeast, or
bacterial) cell. This genetically modified cell is then propagated in large
bioreactors for commercial-scale production of the protein.
24
<PAGE> 26
Figure 2A The Conventional Approach to Recombinant Protein Production
[The figure shows a flowchart diagram of the conventional process to recombinant
protein production. A cell containing a gene is used to isolate and purify
coding DNA sequences. In the test tube, these coding sequences are fused to
regulatory DNA sequences. The resulting DNA fragment is introduced into a
non-human cell, which is used to produce the protein.]
Figure 2B TKT's Approach to Protein Production by Gene Activation
[The figure shows a flowchart diagram of TKT's approach to protein production by
Gene Activation.]
TKT'S GENE ACTIVATION TECHNOLOGY
Although the conventional approach to recombinant protein production is
quite powerful, its use today faces certain commercial barriers and technical
limitations. The primary barrier is that biotechnology companies have sought and
obtained patent protection covering many of the techniques used to produce
commercially-marketed proteins using conventional genetic engineering
techniques. These patent rights have served as an effective entry barrier,
minimizing competition in the $11 billion (1995) protein therapeutics market.
See "Patents, Proprietary Rights and Licenses." In addition, conventional
genetic engineering techniques for protein production may face technical
limitations arising from the need to first clone the gene of interest. For
certain proteins, this step adds to development times, increases costs and is
technically challenging. Technical difficulties may also arise from the use of
non-human production cell lines, which may result in the production of proteins
which may have therapeutically significant differences from those naturally
produced by the cells of the human body. Furthermore, production processes based
on conventional genetic engineering may not have incorporated recent advances in
cell culture systems with significant efficiency and cost advantages as compared
to processes originally developed over a decade ago.
To overcome these commercial barriers and technical limitations, TKT has
developed Gene Activation technology for the production of therapeutic proteins
that does not rely on the manipulation of cloned genes. Using its proprietary
technology, TKT has succeeded in producing therapeutic proteins in human cells
by bypassing regulatory DNA sequences set in the "off position" with regulatory
DNA sequences set in the "on position" in order to activate the gene of
interest. See Figure 2B. The Company's Gene Activation technology does not
require the manipulation of the protein coding DNA sequences of the gene. The
bypass of an "off switch" with an "on switch" is accomplished by "gene
targeting." Gene targeting is a technology by which DNA fragments can be "cut
and pasted" precisely at pre-selected, desirable locations within the cell's
25
<PAGE> 27
genome. Gene targeting can be thought of as molecular surgery, with the surgical
tools literally functioning at the molecular level. The technical term for gene
targeting, homologous recombination, reflects its underlying mechanism: cells
have the capacity to align two homologous DNA sequences (two sequences that are
quite similar) and exchange one with the other. In Gene Activation, the new
regulatory sequences are flanked with "homing" sequences and structural
sequences which allow the cell to exchange the new active regulatory sequences
in place of the old inactive ones. The new sequences must be introduced
precisely in order to allow the proper initiation of gene expression.
In order to manufacture a protein of therapeutic interest using Gene
Activation, a human cell line producing the protein must be generated. This cell
line will ultimately become the master cell bank for large scale manufacturing
and is generated as follows:
1. Determine the sequence of a portion of the regulatory DNA sequences
that control the gene of interest;
2. Build a "targeting fragment" by fusing homing sequences to a new
regulatory region known to be active in the human cell line chosen
for manufacturing;
3. Introduce the targeting fragment into the cell line;
4. Identify and propagate an activated cell line producing the protein
of interest; and
5. Optimize protein productivity and prepare the cell line for
commercial scale manufacturing.
The Company has successfully accomplished all of the steps described above
for GA-EPO. The results of TKT's work in this area have led to proof-of-concept
that (i) gene targeting can be used to direct the integration of regulatory and
structural sequences to a specific, pre-selected position in the genome, (ii)
the product of the targeting event is a cell containing an activated gene and
(iii) the protein production properties of cells created by Gene Activation are
predictable and suitable for, and have been successfully used in, large-scale
manufacturing. Accordingly, the Company believes that these methods may be used
to express a wide variety of therapeutically valuable proteins at levels
suitable for large-scale manufacturing purposes. Because the Gene Activation
process avoids many of the technical limitations of conventional recombinant
protein production technology, the Company also believes that the Gene
Activation process is at least as efficient as, and may be more cost effective
than, conventional genetic engineering techniques for protein production.
TKT'S GENE ACTIVATION PRODUCTS: GENE ACTIVATED ERYTHROPOIETIN
The Company's initial strategy in exploiting its technology is to
commercialize Gene Activated proteins that have proven medical utility, have
received marketing approval from regulatory authorities and have achieved
significant revenues in major markets. These protein products have experienced
high rates of acceptance among physicians and health care providers. The total
market for the top eight marketed proteins in 1995 was estimated to be about
$10.8 billion. See Table I. As the number of new approved protein products
increases and as the number of approved indications for such products increases,
the Company believes that the market for these protein products will continue to
experience substantial growth. The Company also believes that the broad
applicability of its Gene Activation technology for protein production and the
fact that many additional proteins are currently in clinical development will
provide a large number of candidates for commercialization using TKT's Gene
Activation technology.
26
<PAGE> 28
<TABLE>
TABLE I. 1995 WORLDWIDE PROTEIN PRODUCT REVENUES (IN MILLIONS)
<CAPTION>
PROTEIN PRIMARY INDICATION REVENUES
- --------------- ---------------------- --------
<S> <C> <C>
Erythropoietin Anemia $2,900
Insulin Diabetes 1,950
G-CSF Neutropenia 1,700
Growth Hormone Short stature 1,500
- -Interferon Hepatitis/Cancer 1,000
Factor VIII Hemophilia A 950
tPA Myocardial infarction 450
- -Interferon Multiple sclerosis 350
</TABLE>
Sources: Company Annual Reports, Scrip.
TKT has focused its initial Gene Activation efforts on the development of
its GA-EPO product in collaboration with HMRI. See "-- Gene Activation
Collaborations and Commercialization Strategy." Erythropoiesis is the process by
which red blood cells (erythrocytes) are produced. When the body requires
additional red blood cells, the kidney normally produces erythropoietin, a
circulating protein hormone which stimulates the differentiation of certain
progenitor cells in the bone marrow. The kidney's critical role in red blood
cell production was determined in the 1950's, and erythropoietin was first
isolated and purified from the urine of patients with anemia in the 1970's (the
first wave). The gene encoding erythropoietin was cloned in the 1980's and used
for production of the protein using conventional genetic engineering techniques
(the second wave). Erythropoietins have been successfully used to treat anemia
associated with a variety of conditions, including the anemia of kidney failure
(which causes a reduction in the body's ability to produce the protein) and the
anemia of chemotherapy (which causes the destruction of a large number of bone
marrow progenitor cells).
GA-EPO Development Status. TKT has successfully applied its Gene
Activation technology to produce GA-EPO in human cells (the third wave). To
illustrate the underlying concept of the Gene Activation process, consider that
essentially all human cells contain the erythropoietin gene, yet only certain
cells of the kidney actually produce erythropoietin. In all other cells in the
human body, the erythropoietin gene is inactive. The erythropoietin gene is not
expressed in most human cells because regulatory sequences in those cells
prevent the protein from being made; the gene is controlled by a switch
("regulatory DNA sequences") that is permanently in the "off" position. The goal
of TKT's GA-EPO program was to remove this "off switch" in a human cell in which
the erythropoietin gene is inactive and, in effect, replace it with regulatory
sequences comprising an "on switch" to activate erythropoietin expression.
TKT has produced a GA-EPO producing cell line sufficient for scale-up to
commercial production levels. To accomplish this, TKT first studied the
regulatory region that prevents expression of the erythropoietin gene in most
human cells and developed an activation strategy. Next, a targeting fragment was
constructed by fusing certain homing sequences to a new regulatory region known
to be active in the human cell line chosen for manufacturing. The targeting
fragment was then introduced into the cell line under conditions appropriate for
homologous recombination to occur, and a resulting cell line that produced
GA-EPO was identified. The GA-EPO productivity of the cell line was optimized,
and the cells were prepared for commercial-scale manufacturing. At present, a
production cell line has been scaled up and successfully used to produce GA-EPO.
The purified protein has been subjected to an extensive series of analyses and
has the properties expected of a human erythropoietin preparation. In
particular, the protein has an appropriate molecular weight, amino acid
composition, amino acid sequence, secondary structure, and glycosylation
profile. GA-EPO has been shown to function in vitro and in vivo in a
dose-dependent manner. Finally, preclinical safety tests performed to date have
yielded satisfactory results. The Company believes that GA-EPO will be
functional in patients because extensive preclinical testing has demonstrated
that the protein has the structural
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and functional characteristics that would be expected of a human erythropoietin
preparation. The Company anticipates that HMRI will commence clinical trials on
GA-EPO in the first half of 1997. See "-- Gene Activation Collaborations and
Commercialization Strategy."
The Company believes that GA-EPO is likely to be reviewed within FDA by its
Center for Biologics Evaluation and Research ("CBER"). CBER currently has no
"bioequivalence" pathway for the rapid approval of related biologics and the
Company believes that GA-EPO will require a complete clinical and regulatory
program. However, the regulatory and clinical programs have the advantage of
focusing on Gene Activated products with conventional counterparts that are
well-known to regulatory authorities around the world (in contrast to a typical
new biologic, which has no related history concerning its safety and efficacy in
humans). Accordingly, TKT believes that clinical development can be accomplished
in a focused and timely manner.
GENE ACTIVATION COLLABORATIONS AND COMMERCIALIZATION STRATEGY
In order to rapidly develop and exploit its Gene Activation technology, TKT
has entered into two strategic alliances with HMRI, the first in May 1994 and
the second in March 1995. HMRI with its affiliates is the third largest
pharmaceutical group in the world based on revenues, with significant
distribution capabilities in all major markets. The alliances are focused on the
development of two products, GA-EPO and a second, undisclosed protein. TKT has
the potential to receive up to $125 million from HMRI consisting of license
fees, equity investments, milestones and research funding in addition to
royalties on the sales of the two products, of which $42 million has been
received to date (excluding the payment for shares of Common Stock purchased in
this offering). In addition, HMRI is responsible at its own expense for all
worldwide development, manufacturing and marketing activities.
In May 1994, TKT and HMRI (formerly named Marion Merrell Dow Inc.) entered
into an agreement to commercialize TKT's GA-EPO. Under the terms of the
agreement, HMRI is obligated to pay TKT up to $58 million. To date, TKT has
received a total of $17 million, which includes up-front fees of $10 million for
a license to the Gene Activation technology for GA-EPO, $5 million for the
purchase of shares of the Company's Class D Preferred Stock at a price per share
of $17.83 and a $2 million milestone payment in November 1995 at which time HMRI
accepted a cell line sufficient for scale-up to commercial production levels of
GA-EPO. In addition, HMRI will purchase $5 million of Common Stock at the
initial public offering price in the HMRI New Investment. See "Certain
Transactions." The remaining payments are based on HMRI's achievement of certain
GA-EPO clinical development milestones. HMRI is responsible for the worldwide
development, manufacturing and marketing of GA-EPO, and TKT will receive a
royalty based on net sales.
In March 1995, TKT entered into another agreement with HMRI to
commercialize a second, undisclosed protein. Pursuant to the agreement, TKT also
granted to HMRI an option to commercialize certain aspects of TKT's gene therapy
technologies related to this protein. Under the terms of the agreement, HMRI is
obligated to pay to TKT up to $67 million. To date, TKT has received a total of
approximately $25 million from HMRI under the second agreement, including
up-front fees of $10 million for a license to the Gene Activation technology for
the second protein, $10 million for the purchase of shares of the Company's
Class E Preferred Stock at a price per share of $19.10, and $4.5 million to fund
basic research at the Company. The remaining $42 million to be paid by HMRI to
TKT consists primarily of milestone payments based on the development of the
product resulting from the licensed technology. TKT is responsible for
delivering a cell line suitable for large scale manufacturing. HMRI is
responsible for the worldwide development, manufacturing and marketing of the
product and TKT will receive a royalty based on net sales.
In addition to the above transactions, in December 1995, HMRI purchased
$7.9 million of the Company's Class F Preferred Stock at a price per share of
$14.00.
The Company has been able to learn significantly from its interaction with
HMRI and believes that this alliance has played a major role in TKT's growth and
development. In addition, TKT believes that the global marketing capabilities of
HMRI will result in the successful penetration of many markets leading to
substantial royalties to TKT. Finally, because of existing patent and license
arrangements for the commerciali-
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zation of conventionally produced erythropoietin, it is possible that TKT's
GA-EPO will be the only branded erythropoietin capable of being sold in all
major markets worldwide.
Having completed its responsibilities under its first Gene Activation
project by successfully generating a cell line sufficient for scale-up to
commercial production levels of GA-EPO that has been accepted by HMRI, TKT is
actively pursuing other Gene Activation product candidates. The Company believes
that its revenues from the commercialization of Gene Activated proteins will be
divided into three stages. In the short term, TKT will attempt to license out
additional proteins for development by pharmaceutical partners in return for
licensing and milestone payments as well as research funding. In the medium term
the Company anticipates that it will receive royalty payments from HMRI with
respect to GA-EPO as well as from pharmaceutical partners that successfully
manufacture and market its Gene Activated proteins. In the long term, the
Company will consider developing Gene Activation products independently. Future
Gene Activation products may include currently-marketed proteins, proteins
currently in late stage clinical development or proteins that are in much
earlier stages of development. At present, TKT intends to focus on the
currently-marketed products until products from these latter two categories
demonstrate clinical and commercial viability before embarking on development
programs. TKT believes that its focus on currently-marketed proteins for near-
term commercialization and on development-stage proteins for the long-term
appropriately utilizes Company resources, maximizes near-term commercial
potential and will allow the Company to build a strong Gene Activation product
pipeline for the future.
GENE THERAPY TECHNOLOGY
TKT's Gene Therapy Approach. The first three waves of protein production
have a critical feature in common: regardless of methodology, the proteins are
manufactured outside the human body. See "-- Gene Activation." The Company
believes that its approach to gene therapy, Transkaryotic Therapy, represents
the fourth wave of protein production -- a system that would restore the
patient's natural ability to produce a required therapeutic protein. TKT's
approach to gene therapy is based on genetically modifying patients' cells to
produce and deliver therapeutic proteins for extended periods. The Company
believes the approach will be safe, cost-effective and clinically superior to
the conventional delivery of proteins by injection. In preclinical animal
studies, a single administration of one of the Company's gene therapy products
resulted in the lifetime production and delivery of therapeutic proteins. The
Company has initiated a Phase I clinical study to determine the safety of its
gene therapy system, and preliminary data suggests that the administration of
genetically-engineered cells appears to be well-tolerated. See "Gene
Therapy -- Clinical Development Status."
TKT believes its gene therapy system is broadly enabling, and, accordingly,
may be applicable to the treatment of a wide range of human diseases. Because
TKT's gene therapy has demonstrated long-term delivery of therapeutic proteins
in animal model systems, the Company believes its approach may be well-suited to
the treatment of chronic protein deficiency states including hemophilia,
diabetes and hypercholesterolemia. The diseases targeted by TKT are
characterized by a significant unmet medical need and the clinical goals that
must be achieved by TKT's gene therapy products are well-defined. The potential
benefits of TKT's gene therapy products include improved therapeutic outcome,
elimination of frequent painful injections and the problem of patient
compliance, a minimization of side effects due to over- and under-dosing of
conventional proteins and a reduction in costs.
There are a large number of technical approaches to gene therapy, but two
basic distinctions can be used to characterize the field. The first distinction
is viral vs. non-viral -- viral gene therapy approaches use genetically modified
viruses to introduce genes into human cells by infection and non-viral
approaches use non-infectious (chemical or physical) means to introduce the
genes. The second distinction is in vivo vs. ex vivo -- in vivo gene therapies
are based on the administration of DNA-based drugs directly to the patient,
whereas ex vivo gene therapies are based on removing a small number of cells
from a patient, introducing a gene into the cells and implanting the engineered
cells into the patient.
TKT's enabling gene therapy technology platform is a non-viral, ex vivo
system which the Company believes is significantly different from other
approaches to gene therapy. The Company believes that these
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differences will allow for physiologic levels of protein expression in patients
for extended periods, a goal that historically has represented a major obstacle
in alternative gene therapy systems. The major alternative to TKT's system is
based on the use of genetically-modified retroviruses and adenoviruses to infect
patients' cells. The Company believes that such viral ex vivo approaches present
a significant safety risk due to the possibility of causing new viral infections
in patients and have not allowed long-term production of the therapeutic protein
in animal models or patients. Furthermore, to the best of the Company's
knowledge, neither viral nor non-viral in vivo gene therapy technologies have
allowed long-term or high level protein expression in the patient and are likely
best-suited for non-chronic applications such as immunotherapy. TKT believes
Transkaryotic Therapy is well-suited to allow safe and long-term delivery of
therapeutic proteins for the treatment of chronic protein deficiency states as
demonstrated by the long-term delivery of therapeutic proteins in animal models.
In order to develop a safe, effective, non-viral, ex vivo gene therapy
system, the Company believes that several major tasks must first be accomplished
in basic and preclinical settings. Each of the steps must be carried out to
allow the ultimate product to be manufactured efficiently, reproducibly and
cost-effectively, to be subjected to rigorous quality control to ensure safety
and to direct the long-term production and delivery of the therapeutic protein
in the patient. The first step involves the development of techniques for
obtaining and propagating the cell types of interest. Next, non-viral
methodologies must be developed that allow DNA fragments to be stably introduced
into these cells. DNA fragments containing the appropriate DNA regulatory
sequences fused to the desired protein encoding sequences, for example, must be
constructed and introduced into cells to generate genetically-engineered cells
which express the therapeutic protein at clinically relevant levels. After the
DNA fragments have been successfully introduced into human cells, methodologies
must then be developed which allow the engineered cells to properly process the
therapeutic protein. The final step involves the development of methods and
formulations for the implantation of the engineered cells.
TKT scientists have successfully accomplished all of the above tasks (Table
II) and, in model systems, have successfully delivered therapeutic proteins for
the lifetime of the experimental animals. Much of TKT's work has focused on gene
therapy using fibroblasts, a cell type present in the skin (and throughout the
body) that is readily obtained from patients and propagated in culture. The
Company has developed a variety of methodologies for the stable transfection of
normal human cells. "Stable transfection" means that the introduced DNA fragment
becomes part of a chromosome in the treated cell. One such methodology is
electroporation, a technique based on subjecting cells to a brief electrical
pulse. The pulse transiently opens small pores in the cell membrane that allow
the DNA fragments of interest to enter the cell. The technique is simple,
reproducible (it works for a variety of cell types and for cells derived from
newborns to the elderly), efficient (one electroporation provides many more
transfected cells than required for treatment) and cost-effective (less than one
dollar per reaction).
TABLE II. TKT'S GENE THERAPY SYSTEM: SUMMARY OF SELECTED TECHNICAL
ACCOMPLISHMENTS
<TABLE>
<CAPTION>
TASKS ACHIEVEMENT COMMENTS
- ------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Cell types propagated Fibroblasts, myoblasts, mammary Cells retain normal properties
epithelial cells
Proteins expressed Factor VIII, Factor IX, Growth All expressed at levels of at
Hormone, Insulin, Interleukin-2, least 1 ug/million cells/day
LDL receptor, -galactosidase
Transfection Electroporation, microinjection, All with efficiencies greater
methodologies applied polybrene and calcium phosphate than 1 stably transfected cell
precipitation per thousand treated cells
Proteins characterized Factor VIII, Factor IX, Growth All with natural
Hormone, -galactosidase post-translational modifications
In vivo expression Factor VIII, Factor IX, Growth All at physiologic levels in
observed Hormone, Insulin animal models
</TABLE>
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The Company believes it has developed the basic technologies required for a
safe and effective gene therapy approach which can be refined and optimized for
patient use. In patients, TKT envisions that the system would function as
follows:
1. The clinician would identify the patient to be treated and perform
a small skin biopsy.
2. In TKT's manufacturing facility, patient cells would be harvested
from the biopsy specimen.
3. The DNA fragment containing DNA regulatory sequences and protein
coding sequences would be introduced into the harvested cells by
electroporation. The DNA fragment and the electroporation
methodology would be the same for all patients with a given
disease.
4. A genetically-engineered cell expressing the therapeutic protein
would be identified, propagated, subjected to appropriate
characterization and quality control tests and formulated in a
syringe. The syringe would then be returned to the physician.
5. The physician would then inject the engineered cells under the
patient's skin as an outpatient procedure.
The above patient techniques have been successfully carried out in an ongoing
Phase I clinical trial. See "-- Clinical Development Status." These procedures
might vary based on the disease to be treated. For example, different cell
types, sites of implantation and genes of interest could be advantageous for a
given disease.
TKT'S GENE THERAPY SYSTEM IN PRACTICE
To provide an overview of TKT's gene therapy technology in practice,
consider a patient diagnosed with Hemophilia A. See Figure 3. Hemophilia A is a
bleeding disorder caused by a deficiency in Factor VIII, a protein essential for
blood clotting normally found in the blood. As a candidate for a gene therapy
treatment, the patient would visit his physician as an out-patient and have a
small skin biopsy performed. The piece of skin, less than half the size of a
dime, requires only a few minutes to remove. The physician would send the
specimen to TKT's manufacturing facility, where the patient's cells would be
harvested, genetically engineered to produce the missing clotting factor and
characterized to ensure both safety and efficacy. The entire process would
require approximately six weeks and, at the end of that time, TKT would return
the appropriate number of genetically-engineered cells to the physician. Once
again as an out-patient, the cells would be injected back under the patient's
skin. The patient should now be capable of producing his own Factor VIII and
would no longer suffer bleeding problems.
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Figure 3 Transkaryotic Therapy in Practice
TRANSKARYOTIC THERAPY
[A figure depicting the Company's Transkaryotic Therapy system in practice.]
Clinical Development Status. The Company's approach to initial clinical
development of its enabling gene therapy technology is to evaluate product
safety in extremely conservative clinical settings. Towards this end, the
Company has initiated one Phase I clinical trial for the treatment of cancer
cachexia (the gradual wasting of the body) by growth hormone gene therapy and is
sponsoring a second Phase I clinical trial for the treatment of renal cancer and
malignant melanoma by Interleukin-2 gene therapy. Based on the data generated
from these studies, the Company believes it will be well-positioned to perform
clinical trials in patients with conditions that are not life-threatening. At
present, the Company intends to explore the possibility of further development
of these products in conjunction with corporate partners.
TKT's first Company-initiated trial began in the U.S. in late 1994
following both validation of TKT's pilot manufacturing facility and FDA review
of the Company's IND. The Phase I study is based on the implantation of
genetically modified skin fibroblasts to express growth hormone in cancer
patients at risk for cachexia. A total of 20 patients will be enrolled with five
escalating dosage blocks. Community physicians have injected the modified cells
under the skin of subjects; all patient procedures have been performed on an
out-patient basis. The major goal of the study is to develop a safety profile of
the product in humans. To date, 11 patients have been enrolled in the trial and
the therapy appears to be well-tolerated. Due to the extremely conservative
inclusion and exclusion criteria for the trial, it is expected to continue well
into 1997.
The Company has also sponsored a Phase I study at the University of
Freiburg based on the delivery of Interleukin-2 by genetically modified skin
fibroblasts in order to restore or enhance the ability of the immune system to
attack the tumor cells in patients with renal cancer and malignant melanoma. All
manufacturing processes have been developed and performed by the University and
to date, the product appears to be well-tolerated. See "-- Other Gene Therapy
Collaborations."
Based on the results described above, the Company believes that
Transkaryotic Therapy offers several clinical and commercial advantages over
conventional treatments and other gene therapies for targeted diseases,
including:
- SAFETY. Transkaryotic Therapy does not use infectious agents such as
retroviruses to genetically engineer the patient's cells. TKT's non-viral
method of producing genetically engineered cells allows for extensive
safety testing prior to their implantation in the patient. In studies of
TKT's gene therapy system involving over 5,000 animals, no side effects
have been observed.
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- LONG-TERM EXPRESSION. Transkaryotic Therapy is designed to produce
long-term results with a single treatment. In preclinical animal studies,
the Company has produced target proteins at therapeutic levels for the
lifetime of the animals, suggesting the possibility of long-term
effectiveness in humans.
- CONTROLLABILITY. Transkaryotic Therapy is designed to deliver
therapeutic proteins at levels which meet a patient's specific needs. The
Company believes that its gene therapy system will allow the physiologic
and pharmacologic regulation of expression. Further, the Company believes
that the treatment afforded by Transkaryotic Therapy will be readily
reversible so that therapy can be discontinued if no longer required.
- FLEXIBILITY. The Company has focused on genetically-engineering a wide
variety of human cell types because, although certain cell types are
useful in the gene therapy of particular diseases, no single cell type is
appropriate for the gene therapy of all diseases.
- EASE OF ADMINISTRATION. Transkaryotic Therapy will allow for the
administration of its products by a single injection under the patient's
skin on an out-patient basis. Furthermore, the potential long-term
effectiveness of the treatment could eliminate problems of patient
compliance.
- COST-EFFECTIVENESS. Transkaryotic Therapy takes advantage of the
patient's natural ability to synthesize therapeutic proteins for extended
periods. The potential benefits of Transkaryotic Therapy include improved
therapeutic outcome, the elimination of frequent painful injections and
patient compliance problems, a reduction of side effects due to
overdosing and underdosing of conventional proteins and significant
reductions in cost. Accordingly, the Company believes that its therapy
may be less costly than therapy using conventional protein
pharmaceuticals which require frequent administration.
TKT'S GENE THERAPY DEVELOPMENT PROGRAMS AND COMMERCIALIZATION STRATEGY
The Company is focusing its development efforts on gene therapy products
for the treatment of chronic diseases with straightforward and
well-characterized etiologies. For certain of these diseases, such as Hemophilia
A, effectiveness, dose ranges and safety have been clearly established in the
context of currently approved and marketed products. For others, such as Fabry
disease, preliminary in vitro and animal model data strongly suggest that the
long-term delivery of appropriate therapeutic proteins will effectively treat
the disease. The Company believes that this initial focus will provide strategic
advantages by allowing evaluation of Transkaryotic Therapy based on well
understood clinical parameters, thereby facilitating the regulatory approval
process. Furthermore, the Company believes that when administered as part of its
proprietary gene therapy system, these proteins may provide therapeutic benefits
not achievable using conventional methods of delivery.
Hemophilia A. When a blood vessel ruptures, an intricate series of events
allows the rapid formation of a clot in normal individuals. One of the
best-studied coagulation disorders is Hemophilia A, caused by a deficiency or
defect in protein coagulation Factor VIII. Patients with the disease experience
acute, debilitating and often life-threatening bleeding episodes. Depending on
the severity of the disease, bleeding may occur spontaneously or after minor
trauma. Conventional treatment consists of temporarily increasing the patient's
Factor VIII levels through infusions of plasma-derived or recombinantly-produced
Factor VIII. Factor VIII levels typically rise to therapeutic levels for only
two to three days following intravenous administration, then return to the
baseline subtherapeutic level, once again placing the patient at risk for a
serious bleeding episode. It is estimated that there are about 19,000 Hemophilia
A patients in the U.S. and Canada, 25,000 in Europe and 4,000 in Japan. In the
U.S., an adult suffering from the disease receives Factor VIII protein treatment
only during bleeding crises at an average annual cost of approximately $65,000.
TKT's approach to the treatment of hemophilia is based on the production
and delivery of Factor VIII using Transkaryotic Therapy. The Company believes
that its Factor VIII gene therapy product has the potential to provide a
constant supply of therapeutic levels of the missing protein, effectively
eliminating the problem of rapid disappearance of the therapeutic protein. The
Company has produced clonal populations of human fibroblasts which have been
transfected to express Factor VIII in vitro, demonstrated that the protein
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is properly processed and achieved protein expression in animals. The Company
has initiated preclinical studies for the product and intends to initiate
Hemophilia A clinical trials in 1997.
In July 1993, the Company entered into a Collaboration and License
Agreement with Genetics Institute, Inc. ("GI") relating to a joint development
and marketing program for a Hemophilia A gene therapy product based on the
Company's non-viral technology. The agreement provides that the parties will
collaborate to develop and commercialize a non-viral gene therapy product for
the treatment of Hemophilia A using TKT's proprietary technology and GI's
patented Factor VIII genes. Under the agreement, GI has granted TKT a
nonexclusive worldwide license under GI's patents covering truncated versions of
the gene encoding Factor VIII for use in certain non-viral gene therapy
applications. GI has agreed to pay a portion of the clinical development costs
of the product in the U.S., Canada and the European Community. TKT retained
exclusive manufacturing rights throughout the world and exclusive marketing
rights to all countries of the world except those in Europe. Subject to certain
conditions, GI received exclusive rights to market the product in Europe. The
agreement is terminable by GI in the event certain product development and
regulatory approval milestones are not reached.
Fabry Disease. Fabry disease is an X-linked lysosomal storage disease
caused by the deficiency of the enzyme -galactosidase. The disorder is
characterized by the accumulation of lipids in lysosomes of vascular endothelial
and smooth muscle cells and in a wide variety of other tissues. Patients with
classic Fabry disease of early onset, generally in adolescence, show diverse
clinical manifestations including severe pain and cardiovascular and renal
complications. It is estimated that there are about 2,000 patients in the U.S.
and a total of approximately 5,000 patients in the developed world. Current
treatment of the disease is limited to the reduction of symptoms. Clinical
trials of enzyme replacement therapy in the late 1970's have been reported using
infusions of -galactosidase purified from placenta, spleen or plasma. The
intravenous injection of the enzyme resulted in the transient reduction in the
plasma levels of the deleterious lipid but, due to the limited availability of
the enzyme obtained from human sources, insufficient quantities were available
for further studies.
The development of a safe and effective gene therapy product for the direct
delivery of -galactosidase using a gene therapy approach could result in an
elimination of pain symptoms, the medium- and long-term cardiovascular and renal
complications and in an increased life expectancy and improved quality of life.
TKT has produced purified -galactosidase from normal human fibroblasts and
demonstrated that the enzyme has the desired structural and functional
properties. Before proceeding to a gene therapy trial, it is important to
determine the safety and pharmacokinetics of the protein in humans. Towards
these ends, the Company is planning to file an IND in 1996 to study the protein
in a small Phase I clinical trial. Based on the data obtained, it is anticipated
that this study will allow the design of a follow-up gene therapy trial in 1997.
Long-term Gene Therapy Targets. The Company's long-term gene therapy
product development strategy is focused on products for the treatment of
commonly occurring diseases including both juvenile- and adult-onset diabetes,
hypercholesterolemia and osteoporosis. These are diseases for which either (i) a
proven therapeutic protein exists but effective treatment of the disease
requires complex patterns of regulation in the patient (for example, insulin is
widely used in the treatment of diabetes but delivery of insulin by conventional
methods is imprecise and does not prevent the serious complications of the
disease) or (ii) no protein has yet been proven effective in treating the
disease (for example, many proteins are thought to have potential in the
treatment of hypercholesterolemia, but that has yet to be proven conclusively in
patients).
Manufacturing. One of the critical aspects of any cell-based therapy is
the approach to manufacturing. As stated above, the manufacturing process takes
up to six weeks and it is essential to optimize the process to allow for a
commercially-viable product. The Company believes that this has been
accomplished and, for example, the Company believes that the cost for
manufacturing its single administration Factor VIII gene therapy product is less
than that for manufacture of a one year supply of purified Factor VIII protein
required by a typical patient. To produce early clinical materials, TKT has
constructed a pilot manufacturing facility that was designed to conform to FDA
guidelines for Current Good Manufacturing Practice ("CGMP"). For Phase III
clinical trials and commercialization, TKT intends to construct a CGMP-certified
facility.
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The Company intends to manufacture its gene therapy products in central
manufacturing facilities. Initially, a single facility would be constructed to
serve the U.S. As the Company's product pipeline matures, it is anticipated that
demand will increase, possibly requiring the Company to construct an additional
central manufacturing facility in the U.S. Other gene therapy companies have
adopted a strategy wherein every large city (or potentially large hospital)
would have a cell processing facility, but TKT believes that the requirements
for strict quality control and the benefits of economy of scale are best
achieved using the central manufacturing strategy.
OTHER GENE THERAPY COLLABORATIONS
In 1994, the Company entered into a three-year collaboration with the
University of Freiburg. As part of that collaboration, TKT is sponsoring the
first gene therapy trial approved in Germany. The Phase I study is based on the
delivery of Interleukin-2 by genetically modified skin fibroblasts in order to
restore or enhance the ability of the immune system to attack the tumor cells in
patients with renal cancer and malignant melanoma. TKT has no role in the
manufacturing process. The trial was initiated in 1994 and 14 patients have been
enrolled to date. In addition to sponsoring the clinical trial, TKT has certain
rights to technologies developed for the non-viral gene therapy of certain
cancers.
In November 1995, the Company entered into a collaboration with the
Institute Pasteur (the "Institute") to study the gene therapy of Hurler disease,
a lysosomal storage disorder. The Institute has successfully delivered various
proteins in a number of animal models and the Company and the Institute are
working to improve expression of the missing enzyme in human cells. In addition,
the Company has certain rights to related technologies developed at the
Institute.
In July 1996, the Company entered into a collaboration with the Women's and
Children's Hospital, Adelaide (the "Hospital") to study gene and protein
replacement for the mucopolysaccharidoses, a group of lysosomal storage
disorders. The Company and the Hospital plan to work towards developing a series
of therapies for these related diseases, building on the Hospital's twenty years
of experience in their molecular biology and clinical features.
PATENTS, PROPRIETARY RIGHTS AND LICENSES
Proprietary Issues. For many currently-marketed proteins, the product
manufactured using conventional genetic engineering techniques does not
represent the first time the protein was isolated and purified. As such, it was
generally not possible to obtain a broad composition of matter patent for many
of the currently-marketed proteins. In contrast, the isolated and purified DNA
sequences encoding these proteins, various vectors used to insert such DNA
sequences into production cell lines, cell lines modified by the insertion of
such DNA sequences, and corresponding methods (including methods of producing
proteins using this approach) led to issued patents in many cases. TKT believes
that, by completely avoiding the use of isolated and purified DNA sequences
encoding proteins of commercial interest, the Company's technology does not
infringe claims based on isolated and purified DNA sequences encoding such
proteins. Furthermore, the Company intends to avoid the use of technologies
(such as specific protein purification procedures) that are the subject of
patents that are not limited to protein products manufactured using conventional
genetic engineering techniques.
Over the past decade, there has been a dramatic increase in the number of
approaches to gene therapy under development in both academic and industrial
laboratories. A large number of patent applications have been filed in the U.S.
and worldwide relating to this work, and a number of gene therapy patents have
issued to date. The Company requested, and the U.S. Patent and Trademark Office
(the "PTO") declared, an interference regarding an issued patent with broad
claims to ex vivo gene therapy. The participants in the interference are Genetic
Therapies, Inc. (a wholly-owned subsidiary of Novartis), Somatix Therapy
Corporation and TKT. The PTO proceeding will determine the patentability of the
subject matter of the interference and which of the parties first developed this
subject matter. The process to resolve the interference can take many years. The
outcome of interferences can be quite variable: for example, none of the three
parties may receive the desired claims, one party may prevail, or a settlement
involving two or more of the parties may be
35
<PAGE> 37
reached. There can be no assurance that TKT will prevail in this interference or
that, even if it does prevail, that the Company can meaningfully protect its
proprietary position. In the event TKT does not prevail, there can be no
assurance that TKT could obtain a license to the disputed claims, and, if it can
not, commercialization of the Company's gene therapy products in the U.S. could
be adversely affected. With the possible exception of the patents involved in
the interference, the Company believes its Transkaryotic Therapy technology does
not infringe on patents issued to date.
Currently, the Company has 19 pending patent applications in the U.S. to
protect its proprietary methods and processes; it has also filed corresponding
foreign patent applications for certain of these U.S. patent applications. The
U.S. patent applications relate to Gene Activation in general, DNA sequences
required for Gene Activation, vectors required for Gene Activation, cells
modified by Gene Activation, proteins produced by Gene Activation, corresponding
Gene Activation methods, Transkaryotic Therapy in general, methods of
propagating and transfecting cells, methods for obtaining expression of
therapeutic proteins and homologous recombination in cells, and cells modified
by the preceding methods. Where appropriate, the Company intends to file, or
cause to be filed on its behalf, additional patent applications relating to
future discoveries and improvements.
The Company believes that protection of the proprietary nature of its
products and technology is important to its business. Accordingly, it has
adopted and will maintain a vigorous program to secure and maintain such
protection. The Company's practice is to file patent applications with respect
to technology, inventions and improvements that are important to its business.
The Company also relies upon trade secrets, unpatented know-how, continuing
technological innovation and the pursuit of licensing opportunities to develop
and maintain its competitive position. There can be no assurance that others
will not independently develop substantially equivalent proprietary technology
or that the Company can meaningfully protect its proprietary position.
As a general matter, patent positions in the fields of biotechnology and
biopharmacology are highly uncertain and involve complex legal, scientific and
factual matters. To date, there has emerged no consistent policy regarding the
breadth of claims allowed in biotechnology patents. Consequently, although TKT
plans to prosecute aggressively its applications and defend its patents against
third parties, there can be no assurance that any of the Company's patent
applications relating to the technology used by the Company will result in the
issuance of patents or that, if issued, such patents will not be challenged,
invalidated or circumvented or will afford the Company protection against
competitors with similar technology. Should the Company become involved in any
litigation or interference proceedings regarding patent or other proprietary
rights, such litigation or interference proceedings may result in substantial
cost to the Company, regardless of outcome and, further, may adversely affect
TKT's ability to develop, manufacture and market its products and to form
strategic alliances.
The Company's technologies and potential products may conflict with patents
which have been or may be granted to competitors, universities or others. As the
biotechnology industry expands and more patents are issued, the risk increases
that the Company's technologies and potential products may give rise to claims
that they infringe the patents of others. Such other persons could bring legal
actions against the Company claiming damages and seeking to enjoin
commercialization of a product or use of a technology. If any such actions are
successful, in addition to any potential liability for damages, the Company
could be required to obtain a license in order to continue to use such
technology or to manufacture or market such product or could be required to
cease using such product or technology. There can be no assurance that the
Company would prevail in any such action or that any license required under any
such patent would be made available or would be made available on acceptable
terms. The Company believes that there may be significant litigation in the Gene
Activation and gene therapy fields regarding patent and other intellectual
property rights. If the Company becomes involved in such litigation, it could
consume substantial Company resources.
To further protect its trade secrets and other proprietary property, the
Company requires all employees, Scientific Advisory Board members, consultants
and collaborators having access to such proprietary property to execute
confidentiality and invention rights agreements in favor of the Company before
beginning their relationship with the Company. While such arrangements are
intended to enable the Company to better
36
<PAGE> 38
control the use and disclosure of its proprietary property and provide for the
Company's ownership of proprietary technology developed on its behalf, they may
not provide meaningful protection for such property and technology in the event
of unauthorized use or disclosure.
Licensing. The Company has entered into several licensing agreements under
which it has acquired certain worldwide rights to use proprietary genes and
related technology in its non-viral gene therapy products: The Company has a
nonexclusive license for certain non-viral gene therapy applications from GI
with respect to GI's patented Factor VIII genes and a nonexclusive sublicense
for non-viral gene therapy applications from British Technology Group plc
("BTG") with respect to BTG's patented Factor IX gene. TKT's rights under these
gene licenses and sublicenses are for the term of the last to expire patent
included in the licensed patent rights, subject to earlier termination in the
event of the Company's failure to meet certain specified milestones. Although
the Company is not currently in default under any of these agreements, there can
be no assurance that such defaults will not occur in the future. Should such a
default occur and any of these licenses or sublicenses be terminated in the
future, the Company could lose the right to continue to develop one or more of
its potential products, which loss could have a material adverse effect upon the
Company's business.
COMPETITION
Gene Activation. At present, the Company considers its primary competition
with respect to its Gene Activation technology to be companies involved in the
current production of therapeutic proteins. These companies have obtained patent
protection covering many of the techniques used to produce commercially-marketed
proteins using conventional genetic engineering techniques. These patent rights
have served as an effective entry barrier in the $11 billion (1995) protein
therapeutics market. Several pharmaceutical and biotechnology companies have an
established presence in the field of therapeutic protein production. For
example, erythropoietin is marketed by Johnson & Johnson and Amgen, Inc. in the
U.S.; by Boehringer Mannheim GmbH and Johnson & Johnson in Europe; and by Sankyo
Company Ltd. and Chugai Pharmaceutical Co., Ltd. in Japan. These and other
competitors have substantially greater financial and other resources than the
Company, including larger research and development staffs and more experience
and capabilities in conducting research and development activities, testing
products in clinical trials, obtaining regulatory approvals and manufacturing,
marketing and distributing products. There can be no assurance that TKT will
succeed in developing and marketing technologies and products that are more
clinically efficacious and cost-effective than the more established treatments
or the new approaches and products developed and marketed by its competitors.
The Company believes that the primary competitive factors in the market for
therapeutic proteins may include product safety, efficacy, distribution channels
and price, and disease management services. In addition, the length of time
required for products to be developed and to obtain regulatory and in some
cases, reimbursement approval are important competitive factors. The
biotechnology industry is characterized by rapid and significant technological
change. Accordingly, the Company's success will depend in part on its ability to
respond quickly to medical and technological changes through the development and
introduction of new products. The Company believes it competes favorably with
respect to these factors, although there is no assurance that it will be able to
continue to do so.
Gene Therapy. The Company's gene therapy system will have to compete with
other gene therapy systems as well as with conventional methods of treating the
diseases and conditions targeted by the Company and new non-gene therapy
treatments which may be developed in the future.
A number of commercial entities, including major established biotechnology
and pharmaceutical companies, as well as development stage entities, currently
are involved in the field of human gene therapy. Additional competitors may
enter the field in the future as gene therapy becomes better established. Some
of these existing competitors have and certain of these potential competitors
may have, substantially greater financial, technical, scientific, marketing or
other capabilities and resources than are available to the Company. Smaller
companies may obtain access to such skills and resources through collaborative
arrangements with pharmaceutical companies or academic institutions. Moreover,
existing or potential competitors may possess or acquire patents or other rights
to genes or technology which are necessary or useful for certain
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<PAGE> 39
applications of the Company's gene therapies, thereby hampering or preventing
the Company from exploiting such applications. See "Risk
Factors -- Competition."
The Company is developing gene therapy products to address a variety of
diseases and conditions. For certain of the Company's potential products, an
important competitive factor may be timing of market entry. The speed with which
TKT can enter and complete human clinical trials and approval processes may
therefore be a significant competitive factor. The Company believes that product
efficacy, safety, reliability and price may also be important competitive
factors. The development by others of alternative or superior treatment methods
could render the Company's products obsolete or noncompetitive with respect to
some or all of these competitive factors. In addition, treatment methods not
clearly superior to the Company's could achieve greater market penetration
through competitors' superior sales, marketing or distribution capabilities. The
Company's competitive position also depends upon its ability to attract and
retain qualified personnel, obtain patent protection, secure licenses of
necessary genes and technology from third parties, or otherwise develop
proprietary products or processes and secure sufficient capital resources for
the typically substantial expenditures and period of time prior to commercial
sales of each product.
GOVERNMENT REGULATION
All the Company's products will require regulatory approval by U.S. and
foreign government agencies prior to commercialization in such countries. In
particular, protein therapeutics are subject to rigorous pre-clinical and
clinical testing, and other pre-market approval procedures administered by the
FDA and similar authorities in foreign countries. In addition, gene therapy is a
new technology, and regulatory approvals may be obtained more slowly than for
products produced using conventional technologies. In the U.S., various federal
and in some cases state and local, statutes and regulations also govern or
influence the manufacturing, labeling, storage, record keeping and marketing of
such products.
Obtaining approval from the FDA and other regulatory authorities for a
therapeutic product may take several years and involve substantial expenditures.
Moreover, ongoing compliance with applicable requirements can entail the
expenditure of substantial resources. Difficulties or unanticipated costs may be
encountered by the Company in its efforts to secure necessary governmental
approvals, which could delay or preclude the Company from marketing its
products.
The activities required before a new pharmaceutical agent may be marketed
in the U.S. begin with pre-clinical testing. Pre-clinical tests include
laboratory evaluation and animal studies to assess the potential safety and
efficacy of the product. The results of these studies must be submitted to the
FDA as part of an Investigational New Drug Application ("IND"), which must be
reviewed and cleared by the FDA before proposed clinical testing can begin.
Clinical trials are conducted in accordance with specific federal regulations
(known as Good Clinical Practices). The clinical protocols detail the objectives
of the study, the parameters to be used to monitor safety and the efficacy
criteria to be evaluated. Each clinical protocol must be submitted to the FDA as
part of an IND. Further, each clinical study must be conducted under the
auspices of an independent Institutional Review Board ("IRB") at the institution
at which the study will be conducted. Each IRB will consider, among other
things, ethical factors, the safety of human subjects, and informed consent.
Clinical trials are typically conducted in three sequential phases. In
Phase I, clinical trials typically include a small number of subjects (often
healthy volunteers) to determine the early safety profile and the pattern of
drug distribution and metabolism. In Phase II, clinical trials are conducted
with larger groups of patients afflicted with a specific disease in order to
further test safety, and determine optimal dose amounts, dose schedules, and
routes of drug administration. In Phase III, larger-scale, multi-center,
comparative clinical trials are conducted with patients afflicted with a target
disease in order to provide enough data for a valid statistical test of efficacy
and safety required by the FDA and others. In the case of products for life-
threatening disease, the initial human testing may be done in patients rather
than healthy volunteers. Since these patients are already afflicted with the
target disease, it is possible that such studies may provide results
traditionally obtained in Phase II trials. These trials are frequently referred
to as Phase I/II trials. Although some of the Company's products are being
considered for patients with life-threatening diseases, there can be no
assurance that the FDA will allow Phase I/II studies, or that if Phase I/II
studies are permitted, that this
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<PAGE> 40
study design would shorten the development time for any of the Company's
products. The FDA receives reports on the progress of each phase of clinical
testing and it may require the modification, suspension, or termination of
clinical trials if an unwarranted risk is presented to patients, or if the
design of the trial is insufficient to meet its stated objectives.
After completion of clinical trials of a new product, FDA marketing
approval must be obtained. The Company expects that its products will be
regulated as biologics. Traditionally, both a Product License Application
("PLA") and an Establishment License Application ("ELA") have been required
prior to commercial marketing. The Company expects that both licenses will be
required for its gene therapy products. Recently the FDA has announced its
intention to simplify the licensing process for well-characterized biologics,
and put forth a regulatory mechanism to allow for a single license application,
a Biologics License Application ("BLA"), for well-characterized biologics. The
Company expects that its Gene Activation products will fall into this category
and require a single BLA. License applications submitted to the FDA have
historically taken, typically, two to five years to receive approval. In 1992,
at the same time of passage of the Prescription Drug User Fee Act, the FDA
committed to reviewing and acting on a complete license application within 12
months of the submission date. Nevertheless, if FDA determines that an
application is incomplete, or that important issues are unanswered by the data
in the application, approval times could be delayed significantly.
Notwithstanding the submission of relevant data, the FDA may ultimately decide
that the license application does not satisfy its criteria for approval. Even if
FDA clearances are obtained, a marketed product is subject to continual review.
Later discovery of previously unknown problems or failure to comply with the
applicable regulatory requirements may result in restriction on the marketing of
a product or withdrawal of the product from the market as well as possible civil
or criminal sanctions. In addition, the manufacturing facility for the Company's
products will be subject to FDA inspection for adherence to CGMP prior to
marketing clearance and periodically following approval. This will require the
Company to observe rigorous manufacturing specifications.
The Company believes that many of its Gene Activation products are likely
to be reviewed within FDA by its Center for Biological Evaluation and Research
("CBER"). CBER currently has no "bioequivalence" pathway for the rapid approval
of closely-related biologics and the Company believes that its Gene Activated
products will be treated as new biologic entities and require a complete
regulatory and clinical program. However, these programs will often have the
advantage of focusing on Gene Activated products with conventional, previously
approved, counterparts that are well-known to regulatory authorities around the
world (in contrast to a typical new chemical entity, which has no related
history concerning its safety and efficacy in humans). In April 1996, the FDA
issued a document entitled "FDA Guidance Concerning Demonstration of
Comparability of Human Biological Products, Including Therapeutic
Biotechnology-derived Products." This document describes situations in which a
manufacturer can establish the equivalence of a modified version of their own
product using physical, chemical, and/or pharmacological methods, without the
need for additional clinical trials. This is a departure from traditional
doctrine, in which biologics were deemed too complex to compare using such
methods, and reflects the increased purity of many products and technical
advances in the analytical methods currently in use. Although an approval
pathway for bioequivalent biologics does not exist, the Company believes that
increased analytical sophistication and enhanced purity of biologic products
will facilitate the development and regulatory review of its Gene Activation
products.
In addition to regulations enforced by FDA, the Company is also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other present and potential future federal, state or local
regulations. The Company's research and development involves the controlled use
of hazardous materials, chemicals, biological materials and various radioactive
compounds. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by state
and federal regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company.
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<PAGE> 41
For marketing outside the U.S., the Company also is subject to foreign
regulatory requirements governing human clinic trials and marketing approval for
products. The requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary greatly from country to country.
FACILITIES
TKT currently leases approximately 56,000 square feet of laboratory and
office space in a building located in Cambridge, Massachusetts. Approximately
8,000 square feet are utilized as office space, 43,000 square feet are utilized
for laboratory space and 5,000 square feet are dedicated to manufacturing of the
Company's gene therapy products for clinical testing. The Company has no
manufacturing facility for protein production and, under the agreements between
the Company and HMRI for the commercialization of GA-EPO, HMRI is responsible
for the manufacture of this product. The Company believes that its existing
facilities are adequate to meet its current needs. The Company also believes
that its current facilities comply with all material zoning requirements and
that it has all necessary permits and authorizations for such facilities.
LEGAL PROCEEDINGS
The Company is currently involved in a patent interference proceeding
before the United Stated Patent and Trademark office. See "Patents, Proprietary
Rights and Licenses." The Company is not a party to any other legal proceedings.
EMPLOYEES
As of August 15, 1996, the Company had 117 full-time employees, including
88 scientists and 29 development, manufacturing and administrative personnel.
The Company's employees are not covered by any collective bargaining agreement.
TKT considers relations with its employees to be good.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors, executive officers and key employees of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- ----------------------------------------------------------
<S> <C> <C>
Richard F Selden, M.D., Ph.D. ........ 37 President; Chief Executive Officer; and Director
Christoph M. Adams, Ph.D. ............ 39 Vice President, Business Development
Kurt Gunter, M.D. .................... 41 Vice President, Clinical and Regulatory Affairs
Anthony R. Hall....................... 57 Vice President, Finance and Administration; Chief
Financial Officer
Douglas A. Treco, Ph.D. .............. 38 Vice President, Director of Research and Development
Andrea T. Jeffrey..................... 46 Director of Operations
Robert A. Pazzano, Pharm.D. .......... 49 Director of Manufacturing
William R. Miller(1)(2)............... 68 Director
Rodman W. Moorhead, III(1)............ 52 Director; Chairman of the Board
James E. Thomas(2).................... 36 Director; Secretary
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Richard F Selden, M.D., Ph.D. is the founder of TKT. He has served as Chief
Scientific Officer, Chairman of the Scientific Advisory Board and a Director
since the Company's inception in 1988 and as President and Chief Executive
Officer since June 1994. Prior to founding TKT, Dr. Selden was a post-doctoral
fellow in the Department of Genetics at Harvard Medical School and a pediatric
resident at Massachusetts General Hospital. From 1989 to 1992, Dr. Selden held
an academic appointment as Instructor in the Harvard Medical School Department
of Pediatrics. He received an A.B. in Biology from Harvard College, an A.M. in
Biology from the Harvard University Graduate School of Arts and Sciences, a
Ph.D. in genetics from the Division of Medical Sciences at Harvard Medical
School and an M.D. from Harvard Medical School.
Christoph M. Adams, Ph.D. has served as Vice President, Business
Development of the Company since March 1994. From May 1991 to February 1994, Dr.
Adams was Business Development Manager and from 1989 to 1991, he was
International Product Manager at the Pharmaceuticals Division of Ciba-Geigy AG
in Basel, Switzerland. Dr. Adams received a Ph.D. in Organic Chemistry from the
University of Zurich and an M.B.A. from INSEAD, Fontainebleau, France.
Kurt Gunter, M.D. has served as a consultant to the Company since September
1993 and as Vice President, Clinical and Regulatory Affairs since July 1996.
From September 1993 to June 1996, Dr. Gunter worked at Children's National
Medical Center, most recently as Director of Stem Cell Processing, Hematology
and Blood Donor Center/Hematology Division. From 1988 to 1993, Dr. Gunter worked
at the Center for Biologics Evaluation and Research of the U.S. Food and Drug
Administration as Acting Deputy Director, Division of Cellular Therapies and
Gene Therapies and Chief, Cytokine and Cell Biology Branch. He received a B.S.
in Biological Sciences from Stanford University and an M.D. from the University
of Kansas School of Medicine.
Anthony R. Hall has served as the Vice President, Finance and
Administration, and Chief Financial Officer since June 1996. From September 1989
until May 1994, Mr. Hall served as Vice President, Fiduciary and Risk
Management, of Bristol-Myers Squibb Company ("BMS"), a pharmaceutical company
and from May 1994 to May 1996 as a consultant to BMS. From 1984 to 1989, Mr.
Hall served as Corporate Vice President and Assistant Treasurer of Bristol-Myers
Company. Mr. Hall is a Fellow of the Chartered Association of Certified
Accountants of the United Kingdom and received a B. Comm. from the University of
Capetown.
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<PAGE> 43
Douglas A. Treco, Ph.D. has directed research at the Company since its
inception in 1988. Since June 1993, he has served as Vice President, Director of
Research and Development. From December 1990 to June 1993, he served as Director
of Research. From 1988 to 1990, he served as Manager of Research. From 1985 to
1988, Dr. Treco was a Research Fellow in Genetics, Department of Molecular
Biology, Massachusetts General Hospital and Department of Genetics, Harvard
Medical School. He received a Ph.D. in Biochemistry and Molecular Biology from
the State University of New York, Stony Brook.
Andrea T. Jeffrey has served as Director of Operations of the Company since
July 1993. From January 1992 to June, 1993, Ms. Jeffrey was Facility Director at
the Center for Blood Research at Harvard Medical School. From 1982 to 1991, she
was Director of Laboratory Services at BioTechnica International, a
biotechnology company in Cambridge, Massachusetts. Ms. Jeffrey received a B.S.
in Biology from Wheaton College.
Robert A. Pazzano, Pharm. D. has served as Director of Manufacturing of the
Company since October 1993. From 1988 to 1993, Mr. Pazzano was Director of
Manufacturing at Organogenesis Inc. and, from 1981 to 1988, he held related
positions at Damon Biotech, Inc., Medchem Products, Inc. and Delmed, Inc. Mr.
Pazzano received a B.S. in Pharmacy and a Pharm.D. in Industrial Pharmacy from
Massachusetts College of Pharmacy, and an M.S. in Pharmaceutical Business
Administration from Northeastern University.
William R. Miller has served as a Director since September 1991. In January
1991, he retired as Vice Chairman of the Board of Directors of BMS, which
position he had held since 1985. Mr. Miller was a member of the Board of
Pharmaceutical Manufacturers Associations from 1981 to 1990 and served as
Chairman from 1986 to 1987. He was Vice President and a member of the council of
the International Federation of Pharmaceutical Manufacturers Associations from
1988 until 1990. Mr. Miller is a member of the Board of Trustees of the Cold
Spring Harbor Laboratory and is a director of Imclone Systems, Inc., Isis
Pharmaceuticals, Inc., St. Jude Medical, Inc., and Westvaco Corporation, as well
as several private companies. In addition, Mr. Miller serves as Chairman of the
Board of Directors of SIBIA Neurosciences, Inc. and Vion Pharmaceuticals, Inc.
Rodman W. Moorhead, III has served as Chairman of the Board of Directors
since May 1992. Since 1973, he has been with E.M. Warburg, Pincus & Co., Inc.
("Warburg, Pincus"), a private investment firm, where he currently serves as a
Senior Managing Director. He is also a director of NeXstar, Inc., Value Health,
Inc. and a number of privately held companies.
James E. Thomas has served as a Director and Secretary of the Company since
May 1992. Mr. Thomas has served as a Managing Director of Warburg, Pincus since
January 1994, and prior to that served as Vice President from 1991 to 1994 and
Associate from 1989 to 1991. Mr. Thomas is also a director of Anergen, Inc.,
Celtrix Pharmaceuticals, Inc., Menley & James Laboratories, Inc. and a number of
privately held companies.
The Company currently has four Directors. All Directors hold office until
the next annual meeting of stockholders or until their successors are duly
elected and qualified. The officers serve until the next annual meeting of the
Board of Directors or until their earlier resignation or removal.
All of the current members of the Board of Directors were elected pursuant
to an Amended and Restated Voting Rights Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries of each employee of the Company entitled to
a salary in excess of $150,000 and which exercises the authority of the Board
with respect to all incentive or stock option plans or arrangements established
by the Company. The Company also has an Audit Committee, which reviews the
results and scope of the audit and other services provided by the Company's
independent auditors.
DIRECTOR COMPENSATION
In general, the Company does not compensate Directors for service as
Directors but reimburses them for expenses incurred in connection with
attendance at meetings of the Board of Directors and committees
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<PAGE> 44
thereof. Mr. Miller is paid $1,000 for attendance at each meeting of the Board.
For the fiscal year ending December 31, 1995, Mr. Miller earned $3,000 in
Director's fees.
SCIENTIFIC ADVISORY BOARD
The Company is assisted in its research and development activities by its
Scientific Advisory Board ("SAB"), composed of leading scientists who meet
several times each year to review the Company's research and development
activities, discuss technological advances relevant to the Company and its
business, and otherwise assist the Company.
In addition to Dr. Selden, who serves as Chairman of the Scientific
Advisory Board, and Dr. Treco, the following persons are members of the
Scientific Advisory Board:
Bruce Furie, M.D. is Professor of Medicine and Biochemistry at Tufts
University School of Medicine. Chief of the Division of Hematology-Oncology at
New England Medical Center, Director of the Hemophilia Center at New England
Medical Center, and Co-Director of the Center for Hemostasis and Thrombosis
Research at New England Medical Center. He received an M.D. from the University
of Pennsylvania School of Medicine in 1970. Dr. Furie studies the molecular
basis of blood coagulation and related clinical disorders, including hemophilia.
Barbara C. Furie, Ph.D. is Professor of Medicine and Biochemistry at Tufts
University School of Medicine, Co-Director of the Center for Hemostasis and
Thrombosis Research at New England Medical Center, and a member of the Division
of Hematology-Oncology, New England Medical Center. She received a Ph.D. in
Chemistry from the University of Pennsylvania in 1970. Dr. Furie studies the
molecular basis of blood coagulation and platelet membrane cell adhesion
molecules.
Walter Gilbert, Ph.D. is the Carl M. Loeb University Professor at Harvard
University. He served as Chairman of the Department of Cellular and
Developmental Biology at Harvard University from 1987 to 1993. In 1980, Dr.
Gilbert (together with two others) received the Nobel Prize for Chemistry for
his work in developing one of the two rapid DNA sequencing techniques that have
provided a major stimulus to the study of gene structure. Dr. Gilbert received a
Ph.D. from Cambridge University in 1957. His current research interests include
molecular biology, molecular evolution and intron/exon gene structure.
Howard M. Goodman, Ph.D. is Professor of Genetics at Harvard Medical School
and Chief of the Department of Molecular Biology at Massachusetts General
Hospital. Dr. Goodman was a Professor of Biochemistry at the University of
California, San Francisco from 1970 to 1981. He received a Ph.D. in Biophysics
from Massachusetts Institute of Technology in 1964. Dr. Goodman has previously
studied the molecular biology of hormones and peptides and is currently engaged
in a plant genome project.
David D. Moore, Ph.D. is Associate Professor of Genetics in the Department
of Molecular Biology at Massachusetts General Hospital and in the Department of
Genetics at Harvard Medical School. He received a Ph.D. in Molecular Biology
from The University of Wisconsin, Madison in 1979. Dr. Moore studies the
molecular basis of hormone action and gene regulation in endocrine systems.
Gordon H. Sato, Ph.D. is Director Emeritus of the W. Alton Jones Cell
Science Center in Lake Placid, New York. Dr. Sato was Director of the Cell
Science Center from 1983 until his retirement in 1993. Dr. Sato received a Ph.D.
in Biophysics from the California Institute of Technology in 1955. He was a
Professor in the Graduate Department of Biochemistry at Brandeis University from
1958 to 1969, and he was a Professor of Biology at the University of California
San Diego from 1969 to 1983. Dr. Sato was elected to the National Academy of
Sciences in 1984. Dr. Sato has studied the effects of hormones and growth
factors on cells in culture, and he established the first differentiated
mammalian cell lines.
Jack W. Szostak, Ph.D. is Professor of Genetics in the Department of
Molecular Biology at Massachusetts General Hospital and the Department of
Genetics at Harvard Medical School. He received a Ph.D. in Biochemistry from
Cornell University in 1977. Dr. Szostak studies the mechanism of ribozyme
function.
Except for Drs. Selden and Treco, each member of the SAB has entered into a
consulting agreement with the Company covering the terms of such person's
position as a consultant to the Company and member of the
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<PAGE> 45
SAB. All scientific advisors own shares of Common Stock of the Company, some of
which shares are subject to vesting. All of the Company's scientific advisors
(other than Drs. Selden and Treco) are employed by employers other than the
Company and may have other commitments to, or consulting or advisory contracts
with, other entities which may conflict or compete with their obligations to the
Company. Generally, scientific advisors are not expected to devote a substantial
portion of their time to Company matters.
EXECUTIVE COMPENSATION
The table below sets forth certain compensation information for the Chief
Executive Officer of the Company and the three other most highly compensated
executive officers of the Company whose salary and bonus for the fiscal year
ended December 31, 1995 exceeded $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) RESTRICTED
-------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) AWARDS($)(2) COMPENSATION($)(3)
- --------------------------------------- -------- ------- ------------ ------------------
<S> <C> <C> <C> <C>
Richard F Selden....................... $200,000 $86,000(4) -- $ 4,659
President and Chief Executive Officer
Douglas A. Treco....................... 134,000 30,000 -- 3,125
Vice President, Director of Research
and Development
Christoph M. Adams..................... 142,000 17,500 -- 21,193(5)
Vice President, Business Development
Robert A. Pazzano...................... 106,000 3,000 -- 3,241
Director of Manufacturing
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total amount of annual salary and bonus for the
executive officer for the year ended December 31, 1995.
(2) No shares of restricted stock were awarded in the year ended December 31,
1995. As of December 31, 1995, Dr. Treco held an aggregate of 17,357 shares
of unvested restricted stock valued at $114,615. The value of the restricted
stock held by Dr. Treco at December 31, 1995 was determined by multiplying
the fair market value of the Common Stock determined by the Board of
Directors on the date of grant ($6.60) by the number of shares held and
subtracting the aggregate purchase price paid by Dr. Treco for such shares.
No dividends were paid in 1995 on the outstanding shares of restricted
stock.
(3) Includes the following: (a) the Company's contributions for Dr. Selden, Dr.
Treco, Dr. Adams and Mr. Pazzano under the Company's 401(k) Plan in the
amounts of $3,750, $2,945, $3,750 and $2,725, respectively; (b) the taxable
portion of group term life insurance premiums paid by the Company for Dr.
Selden, Dr. Treco, Dr. Adams and Mr. Pazzano in the amounts of $180, $180,
$180 and $516, respectively.
(4) Bonus earned in the year ended December 31, 1995 was paid in 1996.
(5) Includes reimbursement by the Company for costs associated with relocation.
44
<PAGE> 46
Options Grants. The Company did not grant any stock options to the Named
Executive Officers during the fiscal year ended December 31, 1995.
In January 1996, the Company granted nonqualified stock options to Dr.
Selden (100,000 shares), Dr. Treco (20,000 shares), Dr. Adams (5,000 shares) and
Mr. Pazzano (4,000 shares) at an exercise price of $.01 per share. All such
options vest in equal annual installments over six years on the anniversary of
the grant date and expire on January 17, 2006.
Year-End Option Table. The following table sets forth certain information
concerning exercisable and unexercisable stock options as of December 31, 1995.
None of the Named Executive Officers exercised options during the fiscal year
ended December 31, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------------------- ------------------------------- -------------------------
<S> <C> <C>
Richard F Selden..................... -- --
Douglas A. Treco..................... -- --
Christoph M. Adams................... 8,570/42,858 $119,922 / $599,679
Robert A. Pazzano.................... 5,143/10,286 $ 71,960 / $143,920
</TABLE>
- ---------------
(1) There was no public trading market for the Common Stock as of December 31,
1995. Accordingly, in accordance with the rules of the Securities and
Exchange Commission, these values have been calculated based on the assumed
initial public offering price of $14.00 per share (the mid-point of the
filing range) less the aggregate exercise price.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with certain of its
executive officers, including Drs. Selden, Adams and Treco and Mr. Pazzano. Each
employment agreement contains provisions for establishing the annual base salary
of each executive officer. Pursuant to the terms of the employment agreements,
the 1996 annual base salary for each of Drs. Selden, Treco and Adams and Mr.
Pazzano has been established at $210,000, $152,000, $152,000 and $111,000,
respectively. Under the terms of such employment agreements, if the employment
of Drs. Selden, Treco or Adams is terminated without cause, the Company is
required to pay to such executive severance payments at the executive's base
salary rate for 18 months in the case of Dr. Selden and 12 months in the case of
Drs. Treco and Adams (a "Severance Period"), to be reduced by an amount equal to
the amount of any other compensation earned by such individual during such
Severance Period. The executive shall be bound by certain non-compete
obligations for two years after termination of employment or such longer period
during which severance payments are paid under the employment agreement.
1993 LONG-TERM INCENTIVE PLAN
The Company's 1993 Long-Term Incentive Plan (the "1993 Incentive Plan") was
approved by the Board of Directors and the Company's stockholders in June 1993.
The 1993 Incentive Plan provides for awards in the form of stock options, stock
appreciation rights, restricted stock, long-term performance awards and stock
grants. Stock options may include options intended to qualify for preferential
tax treatment ("Incentive Stock Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and nonstatutory stock options
that do not qualify for such treatment. Employees, consultants and advisors of
the Company are eligible for awards under the 1993 Incentive Plan, but Directors
who are not employees of or consultants to the Company are not eligible for such
awards.
45
<PAGE> 47
The 1993 Incentive Plan is administered by the Compensation Committee,
which has complete authority to make awards thereunder. No member of the
Compensation Committee is eligible to receive an award under the 1993 Incentive
Plan, and no individual is eligible for membership on the Compensation Committee
within one year of having received an award under the 1993 Incentive Plan.
As amended to date, a total of 2,250,000 shares of Common Stock have been
reserved for issuance under the 1993 Incentive Plan. At August 15, 1996, options
to purchase 875,243 shares were outstanding under the 1993 Incentive Plan.
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Company's 1993 Non-Employee Directors' Stock Option Plan (the "1993
Directors' Plan") was approved by the Board of Directors and the Company's
stockholders in June 1993. The 1993 Directors' Plan provides for automatic
option grants to each Director who (i) is not an employee of the Company or of
any subsidiary, affiliate or five or more percent stockholder of the Company and
(ii) does not own or hold any Common Stock which was purchased prior to the
approval of the 1993 Directors' Plan and which remains at the time the Director
is being considered for eligibility for any specific grant under the 1993
Directors' Plan subject to substantial risk of forfeiture under an agreement
entered into with the Company. Any Director who becomes such an employee shall
cease to be eligible for any further option grants under the 1993 Directors'
Plan while such an employee, but shall not, by reason of becoming such an
employee, cease to be eligible to retain options previously granted under the
1993 Directors' Plan.
Under the 1993 Directors' Plan, each eligible Director will receive an
option grant on the date immediately following each annual meeting of
stockholders. Each option grant shall consist of an option to acquire an
aggregate of 6,750 shares of Common Stock exercisable at a price equal to the
fair market value of the Common Stock at the time of the grant and vesting over
a period of three years. The 1993 Directors' Plan will be administered by the
Compensation Committee.
A total of 231,429 shares of Common Stock have been reserved for issuance
under the 1993 Directors' Plan. To date, no awards have been made under the 1993
Directors' Plan. None of the present Directors are currently eligible to receive
options under the 1993 Directors' Plan.
401(K) PLAN
In January 1992, the Company established the Company's 401(k) plan (the
"401(k) Plan") covering all full-time employees. Generally, an eligible employee
may become a participant in the 401(k) Plan on the first day of the month next
following completion of six months of employment. Pursuant to the 401(k) Plan,
an employee may elect to reduce his or her current compensation by up to 15
percent (subject to an overall dollar limitation under the Code of $9,240 of
1995) and have the amount of such reduction contributed to the 401(k) Plan. The
401(k) Plan allows the Company to make matching contributions to the Plan, and
the Company currently makes matching contributions equal to 50 percent of the
first five percent contributed to the 401(k) Plan by each employee during each
six month period. In 1995, the Company's matching contributions totalled
$84,456. The 401(k) Plan is intended to qualify under Section 401 of the Code so
that contributions by employees or the Company, and income earned thereon, are
not taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by the Company will be deductible by the Company when made. The
administrator of the 401(k) Plan invests each employee's account at the
direction of each such employee, who can choose among certain investment
alternatives provided. As of December 31, 1995, 86 of the 95 eligible employees
were enrolled in the 401(k) Plan.
LIMITATIONS ON DIRECTOR'S LIABILITY AND INDEMNIFICATION
The Company's Restated Certificate of Incorporation to be filed with the
State of Delaware upon the closing of this offering and Restated By-laws to be
effective upon the closing of this offering provide that the Company will
indemnify its directors and officers and may indemnify its employees and agents
to the fullest extent permitted by the Delaware General Corporation Law (the
"Delaware Law"). In addition, the Company's Restated Certificate of
Incorporation, as amended, provides that, to the fullest extent permitted by
46
<PAGE> 48
Delaware Law, the Directors will not be personally liable to the Company and its
stockholders for monetary damages for breach of fiduciary duty as Directors.
This provision in the Restated Certificate of Incorporation does not eliminate
the fiduciary duty as a Director, and in appropriate circumstances equitable
remedies such as an injunction or other forms of non-monetary relief would
remain available under Delaware Law. Each Director will continue to be subject
to liability for breach of the Director's duty of loyalty to the Company for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, for any willful or negligent violation concerning
the unlawful payment of dividends or the unlawful purchase or redemption of
stock, and for any transaction from which the Director derived any improper
personal benefit. This provision also does not affect a Director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors.
47
<PAGE> 49
CERTAIN TRANSACTIONS
Mr. Rodman W. Moorhead III and Mr. James E. Thomas, each a general partner
of Warburg, Pincus & Co., the sole general partner of Warburg, Pincus Capital
Company, L.P. ("Warburg"), and Dr. Richard Selden, the President and Chief
Executive Officer of the Company, were elected to the Board of Directors of the
Company pursuant to the terms of an Amended and Restated Voting Rights
Agreement, dated November 3, 1993 and amended on May 18, 1994, March 1, 1995,
October 26, 1995, July 10, 1996, and August 7, 1996, by and among the Company
and certain stockholders named therein (the "Voting Rights Agreement"). Upon the
effectiveness of the Registration Statement of which this Prospectus is a part,
this Voting Rights Agreement will be amended to provide that (i) so long as
Warburg owns beneficially at least 20% of the outstanding stock of the Company,
the stockholders named in the Voting Rights Agreement shall nominate for
election as directors of the Company two (2) persons designated by Warburg and
(ii) so long as Warburg owns beneficially at least 10% of the outstanding stock
of the Company, the stockholders named in the Voting Rights Agreement shall
nominate for election as directors of the Company one (1) person designated by
Warburg.
Mr. William R. Miller was initially elected to the Board of Directors in
1991 pursuant to a Letter Agreement, dated September 1, 1991, by and between Mr.
Miller and the Company. The Company is not obligated to continue to nominate Mr.
Miller as a director pursuant to this letter agreement.
Since July 1988, the Company has sold in private financings shares of
Preferred Stock convertible into an aggregate of 8,613,792 shares of Common
Stock.
In July 1988 and May 1989, the Company sold to Warburg an aggregate of
3,000 shares of Class A Redeemable Convertible Preferred Stock at a price of
$1,000 per share. Pursuant to the Company's Restated Certificate of
Incorporation, as amended, all of such shares of Class A Redeemable Convertible
Preferred Stock will automatically convert into 214,286 shares of Common Stock
at an assumed initial public offering price of $14.00 per share (the mid-point
of the filing range) upon the closing of this offering.
In February 1990, the Company sold 3,000 shares of Class A Convertible
Preferred Stock at a price of $1,000 per share. Pursuant to the Company's
Restated Certificate of Incorporation, as amended, all of such shares of Class A
Convertible Preferred Stock will automatically convert into 214,285 shares of
Common Stock at an assumed initial public offering price of $14.00 per share
upon the closing of this offering.
In February 1992, the Company sold to Warburg an aggregate of 21,359 shares
of Class B Convertible Preferred Stock. Pursuant to the Company's Restated
Certificate of Incorporation, as amended, all of such shares of Class B
Convertible Preferred Stock will automatically convert into 1,261,979 shares of
Common Stock upon the closing of this offering.
In November 1993, the Company sold to Warburg an aggregate of 625,000
shares of Class C Convertible Preferred Stock. Pursuant to the Company's
Restated Certificate of Incorporation, as amended, all of such shares of Class C
Convertible Preferred Stock will automatically convert into 803,571 shares of
Common Stock upon the closing of this offering.
In May 1994 and March 1995, the Company entered into two License Agreements
(the "License Agreements") with HMRI (formerly named Marion Merrell Dow Inc.)
relating to joint research and development programs by the Company and HMRI (the
"Programs"). Under the License Agreements, TKT will receive payments from HMRI
upon the attainment of various development and commercialization milestones and
royalty payments from HMRI based on sales of products developed under the
Programs. In connection with the first License Agreement, HMRI purchased 280,367
shares of the Company's Class D Convertible Preferred Stock at a price per share
of $17.83 for an aggregate purchase price of $5,000,000. Pursuant to the
Company's Restated Certificate of Incorporation, as amended, all of such shares
of Class D Convertible Preferred Stock will automatically convert into 455,680
shares of Common Stock upon the closing of this offering. In connection with the
second License Agreement, HMRI purchased 523,560 shares of the Company's Class E
Preferred Stock at a price per share of $19.10 for an aggregate purchase price
of $10,000,000. Pursuant to the Company's Restated Certificate of Incorporation,
as amended, all of such shares will automatically convert into 673,148 shares of
Common Stock upon the closing of this offering.
48
<PAGE> 50
Pursuant to the provisions of the Class D Preferred Stock Purchase
Agreement, at the closing of this offering, the Company agreed to sell to HMRI,
and HMRI agreed to purchase, at the initial public offering price, that number
of shares of Common Stock of the Company equal to $5,000,000 divided by the
initial public offering price. Accordingly, upon the closing of this offering,
TKT will sell to HMRI 357,143 shares of Common Stock at the assumed initial
public offering price of $14.00 per share (the mid-point of the filing range)
for aggregate consideration of $5,000,000. The actual number of shares will be
determined by dividing $5,000,000 by the initial public offering price. In
addition, with respect to such shares, the Company intends to grant to HMRI one
demand registration right exercisable after the expiration of the lock-up
agreements on substantially the same terms and conditions as those contained in
the Registration Rights Agreement by and among the Company and certain
stockholders named therein.
In December 1995, the Company sold to HMRI an aggregate of 564,286 shares
of Class F Convertible Preferred Stock. Pursuant to the Company's Restated
Certificate of Incorporation, as amended, all of such shares of Class F
Convertible Preferred Stock will automatically convert into 725,510 shares of
Common Stock upon the closing of this offering.
Holders of certain shares of Common Stock are entitled to certain
registration rights with respect to such shares. See "Description of Capital
Stock -- Registration Rights."
The Company believes that all transactions with affiliates have been made
on terms at least as favorable to the Company as could have been made for
similar transactions with unrelated third parties.
49
<PAGE> 51
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 15, 1996 as adjusted to
reflect the sale of the shares offered hereby: (i) by each person known by the
Company to beneficially own more than 5% of its Common Stock; (ii) by each
Director of the Company; (iii) by each Named Executive Officer; and (iv) by all
executive officers and Directors as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE OWNERSHIP
OWNED PRIOR TO -------------------------------------
NAME OFFERING(1) BEFORE OFFERING AFTER OFFERING(2)
- ------------------------------------------------- ------------------- --------------- -----------------
<S> <C> <C> <C>
Warburg, Pincus Capital.......................... 5,957,781 41.7% 34.7%
Company, L.P.(3)
466 Lexington Avenue
New York, NY 10017
Hoechst Marion Roussel, Inc...................... 1,854,338 13.4% 13.3%(4)
9300 Ward Parkway
Kansas City, MO 64114
Biotech Target, S.A.............................. 1,168,831 8.5% 7.0%
c/o BB Biotech AG
c/o Bellevue Asset Management AG
Grundstrasse 12
CH-6364 Rotkreuz
Switzerland
Christoph M. Adams(5)............................ 17,142 * *
William R. Miller................................ 28,928 * *
Rodman W. Moorhead, III(6)(7).................... 5,957,781 41.7% 34.7%
Robert Pazzano(8)................................ 7,714 * *
Richard F Selden(9).............................. 806,876 5.8% 4.8%
James E. Thomas(6)(7)............................ 5,957,781 41.7% 34.7%
Douglas A. Treco(10)............................. 236,404 1.7% 1.4%
All Directors and executive officers as a group % %
(10 persons)(11)............................... 7,063,523 49.4 41.1
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
Amounts shown include shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within the 60-day period following
August 15, 1996. The inclusion herein of shares of Common Stock listed as
beneficially owned does not constitute an admission of beneficial
ownership. The number and percentage of outstanding shares of Common Stock
owned after this offering gives effect to the purchase by HMRI of $5
million of Common Stock to be sold at the initial public offering price
pursuant to the HMRI New Investment and assumes that none of the other
listed stockholders will purchase additional shares of Common Stock in this
offering. The number of shares deemed outstanding for purposes of
calculating these percentages includes 13,811,417 shares of Common Stock
outstanding as of August 15, 1996 (after giving effect to the conversion
into shares of Common Stock of all of the outstanding shares of Preferred
Stock) and any shares issuable upon exercise of outstanding stock options
held by the person or entity in question exercisable within the 60-day
period following August 15, 1996.
(2) Assumes no exercise of the Underwriters' overallotment option. The
percentages of ownership after the offering were determined by including
the shares of Common Stock being offered by the Company hereby including
357,143 shares to be sold to HMRI in the HMRI New Investment.
50
<PAGE> 52
(3) Includes 478,967 shares issuable upon the exercise of outstanding warrants
and 428,571 shares of Class A Redeemable Convertible Preferred Stock and
Class A Convertible Preferred Stock converted at an assumed initial public
offering price of $14.00 per share.
(4) Includes 357,143 shares to be purchased in the HMRI New Investment at the
assumed initial public offering price. See "Certain Transactions."
(5) Reflects 17,142 shares of Common Stock issuable upon exercise of
outstanding stock options exercisable within the 60-day period following
August 15, 1996.
(6) Includes 478,967 shares issuable upon exercise of the outstanding warrants,
owned by Warburg, Pincus Capital Company, L.P. ("Warburg"). The sole
general partner of Warburg is Warburg, Pincus & Co., a New York general
partnership ("WP"). E.M. Warburg, Pincus & Co., Inc. ("EMW"), through a
wholly-owned subsidiary, manages Warburg. WP owns all of the outstanding
stock of EMW and, as the sole general partner of Warburg, has a 20%
interest in the profits of Warburg. EMW owns 0.9% of the limited
partnership interests in Warburg. Lionel I. Pincus is the managing partner
of WP and may be deemed to control it. Rodman W. Moorhead, III, Chairman of
the Board of Directors, is a Senior Managing Director of EMW and a general
partner of WP. As such, Mr. Moorhead may be deemed to have an indirect
pecuniary interest in an indeterminate portion of the shares beneficially
owned by Warburg. All of the shares indicated as owned by Mr. Moorhead are
owned directly by Warburg and are included herein because of Mr. Moorhead's
affiliation with Warburg. Mr. Moorhead disclaims "beneficial ownership" of
these shares within the meaning of Rule 13d-3 under the Exchange Act. James
E. Thomas, a director of the Company, is a Managing Director of EMW and a
general partner of WP. As such, Mr. Thomas may be deemed to have an
indirect pecuniary interest in an indeterminate portion of the shares
beneficially owned by Warburg. All of the shares indicated as owned by Mr.
Thomas are owned directly by Warburg and are included herein because of Mr.
Thomas' affiliation with Warburg. Mr. Thomas disclaims "beneficial
ownership" of these shares within the meaning of Rule 13d-3 under the
Exchange Act.
(7) Stockholder's address is c/o Warburg, Pincus Capital Company, L.P., 466
Lexington Avenue, New York, New York 10017.
(8) Reflects 7,714 shares of Common Stock issuable upon exercise of outstanding
stock options exercisable within the 60-day period following August 15,
1996.
(9) Dr. Selden's address is c/o the Company, 195 Albany Street, Cambridge,
Massachusetts 02139.
(10) Includes 17,357 shares of Restricted Stock, of which 5,786 shares will vest
on each of June 16, 1997, 1998 and 1999.
(11) Includes 24,856 shares of Common Stock that are issuable upon exercise of
outstanding stock options exercisable within the 60-day period following
August 15, 1996.
51
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
After giving effect to the Company's Restated Certificate of Incorporation
of the Company to be filed upon the closing of this offering to authorize, among
other things, the elimination of the Class A Redeemable Convertible, Class A,
Class B, Class C, Class D, Class E, Class F and Class G Convertible Preferred
Stock, the authorized capital stock of the Company will consist of 30,000,000
shares of Common Stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share ("Preferred Stock").
The following summary contains an accurate description of the material
terms of the Company's Common Stock and Preferred Stock. Such summary is subject
to, and qualified in its entirety by, applicable law and by the provisions of
the Company's Restated Certificate of Incorporation and Restated By-laws, each
to be filed and effected, respectively, on or before the closing of this
offering and included as exhibits to the Registration Statement of which this
Prospectus is a part. See "Additional Information."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefor, subject to any preferential dividend. Upon
the liquidation, dissolution or winding-up of the Company, holders of Common
Stock are entitled to receive ratably the net assets of the Company available
for distribution after the payment of all debts and other liabilities of the
Company and subject to the prior rights of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered hereby will be, when issued and paid for, fully paid and nonassessable.
The rights, preferences and privileges of holders of Common Stock are subject
to, and may be adversely affected by, the rights of holders of shares of any
series of Preferred Stock that the Company may designate and issue in the
future.
As of August 15, 1996, there were 13,811,417 shares of Common Stock
outstanding held of record by 168 stockholders, after giving effect to
conversion of all outstanding shares of convertible Preferred Stock into an
aggregate of 8,613,792 shares of Common Stock effective upon the closing of this
offering. Based upon the number of shares of Common Stock outstanding as of that
date, and giving effect to (i) the issuance of the 2,500,000 shares of Common
Stock offered by the Company hereby (assuming no exercise of the Underwriters'
overallotment option), and (ii) the sale to HMRI of 357,143 shares of Common
Stock pursuant to the HMRI New Investment, there will be 16,668,560 shares of
Common Stock outstanding upon the closing of this offering. An additional
875,243 shares of Common Stock were issuable upon exercise of outstanding stock
options granted under the Company's 1993 Long-Term Incentive Plan.
WARRANTS
The Company has issued warrants (the "Warrants") to various entities
exercisable for an aggregate of 817,093 shares of Common Stock with exercise
prices ranging from $6.22 to $7.78 per share and a weighted average exercise
price of $7.53 per share, in each case subject to adjustment. The Warrants have
expiration dates ranging to November 3, 1998. The holders of the Warrants are
entitled to certain registration rights with respect to the Common Stock
issuable upon the exercise thereof. See "-- Registration Rights."
PREFERRED STOCK
The Board of Directors will be authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to 10,000,000 shares of Preferred Stock, in one or more series. Each
such series of Preferred Stock shall have such number of shares, designations,
preferences, voting powers, qualifications and special or relative rights or
privileges as shall be determined by the Board of Directors, which may include,
among others, dividend rights, voting rights, redemption and sinking fund
provisions, liquidation preferences, conversion rights and preemptive rights.
52
<PAGE> 54
The stockholders of the Company have granted the Board of Directors
authority to issue the Preferred Stock and to determine its rights and
preferences in order to eliminate delays associated with a stockholder vote on
specific issuances. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of the outstanding voting stock of the Company. Upon the
closing of this offering, no shares of Preferred Stock will be outstanding. The
Company has no present plans to issue any shares of Preferred Stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
such status with the approval of the Board of Directors and the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Company's Restated Certificate of Incorporation contains certain
provisions permitted under the Delaware Law relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty, except in certain circumstances involving
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions which involve intentional misconduct or a knowing violation of law.
The Company's Restated Certificate of Incorporation also contains provisions
obligating the Company to indemnify its directors and officers to the fullest
extent permitted by the Delaware Law. The Company believes that these provisions
will assist the Company in attracting and retaining qualified individuals to
serve as directors.
The Company's Restated Certificate of Incorporation and By-laws also
provide that any action required or permitted to be taken by the stockholders of
the Company may be taken only at a duly called annual or special meeting of
stockholders and that the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the Company's outstanding voting securities is required to amend
such provision. These provisions could have the effect of delaying until the
next stockholders' meeting stockholder actions which are favored by the holders
of a majority of the outstanding voting securities of the Company, particularly
since special meetings of stockholders may be called only by the Board of
Directors, the Chief Executive Officer or upon the request of the holders of 51%
of the Company's voting securities. These provisions may also discourage another
person or entity from making a tender offer for the Common Stock, because such
person or entity, even if it acquired a majority of the outstanding voting
securities of the Company, would be able to take action as a stockholder (such
as electing new directors or approving a merger) only at a duly called
stockholders' meeting, and not by written consent.
In addition, nomination for election to the Board of Directors at a meeting
of stockholders may be made either (i) by the Board of Directors or (ii) by a
stockholder who complies with certain notice provisions. The By-laws contain
similar advance notice provisions for stockholder proposals for action at
stockholder meetings. These provisions prevent stockholders from making
nominations for directors and stockholder proposals from the floor at any
stockholder meeting and require any stockholder making a nomination or proposal
to submit the name of the nominees for Board seats or such proposal, together
with certain information about the nominee or proposal prior to the meeting at
which such director is to be elected or action is to be taken. These provisions
ensure that stockholders have adequate time to consider nominations and
proposals before action is required, but they may also have the effect of
delaying action if the proper procedures are followed.
53
<PAGE> 55
REGISTRATION RIGHTS
Under the terms of a Registration Rights Agreement dated as of November 3,
1993 (as amended from time to time, the "Registration Rights Agreement") and
subject to certain conditions, certain stockholders are entitled to certain
rights with respect to registration under the Act of shares of Common Stock to
be received upon conversion of Preferred Stock ("Registrable Securities"). If
the Company proposes to register any of its securities under the Act, either for
its own account or for the account of other security holders, the Company is
required under the Registration Rights Agreement to use its best efforts to
include such holders' Registrable Securities in such registration, subject to
such reduction as may be required by the Company's underwriters. In addition,
subject to certain conditions, the holders of not less than 30% of the
Registrable Securities may require the Company on not more than two occasions to
file a registration statement under the Act with respect to such Registrable
Securities. See "Shares Eligible for Future Sale."
The holders of Registrable Securities have waived any rights to include any
Registrable Securities in this offering and have agreed not to exercise their
respective registration rights for a period of 180 days following the effective
date of this offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be Boston
EquiServe.
54
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering the Company will have 16,668,560
shares of Common Stock outstanding, assuming no exercise of any of the
outstanding options and warrants to purchase Common Stock outstanding as of
August 15, 1996. Of these shares, the 2,500,000 shares sold in this offering
will be freely tradeable without restriction or further registration under the
Securities Act, except for shares purchased by "affiliates" of the Company as
that term is defined in Rule 144 under the Securities Act.
The remaining 14,168,560 outstanding shares of Common Stock are deemed
"Restricted Shares" under Rule 144 and may not be resold except pursuant to an
effective registration statement or an applicable exemption from registration,
including Rule 144. Approximately 1,646,315 of these Restricted Shares will be
eligible for sale in the public market immediately after this offering pursuant
to Rule 144(k). Approximately 520,942 additional Restricted Shares will be
eligible for sale in the public market pursuant to Rule 144 or Rule 701 under
the Securities Act beginning 90 days after the effective date of this offering.
Beginning 180 days after the effective date of this offering, an additional
9,021,893 Restricted Shares will be eligible for sale pursuant to Rule 144 or
Rule 701 when the agreements between such holders and the Underwriters not to
sell such Restricted Shares expire. See "Underwriters." The remaining Restricted
Shares will become eligible from time to time thereafter upon the expiration of
the minimum two-year holding period under Rule 144 from the date such Restricted
Shares were acquired.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least two years from the later of the date such
Restricted Shares were acquired from the Company and (if applicable) the date
they were acquired from an Affiliate, is entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock (166,685 shares based on the number of
shares to be outstanding after this offering) or the average weekly trading
volume in the public market during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
and notice of sale and the availability of public information concerning the
Company. Affiliates may sell shares not constituting Restricted Shares in
accordance with the foregoing volume limitations and other restrictions, but
without regard to the two-year holding period.
Further, under Rule 144(k), if a period of at least three years has elapsed
between the later of the date the Restricted Shares were acquired from the
Company or an Affiliate of the Company, a holder of such Restricted Shares who
is not an Affiliate of the Company at the time of the sale and has not been an
Affiliate of the Company for at least three months prior to the sale would be
entitled to sell the shares immediately without regard to the volume
restrictions and other conditions describe above.
The Securities and Exchange Commission has proposed an amendment to Rule
144 which would reduce the holding period required for shares subject to Rule
144(k) to become eligible for sale in the public market from three years to two
years, and from two years to one year in the case of Rule 144. If this proposal
is adopted, approximately 2,167,257 Restricted Shares would be eligible for sale
in the public market immediately after this offering pursuant to Rule 144(k) and
approximately 30,374 additional Restricted Shares would be eligible for sale in
the public market pursuant to Rule 144 or Rule 701 under the Securities Act
beginning 90 days after the effective date of this offering. An additional
9,021,893 shares of Common Stock will become eligible for sale to the public
within 180 days after the Effective Date when agreements between certain
stockholders and the Underwriters not to sell such Restricted Shares expire.
The Company intends to file a registration statement under the Securities
Act to register all shares of Common Stock issuable under its stock option plan
as well certain other outstanding options and shares of Common Stock. This
registration statement is expected to be filed as soon as practicable after the
date of this Prospectus and is expected to become effective immediately upon
filing. Shares covered by that registration
55
<PAGE> 57
statement will be eligible for sale in the public market after the effective
date of such registration. Beginning 90 days after such effective date, it is
anticipated that approximately 48,754 shares of Common Stock will become
eligible for immediate resale upon the exercise of such options and upon
expiration of the lock-up agreements.
Rule 701 under the Securities Act provides an exemption from the
registration requirements of the Act for offer, and sales of securities issued
pursuant to certain compensatory benefit plans or written contracts of a company
not subject to the reporting requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any employee,
officer or director of or consultant to the Company who acquired shares of
Common Stock pursuant to the Company's 1993 Long-Term Incentive Plan or any
other written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permit non-affiliates to sell such shares without
having to comply with the public information, holding period, volume limitation,
or notice requirements of Rule 144 and permit Affiliates to sell their Rule 701
shares without having to comply with the holding period requirements of Rule 144
commencing, in each case, 90 days after the date of this Prospectus.
Rule 144A permits unlimited resales of Restricted Shares under certain
circumstances to Qualified Institutional Buyers, which are generally defined as
institutions with over $100 million invested in securities. Rule 144A allows
holders of Restricted Shares to sell their shares to such institutional buyers
without regard to any volume or other restrictions.
The Company, and the Company's officers, directors and other stockholders,
holding an aggregate of 8,901,523 shares of Common Stock, are expected to agree
that they will not, without the prior written consent of the representatives of
the Underwriters, offer for sale, sell, distribute or otherwise dispose of any
shares of Common Stock, or sell or grant options, rights or warrants with
respect to any shares of Common Stock, for a period of 180 days after the
effective date of this offering.
At the completion of this offering, certain persons and entities (the
"Rightholders") will be entitled to certain rights with respect to the
registration under the Act of a total of 8,613,792 shares of Common Stock (the
"Registrable Shares") under the terms of the Registration Rights Agreement. The
Registration Rights Agreement provides that in the event the Company proposes to
register any of its securities under the Act for its own account at any time or
times, subject to certain conditions or limitations, including the right of the
managing underwriter of any such offering to exclude for certain reasons some or
all of such Registrable Shares from such registration, the Rightholders shall be
entitled to include Registrable Shares in such registration. Subject to certain
conditions, at any time after the completion of this offering, Rightholders
holding at least 15% of the Registrable Shares have the right to require the
Company to file an unlimited number of registration statements on Form S-3,
provided that such right to request the Company to file a registration statement
on Form S-3 is not exercised more than once during any consecutive twelve month
period. In addition, in connection with the sale of 357,143 shares of Common
Stock in the HMRI New Investment, the Company intends to grant to HMRI one
demand registration right with respect to such shares exercisable after the
expiration of the lock-up agreement.
Prior to this offering, there has been no market for the Common Stock and
no precise predictions can be made as to the effect, if any, that market sales
of shares or the availability of such shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of Common Stock in the public market could adversely affect prevailing market
prices and could impair the Company's future ability to raise capital through
the sale of its equity securities. See "Risk Factors -- Shares Eligible for
Future Sale."
56
<PAGE> 58
UNDERWRITERS
Under the terms and subject to conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), each of the
Underwriters named below, for whom Morgan Stanley & Co. Incorporated, UBS
Securities and Pacific Growth Equities are acting as Representatives, have
severally agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of Common Stock set forth opposite their respective
names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated.........................................
UBS Securities LLC........................................................
Pacific Growth Equities, Inc. ............................................
---------
Total........................................................... 2,500,000
========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all the shares of Common Stock offered hereby (other than those
covered by the overallotment option described below) if any such shares are
taken.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ per share under the public offering price. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to other Underwriters or to certain other dealers. After
the initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock at the public offering price set forth on the
cover page hereof, less the underwriting discounts and commissions. The
Underwriters may exercise such option to purchase solely for the purpose of
covering overallotments, if any, made in connection with this offering. To the
extent that such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional shares as the number set forth next to such Underwriter's name
in the preceding table bears to the total number of shares offered hereby.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities under the Securities Act.
Each of the Company, the Company's officers, directors and other
stockholders, holding an aggregate of 8,901,523 shares of Common Stock, will
agree that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, it will not, during the period
commenced on the date hereof and ending 180 days after the date of this
Prospectus, (1) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned by or hereafter acquired), or (2) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common
57
<PAGE> 59
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. In addition, each such stockholder has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, for a period ending 180 days after the date of this
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
PRICING OF THE OFFERING
Prior to this offering, these has been no public market for the Common
Stock. The initial public offering price has been determined by negotiations
among the Company and the Representatives of the Underwriters. Among the factors
considered in determining the initial public offering price were the future
prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company. There can, however, be no
assurance that the prices at which the Common Stock will sell in the public
market after this offering will not be lower than the price at which it is sold
by the Underwriters.
58
<PAGE> 60
LEGAL MATTERS
The validity of the Common Stock to be issued in this offering is being
passed upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts.
Certain patent issues relating to this offering will be passed upon for the
Company by Hamilton, Brook, Smith & Reynolds, P.C., Lexington, Massachusetts.
Certain legal matters relating to this offering will be passed upon for the
Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
Statements relating to patent matters in the portions of this Prospectus
entitled "Risk Factors -- Patents and Proprietary Rights" (except for the last
two paragraphs relating to licensing and employee confidentiality) and
"Business -- Patents, Proprietary Rights and Licenses," (except for the second
paragraph relating to the gene therapy interference and except for the last two
paragraphs relating to employee confidentiality and licensing) insofar as they
constitute summaries of matters of patent law, have been reviewed and passed on
by the Company's patent counsel, Hamilton, Brook, Smith & Reynolds, P.C. as
experts in patent laws.
The financial statements of Transkaryotic Therapies, Inc. at December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995 appearing in this Prospectus and Registration Statement, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-1 under the
Securities Act with respect to the Common Stock being offered hereby. For
further information about the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and to the financial statements,
schedules and exhibits filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including exhibits thereto, may be inspected without
charge at the Commission's principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part thereof may
be obtained from such office after payment of the fees prescribed by the
Commission. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.
59
<PAGE> 61
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors........................................................ F-2
Financial Statements
Balance Sheets as of December 31, 1994 and 1995, and June 30, 1996 (unaudited)...... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995, and
the six months ended June 30, 1995 and 1996 (unaudited) and the period July 7,
1988 (date of inception) through June 30, 1996 (unaudited)....................... F-4
Statements of Stockholders' Equity (Deficit) for the period July 7, 1988 (date of
inception) through December 31, 1995 and the six months ended June 30, 1996
(unaudited)...................................................................... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995, and
the six months ended June 30, 1995 and 1996 (unaudited) and the period July 7,
1988 (date of inception) through June 30, 1996 (unaudited)....................... F-7
Notes to Financial Statements....................................................... F-9
</TABLE>
F-1
<PAGE> 62
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Transkaryotic Therapies, Inc.
We have audited the accompanying balance sheets of Transkaryotic Therapies,
Inc. (A Company in the Development Stage) (the Company) as of December 31, 1994
and 1995, and the related statements of operations, and cash flows for each of
the three years in the period ended December 31, 1995 and the statement of
stockholders' equity (deficit) for the period July 7, 1988 (date of inception)
through December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Transkaryotic Therapies,
Inc. (A Company in the Development Stage) at December 31, 1994 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Boston, Massachusetts
February 23, 1996
F-2
<PAGE> 63
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 2,606,792 $11,539,531 $17,798,459
Marketable securities..................................................... 4,972,492 22,945,311 10,975,201
Prepaid expenses and other current assets................................. 268,148 97,010 243,139
---------- ----------- -----------
Total current assets............................................... 7,847,432 34,581,852 29,016,799
Property and equipment, net................................................. 4,902,961 3,998,653 3,754,445
Other assets................................................................ 721,793 637,014 854,318
---------- ----------- -----------
$13,472,186 $39,217,519 $33,625,562
========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................................... $ 352,685 $ 515,335 $ 483,378
Accrued expenses.......................................................... 449,231 541,352 575,382
Current portion of bank debt.............................................. 1,097,945 -- --
---------- ----------- -----------
Total current liabilities.......................................... 1,899,861 1,056,687 1,058,760
Long-term portion of deferred rent.......................................... 268,800 179,200 134,400
Redeemable Preferred Stock:
Class A redeemable preferred stock, $1.00 par value; 3,000 shares
authorized, issued and outstanding ($3,540,000 aggregate liquidation
preference)............................................................. 4,230,273 4,440,273 4,545,273
Stockholders' equity:
Class A preferred stock, $1.00 par value; 3,000 shares authorized, issued
and outstanding ($3,327,000 aggregate liquidation preference)........... 3,000 3,000 3,000
Class B convertible preferred stock, $1.00 par value; 60,000 shares
authorized; 49,339 shares issued and outstanding ($19,736,000 aggregate
liquidation preference)................................................. 49,339 49,339 49,339
Class C convertible preferred stock, $1.00 par value; 1,875,000 shares
authorized; 1,015,974 shares issued and outstanding ($8,128,000
aggregate liquidation preference)....................................... 1,015,974 1,015,974 1,015,974
Class D convertible preferred stock, $1.00 par value; 280,367 shares
authorized; 280,367 shares issued and outstanding ($5,000,000 aggregate
liquidation preference)................................................. 280,367 280,367 280,367
Class E convertible preferred stock, $1.00 par value; 523,560 shares
authorized at December 31, 1995 (none in 1994); 523,560 shares issued
and outstanding at December 31, 1995 (none in 1994) ($10,000,000
aggregate liquidation preference)....................................... -- 523,560 523,560
Class F convertible preferred stock, $1.00 par value; 1,071,429 shares
authorized at December 31, 1995 (none in 1994); 1,071,429 shares issued
and outstanding at December 31, 1995 (none in 1994) ($15,000,000
aggregate liquidation preference)....................................... -- 1,071,429 1,071,429
Common stock, $.01 par value; 15,000,000 shares authorized; 5,171,759,
5,197,662 and 5,197,662 (unaudited) shares issued and outstanding at
December 31, 1994, 1995 and June 30, 1996, respectively................. 51,718 51,977 51,977
Additional paid-in capital.................................................. 34,140,551 57,087,079 57,567,805
Accretion of redeemable preferred stock dividends........................... (1,230,273) (1,440,273) (1,545,273)
Deficit accumulated during the development stage............................ (27,218,176) (25,143,705) (31,131,049)
Unrealized gain (loss) on available-for-sale securities..................... (19,248) 42,612 --
---------- ----------- -----------
Total stockholders' equity......................................... 7,073,252 33,541,359 27,887,129
---------- ----------- -----------
$13,472,186 $39,217,519 $33,625,562
========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 64
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD
JULY 7, 1988
YEAR ENDED DECEMBER 31, JUNE 30, (DATE OF
----------------------------------------- -------------------------- INCEPTION)
1993 1994 1995 1995 1996 SIX MONTHS
----------- ----------- ----------- ----------- ----------- ENDED
JUNE 30,
(UNAUDITED) (UNAUDITED) 1996
------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
License and contract fee
revenues.............. $ -- $10,000,000 $15,400,000 $11,700,000 $ 1,975,000 $ 27,375,000
Costs and expenses:
Research and
development......... 6,253,051 9,125,732 10,066,700 5,205,074 6,839,398 43,566,814
General and
administrative...... 2,998,193 4,690,399 4,289,910 1,737,458 1,911,071 17,793,685
----------- ----------- ----------- ----------- ----------- ------------
Total costs and
expenses............ 9,251,244 13,816,131 14,356,610 6,942,532 8,750,469 61,360,499
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) from
operations............ (9,251,244) (3,816,131) 1,043,390 4,757,468 (6,775,469) (33,985,499)
Other income (expense):
Interest income....... 168,878 470,888 1,129,301 445,772 788,125 3,247,234
Interest expense...... (393) (76,358) (13,220) (13,220) -- (307,784)
----------- ----------- ----------- ----------- ----------- ------------
Other income, net..... 168,485 394,530 1,116,081 432,552 788,125 2,939,450
----------- ----------- ----------- ----------- ----------- ------------
Income (loss) before
provision for income
taxes................. (9,082,759) (3,421,601) 2,159,471 5,190,020 (5,987,344) (31,046,049)
Provision for income
taxes................. -- -- 85,000 85,000 -- 85,000
----------- ----------- ----------- ----------- ----------- ------------
Net income (loss)....... $(9,082,759) $(3,421,601) $ 2,074,471 $ 5,105,020 $(5,987,344) $(31,131,049)
=========== =========== =========== =========== =========== ============
Pro forma net income
(loss) per share
(unaudited)........... $ 0.14 $ 0.35 $ (0.42)
=========== =========== ===========
Shares used in computing
pro forma net income
(loss) per share
(unaudited)........... 14,632,870 14,639,748 14,255,336
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 65
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
UNREALIZED
CUMULATIVE GAIN
ACCRETION (LOSS) ON TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL OF AVAILABLE- STOCKHOLDERS'
---------------------- -------------------- PAID-IN PREFERRED ACCUMULATED FOR-SALE EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK DEFICIT SECURITIES (DEFICIT)
--------- ---------- ---------- ------- ----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of
common
stock
for cash
at
September
and
December
1988.... 3,905,356 $39,054 $ (38,379) $ 675
Preferred
stock
dividend
accretion.. $ (19,753) (19,753)
Net
loss.... $ (99,731 ) (99,731)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1988.... 3,905,356 39,054 (38,379) (19,753) (99,731 ) (118,809)
Sale of
common
stock
for cash
at May,
June and
August
1989.... 227,089 2,270 (2,231) 39
Preferred
stock
dividend
accretion.. (160,520) (160,520)
Net
loss.... (1,346,189 ) (1,346,189)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1989.... 4,132,445 41,324 (40,610) (180,273) (1,445,920 ) (1,625,479)
Sale of
common
stock
for cash
at
February,
May and
November
1990.... 71,222 712 (699) 13
Repurchase
of
common
stock
for cash
at
January,
May and
September
1990.... (50,046) (500 ) 491 (9)
Sale of
Class A
Preferred
Stock
for cash
at
February
1990.... 3,000 $ 3,000 2,997,000 3,000,000
Preferred
stock
dividend
accretion.. (210,000) (210,000)
Net
loss.... (2,478,131 ) (2,478,131)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1990.... 3,000 3,000 4,153,621 41,536 2,956,182 (390,273) (3,924,051 ) (1,313,606)
Sale of
common
stock
for cash
at
April,
August
and
September
1991.... 367,798 3,678 (3,615) 63
Repurchase
of
common
stock
for cash
at
August
1991.... (1,446) (14 ) 14
Preferred
stock
dividend
accretion.. (210,000) (210,000)
Net
loss.... (4,389,924 ) (4,389,924)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1991.... 3,000 3,000 4,519,973 45,200 2,952,581 (600,273) (8,313,975 ) (5,913,467)
Sale of
common
stock
for cash
at
March,
May,
June,
August
and
December
1992.... 573,942 5,739 (5,640) 99
Repurchase
of
common
stock
for cash
at
February,
March,
April,
May,
July,
October
and
December
1992.... (46,170) (462 ) 454 (8)
Sale of
Class B
preferred
stock
for cash
and
notes at
February
1992.... 39,459 39,459 15,259,265 15,298,724
Preferred
stock
dividend
accretion.. (210,000) (210,000)
Net
loss.... (6,399,841 ) (6,399,841)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1992.... 42,459 42,459 5,047,745 50,477 18,206,660 (810,273) (14,713,816 ) 2,775,507
Sale of
common
stock
for cash
at
March,
May and
August
1993.... 254,687 2,547 (874) 1,673
Repurchase
of
common
stock
for cash
at
January,
February,
April,
June,
July,
September
and
October
1993.... (8,331) (83 ) 73 (10)
Sale of
Class B
preferred
stock
for
April
1993.... 9,880 9,880 3,915,780 3,925,660
Sale of
Class C
preferred
stock
for cash
at
November
1993.... 1,015,974 1,015,974 7,059,222 8,075,196
</TABLE>
F-5
<PAGE> 66
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) -- (CONTINUED)
<TABLE>
<CAPTION>
UNREALIZED
CUMULATIVE GAIN
ACCRETION (LOSS) ON TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL OF AVAILABLE- STOCKHOLDERS'
---------------------- -------------------- PAID-IN PREFERRED ACCUMULATED FOR-SALE EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK DEFICIT SECURITIES (DEFICIT)
--------- ---------- ---------- ------- ----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Compensation
expense
related to
equity
issuances... $ 238,571 $ 238,571
Preferred
stock
dividend
accretion.. $ (210,000) (210,000)
Net
loss.... $(9,082,759 ) (9,082,759)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1993.... 1,068,313.. $1,068,313 5,294,101 $52,941 29,419,432 (1,020,273) (23,796,575 ) 5,723,838
Repurchase
of
common
stock
for cash
at
January,
February,
June,
August
and
September
1994.... (122,342) (1,223 ) (99,008) (100,231)
Sale of
Class D
preferred
stock
for cash
at May
1994.... 280,367 280,367 4,455,053 4,735,420
Compensation
expense
related to
equity
issues... 365,074 365,074
Preferred
stock
dividend
accretion.. (210,000) (210,000)
Unrealized
loss on
available-for-
sale
securities... (19,248) (19,248)
Net
loss.... (3,421,601 ) (3,421,601)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1994.... 1,348,680.. 1,348,680 5,171,759 51,718 34,140,551 (1,230,273) (27,218,176 ) (19,248) 7,073,252
Sale of
common
stock
for cash
at June
and
August
1995.... 30,957 310 (69) 241
Repurchase
of
common
stock
for cash
at
January,
June and
September
1995.... (5,054) (51 ) 11 (40)
Sale of
Class E
preferred
stock
for cash
at March
1995.... 523,560 523,560 9,344,440 9,868,000
Sale of
Class F
preferred
stock
for cash
at
October
and
December
1995.... 1,071,429 1,071,429 13,179,894 14,251,323
Compensation
expense
related to
equity
issues... 422,252 422,252
Preferred
stock
dividend
accretion.. (210,000) (210,000)
Unrealized
gain on
available-for-
sale
securities... 61,860 61,860
Net
income... 2,074,471 2,074,471
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
DECEMBER
31,
1995.... 2,943,669 2,943,669 5,197,662 51,977 57,087,079 (1,440,273) (25,143,705 ) 42,612 33,541,359
Sale of
common
stock
for cash
at
January
and June
1996
(unaudited)... 289 3 (1) 2
Repurchase
of
common
stock
for cash
at
January
1996
(unaudited)... (289) (3 ) 1 (2)
Compensation
expenses
related to
equity
issues
(unaudited)... 480,726 480,726
Preferred
stock
dividend
accretion.. (105,000) (105,000)
Unrealized
loss on
available-for-
sale
securities
(unaudited)... (42,612) (42,612)
Net loss
(unaudited)... (5,987,344 ) (5,987,344)
----- ------ --------- ------- ---------- --------- ----------- ------- -----------
BALANCE AT
JUNE 30,
1996
(UNAUDITED)... 2,943,669 $2,943,669 5,197,662 $51,977 $57,567,805 $(1,545,273) $(31,131,049) $ -- $27,887,129
===== ====== ========= ======= ========== ========= =========== ======= ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 67
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD
JULY 7, 1988
SIX MONTHS ENDED (DATE OF
YEAR ENDED DECEMBER 31, JUNE 30, INCEPTION)
---------------------------------------- --------------------------- THROUGH
1993 1994 1995 1995 1996 JUNE 30, 1996
----------- ----------- ------------ ------------ ------------ -------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............. $(9,082,759) $(3,421,601) $ 2,074,471 $ 5,105,020 $ (5,987,344) $ (31,131,049)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation and
amortization............. 612,666 1,252,734 1,488,318 734,321 789,401 5,232,717
Compensation expense
related to equity
issuances................ 238,571 365,074 422,252 238,000 480,726 1,506,623
Forgiveness of loan and
interest receivable from
terminated employee...... 334,000 334,000
Accrued interest on
convertible debt......... 217,679
Changes in operating assets
and liabilities:
(Increase) decrease in
prepaid expenses and
other current assets..... (214,470) 100,035 171,138 79,378 (146,129) (302,139)
Increase (decrease) in
accounts payable......... 880,116 (820,943) 162,650 (99,320) (31,957) 483,378
Increase in accrued
expenses................. 191,567 276,988 2,521 (141,517) (10,770) 709,782
----------- ----------- ------------ ------------ ------------ ------------
Net cash provided (used) by
operating activities......... (7,374,309) (1,913,713) 4,321,350 5,915,882 (4,906,073) (22,949,009)
INVESTING ACTIVITIES
Sales of marketable
securities................... 6,821,432 41,850,807 29,655,524 27,033,777 75,706,016
Purchases of marketable
securities................... (2,398,499) (9,414,673) (59,761,766) (43,718,701) (15,106,279) (86,681,217)
Property and equipment
additions.................... (2,352,334) (2,837,450) (558,243) (178,301) (526,889) (8,901,132)
(Increase) decrease in employee
loans........................ 2,507 (20,901) (20,176) (440,868)
License additions.............. (10,714) (41,557) (122,403) (32,403) (53,225) (442,899)
(Increase) decrease in other
assets....................... (156,807) (47,107) 202,316 187,914 (182,383) (331,581)
----------- ----------- ------------ ------------ ------------ ------------
Net cash provided by (used in)
investing activities......... (4,918,354) (5,516,848) (18,410,190) (14,106,143) 11,165,001 (21,091,681)
</TABLE>
F-7
<PAGE> 68
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
PERIOD
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JULY 7, 1988
---------------------------------------- JUNE 30, (DATE OF
1993 1994 1995 --------------------------- INCEPTION)
----------- ----------- ------------ 1995 1996 THROUGH
------------ ------------ JUNE 30, 1996
(UNAUDITED) (UNAUDITED) -------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
FINANCING ACTIVITIES
Sale of Class A redeemable
preferred (September 1988 and
May 1989).................... $ 3,000,000
Sale of Class A preferred stock
(February 1990).............. 3,000,000
Sale of Class B convertible
stock........................ $ 3,925,660 14,006,705
Sale of Class C convertible
stock........................ 8,075,196 8,075,196
Sale of Class D convertible
preferred stock.............. $ 4,735,420 4,735,420
Sale of Class E convertible
preferred stock.............. $ 9,868,000 $ 9,868,000 9,868,000
Sale of Class F convertible
preferred stock.............. 14,251,323 14,251,323
Issuance of convertible debt... 5,000,000
Bank debt proceeds............. 50,000 1,447,147 1,497,147
Bank debt repayments........... (399,202) (1,097,945) (1,097,945) (1,497,147)
Sale (repurchase) of common
stock, net................... 1,663 (100,231) 201 203 (97,495)
----------- ----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities................... 12,052,519 5,683,134.. 23,021,579 8,770,258 61,839,149
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents......... (240,144) (1,747,427) 8,932,739 579,997 $ 6,258,928 17,798,459
Cash and cash equivalents at
beginning of period.......... 4,594,363 4,354,219 2,606,792 2,606,792 11,539,531 --
----------- ----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at
end of period................ $ 4,354,219 $ 2,606,792 $ 11,539,531 $ 3,186,789 $ 17,798,459 $ 17,798,459
=========== =========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
NONCASH FINANCING ACTIVITIES:
Conversion of convertible debt
and accrued interest for
Class B convertible preferred
stock........................ $ 5,217,679
===========
</TABLE>
See accompanying notes.
F-8
<PAGE> 69
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND
1996 IS UNAUDITED)
1. BASIS OF PRESENTATION
NATURE OF BUSINESS
Transkaryotic Therapies, Inc. (the Company) was incorporated in July 1988
and is a development-stage enterprise. The Company is dedicated to the
development and commercialization of therapeutic human proteins produced with
the Company's gene activation technology, and gene therapy products for the
long-term treatment and cure of a broad range of chronic human diseases. Since
inception, principal activities have been focused on the discovery and
development of technology and products in gene therapy and related fields, the
development of business plans, the seeking of financing, and the recruitment and
training of personnel. The Company's ability to progress beyond the development
stage is dependent upon the completion of additional financings and, ultimately,
the successful development and marketing of its products.
2. SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The balance sheet at June 30, 1996, the statements of operations and
statements of cash flows for the six months ended June 30, 1995 and 1996 and the
period from July 7, 1988 (date of inception) through June 30, 1996, and the
statement of stockholders' equity for the six months ended June 30, 1996 are
unaudited, but, in the opinion of management, include all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
results for these interim periods. The results of operations for the six months
ended June 30, 1996 are not necessarily indicative of results to be expected for
the entire year.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which
establishes criteria for the recognition and measurement of impairment loss
associated with long-lived assets. The Company adopted this standard in the
first quarter of 1996. Adoption of this standard did not have a material impact
on the Company's financial position or results of operation.
MARKETABLE SECURITIES
Marketable securities consist of highly liquid investments with a maturity
of more than three months when purchased. The Company uses these investments in
its cash management program. The investments are classified as
available-for-sale. Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as of each
balance sheet date.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of temporary cash investments. The Company
maintains cash and cash equivalents with high-credit-quality financial
institutions and limits the amount of credit exposure to any one institution.
PROPERTY AND EQUIPMENT
Equipment, furniture and fixtures are stated at cost and are being
depreciated using the straight-line method over estimated useful lives of three
to five years. Leasehold improvements are stated at cost and are being amortized
using the straight-line method over the term of the lease.
F-9
<PAGE> 70
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), and related
interpretations in accounting for its stock-based compensation plans rather than
the alternative fair value accounting provided under Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation."
REVENUE RECOGNITION
Fees received for licenses, research milestones and contract research are
recognized when earned.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PRO FORMA NET INCOME (LOSS) PER SHARE (UNAUDITED)
Pro forma net income (loss) per share is computed using the weighted
average number of common shares, convertible preferred shares assuming
conversion at date of issuance, and dilutive equivalent shares from stock
options and 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
proposed 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 and using the assumed initial public offering
price). 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 that will occur in connection with this offering.
All shares of common stock and related per share amounts included in the
accompanying financial statements and notes thereto have been retroactively
restated to give effect to a 1.285714 for 1 stock split, effected in the form of
a stock dividend (see Note 10).
3. AVAILABLE-FOR-SALE SECURITIES
The following is a summary of available-for-sale securities at December 31,
1994 and 1995, and June 30, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. Government agencies................... $ 2,558,787 $ -- $ (1,591) $ 2,557,196
U.S. corporate securities.................... 3,500,111 -- (5,036) 3,495,075
Foreign corporate securities................. 999,551 -- (12,621) 986,930
----------- ------- -------- -----------
$ 7,058,449 $ -- $ (19,248) $ 7,039,201
=========== ======= ======== ===========
</TABLE>
F-10
<PAGE> 71
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. Government agencies................... $29,750,091 $ 44,886 $ (2,274) $29,792,703
=========== ======= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996 (UNAUDITED)
-------------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. Government agencies................... $27,074,385 $ -- $ -- $27,074,385
=========== ======= ======== ===========
</TABLE>
These securities are classified in the accompanying balance sheet as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996
---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Cash equivalents............................. $2,066,709 $ 6,847,392 $16,099,184
Marketable securities........................ 4,972,492 22,945,311 10,975,201
--------- ---------- ----------
$7,039,201 $29,792,703 $27,074,385
========= ========== ==========
</TABLE>
The amortized cost and fair value of available-for-sale securities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1996
--------------------------- ---------------------------
COST FAIR VALUE COST FAIR VALUE
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government agencies:
Due in one year or less....... $18,360,507 $18,371,453 $27,074,385 $27,074,385
Due after one year through
three years................. 11,389,584 11,421,250 -- --
----------- ----------- ----------- -----------
$29,750,091 $29,792,703 $27,074,385 $27,074,385
=========== =========== =========== ===========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- 1996
1994 1995 -----------
---------- ---------- (UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements......................... $4,912,343 $5,015,967 $ 5,040,767
Laboratory equipment........................... 2,177,368 2,386,082 2,693,876
Office furniture and equipment................. 682,563 927,390 1,101,868
---------- ---------- ----------
7,772,274 8,329,439 8,836,511
Less accumulated depreciation and
amortization................................. 2,869,313 4,330,786 5,082,066
---------- ---------- ----------
Property and equipment, net.................... $4,902,961 $3,998,653 $ 3,754,445
========== ========== ==========
</TABLE>
F-11
<PAGE> 72
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation and amortization expense on property and equipment was
approximately $597,000, $1,233,000 and $1,463,000 in 1993, 1994 and 1995,
respectively.
5. EMPLOYEE LOANS
The Company has periodically provided loans to selected management
personnel. Outstanding loans of $166,000 at December 31, 1995, classified as
other assets in the accompanying balance sheet, will be repaid by 2003 and bear
interest at rates derived from the U.S. Treasury secondary market rate. The
loans may be prepaid and are secured by the employee's common shares and options
to purchase common shares. In 1994, one loan of $275,000 was forgiven as part of
a severance arrangement (see Note 13).
6. LICENSES
The Company has entered into licensing agreements with various universities
and research organizations. Under the terms of these agreements, the Company has
received exclusive and nonexclusive licenses to technology and technology
claimed in certain patents and patent applications. The Company is required to
make payments of nonrefundable license fees and royalties on future sales of
products employing the technology. In 1993, 1994 and 1995, the Company paid
license fees under these agreements totaling approximately $11,000, $42,000 and
$122,000, respectively.
7. ACCRUED EXPENSES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Salaries and benefits............................. $204,946 $177,937 $ 172,401
Professional fees................................. 112,896 157,815 257,647
Deferred rent..................................... 89,600 89,600 89,600
Income taxes payable.............................. -- 85,000 --
Other............................................. 41,789 31,000 55,734
-------- -------- --------
$449,231 $541,352 $ 575,382
======== ======== ========
</TABLE>
8. BANK DEBT
At December 31, 1994, the Company had borrowed $1,497,000 subject to the
terms of a bank loan and a lease line of credit. Funds obtained under these
agreements were repayable over a 36-month term at interest rates ranging from
6.42% to 9.75%. In February 1995, the Company paid a fee of $10,000 and repaid
the obligations in full under the prepayment terms of these lending
arrangements.
9. REDEEMABLE PREFERRED STOCK
At December 31, 1995, the Company has authorized, issued and outstanding
3,000 shares of Class A Redeemable preferred stock. Each holder of Class A
Redeemable preferred stock is entitled to receive cumulative annual dividends of
$70 per share. At December 31, 1995, dividend payments in arrears were
$1,440,273. The carrying amount of the Class A Redeemable preferred stock has
been increased by periodic accretions equal to the cumulative unpaid dividends.
In the event seven consecutive dividend payments are in arrears and until all
such dividends are paid, the holders of the Class A Redeemable preferred shares
may vote as a class to elect one additional director to the Company's Board of
Directors. Class A Redeemable preferred stockholders have preemptive rights to
purchase all or part of any new securities that the Company proposes to
F-12
<PAGE> 73
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
issue. These rights will terminate upon the closing of an initial public
offering of the Company's common stock.
In 1995, the Class A preferred stockholders agreed to amend the redemption
provisions of the stockholders' agreement, moving the commencement date of the
redemption from December 31, 1995 to December 31, 1997. Therefore, beginning on
December 31, 1997, the Company is required annually to redeem 750 shares of
Class A Redeemable preferred stock for $1,000 per share plus all accrued but
unpaid dividends. In the event of liquidation, the Class A Redeemable preferred
stockholders would be entitled to be paid an amount equal to $700 per share plus
all accrued but undeclared and declared but unpaid dividends thereon. Upon the
closing of an initial public offering of the Company's common stock, as
contemplated in this Prospectus, the Class A Redeemable preferred stock and all
rights to accrued dividends thereon will be automatically converted into common
stock of the Company at a formula price.
10. STOCKHOLDERS' EQUITY
Class A Preferred Stock
At December 31, 1995, the Company has authorized, issued and outstanding
3,000 shares of Class A preferred stock. Class A preferred stockholders have
preemptive rights to purchase all or part of any new securities that the Company
proposes to issue. These rights will terminate upon the closing of an initial
public offering of the Company's common stock, as contemplated in this
Prospectus. In the event of liquidation, the Class A preferred stockholders
would be entitled to be paid an amount equal to $700 per share and cumulative
annual dividends of $70 per share. Upon the closing of an initial public
offering of the Company's common stock, as contemplated in this Prospectus, the
Class A preferred stock will be automatically converted into common stock at a
formula price.
Convertible Preferred Stock
The Company has authorized five classes of convertible preferred stock:
Class B, Class C, Class D, Class E and Class F. Each Class has liquidation
preference over common stock, but subordinate to Class A preferred stock. Each
share of convertible preferred stock may be converted, at the option of the
holder, into shares of common stock at a defined ratio and will be automatically
converted into common stock upon the closing of an initial public offering of
the Company's common stock, as contemplated in this Prospectus. Each share of
convertible preferred stock is entitled to one vote for each share of common
stock issuable upon conversion thereof. Convertible preferred stockholders have
preemptive rights to purchase all or part of any subsequent issue of equity
securities by the Company, which rights will terminate upon the closing of an
initial public offering of the Company's common stock, as contemplated in this
Prospectus.
The liquidation preference and conversion ratio per share of each class of
convertible preferred stock are as follows:
<TABLE>
<CAPTION>
LIQUIDATION CONVERSION
PREFERENCE RATIO
----------- ----------
<S> <C> <C>
Class B............................................... $400.00 59:1
Class C............................................... 8.00 1.29:1
Class D............................................... 17.83 1.62:1
Class E............................................... 19.10 1.29:1
Class F............................................... 14.00 1.29:1
</TABLE>
In July 1996, the Company authorized 1,136,364 shares of $1.00 par value
Class G convertible preferred stock, of which 1,133,589 shares were sold during
July and August 1996 raising approximately $23,470,000 after deducting the costs
associated with the financing. The Class G convertible preferred stock has
liquidation
F-13
<PAGE> 74
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
preference over the common stock in the amount of $22.00 per share and each
share may be converted into 1.29 shares of common stock at the option of the
stockholder and will be automatically converted to common stock upon the closing
of an initial public offering of the Company's common stock, as contemplated in
this Prospectus. Class G convertible preferred stockholders have preemptive
rights to purchase, up to certain limits, their pro rata share of any new
securities that the Company proposes to issue. These rights will terminate upon
the closing of an initial public offering of the Company's common stock, as
contemplated in this Prospectus.
On July 22, 1996, the Board of Directors authorized, subject to shareholder
approval and the completion of the initial public offering as contemplated in
this Prospectus, 10,000,000 shares of undesignated preferred stock with a par
value of $.01 per share.
Common Stock
Certain shares of common stock are restricted by terms of stock purchase
agreements between the Company and certain employees and consultants. Restricted
shares vest at annual rates ranging from 16.7% to 33.3% subject to the terms of
the vesting agreements.
Upon termination of the services of the employee or consultant, the Company
has the right to repurchase any unvested shares at the original issue price of
$.01 per share. At December 31, 1995, there were 1,580,974 shares outstanding
under these agreements, of which 1,417,262 shares were vested. Cash dividends
may not be declared on common stock until all dividend rights of the preferred
stockholders have been fulfilled. As of December 31, 1995 a total of 9,932,000
shares of common stock have been reserved for issuance of stock options and
warrants and the conversion of preferred stock. For certain equity issuances,
the Company recognizes as compensation expense the excess of the deemed value
for accounting purposes of the common stock and common stock options (see Note
11) issued over the purchase price of the stock. This compensation expense is
amortized over the term of the vesting agreement. As of December 31, 1995 and
June 30, 1996, the Company had unamortized deferred compensation associated with
unvested equity awards aggregating $1,243,897 and $4,948,576, respectively.
Compensation expense recognized on outstanding common stock and options was
approximately $231,000, $365,000 and $422,000 for 1993, 1994 and 1995,
respectively, and $238,000 and $481,000 for the six months ended June 30, 1995
and 1996, respectively.
On July 22, 1996, the Board of Directors authorized, subject to shareholder
approval and the completion of the initial public offering as contemplated in
this Prospectus, an increase in the authorized shares of common stock from
15,000,000 to 30,000,000 shares.
On August 15, 1996, the Board of Directors approved a 1.285714 for 1 stock
split of common stock, effected in the form of a stock dividend. All shares of
common stock and related per share amounts included in the accompanying
financial statements and notes thereto have been retroactively restated to give
effect to the stock split.
11. STOCK-BASED INCENTIVE PLANS AND STOCK WARRANTS
Under the Company's 1993 Long-Term Incentive Plan, awards in the form of
stock options, stock appreciation rights, restricted stock, long-term
performance awards and stock grants may be issued to employees, consultants and
advisors of the Company at prices to be determined by the Compensation Committee
of the Board of Directors. At December 31, 1996, a total of 1,607,143 shares of
common stock have been reserved for issuance under the plan. On July 22, 1996,
the Board of Directors voted to increase the number of shares available for
issuance under the plan to 2,250,000, subject to shareholder approval. Options
vest over a period of six years and terminate ten years from date of grant.
Options to purchase 7,660 and 289 shares of common stock were exercised during
1995 and the six months ended June 30, 1996, respectively. At
F-14
<PAGE> 75
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995 and June 30, 1996, respectively, options to purchase 136,344
and 810,315 shares of common stock at nominal value were outstanding. Options
for 27,519 and 39,759 shares were exercisable at December 31, 1995 and June 30,
1996, respectively.
The Company's 1993 Non-Employee Directors' Stock Option Plan provides for
automatic common stock option grants to each Director who is not an employee of
the Company and does not own any common stock of the Company which was purchased
prior to June 1993. Such eligible Directors will receive an annual option grant
to purchase 6,750 shares of common stock while the Director remains an active
member of the Board. The options will be exercisable ratably over a three-year
period and must be exercised within ten years from date of grant. The options
will entitle the holder to purchase shares at fair market value on the date of
grant. A total of 231,429 shares of common stock have been reserved for issuance
under the plan. At December 31, 1995, no awards had been made under this plan,
and no Directors were eligible to participate.
The following exercisable common stock warrants are outstanding at December
31, 1995 and June 30, 1996:
<TABLE>
<CAPTION>
COMMON EXERCISE EXPIRATION
SHARES PRICE DATE
- ------- -------- --------------
<S> <C> <C>
86,786 $ 6.22 November 1997
77,181 6.91 April 1998
653,126 7.78 November 1998
</TABLE>
12. LICENSE AND CONTRACT FEE REVENUES
In May 1994 and March 1995, the Company entered into license and stock
purchase agreements with a pharmaceutical company (the Partner), whereby the
Partner was granted exclusive rights to make, use and sell worldwide two
therapeutic products produced under patent rights and technologies owned by the
Company. Under the terms of the agreements, the Company received $10 million in
each of 1994 and 1995 as nonrefundable licensing fees. In 1995, the Company also
received an initial milestone payment of $2 million for successful completion of
certain research and $3.4 million for primarily contract research funding under
these agreements. In the six month period ended June 30, 1996, the Company
received an additional $1.7 million under these agreements. As part of these
agreements, the Partner will make additional payments of up to $83.3 million in
the form of equity purchases and payments due upon achievement of predetermined
milestones.
13. RETIREMENT PLAN AND OTHER BENEFITS
The Company maintains a 401(k) matched retirement savings plan which covers
substantially all employees who have completed at least six months of service to
the Company. The Company may match employee contributions up to 50% of the first
5% of employee compensation. Employees are fully vested in contributions they
make to the plan. Employer contributions vest at a rate of 20% per year after
the first year of service by the employee. The total expense related to the
retirement plan in 1993, 1994 and 1995 was approximately $45,000, $57,000 and
$83,000, respectively.
In 1994, a former officer and director terminated his association with the
Company. As part of the termination agreement, the Company forgave loans and
interest of approximately $334,000, repurchased 16,071 shares of its common
stock for $100,000 and made severance payments of approximately $210,000 to the
former executive.
F-15
<PAGE> 76
TRANSKARYOTIC THERAPIES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
14. INCOME TAXES
Prior to 1995, the Company had incurred only operating losses; however, no
tax benefit for these operating losses had been provided given uncertainty
regarding their realization. In 1995, the Company utilized approximately $1.6
million of tax benefit from net operating loss carryforwards to offset the
current year tax provision except for $85,000 of income taxes due under the
alternative minimum tax rules of the Internal Revenue Code (the Code). At
December 31, 1995, the Company had net operating loss carryforwards of
approximately $22 million which expire through 2009. For financial reporting
purposes, a valuation allowance has been recognized to offset the deferred tax
assets relating to those carryforwards. The future utilization of net operating
loss carryforwards may be subject to limitation under the change in stock
ownership rules of the Code. Because of this limitation, it is possible that
taxable income in future years, which would otherwise be offset by net operating
losses, will not be offset and therefore will be subject to tax.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company has no
deferred tax liabilities as of December 31, 1994 and 1995. Significant
components of the Company's deferred tax assets as of December 31, 1994 and 1995
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $10,975 $ 9,397
Tax credits.................................................... 1,801 2,479
Fixed assets................................................... 519 752
Other.......................................................... 298 40
-------- --------
Total deferred tax assets........................................ 13,593 12,668
Valuation allowance.............................................. (13,593) (12,668)
-------- --------
Net deferred tax assets.......................................... $ 0 $ 0
======== ========
</TABLE>
15. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under operating leases. The Company has a
five-year lease for additional space at its current facility. The lease allowed
for a reduced rental payment in the first year of the lease. For financial
reporting purposes, the aggregate rent expense of the entire lease period is
recognized ratably over the lease period, thus creating a deferred liability
which amounted to $268,800 at December 31, 1995. The lease agreement contains a
renewal option to extend the lease for two five-year periods.
Future annual minimum payments under all noncancelable operating leases are
as follows:
<TABLE>
<S> <C>
Year ended:
1996................................................... $1,154,000
1997................................................... 1,056,000
1998................................................... 1,028,000
----------
Total.......................................... $3,238,000
==========
</TABLE>
Rent expense was approximately $275,000, $1,087,000 and $992,000 in 1993,
1994 and 1995, respectively.
F-16
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses to be paid by the Registrant in connection with this
offering are as follows:
<TABLE>
<S> <C>
SEC registration fee...................................................... $ 14,871
Nasdaq National Market fee................................................ 50,000
NASD filing fee and expenses.............................................. 4,813
Blue Sky fees and expenses................................................ 17,000
Printing and engraving expenses........................................... 100,000
Accounting fees and expenses.............................................. 100,000
Legal fees and expenses................................................... 370,000
Transfer Agent and Registrar fees......................................... 5,800
Miscellaneous............................................................. 17,516
--------
Total........................................................... $680,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits the Registrant
to indemnify directors, officers, employees and agents of the Registrant against
actual and reasonable expenses (including attorneys' fees) incurred by them in
connection with any action, suit or proceeding brought against them by reason of
their status or service as a director, officer, employee or agent by or on
behalf of the Registrant, and against expenses (including attorneys' fees),
judgments, fines and settlements actually and reasonably incurred by him in
connection with any such action, suit or proceeding, if (i) he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Registrant, and (ii) in the case of a criminal proceeding, he
had no reasonable cause to believe his conduct was unlawful. Except as ordered
by a court, no indemnification shall be made in connection with any proceeding
brought by or in the right of the corporation where the person involved is
adjudged to be liable to the Registrant.
Article VII of the Registrant's Amended and Restated Certificate of
Incorporation provides that a director shall not be personally liable to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director, except to the extent that elimination or limitation of liability
is not permitted under the Delaware General Corporation Law as in effect when
such liability is determined.
Article VIII of the Registrant's Amended and Restated Certificate of
Incorporation provides that the Registrant shall, to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as amended
from time to time, 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, by reason
of the fact that he is or was, or has agreed to become a director or officer of
the Registrant, or is or was serving, or has agreed to serve at the request of
the Registrant as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other
enterprise. The indemnification provided for in Article VIII is expressly not
exclusive of any other rights to which those seeking indemnification may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and shall inure to the benefit of the heirs, executors
and administrators of such persons. Article VIII further permits the Board of
Directors to authorize the grant of indemnification rights to other employees
and agents of the Registrant and such rights may be equivalent to, or greater or
less than, those set forth in Article VIII. Article VIII further permits the
Registrant to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee, fiduciary, or agent of the Registrant against
any liability asserted against and incurred by such person in any such capacity
or arising out of such person's position, whether or not the Registrant would
have the power to indemnify against such liability under the provisions set
forth in Article VIII.
II-1
<PAGE> 78
Article VIII, Section 8 of the Registrant's By-Laws provides that the
Registrant shall indemnify any and all of its directors or officers to the
fullest extent permitted by the General Corporation Law of the State of
Delaware.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since August 15, 1993, the Registrant has sold and issued the following
unregistered securities:
On November 3, 1993, the Registrant sold an aggregate of 507,987 Units,
each consisting of (i) two shares of Class C Preferred Stock and (ii) one Common
Stock Purchase Warrant to certain investors at a purchase price of $16.00 per
Unit for an aggregate consideration of $8,127,792.00.
On May 18, 1994, the Registrant sold an aggregate of 280,367 shares of
Class D Preferred Stock to HMRI (formerly named Marion Merrell Dow Inc.) at a
purchase price of $17.8338 per share for an aggregate consideration of
$5,000,000 in connection with a License Agreement relating to joint research and
development by the Company and HMRI.
On March 1, 1995, the Registrant sold an aggregate of 523,560 shares of
Class E Preferred Stock to HMRI at a purchase price of $19.10 per share for an
aggregate consideration of $10,000,000 in connection with a second License
Agreement relating to joint research and development between the Company and
HMRI.
On October 26, 1995 and December 4, 1995, the Registrant sold an aggregate
of 1,071,429 shares of Class F Preferred Stock to certain investors at a
purchase price of $14.00 per share for an aggregate consideration of
$15,000,000.
On July 10, 1996 and August 7, 1996, the registrant sold an aggregate of
1,133,589 shares of Class G Preferred Stock to certain investors at a purchase
price of $22.00 per share for an aggregate consideration of $24,938,958.
Between August 15, 1993 and August 15, 1996, the Registrant granted options
to purchase 930,529 shares of Common Stock to its employees and consultants
under its 1993 Long-Term Incentive Plan at an exercise price of $0.01 per share.
As of August 15, 1996, options to purchase 7,950 shares have been exercised,
options to purchase 47,336 shares have been cancelled and options to purchase
875,243 shares remain outstanding.
Between August 15, 1993 and August 15, 1996 the Registrant has granted
24,303 shares of Restricted Common Stock to its employees and consultants. As of
August 15, 1996, 15,303 shares have vested, no shares have been cancelled and
9,000 shares remain unvested.
No underwriter was engaged in connection with the foregoing sales of
securities. Sales of Common Stock to employees have been made in reliance upon
the exemption from the registration requirements afforded by Section 3(b) of the
Securities Act of 1933 (the "Act") and Rule 701 thereunder as sales of an
issuer's securities pursuant to a written contract relating to the compensation
of such individuals. Sales of the shares of Preferred Stock and issuances of
warrants to purchase shares of Common Stock were made in reliance upon Section
4(2) of the Act as transactions not involving any public offering and Regulation
D thereunder. The Registrant 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 Registrant, 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
Common Stock and Preferred Stock, or warrants to purchase shares, were deemed to
be restricted securities for the purposes of the Act, and the certificates
representing such securities bore legends to that effect.
II-2
<PAGE> 79
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
(a) The following exhibits are filed herewith:
<S> <C> <C>
1.1* -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of the Registrant.
3.2 -- Form of Amended and Restated Certificate of Incorporation of the Registrant.
3.3 -- By-Laws of the Registrant.
3.4 -- Form of Amended and Restated By-Laws of the Registrant.
4.1* -- Specimen certificate for shares of Common Stock of the Registrant.
5.1 -- Opinion of Palmer & Dodge LLP as to legality of the shares being registered.
9.1 -- Amended and Restated Voting Rights Agreement, dated November 3, 1993 and
amended on May 18, 1994, March 1, 1995, October 26, 1995, July 10, 1996 and
August 7, 1996, by and among the Registrant and certain holders of the
Registrant's Preferred Stock named therein.
10.1 -- Stock Purchase Agreement, dated July 1988, by and between Warburg, Pincus
Capital Company, L.P. ("Warburg") and the Registrant.
10.2 -- Stockholders' Agreement, dated September 16, 1988, by and among Warburg,
certain individual investors and the Registrant.
10.3 -- Class B Preferred Stock Purchase Agreement, dated February 14, 1992 and
amended on April 20, 1993, by and among certain Purchasers and the Registrant.
10.4 -- Class B Preferred Stock Purchase Agreement, dated April 20, 1993, by and among
certain Purchasers and the Registrant.
10.5 -- Class C Preferred Stock and Warrant Purchase Agreement, dated November 3,
1993, by and among the Registrant and certain Purchasers named therein.
10.6 -- Class D Preferred Stock Purchase Agreement, dated May 18, 1994, by and among
the Registrant and certain Purchasers named therein.
10.7 -- Class E Preferred Stock Purchase Agreement, dated March 1, 1995, by and among
the Registrant and certain Purchasers named therein.
10.8 -- Class F Preferred Stock Purchase Agreement, dated October 26, 1995, by and
among the Registrant and certain Purchasers named therein.
10.9 -- Class G Preferred Stock Purchase Agreement, dated July 10, 1996, by and among
the Registrant and certain Purchasers named therein.
10.10 -- Supplemental Class G Preferred Stock Purchase Agreement, dated August 7, 1996,
by and among the Registrant and certain Purchasers named therein.
10.11 -- Amended and Restated Registration Rights Agreement, dated November 3, 1993 and
amended on May 13, 1994, March 1, 1995, October 26, 1995, July 10, 1996 and
August 7, 1996, by and among the Registrant and certain holders of the
Registrant's Preferred Stock named therein.
10.12 -- Lease Agreement, dated January 1, 1994, by and between the Trust under the
Will of Harry F. Stimpson for office space at 195 Albany Street, Cambridge,
Massachusetts.
10.13 -- Sublease Agreement, dated April 7, 1992, by and between the Massachusetts
Institute of Technology and the Registrant, for office space located at 185
Albany Street, Cambridge, Massachusetts.
10.14 -- 1993 Non-Employee Directors' Stock Option Plan.
10.15 -- 1993 Long-Term Incentive Plan.
10.16 -- Form of Letter Agreement re: Confidentiality, Inventions and Non-Disclosure.
10.17 -- Form of Letter Agreement re: Restricted Stock.
10.18 -- Form of Scientific Advisor Agreement.
10.19 -- Amended and Restated Promissory Note, dated June 16, 1993, issued by the
Registrant to Dr. Richard F Selden, in the original principal amount of
$125,000.
10.20 -- Amended and Restated Promissory Note, dated June 16, 1993, issued by the
Registrant to Dr. Douglas A. Treco, in the original principal amount of
$60,000.
</TABLE>
II-3
<PAGE> 80
<TABLE>
<S> <C> <C>
10.21 -- Amended and Restated Promissory Note, dated April 21, 1995, issued by the
Registrant to Dr. Christoph M. Adams, in the original principal amount of
$15,000.
10.22 -- Amended and Restated Promissory Note, dated May 5, 1995, issued by the
Registrant to Dr. Christoph M. Adams, in the original principal amount of
$20,000.
10.23 -- Employment Agreement, dated July 19, 1991, by and between Dr. Richard F Selden
and the Registrant.
10.24 -- Pledge Agreement, dated May 14, 1991, by and between Dr. Richard F Selden and
the Registrant.
10.25 -- Employment Agreement, dated July 26, 1991, by and between Dr. Douglas A. Treco
and the Registrant.
10.26 -- Pledge Agreement, dated August 15, 1991, by and between Dr. Douglas A. Treco
and the Registrant.
10.27 -- Employment Agreement, dated November 20, 1993, by and between Dr. Christoph M.
Adams and the Registrant.
10.28 -- Pledge Agreement, dated April 21, 1995, by and between Dr. Christoph M. Adams
and the Registrant.
10.29 -- Agreement, dated September 1, 1991, by and between Mr. William R. Miller and
the Registrant.
10.30 -- Agreement, dated July 30, 1993, by and between Warburg and the Registrant.
10.31 -- Common Stock Purchase Warrant, dated September 12, 1991.
10.32 *+ -- Collaboration and License Agreement, dated July 22, 1993 and amended on May
30, 1996, by and between Genetics Institute, Inc. and the Registrant.
10.33 *+ -- Amended and Restated License Agreement, dated March 1, 1995, by and between
Hoechst Marion Roussel, Inc. ("HMRI") and the Registrant.
10.34 *+ -- License Agreement, dated March 1, 1995, by and between HMRI and the
Registrant.
11.1 -- Statement re: computation of earnings (loss) per share -- pro forma.
23.1 -- Consent of Palmer & Dodge LLP (included in Exhibit 5.1).
23.2 -- Consent of Hamilton, Brook, Smith & Reynolds, P.C.
23.3 -- Consent of Ernst & Young LLP.
24.1 -- Power of Attorney (included on the signature pages to this Registration
Statement)
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended.
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under "Item
14 -- Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court
II-4
<PAGE> 81
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth
of Massachusetts, on August 26, 1996.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ RICHARD F SELDEN
---------------------------------
Richard F Selden
President and Chief Executive
Officer
Each undersigned person hereby constitutes and appoints Richard F Selden,
Anthony R. Hall and Peter Wirth and each of them with full power of substitution
and full power to act without the other, as his true and lawful attorney-in-fact
and agent, with full power to sign any and all amendments to this Registration
Statement on Form S-1 of Transkaryotic Therapies, Inc., and to file the same
with the Securities and Exchange Commission, including any and all
post-effective amendments and any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b) and to execute all other documents
and take all other actions on behalf of such undersigned person as may be
necessary or advisable in connection with the registration of the shares covered
by this Registration Statement under the Securities Act of 1933, hereby
ratifying and confirming all that said attorneys-in-fact may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ RICHARD F SELDEN President, Chief Executive August 26, 1996
- ---------------------------- Officer, Treasurer and Director
Richard F Selden (principal executive officer)
/s/ ANTHONY R. HALL Vice President, Finance and August 26, 1996
- ---------------------------- Administration; Chief Financial
Anthony R. Hall Officer (principal financial
and accounting officer)
/s/ WILLIAM R. MILLER Director August 26, 1996
- ----------------------------
William R. Miller
/s/ RODMAN W. MOORHEAD, III Director August 26, 1996
- ----------------------------
Rodman W. Moorhead, III
/s/ JAMES E. THOMAS Director August 26, 1996
- ----------------------------
James E. Thomas
II-6
<PAGE> 83
<TABLE>
EXHIBIT INDEX
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
------------
<S> <C> <C>
1.1* -- Form of Underwriting Agreement. ....................................
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant. ........................................................
3.2 -- Form of Amended and Restated Certificate of Incorporation of the
Registrant. ........................................................
3.3 -- By-Laws of the Registrant. .........................................
3.4 -- Form of Amended and Restated By-Laws of the Registrant. ............
4.1* -- Specimen certificate for shares of Common Stock of the
Registrant. ........................................................
5.1 -- Opinion of Palmer & Dodge LLP as to legality of the shares being
registered. ........................................................
9.1 -- Amended and Restated Voting Rights Agreement, dated November 3, 1993
and amended on May 18, 1994, March 1, 1995, October 26, 1995, July
10, 1996 and August 7, 1996, by and among the Registrant and certain
holders of the Registrant's Preferred Stock named therein. .........
10.1 -- Stock Purchase Agreement, dated July 1988, by and between Warburg,
Pincus Capital Company, L.P. ("Warburg") and the Registrant. .......
10.2 -- Stockholders' Agreement, dated September 16, 1988, by and among
Warburg, certain individual investors and the Registrant. ..........
10.3 -- Class B Preferred Stock Purchase Agreement, dated February 14, 1992
and amended on April 20, 1993, by and among certain Purchasers and
the Registrant. ....................................................
10.4 -- Class B Preferred Stock Purchase Agreement, dated April 20, 1993, by
and among certain Purchasers and the Registrant. ...................
10.5 -- Class C Preferred Stock and Warrant Purchase Agreement, dated
November 3, 1993, by and among the Registrant and certain Purchasers
named therein. .....................................................
10.6 -- Class D Preferred Stock Purchase Agreement, dated May 18, 1994, by
and among the Registrant and certain Purchasers named therein. .....
10.7 -- Class E Preferred Stock Purchase Agreement, dated March 1, 1995, by
and among the Registrant and certain Purchasers named therein. .....
10.8 -- Class F Preferred Stock Purchase Agreement, dated October 26, 1995,
by and among the Registrant and certain Purchasers named
therein. ...........................................................
10.9 -- Class G Preferred Stock Purchase Agreement, dated July 10, 1996, by
and among the Registrant and certain Purchasers named therein. .....
10.10 -- Supplemental Class G Preferred Stock Purchase Agreement, dated
August 7, 1996, by and among the Registrant and certain Purchasers
named therein. .....................................................
10.11 -- Amended and Restated Registration Rights Agreement, dated November
3, 1993 and amended on May 13, 1994, March 1, 1995, October 26,
1995, July 10, 1996 and August 7, 1996, by and among the Registrant
and certain holders of the Registrant's Preferred Stock named
therein. ...........................................................
10.12 -- Lease Agreement, dated January 1, 1994, by and between the Trust
under the Will of Harry F. Stimpson for office space at 195 Albany
Street, Cambridge, Massachusetts. ..................................
10.13 -- Sublease Agreement, dated April 7, 1992, by and between the
Massachusetts Institute of Technology and the Registrant, for office
space located at 185 Albany Street, Cambridge, Massachusetts. ......
10.14 -- 1993 Non-Employee Directors' Stock Option Plan. ....................
10.15 -- 1993 Long-Term Incentive Plan. .....................................
10.16 -- Form of Letter Agreement re: Confidentiality, Inventions and
Non-Disclosure. ....................................................
10.17 -- Form of Letter Agreement re: Restricted Stock. .....................
10.18 -- Form of Scientific Advisor Agreement. ..............................
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
------------
<S> <C> <C> <C>
10.19 -- Amended and Restated Promissory Note, dated June 16, 1993, issued by
the Registrant to Dr. Richard F Selden, in the original principal
amount of $125,000. ................................................
10.20 -- Amended and Restated Promissory Note, dated June 16, 1993, issued by
the Registrant to Dr. Douglas A. Treco, in the original principal
amount of $60,000. .................................................
10.21 -- Amended and Restated Promissory Note, dated April 21, 1995, issued
by the Registrant to Dr. Christoph M. Adams, in the original
principal amount of $15,000. .......................................
10.22 -- Amended and Restated Promissory Note, dated May 5, 1995, issued by
the Registrant to Dr. Christoph M. Adams, in the original principal
amount of $20,000. .................................................
10.23 -- Employment Agreement, dated July 19, 1991, by and between Dr.
Richard F Selden and the Registrant. ...............................
10.24 -- Pledge Agreement, dated May 14, 1991, by and between Dr. Richard F
Selden and the Registrant. .........................................
10.25 -- Employment Agreement, dated July 26, 1991, by and between Dr.
Douglas A. Treco and the Registrant. ...............................
10.26 -- Pledge Agreement, dated August 15, 1991, by and between Dr. Douglas
A. Treco and the Registrant. .......................................
10.27 -- Employment Agreement, dated November 20, 1993, by and between Dr.
Christoph M. Adams and the Registrant. .............................
10.28 -- Pledge Agreement, dated April 21, 1995, by and between Dr. Christoph
M. Adams and the Registrant. .......................................
10.29 -- Agreement, dated September 1, 1991, by and between Mr. William R.
Miller and the Registrant. .........................................
10.30 -- Agreement, dated July 30, 1993, by and between Warburg and the
Registrant. ........................................................
10.31 -- Common Stock Purchase Warrant, dated September 12, 1991. ...........
10.32 *+ -- Collaboration and License Agreement, dated July 22, 1993 and amended
on May 30, 1996, by and between Genetics Institute, Inc. and the
Registrant. ........................................................
10.33 *+ -- Amended and Restated License Agreement, dated March 1, 1995, by and
between Hoechst Marion Roussel, Inc. ("HMRI") and the
Registrant. ........................................................
10.34 *+ -- License Agreement, dated March 1, 1995, by and between HMRI and the
Registrant. ........................................................
11.1 -- Statement re: computation of earnings (loss) per share -- pro
forma. .............................................................
23.1 -- Consent of Palmer & Dodge LLP (included in Exhibit 5.1). ...........
23.2 -- Consent of Hamilton, Brook, Smith & Reynolds, P.C. .................
23.3 -- Consent of Ernst & Young LLP. ......................................
24.1 -- Power of Attorney (included on the signature pages to this
Registration Statement).............................................
27 -- Financial Data Schedule.............................................
</TABLE>
- ---------------
* To be filed by amendment.
+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended.
<PAGE> 1
EXHIBIT 3.1
TRANSKARYOTIC THERAPIES, INC.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The Certificate of Incorporation was filed on July 7, 1988, and the
Restated Certificate of Incorporation of the Corporation, filed with the
Secretary of State or the State of Delaware on February 14, 1992, as amended on
April 16, 1993 and July 1, 1993, respectively, as hereby further amended and
restated in its entirety to 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:
(a) To engage in research and development in the field of gene therapy
and to pursue various commercial applications of such research;
(b) 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
(c) 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.
This Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and preferred Stock. The total number or
shares of Common
<PAGE> 2
Stock this Corporation shall have authority to issue is 15,000,000, par value
$0.01 per share, and the total number of shares of Preferred Stock this
Corporation shall have authority to issue is 1,941,000, par value $1.00 per
share. There shall be three classes of Preferred Stock. The first such class
shall consist of 6,000 shares designated Class A Preferred Stock (the "Class A
Preferred Stock"); the second such class shall consist of 66,000 shares
designated Class B Preferred Stock (the "Class B Preferred Stock"); and the
third such class shall consist of 1,875,000 shares of Class C Preferred Stock
(the "Class C Preferred Stock," and together with the Class A Preferred Stock
and the Class B Preferred Stock, the "Preferred Stock").
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences and rights, and relative
participating, optional or other special rights, and the qualifications,
limitations, or restrictions thereof, granted to or imposed on the respective
classes and series of the shares of capital stock or the holders thereof are as
follows:
1. DIVIDENDS.
1.1. Preferred Stock.
(a) Subject to Section 4.1, the holders of the Class
A Preferred Stock shall be entitled to receive cumulative dividends, out of any
assets at the time legally available, when and as declared by the Board of
Directors, on a pro rata basis in accordance with the number of shares of Class
A Preferred Stock held by each such holder, which shall accrue from day-to-day
at the rate per annum of $70.00 per share, payable quarterly on the last day of
each March, June, September and December (commencing March 31, 1992) and an
additional amount equal to the amount of the accrued dividend on the preferred
stock exchanged by such holder in consideration of Class A Preferred Stock
pursuant to the Stock Exchange Agreement dated February 14, 1992, between the
Corporation and such holder, and in preference and priority to any payment of
any dividend on any Class B Preferred Stock, Class C Preferred Stock and Common
Stock of the Corporation. To the extent that such dividends are not paid,
because there exist no funds legally available therefor or for any other reason,
such dividends shall accrue.
(b) No dividend shall be paid on the Class B
Preferred Stock, the Class C Preferred Stock or the Common Stock in any year
until all declared and accumulated dividends have been paid on the Class A
Preferred Stock. In the event the Board of Directors shall have declared and
paid, or set apart for payment, dividends at the rate specified in Section
1.1(a) in any one fiscal year, and shall elect to declare additional dividends
in that fiscal year out of funds legally available therefor on the Common Stock,
such additional dividends shall, subject to Section 1.1(a) hereof, be declared
and paid on each share of Class B Preferred Stock and Class C Preferred Stock at
the same time as any dividends are declared and paid on the Common Stock, in an
amount equal to the additional
- 2 -
<PAGE> 3
dividends paid on such number of shares of Common Stock into which each share
Class B Preferred Stock and Class C Preferred Stock is convertible on the record
date for such dividend payment.
1.2. Common Stock. Subject to the preferences and other rights
of the Preferred Stock set forth in Section 1.1, the holders of Common Stock
shall be entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefor, on a pro rata basis in
accordance with the number of shares of Common Stock held by each such holder.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the stockholders of the Corporation shall be made in the
following manner:
(a) The holders of the Class A Preferred Stock, the
Class B Preferred Stock and the Class C Preferred Stock shall first be entitled
to receive, prior and in preference to any distribution or any of the assets of
the Corporation to the holders of any other class of Preferred Stock or Common
Stock by reason of their ownership of such stock, the amount of $700.00 per
share of Class A Preferred Stock, $400.00 per share of Class B Preferred Stock
and $8.00 per share of Class C Preferred Stock plus accrued but undeclared and
declared but unpaid dividends on each such share. If the assets and funds of the
Corporation shall be insufficient to permit the payment in full to such holders
of the Class A Preferred Stock, the Class B Preferred Stock and the Class C
Preferred Stock of the full aforesaid preferential amount, then the entire
assets of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Class A Preferred Stock, the Class
B Preferred Stock and the Class C Preferred Stock in accordance with the
aggregate liquidation preference of the shares of Class A Preferred Stock, Class
B Preferred Stock and/or Class C Preferred Stock held by each of them.
(b) After payment has been made to the holders of the
Class A Preferred Stock, the Class B Preferred Stock and the Class C Preferred
Stock of the full amounts to which they shall be entitled as aforesaid, the
holders of the Common Stock, the holders of the Class B Preferred Stock and the
holders of the Class C Preferred Stock shall be entitled to share ratably in the
remaining assets, based on the number of shares of Common Stock held by them,
assuming conversion of the Class B Preferred Stock and the Class C Preferred
Stock at the respective Conversion Prices then in effect.
(c) For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations in which the stockholders of the Corporation immediately prior to
the merger or consolidation do not own more than fifty percent (50%) of the
outstanding voting power (assuming conversion of all convertible securities and
the exercise of all outstanding options and warrants) or the surviving
corporation, or the sale of all or substantially all of the assets of the
Corporation, shall be treated as a liquidation, dissolution or winding up of the
Corporation. Approval of any of the foregoing events by the holders of at least
a majority of the Preferred Stock pursuant to Section 5 hereof shall be deemed
an election not to treat any of the foregoing events as a liquidation,
dissolution or winding up hereunder.
- 3 -
<PAGE> 4
3. VOTING RIGHTS.
3.1. Generally. Subject to Section 5 hereof and except as
otherwise required by law, the holder of each share of Common Stock issued and
outstanding shall have one vote in respect of each share of Common Stock and the
holder of each share of Class B Preferred Stock and/or Class C Preferred Stock
issued and outstanding shall be entitled to the number of votes equal to the
number of shares of Common Stock into which such share of Class B Preferred
Stock and/or Class C Preferred Stock can be converted at the record date for
determination of those entitled to vote on such matters, or, if no such record
date is established, at the date such vote is taken or any written consent of
stockholders is obtained, such votes to be counted together with all other
shares of stock of the Corporation having voting power in the election of
directors and not separately as a class. Except as otherwise provided by law or
in this Certificate of Incorporation, the holders of Class A Preferred Stock
shall not be entitled to notice of, or to vote at, any meeting of the
stockholders of the Corporation or to vote on any matter relating to the
business of affairs of the Corporation. Record holders of Common Stock, Class B
Preferred Stock and/or Class C Preferred Stock shall be entitled to notice of
any stockholders' meeting in accordance with the By-laws of the Corporation.
3.2. Class. A Preferred Stock Director. Notwithstanding the
provisions of Section 3.1:
(a) In an event that seven (7) consecutive quarterly
dividends with respect to the Class A Preferred Stock as set forth in Section
1.1(a) shall be in arrears and shall not have been paid in full, whether or not
earned, or in the event the Corporation shall be more than one year in arrears
in the redemption of Class A Preferred Stock, then, upon notice to the
Corporation given by the holders of not less than 50% of the Class A Preferred
Stock then outstanding, the holders of the Class A Preferred Stock shall as a
class become entitled to elect one member to the Board of Directors until all
accumulated and unpaid dividends thereon and all redemptions in arrears shall
have been paid, whereupon such right of the holders of the Class A Preferred
Stock to elect one director shall cease, subject to being again revived from
time to time upon the reoccurrence of the conditions above described. Failure by
the holders of the Class A Preferred Stock to exercise their rights under this
Section 3.2 promptly upon the occurrence of the conditions giving rise to such
rights shall not be deemed to be a waiver of such rights, such rights being
exercisable at any time such conditions shall have occurred and be continuing.
(b) Immediately upon accrual of such right of the
holders of Class A Preferred Stock to elect a director pursuant to paragraph (a)
above, the number of directors of the Corporation shall, ipso facto, be
increased by one, and the directors of the Corporation shall thereupon be
divided into classes. One such class shall consist of one director (the
"Preferred Director") elected solely by the holders of Class A Preferred Stock
(voting as a class), and the other class shall consist of the remaining
directors. Whenever the number of directors of the Corporation shall have been
so increased, the number as so increased may thereafter be further increased or
decreased in such manner as may be permitted by the By-laws of the Corporation
and without the vote of the holders of Class A Preferred Stock, provided that no
such action shall impair the right of the holders of Class A
- 4 -
<PAGE> 5
Preferred Stock to elect the Preferred Director. The holders of the Class A
Preferred Stock may at their option at any time exercise their rights under this
Section 3.2 by written consent without a meeting in accordance with the General
Corporation Law of Delaware.
(c) Each Preferred Director elected by the holders of
Class A Preferred Stock shall serve for a term of one year and until his or her
successor is elected and qualified, or, if earlier, until the right to elect
such director ceases in accordance with paragraph (a) above. So long as the
holders of Class A Preferred Stock are entitled to elect a Preferred Director,
any vacancy in the position of Preferred Director may be filled only by the
holders of the Class A Preferred Stock entitled to vote thereon. The Class A
Preferred Director may, during his or her term of office, be removed at any
time, with or without cause, by and only by the affirmative vote, at a special
meeting of holders of Class A Preferred Stock called for such purpose, or the
written consent, of the holders of record of a majority of the then outstanding
shares of Class A Preferred Stock. Any vacancy created by such removal may also
be filled at such meeting or by such consent.
(d) Upon the termination of the right of holders of
Class A Preferred Stock to elect a Preferred Director, the term of office of the
Preferred Director shall forthwith terminate and the number of directors of the
Corporation shall thereupon be appropriately decreased.
4. CONVERSION.
4.1. Optional Conversion. The holders of the Class B Preferred
Stock and the Class C Preferred Stock (together, the "Additional Preferred
Stock") shall have conversion rights as follows (the "Additional Preferred
Conversion Rights"). Each share of Additional Preferred Stock shall be
convertible (at the option of the holder thereof) any time at the office of the
Corporation or any transfer agent for the Additional Preferred Stock into the
number of shares of the Common Stock of the Corporation obtained by dividing the
Original Issuance Price (as defined below) for such class of Preferred Stock by
the conversion price in effect at the time of conversion, determined as
hereinafter provided (the "Conversion Price"). For the Class C Preferred Stock,
the Original Issuance Price is $8.00 and the initial Conversion Price is $8.00.
All calculations under this Section 4 shall be made to the nearest cent.
4.2. Automatic Conversion.
(a) Class A Preferred Stock. Immediately upon the
closing of an initial public offering of TKT Common Stock at an aggregate
offering price of not less than $12.00 per share (as adjusted for any stock
dividends, stock splits, combination, or similar recapitalizations occurring
after the date hereof) and which results in gross proceeds to the Corporation of
at least ten million dollars ($10,000,000) ("Qualified Public Offering"), and
simultaneously with the conversion of the Class B Preferred Stock and the Class
C Preferred Stock into Common Stock, all Class A Preferred Stock then
outstanding and all rights to any and all then unpaid accrued dividends thereon
shall automatically be converted into the number of original issue shares of
Common Stock produced by dividing (a) six million
- 5 -
<PAGE> 6
dollars ($6,000,000) by (b) the price per share at which Common Stock is offered
in the Qualified Public Offering.
(b) Additional Preferred Stock. At any time upon the
closing of a Qualified Public Offering, each share of Additional Preferred Stock
shall automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective Conversion Price
of such class of Preferred Stock. In the event of the automatic conversion of
Additional Preferred Stock upon a Qualified Public Offering, the party entitled
to receive the Common Stock issuable upon such conversion of Additional
Preferred Stock shall not be deemed to have converted such Additional Preferred
Stock until such party has received from the Corporation all declared and unpaid
dividends and accrued but undeclared dividends owed with respect to such party's
Additional Preferred Stock and, in any event, until immediately prior to the
closing of the Qualified Public Offering.
Each share of Additional Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the formula
set forth in Section 4.1 hereof at the then effective Conversion Price for such
class of Preferred Stock upon the vote to so convert of the holders of at least
66 2/3% of such class of Additional Preferred Stock then outstanding. Each share
of Class B Preferred Stock shall automatically be converted into shares of
Common Stock pursuant to the formula set forth in Section 4.1 hereof at the then
effective Conversion Price for Class B Preferred Stock in the event at least 66
2/3% of the Class B Preferred Stock purchased pursuant to (i) the Class B
Preferred Stock Purchase Agreement dated as of February 14, 1992 among the
Corporation and the purchasers listed on Schedule A thereto (the "1992 Class B
Agreement") and (ii) the Class B Preferred Stock Purchase Agreement dated as of
April 20, 1993 among the Corporation and the purchasers listed on Schedule A
thereto (the 1993 Class B Agreement"), collectively as one group, have been
converted into Common Stock. Each share of Class C Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the formula
set forth in Section 4.1 hereof at the then effective Conversion Price for Class
C Preferred Stock in the event at least 66 2/3% of the Class C Preferred Stock
purchased pursuant to the Class C Preferred Stock and Warrant Purchase Agreement
dated as of November 3, 1993 among the Corporation and the purchasers listed on
Schedule A thereto (the "Class A Agreement") have been converted into Common
Stock.
4.3. Mechanics of Conversion. Before any holder of Additional
Preferred Stock shall be entitled to convert such Stock into shares of Common
Stock and to receive certificates therefor, such holder shall surrender the
certificate or certificates evidencing the shares of Additional Preferred Stock
to be converted, duly endorsed, at the office of the Corporation or of any
transfer agent for the Additional Preferred Stock, and shall give written notice
to the Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 4.2, the outstanding shares of Class A Preferred Stock or Additional
Preferred Stock, as the case may be, shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent, and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless the certificates evidencing such shares of
Class A Preferred
- 6 -
<PAGE> 7
Stock or Additional Preferred Stock, as the case may be, are either delivered to
the Corporation or its transfer agent as provided above, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and indemnify the Corporation from any loss incurred by it
in connection with such certificates. The Corporation shall, as soon as
practicable after such delivery, or such agreement and indemnification in the
case of a lost certificate, issue and deliver at such office to such holder of
Class A Preferred Stock or Additional Preferred Stock, as the case may be, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled hereunder and a check payable to the holder in the
amount of any cash amounts payable as the result of a conversion into fractional
shares of Common Stock plus all accrued and unpaid dividends on such holder's
Additional Preferred Stock, if any. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Additional Preferred Stock to be converted, or in the case of
automatic conversion immediately prior to closing of the qualified conversion of
Class A Preferred Stock or Additional Preferred Stock described in Sections 4.1
and 4.2, as applicable, and the party entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
4.4. Adjustment of Conversion Prices due to Issuance of
Additional Shares. The Conversion Price in effect from time to time for the
Additional Preferred Stock shall be subject to adjustment as follows:
(a) Special Definitions. For purposes of this
Section 4.4, the following definitions shall apply:
(i) "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(ii) "Original Issue Date" shall mean the
date on which the class of such Additional Preferred Stock is first issued by
the Corporation.
(iii) "Convertible Securities" shall mean
any evidences of indebtedness, shares or other securities convertible into or
exchangeable for Common Stock.
(iv) "Additional Shares of Common Stock"
shall mean all shares of Common stock issued (or, pursuant to Subsection 4.4(c),
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable at any time:
(A) upon conversion of the
Additional Preferred Stock authorized herein;
(B) as a dividend or distribution on
the Class A Preferred Stock or Additional Preferred Stock or any event for which
adjustment is made pursuant to Section 4.4(f) hereof;
- 7 -
<PAGE> 8
(C) by way of dividend or other
distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common Stock by the foregoing clauses (A), (B) or this
clause (C);
(D) out of those 1,250,000 shares of
Common Stock reserved for issuance pursuant to the 1993 Long-Term Incentive Plan
or out of those 180,000 shares of Common Stock reserved for issuance pursuant to
the 1993 Non-Employee Directors' Stock Option Plan or pursuant to any other
stock option, stock bonus or other employee stock plan approved by the holders
of at least a majority of the Additional Preferred Stock voting as one class,
which approval shall include the number of shares of Common Stock available for
distribution under any such plan; or
(E) upon the exercise of any options
or warrants outstanding on the Original Issue Date.
(b) No Adjustment of Conversion Price. No adjustment
in the Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the Corporation is less
than the applicable Conversion Price in effect on the date of, and immediately
prior, to such issue.
(c) Deemed Issuance of Additional Shares of Common
Stock - Options and Convertible Securities. Except as provided in Section 4.4(a)
or Section 4.4(b) hereof, in the event the Corporation at any time or from time
to time after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of any
class of securities entitled to receive any such Options or Convertible
Securities, then the maximum number of shares (as set forth in the document
relating thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 4.4(e) hereof) of such Additional Shares of Common Stock
would be less than the applicable Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued.
(i) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible
Securities by their terms provided, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in the
number of shares of Common Stock issuable,
- 8 -
<PAGE> 9
upon the exercise, conversion or exchange thereof, the applicable Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(iii) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the applicable Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if,
(A) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were shares of Common Stock, if any actually issue upon the
exercise of such Options of the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or exchange, and
(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to which
such Options were actually exercised;
(iv) no readjustment pursuant to clause (ii)
or (iii) above all have the effect of increasing the applicable Conversion Price
to an amount which exceeds the lower of (A) the applicable Conversion Price on
the original adjustment date, or (B) the applicable Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date.
(d) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 4.4(c)) for a consideration per share
less than the applicable Conversion Price of a class of Additional Preferred
Stock in effect on the date of and immediately prior to such issue, then and in
such event, the applicable Conversion Price for such class of Additional
Preferred Stock shall be recomputed, concurrently with such issue (calculated to
the nearest cent) by dividing (x) an among equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior such issue multiplied by
the effective Conversion Price and (2) the consideration, if any, deemed
received by the Corporation upon such issue by (y)
- 9 -
<PAGE> 10
the total number of shares of Common Stock deemed to be outstanding immediately
after such issue; and provided that, for the purpose of this Section 4.4(d), all
shares of Common Stock outstanding and issuable upon conversion of outstanding
Options, Convertible Securities and the Additional Preferred Stock shall be
deemed to be outstanding, other than shares of Common Stock excluded from the
definition of Additional Shares of Common Stock in this Section 4.4. In no event
will the Conversion Price be adjusted as the result of a particular issuance of
securities to a price less than the price per share of the Additional Shares of
Common Stock issued in such issuance nor shall any adjustment be made in the
Conversion Price of any class of Additional Preferred Stock as a result of any
issuance of any Additional Shares of Common Stock at a price per share in excess
of the initial Conversion Price of such class of Additional Preferred Stock nor
any adjustments made in such Conversion Price which would result in a Conversion
Price higher than the then applicable Conversion Price.
(e) Determination of Consideration. for purposes of
this Section 4.4, the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. such consideration
shall:
(A) insofar as it consists of cash,
be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors of the
Corporation; and
(C) insofar as Additional Shares of
Common Stock are issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided n clauses (A) and (B)
above, as determined in good faith by the Board of Directors of the Corporation.
(ii) Options and Convertible Securities. the
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4.4(c)(i), relating
to Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities by
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<PAGE> 11
(B) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(f) Adjustments for Subdivisions, Stock Dividend
Combinations, or Consolidation of Common Stock. In the event the outstanding
shares of Common Stock shall be increased by way of stock issued as a dividend
for no consideration or subdivided (by stock split, or otherwise) into a greater
number of shares of Common Stock, the Conversion Price then in effect shall,
concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.
4.5. Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of the Corporation other than
shares of Common Stock, securities of other persons, evidences or indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in Section 4.4(c), then, in each such case for
the purpose of this Section 4.5, the holders of the Additional Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of the corporation
into which their shares of such Additional Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the Corporation entitled to receive such distribution.
4.6. Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Amended and Restated Certificate of Incorporation), provision shall be made
so that the holders of the Additional Preferred Stock shall thereafter be
entitled to receive upon conversion of the Additional Preferred Stock the number
of shares of stock or other securities or property of the Corporation or
otherwise, to which a holder of Common Stock deliverable upon conversion would
have been entitled on such recapitalization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 4
with respect to the rights of the holders of the Additional Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of such class of Additional Preferred Stock)
shall be applicable after that event in as nearly an equivalent manner as may be
practicable.
4.7. No Impairment. The Corporation will not, by further
amendment of its Amended and Restated Certificate of Incorporation or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to
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<PAGE> 12
protect the conversion rights of the holders of the Class A Preferred Stock and
Additional Preferred Stock against impairment.
4.8. Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of any share
of Class A or Additional Preferred Stock. If, upon conversion of any share of
Class A or Additional Preferred Stock, the registered holder would, except for
the provisions of this Section 4.8, be entitled to receive a fractional share of
Common Stock, then an amount equal to such fractional share multiplied by the
then applicable Conversion Price shall be paid by the Corporation in cash to
such registered holder.
4.9. Reservation of Shares. The Corporation agrees that, so
long as any share of Class A or Additional Preferred Stock shall remain
outstanding, the Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized capital stock, for the purpose of
issue upon conversion of the Class A or Additional Preferred Stock, the full
number of shares of Common Stock then issuable upon exercise of the Class A and
Additional Preferred Stock.
4.10. Validity of Shares. The Corporation agrees that it will
from time to time take all such actions as may be requisite to assure that all
shares of Common Stock which may be issued upon conversion of any share of the
Class A or Additional Preferred Stock will, upon issuance, be legally and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof; and, without limiting the generality
of the foregoing, the Corporation agrees that it will from time to time take all
such action as may be requisite to assure that the par value per share, if any,
of the Common Stock is at all times equal to or less than the lowest quotient of
the then current par value of the Class A, Class B and Class C Preferred Stock
divided by the number of shares of Common Stock into which each share of Class
A, Class B or Class C Preferred Stock can, from time to time, be converted.
4.11. Notice of Adjustment. Upon each adjustment of the
Conversion Price, the Corporation shall give prompt written notice thereof
addressed to the registered holder of each share of the class of Additional
Preferred Stock so affected at the address of such holder as shown on the
records of the Corporation, which notice shall state the Conversion Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares issuable upon the conversion of such holder's shares of
Additional Preferred Stock, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based together with a
certificate of the chief financial officer of the Corporation stating that he or
she has examined such notice and certifying that the information contained
therein is accurate.
4.12. Notice of Capital Changes. If at any time:
(a) the Corporation shall declare any dividend or
distribution payable to the holders of its Common Stock;
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<PAGE> 13
(b) The Corporation shall offer for subscription pro
rate to the holders of Common Stock any additional shares of stock of any class
or other rights;
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or consolidation or
merger of the Corporation with, or sale of all or substantially all of its
assets to, another corporation or business organization; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any such case, the Corporation shall give the registered holders of the
Additional Preferred Stock written notice of the date on which a record shall be
taken for such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and of the
date when any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least twenty (20) days prior to the record date
with respect thereto.
4.13. Taxes. The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of the Additional Preferred Stock.
4.14. Waiver of Adjustment.
(a) With the consent of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the then currently outstanding
shares of Class B Preferred Stock or Class C Preferred Stock, any antidilution
adjustment to which such class of preferred stock would otherwise be entitled
under this Section 4 may be limited or waived in its entirety. In the event of
such a limitation or waiver, the Corporation shall not be required to make any
adjustment whatsoever with respect to the Conversion Price of such class of
Preferred Stock, or to make any adjustment with respect to such class of
Preferred Stock in excess of such limit, as the terms of such consent may
dictate.
(b) Any holder of Additional Preferred Stock shall
also be permitted to waive in whole or in part, currently or prospectively, by
contract or any other writing, any antidilution adjustment to which such holder
would otherwise be entitled pursuant to the provisions of this Section 4.
5. COVENANTS. In addition to any other rights provided by law, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the then issued and outstanding
shares of the applicable class of Preferred Stock:
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<PAGE> 14
(a) amend or repeal any provision of the
Corporation's Amended and Restated Certificate of Incorporation so as to
adversely affect the rights, preferences, or privileges of such class of
Preferred Stock;
(b) authorize or issue additional shares of any class
or series of stock of the Corporation other than series of stock of the
Corporation ranking equal or junior in rights to such class of Preferred Stock
as to dividends or redemption or rights on liquidation, dissolution or winding
up;
(c) increase the authorized number of shares of such
existing class of Preferred Stock or authorize the reissuance thereof after
repurchase or redemption;
(d) authorize any liquidation, dissolution, winding
up of the affairs of the Corporation, consolidation or merger of the Corporation
into or with another corporation or corporations, sale of all or substantially
all of the Corporation's assets (unless after such consolidation or merger all
the terms of such class of Preferred Stock would remain in effect and be assumed
by the consolidated or surviving corporation), or distribution of the
Corporation's assets by way of return of capital;
(e) change the par value of such class of Preferred
Stock;
(f) alter in any way the voting rights of such class
of Preferred Stock.
6. REDEMPTION.
(a) The Corporation shall redeem (to the extent that
such redemption shall not violate any applicable provisions of the laws of the
State of Delaware) at a price of One Thousand Dollars ($1,000) per share, plus
an amount equal to any and all dividends accrued and unpaid, but without
interest, on the 31st day of December (the "Redemption Date") of each of the
years of 1995 through 1998 Seven hundred fifty (750) shares of Class A Preferred
Stock (or such lesser number as shall then be outstanding). If the Corporation
is unable on any Redemption Date to redeem any shares of Class A Preferred Stock
then to be redeemed because such redemption would violate the applicable laws of
the State of Delaware, then the Corporation shall redeem such shares as soon
thereafter as redemption would not violate such laws.
(b) The Corporation shall have the right, at its
option, to redeem as a whole, or from time to time in part, shares of Class A
Preferred Stock at the redemption price specified in the preceding paragraph
plus an amount equal to any and all dividends accrued and unpaid, but without
interest. The Corporation may credit against any mandatory redemption specified
in paragraph (a) any shares of Class A Preferred Stock redeemed pursuant to this
paragraph (b) or otherwise acquired by the Corporation. Any such credit shall be
applied against mandatory redemptions in the inverse order of the above-stated
redemption requirements.
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<PAGE> 15
(c) In case of redemption of any part of the shares
of Class A Preferred Stock at any time outstanding, the Corporation shall
designate by lot the shares so to be redeemed. Subject to the limitations and
provisions herein contained, the Board of Directors shall have full power and
authority to prescribe the manner in which the drawings by lot shall be
conducted.
(d) Notice of every redemption provided for in this
Section 6 shall be given by mailing the same to every holder of record, any of
whose shares are then to be redeemed, not less than fifteen (15) nor more than
thirty (30) days prior to the date fixed as the date of the redemption thereof,
at the respective addresses of such holders as the same shall appear on the
stock transfer books of the Corporation. The notice shall state the shares
specified in such notice will be redeemed by the Corporation at the redemption
price and on the date specified in such notice, upon the surrender for
cancellation at the placed designated in such notice, or the certificates
representing the shares so the be redeemed, properly endorsed in blank for
transfer in blank, bearing any necessary transfer tax stamps thereto affixed and
cancelled, or accompanied by cash or a certified check in the amount of any
stock transfer tax applicable to such transaction. On and after the date in the
notice described above, each holder of shares called for redemption, upon
presentation and surrender in accordance with such notice of the certificates
for shares held by such holder and called for redemption, shall be entitled to
receive therefor the applicable redemption price. If the Corporation shall give
notice of redemption as aforesaid (and unless the Corporation shall fail to pay
the redemption price of shares presented for redemption in accordance with such
notice), all shares called for redemption shall be deemed to have been redeemed
on the date specified in such notice whether or not the certificates for such
shares be surrendered for redemption and cancellation, and such shares so called
for redemption shall from and after such date cease to represent any interest
whatever in the Corporation or its property, and the holders thereof shall have
no rights other than the right to receive such redemption price but without any
interest thereon from or after such date.
(e) Notwithstanding any other provision of this
Section 6, if the holders of at least a majority of the Class A Preferred Stock
elect not to have the Corporation redeem the Class A Preferred Stock, then the
Corporation shall not redeem any shares of Class A Preferred Stock.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Class A,
Class B or Class C Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be cancelled, retired and limited from the shares which the
Corporation shall be authorized to issue. The Corporation may from time to time
take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of any such class of Preferred Stock accordingly.
8. AMENDMENTS AND WAIVERS.
(a) Any action, approval, request, consent, notice or
waiver which is required or permitted under this Article IV with respect to the
Class A Preferred Stock shall become effective and binding upon all holders of
Class A Preferred Stock if the same is
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<PAGE> 16
approved by the vote or written consent of the holders of at least a majority of
the Class A Preferred Stock then issued and outstanding.
(b) Any action, approval, request, consent, notice or
waiver which is required or permitted under this Article IV with respect to the
Class B Preferred Stock shall become effective and binding upon all holders of
Class B Preferred Stock if the same is approved by the vote or written consent
of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
Class B Preferred Stock then issued and outstanding, except as expressly
provided otherwise in this Restated Certificate of Incorporation.
(c) Any action, approval, request, consent, notice or
waiver which is required or permitted under this Article IV with respect to the
Class C Preferred Stock shall become effective and binding upon all holders of
Class C Preferred Stock if the same is approved by the vote or written consent
of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
Class C Preferred Stock then issued and outstanding, except as expressly
provided otherwise in this Restated Certificate of Incorporation.
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.
1. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except as to liability (i) for any breach of the director's
duty to loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for violations of Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to further eliminate or limit the liability of a director, then, in
addition to the elimination and limitation upon liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent provided or permitted by the amended Delaware
General Corporation Law.
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<PAGE> 17
2. Any repeal or modification of the foregoing Section 1 by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE VIII.
The Corporation shall, to the fullest extent permitted by Delaware law
as in effect from time to time, indemnify any person against all liability and
expense (including reasonable attorneys' fees) incurred by reason of the fact
that such person is or was a director or officer of the Corporation or, while
serving as a director or officer of the Corporation, such person is or was
serving at the request of the Corporation as a director, officer, partner or
trustee of, or in any smaller managerial or fiduciary position of, or as an
employee or agent of, another corporation, partnership, joint venture, trust,
association, or other entity. The Corporation may, to the fullest extent
permitted by Delaware law, as in effect from time to time, indemnify any person
against all liability and expense (including attorneys' fees) by reason of fact
that he is or was an employee, fiduciary or agent of the Corporation or, while
serving as an employee, fiduciary or agent of the Corporation, such person is or
was serving at the request of the Corporation as a director, officer, partner or
trustee of, or in any similar managerial or fiduciary position of, or an
employee or agent of, another corporation, partnership, joint venture, trust,
association or other entity. The Corporation may enter into indemnity contracts
with directors, officers, employees, fiduciaries and agents of the Corporation
setting forth such terms and conditions for the indemnification of such persons
as the Corporation's Board of Directors deems advisable subject to the
obligations set forth in this Article VIII. Expenses (including reasonable
attorneys' fees) incurred in defending an action, suit, or proceeding to the
full extent and under the circumstances permitted by Delaware law. The
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, fiduciary, or agent of the Corporation
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the
Corporation would have the power to indemnify against such liability under the
provisions of this Article VIII. The indemnification provided by this Article
VIII shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under this Certificate of Incorporation, any by-law,
agreement, vote of stockholders or disinterested directors statute, or
otherwise, and shall inure to the benefit of their heirs, executors and
administrators. The provisions of this Article VIII shall not be deemed to
preclude the Corporation from indemnifying other persons from similar or other
expenses and liabilities as the Board of Directors or the stockholders may
determine in a specific instance or by resolution of general application.
ARTICLE IX.
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 outside the State of Delaware at such
place or places as may be
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<PAGE> 18
designated from time to time by the By-laws and/or the Board of Directors of the
Corporation.
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
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<PAGE> 19
application has been made, be binding on all the creditors or class of
creditors, and/or on all 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.
This Amended and Restated Certificate of Incorporation has been duly
adopted by the Stockholders of the Corporation upon the recommendation of the
Board of Directors in accordance with the provisions of Sections 228, 242 and
245 of the Delaware General Corporation Law.
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 and attested by is Secretary this 5th day of November,
1993.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
---------------------------
K. Michael Forrest
ATTEST:
/s/ Leslie H. Shapiro
- ----------------------------
Leslie H. Shapiro
Assistant Secretary
[Corporate Seal]
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<PAGE> 20
CERTIFICATE OF CORRECTION
FILED TO CORRECT A CERTAIN ERROR IN THE
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:
1. The name of the corporation is Transkaryotic Therapies, Inc.
2. An Amended and Restated Certificate of Incorporation was filed by
the Secretary of State of Delaware on November 3, 1993 and said Certificate
requires correction as permitted by subsection (E) of Section 103 of The General
Corporation Law of the State of Delaware.
3. The inaccuracy of said Certificate to be corrected is the number of
shares of Preferred Stock designated Class B Preferred Stock, which said
Certificate stated to be 66,000 shares. The correct number of shares of
Preferred Stock designated Class B Preferred Stock is 60,000 shares.
(a) The first paragraph of Article IV as filed reads as
follows:
"This Corporation is authorized to issue two classes
of shares to be designated respectively Common Stock and
Preferred Stock. The total number of shares of Common Stock
this Corporation shall have authority to issue 15,000,000, par
value $0.01 per share, and the total number of shares of
Preferred Stock this Corporation shall have authority to issue
is 1,941,000, par value $1.00 per share. There shall be three
classes of Preferred Stock. The first such class shall consist
of 6,000 shares designated Class A Preferred Stock (the "Class
A Preferred Stock"); the second such class shall consist of
66,000 shares designated Class B Preferred Stock (the "Class B
Preferred Stock"); and the third such class shall consist of
1,875,000 shares of Class C Preferred Stock (the "Class C
Preferred Stock," and together with the Class A Preferred
Stock and the Class B Preferred Stock, the "Preferred
Stock")."
(b) The first paragraph of Article IV is corrected to read as
follows:
"This Corporation is authorized to issue two classes
of shares to be designated respectively Common Stock and
Preferred Stock. The total number of shares of Common Stock
this Corporation shall have authority to issue 15,000,000, par
value $0.01 per share, and the total number of shares of
Preferred Stock this Corporation shall have authority to issue
is 1,941,000, par value $1.00 per share. There shall be three
classes of Preferred Stock. The first such class shall consist
of 6,000 shares designated Class A Preferred
<PAGE> 21
Stock (the "Class A Preferred Stock"); the second such class
shall consist of 60,000 shares designated Class B Preferred
Stock (the "Class B Preferred Stock"); and the third such
class shall consist of 1,875,000 shares of Class C Preferred
Stock (the "Class C Preferred Stock," and together with the
Class A Preferred Stock and the Class B Preferred Stock, the
"Preferred Stock")."
IN WITNESS WHEREOF, said Transkaryotic Therapies, Inc. has caused this
certificate to be signed by K. Michael Forrest, its duly authorized President
and Chief Executive Officer, and attested by Leslie H. Shapiro, its duly
authorized Assistant Secretary, this 17th day of November, 1993.
TRANSKARYOTIC THERAPIES, INC.
By:/s/ K. Michael Forrest
--------------------------------
K. Michael Forrest
President and Chief Executive Officer
ATTEST:
/s/ Leslie H. Shapiro
- ----------------------------
Leslie H. Shapiro
Assistant Secretary
[Corporate Seal]
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<PAGE> 22
CERTIFICATE OF AMENDMENT
OF
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 (the
"Corporation"), does hereby certify:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said amendment
by written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and notice has been given as provided
in Section 228 of the General Corporation Law of the State of Delaware. The
resolution provides that the Amended and Restated Certificate of Incorporation
of the Corporation is hereby amended as follows:
Article Fourth of the Certificate of Incorporation of the Corporation
is hereby deleted in its entirety and replaced with the following:
ARTICLE IV.
This Corporation is authorized to issue five classes of shares to be
designated respectively Common Stock and four classes of Preferred Stock. The
total number of shares of Common Stock this Corporation shall have authority to
issue is 15,000,000, par value $0.01 per share, and the total number of shares
of Preferred Stock this Corporation shall have authority to issue is 2,221,367,
par value $1.00 per share. The first class of Preferred Stock shall consist of
6,000 shares designated Class A Preferred Stock (the "Class A Preferred Stock");
the second class of Preferred Stock shall consist of 60,000 shares
<PAGE> 23
designated Class B Preferred Stock (the "Class B Preferred Stock"); the third
class of Preferred Stock shall consist of 1,875,000 shares of Class C Preferred
Stock (the "Class C Preferred Stock"); and the fourth class of Preferred Stock
shall consist of 280,367 shares of Class D Preferred Stock (the "Class D
Preferred Stock," and together with the Class A Preferred Stock, the Class B
Preferred Stock and the Class C Preferred Stock, the "Preferred Stock").
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences and rights, and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, granted to or imposed on the respective
classes and series of the shares of capital stock or the holders thereof are as
follows:
1. DIVIDENDS.
1.1. Preferred Stock.
(a) Subject to Section 4.1, the holders of the Class A Preferred Stock
shall be entitled to receive cumulative dividends, out of any assets at the time
legally available, when and as declared by the Board of Directors, on a pro rata
basis in accordance with the number of shares of Class A Preferred Stock held by
each such holder, which shall accrue from day-to-day at the rate per annum of
$70.00 per share, payable quarterly on the last day of each March, June,
September and December (commencing March 31, 1992) and an additional amount
equal to the amount of the accrued dividend on the preferred stock exchanged by
such holder in consideration of Class A Preferred Stock pursuant to the Stock
Exchange Agreement dated February 14, 1992, between the Corporation and such
holder, and in preference and priority to any payment of any dividend on any
Class B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock and
Common Stock of the Corporation. To the extent that such dividends are not paid,
because there exist no funds legally available therefor or for any other reason,
such dividends shall accrue.
(b) No dividend shall be paid on the Class B Preferred Stock, the Class
C Preferred Stock, the Class D Preferred Stock or the Common Stock in any year
until all declared and accumulated dividends have been paid on the Class A
Preferred Stock. In the event the Board of Directors shall have declared and
paid, or set apart for payment, dividends at the rate specified in Section
1.1(a) in any one fiscal year, and shall elect to declare additional dividends
in that fiscal year out of funds legally available therefor on the Common Stock,
such additional dividends shall, subject to Section 1.1(a) hereof, be declared
and paid on each share of Class B Preferred Stock, Class C Preferred Stock, and
Class D Preferred Stock at the same time as any dividends are declared and paid
on the Common Stock, in an amount equal to the additional dividends paid on such
number of shares of
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<PAGE> 24
Common Stock into which each share of Class B Preferred Stock, Class C Preferred
Stock and Class D Preferred Stock is convertible on the record date for such
dividend payment.
1.2. Common Stock. Subject to the preferences and other rights of the
Preferred Stock set forth in Section 1.1, the holders of Common Stock shall be
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor, on a basis in accordance with the
number of shares of Common Stock held by each such holder.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the stockholders of the Corporation shall be made in the
following manner:
(a) The holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock and the Class D Preferred
Stock shall first be entitled to receive, prior and in preference to
any distribution of any of the assets of the Corporation to the holders
of any other class of Preferred Stock or Common Stock by reason of
their ownership of such stock, the amount of $700.00 per share of Class
A Preferred Stock, $400.00 per share of Class B Preferred Stock, $8.00
per share of Class C Preferred Stock and $17.8338 per share of Class D
Preferred Stock plus accrued but undeclared and declared but unpaid
dividends on each such share. If the assets and funds of the
Corporation shall be insufficient to permit the payment in full to such
holders of the Class A Preferred Stock, the Class B Preferred Stock,
the Class C Preferred Stock and the Class D Preferred Stock of the full
aforesaid preferential amount, then the entire assets of the
Corporation legally available for distribution shall be distributed
ratably among the holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock and the Class D Preferred
Stock in accordance with the aggregate liquidation preference of the
shares of Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock and/or Class D Preferred Stock held by each of them.
(b) After payment has been made to the holders of the Class A
Preferred Stock, the Class B Preferred Stock, the Class C Preferred
Stock and the Class D Preferred Stock of the full amounts to which they
shall be entitled as aforesaid, the holders of the Common Stock, the
holders of the Class B Preferred Stock, the holders of the Class C
Preferred Stock and the holders of the Class D Preferred Stock shall be
entitled to share ratably in the remaining assets, based on the number
of shares of Common Stock held by them, assuming conversion of the
Class B Preferred Stock, the Class C Preferred Stock and the Class D
Preferred Stock at the respective Conversion Prices then in effect.
(c) For purposes of this Section 2, a merger or consolidation
of the Corporation with or into any other corporation or corporations
in which the stockholders of the Corporation immediately prior to the
merger or consolidation do not own more than fifty percent (50%) of the
outstanding voting power (assuming conversion of all convertible
securities and the exercise of all outstanding options and warrants) of
the surviving corporation, or the sale of all or substantially all of
the
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<PAGE> 25
assets of the Corporation, shall be treated as a liquidation,
dissolution or winding up of the Corporation. Approval of any of the
foregoing events by the holders of at least a majority of the Preferred
Stock pursuant to Section 5 hereof shall be deemed an election not to
treat any of the foregoing events as a liquidation, dissolution or
winding up hereunder.
3. VOTING RIGHTS.
3.1. Generally. Subject to Section 5 hereof and except as otherwise
required by law, the holder of each share of Common Stock issued and outstanding
shall have one vote in respect of each share of Common Stock and the holder of
each share of Class B Preferred Stock, Class C Preferred Stock and/or Class D
Preferred Stock issued and outstanding shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such share of Class B
Preferred Stock, Class C Preferred Stock and/or Class D Preferred Stock can be
converted at the record date for determination of those entitled to vote on such
matters, or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is obtained, such votes to be
counted together with all other shares of stock of the Corporation having voting
power in the election of directors and not separately as a class. Except as
otherwise provided by law or in this Certificate of Incorporation, the holders
of Class A Preferred Stock shall not be entitled to notice of, or to vote at,
any meeting of the stockholders of the Corporation or to vote on any matter
relating to the business or affairs of the Corporation. Record holders of Common
Stock, Class B Preferred Stock, Class C Preferred Stock and/or Class D Preferred
Stock shall be entitled to notice of any stockholders' meeting in accordance
with the by-laws of the Corporation.
3.2. Class A Preferred Stock Director. Notwithstanding the provisions
of Section 3.1:
(a) In the event that seven (7) consecutive quarterly
dividends with respect to the Class A Preferred Stock as set forth in
Section 1.1(a) shall be in arrears and shall not have been paid in
full, whether or not earned, or in the event the Corporation shall be
more than one year in arrears in the redemption of Class A Preferred
Stock, then, upon notice to the Corporation given by the holders of not
less than 50% of the Class A Preferred Stock then outstanding, the
holders of the Class A Preferred shall as a class become entitled to
elect one member to the Board of Directors until all accumulated and
unpaid dividends thereon and all redemptions in arrears shall have been
paid, whereupon such right of the holders of the Class A Preferred
Stock to elect one director shall cease, subject to being again revived
from time to time upon the reoccurrence of the conditions above
described. Failure by the holders of the Class A Preferred Stock to
exercise their rights under this Section 3.2 promptly upon the
occurrence of the conditions giving rise to such rights shall not be
deemed to be a waiver of such rights, such rights being exercisable at
any time such conditions shall have occurred and be continuing.
(b) Immediately upon accrual of such right of the holders of
Class A Preferred Stock to elect a director pursuant to paragraph (a)
above, the number of directors of the Corporation shall, ipso facto, be
increased by one, and the directors
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<PAGE> 26
of the Corporation shall thereupon be divided into classes. One such
class shall consist of one director (the "Preferred Director") elected
solely by the holders of Class A Preferred Stock (voting as a class),
and the other class shall consist of the remaining directors. Whenever
the number of directors of the Corporation shall have been so
increased, the number as so increased may thereafter be further
increased or decreased in such manner as may be permitted by the
By-laws of the Corporation and without the vote of the holders of Class
A Preferred Stock, provided that no such action shall impair the right
of the holders of Class A Preferred Stock to elect the Preferred
Director. The holders of the Class A Preferred Stock may at their
option at any time exercise their rights under this Section 3.2 by
written consent without a meeting in accordance with the General
Corporation Law of Delaware.
(c) Each Preferred Director elected by the holders of Class A
Preferred Stock shall serve for a term of one year and until his or her
successor is elected and qualified, or, if earlier, until the right to
elect such director ceases in accordance with paragraph (a) above. So
long as the holders of Class A Preferred Stock are entitled to elect a
Preferred Director, any vacancy in the position of Preferred Director
may be filled only by the holders of the Class A Preferred Stock
entitled to vote thereon. The Class A Preferred Director may, during
his or her term of office, be removed at any time, with or without
cause, by and only by the affirmative vote, at a special meeting of
holders of Class A Preferred Stock called for such purpose, or the
written consent, of the holders of record of a majority of the then
outstanding shares of Class A Preferred Stock. Any vacancy created by
such removal may also be filled at such meeting or by such consent.
(d) Upon the termination of the right of holders of Class A
Preferred Stock to elect a Preferred Director, the term of office of
the Preferred Director shall forthwith terminate and the number of
directors of the Corporation shall thereupon be appropriately
decreased.
4. CONVERSION.
4.1. Optional Conversion. The holders of Class B Preferred Stock, Class
C Preferred Stock and Class D Preferred Stock (together, the "Additional
Preferred Stock") shall have conversion rights as follows (the "Additional
Preferred Conversion Rights"). Each share of Additional Preferred Stock shall be
convertible (at the option of the holder thereof) any time at the office of the
Corporation or any transfer agent for the Additional Preferred Stock into the
number of shares of the Common Stock of the Corporation obtained by dividing the
Original Issuance Price (as defined below) for such class of Preferred Stock by
the conversion price in effect at the time of conversion, determined as
hereinafter provided (the "Conversion Price"). For the Class B Preferred Stock,
the Original Issuance Price is $400.00 and the present Conversion Price is
$8.71. For the Class C Preferred Stock, the Original Issuance Price is $8.00 and
the initial Conversion Price is $8.00. For the Class D Preferred Stock, the
Original Issuance Price is $17.83 and the initial Conversion Price is $17.83.
All calculations under this Section 4 shall be made to the nearest cent.
4.2. Automatic Conversion.
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<PAGE> 27
(a) Class A Preferred Stock. Immediately upon the closing of
an initial public offering of the Corporation's Common Stock at an
aggregate offering price of not less than $12.00 per share (as adjusted
for any stock dividends, stock splits, combination, or similar
recapitalizations occurring after the date hereof) and which results in
gross proceeds to the Corporation of at least ten million dollars
($10,000,000) ("Qualified Public Offering"), and simultaneously with
the conversion of the Class B Preferred Stock, the Class C Preferred
Stock and the Class D Preferred Stock into Common Stock, all Class A
Preferred Stock then outstanding and all rights to any and all then
unpaid accrued dividends thereon shall automatically be converted into
the number of original issue shares of Common Stock produced by
dividing (a) six million dollars ($6,000,000) by (b) the price per
share at which Common Stock is offered in the Qualified Public
Offering.
(b) Additional Preferred Stock. At any time upon the closing
of a Qualified Public Offering, each share of Additional Preferred
Stock shall automatically be converted into shares of Common Stock
pursuant to the formula set forth in Section 4.1 hereof at the then
effective Conversion Price of such class of Preferred Stock. In the
event of the automatic conversion of Additional Preferred Stock upon a
Qualified Public Offering, the party entitled to receive the Common
Stock issuable upon such conversion of Additional Preferred Stock shall
not be deemed to have converted such Additional Preferred Stock until
such party has received from the Corporation all declared and unpaid
dividends and accrued but undeclared dividends owed with respect to
such party's Additional Preferred Stock and, in any event, until
immediately prior to the closing of the Qualified Public Offering.
Each share of Additional Preferred Stock shall automatically
be converted into shares of Common Stock pursuant to the formula set
forth in Section 4.1 hereof at the then effective Conversion Price for
such class of Preferred Stock upon the vote to so convert of the
holders of at least 66-2/3% of such class of Additional Preferred Stock
then outstanding. Each share of Class B Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class B Preferred Stock in the event at least
66-2/3% of the Class B Preferred Stock purchased pursuant to (i) the
Class B Preferred Stock Purchase Agreement dated as of February 14,
1992 among the Corporation and the purchasers listed on Schedule A
thereto (the "1992 Class B Agreement") and (ii) the Class B Preferred
Stock Purchase Agreement dated as of April 20, 1993 among the
Corporation and the purchasers listed on Schedule A thereto (the "1993
Class B Agreement"), collectively as one group, have been converted
into Common Stock. Each share of Class C Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class C Preferred Stock in the event at least
66-2/3% of the Class C Preferred Stock purchased pursuant to the Class
C Preferred Stock and Warrant Purchase Agreement dated as of November
3, 1993 among the Corporation and the purchasers listed on Schedule A
thereto (the "Class C Agreement") have been converted into Common
Stock. Each share of Class D Preferred Stock shall automatically be
converted into
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<PAGE> 28
shares of Common Stock pursuant to the formula set forth in Section 4.1
hereof at the then effective Conversion Price for Class D Preferred
Stock in the event at least 66- 2/3% of the Class D Preferred Stock
purchased pursuant to the Class D Preferred Stock Purchase Agreement
dated as of May ___, 1994 among the Corporation and Marion Merrell Dow,
Inc. (the "Class D Agreement") have been converted into Common Stock.
4.3. Mechanics of Conversion. Before any holder of Additional Preferred
Stock shall be entitled to convert such Stock into shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates evidencing the shares of Additional Preferred Stock to be
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for the Additional Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 4.2, the outstanding shares of Class A Preferred Stock or Additional
Preferred Stock, as the case may be, shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent, and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless the certificates evidencing such shares of
Class A Preferred Stock or Additional Preferred Stock, as the case may be, are
either delivered to the Corporation or its transfer agent as provided above, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as practicable
after such delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Class A
Preferred Stock or Additional Preferred Stock, as the case may be, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled hereunder and a check payable to the holder in the amount of
any cash amounts payable as the result of a conversion into fractional shares of
Common Stock plus all accrued and unpaid dividends on such holder's Additional
Preferred Stock, if any. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Additional Preferred Stock to be converted, or in the case of
automatic conversion immediately prior to closing of the Qualified Public
Offering or the date of the shareholder vote or conversion of Class A Preferred
Stock or Additional Preferred Stock described in Sections 4.1 and 4.2, as
applicable, and the party entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
4.4. Adjustment of Conversion Prices due to Issuance of Additional
Shares. The Conversion Price in effect from time to time for the Additional
Preferred Stock shall be subject to adjustment as follows:
(a) Special Definitions. For purposes of this Section 4.4, the
following definitions shall apply:
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<PAGE> 29
(i) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(ii) "Original Issue Date" shall mean the date on
which the class of such Additional Preferred Stock is first
issued by the Corporation.
(iii) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
convertible into or exchangeable for Common Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Subsection
4.4(c), deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued
or issuable at any time:
(A) upon conversion of the Additional
Preferred Stock authorized herein;
(B) as a dividend or distribution on the
Class A Preferred Stock or Additional Preferred Stock
or any event for which adjustment is made pursuant to
Section 4.4(f) hereof;
(C) by way of dividend or other distribution
on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by
the foregoing clauses (A), (B) or this clause (C);
(D) out of those 1,250,000 shares of Common
Stock reserved for issuance pursuant to the 1993
Long-Term Incentive Plan or out of those 180,000
shares of Common Stock reserved for issuance pursuant
to the 1993 Non-Employee Directors' Stock Option Plan
or pursuant to any other stock option, stock bonus or
other employee stock plan approved by the holders of
at least a majority of the Additional Preferred Stock
voting as one class, which approval shall include the
number of shares of Common Stock available for
distribution under any such plan; or
(E) upon the exercise of any options or
warrants outstanding on the Original Issue Date.
(b) No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Conversion Price in effect on
the date of, and immediately prior, to such issue.
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<PAGE> 30
(c) Deemed Issuance of Additional Shares of Common Stock -
Options and Convertible Securities. Except as provided in Section
4.4(a) or Section 4.4(b) hereof, in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the document relating thereto without regard to
any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares
of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 4.4(e) hereof)
of such Additional Shares of Common Stock would be less than the
applicable Conversion Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued,
(i) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the applicable
Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if,
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares
of Common Stock issued were shares of Common Stock,
if any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration
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<PAGE> 31
actually received by the Corporation for the issue of
all such Options, whether or not exercised, plus the
consideration actually received by the Corporation
upon such exercise, or for the issue of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(iv) no readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the applicable
Conversion Price to an amount which exceeds the lower of (A)
the applicable Conversion Price on the original adjustment
date, or (B) the applicable Conversion Price that would have
resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such
readjustment date.
(d) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 4.4(c)) for a
consideration per share less than the applicable Conversion Price of a
class of Additional Preferred Stock in effect on the date of and
immediately prior to such issue, then and in such event, the applicable
Conversion Price for such class of Additional Preferred Stock shall be
recomputed, concurrently with such issue (calculated to the nearest
cent) by dividing (x) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue
multiplied by the then effective Conversion Price and (2) the
consideration, if any, deemed received by the Corporation upon such
issue by (y) the total number of shares of Common Stock deemed to be
outstanding immediately after such issue; and provided that, for the
purposes of this Section 4.4(d), all shares of Common Stock outstanding
and issuable upon conversion of outstanding Options, Convertible
Securities and the Additional Preferred Stock shall be deemed to be
outstanding, other than shares of Common Stock excluded from the
definition of Additional Shares of Common Stock in this Section 4.4. In
no event will the Conversion Price be adjusted as the result of a
particular issuance of securities to a price less than the price per
share of the Additional Shares of Common Stock issued in such issuance
nor shall any adjustment be made in the Conversion Price of any class
of Additional Preferred Stock as a result of any issuance of any
Additional Shares of Common Stock at a price per share in excess of the
initial Conversion Price of such class of Additional
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<PAGE> 32
Preferred Stock nor any adjustments made in such Conversion Price which
would result in a Conversion Price higher than the then applicable
Conversion Price.
(e) Determination of Consideration. For purposes of this
Section 4.4, the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by
the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of such issue, as determined in good faith
by the Board of Directors of the Corporation; and
(C) insofar as Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation for
consideration which covers both, be the proportion of
such consideration so received, computed as provided
in clauses (A) and (B) above, as determined in good
faith by the Board of Directors of the Corporation.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.4(c) (i), relating to Options and
Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
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<PAGE> 33
(f) Adjustments for Subdivisions, Stock Dividends,
Combinations, or Consolidation of Common Stock. In the event the
outstanding shares of Common Stock shall be increased by way of stock
issued as a dividend for no consideration or subdivided (by stock
split, or otherwise) into a greater number of shares of Common Stock,
the Conversion Price then in effect shall, concurrently with the
effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in
effect shall, concurrently with the effectiveness of such combination
or consolidation, be proportionately increased.
4.5. Provision Regarding Adjustment of Conversion Price for Class D
Preferred Stock. Notwithstanding any other provision of this Article IV, the
Conversion Price of the Class D Preferred Stock shall be reduced, in the event
that a Qualified Public Offering does not close on or before March 31, 1995, to
$14.12 as of such date, or to such lesser amount as may be required under other
provisions of this Article IV.
4.6. Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of the Corporation other than shares of
Common Stock, securities of other persons, evidences of indebtedness issued by
the Corporation or other persons, assets (excluding cash dividends) or options
or rights not referred to in Section 4.4(c), then, in each such case for the
purpose of this Section 4.6, the holders of the Additional Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of the Corporation into
which their shares of such Additional Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
4.7. Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in this Amended
and Restated Certificate of Incorporation), provision shall be made so that the
holders of the Additional Preferred Stock shall thereafter be entitled to
receive upon conversion of the Additional Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Additional Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of such class of Additional Preferred Stock) shall
be applicable after that event in as nearly an equivalent manner as may be
practicable.
4.8. No Impairment. The Corporation will not, by further amendment of
its Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation,
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<PAGE> 34
but will at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Class A Preferred Stock and Additional Preferred Stock against
impairment.
4.9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any share of Class A or
Additional Preferred Stock. If, upon conversion of any share of Class A or
Additional Preferred Stock, the registered holder would, except for the
provisions of this Section 4.9, be entitled to receive a fractional share of
Common Stock, then an amount equal to such fractional share multiplied by the
then applicable Conversion Price shall be paid by the Corporation in cash to
such registered holder.
4.10. Reservation of Shares. The Corporation agrees that, so long as
any share of Class A or Additional Preferred Stock shall remain outstanding, the
Corporation shall at all times reserve and keep available, free from preemptive
rights, out of its authorized capital stock, for the purpose of issue upon
conversion of the Class A or Additional Preferred Stock, the full number of
shares of Common Stock then issuable upon conversion of the Class A and
Additional Preferred Stock.
4.11. Validity of Shares. The Corporation agrees that it will from time
to time take all such actions as may be requisite to assure that all shares of
Common Stock which may be issued upon conversion of any share of the Class A or
Additional Preferred Stock will, upon issuance, be legally and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof; and, without limiting the generality of the
foregoing, the Corporation agrees that it will from time to time take all such
action as may be requisite to assure that the par value per share, if any, of
the Common Stock is at all times equal to or less than the lowest quotient of
the then current par value of the Class A, Class B, Class C and Class D
Preferred Stock divided by the number of shares of Common Stock into which each
share of Class A, Class B, Class C or Class D Preferred Stock can, from time to
time, be converted.
4.12. Notice of Adjustment. Upon each adjustment of the Conversion
Price, the Corporation shall give prompt written notice thereof addressed to the
registered holder of each share of the class of Additional Preferred Stock so
affected at the address of such holder as shown on the records of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
issuable upon the conversion of such holder's shares of Additional Preferred
Stock, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based together with a certificate of the
chief financial officer of the Corporation stating that he or she has examined
such notice and certifying that the information contained therein is accurate.
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<PAGE> 35
4.13. Notice of Capital Changes. If at any time:
(a) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(b) the Corporation shall offer for subscription to the
holders of Common Stock any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation or business
organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any such case, the Corporation shall give the registered holders of the
Additional Preferred Stock written notice of the date on which a record shall be
taken for such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and of the
date when any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least twenty (20) days prior to the record date
with respect thereto.
4.14. Taxes. The Corporation will pay all taxes and other governmental
charges that may be imposed in respect of the issue or delivery of shares of
Common Stock upon conversion of the Additional Preferred Stock.
4.15. Waiver of Adjustment.
(a) With the consent of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then currently outstanding shares of Class B
Preferred Stock, Class C Preferred Stock or Class D Preferred Stock, any
antidilution adjustment to which such class of Preferred Stock would otherwise
be entitled under this Section 4 may be limited or waived in its entirety. In
the event of such a limitation or waiver, the Corporation shall not be required
to make any adjustment whatsoever with respect to the Conversion Price of such
class of Preferred Stock, or to make any adjustment with respect to such class
of Preferred Stock in excess of such limit, as the terms of such consent may
dictate.
(b) Any holder of Additional Preferred Stock shall also be permitted to
waive in whole or in part, currently or prospectively, by contract or any other
writing, any antidilution adjustment to which such holder would otherwise be
entitled pursuant to the provisions of this Section 4.
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<PAGE> 36
5. COVENANTS. In addition to any other rights provided by law, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the then issued and outstanding
shares of the applicable class of Preferred Stock:
(a) amend or repeal any provision of the Corporation's Amended
and Restated Certificate of Incorporation so as to adversely affect the
rights, preferences, or privileges of such class of Preferred Stock;
(b) authorize or issue additional shares of any class or
series of stock of the Corporation other than a class or series of
stock of the Corporation ranking equal or junior in rights to such
class of Preferred Stock as to dividends or redemption or rights on
liquidation, dissolution or winding up;
(c) increase the authorized number of shares of such existing
class of Preferred Stock or authorize the reissuance thereof after
repurchase or redemption;
(d) authorize any liquidation, dissolution, winding up of the
affairs of the Corporation, consolidation or merger of the Corporation
into or with another corporation or corporations, sale of all or
substantially all of the Corporation's assets (unless after such
consolidation or merger all the terms of such class of Preferred Stock
would remain in effect and be assumed by the consolidated or surviving
corporation), or distribution of the Corporation's assets by way of
return of capital;
(e) change the par value of such class of Preferred Stock; or
(f) alter in any way the voting rights of such class of
Preferred Stock.
6. REDEMPTION
(a) The Corporation shall redeem (to the extent that such redemption
shall not violate any applicable provisions of the laws of the State of
Delaware) at a price of One Thousand Dollars ($1,000) per share, plus an amount
equal to any and all dividends accrued and unpaid, but without interest, on the
31st day of December (the "Redemption Date") of each of the years of 1995
through 1998 seven hundred fifty (750) shares of Class A Preferred Stock (or
such lesser number as shall then be outstanding). If the Corporation is unable
on any Redemption Date to redeem any shares of Class A Preferred Stock then to
be redeemed because such redemption would violate the applicable laws of the
State of Delaware, then the Corporation shall redeem such shares as soon
thereafter as redemption would not violate such laws.
(b) The Corporation shall have the right, at its option, to redeem as a
whole, or from time to time in part, shares of Class A Preferred Stock at the
redemption price specified in the preceding paragraph plus an amount equal to
any and all dividends accrued and unpaid, but without interest. The Corporation
may credit against any mandatory redemption specified in paragraph (a) any
shares of Class A Preferred Stock redeemed pursuant to this paragraph (b) or
otherwise acquired by the Corporation. Any such credit
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<PAGE> 37
shall be applied against mandatory redemptions in the inverse order of the
above-stated redemption requirements.
(c) In case of redemption of only part of the shares of Class A
Preferred Stock at any time outstanding, the Corporation shall designate by lot
the shares so to be redeemed. Subject to the limitations and provisions herein
contained, the Board of Directors shall have full power and authority to
prescribe the manner in which the drawings by lot shall be conducted.
(d) Notice of every redemption provided for in this Section 6 shall be
given by mailing the same to every holder of record, any of whose shares are
then to be redeemed, not less than fifteen (15) nor more than thirty (30) days
prior to the date fixed as the date of the redemption thereof, at the respective
addresses of such holders as the same shall appear on the stock transfer books
of the Corporation. The notice shall state that the shares specified in such
notice will be redeemed by the Corporation at the redemption price and on the
date specified in such notice, upon the surrender for cancellation at the places
designated in such notice, of the certificates representing the shares so to be
redeemed, properly endorsed in blank for transfer, or accompanied by proper
instruments of assignment and transfer in blank, bearing any necessary transfer
tax stamps thereto affixed and cancelled, or accompanied by cash or a certified
check in the amount of any stock transfer tax applicable to such transaction. On
and after the date specified in the notice described above, each holder of
shares called for redemption, upon presentation and surrender in accordance with
such notice of the certificates for shares held by such holder and called for
redemption, shall be entitled to receive therefor the applicable redemption
price. If the Corporation shall give notice of redemption as aforesaid (and
unless the Corporation shall fail to pay the redemption price of shares
presented for redemption in accordance with such notice), all shares called for
redemption shall be deemed to have been redeemed on the date specified in such
notice whether or not the certificates for such shares be surrendered for
redemption and cancellation, and such shares so called for redemption shall from
and after such date cease to represent any interest whatever in the Corporation
or its property, and the holders thereof shall have no rights other than the
right to receive such redemption price but without any interest thereon from or
after such date.
(e) Notwithstanding any other provision of this Section 6, if the
holders of at least a majority of the Class A Preferred Stock elect not to have
the Corporation redeem the Class A Preferred Stock, then the Corporation shall
not redeem any shares of Class A Preferred Stock.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Class A,
Class B, Class C or Class D Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion or otherwise shall be reissued, and
all such shares shall be cancelled, retired and limited from the shares which
the Corporation shall be authorized to issue. The Corporation may from time to
time take such appropriate corporate action as may be necessary to reduce the
authorized number of shares of any such class of Preferred Stock accordingly.
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<PAGE> 38
8. AMENDMENTS AND WAIVERS.
(a) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class A
Preferred Stock shall become effective and binding upon all holders of Class A
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least a majority of the Class A Preferred Stock then issued and
outstanding.
(b) Any action, approval, request, consent, notice or waiver
which is required or permitted under Article IV with respect to the Class B
Preferred Stock shall become effective and binding upon all holders of Class B
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class B
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(c) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class C
Preferred Stock shall become effective and binding upon all holders of Class C
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class C
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(d) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class D
Preferred Stock shall become effective and binding upon all holders of Class D
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class D
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
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<PAGE> 39
IN WITNESS WHEREOF, the Corporation has caused the Certificate of
Amendment to be signed by its President and attested by its Secretary this 17th
day of May, 1994.
Transkaryotic Therapies, Inc.
By: /s/ K. Michael Forrest
-------------------------------
K. Michael Forrest
President
ATTEST:
/s/ James E. Thomas
- -------------------------
James Thomas
Secretary
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<PAGE> 40
CERTIFICATE OF AMENDMENT
OF
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 (the
"Corporation"), does hereby certify:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said amendment
by written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and notice has been given as provided
in Section 228 of the General Corporation Law of the State of Delaware. The
resolution provides that the Amended and Restated Certificate of Incorporation
of the Corporation is hereby amended as follows:
Article Fourth of the Certificate of Incorporation of the Corporation
is hereby deleted in its entirety and replaced with the following:
ARTICLE IV.
This Corporation is authorized to issue six classes of shares to be
designated respectively Common Stock and five classes of Preferred Stock. The
total number of shares of Common Stock this Corporation shall have authority to
issue is 15,000,000, par value
<PAGE> 41
$0.01 per share, and the total number of shares of Preferred Stock this
Corporation shall have authority to issue is 2,744,927, par value $1.00 per
share. The first class of Preferred Stock shall consist of 6,000 shares
designated Class A Preferred Stock (the "Class A Preferred Stock"); the second
class of Preferred Stock shall consist of 60,000 shares designated Class B
Preferred Stock (the "Class B Preferred Stock"); the third class of Preferred
Stock shall consist of 1,875,000 shares of Class C Preferred Stock (the "Class C
Preferred Stock"); the fourth class of Preferred Stock shall consist of 280,367
shares of Class D Preferred Stock (the "Class D Preferred Stock"); and the fifth
class of Preferred Stock shall consist of 523,560 shares of Class E Preferred
Stock (the "Class E Preferred Stock," and together with the Class A Preferred
Stock, the Class B Preferred Stock, the Class C Preferred Stock and the Class D
Preferred Stock, the "Preferred Stock").
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences and rights, and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, granted to or imposed on the respective
classes and series of the shares of capital stock or the holders thereof are as
follows:
1. DIVIDENDS.
1.1. Preferred Stock.
(a) Subject to Section 4.1, the holders of the Class A Preferred Stock
shall be entitled to receive cumulative dividends, out of any assets at the time
legally available, when and as declared by the Board of Directors, on a pro rata
basis in accordance with the number of shares of Class A Preferred Stock held by
each such holder, which shall accrue from day-to-day at the rate per annum of
$70.00 per share, payable quarterly on the last day of each March, June,
September and December (commencing March 31, 1992) and an additional amount
equal to the amount of the accrued dividend on the preferred stock exchanged by
such holder in consideration of Class A Preferred Stock pursuant to the Stock
Exchange Agreement dated February 14, 1992, between the Corporation and such
holder, and in preference and priority to any payment of any dividend on any
Class B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class
E Preferred Stock and Common Stock of the Corporation. To the extent that such
dividends are not paid, because there exist no funds legally available therefor
or for any other reason, such dividends shall accrue.
(b) No dividend shall be paid on the Class B Preferred Stock, the Class
C Preferred Stock, the Class D Preferred Stock, the Class E Preferred Stock or
the Common Stock in any year until all declared and accumulated dividends have
been paid on the Class A Preferred Stock. In the event the Board of Directors
shall have declared and paid, or set apart for payment, dividends at the rate
specified in Section 1.1(a) in any one fiscal year, and shall elect to declare
additional dividends in that fiscal year out of funds legally available
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<PAGE> 42
therefor on the Common Stock, such additional dividends shall, subject to
Section 1.1(a) hereof, be declared and paid on each share of Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock, and Class E Preferred
Stock at the same time as any dividends are declared and paid on the Common
Stock, in an amount equal to the additional dividends paid on such number of
shares of Common Stock into which each share of Class B Preferred Stock, Class C
Preferred Stock, Class D Preferred Stock and Class E Preferred Stock is
convertible on the record date for such dividend payment.
1.2. Common Stock. Subject to the preferences and other rights of the
Preferred Stock set forth in Section 1.1, the holders of Common Stock shall be
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor, on a basis in accordance with the
number of shares of Common Stock held by each such holder.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the stockholders of the Corporation shall be made in the
following manner:
(a) The holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred
Stock and the Class E Preferred Stock shall first be entitled to
receive, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of any other class of
Preferred Stock or Common Stock by reason of their ownership of such
stock, the amount of $700.00 per share of Class A Preferred Stock,
$400.00 per share of Class B Preferred Stock, $8.00 per share of Class
C Preferred Stock, $17.8338 per share of Class D Preferred Stock and
$19.10 per share of Class E Preferred Stock plus accrued but undeclared
and declared but unpaid dividends on each such share. If the assets and
funds of the Corporation shall be insufficient to permit the payment in
full to such holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred
Stock and the Class E Preferred Stock of the full aforesaid
preferential amount, then the entire assets of the Corporation legally
available for distribution shall be distributed ratably among the
holders of the Class A Preferred Stock, the Class B Preferred Stock,
the Class C Preferred Stock, the Class D Preferred Stock and the Class
E Preferred Stock in accordance with the aggregate liquidation
preference of the shares of Class A Preferred Stock, Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock and/or Class E
Preferred Stock held by each of them.
(b) After payment has been made to the holders of the Class A
Preferred Stock, the Class B Preferred Stock, the Class C Preferred
Stock, the Class D Preferred Stock and the Class E Preferred Stock of
the full amounts to which they shall be entitled as aforesaid, the
holders of the Common Stock, the holders of the Class B Preferred
Stock, the holders of the Class C Preferred Stock, the holders of the
Class D Preferred Stock and the holders of the Class E Preferred Stock
shall be entitled to share ratably in the remaining assets, based on
the number of shares of Common Stock held by them, assuming conversion
of the Class B Preferred Stock,
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<PAGE> 43
the Class C Preferred Stock, the Class D Preferred Stock and the Class
E Preferred Stock at the respective Conversion Prices then in effect.
(c) For purposes of this Section 2, a merger or consolidation
of the Corporation with or into any other corporation or corporations
in which the stockholders of the Corporation immediately prior to the
merger or consolidation do not own more than fifty percent (50%) of the
outstanding voting power (assuming conversion of all convertible
securities and the exercise of all outstanding options and warrants) of
the surviving corporation, or the sale of all or substantially all of
the assets of the Corporation, shall be treated as a liquidation,
dissolution or winding up of the Corporation. Approval of any of the
foregoing events by the holders of at least a majority of the Preferred
Stock pursuant to Section 5 hereof shall be deemed an election not to
treat any of the foregoing events as a liquidation, dissolution or
winding up hereunder.
3. VOTING RIGHTS.
3.1. Generally. Subject to Section 5 hereof and except as otherwise
required by law, the holder of each share of Common Stock issued and outstanding
shall have one vote in respect of each share of Common Stock and the holder of
each share of Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock and/or Class E Preferred Stock issued and outstanding shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such share of Class B Preferred Stock, Class C Preferred Stock, Class
D Preferred Stock and/or Class E Preferred Stock can be converted at the record
date for determination of those entitled to vote on such matters, or, if no such
record date is established, at the date such vote is taken or any written
consent of stockholders is obtained, such votes to be counted together with all
other shares of stock of the Corporation having voting power in the election of
directors and not separately as a class. Except as otherwise provided by law or
in this Certificate of Incorporation, the holders of Class A Preferred Stock
shall not be entitled to notice of, or to vote at, any meeting of the
stockholders of the Corporation or to vote on any matter relating to the
business or affairs of the Corporation. Record holders of Common Stock, Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock and/or Class E
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the by-laws of the Corporation.
3.2. Class A Preferred Stock Director. Notwithstanding the provisions
of Section 3.1:
(a) In the event that seven (7) consecutive quarterly
dividends with respect to the Class A Preferred Stock as set forth in
Section 1.1(a) shall be in arrears and shall not have been paid in
full, whether or not earned, or in the event the Corporation shall be
more than one year in arrears in the redemption of Class A Preferred
Stock, then, upon notice to the Corporation given by the holders of not
less than 50% of the Class A Preferred Stock then outstanding, the
holders of the Class A Preferred shall as a class become entitled to
elect one member to the Board of Directors until all accumulated and
unpaid dividends thereon and all redemptions in arrears shall have been
paid, whereupon such right of the holders of the Class A
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<PAGE> 44
Preferred Stock to elect one director shall cease, subject to being
again revived from time to time upon the reoccurrence of the conditions
above described. Failure by the holders of the Class A Preferred Stock
to exercise their rights under this Section 3.2 promptly upon the
occurrence of the conditions giving rise to such rights shall not be
deemed to be a waiver of such rights, such rights being exercisable at
any time such conditions shall have occurred and be continuing.
(b) Immediately upon accrual of such right of the holders of
Class A Preferred Stock to elect a director pursuant to paragraph (a)
above, the number of directors of the Corporation shall, ipso facto, be
increased by one, and the directors of the Corporation shall thereupon
be divided into classes. One such class shall consist of one director
(the "Preferred Director") elected solely by the holders of Class A
Preferred Stock (voting as a class), and the other class shall consist
of the remaining directors. Whenever the number of directors of the
Corporation shall have been so increased, the number as so increased
may thereafter be further increased or decreased in such manner as may
be permitted by the By-laws of the Corporation and without the vote of
the holders of Class A Preferred Stock, provided that no such action
shall impair the right of the holders of Class A Preferred Stock to
elect the Preferred Director. The holders of the Class A Preferred
Stock may at their option at any time exercise their rights under this
Section 3.2 by written consent without a meeting in accordance with the
General Corporation Law of Delaware.
(c) Each Preferred Director elected by the holders of Class A
Preferred Stock shall serve for a term of one year and until his or her
successor is elected and qualified, or, if earlier, until the right to
elect such director ceases in accordance with paragraph (a) above. So
long as the holders of Class A Preferred Stock are entitled to elect a
Preferred Director, any vacancy in the position of Preferred Director
may be filled only by the holders of the Class A Preferred Stock
entitled to vote thereon. The Class A Preferred Director may, during
his or her term of office, be removed at any time, with or without
cause, by and only by the affirmative vote, at a special meeting of
holders of Class A Preferred Stock called for such purpose, or the
written consent, of the holders of record of a majority of the then
outstanding shares of Class A Preferred Stock. Any vacancy created by
such removal may also be filled at such meeting or by such consent.
(d) Upon the termination of the right of holders of Class A
Preferred Stock to elect a Preferred Director, the term of office of
the Preferred Director shall forthwith terminate and the number of
directors of the Corporation shall thereupon be appropriately
decreased.
4. CONVERSION.
4.1. Optional Conversion. The holders of Class B Preferred Stock, Class
C Preferred Stock, Class D Preferred Stock and Class E Preferred Stock
(together, the "Additional Preferred Stock") shall have conversion rights as
follows (the "Additional Preferred Conversion Rights"). Each share of Additional
Preferred Stock shall be convertible (at the option of the holder thereof) any
time at the office of the Corporation or
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<PAGE> 45
any transfer agent for the Additional Preferred Stock into the number of shares
of the Common Stock of the Corporation obtained by dividing the Original
Issuance Price (as defined below) for such class of Preferred Stock by the
conversion price in effect at the time of conversion, determined as hereinafter
provided (the "Conversion Price"). For the Class B Preferred Stock, the Original
Issuance Price is $400.00 and the present Conversion Price is $8.71. For the
Class C Preferred Stock, the Original Issuance Price is $8.00 and the initial
Conversion Price is $8.00. For the Class D Preferred Stock, the Original
Issuance Price is $17.83 and the initial Conversion Price is $17.83. For the
Class E Preferred Stock, the Original Issuance Price is $19.10 and the initial
Conversion Price is $19.10. All calculations under this Section 4 shall be made
to the nearest cent.
4.2. Automatic Conversion.
(a) Class A Preferred Stock. Immediately upon the closing of
an initial public offering of the Corporation's Common Stock at an
aggregate offering price of not less than $12.00 per share (as adjusted
for any stock dividends, stock splits, combination, or similar
recapitalizations occurring after the date hereof) and which results in
gross proceeds to the Corporation of at least ten million dollars
($10,000,000) ("Qualified Public Offering"), and simultaneously with
the conversion of the Class B Preferred Stock, the Class C Preferred
Stock, the Class D Preferred Stock and the Class E Preferred Stock into
Common Stock, all Class A Preferred Stock then outstanding and all
rights to any and all then unpaid accrued dividends thereon shall
automatically be converted into the number of original issue shares of
Common Stock produced by dividing (a) six million dollars ($6,000,000)
by (b) the price per share at which Common Stock is offered in the
Qualified Public Offering.
(b) Additional Preferred Stock. At any time upon the closing
of a Qualified Public Offering, each share of Additional Preferred
Stock shall automatically be converted into shares of Common Stock
pursuant to the formula set forth in Section 4.1 hereof at the then
effective Conversion Price of such class of Preferred Stock. In the
event of the automatic conversion of Additional Preferred Stock upon a
Qualified Public Offering, the party entitled to receive the Common
Stock issuable upon such conversion of Additional Preferred Stock shall
not be deemed to have converted such Additional Preferred Stock until
such party has received from the Corporation all declared and unpaid
dividends and accrued but undeclared dividends owed with respect to
such party's Additional Preferred Stock and, in any event, until
immediately prior to the closing of the Qualified Public Offering.
Each share of Additional Preferred Stock shall automatically
be converted into shares of Common Stock pursuant to the formula set
forth in Section 4.1 hereof at the then effective Conversion Price for
such class of Preferred Stock upon the vote to so convert of the
holders of at least 66-2/3% of such class of Additional Preferred Stock
then outstanding. Each share of Class B Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class B Preferred Stock in the event at least
66-2/3% of the Class B Preferred Stock purchased pursuant to (i) the
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<PAGE> 46
Class B Preferred Stock Purchase Agreement dated as of February 14,
1992 among the Corporation and the purchasers listed on Schedule A
thereto (the "1992 Class B Agreement") and (ii) the Class B Preferred
Stock Purchase Agreement dated as of April 20, 1993 among the
Corporation and the purchasers listed on Schedule A thereto (the "1993
Class B Agreement"), collectively as one group, have been converted
into Common Stock. Each share of Class C Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class C Preferred Stock in the event at least
66-2/3% of the Class C Preferred Stock purchased pursuant to the Class
C Preferred Stock and Warrant Purchase Agreement dated as of November
3, 1993 among the Corporation and the purchasers listed on Schedule A
thereto (the "Class C Agreement") have been converted into Common
Stock. Each share of Class D Preferred Stock shall automatically be
converted into shares of Common Stock pursuant to the formula set forth
in Section 4.1 hereof at the then effective Conversion Price for Class
D Preferred Stock in the event at least 66- 2/3% of the Class D
Preferred Stock purchased pursuant to the Class D Preferred Stock
Purchase Agreement dated as of May 18, 1994 among the Corporation and
Marion Merrell Dow Inc. (the "Class D Agreement") have been converted
into Common Stock. Each share of Class E Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class E Preferred Stock in the event at least
66-2/3% of the Class E Preferred Stock purchased pursuant to the Class
E Preferred Stock Purchase Agreement dated as of March 1, 1995 among
the Corporation and Marion Merrell Dow Inc. (the "Class E Agreement")
have been converted into Common Stock.
4.3. Mechanics of Conversion. Before any holder of Additional Preferred
Stock shall be entitled to convert such Stock into shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates evidencing the shares of Additional Preferred Stock to be
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for the Additional Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 4.2, the outstanding shares of Class A Preferred Stock or Additional
Preferred Stock, as the case may be, shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent, and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless the certificates evidencing such shares of
Class A Preferred Stock or Additional Preferred Stock, as the case may be, are
either delivered to the Corporation or its transfer agent as provided above, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as practicable
after such delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Class A
Preferred Stock or Additional Preferred Stock, as the case may be, a certificate
or certificates for the number of
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<PAGE> 47
shares of Common Stock to which such holder shall be entitled hereunder and a
check payable to the holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock plus all accrued
and unpaid dividends on such holder's Additional Preferred Stock, if any. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Additional Preferred
Stock to be converted, or in the case of automatic conversion immediately prior
to closing of the Qualified Public Offering or the date of the shareholder vote
or conversion of Class A Preferred Stock or Additional Preferred Stock described
in Sections 4.1 and 4.2, as applicable, and the party entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
4.4. Adjustment of Conversion Prices due to Issuance of Additional
Shares. The Conversion Price in effect from time to time for the Additional
Preferred Stock shall be subject to adjustment as follows:
(a) Special Definitions. For purposes of this Section 4.4, the
following definitions shall apply:
(i) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(ii) "Original Issue Date" shall mean the date on
which the class of such Additional Preferred Stock is first
issued by the Corporation.
(iii) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
convertible into or exchangeable for Common Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Section
4.4(c), deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued
or issuable at any time:
(A) upon conversion of the Additional
Preferred Stock authorized herein;
(B) as a dividend or distribution on the
Class A Preferred Stock or Additional Preferred Stock
or any event for which adjustment is made pursuant to
Section 4.4(f) hereof;
(C) by way of dividend or other distribution
on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by
the foregoing clauses (A), (B) or this clause (C);
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<PAGE> 48
(D) out of those 1,250,000 shares of Common
Stock reserved for issuance pursuant to the 1993
Long-Term Incentive Plan or out of those 180,000
shares of Common Stock reserved for issuance pursuant
to the 1993 Non-Employee Directors' Stock Option Plan
or pursuant to any other stock option, stock bonus or
other employee stock plan approved by the holders of
at least a majority of the Additional Preferred Stock
voting as one class, which approval shall include the
number of shares of Common Stock available for
distribution under any such plan; or
(E) upon the exercise of any options or
warrants outstanding on the Original Issue Date.
(b) No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Conversion Price in effect on
the date of, and immediately prior, to such issue.
(c) Deemed Issuance of Additional Shares of Common Stock -
Options and Convertible Securities. Except as provided in Section
4.4(a) or Section 4.4(b) hereof, in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the document relating thereto without regard to
any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares
of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 4.4(e) hereof)
of such Additional Shares of Common Stock would be less than the
applicable Conversion Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued,
(i) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the
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<PAGE> 49
applicable Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the applicable
Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if,
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares
of Common Stock issued were shares of Common Stock,
if any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by
the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon such
exercise, or for the issue of all such Convertible
Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(iv) no readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the applicable
Conversion Price to an amount which exceeds the lower of (A)
the applicable Conversion Price on the original adjustment
date, or (B) the applicable Conversion Price that would have
resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such
readjustment date.
(d) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 4.4(c)) for a
consideration per share less than the applicable
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<PAGE> 50
Conversion Price of a class of Additional Preferred Stock (other than
the Class E Preferred Stock) in effect on the date of and immediately
prior to such issue, or in the case of the Class E Preferred Stock for
consideration per share less than $14.00 per share, the applicable
Conversion Price for such class of Additional Preferred Stock, shall be
recomputed, concurrently with such issue (calculated to the nearest
cent) by dividing (x) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue
multiplied by the then effective Conversion Price and (2) the
consideration, if any, deemed received by the Corporation upon such
issue by (y) the total number of shares of Common Stock deemed to be
outstanding immediately after such issue; and provided that, for the
purposes of this Section 4.4(d), all shares of Common Stock outstanding
and issuable upon conversion of outstanding Options, Convertible
Securities and the Additional Preferred Stock shall be deemed to be
outstanding, other than shares of Common Stock excluded from the
definition of Additional Shares of Common Stock in this Section 4.4.;
and provided further that no adjustment to the Conversion Price of the
Class E Preferred Stock shall be made pursuant to this Section 4.4(d)
unless the Corporation shall issue Additional Shares of Common Stock
for a consideration per share less than $14.00. In no event will the
Conversion Price be adjusted as the result of a particular issuance of
securities to a price less than the price per share of the Additional
Shares of Common Stock issued in such issuance nor shall any adjustment
be made in the Conversion Price of any class of Additional Preferred
Stock as a result of any issuance of any Additional Shares of Common
Stock at a price per share in excess of the initial Conversion Price of
such class of Additional Preferred Stock nor any adjustments made in
such Conversion Price which would result in a Conversion Price higher
than the then applicable Conversion Price.
(e) Determination of Consideration. For purposes of this
Section 4.4, the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by
the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of such issue, as determined in good faith
by the Board of Directors of the Corporation; and
(C) insofar as Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation for
consideration which covers both, be the proportion of
such consideration so received, computed as provided
in clauses (A) and (B) above, as determined in good
faith by the Board of Directors of the Corporation.
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<PAGE> 51
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.4(c) (i), relating to Options and
Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
(f) Adjustments for Subdivisions, Stock Dividends,
Combinations, or Consolidation of Common Stock. In the event the
outstanding shares of Common Stock shall be increased by way of stock
issued as a dividend for no consideration or subdivided (by stock
split, or otherwise) into a greater number of shares of Common Stock,
the Conversion Price then in effect shall, concurrently with the
effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in
effect shall, concurrently with the effectiveness of such combination
or consolidation, be proportionately increased.
4.5. Provision Regarding Adjustment of Conversion Price for Class D
Preferred Stock. Notwithstanding any other provision of this Article IV, the
Conversion Price of the Class D Preferred Stock shall be reduced, in the event
that a Qualified Public Offering does not close on or before March 31, 1995, to
$14.12 as of such date, or to such lesser amount as may be required under other
provisions of this Article IV.
4.6. Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of the Corporation other than shares of
Common Stock, securities of other persons, evidences of indebtedness issued by
the Corporation or other persons, assets (excluding cash dividends) or options
or rights not referred to in Section 4.4(c), then, in each such case for the
purpose of this Section 4.6, the holders of the Additional Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of the Corporation into
which their shares of such Additional Preferred Stock are convertible as of the
record date fixed for the
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<PAGE> 52
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
4.7. Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in this Amended
and Restated Certificate of Incorporation), provision shall be made so that the
holders of the Additional Preferred Stock shall thereafter be entitled to
receive upon conversion of the Additional Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Additional Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of such class of Additional Preferred Stock) shall
be applicable after that event in as nearly an equivalent manner as may be
practicable.
4.8. No Impairment. The Corporation will not, by further amendment of
its Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Class A Preferred Stock and
Additional Preferred Stock against impairment.
4.9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any share of Class A or
Additional Preferred Stock. If, upon conversion of any share of Class A or
Additional Preferred Stock, the registered holder would, except for the
provisions of this Section 4.9, be entitled to receive a fractional share of
Common Stock, then an amount equal to such fractional share multiplied by the
then applicable Conversion Price shall be paid by the Corporation in cash to
such registered holder.
4.10. Reservation of Shares. The Corporation agrees that, so long as
any share of Class A or Additional Preferred Stock shall remain outstanding, the
Corporation shall at all times reserve and keep available, free from preemptive
rights, out of its authorized capital stock, for the purpose of issue upon
conversion of the Class A or Additional Preferred Stock, the full number of
shares of Common Stock then issuable upon conversion of the Class A and
Additional Preferred Stock.
4.11. Validity of Shares. The Corporation agrees that it will from time
to time take all such actions as may be requisite to assure that all shares of
Common Stock which may be issued upon conversion of any share of the Class A or
Additional Preferred Stock will, upon issuance, be legally and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof; and, without limiting the generality of the
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<PAGE> 53
foregoing, the Corporation agrees that it will from time to time take all such
action as may be requisite to assure that the par value per share, if any, of
the Common Stock is at all times equal to or less than the lowest quotient of
the then current par value of the Class A, Class B, Class C, Class D and Class E
Preferred Stock divided by the number of shares of Common Stock into which each
share of Class A, Class B, Class C, Class D or Class E Preferred Stock can, from
time to time, be converted.
4.12. Notice of Adjustment. Upon each adjustment of the Conversion
Price, the Corporation shall give prompt written notice thereof addressed to the
registered holder of each share of the class of Additional Preferred Stock so
affected at the address of such holder as shown on the records of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
issuable upon the conversion of such holder's shares of Additional Preferred
Stock, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based together with a certificate of the
chief financial officer of the Corporation stating that he or she has examined
such notice and certifying that the information contained therein is accurate.
4.13. Notice of Capital Changes. If at any time:
(a) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(b) the Corporation shall offer for subscription to the
holders of Common Stock any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation or business
organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any such case, the Corporation shall give the registered holders of the
Additional Preferred Stock written notice of the date on which a record shall be
taken for such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and of the
date when any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least twenty (20) days prior to the record date
with respect thereto.
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<PAGE> 54
4.14. Taxes. The Corporation will pay all taxes and other governmental
charges that may be imposed in respect of the issue or delivery of shares of
Common Stock upon conversion of the Additional Preferred Stock.
4.15. Waiver of Adjustment.
(a) With the consent of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then currently outstanding shares of Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock or Class E
Preferred Stock, any antidilution adjustment to which such class of Preferred
Stock would otherwise be entitled under this Section 4 may be limited or waived
in its entirety. In the event of such a limitation or waiver, the Corporation
shall not be required to make any adjustment whatsoever with respect to the
Conversion Price of such class of Preferred Stock, or to make any adjustment
with respect to such class of Preferred Stock in excess of such limit, as the
terms of such consent may dictate.
(b) Any holder of Additional Preferred Stock shall also be permitted to
waive in whole or in part, currently or prospectively, by contract or any other
writing, any antidilution adjustment to which such holder would otherwise be
entitled pursuant to the provisions of this Section 4.
5. COVENANTS. In addition to any other rights provided by law, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the then issued and outstanding
shares of the applicable class of Preferred Stock:
(a) amend or repeal any provision of the Corporation's Amended
and Restated Certificate of Incorporation so as to adversely affect the
rights, preferences, or privileges of such class of Preferred Stock;
(b) authorize or issue additional shares of any class or
series of stock of the Corporation other than a class or series of
stock of the Corporation ranking equal or junior in rights to such
class of Preferred Stock as to dividends or redemption or rights on
liquidation, dissolution or winding up;
(c) increase the authorized number of shares of such existing
class of Preferred Stock or authorize the reissuance thereof after
repurchase or redemption;
(d) authorize any liquidation, dissolution, winding up of the
affairs of the Corporation, consolidation or merger of the Corporation
into or with another corporation or corporations, sale of all or
substantially all of the Corporation's assets (unless after such
consolidation or merger all the terms of such class of Preferred Stock
would remain in effect and be assumed by the consolidated or surviving
corporation), or distribution of the Corporation's assets by way of
return of capital;
(e) change the par value of such class of Preferred Stock; or
(f) alter in any way the voting rights of such class of
Preferred Stock.
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<PAGE> 55
6. REDEMPTION
(a) The Corporation shall redeem (to the extent that such redemption
shall not violate any applicable provisions of the laws of the State of
Delaware) at a price of One Thousand Dollars ($1,000) per share, plus an amount
equal to any and all dividends accrued and unpaid, but without interest, on the
31st day of December (the "Redemption Date") of each of the years of 1995
through 1998 seven hundred fifty (750) shares of Class A Preferred Stock (or
such lesser number as shall then be outstanding). If the Corporation is unable
on any Redemption Date to redeem any shares of Class A Preferred Stock then to
be redeemed because such redemption would violate the applicable laws of the
State of Delaware, then the Corporation shall redeem such shares as soon
thereafter as redemption would not violate such laws.
(b) The Corporation shall have the right, at its option, to redeem as a
whole, or from time to time in part, shares of Class A Preferred Stock at the
redemption price specified in the preceding paragraph plus an amount equal to
any and all dividends accrued and unpaid, but without interest. The Corporation
may credit against any mandatory redemption specified in paragraph (a) any
shares of Class A Preferred Stock redeemed pursuant to this paragraph (b) or
otherwise acquired by the Corporation. Any such credit shall be applied against
mandatory redemptions in the inverse order of the above-stated redemption
requirements.
(c) In case of redemption of only part of the shares of Class A
Preferred Stock at any time outstanding, the Corporation shall designate by lot
the shares so to be redeemed. Subject to the limitations and provisions herein
contained, the Board of Directors shall have full power and authority to
prescribe the manner in which the drawings by lot shall be conducted.
(d) Notice of every redemption provided for in this Section 6 shall be
given by mailing the same to every holder of record, any of whose shares are
then to be redeemed, not less than fifteen (15) nor more than thirty (30) days
prior to the date fixed as the date of the redemption thereof, at the respective
addresses of such holders as the same shall appear on the stock transfer books
of the Corporation. The notice shall state that the shares specified in such
notice will be redeemed by the Corporation at the redemption price and on the
date specified in such notice, upon the surrender for cancellation at the places
designated in such notice, of the certificates representing the shares so to be
redeemed, properly endorsed in blank for transfer, or accompanied by proper
instruments of assignment and transfer in blank, bearing any necessary transfer
tax stamps thereto affixed and cancelled, or accompanied by cash or a certified
check in the amount of any stock transfer tax applicable to such transaction. On
and after the date specified in the notice described above, each holder of
shares called for redemption, upon presentation and surrender in accordance with
such notice of the certificates for shares held by such holder and called for
redemption, shall be entitled to receive therefor the applicable redemption
price. If the Corporation shall give notice of redemption as aforesaid (and
unless the Corporation shall fail to pay the redemption price of shares
presented for redemption in accordance with such notice), all shares called for
redemption shall be deemed to have been redeemed on the date specified in such
notice whether or not the certificates for such shares be surrendered for
redemption and
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<PAGE> 56
cancellation, and such shares so called for redemption shall from and after such
date cease to represent any interest whatever in the Corporation or its
property, and the holders thereof shall have no rights other than the right to
receive such redemption price but without any interest thereon from or after
such date.
(e) Notwithstanding any other provision of this Section 6, if the
holders of at least a majority of the Class A Preferred Stock elect not to have
the Corporation redeem the Class A Preferred Stock, then the Corporation shall
not redeem any shares of Class A Preferred Stock.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Class A,
Class B, Class C, Class D or Class E Preferred Stock acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be cancelled, retired and limited from the shares
which the Corporation shall be authorized to issue. The Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce the authorized number of shares of any such class of Preferred Stock
accordingly.
8. AMENDMENTS AND WAIVERS.
(a) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class A
Preferred Stock shall become effective and binding upon all holders of Class A
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least a majority of the Class A Preferred Stock then issued and
outstanding.
(b) Any action, approval, request, consent, notice or waiver
which is required or permitted under Article IV with respect to the Class B
Preferred Stock shall become effective and binding upon all holders of Class B
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class B
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(c) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class C
Preferred Stock shall become effective and binding upon all holders of Class C
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class C
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(d) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class D
Preferred Stock shall become effective and binding upon all holders of Class D
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class D
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
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<PAGE> 57
(e) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class E
Preferred Stock shall become effective and binding upon all holders of Class E
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class E
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
IN WITNESS WHEREOF, the Corporation has caused the Certificate of
Amendment to be signed by its President and attested by its Secretary this 1st
day of March, 1995.
Transkaryotic Therapies, Inc.
By:/s/ Richard F. Selden
-----------------------------------
Richard F. Selden, M.D., Ph.D.
Chief Executive Officer
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<PAGE> 58
CERTIFICATE OF AMENDMENT
OF
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 (the
"Corporation"), does hereby certify:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said amendment
by written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and notice has been given as provided
in Section 228 of the General Corporation Law of the State of Delaware. The
resolution provides that the Amended and Restated Certificate of Incorporation
of the Corporation is hereby amended as follows:
Article Fourth of the Certificate of Incorporation of the Corporation
is hereby deleted in its entirety and replaced with the following:
ARTICLE IV.
This Corporation is authorized to issue seven classes of shares to be
designated respectively Common Stock and six classes of Preferred Stock. The
total number of shares of Common Stock this Corporation shall have authority to
issue is 15,000,000, par value
<PAGE> 59
$0.01 per share, and the total number of shares of Preferred Stock this
Corporation shall have authority to issue is 3,816,356, par value $1.00 per
share. The first class of Preferred Stock shall consist of 6,000 shares
designated Class A Preferred Stock (the "Class A Preferred Stock"); the second
class of Preferred Stock shall consist of 60,000 shares designated Class B
Preferred Stock (the "Class B Preferred Stock"); the third class of Preferred
Stock shall consist of 1,875,000 shares of Class C Preferred Stock (the "Class C
Preferred Stock"); the fourth class of Preferred Stock shall consist of 280,367
shares of Class D Preferred Stock (the "Class D Preferred Stock"); the fifth
class of Preferred Stock shall consist of 523,560 shares of Class E Preferred
Stock (the "Class E Preferred Stock,"); and the sixth class of Preferred Stock
shall consist of 1,071,429 shares of Class F Preferred Stock (the "Class F
Preferred Stock", and together with the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, and
the Class E Preferred Stock, the "Preferred Stock").
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences and rights, and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, granted to or imposed on the respective
classes and series of the shares of capital stock or the holders thereof are as
follows:
1. DIVIDENDS.
1.1. Preferred Stock.
(a) Subject to Section 4.1, the holders of the Class A Preferred Stock
shall be entitled to receive cumulative dividends, out of any assets at the time
legally available, when and as declared by the Board of Directors, on a pro rata
basis in accordance with the number of shares of Class A Preferred Stock held by
each such holder, which shall accrue from day-to-day at the rate per annum of
$70.00 per share, payable quarterly on the last day of each March, June,
September and December (commencing March 31, 1992) and an additional amount
equal to the amount of the accrued dividend on the Preferred Stock exchanged by
such holder in consideration of Class A Preferred Stock pursuant to the Stock
Exchange Agreement dated February 14, 1992, between the Corporation and such
holder, and in preference and priority to any payment of any dividend on any
Class B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class
E Preferred Stock, Class F Preferred Stock and Common Stock of the Corporation.
To the extent that such dividends are not paid, because there exists no funds
legally available therefor or for any other reason, such dividends shall accrue.
(b) No dividend shall be paid on the Class B Preferred Stock, the Class
C Preferred Stock, the Class D Preferred Stock, the Class E Preferred Stock, the
Class F Preferred Stock or the Common Stock in any year until all declared and
accumulated
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dividends have been paid on the Class A Preferred Stock. In the event the Board
of Directors shall have declared and paid, or set apart for payment, dividends
at the rate specified in Section 1.1(a) in any one fiscal year, and shall elect
to declare additional dividends in that fiscal year out of funds legally
available therefor on the Common Stock, such additional dividends shall, subject
to Section 1.1(a) hereof, be declared and paid on each share of Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock, and Class F Preferred Stock, at the same time as any dividends
are declared and paid on the Common Stock, in an amount equal to the additional
dividends paid on such number of shares of Common Stock into which each share of
Class B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class
E Preferred Stock and Class F Preferred Stock is convertible on the record date
for such dividend payment.
1.2. Common Stock. Subject to the preferences and other rights of the
Preferred Stock set forth in Section 1.1, the holders of Common Stock shall be
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor, on a basis in accordance with the
number of shares of Common Stock held by each such holder.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the stockholders of the Corporation shall be made in the
following manner:
(a) The holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred
Stock, the Class E Preferred Stock and the Class F Preferred Stock
shall first be entitled to receive, prior and in preference to any
distribution of any of the assets of the Corporation to the holders of
any other class of Preferred Stock or Common Stock by reason of their
ownership of such stock, the amount of $700.00 per share of Class A
Preferred Stock, $400.00 per share of Class B Preferred Stock, $8.00
per share of Class C Preferred Stock, $17.8338 per share of Class D
Preferred Stock, $19.10 per share of Class E Preferred Stock, and
$14.00 per share of Class F Preferred Stock plus accrued but undeclared
and declared but unpaid dividends on each such share. If the assets and
funds of the Corporation shall be insufficient to permit the payment in
full to such holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred
Stock, the Class E Preferred Stock and the Class F Preferred Stock of
the full aforesaid preferential amount, then the entire assets of the
Corporation legally available for distribution shall be distributed
ratably among the holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred
Stock, the Class E Preferred Stock and the Class F Preferred Stock in
accordance with the aggregate liquidation preference of the shares of
Class A Preferred Stock, Class B Preferred Stock, Class C Preferred
Stock, Class D Preferred Stock, Class E Preferred Stock and/or Class F
Preferred Stock held by each of them.
(b) After payment has been made to the holders of the Class A
Preferred Stock, the Class B Preferred Stock, the Class C Preferred
Stock, the Class D Preferred Stock, the Class E Preferred Stock and the
Class F Preferred Stock of the
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full amounts to which they shall be entitled as aforesaid, the holders
of the Common Stock, the holders of the Class B Preferred Stock, the
holders of the Class C Preferred Stock, the holders of the Class D
Preferred Stock, the holders of the Class E Preferred Stock and the
holders of the Class F Preferred Stock shall be entitled to share
ratably in the remaining assets, based on the number of shares of
Common Stock held by them, assuming conversion of the Class B Preferred
Stock, the Class C Preferred Stock, the Class D Preferred Stock, the
Class E Preferred Stock and the Class F Preferred Stock at the
respective Conversion Prices then in effect.
(c) For purposes of this Section 2, a merger or consolidation
of the Corporation with or into any other corporation or corporations
in which the stockholders of the Corporation immediately prior to the
merger or consolidation do not own more than fifty percent (50%) of the
outstanding voting power (assuming conversion of all convertible
securities and the exercise of all outstanding options and warrants) of
the surviving corporation, or the sale of all or substantially all of
the assets of the Corporation, shall be treated as a liquidation,
dissolution or winding up of the Corporation. Approval of any of the
foregoing events by the holders of at least a majority of the Preferred
Stock pursuant to Section 5 hereof shall be deemed an election not to
treat any of the foregoing events as a liquidation, dissolution or
winding up hereunder.
3. VOTING RIGHTS.
3.1. Generally. Subject to Section 5 hereof and except as otherwise
required by law, the holder of each share of Common Stock issued and outstanding
shall have one vote in respect of each share of Common Stock and the holder of
each share of Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock, Class E Preferred Stock and/or Class F Preferred Stock issued
and outstanding shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such share of Class B Preferred Stock, Class C
Preferred Stock, Class D Preferred Stock, Class E Preferred Stock and/or Class F
Preferred Stock can be converted at the record date for determination of those
entitled to vote on such matters, or, if no such record date is established, at
the date such vote is taken or any written consent of stockholders is obtained,
such votes to be counted together with all other shares of stock of the
Corporation having voting power in the election of directors and not separately
as a class. Except as otherwise provided by law or in this Certificate of
Incorporation, the holders of Class A Preferred Stock shall not be entitled to
notice of, or to vote at, any meeting of the stockholders of the Corporation or
to vote on any matter relating to the business or affairs of the Corporation.
Record holders of Common Stock, Class B Preferred Stock, Class C Preferred
Stock, Class D Preferred Stock, Class E Preferred Stock and/or Class F Preferred
Stock shall be entitled to notice of any stockholders' meeting in accordance
with the By-laws of the Corporation.
3.2. Class A Preferred Stock Director. Notwithstanding the provisions
of Section 3.1:
(a) In the event that seven (7) consecutive quarterly
dividends with respect to the Class A Preferred Stock as set forth in
Section 1.1(a) shall be in arrears and
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shall not have been paid in full, whether or not earned, or in the
event the Corporation shall be more than one year in arrears in the
redemption of Class A Preferred Stock, then, upon notice to the
Corporation given by the holders of not less than 50% of the Class A
Preferred Stock then outstanding, the holders of the Class A Preferred
shall as a class become entitled to elect one member to the Board of
Directors until all accumulated and unpaid dividends thereon and all
redemptions in arrears shall have been paid, whereupon such right of
the holders of the Class A Preferred Stock to elect one director shall
cease, subject to being again revived from time to time upon the
reoccurrence of the conditions above described. Failure by the holders
of the Class A Preferred Stock to exercise their rights under this
Section 3.2 promptly upon the occurrence of the conditions giving rise
to such rights shall not be deemed to be a waiver of such rights, such
rights being exercisable at any time such conditions shall have
occurred and be continuing.
(b) Immediately upon accrual of such right of the holders of
Class A Preferred Stock to elect a director pursuant to paragraph (a)
above, the number of directors of the Corporation shall, ipso facto, be
increased by one, and the directors of the Corporation shall thereupon
be divided into classes. One such class shall consist of one director
(the "Preferred Director") elected solely by the holders of Class A
Preferred Stock (voting as a class), and the other class shall consist
of the remaining directors. Whenever the number of directors of the
Corporation shall have been so increased, the number as so increased
may thereafter be further increased or decreased in such manner as may
be permitted by the By-laws of the Corporation and without the vote of
the holders of Class A Preferred Stock, provided that no such action
shall impair the right of the holders of Class A Preferred Stock to
elect the Preferred Director. The holders of the Class A Preferred
Stock may at their option at any time exercise their rights under this
Section 3.2 by written consent without a meeting in accordance with the
General Corporation Law of Delaware.
(c) Each Preferred Director elected by the holders of Class A
Preferred Stock shall serve for a term of one year and until his or her
successor is elected and qualified, or, if earlier, until the right to
elect such director ceases in accordance with paragraph (a) above. So
long as the holders of Class A Preferred Stock are entitled to elect a
Preferred Director, any vacancy in the position of Preferred Director
may be filled only by the holders of the Class A Preferred Stock
entitled to vote thereon. The Class A Preferred Director may, during
his or her term of office, be removed at any time, with or without
cause, by and only by the affirmative vote, at a special meeting of
holders of Class A Preferred Stock called for such purpose, or the
written consent, of the holders of record of a majority of the then
outstanding shares of Class A Preferred Stock. Any vacancy created by
such removal may also be filled at such meeting or by such consent.
(d) Upon the termination of the right of holders of Class A
Preferred Stock to elect a Preferred Director, the term of office of
the Preferred Director shall forthwith terminate and the number of
directors of the Corporation shall thereupon be appropriately
decreased.
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4. CONVERSION.
4.1. Optional Conversion. The holders of Class B Preferred Stock, Class
C Preferred Stock, Class D Preferred Stock, Class E Preferred Stock and Class F
Preferred Stock (together, the "Additional Preferred Stock") shall have
conversion rights as follows (the "Additional Preferred Conversion Rights").
Each share of Additional Preferred Stock shall be convertible (at the option of
the holder thereof) any time at the office of the Corporation or any transfer
agent for the Additional Preferred Stock into the number of shares of the Common
Stock of the Corporation obtained by dividing the Original Issuance Price (as
defined below) for such class of Preferred Stock by the conversion price in
effect at the time of conversion, determined as hereinafter provided (the
"Conversion Price"). For the Class B Preferred Stock, the Original Issuance
Price is $400.00 and the present Conversion Price is $8.71. For the Class C
Preferred Stock, the Original Issuance Price is $8.00 and the initial Conversion
Price is $8.00. For the Class D Preferred Stock, the Original Issuance Price is
$17.83 and the initial Conversion Price is $17.83. For the Class E Preferred
Stock, the Original Issuance Price is $19.10 and the initial Conversion Price is
$19.10. For the Class F Preferred Stock, the Original Issuance Price is $14.00
and the initial Conversion Price is $14.00. All calculations under this Section
4 shall be made to the nearest cent.
4.2. Automatic Conversion.
(a) Class A Preferred Stock. Immediately upon the closing of
an initial public offering of the Corporation's Common Stock at an
aggregate offering price of not less than $12.00 per share (as adjusted
for any stock dividends, stock splits, combination, or similar
recapitalizations occurring after the date hereof) and which results in
gross proceeds to the Corporation of at least ten million dollars
($10,000,000) ("Qualified Public Offering"), and simultaneously with
the conversion of the Class B Preferred Stock, the Class C Preferred
Stock, the Class D Preferred Stock, the Class E Preferred Stock and the
Class F Preferred Stock into Common Stock, all Class A Preferred Stock
then outstanding and all rights to any and all then unpaid accrued
dividends thereon shall automatically be converted into the number of
original issue shares of Common Stock produced by dividing (a) six
million dollars ($6,000,000) by (b) the price per share at which Common
Stock is offered in the Qualified Public Offering.
(b) Additional Preferred Stock. At any time upon the closing
of a Qualified Public Offering, each share of Additional Preferred
Stock shall automatically be converted into shares of Common Stock
pursuant to the formula set forth in Section 4.1 hereof at the then
effective Conversion Price of such class of Preferred Stock. In the
event of the automatic conversion of Additional Preferred Stock upon a
Qualified Public Offering, the party entitled to receive the Common
Stock issuable upon such conversion of Additional Preferred Stock shall
not be deemed to have converted such Additional Preferred Stock until
such party has received from the Corporation all declared and unpaid
dividends and accrued but undeclared dividends owed with respect to
such party's Additional Preferred Stock and, in any event, until
immediately prior to the closing of the Qualified Public Offering.
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Each share of Additional Preferred Stock shall automatically
be converted into shares of Common Stock pursuant to the formula set
forth in Section 4.1 hereof at the then effective Conversion Price for
such class of Preferred Stock upon the vote to so convert of the
holders of at least 66-2/3% of such class of Additional Preferred Stock
then outstanding. Each share of Class B Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class B Preferred Stock in the event at least
66-2/3% of the Class B Preferred Stock purchased pursuant to (i) the
Class B Preferred Stock Purchase Agreement dated as of February 14,
1992 among the Corporation and the purchasers listed on Schedule A
thereto (the "1992 Class B Agreement") and (ii) the Class B Preferred
Stock Purchase Agreement dated as of April 20, 1993 among the
Corporation and the purchasers listed on Schedule A thereto (the "1993
Class B Agreement"), collectively as one group, have been converted
into Common Stock. Each share of Class C Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class C Preferred Stock in the event at least
66-2/3% of the Class C Preferred Stock purchased pursuant to the Class
C Preferred Stock and Warrant Purchase Agreement dated as of November
3, 1993 among the Corporation and the purchasers listed on Schedule A
thereto (the "Class C Agreement") have been converted into Common
Stock. Each share of Class D Preferred Stock shall automatically be
converted into shares of Common Stock pursuant to the formula set forth
in Section 4.1 hereof at the then effective Conversion Price for Class
D Preferred Stock in the event at least 66- 2/3% of the Class D
Preferred Stock purchased pursuant to the Class D Preferred Stock
Purchase Agreement dated as of May 18, 1994 among the Corporation and
Marion Merrell Dow Inc. (the "Class D Agreement") have been converted
into Common Stock. Each share of Class E Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class E Preferred Stock in the event at least
66-2/3% of the Class E Preferred Stock purchased pursuant to the Class
E Preferred Stock Purchase Agreement dated as of March 1, 1995 among
the Corporation and Marion Merrell Dow Inc. (the "Class E Agreement")
have been converted into Common Stock. Each share of Class F Preferred
Stock shall automatically be converted into shares of Common Stock
pursuant to the formula set forth in Section 4.1 hereof at the then
effective Conversion Price for Class F Preferred Stock in the event at
least 66-2/3% of the Class F Preferred Stock purchased pursuant to the
Class F Preferred Stock Purchase Agreement dated as of October 26, 1995
among the Corporation and the purchasers listed on Schedule A thereto
(the "Class F Agreement") have been converted into Common Stock.
4.3. Mechanics of Conversion. Before any holder of Additional Preferred
Stock shall be entitled to convert such Stock into shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates evidencing the shares of Additional Preferred Stock to be
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for the Additional Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 4.2, the
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outstanding shares of Class A Preferred Stock or Additional Preferred Stock, as
the case may be, shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent, and provided
further, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such automatic conversion
unless the certificates evidencing such shares of Class A Preferred Stock or
Additional Preferred Stock, as the case may be, are either delivered to the
Corporation or its transfer agent as provided above, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. The Corporation shall, as soon as practicable after such delivery,
or such agreement and indemnification in the case of a lost certificate, issue
and deliver at such office to such holder of Class A Preferred Stock or
Additional Preferred Stock, as the case may be, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be entitled
hereunder and a check payable to the holder in the amount of any cash amounts
payable as the result of a conversion into fractional shares of Common Stock
plus all accrued and unpaid dividends on such holder's Additional Preferred
Stock, if any. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Additional Preferred Stock to be converted, or in the case of automatic
conversion immediately prior to closing of the Qualified Public Offering or the
date of the shareholder vote or conversion of Class A Preferred Stock or
Additional Preferred Stock described in Sections 4.1 and 4.2, as applicable, and
the party entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
4.4. Adjustment of Conversion Prices due to Issuance of Additional
Shares. The Conversion Price in effect from time to time for the Additional
Preferred Stock shall be subject to adjustment as follows:
(a) Special Definitions. For purposes of this Section 4.4, the
following definitions shall apply:
(i) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(ii) "Original Issue Date" shall mean the date on
which the class of such Additional Preferred Stock is first
issued by the Corporation.
(iii) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
convertible into or exchangeable for Common Stock.
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(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Section
4.4(c), deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued
or issuable at any time:
(A) upon conversion of the Additional
Preferred Stock authorized herein;
(B) as a dividend or distribution on the
Class A Preferred Stock or Additional Preferred Stock
or any event for which adjustment is made pursuant to
Section 4.4(f) hereof;
(C) by way of dividend or other distribution
on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by
the foregoing clauses (A), (B) or this clause (C);
(D) out of those 1,250,000 shares of Common
Stock reserved for issuance pursuant to the 1993
Long-Term Incentive Plan or out of those 180,000
shares of Common Stock reserved for issuance pursuant
to the 1993 Non-Employee Directors' Stock Option Plan
or pursuant to any other stock option, stock bonus or
other employee stock plan approved by the holders of
at least a majority of the Additional Preferred Stock
voting as one class, which approval shall include the
number of shares of Common Stock available for
distribution under any such plan; or
(E) upon the exercise of any options or
warrants outstanding on the Original Issue Date.
(b) No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Conversion Price in effect on
the date of, and immediately prior, to such issue.
(c) Deemed Issuance of Additional Shares of Common Stock -
Options and Convertible Securities. Except as provided in Section
4.4(a) or Section 4.4(b) hereof, in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the document relating thereto without regard to
any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the
close of business on such
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record date, provided that Additional Shares of Common Stock shall not
be deemed to have been issued unless the consideration per share
(determined pursuant to Section 4.4(e) hereof) of such Additional
Shares of Common Stock would be less than the applicable Conversion
Price in effect on the date of and immediately prior to such issue, or
such record date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are deemed to be
issued,
(i) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase in the consideration payable to the
Corporation, or decrease in the number of shares of Common
Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the applicable
Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if,
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares
of Common Stock issued were shares of Common Stock,
if any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by
the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon such
exercise, or for the issue of all such Convertible
Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration
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actually received by the Corporation for the issue of
all such Options, whether or not exercised, plus the
consideration deemed to have been received by the
Corporation upon the issue of the Convertible
Securities with respect to which such Options were
actually exercised;
(iv) no readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the applicable
Conversion Price to an amount which exceeds the lower of (A)
the applicable Conversion Price on the original adjustment
date, or (B) the applicable Conversion Price that would have
resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such
readjustment date.
(d) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 4.4(c)) for a
consideration per share less than the applicable Conversion Price of a
class of Additional Preferred Stock (other than the Class E Preferred
Stock) in effect on the date of and immediately prior to such issue, or
in the case of the Class E Preferred Stock for consideration per share
less than $14.00 per share, the applicable Conversion Price for such
class of Additional Preferred Stock, shall be recomputed, concurrently
with such issue (calculated to the nearest cent) by dividing (x) an
amount equal to the sum of (1) the number of shares of Common Stock
deemed to be outstanding immediately prior to such issue multiplied by
the then effective Conversion Price and (2) the consideration, if any,
deemed received by the Corporation upon such issue by (y) the total
number of shares of Common Stock deemed to be outstanding immediately
after such issue; and provided that, for the purposes of this Section
4.4(d), all shares of Common Stock outstanding and issuable upon
conversion of outstanding Options, Convertible Securities and the
Additional Preferred Stock shall be deemed to be outstanding, other
than shares of Common Stock excluded from the definition of Additional
Shares of Common Stock in this Section 4.4.; and provided further that
no adjustment to the Conversion Price of the Class E Preferred Stock
shall be made pursuant to this Section 4.4(d) unless the Corporation
shall issue Additional Shares of Common Stock for a consideration per
share less than $14.00. In no event will the Conversion Price be
adjusted as the result of a particular issuance of securities to a
price less than the price per share of the Additional Shares of Common
Stock issued in such issuance nor shall any adjustment be made in the
Conversion Price of any class of Additional Preferred Stock as a result
of any issuance of any Additional Shares of Common Stock at a price per
share in excess of the initial Conversion Price of such class of
Additional Preferred Stock nor any adjustments made in such Conversion
Price which would result in a Conversion Price higher than the then
applicable Conversion Price.
(e) Determination of Consideration. For purposes of this
Section 4.4, the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
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(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by
the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of such issue, as determined in good faith
by the Board of Directors of the Corporation; and
(C) insofar as Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation for
consideration which covers both, be the proportion of
such consideration so received, computed as provided
in clauses (A) and (B) above, as determined in good
faith by the Board of Directors of the Corporation.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.4(c) (i), relating to Options and
Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
(f) Adjustments for Subdivisions, Stock Dividends,
Combinations, or Consolidation of Common Stock. In the event the
outstanding shares of Common Stock shall be increased by way of stock
issued as a dividend for no consideration or subdivided (by stock
split, or otherwise) into a greater number of shares of Common Stock,
the Conversion Price then in effect shall, concurrently with the
effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by
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reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Price then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
4.5. Provision Regarding Adjustment of Conversion Price for Class D
Preferred Stock. Notwithstanding any other provision of this Article IV, the
Conversion Price of the Class D Preferred Stock shall be reduced, in the event
that a Qualified Public Offering does not close on or before March 31, 1995, to
$14.12 as of such date, or to such lesser amount as may be required under other
provisions of this Article IV.
4.6. Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of the Corporation other than shares of
Common Stock, securities of other persons, evidences of indebtedness issued by
the Corporation or other persons, assets (excluding cash dividends) or options
or rights not referred to in Section 4.4(c), then, in each such case for the
purpose of this Section 4.6, the holders of the Additional Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of the Corporation into
which their shares of such Additional Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
4.7. Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in this Amended
and Restated Certificate of Incorporation), provision shall be made so that the
holders of the Additional Preferred Stock shall thereafter be entitled to
receive upon conversion of the Additional Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Additional Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of such class of Additional Preferred Stock) shall
be applicable after that event in as nearly an equivalent manner as may be
practicable.
4.8. No Impairment. The Corporation will not, by further amendment of
its Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Class A Preferred Stock and
Additional Preferred Stock against impairment.
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4.9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any share of Class A or
Additional Preferred Stock. If, upon conversion of any share of Class A or
Additional Preferred Stock, the registered holder would, except for the
provisions of this Section 4.9, be entitled to receive a fractional share of
Common Stock, then an amount equal to such fractional share multiplied by the
then applicable Conversion Price shall be paid by the Corporation in cash to
such registered holder.
4.10. Reservation of Shares. The Corporation agrees that, so long as
any share of Class A or Additional Preferred Stock shall remain outstanding, the
Corporation shall at all times reserve and keep available, free from preemptive
rights, out of its authorized capital stock, for the purpose of issue upon
conversion of the Class A or Additional Preferred Stock, the full number of
shares of Common Stock then issuable upon conversion of the Class A and
Additional Preferred Stock.
4.11. Validity of Shares. The Corporation agrees that it will from time
to time take all such actions as may be requisite to assure that all shares of
Common Stock which may be issued upon conversion of any share of the Class A or
Additional Preferred Stock will, upon issuance, be legally and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof; and, without limiting the generality of the
foregoing, the Corporation agrees that it will from time to time take all such
action as may be requisite to assure that the par value per share, if any, of
the Common Stock is at all times equal to or less than the lowest quotient of
the then current par value of the Class A, Class B, Class C, Class D, Class E
and Class F Preferred Stock divided by the number of shares of Common Stock into
which each share of Class A, Class B, Class C, Class D, Class E or Class F
Preferred Stock can, from time to time, be converted.
4.12. Notice of Adjustment. Upon each adjustment of the Conversion
Price, the Corporation shall give prompt written notice thereof addressed to the
registered holder of each share of the class of Additional Preferred Stock so
affected at the address of such holder as shown on the records of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
issuable upon the conversion of such holder's shares of Additional Preferred
Stock, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based together with a certificate of the
chief financial officer of the Corporation stating that he or she has examined
such notice and certifying that the information contained therein is accurate.
4.13. Notice of Capital Changes. If at any time:
(a) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(b) the Corporation shall offer for subscription to the
holders of Common Stock any additional shares of stock of any class or
other rights;
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(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation or business
organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any such case, the Corporation shall give the registered holders of the
Additional Preferred Stock written notice of the date on which a record shall be
taken for such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and of the
date when any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least twenty (20) days prior to the record date
with respect thereto.
4.14. Taxes. The Corporation will pay all taxes and other governmental
charges that may be imposed in respect of the issue or delivery of shares of
Common Stock upon conversion of the Additional Preferred Stock.
4.15. Waiver of Adjustment.
(a) With the consent of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then currently outstanding shares of Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock or Class F Preferred Stock, any antidilution adjustment to which
such class of Preferred Stock would otherwise be entitled under this Section 4
may be limited or waived in its entirety. In the event of such a limitation or
waiver, the Corporation shall not be required to make any adjustment whatsoever
with respect to the Conversion Price of such class of Preferred Stock, or to
make any adjustment with respect to such class of Preferred Stock in excess of
such limit, as the terms of such consent may dictate.
(b) Any holder of Additional Preferred Stock shall also be permitted to
waive in whole or in part, currently or prospectively, by contract or any other
writing, any antidilution adjustment to which such holder would otherwise be
entitled pursuant to the provisions of this Section 4.
5. COVENANTS. In addition to any other rights provided by law, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the then issued and outstanding
shares of the applicable class of Preferred Stock:
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<PAGE> 73
(a) amend or repeal any provision of the Corporation's Amended
and Restated Certificate of Incorporation so as to adversely affect the
rights, preferences, or privileges of such class of Preferred Stock;
(b) authorize or issue additional shares of any class or
series of stock of the Corporation other than a class or series of
stock of the Corporation ranking equal or junior in rights to such
class of Preferred Stock as to dividends or redemption or rights on
liquidation, dissolution or winding up;
(c) increase the authorized number of shares of such existing
class of Preferred Stock or authorize the reissuance thereof after
repurchase or redemption;
(d) authorize any liquidation, dissolution, winding up of the
affairs of the Corporation, consolidation or merger of the Corporation
into or with another corporation or corporations, sale of all or
substantially all of the Corporation's assets (unless after such
consolidation or merger all the terms of such class of Preferred Stock
would remain in effect and be assumed by the consolidated or surviving
corporation), or distribution of the Corporation's assets by way of
return of capital;
(e) change the par value of such class of Preferred Stock; or
(f) alter in any way the voting rights of such class of
Preferred Stock.
6. REDEMPTION
(a) The Corporation shall redeem (to the extent that such redemption
shall not violate any applicable provisions of the laws of the State of
Delaware) at a price of One Thousand Dollars ($1,000) per share, plus an amount
equal to any and all dividends accrued and unpaid on each share to be redeemed,
but without interest, on the 31st day of December (the "Redemption Date") of
each of the years of 1997 through 2000 seven hundred fifty (750) shares of Class
A Preferred Stock (or such lesser number as shall then be outstanding). If the
Corporation is unable on any Redemption Date to redeem any shares of Class A
Preferred Stock then to be redeemed because such redemption would violate the
applicable laws of the State of Delaware, then the Corporation shall redeem such
shares as soon thereafter as redemption would not violate such laws.
(b) The Corporation shall have the right, at its option, to redeem as a
whole, or from time to time in part, shares of Class A Preferred Stock at the
redemption price specified in the preceding paragraph plus an amount equal to
any and all dividends accrued and unpaid, but without interest. The Corporation
may credit against any mandatory redemption specified in paragraph (a) any
shares of Class A Preferred Stock redeemed pursuant to this paragraph (b) or
otherwise acquired by the Corporation. Any such credit shall be applied against
mandatory redemptions in the inverse order of the above-stated redemption
requirements.
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<PAGE> 74
(c) In case of redemption of only part of the shares of Class A
Preferred Stock at any time outstanding, the Corporation shall designate by lot
the shares so to be redeemed. Subject to the limitations and provisions herein
contained, the Board of Directors shall have full power and authority to
prescribe the manner in which the drawings by lot shall be conducted.
(d) Notice of every redemption provided for in this Section 6 shall be
given by mailing the same to every holder of record, any of whose shares are
then to be redeemed, not less than fifteen (15) nor more than thirty (30) days
prior to the date fixed as the date of the redemption thereof, at the respective
addresses of such holders as the same shall appear on the stock transfer books
of the Corporation. The notice shall state that the shares specified in such
notice will be redeemed by the Corporation at the redemption price and on the
date specified in such notice, upon the surrender for cancellation at the places
designated in such notice, of the certificates representing the shares so to be
redeemed, properly endorsed in blank for transfer, or accompanied by proper
instruments of assignment and transfer in blank, bearing any necessary transfer
tax stamps thereto affixed and cancelled, or accompanied by cash or a certified
check in the amount of any stock transfer tax applicable to such transaction. On
and after the date specified in the notice described above, each holder of
shares called for redemption, upon presentation and surrender in accordance with
such notice of the certificates for shares held by such holder and called for
redemption, shall be entitled to receive therefor the applicable redemption
price. If the Corporation shall give notice of redemption as aforesaid (and
unless the Corporation shall fail to pay the redemption price of shares
presented for redemption in accordance with such notice), all shares called for
redemption shall be deemed to have been redeemed on the date specified in such
notice whether or not the certificates for such shares be surrendered for
redemption and cancellation, and such shares so called for redemption shall from
and after such date cease to represent any interest whatever in the Corporation
or its property, and the holders thereof shall have no rights other than the
right to receive such redemption price but without any interest thereon from or
after such date.
(e) Notwithstanding any other provision of this Section 6, if the
holders of at least a majority of the Class A Preferred Stock elect not to have
the Corporation redeem the Class A Preferred Stock, then the Corporation shall
not redeem any shares of Class A Preferred Stock.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Class A,
Class B, Class C, Class D, Class E or Class F Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Corporation shall be authorized to issue. The Corporation
may from time to time take such appropriate corporate action as may be necessary
to reduce the authorized number of shares of any such class of Preferred Stock
accordingly.
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<PAGE> 75
8. AMENDMENTS AND WAIVERS.
(a) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class A
Preferred Stock shall become effective and binding upon all holders of Class A
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least a majority of the Class A Preferred Stock then issued and
outstanding.
(b) Any action, approval, request, consent, notice or waiver
which is required or permitted under Article IV with respect to the Class B
Preferred Stock shall become effective and binding upon all holders of Class B
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class B
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(c) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class C
Preferred Stock shall become effective and binding upon all holders of Class C
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class C
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(d) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class D
Preferred Stock shall become effective and binding upon all holders of Class D
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class D
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(e) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class E
Preferred Stock shall become effective and binding upon all holders of Class E
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class E
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(f) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class F
Preferred Stock shall become effective and binding upon all holders of Class F
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class F
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
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<PAGE> 76
IN WITNESS WHEREOF, the Corporation has caused the Certificate of
Amendment to be signed by its President this 25th day of October, 1995.
Transkaryotic Therapies, Inc.
By:/s/ Richard F. Selden
----------------------------------
Richard F. Selden, M.D., Ph.D.
President
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<PAGE> 77
CERTIFICATE OF AMENDMENT
OF
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 (the
"Corporation"), does hereby certify:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said amendment
by written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware and notice has been given as provided
in Section 228 of the General Corporation Law of the State of Delaware. The
resolution provides that the Amended and Restated Certificate of Incorporation
of the Corporation is hereby amended as follows:
Article Fourth of the Certificate of Incorporation of the Corporation
is hereby deleted in its entirety and replaced with the following:
ARTICLE IV.
This Corporation is authorized to issue eight classes of shares to be
designated Common Stock and seven classes of Preferred Stock, respectively. The
total number of shares of Common Stock this Corporation shall have authority to
issue is 15,000,000, par value $1.00 per share, and the total number of shares
of Preferred Stock this Corporation
<PAGE> 78
shall have authority to issue is 4,952,720, par value $1.00 per share. The first
class of Preferred Stock shall consist of 6,000 shares designated Class A
Preferred Stock (the "Class A Preferred Stock"); the second class of Preferred
Stock shall consist of 60,000 shares designated Class B Preferred Stock (the
"Class B Preferred Stock"); the third class of Preferred Stock shall consist of
1,875,000 shares of Class C Preferred Stock (the "Class C Preferred Stock"); the
fourth class of Preferred Stock shall consist of 280,367 shares of Class D
Preferred Stock (the "Class D Preferred Stock"); the fifth class of Preferred
Stock shall consist of 523,560 shares of Class E Preferred Stock (the "Class E
Preferred Stock,"); the sixth class of Preferred Stock shall consist of
1,071,429 shares of Class F Preferred Stock (the "Class F Preferred Stock,");
and the seventh class of Preferred Stock shall consist of 1,136,364 shares of
Class G Preferred Stock (the "Class G Preferred Stock;" together with the Class
A Preferred Stock, the Class B Preferred Stock, the Class C Preferred Stock, the
Class D Preferred Stock, the Class E Preferred Stock and the Class F Preferred
Stock, the "Preferred Stock").
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences and rights, and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, granted to or imposed on the respective
classes and series of the shares of capital stock or the holders thereof are as
follows:
1. DIVIDENDS.
1.1. Preferred Stock.
(a) Subject to Section 4.1, the holders of the Class A Preferred Stock
shall be entitled to receive cumulative dividends, out of any assets at the time
legally available, when and as declared by the Board of Directors, on a pro rata
basis in accordance with the number of shares of Class A Preferred Stock held by
each such holder, which shall accrue from day-to-day at the rate per annum of
$70.00 per share, payable quarterly on the last day of each March, June,
September and December (commencing March 31, 1992) and an additional amount
equal to the amount of the accrued dividend on the Preferred Stock exchanged by
such holder in consideration of Class A Preferred Stock pursuant to the Stock
Exchange Agreement dated February 14, 1992, between the Corporation and such
holder, and in preference and priority to any payment of any dividend on any
Class B Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class
E Preferred Stock, Class F Preferred Stock, Class G Preferred Stock and Common
Stock of the Corporation. To the extent that such dividends are not paid,
because there exists no funds legally available therefor or for any other
reason, such dividends shall accrue.
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<PAGE> 79
(b) No dividend shall be paid on the Class B Preferred Stock, the Class
C Preferred Stock, the Class D Preferred Stock, the Class E Preferred Stock, the
Class F Preferred Stock, the Class G Preferred Stock or the Common Stock in any
year until all declared and accumulated dividends have been paid on the Class A
Preferred Stock. In the event the Board of Directors shall have declared and
paid, or set apart for payment, dividends at the rate specified in Section
1.1(a) in any one fiscal year, and shall elect to declare additional dividends
in that fiscal year out of funds legally available therefor on the Common Stock,
such additional dividends shall, subject to Section 1.1(a) hereof, be declared
and paid on each share of Class B Preferred Stock, Class C Preferred Stock,
Class D Preferred Stock, Class E Preferred Stock, Class F Preferred Stock and
Class G Preferred Stock, at the same time as any dividends are declared and paid
on the Common Stock, in an amount equal to the additional dividends paid on such
number of shares of Common Stock into which each share of Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock, Class E Preferred
Stock, Class F Preferred Stock and Class G Preferred Stock is convertible on the
record date for such dividend payment.
1.2. Common Stock. Subject to the preferences and other rights of the
Preferred Stock set forth in Section 1.1, the holders of Common Stock shall be
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor, on a basis in accordance with the
number of shares of Common Stock held by each such holder.
2. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the stockholders of the Corporation shall be made in the
following manner:
(a) The holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred
Stock, the Class E Preferred Stock, the Class F Preferred Stock and the
Class G Preferred Stock shall first be entitled to receive, prior and
in preference to any distribution of any of the assets of the
Corporation to the holders of any other class of Preferred Stock or
Common Stock by reason of their ownership of such stock, the amount of
$700.00 per share of Class A Preferred Stock, $400.00 per share of
Class B Preferred Stock, $8.00 per share of Class C Preferred Stock,
$17.8338 per share of Class D Preferred Stock, $19.10 per share of
Class E Preferred Stock, $14.00 per share of Class F Preferred Stock
and $22.00 per share of Class G Preferred Stock, plus accrued but
undeclared and declared but unpaid dividends on each such share. If the
assets and funds of the Corporation shall be insufficient to permit the
payment in full to such holders of the Class A Preferred Stock, the
Class B Preferred Stock, the Class C Preferred Stock, the Class D
Preferred Stock, the Class E Preferred Stock, the Class F Preferred
Stock and the Class G Preferred Stock of the full aforesaid
preferential amount, then the entire assets of the Corporation legally
available for distribution shall be distributed ratably among the
holders of the Class A Preferred Stock, the Class B Preferred Stock,
the Class C Preferred Stock, the Class D Preferred Stock, the Class E
Preferred Stock, the Class F Preferred Stock and
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<PAGE> 80
Class G Preferred Stock in accordance with the aggregate liquidation
preference of the shares of Class A Preferred Stock, Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock, Class F Preferred Stock and/or Class G Preferred Stock
held by each of them.
(b) After payment has been made to the holders of the Class A
Preferred Stock, the Class B Preferred Stock, the Class C Preferred
Stock, the Class D Preferred Stock, the Class E Preferred Stock, the
Class F Preferred Stock and the Class G Preferred Stock of the full
amounts to which they shall be entitled as aforesaid, the holders of
the Common Stock, the holders of the Class B Preferred Stock, the
holders of the Class C Preferred Stock, the holders of the Class D
Preferred Stock, the holders of the Class E Preferred Stock, the
holders of the Class F Preferred Stock and the holders of the Class G
Preferred Stock shall be entitled to share ratably in the remaining
assets, based on the number of shares of Common Stock held by them,
assuming conversion of the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, the Class E Preferred
Stock, the Class F Preferred Stock and the Class G Preferred Stock at
the respective Conversion Prices then in effect.
(c) For purposes of this Section 2, a merger or consolidation
of the Corporation with or into any other corporation or corporations
in which the stockholders of the Corporation immediately prior to the
merger or consolidation do not own more than fifty percent (50%) of the
outstanding voting power (assuming conversion of all convertible
securities and the exercise of all outstanding options and warrants) of
the surviving corporation, or the sale of all or substantially all of
the assets of the Corporation, shall be treated as a liquidation,
dissolution or winding up of the Corporation. Approval of any of the
foregoing events by the holders of at least a majority of the Preferred
Stock pursuant to Section 5 hereof shall be deemed an election not to
treat any of the foregoing events as a liquidation, dissolution or
winding up hereunder.
3. VOTING RIGHTS.
3.1. Generally. Subject to Section 5 hereof and except as otherwise
required by law, the holder of each share of Common Stock issued and outstanding
shall have one vote in respect of each share of Common Stock and the holder of
each share of Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock, Class E Preferred Stock, Class F Preferred Stock and/or Class G
Preferred Stock issued and outstanding shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such share of Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock, Class F Preferred Stock and/or Class G Preferred Stock can be
converted at the record date for determination of those entitled to vote on such
matters, or, if no such record date is established, at the date such vote is
taken or any written consent of stockholders is obtained, such votes to be
counted together with all other shares of stock of the Corporation having voting
power in the election of directors and not separately as a class.
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<PAGE> 81
Except as otherwise provided by law or in this Certificate of Incorporation, the
holders of Class A Preferred Stock shall not be entitled to notice of, or to
vote at, any meeting of the stockholders of the Corporation or to vote on any
matter relating to the business or affairs of the Corporation. Record holders of
Common Stock, Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock, Class E Preferred Stock, Class F Preferred Stock and/or Class G
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the By-laws of the Corporation.
3.2. Class A Preferred Stock Director. Notwithstanding the provisions
of Section 3.1:
(a) In the event that seven (7) consecutive quarterly
dividends with respect to the Class A Preferred Stock as set forth in
Section 1.1(a) shall be in arrears and shall not have been paid in
full, whether or not earned, or in the event the Corporation shall be
more than one year in arrears in the redemption of Class A Preferred
Stock, then, upon notice to the Corporation given by the holders of not
less than 50% of the Class A Preferred Stock then outstanding, the
holders of the Class A Preferred shall as a class become entitled to
elect one member to the Board of Directors until all accumulated and
unpaid dividends thereon and all redemptions in arrears shall have been
paid, whereupon such right of the holders of the Class A Preferred
Stock to elect one director shall cease, subject to being again revived
from time to time upon the reoccurrence of the conditions above
described. Failure by the holders of the Class A Preferred Stock to
exercise their rights under this Section 3.2 promptly upon the
occurrence of the conditions giving rise to such rights shall not be
deemed to be a waiver of such rights, such rights being exercisable at
any time such conditions shall have occurred and be continuing.
(b) Immediately upon accrual of such right of the holders of
Class A Preferred Stock to elect a director pursuant to paragraph (a)
above, the number of directors of the Corporation shall, ipso facto, be
increased by one, and the directors of the Corporation shall thereupon
be divided into classes. One such class shall consist of one director
(the "Preferred Director") elected solely by the holders of Class A
Preferred Stock (voting as a class), and the other class shall consist
of the remaining directors. Whenever the number of directors of the
Corporation shall have been so increased, the number as so increased
may thereafter be further increased or decreased in such manner as may
be permitted by the By-laws of the Corporation and without the vote of
the holders of Class A Preferred Stock, provided that no such action
shall impair the right of the holders of Class A Preferred Stock to
elect the Preferred Director. The holders of the Class A Preferred
Stock may at their option at any time exercise their rights under this
Section 3.2 by written consent without a meeting in accordance with the
General Corporation Law of Delaware.
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<PAGE> 82
(c) Each Preferred Director elected by the holders of Class A
Preferred Stock shall serve for a term of one year and until his or her
successor is elected and qualified, or, if earlier, until the right to
elect such director ceases in accordance with paragraph (a) above. So
long as the holders of Class A Preferred Stock are entitled to elect a
Preferred Director, any vacancy in the position of Preferred Director
may be filled only by the holders of the Class A Preferred Stock
entitled to vote thereon. The Class A Preferred Director may, during
his or her term of office, be removed at any time, with or without
cause, by and only by the affirmative vote, at a special meeting of
holders of Class A Preferred Stock called for such purpose, or the
written consent, of the holders of record of a majority of the then
outstanding shares of Class A Preferred Stock. Any vacancy created by
such removal may also be filled at such meeting or by such consent.
(d) Upon the termination of the right of holders of Class A
Preferred Stock to elect a Preferred Director, the term of office of
the Preferred Director shall forthwith terminate and the number of
directors of the Corporation shall thereupon be appropriately
decreased.
4. CONVERSION.
4.1. Optional Conversion. The holders of Class B Preferred Stock, Class
C Preferred Stock, Class D Preferred Stock, Class E Preferred Stock, Class F
Preferred Stock and Class G Preferred Stock (together, the "Additional Preferred
Stock") shall have conversion rights as follows (the "Additional Preferred
Conversion Rights"). Each share of Additional Preferred Stock shall be
convertible (at the option of the holder thereof) any time at the office of the
Corporation or any transfer agent for the Additional Preferred Stock into the
number of shares of the Common Stock of the Corporation obtained by dividing the
Original Issuance Price (as defined below) for such class of Preferred Stock by
the conversion price in effect at the time of conversion, determined as
hereinafter provided (the "Conversion Price"). For the Class B Preferred Stock,
the Original Issuance Price is $400.00 and the present Conversion Price is
$8.71. For the Class C Preferred Stock, the Original Issuance Price is $8.00 and
the initial Conversion Price is $8.00. For the Class D Preferred Stock, the
Original Issuance Price is $17.83 and the initial Conversion Price is $17.83.
For the Class E Preferred Stock, the Original Issuance Price is $19.10 and the
initial Conversion Price is $19.10. For the Class F Preferred Stock, the
Original Issuance Price is $14.00 and the initial Conversion Price is $14.00.
For the Class G Preferred Stock, the Original Issuance Price is $22.00 and the
initial Conversion Price is $22.00. All calculations under this Section 4 shall
be made to the nearest cent.
4.2. Automatic Conversion.
(a) Class A Preferred Stock. Immediately upon the closing of
an initial public offering of the Corporation's Common Stock at an
aggregate offering price of not less than $12.00 per share (as adjusted
for any stock dividends, stock splits, combination, or similar
recapitalizations occurring after the date hereof) and which
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results in gross proceeds to the Corporation of at least ten million
dollars ($10,000,000) ("Qualified Public Offering"), and simultaneously
with the conversion of the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, the Class E Preferred
Stock, the Class F Preferred Stock and the Class G Preferred Stock into
Common Stock, all Class A Preferred Stock then outstanding and all
rights to any and all then unpaid accrued dividends thereon shall
automatically be converted into the number of original issue shares of
Common Stock produced by dividing (a) six million dollars ($6,000,000)
by (b) the price per share at which Common Stock is offered in the
Qualified Public Offering.
(b) Additional Preferred Stock. At any time upon the closing
of a Qualified Public Offering, each share of Additional Preferred
Stock shall automatically be converted into shares of Common Stock
pursuant to the formula set forth in Section 4.1 hereof at the then
effective Conversion Price of such class of Preferred Stock. In the
event of the automatic conversion of Additional Preferred Stock upon a
Qualified Public Offering, the party entitled to receive the Common
Stock issuable upon such conversion of Additional Preferred Stock shall
not be deemed to have converted such Additional Preferred Stock until
such party has received from the Corporation all declared and unpaid
dividends and accrued but undeclared dividends owed with respect to
such party's Additional Preferred Stock and, in any event, until
immediately prior to the closing of the Qualified Public Offering.
Each share of Additional Preferred Stock shall automatically
be converted into shares of Common Stock pursuant to the formula set
forth in Section 4.1 hereof at the then effective Conversion Price for
such class of Preferred Stock upon the vote to so convert of the
holders of at least 66-2/3% of such class of Additional Preferred Stock
then outstanding. Each share of Class B Preferred Stock shall
automatically be converted into shares of Common Stock pursuant to the
formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class B Preferred Stock in the event at least
66-2/3% of the Class B Preferred Stock purchased pursuant to (i) the
Class B Preferred Stock Purchase Agreement dated as of February 14,
1992 among the Corporation and the purchasers listed on Schedule A
thereto and (ii) the Class B Preferred Stock Purchase Agreement dated
as of April 20, 1993 among the Corporation and the purchasers listed on
Schedule A thereto, collectively as one group, have been converted into
Common Stock. Each share of Class C Preferred Stock shall automatically
be converted into shares of Common Stock pursuant to the formula set
forth in Section 4.1 hereof at the then effective Conversion Price for
Class C Preferred Stock in the event at least 66-2/3% of the Class C
Preferred Stock purchased pursuant to the Class C Preferred Stock and
Warrant Purchase Agreement dated as of November 3, 1993 among the
Corporation and the purchasers listed on Schedule A thereto have been
converted into Common Stock. Each share of Class D Preferred Stock
shall automatically be converted into shares of Common Stock pursuant
to the formula set forth in Section 4.1 hereof at the then effective
Conversion Price for Class D Preferred Stock in the event at least
66-2/3% of the
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Class D Preferred Stock purchased pursuant to the Class D Preferred
Stock Purchase Agreement dated as of May 18, 1994 among the Corporation
and Marion Merrell Dow Inc. have been converted into Common Stock. Each
share of Class E Preferred Stock shall automatically be converted into
shares of Common Stock pursuant to the formula set forth in Section 4.1
hereof at the then effective Conversion Price for Class E Preferred
Stock in the event at least 66-2/3% of the Class E Preferred Stock
purchased pursuant to the Class E Preferred Stock Purchase Agreement
dated as of March 1, 1995 among the Corporation and Marion Merrell Dow
Inc. have been converted into Common Stock. Each share of Class F
Preferred Stock shall automatically be converted into shares of Common
Stock pursuant to the formula set forth in Section 4.1 hereof at the
then effective Conversion Price for Class F Preferred Stock in the
event at least 66-2/3% of the Class F Preferred Stock purchased
pursuant to the Class F Preferred Stock Purchase Agreement dated as of
October 26, 1995 among the Corporation and the purchasers listed on
Schedule A thereto have been converted into Common Stock. Each share of
Class G Preferred Stock shall automatically be converted into shares of
Common Stock pursuant to the formula set forth in Section 4.1 hereof at
the then effective Conversion Price for Class G Preferred Stock in the
event at least 66-2/3% of the Class G Preferred Stock purchased
pursuant to the Class G Preferred Stock Purchase Agreement dated as of
____ __, 1996 among the Corporation and the purchasers listed on
Schedule A thereto have been converted into Common Stock.
4.3. Mechanics of Conversion. Before any holder of Additional Preferred
Stock shall be entitled to convert such Stock into shares of Common Stock and to
receive certificates therefor, such holder shall surrender the certificate or
certificates evidencing the shares of Additional Preferred Stock to be
converted, duly endorsed, at the office of the Corporation or of any transfer
agent for the Additional Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same;
provided, however, that in the event of an automatic conversion pursuant to
Section 4.2, the outstanding shares of Class A Preferred Stock or Additional
Preferred Stock, as the case may be, shall be converted automatically without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent, and provided further, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless the certificates evidencing such shares of
Class A Preferred Stock or Additional Preferred Stock, as the case may be, are
either delivered to the Corporation or its transfer agent as provided above, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as practicable
after such delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Class A
Preferred Stock or Additional Preferred Stock, as the case may be, a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled hereunder and a check payable to the holder in the amount of
any cash amounts payable as the result of a
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conversion into fractional shares of Common Stock plus all accrued and unpaid
dividends on such holder's Additional Preferred Stock, if any. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Additional Preferred Stock to be
converted, or in the case of automatic conversion immediately prior to closing
of the Qualified Public Offering or the date of the shareholder vote or
conversion of Class A Preferred Stock or Additional Preferred Stock described in
Sections 4.1 and 4.2, as applicable, and the party entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
4.4. Adjustment of Conversion Prices due to Issuance of Additional
Shares. The Conversion Price in effect from time to time for the Additional
Preferred Stock shall be subject to adjustment as follows:
(a) Special Definitions. For purposes of this Section 4.4, the
following definitions shall apply:
(i) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(ii) "Original Issue Date" shall mean the date on
which the class of such Additional Preferred Stock is first
issued by the Corporation.
(iii) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
convertible into or exchangeable for Common Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to Section
4.4(c), deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued
or issuable at any time:
(A) upon conversion of the Additional
Preferred Stock authorized herein;
(B) as a dividend or distribution on the
Class A Preferred Stock or Additional Preferred Stock
or any event for which adjustment is made pursuant to
Section 4.4(f) hereof;
(C) by way of dividend or other distribution
on shares of Common Stock excluded from the
definition of Additional Shares of Common Stock by
the foregoing clauses (A), (B) or this clause (C);
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(D) out of those 1,250,000 shares of Common
Stock reserved for issuance pursuant to the 1993
Long-Term Incentive Plan or out of those 180,000
shares of Common Stock reserved for issuance pursuant
to the 1993 Non-Employee Directors' Stock Option Plan
or pursuant to any other stock option, stock bonus or
other employee stock plan approved by the holders of
at least a majority of the Additional Preferred Stock
voting as one class, which approval shall include the
number of shares of Common Stock available for
distribution under any such plan; or
(E) upon the exercise of any options or
warrants outstanding on the Original Issue Date.
(b) No Adjustment of Conversion Price. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Conversion Price in effect on
the date of, and immediately prior, to such issue.
(c) Deemed Issuance of Additional Shares of Common Stock -
Options and Convertible Securities. Except as provided in Section
4.4(a) or Section 4.4(b) hereof, in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive
any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the document relating thereto without regard to
any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or,
in the case of Convertible Securities and options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the
close of business on such record date, provided that Additional Shares
of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 4.4(e) hereof)
of such Additional Shares of Common Stock would be less than the
applicable Conversion Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued,
(i) no further adjustment in the applicable
Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase in the consideration
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payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof, the applicable Conversion Price computed
upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities;
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the applicable
Conversion Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if,
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares
of Common Stock issued were shares of Common Stock,
if any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by
the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon such
exercise, or for the issue of all such Convertible
Securities which were actually converted or
exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(iv) no readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the applicable
Conversion Price to an amount which exceeds the lower of (A)
the applicable Conversion Price on the original adjustment
date, or (B) the applicable Conversion Price that would have
resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such
readjustment date.
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(d) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 4.4(c)) for a
consideration per share less than the applicable Conversion Price of a
class of Additional Preferred Stock (other than the Class E Preferred
Stock) in effect on the date of and immediately prior to such issue or,
in the case of the Class E Preferred Stock, for consideration per share
less than $14.00 per share, the applicable Conversion Price for such
class of Additional Preferred Stock, shall be recomputed, concurrently
with such issue (calculated to the nearest cent) by dividing (x) an
amount equal to the sum of (1) the number of shares of Common Stock
deemed to be outstanding immediately prior to such issue multiplied by
the then effective Conversion Price and (2) the consideration, if any,
deemed received by the Corporation upon such issue by (y) the total
number of shares of Common Stock deemed to be outstanding immediately
after such issue; and provided that, for the purposes of this Section
4.4(d), all shares of Common Stock outstanding and issuable upon
conversion of outstanding Options, Convertible Securities and the
Additional Preferred Stock shall be deemed to be outstanding, other
than shares of Common Stock excluded from the definition of Additional
Shares of Common Stock in this Section 4.4; and provided further that
no adjustment to the Conversion Price of the Class E Preferred Stock
shall be made pursuant to this Section 4.4(d) unless the Corporation
shall issue Additional Shares of Common Stock for a consideration per
share less than $14.00. In no event will the Conversion Price be
adjusted as the result of a particular issuance of securities to a
price less than the price per share of the Additional Shares of Common
Stock issued in such issuance nor shall any adjustment be made in the
Conversion Price of any class of Additional Preferred Stock as a result
of any issuance of any Additional Shares of Common Stock at a price per
share in excess of the initial Conversion Price of such class of
Additional Preferred Stock nor any adjustments made in such Conversion
Price which would result in a Conversion Price higher than the then
applicable Conversion Price.
(e) Determination of Consideration. For purposes of this
Section 4.4, the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as
follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by
the Corporation excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of such issue, as determined in good faith
by the Board of Directors of the Corporation; and
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<PAGE> 89
(C) insofar as Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation for
consideration which covers both, be the proportion of
such consideration so received, computed as provided
in clauses (A) and (B) above, as determined in good
faith by the Board of Directors of the Corporation.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to Section 4.4(c) (i), relating to Options and
Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible
Securities.
(f) Adjustments for Subdivisions, Stock Dividends,
Combinations, or Consolidation of Common Stock. In the event the
outstanding shares of Common Stock shall be increased by way of stock
issued as a dividend for no consideration or subdivided (by stock
split, or otherwise) into a greater number of shares of Common Stock,
the Conversion Price then in effect shall, concurrently with the
effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in
effect shall, concurrently with the effectiveness of such combination
or consolidation, be proportionately increased.
4.5. Provision Regarding Adjustment of Conversion Price for Class D
Preferred Stock. Notwithstanding any other provision of this Article IV, the
Conversion Price of the Class D Preferred Stock shall be reduced, in the event
that a Qualified Public Offering does not close on or before March 31, 1995, to
$14.12 as of such date, or to such lesser amount as may be required under other
provisions of this Article IV.
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4.6. Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of the Corporation other than shares of
Common Stock, securities of other persons, evidences of indebtedness issued by
the Corporation or other persons, assets (excluding cash dividends) or options
or rights not referred to in Section 4.4(c), then, in each such case for the
purpose of this Section 4.6, the holders of the Additional Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of the Corporation into
which their shares of such Additional Preferred Stock are convertible as of the
record date fixed for the determination of the holders of Common Stock of the
Corporation entitled to receive such distribution.
4.7. Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in this Amended
and Restated Certificate of Incorporation), provision shall be made so that the
holders of the Additional Preferred Stock shall thereafter be entitled to
receive upon conversion of the Additional Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Additional Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of such class of Additional Preferred Stock) shall
be applicable after that event in as nearly an equivalent manner as may be
practicable.
4.8. No Impairment. The Corporation will not, by further amendment of
its Amended and Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Class A Preferred Stock and
Additional Preferred Stock against impairment.
4.9. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any share of Class A or
Additional Preferred Stock. If, upon conversion of any share of Class A or
Additional Preferred Stock, the registered holder would, except for the
provisions of this Section 4.9, be entitled to receive a fractional share of
Common Stock, then an amount equal to such fractional share multiplied by the
then applicable Conversion Price shall be paid by the Corporation in cash to
such registered holder.
4.10. Reservation of Shares. The Corporation agrees that, so long as
any share of Class A or Additional Preferred Stock shall remain outstanding, the
Corporation shall at all
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times reserve and keep available, free from preemptive rights, out of its
authorized capital stock, for the purpose of issue upon conversion of the Class
A or Additional Preferred Stock, the full number of shares of Common Stock then
issuable upon conversion of the Class A and Additional Preferred Stock.
4.11. Validity of Shares. The Corporation agrees that it will from time
to time take all such actions as may be requisite to assure that all shares of
Common Stock which may be issued upon conversion of any share of the Class A or
Additional Preferred Stock will, upon issuance, be legally and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof; and, without limiting the generality of the
foregoing, the Corporation agrees that it will from time to time take all such
action as may be requisite to assure that the par value per share, if any, of
the Common Stock is at all times equal to or less than the lowest quotient of
the then current par value of the Class A, Class B, Class C, Class D, Class E,
Class F and Class G Preferred Stock divided by the number of shares of Common
Stock into which each share of Class A, Class B, Class C, Class D, Class E,
Class F or Class G Preferred Stock can, from time to time, be converted.
4.12. Notice of Adjustment. Upon each adjustment of the Conversion
Price, the Corporation shall give prompt written notice thereof addressed to the
registered holder of each share of the class of Additional Preferred Stock so
affected at the address of such holder as shown on the records of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
issuable upon the conversion of such holder's shares of Additional Preferred
Stock, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based together with a certificate of the
chief financial officer of the Corporation stating that he or she has examined
such notice and certifying that the information contained therein is accurate.
4.13. Notice of Capital Changes. If at any time:
(a) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(b) the Corporation shall offer for subscription to the
holders of Common Stock any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation or business
organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
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then, in any such case, the Corporation shall give the registered holders of the
Additional Preferred Stock written notice of the date on which a record shall be
taken for such dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and of the
date when any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least twenty (20) days prior to the record date
with respect thereto.
4.14. Taxes. The Corporation will pay all taxes and other governmental
charges that may be imposed in respect of the issue or delivery of shares of
Common Stock upon conversion of the Additional Preferred Stock.
4.15. Waiver of Adjustment.
(a) With the consent of the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the then currently outstanding shares of Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock, Class F Preferred Stock or Class G Preferred Stock, any
antidilution adjustment to which such class of Preferred Stock would otherwise
be entitled under this Section 4 may be limited or waived in its entirety. In
the event of such a limitation or waiver, the Corporation shall not be required
to make any adjustment whatsoever with respect to the Conversion Price of such
class of Preferred Stock, or to make any adjustment with respect to such class
of Preferred Stock in excess of such limit, as the terms of such consent may
dictate.
(b) Any holder of Additional Preferred Stock shall also be permitted to
waive in whole or in part, currently or prospectively, by contract or any other
writing, any antidilution adjustment to which such holder would otherwise be
entitled pursuant to the provisions of this Section 4.
5. COVENANTS. In addition to any other rights provided by law, this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of at least a majority of the then issued and outstanding
shares of the applicable class of Preferred Stock:
(a) amend or repeal any provision of the Corporation's Amended
and Restated Certificate of Incorporation so as to adversely affect the
rights, preferences, or privileges of such class of Preferred Stock;
(b) authorize or issue additional shares of any class or
series of stock of the Corporation other than a class or series of
stock of the Corporation ranking equal or
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junior in rights to such class of Preferred Stock as to dividends or
redemption or rights on liquidation, dissolution or winding up;
(c) increase the authorized number of shares of such existing
class of Preferred Stock or authorize the reissuance thereof after
repurchase or redemption;
(d) authorize any liquidation, dissolution, winding up of the
affairs of the Corporation, consolidation or merger of the Corporation
into or with another corporation or corporations, sale of all or
substantially all of the Corporation's assets (unless after such
consolidation or merger all the terms of such class of Preferred Stock
would remain in effect and be assumed by the consolidated or surviving
corporation), or distribution of the Corporation's assets by way of
return of capital;
(e) change the par value of such class of Preferred Stock; or
(f) alter in any way the voting rights of such class of
Preferred Stock.
6. REDEMPTION
(a) The Corporation shall redeem (to the extent that such redemption
shall not violate any applicable provisions of the laws of the State of
Delaware) at a price of One Thousand Dollars ($1,000) per share, plus an amount
equal to any and all dividends accrued and unpaid on each share to be redeemed,
but without interest, on the 31st day of December (the "Redemption Date") of
each of the years of 1997 through 2000 seven hundred fifty (750) shares of Class
A Preferred Stock (or such lesser number as shall then be outstanding). If the
Corporation is unable on any Redemption Date to redeem any shares of Class A
Preferred Stock then to be redeemed because such redemption would violate the
applicable laws of the State of Delaware, then the Corporation shall redeem such
shares as soon thereafter as redemption would not violate such laws.
(b) The Corporation shall have the right, at its option, to redeem as a
whole, or from time to time in part, shares of Class A Preferred Stock at the
redemption price specified in the preceding paragraph plus an amount equal to
any and all dividends accrued and unpaid, but without interest. The Corporation
may credit against any mandatory redemption specified in paragraph (a) any
shares of Class A Preferred Stock redeemed pursuant to this paragraph (b) or
otherwise acquired by the Corporation. Any such credit shall be applied against
mandatory redemptions in the inverse order of the above-stated redemption
requirements.
(c) In case of redemption of only part of the shares of Class A
Preferred Stock at any time outstanding, the Corporation shall designate by lot
the shares so to be redeemed. Subject to the limitations and provisions herein
contained, the Board of Directors shall have full power and authority to
prescribe the manner in which the drawings by lot shall be conducted.
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(d) Notice of every redemption provided for in this Section 6 shall be
given by mailing the same to every holder of record, any of whose shares are
then to be redeemed, not less than fifteen (15) nor more than thirty (30) days
prior to the date fixed as the date of the redemption thereof, at the respective
addresses of such holders as the same shall appear on the stock transfer books
of the Corporation. The notice shall state that the shares specified in such
notice will be redeemed by the Corporation at the redemption price and on the
date specified in such notice, upon the surrender for cancellation at the places
designated in such notice, of the certificates representing the shares so to be
redeemed, properly endorsed in blank for transfer, or accompanied by proper
instruments of assignment and transfer in blank, bearing any necessary transfer
tax stamps thereto affixed and cancelled, or accompanied by cash or a certified
check in the amount of any stock transfer tax applicable to such transaction. On
and after the date specified in the notice described above, each holder of
shares called for redemption, upon presentation and surrender in accordance with
such notice of the certificates for shares held by such holder and called for
redemption, shall be entitled to receive therefor the applicable redemption
price. If the Corporation shall give notice of redemption as aforesaid (and
unless the Corporation shall fail to pay the redemption price of shares
presented for redemption in accordance with such notice), all shares called for
redemption shall be deemed to have been redeemed on the date specified in such
notice whether or not the certificates for such shares be surrendered for
redemption and cancellation, and such shares so called for redemption shall from
and after such date cease to represent any interest whatever in the Corporation
or its property, and the holders thereof shall have no rights other than the
right to receive such redemption price but without any interest thereon from or
after such date.
(e) Notwithstanding any other provision of this Section 6, if the
holders of at least a majority of the Class A Preferred Stock elect not to have
the Corporation redeem the Class A Preferred Stock, then the Corporation shall
not redeem any shares of Class A Preferred Stock.
7. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Class A,
Class B, Class C, Class D, Class E, Class F or Class G Preferred Stock acquired
by the Corporation by reason of redemption, purchase, conversion or otherwise
shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be authorized to issue.
The Corporation may from time to time take such appropriate corporate action as
may be necessary to reduce the authorized number of shares of any such class of
Preferred Stock accordingly.
8. AMENDMENTS AND WAIVERS.
(a) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class A
Preferred Stock shall become effective and binding upon all holders of Class A
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least a majority of the Class A Preferred Stock then issued and
outstanding.
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(b) Any action, approval, request, consent, notice or waiver
which is required or permitted under Article IV with respect to the Class B
Preferred Stock shall become effective and binding upon all holders of Class B
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class B
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(c) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class C
Preferred Stock shall become effective and binding upon all holders of Class C
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class C
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(d) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class D
Preferred Stock shall become effective and binding upon all holders of Class D
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class D
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(e) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class E
Preferred Stock shall become effective and binding upon all holders of Class E
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class E
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(f) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class F
Preferred Stock shall become effective and binding upon all holders of Class F
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class F
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
(g) Any action, approval, request, consent, notice or waiver
which is required or permitted under this Article IV with respect to the Class G
Preferred Stock shall become effective and binding upon all holders of Class G
Preferred Stock if the same is approved by the vote or written consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the Class G
Preferred Stock then issued and outstanding, except as expressly provided
otherwise in this Amended and Restated Certificate of Incorporation.
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IN WITNESS WHEREOF, the Corporation has caused the Certificate of
Amendment to be signed by its President this 9th day of July, 1996.
Transkaryotic Therapies, Inc.
By:/s/ Richard F. Selden
-----------------------------------
Richard F. Selden, M.D., Ph.D.
President
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EXHIBIT 3.2
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 or the
State of Delaware on November 3, 1993, which was subsequently amended on May 17,
1994, March 1, 1995 and July 10, 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.
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<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
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<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
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<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
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<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
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<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.
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<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
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<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
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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 __________ day of ______________, 1996.
TRANSKARYOTIC THERAPIES, INC.
By: _________________________________
Richard F. Selden, M.D., Ph.D.
President
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EXHIBIT 3.3
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
<PAGE> 2
in connection with such adjournment. Such further notice, if any, shall be given
as may be required by law.
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. At all meetings or
Stockholders all matters, except as otherwise provided by law, the Certificate
of Incorporation, or these By-laws shall be determined by a majority vote of the
Stockholders present in person or by proxy and entitled to vote thereat.
Section 8. Action by Stockholders Without a Meeting: Whenever under the
General Corporation Law of Delaware Stockholders are required or permitted to
take any action by vote, such action may be taken without a meeting upon written
consent, setting forth the action so taken, signed by the holders of outstanding
shares 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 the State of Delaware, its principal place
of business, or an
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officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded.
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, with or without cause, by the holders of a
majority 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.
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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
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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 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
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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.
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.
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<PAGE> 7
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 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
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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.
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
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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.
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
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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 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
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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.
These By-laws may be amended or repealed, or new By-laws may be
adopted, at any annual or special meeting of the Stockholders, by vote of the
Stockholders entitled to vote in the election of Directors; provided, however,
that the notice of such meetings shall have been given as provided in these
By-laws, which notice shall mention that amendment or repeal of these By-laws,
or the adoption of new By-laws, is one of the purposes of such a meeting; and
provided, further, that By-laws adopted by the Stockholders shall not be
rescinded, altered, amended or repealed by the Board of Directors if such
By-laws adopted by the Stockholders so express. These By-laws may also be
amended or repealed, or new By-laws may be adopted, by the Board of Directors at
any meeting thereof; provided, however, that notice of such meeting shall have
been given as provided in these bylaws, which notice shall mention that
amendment or the repeal of the By-laws, or the adoption of new By-laws, is one
of the purposes of such meeting; and provided, further, that By-laws adopted by
the Board of Directors may be amended or repealed by the Stockholders as
hereinabove provided.
Dated: May 27, 1992.
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EXHIBIT 3.4
TRANSKARYOTIC THERAPIES, INC.
FORM OF 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
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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
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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.
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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.
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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
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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.
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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
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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.
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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.
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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
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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: ________ __, 1996.
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EXHIBIT 5.1
PALMER & DODGE LLP
ONE BEACON STREET
BOSTON, MA 02108-3190
TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420
August 23, 1996
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, Massachusetts 02139
We are rendering this opinion in connection with the Registration Statement
on Form S-1 (the "Registration Statement") filed by Transkaryotic Therapies,
Inc. (the "Company") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, on or about the date hereof. The
Registration Statement relates to up to 2,500,000 shares (2,875,000 shares if
the underwriters' over-allotment option is exercised in full) of the Company's
Common Stock, $0.01 par value per share (the "Shares"). We understand that the
Shares are to be offered and sold in the manner described in the Registration
Statement.
We have acted as your counsel in connection with the preparation of the
Registration Statement. We are familiar with the proceedings of the Board of
Directors on July 22, 1996 in connection with the authorization, issuance and
sale of the Shares (the "Resolutions"). We have examined such other documents as
we consider necessary to render this opinion.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and, when issued and delivered by the Company against payment
therefor at the price to be determined pursuant to the Resolutions, will be
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as a part of the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus filed as part thereof.
Very truly yours,
/s/ PALMER & DODGE LLP
PALMER & DODGE LLP
<PAGE> 1
EXHIBIT 9.1
AMENDED AND RESTATED
VOTING RIGHTS AGREEMENT
This Amended and Restated Voting Rights Agreement (the "AGREEMENT") is
made as of this 3rd day of November, 1993 by and among Transkaryotic Therapies,
Inc. (the "Company'), the holders of the Company's Class B Preferred Stock (the
"CLASS B HOLDERS"), and the Purchasers listed on Exhibit A hereto (the "CLASS C
PURCHASERS" and together with the Class B Holders, the "PURCHASERS").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution of this Agreement, the
Purchasers and the Company are entering into a Class C Preferred Stock and
Warrant Purchase Agreement (the "STOCK PURCHASE AGREEMENT") pursuant to which
the Class C Purchasers are purchasing certain "Units," each of which consists of
two shares of the Class C Preferred Stock, par value $1.00 of the Company (the
"CLASS C PREFERRED STOCK") and a common stock purchase warrant (the "Warrants")
for the purchase of one share of the Common Stock, par value $.01 per share, of
the Company; and
WHEREAS, this Agreement will become effective, and shall amend and
restate the Voting Rights Agreement, dated as of February 14, 1992, among the
Company and the parties listed therein (the "PRIOR VOTING AGREEMENT"), only upon
the execution and delivery hereof by Class B Holders holding at least 66 and
2/3% of the Class B Preferred Stock, par value $1.00 per share, of the Company
(the "CLASS B PREFERRED STOCK").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants hereinafter contained, the parties agree with each other as follows:
1. Definitions.
-----------
1.1. GENERALLY. Terms defined in the Stock Purchase Agreement and
not otherwise defined herein shall have the same meaning herein
as therein.
1.2. "VOTING SECURITIES" shall mean (i) the Common Stock held by
Warburg Pincus Capital Company L.P. ("Warburg"), (ii) the Class B
Preferred Stock held by the Class B Holders, (iii) the Class C
Preferred Stock held by the Purchasers, (iv) all shares of Common
Stock issued to the Class B Holders or the Purchasers upon
conversion of the Class B or Class C Preferred Stock or upon
exercise of the Warrants, and (v) all shares of Common Stock
issued to Warburg upon exercise of the Common Stock Purchase
Warrant, dated September 12, 1991, held by Warburg. Voting
Securities will continue to be Voting Securities in the hands of
transferees of any holder of the Voting Securities (other than
the Company and purchasers pursuant to a registered public
offering or Rule 144
<PAGE> 2
transaction).
2. VOTING RIGHTS. Each Purchaser hereby agrees to vote its
respective Voting Securities, and otherwise to use its respective best efforts
as a shareholder, director and/or officer of the Company, to fix the number of
directors of the Company at six (6) and to elect to the Board of Directors (i)
two members designated by the holders of a majority of the Class A Preferred
Stock, (ii) two members designated by management of the Company, (iii) one
member designated by the holders of the Class B Preferred Stock and Class C
Preferred Stock (collectively, the "ADDITIONAL PREFERRED STOCK") voting together
as one class (the number of votes of each such holder being equal to the number
of shares of Common Stock into which such shares of preferred stock are
convertible on the applicable record date), and (iv) one member designated by
the Board of Directors (each a "DESIGNATING PARTY").
In the absence of any designation by a Designating Party, the
director(s) previously designated by it and then serving shall be reelected if
still eligible to serve as provided herein.
Any vacancy on the Board of Directors created by the resignation,
removal, incapacity or death of any person designated under this Section 2 shall
be filled by another person designated by the Designating Party entitled to
designate a director to fill such vacancy. The Purchasers shall vote their
respective Voting Securities in accordance with the new designation, and any
such vacancy shall not be filled in the absence of a new designation by such
Designating Party.
3. TERMINATION. This Agreement shall terminate on the earlier to
occur of (i) the date on which the Company closes an Initial Public Offering (as
defined in the Stock Purchase Agreement), (ii) the tenth anniversary of the
Closing or (iii) the date on which there are no shares of Class B Preferred
Stock and Class C Preferred Stock outstanding.
4. LEGEND. The Company shall cause each certificate representing
Voting Securities to include the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS OF A VOTING AGREEMENT DATED AS OF NOVEMBER 3,
1993, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION.
Notwithstanding the foregoing, the Company shall be under no obligation to
cancel and reissue any outstanding certificate representing Class B Preferred
Stock for the purpose of adding the foregoing legend, provided, however, that at
such time as any Class B Holder transfers any shares of Class B Preferred Stock
or requests a replacement certificate or transfers, the Company agrees to
include the legend set forth below on such new or replacement certificates
issued in connection therewith.
5. REMEDIES. Each party to this Agreement shall be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision
- 2 -
<PAGE> 3
of this Agreement, and to exercise all other rights existing in its favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction in order to enforce or prevent any violations of the provisions of
this Agreement.
6. NOTICES. All notices or other communications required or
permitted to be delivered hereunder shall be in writing signed by the party
giving the notice: to the Company at Transkaryotic Therapies, Inc. 195 Albany
Street, Cambridge, Massachusetts 02139, Attention: President and Chief Executive
Officer, with a copy to the Company's Founder and Chief Scientific Officer, and
a copy to Leslie H. Shapiro, Esq., Bingham, Dana & Gould, 150 Federal Street,
Boston, Massachusetts 02110; to each Purchaser at its address given in writing
from time to time to the Company, with a copy to Hale & Dorr, 60 State Street,
Boston, Massachusetts 02109, Attention: John A. Burgess, Esq. and Willkie, Farr
and Gallagher, One Citicorp Center, 155 East 53rd Street, New York, New York
10022, Attention: Deborah Bode, Esq.; or to such other address as may be
furnished in writing to the other parties hereto. Notices shall be deemed
effectively given upon actual receipt, or if earlier, five (5) business days
after (a) deposit in the United States mail, postage prepaid, or (b) prepaid
delivery to a nationally recognized courier service, in each case, addressed to
the recipient at the address set forth above.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the matters contemplated herein. This
Agreement supersedes any and all prior oral or written understandings as to the
subject matter of this Agreement.
7A. NEW PURCHASERS. The Company will not issue any shares of Class B
Preferred Stock, or any shares of Class C Preferred Stock pursuant to the Stock
Purchase Agreement, unless the purchaser of such shares shall have first
executed an Instrument of Accession in the form of Exhibit B hereto if such
Person is not already a party to this Agreement.
8. AMENDMENTS, WAIVERS AND CONSENTS. Any amendments to this
Agreement, and any waivers of the provisions hereof, shall be in writing. Any
provision of this Agreement relating to the rights of holders of the Additional
Preferred Stock may be waived with the concurrence of the holders of at least 66
2/3% of the Additional Preferred Stock voting together as one class as set forth
in Section 2 above. This Agreement may be amended or terminated with respect to
the holders of the Additional Preferred Stock at any time with the concurrence
of the holders of at least 66 2/3% of the Additional Preferred Stock voting
together as one class as set forth in Section 2 above.
9. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors,
transferees and assigns of the respective parties hereto (other than the Company
and purchasers pursuant to a registered offering or Rule 144(k) transaction). No
party to this Agreement may assign any right granted or implied by this
Agreement apart from a transfer of Voting Securities. No party to this Agreement
may transfer Voting Securities to any person (other than the Company and
purchasers pursuant to a registered offering or Rule 144 transaction) until such
person has agreed to be bound by the provisions of this Agreement.
- 3 -
<PAGE> 4
10. MISCELLANEOUS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural; the plural, the singular; the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the internal laws of the State of Delaware.
11. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any. provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
Signed, sealed and delivered as of the date first written above.
COMPANY:
-------
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
---------------------------------
Title: President and CEO
--------------------------
PURCHASERS:
----------
WARBURG PINCUS CAPITAL COMPANY, L.P.
(312,500 units)
By: Warburg Pincus & Co., General Partner
By: /s/ Rodman W. Moorhead, III
-----------------------------
Title:Managing Director
---------------------------
- 4 -
<PAGE> 5
TKT PARTNERS LIMITED PARTNERSHIP
(62,500 units)
By: Medical Portfolio Management, Inc.,
as General Partner
By: /s/ Ansbert Gadicke
------------------------------
Title: Managing Partner
---------------------------
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni, Ph.D.
(12,500 units)
H&Q HEALTHCARE INVESTORS**
(12,500 units)
By: /s/ Kimberley L. Carroll
----------------------------------
Title:Treasurer
--------------------------------
**LIMITATION OF LIABILITY. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&Q Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
H&Q LIFE SCIENCES INVESTORS***
(6,250 units)
By: /s/ Kimberley L. Carroll
-----------------------------------
Title:Treasurer
--------------------------------
***LIMITATION OF LIABILITY. The name H&Q Life Sciences Investors is the
designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as amended. All persons dealing with H&Q Life Sciences
Investors must look solely to the trust property for the enforcement of any
claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor
shareholders assume any personal liability for obligations entered into on
behalf of H&Q Life Sciences Investors.
- 5 -
<PAGE> 6
HUGO de NEUFVILLE & JOHN P.
de NEUFVILLE, TTEES, UAD 7/01/92,
HUGO de NEUFVILLE REVOCABLE TRUST:
(6,500 units)
By: /s/ John P. de Neufville
----------------------------------
Title:Trustee
--------------------------------
MARGARET W. de NEUFVILLE & JOHN P.
de NEUFVILLE, TTEES, UAD 7/01/92,
MARGARET W. de NEUFVILLE
REVOCABLE TRUST:
(6,500 units)
By: /s/ John P. de Neufville
----------------------------------
Title:Trustee
--------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO
CAROL de NEUFVILLE (6,500 units)
By: /s/ John P. de Neufville
-----------------------------------
Title:Trustee
--------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, U/A DTD 12/23/76 FBO
DAVID T. de NEUFVILLE (6,500 units)
By: /s/ John P. de Neufville
-----------------------------------
Title:Trustee
--------------------------------
- 6 -
<PAGE> 7
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, UAD 12/23/76 FBO
JOHN HOWARD de NEUFVILLE (3,500 units)
By: /s/ John P. de Neufville
-----------------------------------
Title:Trustee
--------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, U/A DATED 12/23/76 FBO
JOHN P. de NEUFVILLE (6,500 units)
By: /s/ John P. de Neufville
----------------------------------
Title:Trustee
--------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70 FBO
PETER BAYON de NEUFVILLE (3,500 units)
By: /s/ John P. de Neufville
-----------------------------------
Title:Trustee
--------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70 FBO
SUSAN de NEUFVILLE (3,500 units)
By: /s/ John P. de Neufville
----------------------------------
Title:Trustee
--------------------------------
- 7 -
<PAGE> 8
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 12/2/70 FBO
THOMAS PIKE de NEUFVILLE (3,500 units)
By: /s/ John P. de Neufville
-----------------------------------
Title:Trustee
--------------------------------
/s/ John W. Jackson
--------------------------------------
John W. Jackson (3,000 units)
TAB PRODUCTS CO. PENSION PLAN
(4,500 units)
By: *
-----------------------------------
TEMPLE INLAND MASTER TRUST
(25,000 units)
By: *
-----------------------------------
By: BEA ASSOCIATES,
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Title:Managing Director
--------------------------------
ARTHUR D. LITTLE EMPLOYEE
INVESTMENT PLAN (22,000 units)
By: #
-----------------------------------
#By: BEA ASSOCIATES,
as Investment Advisor
- 8 -
<PAGE> 9
By: /s/ Albert L. Zesiger
-----------------------------------
Title:Managing Director
--------------------------------
CLASS B HOLDERS:
---------------
WARBURG PINCUS CAPITAL COMPANY, L.P.
(21,359 shares)
By: Warburg Pincus & Co.,
General Partner
By: /s/ Rodman W. Moorhead, III
-----------------------------------
Title: Managing Director
-------------------------------
H&Q HEALTHCARE INVESTORS**
(3,268 shares)
By: /s/ Kimberley L. Carroll
-----------------------------------
Title:Treasurer
--------------------------------
**LIMITATION OF LIABILITY. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&G Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
H&Q LIFE SCIENCES INVESTORS***
(1,500 units)
By: /s/ Kimberley L. Carroll
-----------------------------------
Title:Treasurer
--------------------------------
***LIMITATION OF LIABILITY. The name H&Q Life Sciences Investors is
the designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as
- 9 -
<PAGE> 10
amended. All persons dealing with H&Q Life Sciences Investors must look solely
to the trust property for the enforcement of any claim against H&Q Life Sciences
Investors, as neither the Trustees, officers nor shareholders assume any
personal liability for obligations entered into on behalf of H&Q Life Sciences
Investors.
H&Q VENTURE INVESTORS L.P.
(807 shares)
By: /s/ Jackie Berterretche
-----------------------------------
Title:
--------------------------------
Jackie Berterretche
Attorney-in-Fact
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni, Ph.D.
(688 shares)
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni, M.D.
(1,000 shares)
/s/ Alex Zaffaroni
--------------------------------------
Alex Zaffaroni (139 shares)
/s/ Lea Zaffaroni
--------------------------------------
Lea Zaffaroni (1,000 shares)
A. CAREY ZESIGER REVOCABLE TRUST
(60 shares)
By: *
----------------------------------
*
--------------------------------------
Sheana Butler (125 shares)
*
--------------------------------------
Nicola Zesiger (60 shares)
*
--------------------------------------
Albert L. Zesiger, custodian for
Alexa L. Zesiger (60 shares)
- 10 -
<PAGE> 11
*
--------------------------------------
Barrie Ramsay Zesiger (351 shares)
*
--------------------------------------
Lucy Butler Finley (60 shares)
DEAN WITTER FOUNDATION (250 shares)
By: *
-----------------------------------
*
--------------------------------------
Domenic Mizio (275 shares)
*
--------------------------------------
Leonard Kingsley (125 shares)
*
--------------------------------------
Andrew Heiskell (351 shares)
*
--------------------------------------
Elizabeth Heller Mandell, trustee for
Elizabeth Heller Mandell (185 shares)
*
--------------------------------------
Lewis Butler Finley (60 shares)
*
--------------------------------------
Serra Butler Finley (60 shares)
AMERICAN MEDICAL INTERNATIONAL, INC.
PENSION PLAN (600 shares)
By: *
-----------------------------------
- 11 -
<PAGE> 12
ALZA CORPORATION RETIREMENT PLAN
(125 shares)
By: *
----------------------------------
/s/ Albert L. Zesinger
--------------------------------------
Albert L. Zesiger (848 shares)
*By: BEA ASSOCIATES
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------
Albert L. Zesiger
Managing Director
- 12 -
<PAGE> 13
Exhibit A
---------
CLASS C PURCHASERS
------------------
PURCHASER
- ---------
Arthur D. Little Employee (BEA)
Investment Plan
(Kane & Co.)
de Neufville, John P.
(various trusts)
H&Q Healthcare Investors
H&Q Life Sciences Investors
Jackson, John
Tab Products Co. Pension Plan (BEA)
(Craig & Co.)
Temple Inland Master Trust (BEA)
(Batterbox & Co.)
TKT Partners Limited Partnership
Warburg, Pincus Capital Company, L.P.
Zaffaroni, Alejandro
- 13 -
<PAGE> 14
Exhibit B
---------
INSTRUMENT OF ACCESSION
-----------------------
Reference is made to that certain Amended and Restated Voting Rights
Agreement dated as of November 3, 1993, a copy of which is attached hereto (as
amended and in effect from time to time, the "Voting Rights Agreement"), among
Transkaryotic Therapies, Inc., a Delaware corporation (the "Company") and the
Purchasers (as defined therein).
The undersigned, __________________, in order to become the owner or
holder of _____ shares (the "Purchased Shares") of Class C Convertible Preferred
Stock, $1.00 par value per share, of the Company, hereby agrees that by the
undersigned's execution hereof (a) the undersigned is a Purchaser party to the
Voting Rights Agreement subject to all of the restrictions and conditions
applicable to Purchasers set forth in the Voting Rights Agreement, and (b) all
of the Purchased Shares constitute Voting Securities subject to all the
restrictions and conditions applicable to Voting Securities as set forth in the
Voting Rights Agreement. This Instrument of Accession shall take effect and
shall become a part of the Voting Rights Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of
Delaware.
Signature: ___________________________
Address: _____________________________
___________________________________
Date: __________________________________
ACCEPTED:
TRANSKARYOTIC THERAPIES, INC.
BY: ___________________________
Date: _________________________
- 14 -
<PAGE> 15
Amendment to Amended and Restated Voting Rights Agreement
This Amendment to the Amended and Restated Voting Rights Agreement
dated as of November 3, 1993 (the "Voting Rights Agreement") by and among
Transkaryotic Therapies, Inc., a Delaware corporation (the "Company"), the
holders of the Company's Class B Preferred Stock and the Purchasers listed on
EXHIBIT A thereto (collectively, the "Purchasers") is dated as of May 18, 1994
(the "Amendment") by and among the Company, Marion Merrell Dow, Inc., a Delaware
corporation ("MMD"), and the holders (the "Holders") of at least 66 2/3% of the
Additional Preferred Stock, as such term is defined in the Voting Rights
Agreement.
WHEREAS, pursuant to the Voting Rights Agreement, each Purchaser has
agreed to vote its respective Voting Securities (as defined in the Voting Rights
Agreement) in accordance with the terms of the Voting Rights Agreement; and
WHEREAS, in connection with the purchase of shares of the Company's
Class D Preferred Stock, $.01 par value per share (the "Class D Preferred
Stock") by MMD, the Company and the Purchasers desire to amend the Voting Rights
Agreement to include MMD as a Purchaser under the Voting Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF VOTING RIGHTS AGREEMENT. The Voting Rights Agreement is hereby
amended as follows:
1.1 The Voting Rights Agreement is hereby amended to include MMD as a
Purchaser under the Voting Rights Agreement.
1.2 The term "Voting Securities", as defined in Section 1.2 of the
Voting Rights Agreement, is hereby amended to include (i) the Class D Preferred
Stock held by MMD and (ii) all shares of Common Stock issued to MMD upon
conversion of the Class D Preferred Stock.
1.3 The first paragraph of Section 2 of the Voting Rights Agreement
is hereby deleted in its entirety and the following is substituted therefor:
2. VOTING RIGHTS. Each Purchaser hereby agrees to vote its
respective Voting Securities, and otherwise to use its respective best
efforts as a shareholder, director and/or officer of the Company, to
fix the number of directors of the Company at six (6) and to elect to
the Board of Directors (i) two members designated by the holders of a
majority of the Class A Preferred Stock, (ii) two members designated
by management of the Company, (iii) one member designated by the
holders of the Class B Preferred Stock, Class C Preferred Stock and
Class D Preferred Stock (collectively, the "Additional Preferred
Stock") voting together as one class (the number of votes of each such
holder being equal to the number of shares of Common Stock into which
such shares of Preferred Stock are convertible on the applicable
record date), and (iv) one member designated by the Board of Directors
(each a "Designating Party").
- 15 -
<PAGE> 16
1.4 Section 3, clause (iii) of the Voting Rights Agreement is hereby
deleted in its entirety and the following is substituted therefor:
(iii) the date on which there are no shares of Class B Preferred
Stock, Class C Preferred Stock and Class D Preferred Stock outstanding.
1.5 Except as expressly amended hereby, the Voting Rights Agreement
shall remain in full force and effect.
2 Miscellaneous.
-------------
2.1 NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be
delivered personally or by facsimile (and promptly confirmed by telephone,
personal delivery or courier) or given by prepaid nationally-recognized
overnight courier service or by prepaid certified or registered mail, return
receipt requested, or by prepaid telegram, addressed as follows:
(a) if to MMD:
Marion Merrell Dow, Inc.
9300 Ward Parkway, P.O. Box 8480
Kansas City, Missouri 64114-0480
Attention: General Counsel
Telephone: (816) 966-4000
Telecopy: (816) 966-3805
with copies to:
Shook, Hardy & Bacon P.C.
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attention: Randall B. Sunberg, Esq.
Telephone: (816) 474-6550
Telecopy: (816) 421-5547
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, Massachusetts 02139
Attention: Chief Executive Officer
Telephone: (617) 349-0200
Telecopy: (617)
- 16 -
<PAGE> 17
with a copy to:
Palmer & Dodge
One Beacon Street
Boston, Massachusetts 02108
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
(c) if to the Purchasers:
at the addresses indicated in the Voting Rights Agreement
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt, with
telephonic confirmation in the case of a facsimile, and (ii) three (3) business
days after deposit in the U.S. mails or delivery to a nationally-recognized
overnight courier service in accordance with this Section.
2.2 GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
2.3 HEADINGS. The headings contained in this Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Amendment.
2.4 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 17 -
<PAGE> 18
IN WITNESS WHEREOF, the Company, the Holders and MMD have each caused
this Amendment to Amended and Restated Voting Rights Agreement to be executed by
their duly authorized officers as of the date first written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ K. Michael Forrest
--------------------------------------------
By: K. Michael Forrest
Its: President and CEO
MARION MERRELL DOW, INC.
/s/ Terry J. Shelton
--------------------------------------------
By: Terry J. Shelton
Its: V.P., Licensing and Business Development
PURCHASERS
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
-----------------------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS
By: /s/ Kimberley L. Carroll
-----------------------------------------
Title: Treasurer
- 18 -
<PAGE> 19
H&Q LIFE SCIENCES INVESTORS
By: /s/ Kimberley L. Carroll
------------------------------------
Title: Treasurer
TAB PRODUCTS CO. PENSION PLAN
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
------------------------------------
Title: Managing Director
TEMPLE INLAND MASTER TRUST
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
------------------------------------
Title: Managing Director
ARTHUR D. LITTLE EMPLOYEE INVESTMENT
PLAN
By: BEA Associates, as Investment Advisor
By: /s/ Albert L. Zesiger
------------------------------------
Title: Managing Director
- 19 -
<PAGE> 20
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ Ansbert Gadicke
------------------------------------
Title: Managing Director
- 20 -
<PAGE> 21
Second Amendment to Amended and Restated Voting Rights Agreement
This Second Amendment to the Amended and Restated Voting Rights
Agreement dated as of November 3, 1993 by and among Transkaryotic Therapies,
Inc., a Delaware corporation (the "Company"), the holders of the Company's Class
B Preferred Stock and the Purchasers listed on EXHIBIT A thereto (collectively,
the "Purchasers"), as amended by the Amendment to Amended and Restated Voting
Rights Agreement dated as of May 18, 1994 (the "Voting Rights Agreement"), is
dated as of March 1, 1995 (the "Second Amendment") by and among the Company and
the holders (the "Holders") of at least 66 2/3% of the Additional Preferred
Stock, as such term is defined in the Voting Rights Agreement.
WHEREAS, pursuant to the Voting Rights Agreement, each Purchaser has
agreed to vote its respective Voting Securities (as defined in the Voting Rights
Agreement) in accordance with the terms of the Voting Rights Agreement; and
WHEREAS, in connection with the purchase of shares of the Company's
Class E Preferred Stock, $.01 par value per share (the "Class E Preferred
Stock") by Marion Merrell Dow Inc. ("MMD"), the Company and the Purchasers
desire to amend the Voting Rights Agreement to include the Class E Preferred
Stock as Voting Securities under the Voting Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF VOTING RIGHTS AGREEMENT. The Voting Rights Agreement is
hereby amended as follows:
1.1 The term "Voting Securities", as defined in Section 1.2 of the
Voting Rights Agreement, is hereby amended to include (i) the Class E Preferred
Stock held by MMD and (ii) all shares of Common Stock issued to MMD upon
conversion of the Class E Preferred Stock.
1.2 The first paragraph of Section 2 of the Voting Rights Agreement
is hereby deleted in its entirety and the following is substituted therefor:
2. VOTING RIGHTS. Each Purchaser hereby agrees to vote its
respective Voting Securities, and otherwise to use its respective best
efforts as a shareholder, director and/or officer of the Company, to
fix the number of directors of the Company at six (6) and to elect to
the Board of Directors (i) two members designated by the holders of a
majority of the Class A Preferred Stock, (ii) two members designated
by management of the Company, (iii) one member designated by the
holders of the Class B Preferred Stock, Class C Preferred Stock, Class
D Preferred Stock and Class E Preferred Stock (collectively, the
"Additional Preferred Stock") voting together as one class (the number
of votes of each such holder being equal to the number of shares of
Common Stock into which such shares of Preferred Stock are convertible
on the applicable record date), and (iv) one member designated by the
Board of Directors (each a "Designating Party").
- 21 -
<PAGE> 22
1.3 Section 3, clause (iii) of the Voting Rights Agreement is hereby
deleted in its entirety and the following is substituted therefor:
(iii) the date on which there are no shares of Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock and Class E Preferred
Stock outstanding.
1.4 Except as expressly amended hereby, the Voting Rights Agreement
shall remain in full force and effect.
2 Miscellaneous.
-------------
2.1 GOVERNING LAW. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to the principles of conflict of laws thereof.
2.2 HEADINGS. The headings contained in this Second Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Second Amendment.
2.3 COUNTERPARTS. This Second Amendment may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 22 -
<PAGE> 23
IN WITNESS WHEREOF, the Company and the Holders have each caused this
Second Amendment to Amended and Restated Voting Rights Agreement to be executed
by their duly authorized officers as of the date first written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden
-------------------------------------------
By: Richard F. Selden
Its: President and CEO
HOLDERS
MARION MERRELL DOW, INC.
/s/ Terry J. Shelton
-------------------------------------------
By: Terry J. Shelton
Its: V.P., Licensing and Business Development
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
----------------------------------------
Title: Managing Director
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
----------------------------------------
Title: President
- 23 -
<PAGE> 24
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan Carr
----------------------------------------
Title: President
TAB PRODUCTS CO. PENSION PLAN
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------------
Title: Managing Director
TEMPLE INLAND MASTER TRUST
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------------
Title: Managing Director
ARTHUR D. LITTLE EMPLOYEE INVESTMENT
PLAN
By: BEA Associates, as Investment Advisor
By: /s/ Albert L. Zesiger
----------------------------------------
Title: Managing Director
- 24 -
<PAGE> 25
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ Ansbert Gadicke
----------------------------------------
Title: President
- 25 -
<PAGE> 26
Third Amendment to Amended and Restated Voting Rights Agreement
This Third Amendment to the Amended and Restated Voting Rights
Agreement dated as of November 3, 1993 by and among Transkaryotic Therapies,
Inc., a Delaware corporation (the "Company"), the holders of the Company's Class
B Preferred Stock and the Purchasers listed on EXHIBIT A thereto (collectively,
the "Purchasers"), as amended by the Amendment to Amended and Restated Voting
Rights Agreement dated as of May 18, 1994 and as further amended by the Second
Amendment to Amended and Restated Voting Rights Agreement dated as of March 1,
1995 (the "Voting Rights Agreement"), is dated as of October 26, 1995 (the
"Third Amendment") by and among the Company and the holders (the "Holders") of
at least 66 2/3% of the Additional Preferred Stock, as such term is defined in
the Voting Rights Agreement.
WHEREAS, pursuant to the Voting Rights Agreement, each Purchaser has
agreed to vote its respective Voting Securities (as defined in the Voting Rights
Agreement) in accordance with the terms of the Voting Rights Agreement; and
WHEREAS, in connection with the purchase of shares of the Company's
Class F Preferred Stock, $.01 par value per share (the "Class F Preferred
Stock") by the Purchasers (the "Class F Purchasers") listed on SCHEDULE A
hereto, the Company and the Purchasers desire to amend the Voting Rights
Agreement to include the Class F Preferred Stock as Voting Securities under the
Voting Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF VOTING RIGHTS AGREEMENT. The Voting Rights Agreement is
hereby amended as follows:
1.1 The term "VOTING SECURITIES", as defined in Section 1.2 of the
Voting Rights Agreement, is hereby amended to include (i) the Class F Preferred
Stock held by the Class F Purchasers and (ii) all shares of Common Stock issued
to the Class F Purchasers upon conversion of the Class F Preferred Stock.
1.2 The first paragraph of Section 2 of the Voting Rights Agreement
is hereby deleted in its entirety and the following is substituted therefor:
2. VOTING RIGHTS. Each Purchaser hereby agrees to vote its
respective Voting Securities, and otherwise to use its respective best
efforts as a shareholder, director and/or officer of the Company, to
fix the number of directors of the Company at six (6) and to elect to
the Board of Directors (i) two members designated by the holders of a
majority of the Class A Preferred Stock, (ii) two members designated
by management of the Company, (iii) one member designated by the
holders of the Class B Preferred Stock, Class C Preferred Stock, Class
D Preferred Stock, Class E Preferred Stock and Class F Preferred Stock
(collectively, the "Additional Preferred Stock") voting together as
one class (the number of votes of each such holder being equal to the
number of shares of Common Stock into which such shares of Preferred
Stock are convertible on
- 26 -
<PAGE> 27
the applicable record date), and (iv) one member designated by the
Board of Directors (each a "Designating Party").
1.3 Section 3, clause (iii) of the Voting Rights Agreement is hereby
deleted in its entirety and the following is substituted therefor:
(iii) the date on which there are no shares of Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock, Class E Preferred Stock
and Class F Preferred Stock outstanding.
1.4 Except as expressly amended hereby, the Voting Rights Agreement
shall remain in full force and effect.
2 Miscellaneous.
-------------
2.1 GOVERNING LAW. This Third Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to the principles of conflict of laws thereof.
2.2 HEADINGS. The headings contained in this Third Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Third Amendment.
2.3 COUNTERPARTS. This Third Amendment may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 27 -
<PAGE> 28
IN WITNESS WHEREOF, the Company, the Holders and the Purchasers have
each caused this Third Amendment to Amended and Restated Voting Rights Agreement
to be executed by their duly authorized officers as of the date first written
above.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden
-------------------------------------------
By: Richard F. Selden
Its: President and CEO
HOLDERS
HOECHST MARION ROUSSEL, INC.
/s/ Terry J. Shelton
-------------------------------------------
By: Terry J. Shelton
Its: V.P. Licensing and Business Devlopment
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
----------------------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
----------------------------------------
Title: President
- 28 -
<PAGE> 29
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan Carr
-----------------------------------------
Title: President
TAB PRODUCTS CO. PENSION PLAN
By: BEA Associates, Attorney-in-Fact
By: /s/ Michael E. Guarasici, Jr.
-----------------------------------------
Title: V.P. Finance
TEMPLE INLAND MASTER TRUST
By: BEA Associates, Attorney-in-Fact
By: /s/ Michael E. Guarasici, Jr.
-----------------------------------------
Title: V.P. Finance
ARTHUR D. LITTLE EMPLOYEE INVESTMENT
PLAN
By: Zesiger Capital Group, Attorney-in-Fact
By: /s/ Mary Estabil
-----------------------------------------
Title: Private Placement Administrator
- 29 -
<PAGE> 30
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ A.S. Gadicke
-----------------------------------------
Title: President
AUDA SECURITIES GmbH
By: /s/ Marcel Giacommetti
-----------------------------------------
Title: Officer
/s/ Franz Burda /s/ M. Bacher
--------------------------------------------
Franz Burda
Frieder Burda
HANSEATIC CORPORATION
By: /s/ Paul Biddleman
-----------------------------------------
Title: Treasurer
/s/ L. Frances /s/ D. Rush
--------------------------------------------
Oppenheim Vermogenstreuhand GmbH
/s/ Klaus Neugebauer
--------------------------------------------
Dr. Klaus Neugebauer
- 30 -
<PAGE> 31
Fourth Amendment to Amended and Restated Voting Rights Agreement
This Fourth Amendment to the Amended and Restated Voting Rights
Agreement dated as of November 3, 1993 by and among Transkaryotic Therapies,
Inc., a Delaware corporation (the "Company"), the holders of the Company's Class
B Preferred Stock and the Purchasers listed on EXHIBIT A thereto (collectively,
the "Purchasers"), as amended by the Amendment to Amended and Restated Voting
Rights Agreement dated as of May 18, 1994, as amended by the Second Amendment to
Amended and Restated Voting Rights Agreement dated as of March 1, 1995 and as
further amended by the Third Amendment to the Amended and Restated Voting Rights
Agreement dated as of October 26, 1995 (the "Voting Rights Agreement"), is dated
as of July 10, 1996 (the "Fourth Amendment") by and among the Company and the
holders (the "Holders") of at least 66 2/3% of the Additional Preferred Stock,
as such term is defined in the Voting Rights Agreement.
WHEREAS, pursuant to the Voting Rights Agreement, each Purchaser has
agreed to vote its respective Voting Securities (as defined in the Voting Rights
Agreement) in accordance with the terms of the Voting Rights Agreement; and
WHEREAS, in connection with the purchase of shares of the Company's
Class G Preferred Stock, $.01 par value per share (the "Class G Preferred
Stock") by the Purchasers (the "Class G Purchasers") listed on SCHEDULE A
hereto, the Company and the Purchasers desire to amend the Voting Rights
Agreement to include the Class G Preferred Stock as Voting Securities under the
Voting Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF VOTING RIGHTS AGREEMENT. The Voting Rights Agreement is
hereby amended as follows:
1.1 The term "VOTING SECURITIES", as defined in Section 1.2 of the
Voting Rights Agreement, is hereby amended to include (i) the Class G Preferred
Stock held by the Class G Purchasers and (ii) all shares of Common Stock issued
to the Class G Purchasers upon conversion of the Class G Preferred Stock.
1.2 The first paragraph of Section 2 of the Voting Rights Agreement
is hereby deleted in its entirety and the following is substituted therefor:
2. VOTING RIGHTS. Each Purchaser hereby agrees to vote its
respective Voting Securities, and otherwise to use its respective best
efforts as a shareholder, director and/or officer of the Company, to
fix the number of directors of the Company at six (6) and to elect to
the Board of Directors (i) two members designated by the holders of a
majority of the Class A Preferred Stock, (ii) two members designated
by management of the Company, (iii) one member designated by the
holders of the Class B Preferred Stock, Class C Preferred Stock, Class
D Preferred Stock, Class E Preferred Stock, Class F Preferred Stock
and Class G Preferred Stock (collectively, the "Additional Preferred
Stock") voting together as one class (the number of votes of each such
holder being equal to the number of shares of Common Stock into which
such shares of Preferred Stock are
- 31 -
<PAGE> 32
convertible on the applicable record date), and (iv) one member
designated by the Board of Directors (each a "Designating Party").
1.3 Section 3, clause (iii) of the Voting Rights Agreement is hereby
deleted in its entirety and the following is substituted therefor:
(iii) the date on which there are no shares of Class B Preferred
Stock, Class C Preferred Stock, Class D Preferred Stock, Class E Preferred
Stock, Class F Preferred Stock and Class G Preferred Stock outstanding.
1.4 Except as expressly amended hereby, the Voting Rights Agreement
shall remain in full force and effect.
2 Miscellaneous.
-------------
2.1 GOVERNING LAW. This Fourth Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to the principles of conflict of laws thereof.
2.2 HEADINGS. The headings contained in this Fourth Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Fourth Amendment.
2.3 COUNTERPARTS. This Fourth Amendment may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 32 -
<PAGE> 33
IN WITNESS WHEREOF, the Company, the Holders and the Purchasers have
each caused this Fourth Amendment to Amended and Restated Voting Rights
Agreement to be executed by their duly authorized officers as of the date first
written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden
----------------------------------------
By: Richard F. Selden
Title: President and CEO
HOLDERS
HOECHST MARION ROUSSEL, INC.
/s/ Charles W. Dalton
----------------------------------------
By: Charles W. Dalton
Title: Vice President
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
-------------------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
-------------------------------------
Title: President
- 33 -
<PAGE> 34
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan Carr
-------------------------------------
Title: President
H&Q VENTURE INVESTORS
By:
-------------------------------------
Title:
---------------------------------
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ Elline Hildebrandt
-------------------------------------
Title: Vice President
PURCHASERS
BIOTECH TARGET, S.A.
By: /s/ Hans Jorge Graf
-------------------------------------
Title:
---------------------------------
By: /s/ Andreas Bremer
-------------------------------------
Title:
---------------------------------
- 34 -
<PAGE> 1
EXHIBIT 10.1
TRANSKARYOTIC THERAPIES, INC.
STOCK PURCHASE AGREEMENT
July , 1988
Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Dear Sirs:
Transkaryotic Therapies, Inc., a Delaware Corporation (the "Company")
hereby agrees with Warburg, Pincus Capital Company, L.P. (the "Investor") as
follows:
SECTION 1: PURCHASE AND SALE OF STOCK
--------------------------
Subject to the terms and conditions hereof, the Company hereby agrees to
sell to the Investor and the Investor hereby subscribes for and agrees to
purchase from the Company, 50,000 shares of common stock of the Company, par
value $0.01 per share ("Common Stock") at a price per share of $0.01, and 1,000
shares of preferred stock of the Company, par value $1.00 per share ("Preferred
Stock"), at a price per share of $1000.00 such sums totalling $1,000,500 in the
aggregate.
Such sales and purchases shall be effected simultaneously with the
execution of this Agreement by the Company executing and delivering to the
Investor duly executed stock certificates evidencing the shares of Preferred
Stock and Common Stock to be purchased, duly registered in the name of the
Investor, against delivery by the Investor of a check in the amount of
$1,000,500 to the Company.
SECTION 2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
---------------------------------------------
The Company warrants and represents to the Investor that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Annexed hereto as
Exhibits A and B respectively, are true and complete copies of the Certificate
of Incorporation and By-Laws of the Company.
(b) The Company has been recently formed and does not yet conduct any
business. The Company has no assets and its only liabilities are those incurred
in connection with the Company's incorporation.
(c) The Board of Directors of the Company has authorized the execution,
delivery, and performance of this Agreement, and each of the transactions
contemplated hereby. No other
<PAGE> 2
corporate action is necessary to authorize such execution and delivery, and upon
such execution and delivery, the Agreement shall constitute a valid and binding
obligation of the Company. The Board of Directors has authorized the issuance
and delivery of the Common Stock, and the Preferred Stock in accordance with
this Agreement.
(d) The shares of Preferred Stock to be issued and sold by the Company
pursuant to this Agreement, when delivered for the consideration specified
herein, will be validly issued by the Company, fully paid and nonassessable
shares of the Company, and no shareholder of the Company has any preemptive
rights to subscribe for any shares of such Preferred Stock. The shares of Common
Stock to be issued and sold by the Company pursuant to this Agreement when
issued will be validly issued by the Company, fully paid and nonassessable
shares of the Company, and no shareholder of the Company has any preemptive
rights to subscribe for any shares of such Common Stock.
(e) Neither the nature of the business which the Company proposes to
conduct, nor any relationship between the Company and any other Person, nor any
circumstance in connection with the creation, authorization, issuance, offer or
sale of the Preferred Stock or Common Stock is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of the Company or the vote, consent or
approval in any manner of the holders of any Security of the Company as a
condition to the execution and delivery of this Agreement or the creation,
authorization, issuance, offer, and sale of the Preferred Stock and the Common
Stock. The execution and delivery by the Company of this Agreement and the
performance by the Company of this Agreement and the performance by the Company
of its obligations hereunder will not violate (i) the terms and conditions of
the Company's Certificate of Incorporation, or By-Laws, or any agreement to
which the Company is a party or (ii) any federal or state law.
SECTION 3. INVESTOR REPRESENTATIONS.
------------------------
The Investor represents and agrees with the Company as follows:
3.1 Offering Exemption.
------------------
The Investor understands that the shares of Preferred Stock and the shares
of Common Stock have not been registered under the Securities Act of 1933 as
amended (the "Act"), nor qualified under any state securities laws, and that
they are being offered and sold pursuant to an exemption from such registration
and qualification based in part upon the representations of the Investor
contained herein.
3.2 Knowledge of Offer.
------------------
The Investor has been given the opportunity to obtain from the Company all
information from the Company that it has requested regarding its business plans
and prospects.
- 2 -
<PAGE> 3
3.3 Knowledge and Experience; Ability to Bear Economic Risks.
--------------------------------------------------------
The Investor has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
contemplated by this Agreement; the Investor is able to bear the economic risk
of its investment in the Company (including a complete loss of its investment).
3.4 Limitations on Disposition.
--------------------------
The Investor recognizes that no public market exists for the Preferred
Stock or the Common Stock, and no representation has been made to the Investor
that such public market will exist in the future. The Investor understands that
the Investor must bear the economic risk of this investment indefinitely unless
its shares of Preferred Stock or Common Stock are registered pursuant to the Act
or an exemption from such registration is available, and unless the disposition
of such shares is qualified under applicable state securities laws or an
exemption from such qualification is available, and that, except as provided in
Section 5 of this Agreement, the Company has no obligation or present intention
of so registering the Preferred Stock or the Common Stock. The Investor further
understands that there is no assurance that any exemption from the Act will be
available, or, if available, that such exemption will allow the Investor to
dispose of or otherwise transfer any or all of the Preferred Stock or the Common
Stock, in the amounts, or at the times the Investor might propose. The Investor
understands at the present time Rule 144 promulgated under the Act by the
Securities and Exchange Commission ("Rule 144") is not applicable to sales of
the Preferred Stock or the Common Stock because neither are registered under
Section 12 of the Exchange Act and there is not publicly available the
information concerning the Company specified in Rule 144. The Investor further
acknowledges that the Company is not presently under any obligation to register
under Section 12 of the Exchange Act or to make publicly available the
information specified in Rule 144 and that it may never be required to do so.
3.5 Investment Purpose.
------------------
The Investor is acquiring the Preferred Stock and Common Stock solely for
its own account for investment and not with a view toward the resale, transfer,
or distribution thereof, nor with any present intention of distributing the
Preferred Stock or Common Stock. No other person has any right with respect to
or interest in the Preferred Stock or Common Stock to be purchased by the
Investor, nor has the Investor agreed to give any person any such interest or
right in the future.
3.6 Capacity.
--------
The Investor has full power and legal right to execute and deliver this
Agreement and to perform its obligations hereunder.
- 3 -
<PAGE> 4
SECTION 4. COVENANTS OF THE PARTIES
------------------------
4.1 Election of Directors.
---------------------
The Company shall take all necessary corporate action, to elect Peter
Stalker, III, and Patrick J. Mahaffy to the Board of Directors of the Company.
The Company shall annually nominate and shall use its best efforts to
solicit the Company's shareholders to elect as directors, two individuals
designated by the Investor as long as the Investor continues to own at least ten
percent (10%) of the then outstanding number of shares of Common Stock and one
individual designated by the Investor as long as the Investor continues to own
at least two percent (2%) of the then outstanding number of Shares of Common
Stock.
4.2 Resale of Securities.
--------------------
(a) The Investor covenants that it will not sell or otherwise transfer any
shares of Preferred Stock or shares of Common Stock except pursuant to an
effective registration under the Act or in a transaction which, in the opinion
of counsel reasonably satisfactory to the Company, qualifies as an exempt
transaction under the Act and the rules and regulations promulgated thereunder.
(b) The certificates evidencing the shares of Preferred Stock and the
certificates evidencing the shares of Common Stock will bear the following
legend reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be transferred
except pursuant to an effective registration under the Act or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Act and the rules and
regulations promulgated thereunder."
4.3 Right of First Refusal.
----------------------
If at any time after the date hereof, the Company proposes to sell equity
securities of any kind (the term "equity securities" shall include for these
purposes any warrants, options or other rights to acquire equity securities and
debt securities convertible into equity securities) of the Company, (other than
the issuance of securities (x) to the public in a firm commitment underwriting
pursuant to a registration statement filed under the Act, (y) pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other form of reorganization or (z) pursuant
to an employee stock option plan, stock bonus plan, stock purchase plan or other
management equity program) pursuant to a bona fide offer to purchase, the
Company shall give the Investor written notice setting forth in reasonable
detail (i) the designation and all of the terms and provisions of the securities
proposed to be sold, including, where applicable, the voting powers, preferences
and relative, participating, optional or other special rights, and the
qualification, limitations or restrictions thereof and interest rate and
maturity; (ii) the price and other terms of the proposed sale of such
securities; (iii) the
- 4 -
<PAGE> 5
amount of such securities proposed to be sold; and (iv) such other information
as the Investor may reasonably request in order to evaluate the proposed sale.
The Investor shall have the prior right to purchase all, or such portion, of
such securities proposed to be sold at the price and upon the terms of such
proposed sale described in such notice. The Investor shall have thirty (30) days
after receipt of such notice and the furnishing of all reasonably requested
information within which to notify the Company as to whether and to what extent
Investor elects to purchase securities pursuant to such proposed sale.
The election by the Investor not to exercise its right of first refusal in
any instance shall not affect its right of first refusal as to any subsequent
proposed sale. Any sale of such securities by the Company without first giving
the Investor the right of first refusal described above shall be void and of no
force and effect. If the Investor does not exercise the above right of first
refusal with respect to the securities proposed to be sold by the Company, or
does not elect to purchase all of such securities, the Company may proceed to
sell such securities within ninety (90) days following the expiration of the
thirty day period described above, but only upon the terms of proposed sale as
described in the notice referred to above.
The rights provided by this Section 4.3 shall expire upon the closing of a
firm commitment underwritten public offering of Common Stock of the Company.
4.4 Accounting Firm.
---------------
Within 90 days after the date hereof, the Company shall retain as its
auditors an accounting firm of recognized national standing reasonably
acceptable to the Investor.
4.5 Insurance.
---------
The Company shall maintain with financially sound and reputable insurance
companies insurance on the business and properties of the Company (including,
without limitation, product liability coverage, and directors and officers
liability insurance) in at least such amounts and against at least such risks as
are usually insured against by companies engaged in similar businesses and as
shall be reasonably acceptable to the Issuer.
5. REGISTRATION RIGHTS
-------------------
5.1 Definitions.
-----------
As used in this Section 5:
(a) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act (and any post-effective amendments filed or required to
be filed) and the declaration or ordering of effectiveness of such registration
statement;
(b) the term "Registrable Securities" means (A) shares of Common Stock
issued to the Investor pursuant to this Agreement or thereafter acquired by the
Investor, including shares of Common Stock issuable upon conversion of any
convertible security of the Company or upon
- 5 -
<PAGE> 6
any exercise of a warrant or right to acquire Common Stock and (B.) any capital
stock of the Company issued as a dividend or other distribution with respect to,
or in exchange for or in replacement of, the shares of Common Stock referred to
in clause (A) above;
(c) the term "Holder" shall mean any holder of Registrable Securities;
(d) the term "Initiating Holder" shall mean any Holder or Holders who in
the aggregate are Holders of more than 50% of the then outstanding Registrable
Securities;
(e) "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Act;
(f) "Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Sections 5.2 and 5.3 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company); and
(g) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for each of the Holders.
5.2 Requested Registration.
----------------------
(a) REQUEST FOR REGISTRATION. If the Company shall receive from an
Initiating Holder, at any time, a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders of Registrable Securities;
and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Act) as may be so
requested and as would permit or facilitate the sale and distribution of
all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any Holder or Holders joining in such request as are specified in a written
request received by the Company within 10 business days after written
notice from the Company is given under Section 5.2 (a)(i) above; provided
that the Company shall not be obligated to effect, or take any action to
effect, any such registration pursuant to this Section 5.2:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in
- 6 -
<PAGE> 7
such jurisdiction and except as may be required by the Act or
applicable rules or regulations thereunder; or
(B) After the Company has effected two (2) such registrations
pursuant to this Section 5.2(a) and such registrations have been
declared or ordered effective and the sales of such Registrable
Securities shall have closed.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 5.2(b) below, include other
securities of the Company which are held by officers or directors of the
Company, or which are held by persons who, by virtue of agreements with the
Company, are entitled to include their securities in any such registration, but
the Company shall have no absolute right to include any of its securities in any
such registration.
The registration rights set forth in this Section 5.2 shall be assignable,
in whole or in part, to any transferee of Common Stock (who shall be bound by
all obligations of this Section 5).
(b) UNDERWRITING. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 5.2. If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to Section 5.2,
or if holders of securities of the Company other than Registrable Securities who
are entitled, by contract with the Company or otherwise, to have securities
included in such a registration (the "Other Shareholders") request such
inclusion, the Holders shall offer to include the securities of such officers,
directors and Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this Section
5. The Company shall (together with all officers, directors and Other
Shareholders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the
Initiating Holders and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 5.2, if the representative advises the Holders
in writing that marketing factors require a limitation on the number of shares
to be underwritten, the securities of the Company held by officers or directors
(other than Registrable Securities) of the Company and the securities held by
Other Shareholders shall be excluded from such registration to the extent so
required by such limitation. If, after the exclusion of shares of the Company
and Other Shareholders, further reductions are still required, the number of
shares included in the registration by each Holder shall be reduced on a pro
rata basis, by such minimum number of shares as is necessary to comply with such
request. No Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any officer, director or Other Shareholder who
has requested inclusion in such registration as provided above disapproves of
the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Initiating Holders. The
securities so withdrawn shall also be withdrawn from registration. If the
underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company may include its securities for its
own account in such registration if the underwriter so agrees and if the number
- 7 -
<PAGE> 8
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
5.3 Company Registration.
--------------------
(a) If the Company shall determine to register any of its securities either
for its own account or for the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue sky
or other state securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by the Holders within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 5.3(b) below. Such written request may specify all or
a part of the Holders' Registrable Securities.
(b) UNDERWRITING. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 5.3(a)(i). In such event, the right of each of the Holders to
registration pursuant to this Section 5.3 shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. The
Holders shall (together with the Company and the Other Shareholders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for underwriting
by the Company. Notwithstanding any other provision of this Section 5.3, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, and (x) if such registration is the first
registered offering of the Company's securities to the public, the underwriter
may (subject to the allocation priority set forth below) exclude from such
registration and underwriting some or all of the Registrable Securities which
would otherwise be underwritten pursuant hereto, and (y) if such registration is
other than the first registered offering of the Company's securities to the
public, the underwriter may (subject to the allocation priority set forth below)
limit the is number of Registrable Securities to be included in the registration
and underwriting to not less than twenty five percent (25%) of the securities
included therein (based on aggregate market values). The Company shall so advise
all holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following manner: The securities of the Company held
by officers, directors and Other Shareholders of the Company (other than
Registrable Securities and other than securities held by holders who by
contractual right demanded such registration ("Demanding
- 8 -
<PAGE> 9
Holders")) shall be excluded from such registration and underwriting to the
extent required by such limitation, and, if a limitation on the number of shares
is still required, the number of shares that may be included in the registration
and underwriting by each of the Holders and Demanding Holders shall be reduced,
on a pro rata basis, by such minimum number of shares as is necessary to comply
with such limitation. If any of the Holders or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) NUMBER AND TRANSFERABILITY. Each of the Holders shall be entitled to
have its shares included in an unlimited number of registrations pursuant to
this Section 5.3. The registration rights granted pursuant to this Section shall
be assignable, in whole or in part, to any transferee of the Common Stock (who
shall be bound by all obligations of this Section 5).
5.4 Expenses of Registration.
------------------------
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Section 5 shall be borne by the
Company, and all Selling Expenses shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by any of the Holders, as applicable, the registration statement
does not become effective, in which case each of the Holders and Other
Shareholders requesting registration shall bear such Registration Expenses pro
rata on the basis of the number of their shares so included in the registration
request, and provided, further, that such registration shall not be counted as a
registration pursuant to Section 5.2(a)(ii)(3).
5.5 Registration Procedures.
-----------------------
In the case of each registration effected by the Company pursuant to
Section 5, the Company will keep the Holders, as applicable, advised in writing
as to the initiation of each registration and as to the completion thereof. At
its expense, the Company will:
(a) Keep such registration effective for a Period of one hundred twenty
(120) days or until the Holders, as applicable, have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period during which the Holders, as applicable,
refrain from selling any securities included in such registration in accordance
with provisions in paragraph 5.9 hereof; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (y) includes any prospectus required by Section
10(a)(3) of the Act or (z) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
- 9 -
<PAGE> 10
statement, the incorporation by reference of information required to be included
in (y) and (z) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
(b) Furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may reasonably
request; and
(c) In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 5.2 hereof, the Company will enter into any
underwriting agreement reasonably necessary to effect the offer and sale of
Common Stock, provided such underwriting agreement is with an underwriter
reasonably acceptable to the Company and contains customary underwriting
provisions and provided further that if the underwriter so requests the
underwriting agreement will contain customary contribution provisions.
5.6 Indemnification.
---------------
(a) The Company will indemnify each of the Holders, as applicable, each of
its officers, directors and partners, and each person controlling each of the
Holders, with respect to each registration which has been effected pursuant to
this Section 5, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Act or any rule
or regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each of the Holders, each of its
officers, directors and partners, and each person controlling each of the
Holders, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by the Holders or underwriter and stated to
be specifically for use therein.
(b) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each Other Shareholder and each of their officers, directors, and
partners, and each person controlling such Other Shareholder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document made by such Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading by
- 10 -
<PAGE> 11
such Holder, and will reimburse the Company and such Other Shareholders,
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each of the Holders hereunder shall be limited to an amount equal
to the proceeds to such Holder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 5.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom provided that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless (i) the employment of counsel by such
Indemnified Party has been authorized by the Indemnifying Party, (ii) the
Indemnified Party shall have reasonably concluded that there may be a conflict
of interest between the Indemnifying Party of such action, in each of which
cases the fees and expenses of counsel shall be at the expense of the
Indemnifying Party), and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Section 7. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
5.7 Information by the Holders.
--------------------------
Each of the Holders and each Other Shareholder holding securities included
in any registration, shall furnish to the Company such information regarding
such Holder or Other Shareholder and the distribution proposed by such Holder or
Other Shareholder as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration, qualification or
compliance referred to in this Section 5.
5.8 Rule 144 Reporting.
------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the restricted
securities to the public without registration, the Company agrees to:
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<PAGE> 12
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Act, at all times from and after
ninety (90) days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
(b) Use its best efforts to file with the Commission ) in a timely manner
all reports and other documents required of the Company under the Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as the Investor owns any Registrable Securities, furnish to the
Investor upon request, a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 (at any time from and after ninety
(90) days following the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Act and the Exchange Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly report of
the company, and such other reports and documents so filed as the Investor may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Investor to sell any such securities without
registration.
5.9 "Market Stand-off" Agreement.
---------------------------
Each of the Holders shall agree, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by such Holder during the ninety (90) day period following the
effective date of a registration statement of the Company filed under the Act,
provided that:
(a) such agreement only applies to the first such registration statement of
the Company which includes securities to be sold on the Company's behalf to the
public in an underwritten offering; and
(b) all Other Shareholders and officers and directors of the Company enter
into similar agreements.
Such agreement shall be in writing in a form satisfactory to the Company
and such underwriter. The Company may impose stop-transfer instructions with
respect to the shares (or securities) subject to the foregoing restriction until
the end of said ninety (90) day period.
SECTION 6. INFORMATION AS TO COMPANY AND RELATED COVENANTS
-----------------------------------------------
6.1 Financial and Business Information.
----------------------------------
From and after the date hereof, the Company shall deliver to the Investor
so long as it holds at least 10% of the outstanding Common Stock or holds other
securities which may be converted into a number of shares of Common Stock as
would equal at least 10% of the Common Stock outstanding upon such conversion:
- 12 -
<PAGE> 13
(a) MONTHLY AND QUARTERLY STATEMENTS, as soon as practicable, and in any
event within thirty (30) days of the close of each month of each fiscal year of
the Company in the case of Monthly Statements and forty-five (45) days after the
close of each of the first three fiscal quarters of each fiscal year of the
Company in the case of Quarterly Statements, a consolidated balance sheet,
statement of income and statement of changes in financial position of the
Company and its Subsidiaries, if any, as of the close of such month or quarter,
as the case may be, and covering operations for such month or quarter and the
portion of the Company's fiscal year ending on the last day of such month or
quarter, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, consistently applied, subject to audit and year
end adjustments, setting forth in each case in comparative form the figures for
the comparable period of the previous fiscal year;
(b) ANNUAL STATEMENTS, as soon as practicable after the end of each fiscal
year of the Company, and in any event within 120 days thereafter, a copy of:
(i) consolidated and consolidating balance sheets of the Company and
its Subsidiaries, if any, at the end of such year, and
(ii) consolidated and consolidating statements of income,
stockholders' equity and changes in financial position of the Company and
its Subsidiaries, if any, for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by an opinion thereon of independent
certified public accountants of recognized national standing selected by
the Company and reasonably acceptable to the Investor, which opinion shall
state that such financial statements fairly present the financial position
of the Company and its Subsidiaries, if any, on a consolidated basis and
have been prepared in accordance with generally accepted accounting
principles consistently applied (except for changes in application in which
such accountants concur) and that the examination of such accountants has
been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) BUSINESS PLAN; PROJECTIONS, prior to the by commencement of each fiscal
year of the Company, an annual business plan of the Company and projections of
operating results, prepared on a monthly basis, and a three year business plan
of the Company and projections of operating results. Within 45 days of the close
of each fiscal quarter of the Company, if so requested by the Investor, the
Company shall provide the Investor with a comparison of actual year-to-date
results with the corresponding budgeted figures;
(d) AUDIT REPORTS, promptly upon receipt thereof, one copy of each other
financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company and its Subsidiaries, if any;
(e) RESEARCH STATUS REPORTS, as soon as practicable and in any event within
fifteen (15) days of the end of each quarter of each fiscal year of the Company,
a status report as regards
- 13 -
<PAGE> 14
the research and development conducted by the Company in the prior quarter and
to be conducted by the Company in the forthcoming quarter;
(f) OTHER REPORTS, promptly upon their becoming available, one copy of each
financial statement, report, notice or proxy statement sent by the Company to
its shareholders generally, of each financial statement, report, notice or proxy
statement sent by the Company or any of its Subsidiaries to the Commission or
any successor agency, if applicable, of each regular or periodic report and any
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by the Company or any of its
Subsidiaries with, or received by such Person in connection therewith from, any
securities exchange or the Commission or any successor agency, of any press
release issued by the Company or any of its Subsidiaries, and of any material of
any nature whatsoever prepared by the Commission, or any successor agency
thereto or any state blue sky or securities law commission which relates to or
affects in any way the Company or any of its Subsidiaries; and
(g) REQUESTED INFORMATION, with reasonable promptness, the Company shall
furnish the Investor with such other data and information as from time to time
may be reasonably requested.
6.2 INSPECTION. As long as the Investor holds at least 10% of the
outstanding Common Stock or holds other securities convertible into a number of
shares of Common Stock outstanding upon such conversion, the Company shall
permit the Investor, its nominee, assignee, and its representative to visit and
inspect any of the properties of the Company, to examine all its books of
account, records, reports and other papers not contractually required of the
Company to be confidential or secret, to make copies and extracts therefrom, and
to discuss its affairs, finances and accounts with its officers, directors, key
employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with the Investor,
its nominee, assign and representatives the finances and affairs of the Company
and its Subsidiaries, if any), all at such reasonable times and as often as may
be reasonably requested.
6.3 Confidentiality.
---------------
As to so much of the information and other material furnished under or in
connection with this Agreement (whether furnished before, on or after the date
hereof) as constitutes or contains confidential business, financial or other
information of the Company or its Subsidiaries, if any, the Investor covenants
for itself and its directors, officers and partners that it will use due care to
prevent its respective officers, directors, employees, counsel, accountants and
other representatives from disclosing such information to persons other than
their respective authorized employees, counsel, accountants, shareholders,
partners, limited partners and other authorized representatives; provided,
however, that the Investor may disclose or deliver any information or other
material disclosed to or received by the Investor should such disclosure or
delivery be required by law.
- 14 -
<PAGE> 15
SECTION 7. INTERPRETATION OF THIS AGREEMENT
--------------------------------
7.1 Terms Defined.
-------------
As used in this Agreement, the following terms have the respective meaning
set forth below or set forth in the Section hereof following such term:
ACT: the Securities Act of 1933, as amended.
COMMISSION: see Section 5.1 hereof.
COMMON STOCK: Common Stock par value $0.01 of the Company.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
PERSON: an individual, partnership, joint-stock company, corporation, trust
or unincorporated organization, and a government or agency or political,
subdivision thereof.
PREFERRED STOCK: Preferred Stock par value $1.00 of the Company
SECURITY, SECURITIES: as defined in Section 2(1) of the Act.
SUBSIDIARY: a corporation of which the Company owns, directly or
indirectly, more than 50% of the Voting Stock.
VOTING STOCK: securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
7.2 Accounting Principles.
---------------------
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with generally
accepted accounting principles at the time in effect, to the extent applicable,
except where such principles are inconsistent with the requirements of this
Agreement.
7.3 Directly or Indirectly.
----------------------
Where any provision in this Agreement refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
- 15 -
<PAGE> 16
7.4 Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
7.5 Paragraph and Section Headings.
------------------------------
The headings of the sections and subsections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part thereof.
SECTION 8. MISCELLANEOUS
-------------
8.1 Notices.
-------
(a) All communications under this Agreement shall be in writing and shall
be mailed by registered or certified mail, postage prepaid:
(i) if to the Investor, at the addresses shown below, marked for
attention as there indicated, or at such other address as the Investor may
have furnished the Company in writing;
Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Peter Stalker, III
(ii) if to the Company, at its address shown at the beginning of this
Agreement, marked for the attention of the President of the Company, or at
such other address as it may have furnished in writing to each of the
Investors.
(b) Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given on the third business day after the date the same is
so mailed.
8.2 Expenses and Taxes.
------------------
The Company will pay, and save the Investor harmless from any and all
liabilities (including interest and penalties) with respect to, or resulting
from any delay or failure in paying, stamp and other taxes (other than income
taxes), if any, which may be payable or determined to be payable on the
execution and delivery of this Agreement or acquisition of its capital stock
pursuant to this Agreement.
8.3 Reproduction of Documents.
-------------------------
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received
- 16 -
<PAGE> 17
by the Investor pursuant hereto (except for certificates evidencing the
Preferred Stock and Common Stock itself) and (c) financial statements,
certificates and other information previously or hereafter furnished to the
Investor, may be reproduced by the Investor by any photographic, photostatic,
microfilm, microcard, miniature photographic or other similar process and the
Investor may destroy any original document so reproduced. All parties hereto
agree and stipulate that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by the Investor in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
8.4 Successors and Assigns.
----------------------
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties. The Investor may assign all or
any portion of its rights herein to any purchaser of some or all of the capital
stock of the Company purchased by it; provided, however, that (i) such assignees
make representations to the Company comparable to those contained in Section 3
hereof, (ii) such assignees agree to be bound by the provisions of Section 4.2
hereof and (iii) the Company is furnished within a reasonable time of its
request, such information as it shall reasonably request relating to such
assignees.
8.5 Entire Agreement; Amendment and Waiver.
--------------------------------------
This Agreement constitutes the entire understanding of the parties hereto
and supersedes all prior understandings among such parties. This Agreement may
be amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Investor.
Very truly yours,
TRANSKARYOTIC, THERAPIES INC.
By: /s/ Peter Stalker, III
-----------------------------
ACCEPTED & AGREED:
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: /s/ Peter Stalker, III
---------------------------------
- 17 -
<PAGE> 1
EXHIBIT 10.2
STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of this 16th day of September, 1988, among:
TRANSKARYOTIC THERAPIES, INC., (herein called the "Company"), a
corporation organized under the laws of the State of Delaware and having its
mailing address at, c/o Warburg, Pincus Capital Company, L.P., 466 Lexington
Avenue, New York, New York 10017;
WARBURG, PINCUS CAPITAL COMPANY, L.P., a Delaware limited partnership
("Warburg") having an address at 466 Lexington Avenue, New York, New York 10017;
and
Each of the individuals listed on Schedule I hereto (the "Individual
Investors") (Warburg and the Individual Investors being herein referred to
collectively as the "Stockholders").
WHEREAS, the parties hereto collectively own all of the issued and
outstanding capital stock of the Company as of the date hereof; and
WHEREAS, such parties desire to promote their mutual interest and the
interests of the Company by imposing certain obligations and restrictions on the
shares of stock of the Company owned by the Company's stockholders and on the
conduct of the Stockholders.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions
-----------
As used herein, the following terms, unless the context clearly
indicates otherwise, shall have the following meanings:
(a) "COMMON STOCK" shall mean the Common Stock of the Company, $0.01
par value per share.
2. Securities Act Matters
----------------------
(a) Each Stockholder acknowledges on his or its own behalf that such
Stockholder is holding the shares of capital stock of the Company owned by him
or it for his or its own investment account. Each Stockholder has been advised
that (i) his or its shares of capital stock of the Company have not been
registered under the Securities Act of 1933, as amended (the "Act"), (ii) such
shares may not be disposed of unless such shares are registered pursuant to the
Act or an exemption from such registration is available, and that, the Company
has no obligation or present intention of so registering such shares. Each
Stockholder further understands that there is no assurance that any exemption
from the Act will be available, or, if available, that such exemption will allow
him or it to dispose of or otherwise transfer any or all of the shares of
capital stock of the Company under the circumstances, in the amounts, or at the
times such Stockholder might propose. Each Stockholder understands that at the
present time Rule 144
<PAGE> 2
promulgated under the Act by the Securities and Exchange Commission ("Rule 144")
is not applicable to sales of the capital stock of the Company because it is not
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and there is not publicly available the information
concerning the Company specified in Rule 144. Each Stockholder further
acknowledges that the Company is not presently under any Obligation to register
under Section 12 of the Exchange Act or to make publicly available the
information specified in Rule 144 and that it may never be required to do so.
(b) Each Stockholder severally covenants and agrees that such
Stockholder shall not sell or otherwise distribute his or its shares of capital
stock of the Company except in a transaction which, in the opinion of counsel
for the Company, qualifies as an exempt transaction under the Act and the rules
and regulations promulgated thereunder or pursuant to a then current and
effective registration statement under the Act. The certificates evidencing the
Stockholder's shares of capital stock of the Company will bear legends
reflecting the foregoing restrictions on transfer as well as the legend
described in Paragraph 6 hereof.
3. Transfers of Stock
------------------
No Individual Investor shall transfer any of the shares of capital
stock of the Company owned by such Individual Investor (except to members of
such Individual Investor's family or trusts therefor, PROVIDED in each instance
that such transferee agrees to be bound by the provisions of this Agreement as
if such transferee were an original signatory hereto), unless the Individual
Investor desiring to make the transfer (hereinafter referred to as the
"Transferor") shall have first made the offers to sell to the Company and then
to the other Stockholders contemplated by this Paragraph 3, and such offers
shall not have been accepted.
(a) OFFER BY TRANSFEROR. (i) Copies of the Transferor's offer shall be
given to the Company and the other Stockholders and shall consist of an offer to
sell to the Company or, failing its election to purchase, then to the other
Stockholders all of the shares then proposed to be transferred by the Transferor
(the "Subject Shares") pursuant to a bona fide offer of a third party, to which
copies shall be attached a statement of intention to transfer to such third
party, the name and address of the prospective third party transferee, the
number of shares of Common Stock involved in the proposed transfer, and terms of
such transfer. (ii) If the Company shall not elect to purchase the Subject
Shares or is legally unable to do so, the Transferor shall forthwith so notify
the other Stockholders, whereupon the other Stockholders shall have the right to
purchase such Shares in the proportions provided in subparagraph (h) below.
(b) ACCEPTANCE OF OFFER. (i) Within 20 days after the receipt of the
offer described in subparagraph (a)(i) above, the Company may, at its option,
elect to purchase all, but not less than all, of the Subject Shares. The Company
shall exercise such option by giving notice thereof to the Transferor and to the
other Stockholders within such 20 day period. (ii) In the event that the Company
does not exercise its option to purchase, the other Stockholders may exercise
their election to purchase by giving notice thereof to the Transferor and to the
Company within 15 days after receipt of notice from the Transferor in accordance
with subparagraph (a)(ii) above to the effect that the Company did not exercise
its option to purchase. (iii) In either event, the notice required to be given
by the purchasing party or parties shall specify a date for the closing of the
purchase which shall not be more than 20 days after the date of the giving of
such notice.
- 2 -
<PAGE> 3
(c) PURCHASE PRICE. The purchase price per share for the Subject Shares
shall be the price per share offered to be paid by the prospective transferee
described in the offer, which price shall be paid in cash or, if so provided in
the offer of the prospective transferee, cash plus deferred payments of cash in
the same proportions, and with the same terms of deferred payment as therein set
forth.
(d) CONSIDERATION OTHER THAN CASH. If the offer of Subject Shares under
this Paragraph 3 is for consideration other than cash or cash plus deferred
payments of cash, the Company or any purchasing Stockholders shall pay the cash
equivalent of such other consideration. If the Transferor and the Company or any
purchasing Stockholders cannot agree on the amount of such cash equivalent
within 10 days after the beginning of the 20-day period under subparagraph
(b)(iii), any of such parties may, by 3 days' written notice to the other,
initiate appraisal proceedings under subparagraph (e) for determination of the
cash equivalent. The Company or any purchasing Stockholder may give notice to
the Transferor revoking an election to purchase the Subject Shares within 10
days after determination of the appraised value, if they choose not to purchase
the Subject Shares. The other purchasing parties shall then have 10 days in
which to elect to purchase the Subject Shares not purchased because of such
revocation.
(e) APPRAISAL PROCEDURE. If any party shall initiate an appraisal
procedure to determine the amount of the cash equivalent of any consideration
for Subject Shares under subparagraph (d), then the Transferor, jointly on the
one hand, and the Company or the purchasing Stockholders, jointly on the other
hand, shall each promptly appoint as an appraiser an individual who shall be a
member of a nationally-recognized investment banking firm. Each appraiser shall,
within 30 days of appointment, separately investigate the value of the
consideration for the Subject Shares as of the proposed transfer date and shall
submit a notice of an appraisal of that value to each party. Each appraiser
shall be instructed to determine such value without regard to income tax
consequences to the Transferor as a result of receiving cash rather than other
consideration. If the appraised values of such consideration (the "Earlier
Appraisals") vary by less than 10%, the average of the two appraisals on a per
share basis shall be controlling as the amount of the cash equivalent. If the
appraised values vary by more than 10%, the appraisers, within 10 days of the
submission of the last appraisal, shall appoint a third appraiser who shall be
member of a nationally recognized investment banking firm. The third appraiser
shall, within 30 days of his appointment, appraise the value of the
consideration for the Subject Shares as of the proposed transfer date and submit
notice of his appraisal to each party. The value determined by the third
appraiser shall be controlling as the amount of the cash equivalent unless that
value is greater than the two Earlier Appraisals, in which case the higher of
the two Earlier Appraisals will control, and unless that value is lower than the
two Earlier Appraisals, in which case the lower of the two Earlier Appraisals
will control. If any party fails to appoint an appraiser or if one of the two
initial appraisers fails after appointment to submit his appraisal within the
required period, the appraisal submitted by the remaining appraiser shall be
controlling. The cost of the foregoing appraisals shall be shared one-half by
the Transferor and one-half by the Company or the purchasing Stockholders.
(f) CLOSING OF PURCHASE. The closing of the purchase shall take place
at the office of the Company or such other location as shall be mutually
agreeable and the purchase price, to the extent comprised of cash, shall be paid
at the closing, and cash equivalents and documents
- 3 -
<PAGE> 4
evidencing any deferred payments of cash permitted pursuant to subparagraph (c)
above shall be delivered at the closing. At the closing, the Transferor shall
deliver to the purchaser(s) of the Subject Shares the certificates evidencing
the Subject Shares to be conveyed, duly endorsed and in negotiable form with all
the requisite documentary stamps affixed thereto.
(g) RELEASE FROM RESTRICTION; TERMINATION OF RIGHTS. (i) If the offer
is neither accepted by the Company nor by the other Stockholders, the Transferor
may make a bona fide transfer to the prospective transferee named in the
statement attached to the offer in accordance with the agreed upon terms of such
transfer, provided, that (A) such transfer shall be made only -in strict
accordance with the terms therein stated and (B) the transferee agrees, in
writing, to be bound by the provisions of this Agreement as if he were an
Individual Investor. However, if the Transferor shall fail to make such transfer
within 30 days following the expiration of the time hereinabove provided for the
election by the other Stockholders, such Shares shall again become subject to
all the restrictions of this Paragraph 3.
(h) RIGHT OF ELECTION. The right of each of the other Stockholders to
elect to purchase Subject Shares as provided in this Paragraph 3 shall be, with
respect to such number of Subject Shares so offered, in the same proportion as
each such other Stockholder's shares of Common Stock bears to the total shares
of Common Stock then owned by all Stockholders, and if one of such persons shall
reject in whole or in part the shares j offered to him or it, then the other
Stockholders shall be entitled to purchase all of the rejected stock offered, in
the same proportion as each other Stockholder's then owned shares of Common
Stock bears to the total shares of Common Stock owned by the other Stockholders
who have not so rejected the stock offered, provided that the Transferor shall
not be obliged to sell any of the Subject Shares so offered under this Paragraph
3 unless all of such offered Subject Shares are accepted for purchase by one or
more of the Stockholders or the Company, as the case may be.
(i) TERMINATION UPON PUBLIC OFFERING. The provisions of this Paragraph
shall terminate simultaneously with the consummation of the first underwritten
public offering of the Company's securities.
4. Additional Shareholders
-----------------------
The Company covenants that it shall not issue or cause to be issued any
shares of capital stock of the Company to any person who is an employee,
consultant, officer or director of the Company unless as a condition to such
issuance such person agrees to become a party to this Agreement and to be bound
by all the obligations of an Individual Investor under this Agreement. Such
agreement shall be evidenced by the execution of a counterpart signature page in
the form of Exhibit B hereto. Stock certificates issued to such persons shall be
marked as provided in Section 6 hereof. No shares of capital stock of the
Company shall be transferred on the books of the Company until all the
applicable provisions of this Agreement have been complied with.
5. Reporting
---------
The Company shall furnish to each of the Stockholders within 120 days
after the end of its fiscal year, a copy of an annual report consisting of
statements of income, stockholders'
- 4 -
<PAGE> 5
equity and changes in financial position of the Company and its subsidiaries, if
any, for such year, all in reasonable detail, and accompanied by an opinion
thereon of independent certified public accountants of recognized national
standing.
6. Legends
-------
In addition to the legend described in Paragraph 2 hereof and any other
legend which may be called for by the terms of any employment or consulting or
Scientific Advisor agreement, the Company and each Individual Investor agree
that certificates evidencing Common Stock held by Individual Investors will bear
the following legend reflecting the provisions of this Agreement:
"The shares of stock represented by this certificate are subject
to all the terms of that certain Stockholders' Agreement, dated
as of July _, 1988, among Transkaryotic Therapies, Inc. and
certain of its Stockholders, a copy of which is on file at the
office of Transkaryotic Therapies, Inc. Such agreement provides
that the shares represented hereby are subject to rights of first
refusal in favor of certain Stockholders and Transkaryotic
Therapies, Inc."
7. Notices
-------
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given as delivered or
mailed, registered mail, return receipt requested to the respective Stockholder
at his or its address as shown at the beginning of this Agreement, on Schedule I
hereto or on a counterpart signature page, or to such other addresses or persons
as any such party shall have last designated by written notice to the other
parties hereto. Any item so mailed shall be deemed to have been delivered on the
third day following the date on which it was so mailed.
8. Term
----
The term of this Agreement shall commence on the date hereof and,
except as otherwise herein expressly provided, shall continue as to each party
to this Agreement for so long as any such party owns such stock of the Company.
9. Assignment
----------
This Agreement shall not be assignable by any party hereto, except that
each Stockholder may assign all or any portion of its rights under this
Agreement to any transferee of all or a portion of the shares of the Company's
capital stock held by such Stockholder.
10. Specific Performance
--------------------
The parties hereby declare that it is impossible to measure in money
the damages which will accrue to a party hereto by reason of a failure to
perform any of the obligations under this Agreement. Therefore, all parties
hereto shall have the right to specific performance of the obligations of the
other parties under this Agreement, and if any party hereto shall institute any
- 5 -
<PAGE> 6
action or proceeding to enforce the provisions hereof, any person (including the
Company) against ) whom such action or proceeding is brought hereby waives the
claim or defense therein that such party has or have an adequate remedy at law,
and such person shall not urge in any such action or proceeding the claim or
defense that such remedy at law exists.
11. Modification
------------
This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein and shall not be modified
or amended except by an instrument in writing signed by or on behalf of all of
the then parties hereto.
12. Prior Agreement
---------------
This Agreement Supersedes any and all previously executed Stockholders
Agreements between the Company and any signatory hereto, and from and after the
date hereof, no party to such prior agreements shall have any further rights or
obligations thereon.
13. Governing Law
-------------
This Agreement shall be governed by, and construed and C enforced in
accordance with, the laws of the State of Delaware.
14. Counterparts
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
15. Paragraph Headings
------------------
The paragraph headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provisions hereof.
Reference to numbered paragraphs and subparagraphs and lettered exhibits refer
to paragraphs and subparagraphs of this Agreement and exhibits annexed thereto.
- 6 -
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.
TRANSKARYOTIC THERAPIES INC.
By: /s/ Peter Stalker, III
------------------------------
Peter Stalker, III
President
WARBURG, PINCUS CAPITAL
CAPITAL, L.P.
By: /s/ Peter Stalker, III
------------------------------
Vice President
INDIVIDUAL INVESTORS:
/s/ Richard F. Selden
- ----------------------------------
Dr. Richard Selden
/s/ Howard Goodman
- ----------------------------------
Dr. Howard Goodman
/s/ David Moore
- ----------------------------------
Dr. David Moore
/s/ Douglas Treco
- ----------------------------------
Dr. Douglas Treco
- 7 -
<PAGE> 8
Schedule I
----------
Name and Address of Individual Investors
Warburg, Pincus Capital Company, L.P.
466 Lexington Avenue
New York, New York
Howard Goodman
#10 The Ledges Road
Newton Center
Boston, MA 02159
Dr. Richard Selden
123 Reed Street
Cambridge, MA 02140
Dr. David Moore
1 Longfellow Place #2415
Boston, MA 02114
Dr. Douglas Treco
71 Ansden Street
8 Arlington, MA 02174
- 8 -
<PAGE> 1
EXHIBIT 10.3
TRANSKARYOTIC THERAPIES, INC.
CLASS B PREFERRED STOCK PURCHASE AGREEMENT
This Class B Preferred Stock Purchase Agreement (the "Agreement") is made
as of the 14th day of February, 1992 by and among Transkaryotic Therapies, Inc.,
a Delaware corporation (the "Company") and the purchasers listed on Schedule A
hereto (each individually, a "Purchaser" and together, the "Purchasers").
In consideration of the mutual promises and undertakings contained herein
the parties hereby agree as follows:
1. PURCHASE AND SALE OF CLASS B CONVERTIBLE PREFERRED STOCK. .
1.1. Purchase and Sale of Shares.
(a) On the Closing Date (as defined in Section 1.2 below), subject
to the terms and conditions hereof and in reliance upon the warranties,
representations and agreements contained herein, the Company agrees to
sell to each of the Purchasers, and each of the Purchasers agrees to
purchase from the Company, the number of shares of the Company's Class B
Convertible Preferred Stock, $1.00 par value per share ("Class B Preferred
Stock"), set forth opposite the name of each such Purchaser on Schedule A
hereto at a price of $400.00 per share. The aggregate or any portion of
the shares of Class B Preferred Stock to be purchased from the Company by
the Purchasers pursuant to this Agreement are herein referred to as the
"Shares."
(b) To the extent that 45,600 Shares are not sold at the Closing (as
defined in Section 1.2 below), the Company may, up to 120 days after the
Closing, sell and issue additional shares of Class B Preferred Stock on
substantially the same terms and conditions as the sale of the Shares
purchased pursuant to this Agreement, provided that each person or entity
acquiring such shares becomes a party to this Agreement as a Purchaser
prior to such acquisition by executing an Instrument of Accession hereto
in the form of Exhibit V hereto and an Instrument of Accession to the
Voting Rights Agreement referred to in Section 5.5 hereof in the form of
Exhibit B thereto. The closing of each such sale of additional shares of
Class B Preferred stock shall be held at such time and place as may be
agreed upon by the parties thereto, upon the same terms and conditions as
those applicable to the initial sale of Shares hereunder, provided that
the Company's representations and warranties shall be subject to such
changes and additions as are necessary to reflect the consummation of the
initial sale of Shares hereunder and any and all intervening events
occurring between the date hereof and the date of such closing. From and
after any such sale of additional shares of Class B Preferred Stock, the
purchaser of such shares shall be deemed a "Purchaser" under this
Agreement and the shares so purchased shall be deemed "Shares" for all
purposes of this Agreement.
(c) The sale of Shares by the Company to each of the Purchasers is a
separate
<PAGE> 2
sale to the same extent as if set forth in a separate agreement.
1.2. Closing. The closing of the initial purchase and sale of Shares
hereunder (the "Closing") shall take place at the offices of Bingham, Dana &
Gould, 150 Federal Street, Boston, Massachusetts at 2:00 p.m., Boston local
time, on February 18, 1992 or at such other time and date as the Company and the
Purchasers may agree upon in writing (the "Closing Date"). At the Closing, the
Company will deliver to each Purchaser certificates evidencing the Shares to be
purchased by such Purchaser, as set forth on Schedule A, against payment of the
entire purchase price for the Shares in lawful money of the United States of
America by cancellation of indebtedness, bank or certified check, wire-transfer
or such other form of payment as shall be mutually agreed upon by such Purchaser
and the Company.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
hereby represents and warrants, to each of the Purchasers that, as of the date
of this Agreement, except as otherwise described on Schedule B hereto, the
following are true and correct:
2.1. Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business as a foreign
corporation in Massachusetts and is in good standing in each jurisdiction in
which failure to so qualify would have a materially adverse effect on the
business, assets or prospects of the Company. The copies of the Company's
Restated Certificate of Incorporation (the "Certificate of Incorporation"), and
By-laws which are attached as Exhibits I and II hereto, respectively, are true,
complete and correct as of the date of this Agreement. The Company has the
corporate power and authority to own and lease its property, to enter into,
deliver, and perform its obligations and undertakings under, this Agreement and
all other agreements referred to herein or contemplated hereby, to issue the
Shares, and to conduct its business as now conducted.
2.2. Subsidiaries. The Company has no subsidiaries and does not control,
directly or indirectly, any other corporation, association or business
organization.
2.3. Capitalization. The Company's entire authorized capital stock
consists of: 200,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"); and 53,500 shares of Preferred Stock, $1.00 par value per share
(the "Preferred Stock"), of which 6,000 shares have been designated as Class A
Convertible Preferred Stock (the "Class A Preferred Stock"), and 47,500 shares
have been designated as Class B Convertible Preferred Stock (the "Class B
Preferred Stock"). Of the authorized shares of Common Stock, 78,795 shares are
issued to the persons named on Schedule D hereto under the heading "Common
Stock". Of the authorized shares of Preferred Stock, 6,000 shares are issued to
the party named on Schedule D hereto under the heading "Preferred Stock," all of
which Preferred Stock is being exchanged for Class A Preferred Stock pursuant to
the Stock Exchange Agreement dated as of the date hereof between Warburg Pincus
Capital Company L.P. ("Warburg") and the Company (the "Exchange Agreement").
Immediately prior to the Closing, no shares of Class B Preferred Stock are
issued or outstanding. No shares of Common Stock or Preferred Stock are held in
the
2
<PAGE> 3
Company's treasury. The Company has reserved 39,250 shares of Common Stock for
issuance to future management employees and consultants. In addition, the
Company has reserved 10,000 shares of Common Stock for issuance upon conversion
of the Class A Preferred Stock and 47,500 shares of Common Stock for issuance
upon Conversion of the Class B Preferred Stock (such shares reserved for
issuance upon conversion of the Class B Preferred Stock hereinafter referred to
as the "Underlying Shares"). The Common Stock and the Preferred Stock are not
entitled to cumulative voting rights, preemptive rights, antidilutive rights or
so-called registration rights under the Securities Act of 1933, as amended (the
"Securities Act"), except as provided in this Agreement or Article IV of the
Company's Certificate of Incorporation, ("Article IV"). The Common Stock and the
Preferred Stock have the preferences, voting powers, qualifications, and special
or relative rights or privileges set forth in Article IV. All outstanding shares
of Common Stock and Preferred Stock have been validly issued and are fully paid
and nonassessable, and were issued in accordance with applicable state and
federal securities laws. The Shares, when issued in accordance with this
Agreement, and the Underlying Shares, when issued in accordance with this
Agreement and the Certificate of Incorporation, will be validly authorized,
issued and outstanding, fully paid and nonassessable and, based in part upon
representations of the Purchasers in Sections 3 and 4 hereof, will be issued in
accordance with applicable state and federal securities laws. The Company does
not have outstanding any option, warrant or other commitment to issue or to
acquire any shares of its capital stock, or any securities or obligations
convertible into or exchangeable for its capital stock, other than as indicated
on Schedule a hereto, and the Company has not given any person any right to
acquire from the Company or sell to the Company any shares of its capital stock.
There is, and immediately upon consummation at the Closing of the transactions
contemplated hereby there will be, no agreement, restriction or encumbrance
(such as a right of first refusal, right of first offer, proxy, voting
agreement, etc.) with respect to the sale or voting of any shares of capital
stock of the Company (whether outstanding or issuable upon conversion or
exercise of outstanding securities) except as contemplated by this Agreement,
and by the Certificate of Incorporation and By-laws of the Company and the
Company will not voluntarily place any restrictions on the transfer of the
Shares or the Underlying Shares except to the extent set forth herein or
contemplated hereby.
2.4. Financial Information. The Company has delivered to the Purchasers a
copy of (a) its audited balance sheet (the "Balance Sheet") as of December 31,
1990 (the "Financial Statement Date") and the related statements of income and
retained earnings and changes in financial position for the year then ended
(with the Balance Sheet, the "Audited Financials") and (b) its unaudited balance
sheet as of December 31, 1991 and the related statements of income and retained
earnings and changes in financial position for the period then ended (the
"Unaudited Financials") and together with the Audited Financials, the "Financial
Statements"). The Financial Statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial condition of the Company at the date thereof and
the results of the operations of the Company for the period then ended;
provided, however, that the Unaudited Financials are subject to year-end
adjustments and may not contain all footnotes required under generally accepted
accounting principles.
3
<PAGE> 4
2.5. Absence of Undisclosed Liabilities. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to the date hereof which are not
fully reflected or provided for on the Balance Sheet, except for obligations
arising after the Financial Statement Date in the ordinary course of business or
reflected in the Unaudited Financials.
2.6. Absence of Certain Chances. Since the Financial Statement Date, other
than as described in the Unaudited Financials or as indicated on Schedule a
hereto, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown
by the Balance Sheet;
(b) any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock or any
direct or indirect redemption, purchase or other acquisition of any of
such stock by the Company;
(d) any labor trouble, or any other event, development, or
condition, of any character, or threat of the same, materially adversely
affecting the business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of the
Company;
(g) any sale, assignment or transfer of any material tangible or
intangible assets of the Company except with respect to tangible assets in
the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor.
2.7. Taxes. For all periods ended on or prior to the Financial Statement
Date, the Company has filed or will file within the time prescribed by law
(including extensions of time approved by the appropriate taxing authority) all
tax returns and reports required to be filed with the United States Internal
Revenue Service, the State of Delaware, the Commonwealth of Massachusetts, any
other states, and all foreign countries and has paid or made adequate provision
in the Balance Sheet for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due (or, to the knowledge of the
Company, claimed by such authority
4
<PAGE> 5
or jurisdiction to be due) on or in respect of such tax returns and reports. The
Company does not know of any (a) other federal, Delaware, Massachusetts, state
or foreign taxes which are due and payable by the Company which have not been so
paid; (b) other federal, Delaware, Massachusetts, state or foreign tax returns
or reports which are required to be filed which have not been so filed; or (c)
unpaid assessment for additional taxes for any fiscal period or any basis
thereof. The Company's federal or state income tax returns have never been
audited.
2.8. Title to Properties; Liens and Encumbrances. Except as indicated on
Schedule B hereto, the Company has good and marketable title to all of its
properties and assets, real and personal, including those reflected in the
Balance Sheet (except as sold or otherwise disposed of in the ordinary course of
business since the Financial Statement Date), subject to no mortgage, pledge,
lien, security interest, conditional sale agreement, encumbrance or charge
except (a) as shown on the Balance Sheet or in the notes thereto, (b) tax,
materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings, and (c) vendors' interests
in installment purchase obligations of the Company which in the aggregate do not
exceed $5,000.
2.9. Intellectual Property Rights. Attached hereto as Schedule C is a true
and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or licenses to use the same,
and any and all applications therefor, as well as all trade secrets and similar
proprietary information owned or held by the Company, are all such items
required to enable the Company to conduct its business as now conducted. The
Company has not received any formal or informal notice of infringement or other
complaint that the Company's operations violate or infringe rights under
patents, trademarks, service marks, trade names, trade secrets, copyrights or
licenses or any other proprietary rights of others, nor does the Company have
any reason to believe that there has been any such violation or infringement.
Except as set forth in Schedule C, no royalties, honoraria, or fees are or will
be payable by the Company to other persons by reason of the ownership or use by
the Company of said patents, trademarks, service marks, trade names, trade
secrets, copyrights or rights or licenses to use the same or similar proprietary
information, or any and all applications therefor.
2.10. Government Approvals and Licenses. The Company has all governmental
approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as presently conducted and will use its best efforts to
obtain all governmental approvals, authorizations, consents, licenses and
permits necessary or required to conduct its business as proposed to be
conducted.
2.11. Contracts. Other than as set forth in Schedule B or described
elsewhere in this Section 2, the Company has no presently existing contract,
obligation or commitment (a) involving payment by or to the Company of more than
$10,000 (other than employment or consulting agreements terminable at the option
of the Company without penalty on no more than thirty (30) days prior written
notice with employees of, or consultants to, the Company who are
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not officers or directors thereof), or (b) which is material to the Company or
its currently contemplated business, including without limitation the following:
(i) any employment, bonus, commission or consulting agreements
or arrangements; pension, profit sharing, deferred compensation,
stock bonus, retirement, stock option, stock purchase, phantom stock
or similar plans, including agreements evidencing rights to purchase
securities of the Company; or agreements with shareholders;
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed
money, or mortgaging, pledging, or granting or creating a lien or
security interest or other encumbrance on any of the Company's
property; or any agreement or instrument evidencing any guaranty by
the Company of payment or performance by any other person;
(iii) any agreements with dealers, sales representatives,
brokers, and other distributors, jobbers, advertisers, sales
agencies;
(iv) any agreements with any labor union or collective
bargaining organization;
(v) any contract or series of contracts with the same person
for the furnishing or purchase of machinery, equipment, goods or
services, including, without limitation, agreements with processors
and subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal
property, including motor vehicles, and real estate;
(vii) any indenture, agreement, or other document relating to
the sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses;
(ix) any agreements limiting the freedom of the Company or any
of its employees to compete in any line of business or in any
geographic area or with any person;
(x) any agreements providing for disposition of the business
and assets, or securities, of the Company; agreements of merger or
consolidation to which the Company is a party; or letters or intent
with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with
respect to, the
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acquisition of assets or securities of any other business or entity.
True and complete copies of all contracts and other items listed on
Schedule B have been made available to the Purchasers. The Company has complied
with all the material provisions of said contracts and commitments set forth in
Schedule B hereto and of all other material contracts and commitments to which
it is a party, and is not in default under any thereof, except to the extent to
which any such noncompliance and defaults would not materially and adversely
affect the business or financial condition of the Company. There exists no
condition, event or act which constitutes, or which after notice, lapse of time
or both would constitute, a material default by the Company or, to the Company's
knowledge, by any third party, under any of said contracts or commitments.
2.12. Shareholders, Directors, and Officers. Schedule D hereto contains a
true, correct and complete list showing the name of each shareholder of record
of the Company and the number of the shares of the Company's capital stock owned
by each shareholder. Schedule E hereto contains a true, correct and complete
list showing the name of each director and officer of the Company.
2.13. Litigation. There is no litigation or proceeding pending or, to the
Company's knowledge, threatened, against the Company, or the Company's
properties nor does the Company know or have reasonable grounds to know of any
basis for any such action, including, without limitation, any governmental
investigation relating to employee safety or discrimination matters. To the
Company's knowledge, there is no litigation or proceeding pending or threatened
against or relating to any present or former employee of the Company by reason
of the past employment or consulting relationships of any of such employees with
the Company. There are no outstanding judgments against the Company.
2.14. Authorization. The execution, delivery and performance by the
Company of this Agreement and the Exchange Agreement, the issue and sale of the
Shares and the issuance of the Underlying Shares upon the conversion of the
Class B Preferred Stock have been duly authorized and approved by all necessary
corporate action. This Agreement has been duly executed and delivered on behalf
of the Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors. The execution, delivery and performance of this Agreement, the
issuance and sale of the Shares and the issuance of the Underlying Shares upon
the conversion of the Class B Preferred Stock will not conflict with, or result
in a breach of any of the terms of, or constitute a default under, the
Certificate of Incorporation or By-laws of the Company or result in a material
breach of any of the terms of, or constitute a material default under, any
agreement, instrument or other restriction to which the Company is a party or by
which it or any of its properties or assets is bound.
2.15. Brokers. Except as described on Schedule B, the Company has no
contract, arrangement or understanding with any broker, finder, or similar agent
with respect to the
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transactions contemplated by this Agreement.
2.16. Governmental Consents. Based in part on the representations made by
the Purchasers in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the execution and delivery of this Agreement or
the offer, issue, sale or delivery of the Shares pursuant to this Agreement or
the consummation of any other transactions contemplated hereby.
2.17. Securities Laws. Neither the Company nor any other person, firm or
corporation acting on its behalf has sold any of the Shares or other securities
of the Company to, or offered any thereof for sale to, or solicited any offers
to purchase any thereof from, or otherwise approached or negotiated (nor will
the Company or any other person, firm or corporation acting on its behalf sell,
offer, solicit or otherwise approach or negotiate) in respect thereof with, such
character or number of persons in the aggregate, or in such manner, as would
result in bringing the Shares, or any part thereof, within the provisions of
Section 5 of the Securities Act. Assuming that the Purchasers' representations
and warranties contained in Sections 3 and 4 of this Agreement are true and
correct at the Closing and on the date of the issuance of the Underlying Shares,
the offering and sale of the Shares and the issuance of the Underlying Shares
upon conversion of the Shares are each exempt or will be exempt from
registration and prospectus delivery requirements of the Securities Act as in
effect on the date hereof and are also exempt or will be exempt from
registration or qualification under applicable state securities laws as in
effect on the date hereof.
2.18. Legal Compliance. The Company is not in violation of any provisions
of its Certificate of Incorporation or By-laws, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which violation materially and adversely
affects the business or financial condition of the Company.
2.19. Insurance. The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including,
without limitation, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
2.20. Nondisclosure Agreements. The Company has entered into nondisclosure
and noncompete agreements in favor of the Company in such forms as have been
approved from time to time by the Board of Directors of the Company, with each
person employed by it or serving as a consultant to it with employment or
consulting responsibility requiring access to proprietary technical information
of the Company.
2.21. Disclosures. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate or instrument furnished to any of the
Purchasers or their special counsel in connection with the transactions
contemplated by this Agreement, including without limitation
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the Confidential Private Placement Memorandum of the Company dated November,
1991 (the "Memorandum"), when read together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading. The Company
knows of no information or fact which has or would have a material adverse
effect on the business, prospects, assets or condition, financial or otherwise,
of the Company which has not been disclosed in Schedule B. Each projection
furnished in the Memorandum was prepared in good faith based on reasonable
assumptions and represents the Company's best estimate of future results based
on information available as of the date of the Memorandum.
2.22. U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States Real Property Holding Corporation" as defined in
Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and Section
1.897-2(b) of the Regulations promulgated by the Internal Revenue Service.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS. Each of the
Purchasers, severally and not jointly, represents and warrants to the Company
that the following are true and correct in all material respects:
3.1. Authority. Such Purchaser has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder. All necessary
corporate and other action has been taken by it or on its behalf to execute,
deliver and perform its obligations under this Agreement and to purchase the
Shares. This Agreement constitutes the valid and legally binding obligation of
such Purchaser, enforceable against the Purchaser in accordance with its terms.
3.2. Brokers. Such Purchaser has no contract, arrangement or understanding
with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
3.3. Accredited Investor Statues. Such Purchaser is acquiring the Shares
for the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Shares; provided that the disposition of its property shall at
all times be and remain within its control. It further represents that it is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act. Such Purchaser further represents that it
is acquiring the Shares for its own account and with its general assets and not
with the assets of any separate account in which any employee benefit plan has
any interest. As used in this Section 3.3, the terms "separate account" and
"employee benefit plan" shall have the respective meanings assigned to them in
the Employee Retirement Income Security Act of 1974.
3.4. Formation. Such Purchaser was not organized for the purpose of making
an investment in the Company.
3.5. Receipt of Information. Such Purchaser has been furnished such
information and
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documents as such Purchaser has requested and has been afforded an opportunity
to ask questions of and receive answers from representatives of the Company
concerning the Company, terms and conditions of this Agreement and the purchase
of the Shares.
4. SECURITIES LAWS.
4.1. Registration of Shares. Each Purchaser, severally and not jointly,
represents and warrants to the Company that it understands that the Shares have
not been registered under the Securities Act or the securities laws of any state
or other jurisdiction and that the Shares must be held indefinitely unless they
are subsequently registered thereunder or an exemption from registration
thereunder is available. Each Purchaser, severally and not jointly, further
represents and warrants to the Company that it will not transfer any of the
Shares in violation of the provisions of this Agreement or any applicable
federal or state securities laws or regulations.
4.2. Financial Matters. Each Purchaser, severally and not jointly,
represents and warrants to the Company that (a) it understands that the purchase
of the Shares involves substantial risk and that its financial condition and
investments are such that it is in a financial position to hold the Shares
purchased by it for an indefinite period of time and to bear the economic risk
of, and withstand a complete loss of, such Shares; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
such Purchaser has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
4.3. Transfer Legends and Restrictions. The Transfer (as defined in
Section 8.1) of the Shares will be restricted in accordance with the terms
hereof. Each certificate evidencing the Shares, including any certificate issued
to any transferee thereof, shall be imprinted with a legend in substantially the
following form (unless otherwise permitted under this Section 4 or unless such
Shares shall have been effectively registered and sold under the Securities Act
and applicable state securities laws):
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF
THESE SHARES SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO
THESE SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME EFFECTIVE OR THE
ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED, UNLESS SUCH OPINION OF
COUNSEL IS NOT REQUIRED BY THE TERMS OF THE CLASS B PREFERRED STOCK
PURCHASE AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED
AS OF FEBRUARY 14, 1992 (THE "AGREEMENT"). TRANSFER OF THESE SHARES IS
FURTHER RESTRICTED AS PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS
AVAILABLE AT THE ISSUER'S OFFICES."
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The Holder (as defined in Section 8.1) of any Shares by acceptance thereof
agrees, so long as any legend described in this Section 4.3 shall remain on the
certificates evidencing the Shares, prior to any Transfer of any of the Shares
(except for a Transfer effected pursuant to an effective registration statement
under the Securities Act or in compliance with Rule 144 thereunder), to give
written notice to the Company of such Holder's intention to effect such Transfer
and agrees to comply in all respects with the provisions of this Section 4.3.
Such notice, if required, shall describe the proposed method of Transfer of the
Shares in question. Upon (but only upon) receipt by the Company of such notice,
and a written opinion of counsel to such Holder (which counsel and opinion shall
be reasonably satisfactory to counsel for the Company) the proposed Transfer may
be effected without registration under the Securities Act or in compliance with
Rule 144 thereunder and under applicable state securities laws, the proposed
Transfer may be effected, and the Holder of such Shares shall thereupon be
entitled to Transfer the same in accordance with the terms of the notice
delivered by such Holder to the Company. Each certificate evidencing the Shares
issued upon any such Transfer shall bear the same legend as set forth in this
Section 4.3. Upon the written request of a Holder of the Shares, the Company
shall remove the foregoing legend from the certificates evidencing such Shares
and issue to such Holder new certificates therefor free of any transfer legend
if, with such request, and at the request of the Company, the Company shall have
received an opinion of counsel selected by the Holder, such counsel and opinion
to be reasonably satisfactory to counsel to the Company, to the effect that any
Transfers by such Holder of such Shares may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws.
4.4. Rule 144. The Purchasers recognize that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company covenants that (a) at all times after the Company first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company will comply with the
current public information requirements of Rule 144(c)(1) under the Securities
Act; and (b) at all such times as Rule 144 is available for use by the
Purchasers, the Company will furnish any Purchaser upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144.
4.5. Warburg Class A Preferred Stock. All representations, warranties, and
covenants made by Warburg in Sections 3 and 4 of this Agreement relating to this
Agreement and the Shares are also hereby made by Warburg, mutatis mutandi, with
respect to the Exchange Agreement and the Class A Preferred Stock acquired by
Warburg pursuant to the Exchange Agreement (the "Class A Shares"), and the
provisions of Sections 3 and 4 of this Agreement shall be applicable to the
Class A Shares in the same manner as the Shares.
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligation of each
of the Purchasers to purchase and pay for the Shares is subject to the
following:
5.1. Representations and Warranties. The representations and warranties of
the
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Company made herein shall be true, correct and complete in all material respects
on and as of the Closing Date, with the same force and effect as if they had
been made on and as of the Closing Date.
5.2. Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the company on or prior to
the Closing Date shall have been performed or complied with.
5.3. Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate (to be signed by its chief executive officer) dated the
Closing Date certifying as to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 in all material respects.
5.4. Exchange Agreement. The Exchange Agreement shall have been executed
and delivered by the Company and Warburg.
5.5. Voting Rights Agreement. A Voting Rights Agreement substantially in
the form of Exhibit III hereto shall have been executed and delivered by the
Company and the Purchasers.
5.6. Opinion of Company's Counsel. The Purchasers shall have received an
opinion of Bingham, Dana & Gould, counsel to the Company, substantially in the
form of Exhibit IV hereto and which opinion shall be satisfactory in form and
substance to the Purchasers' special counsel.
5.7. Restated is Certificate of Incorporation. A Restated Certificate of
Incorporation for the Company in the form attached as Exhibit I hereto shall
have been duly filed with the Secretary of State of the State of Delaware and
shall have become effective.
5.8. Blue Sky Matters. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Shares, and the Underlying Shares shall have been obtained or effected (except
for the filing of any notice subsequent to the Closing which may be required
under applicable state securities laws which, if required, shall be filed on a
timely basis as may be so required).
5.9. Corporate Proceedings and Consents. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers and their special counsel,
each of whom shall have received all such originals or certified or other copies
of such documents as each may reasonably request.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligation
of the Company to sell the Shares is subject to the following:
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6.1. Representations and Warranties. The representations and warranties of
the Purchasers made herein shall be true, correct and complete in all material
respects on and as of the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date.
6.2. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and substance to the Company and the Company's counsel, and
they each shall have received all such counterpart original or certified or
other copies of such documents as they may reasonably request.
6.3. Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchasers on or prior to
the Closing Date shall have been performed or complied with.
6.4. Authorizations. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States of America or
of any state required in connection with the lawful issuance and sale of the
Shares to the Purchasers as contemplated under this Agreement shall have been
duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with each of the Purchasers as
follows, such covenants to expire at such times as the Company shall have
consummated a firm commitment underwritten public offering pursuant to an
effective registration statement on Form S-1 or a successor form under the
Securities Act, covering the offer and sale by the Company of Common Stock to
the public at a price per share that is not less than $600.00 per share (as
adjusted for any stock dividends, stock splits, combinations, or similar
recapitalizations occurring after the date hereof), and which results in
aggregate net proceeds to the Company of not less than $10,000,000 (the "Initial
Public Offering"); provided, that the Company may refrain from compliance with
any such covenant to the extent that such compliance would, in the good faith
judgment of the Board of Directors of the Company, violate applicable securities
laws:
7.1. Quarterly Financial Statements. Within forty-five (45) days after the
end of each of the first three quarters in each fiscal year, the Company will
deliver to each Qualifying Holder (as hereinafter defined) copies of the
Company's unaudited, balance sheet as of the end of, and statements of income
and statements of cash flows for, such quarter, which shall be prepared in
accordance with generally accepted accounting principles consistently applied.
All such financial statements shall be certified as accurate and complete in all
material respects (subject to normal year-end adjustments) by the chief
financial officer of the Company and shall be presented in form comparative to
the similar period of the preceding year. Further, if for any period the Company
shall have any subsidiary or subsidiaries whose accounts are consolidated with
those of the Company, then in respect of such period all such financial
statements shall be the consolidated and consolidating financial statements of
the Company and all such consolidated subsidiaries. In no event will any
Purchaser make any use or disclosure of the financial statements referred to in
this Section 7.1 or Section 7.2 or other information
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acquired pursuant to Section 7.3 or 7.4, except in connection with evaluating
its investment in the Company. For purposes of this Agreement, requalifying
Holder shall mean each Purchaser for so long as such Purchaser holds at least
fifteen percent (15%) of the number of Shares purchased by it hereunder.
7.2. Annual Financial Statements. Within ninety (90) days after the end of
each fiscal year, the Company will deliver to each Qualifying Holder financial
statements analogous to those required by Section 7.1 as at the end of and for
such year, accompanied by a certification by independent public accountants
selected by the Company's Board of Directors, that (except as otherwise stated
therein) such statements have been prepared in accordance with generally
accepted accounting principles consistently applied.
7.3. Budget. As soon as available, but in no event later than ten (10)
days before the beginning of each fiscal year (commencing with the fiscal year
beginning January 1, 1993), the Company will deliver to each of the Qualifying
Holders an operating plan for such fiscal year, together with budgeted financial
statements, in a format approved by the Directors of the Company.
7.4. Other Information. Upon the reasonable request of a Qualifying
Holder, the Company will deliver to such Qualifying Holder other information and
data, not proprietary in nature (in the good faith judgment of the Company),
pertaining to its business, financial and corporate affairs to the extent that
such delivery will not violate any then applicable law or any agreements of the
Company with third parties. The Company will permit each Qualifying Holder, at
the expense of such Qualifying Holder, to visit and inspect any of the
properties of the Company, including its books of account, and to discuss its
affairs, finances and accounts with the Company's officers or directors, all at
such reasonable times and as often as a Qualifying Holder may reasonably
request, in each case, in a manner consistent with the reasonable security and
confidentiality needs of the Company; provide, that the Company shall be under
no such obligation with respect to information deemed in good faith by the
Company to be proprietary or subject to third party restrictions on disclosure.
7.5. SEC Reports. Promptly after each such filing, the Company will
furnish each Purchaser with copies of all registration statements, and
amendments thereto, and all reports on Forms 8-K, 10-Q or 10-K (or any similar
form hereafter in use) which the Company shall file with the Securities and
Exchange Commission or any stock exchange on which securities of the Company may
be listed.
7.6. Use of Proceeds. The Company will use amounts paid for the Shares
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.7. Insurance. The Company will keep all its insurable properties
properly insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any
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premises occupied by it or arising from equipment owned by the Company and
leased to and located upon or in or about any premises occupied by any other
person; maintain all such worker's compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which it may be engaged
in business; and maintain such other insurance as is usually maintained by
persons engaged in the same or similar business as is the Company. All such
insurance shall be maintained against such risks and in at least such amounts as
such insurance is usually carried by persons engaged in the same or similar
businesses, and all insurance herein provided for shall be effected and
maintained in force under a policy or policies issued by insurers of recognized
responsibility, except that the Company may effect worker's compensation or
similar insurance in respect of operations in any state or other jurisdiction
either through an insurance fund operated by such state or other jurisdiction or
by causing to be maintained a system or systems of self-insurance which is in
accord with applicable laws. In addition, the Company shall within a reasonable
period of time obtain "Key Man Insurance" on of the lives of K. Michael Forrest
and Richard F. Selden in an aggregate face amount of not less than $1,000,000
per person and shall maintain such insurance on each such person for so long as
such person is employed by the Company.
7.8. Payment of Taxes. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind (including claims for labor,
materials and supplies), which, if unpaid, might by law become a lien or charge
upon its property; provided, however, that the Company shall not be required to
pay any tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books reserves deemed
by it adequate with respect thereto.
7.9. Corporate Existence. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, provided, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.10. Maintenance of Properties. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.11. Reservation of Common Stock. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
Underlying Shares into which the Shares are convertible and the Company further
agrees that in the event that the
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conversion price applicable to the Shares set forth in the Certificate of
Incorporation is reduced below the initial price set forth therein, it shall
immediately cause to be set aside additional shares of the Company's Common
Stock so as to comply with the provisions of this Section 7.11.
8. REGISTRATION OF SHARES.
8.1. Certain Definitions. As used in this Section 8 and elsewhere in this
Agreement, the following terms shall have the following respective meanings:
(a) "Class A Shares" shall mean shares of Class A Preferred Stock
issued to Warburg pursuant to the Exchange Agreement.
(b) "Registrable Shares" shall mean (i) the shares of Common Stock
issued or issuable upon conversion of the Shares, (ii) any shares of
Common Stock issuable to the Purchasers pursuant to Section 9 of this
Agreement (unless such shares are subject to an agreement with the Company
granting registration rights to the holder thereof on terms no less
favorable to investors than those contained herein), and (iii) any other
shares of Common Stock issued with respect to the Shares, or the shares
enumerated in clauses (i) or (ii) above by reason of stock dividends,
stock splits, recapitalizations, reorganizations, or similar Corporate
action. Wherever reference is made in this Agreement to a request or
consent of holders of a certain percentage of Registrable Shares, or to a
number or percentage of Registrable Shares held by a Holder, such
reference shall include shares of Common Stock issuable upon conversion of
the Shares even though such conversion has not yet been effected.
(c) "Holders" shall mean any Purchaser (in its capacity as holder of
any Shares or Registrable Shares and for so long as it holds such Shares
or Registrable Shares), and such of its respective successors and assigns
who acquire Shares or Registrable Shares from Holders in accordance with
the terms of this Agreement and who agree in writing with the Company to
acquire and hold the Shares or Registrable Shares subject to all the
restrictions hereof but in no event shall "Holders" include any transferee
of Registrable Shares pursuant to sales made under a registration
statement filed under the Securities Act.
(d) "Commission" shall mean the Securities and Exchange Commission
or other successor federal agency.
(e) "Registration Expenses" and "Selling Expenses" shall mean the
expenses so described in Section 8.6.
(f) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
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<PAGE> 17
(g) "Transfer" or "Transfers" shall mean any pledge, sale,
assignment, gift or other transfer of any Shares or Registrable Shares or
any interest therein, whether or not such transfer would constitute a
"sale" as that term is defined in Section 2(3) of the Securities Act.
(h) "Other Holders" shall mean all holders of the Company's
securities except the Holders and except the holders of Additional
Registrable Securities.
(i) "Additional Registrable Securities" shall mean (l) any shares of
the capital stock of the Company that are held by persons or entities who
are parties to, or assignees of a party to, an agreement (other than this
Agreement) with the Company granting registration rights to such holder
and that were sold pursuant to such agreement, and (2) any securities
issued with respect to the capital stock referred to in clause (l) above,
by reason of stock dividends, stock splits or combinations,
recapitalizations, reorganizations or other similar corporate action.
8.2. Company ("Piggyback") Registration. If (but without any obligation to
do so) the Company for itself or any of its security holders shall at any time
or times determine to register under the Securities Act any shares of its
capital stock or other securities (other than (a) the registration of an offer,
sale or other disposition of securities to employees of, or other persons
providing services to, the Company or any subsidiary pursuant to an employee or
similar benefit plan, registered on Form S-8, a comparable or successor form or
another form which is used solely for the purpose of registering such plan, or
exempt from registration pursuant to Regulation A or a comparable or successor
rule; or (b) relating to a merger, acquisition or other transaction of the type
described in Rule 145 or comparable or successor rule, registered on Form S-4 or
similar or successor forms) the Company will notify each Holder of such
determination at least thirty (30) days prior to the filing of such registration
statement, and upon the request of any Holder given in writing within twenty
(20) days after the effective date of such notice, the Company will use its best
efforts as soon as practicable thereafter to cause any of the Registrable Shares
specified by such Holder to be included in such registration statement to the
extent and under the conditions such registration is permissible under the
Securities Act. Notwithstanding the foregoing, in the event the proposed
registration is in whole or in part an underwritten public offering and if the
managing underwriter(s) determines and advises in writing that the inclusion of
some or all of the Registrable Shares of such Holders, the Additional
Registrable Securities and all shares of the Company's capital stock to be
offered by the Company and by Other Holders, whether originally covered by
requests for registration or otherwise included, would interfere with the
successful marketing of such securities, then the number of shares of capital
stock otherwise to be included in the registration statement by Holders, holders
of Additional Registrable Securities and Other Holders shall be reduced as
follows: (i) there shall first be excluded shares proposed to be included by
Other Holders; (ii) any further reduction shall be pro rata among Holders and
holders of Additional Registrable Securities in the proportion of the number of
shares of the Company's capital stock then owned by each, except, however, in
the event of a registration initiated by Warburg pursuant to the terms of the
1988 Agreement (as defined herein) in which case the shares of Common Stock
17
<PAGE> 18
issued to Warburg pursuant to the 1988 Agreement and the shares of Class A
Preferred Stock received by Warburg pursuant to the Exchange Agreement in
exchange for the Preferred Stock issued to Warburg pursuant to the 1988
Agreement shall be the last to be excluded. For purposes of apportionment in the
immediately preceding sentence, for any Holder which is a partnership, the
partners and retired partners of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any
of the foregoing persons shall be deemed to be a single "Holder", and any pro
rata reduction with respect to such "Holder" shall be based upon the aggregate
amount of Shares carrying registration rights owned by all entities and
individuals included with such "Holder", as defined in this sentence. Any Holder
whose Registrable Shares are registered shall, as a condition to participation,
comply with Section 8.4 hereof and such other reasonable requirements as nay be
imposed by the managing underwriters to effect an orderly distribution of the
Registrable Shares. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing underwriters. Any Registrable Shares withdrawn from
such underwriting shall be withdrawn from such registration. The Company shall
be under no obligation to complete any offering of its securities described in
this Section 8.2 and shall incur no liability to any Holder for its failure to
do so. The Company shall not be obligated to offer the Holders the right to
participate in more than three registrations pursuant to this Section 8.2.
8.3. Demand Registration. At any time after February 14, 1995, the
Holder(s) (as defined herein) of at least thirty percent (30%) of the then
outstanding Registrable Shares (as defined herein), may notify the Company in
writing that such Holders intend to offer or cause to be offered for sale a
number of Registrable Shares which represents not less than fifteen percent
(15%) of the Registrable Shares held by such Holder(s), and may request the
Company to cause such Registrable Shares to be registered under the Securities
Act. Such rights to request the Company to register the Holders' Registrable
Shares shall be available to the Holders no more than once during any
consecutive twelve month period. To the extent and under the condition that such
registration is permissible under the Securities Act, the Company will use its
best efforts as soon as practicable after such notification and request by such
Holder(s) to prepare and file a registration statement covering such Registrable
Shares (together with any other Registrable Shares requested by the Holders, or
the holders of Additional Registrable Securities or the Other Holders to be
included in such registration pursuant to Section 8.2 within twenty (20) days
after receipt of a notice from the Company pursuant to said Section 8.2). Such
right to require registration shall be in addition to the rights of the Holders
under Section 8.2, provided that no such request shall be made, or if made shall
be effective, during the period commencing with the date of notice, if any, by
the Company under Section 8.2 of an intention to register its securities and
ending three months after the earlier of the effective date of such registration
or the abandonment by the Company of its intent to register such securities, and
shall be available to Holders on not more than two occasions (exclusive of
registration statements on Form S-3 or comparable or successor form, as provided
below); provided that except as otherwise provided in Section 8.6.1. hereof, any
such registration right shall be deemed to have been used only (i) if the
Holders requesting registration have at least seventy-five percent (75%) of the
Registrable Shares which they have requested in good faith to be registered
included in
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<PAGE> 19
such registration statement; and (ii) upon such registration statement becoming
and remaining effective in accordance with the provisions hereof.
Notwithstanding the foregoing, in no event shall the Holder's right to require
registration under this Section 8.3 be available to Holders on more than two
occasions (exclusive of registration statements on Form S-3 or comparable or
successor form, as provided below). Anything contained herein to the contrary
notwithstanding, with respect to each registration requested pursuant to this
Section 8.3, the Company may, in its discretion, include in any registration
pursuant to this Section 8.3 any authorized but unissued shares of Common Stock
for sale by the Company or any securities for sale by Other Holders or holders
of Additional Registrable Securities. However, neither the Company, the holders
of Additional Registrable Securities, nor any Other Holder(s) may include any
securities in any registration statement requested pursuant to this Section 8.3
unless in the case of an underwritten offering, the managing underwriters shall
determine and advise that such inclusion will not interfere with the successful
marketing of the securities to be offered by the requesting Holder(s). In the
event that the managing underwriter(s) fails to approve the inclusion of any
Additional Registrable Securities in any registration under this Section 8.3 or
limits the number of shares which may be included in any registration pursuant
to this Section 8.3, then the number of shares of capital stock otherwise to be
included in the registration statement by Holders, holders of Additional
Registrable Securities, Other Holders and the Company shall be reduced as
follows: (i) there shall first be excluded shares proposed to be included by the
Company and Other Holders; (ii) any further reduction shall be pro rata among
Holders and holders of Additional Registrable Securities in the proportion of
the number of shares of the Company's capital stock then owned by each, except,
however, that the Registrable Securities of the Holders requesting such demand
registration shall be the last to be excluded. For purposes of apportionment in
the immediately preceding sentence, for any Holder which is a partnership, the
partners and retired partners of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any
of the foregoing persons shall be deemed to be a single "Holder", and any pro
rata reduction with respect to such "Holder" shall be based upon the aggregate
amount of Shares carrying registration rights owned by all entities and
individuals included with such holder", as defined in this sentence. The Company
shall have the privilege of postponing action under this Section 8.3 for a
reasonable period of time not exceeding ninety (90) days) if the filing of such
registration statement would, in the opinion of the Board of Directors of the
Company, adversely affect a material financing project or a material proposed or
pending acquisition, merger or other similar corporate event to which the
Company is or expects to be a party. Further, at any time after the Company's
consummation of an underwritten public offering pursuant to an effective
registration statement on Form S-1 (or successor form) covering the offer and
sale of its Common Stock, Holders of at least fifteen percent (15%) of the then
outstanding Registrable Shares shall have the right to require the Company to
file an unlimited number of registration statements on Form S-3, if available,
or comparable or successor form under the Securities Act (in which case the
minimum number of Registrable Shares to be covered by any such registration
statement shall be such number of Registrable Shares having probable gross
proceeds to the Holders of at least $1,000,000, as such probable gross proceeds
are determined in good faith by the managing underwriter(s) of the offering (or,
if there is none, by the Board of Directors of the Company)); and provided,
further, that such rights to request the Company to file registration statements
on
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<PAGE> 20
Form S-3 shall be available to the Holders no more than once during any
consecutive twelve (12) month period. Any registration pursuant to this Section
8.3 (other than registration statements on Form S-3 and other registrations in
connection with distributions by Holders to their respective affiliates) shall
be by means of a firm commitment underwriting managed by one or more
underwriters chosen by the Company and reasonably satisfactory to the Holder
exercising rights contained in this Section 8.3 or if more than one such Holder
is exercising such rights, reasonably satisfactory to the Holder of the greatest
number of Registrable Shares requested to be included. Any Holder(s) intending
to request a registration pursuant to this Section 8.3 shall notify all other
Holders in writing of such request at least ten (10) days prior to making the
request and permit each other Holder to join such request; provided, that such
other Holder(s), within five (5) days of receipt of such notification, so
indicates such other Holder's intention in writing to the Holder (or Holders)
from which such notification was received.
8.4. Conditions to Obligation to Register Registrable Shares. As
conditions to the Company's obligation hereunder to cause a registration
statement to be filed or Registrable Shares to be included in a registration
statement, each selling Holder shall (a) provide such information and execute
such documents as may reasonably be required in connection with such
registration, (b) have agreed to convert its Shares into the Registrable Shares
to be included, such conversion to be effective simultaneously with the closing
of the sale of the Registrable Shares pursuant to such registration statement,
(c) agree to sell its Registrable Shares on the basis provided in any
underwriting arrangements, and (d) on a timely basis, complete and execute all
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up agreements and other documents required under the terms of such
underwriting arrangements, which arrangements shall not be inconsistent
herewith.
8.5. Registration Procedures. If and whenever the Company is required by
the provisions of this Section 8 to use its best efforts to include any of the
Registrable Shares in a registration statement filed under the Securities Act,
the Company shall, as expeditiously as possible:
8.5.1. Prepare and file with the Commission a registration statement with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become and remain effective.
8.5.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for not more than three months from the date of its
effectiveness (plus such additional time during which any Holder must
cease making offers and sales, as provided in Section 8.5.5) or (unless
otherwise required by the Securities Act) until the Registrable Shares
covered thereunder have been sold, whichever is earlier.
8.5.3. Furnish to each selling Holder such number of copies of the
prospectus contained
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<PAGE> 21
in such registration statement (including each preliminary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such Holder.
8.5.4. Use its best efforts to register or qualify the Registrable Shares
covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the managing underwriter(s) shall reasonably
request, and use its best efforts to do any and all other acts and things
which may be necessary or advisable so to register or qualify the
Registrable Shares to enable such Holder to consummate the disposition of
the Registrable Shares owned by such Holder in such jurisdictions during
the period covered in Section 8.5.2; provide that the Company shall not be
obligated to qualify to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of the offer or
sale of the securities covered by the registration statement in any
jurisdiction where it is not then so subject.
8.5.5. Notify each selling Holder of any Registrable Shares covered by
such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing. Each Holder agrees, upon receipt
of such notice, forthwith to cease making offers and sales of the
Registrable Shares pursuant to such registration statement or deliveries
of the prospectus contained therein for any purpose and to return to the
Company, for modification and exchange, the copies of such prospectus not
theretofore delivered by such Holder; provided, that the Company shall
forthwith prepare and furnish to such Holder, after securing such
approvals as may be necessary, a reasonable number of copies of any
supplement to or amendment of such prospectus that may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
8.5.6. Provide an institutional transfer agent for the Registrable Shares
no later than the effective date of the first registration of any of such
Registrable Shares under the Securities Act.
8.5.7. Immediately notify all selling Holders of any stop order or similar
proceeding initiated by state or federal regulatory bodies and use its
best efforts to take all steps necessary to expeditiously remove such stop
order or similar proceeding.
8.5.8. Furnish, at the request of any Holder requesting registration of
Registrable Shares
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<PAGE> 22
pursuant to Section 8.3, on the date that such Registrable Shares are
delivered to the underwriters for sale in connection with a registration
pursuant to Section 8.3, if such securities are being sold through
underwriters, or, if such securities are not sold through underwriters, on
the date that the registration statement with respect to such securities
becomes effective: (a) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holder
making such request; and (b) two letters, one dated the effective date and
one dated the closing date, from the independent certified public
accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and,
if none, then to the Holder making such request
8.6. Description of Expenses. All expenses incurred by the Company in
complying with any of the foregoing provisions of this Section 8, including
without limitation all federal (including Securities and Exchange Commission and
National Association of Securities Dealers, Inc.) and state registration,
qualification and filing fees, printing expenses, any premium involved in
securing a policy or policies of registration insurance (but only if the Company
in its sole discretion shall choose to secure such a policy or policies, such
policy or policies to be herein referred to as "registration insurance"), fees
and disbursements of counsel for the Company, and accountants fees and expenses
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company), incident to or required by any such
registration are herein called Registration Expenses". Registration Expenses
shall also include (a) in the case of a registration pursuant to Section 8.2,
the reasonable fees and disbursements of one firm selected by the Holder or
Holders of a majority of the Shares to be included, and serving as counsel to
the selling Holder or Holders and other selling shareholders, if any, with
respect to such registration and (b) in the case of a registration pursuant to
Section 8.3 other than on Form S-3, the reasonable fees and disbursements of one
firm selected by the Holder or Holders of a majority of the Shares to be
included requesting such registration and serving as counsel to the selling
Holder or Holders and other selling shareholders, if any, with respect to such
registration. All underwriting discounts, selling commissions and transfer taxes
applicable to the sale of the Shares hereunder are herein called "Selling
Expenses". If the Company is required by the provisions of this Section 8 to use
its best efforts to effect the registration of any of the Shares under the
Securities Act, the Registration Expenses and Selling Expenses in connection
with such registration shall be borne as follows:
8.6.1. All Registration Expenses incurred in connection with (a) all
registrations under Section 8.2, (b) all registrations under Section 8.3
(excluding the second demand registration under Section 8.3 and all
registrations on Form S-3), and (c) securing registration insurance, shall
be borne by the Company, provided that the Company shall not be required
to pay any such Registration Expenses relating to a demand registration
under Section 8.3 if the registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Securities to
be registered (in which case all
22
<PAGE> 23
participating Holders shall bear such Registration Expenses pro rata based
on the number of Registrable Securities to have been registered) unless
the Holders of a majority of the Registerable Securities agree to forfeit
their right to one demand registration under Section 8.3.
8.6.2. All Registration Expenses other than those described in Section
8.6.1 above and all Selling Expenses shall be borne pro rata by the
Holders including shares in the registration statement in question;
provided, however that if other shares of capital restock are included in
such registration statement, such Registration Expenses shall be borne by
the Holders pro rata with all other persons (including the Company) for
whose account the securities covered by such registration statement are
offered in accordance with the amount of securities being so offered for
the account of each such party.
8.7. Indemnification; Underwriting Agreements. In the event that the
Company registers under the Securities Act any shares held by a Holder pursuant
to the provisions of this Agreement:
8.7.1. The Company agrees to indemnify and hold harmless such Holder, and
each person, if any, who controls such Holder within the meaning of the
Securities Act, against any and all losses, claims, damages, liabilities
or expenses, joint or several, arising out of or based upon any violation
of the Securities Act, the Securities Exchange Act of 1934, as amended,
any rules and regulations promulgated thereunder or any untrue statement
or alleged untrue statement of a material fact in any related registration
statement, prospectus, offering circular, notification or other document
or any omission or alleged omission of any material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon a statement in
writing furnished by or on behalf of the Holder or any other Holder for
inclusion therein or an omission or failure by any such Holder to furnish
any statement with respect to such Holder required to be included therein.
Promptly after receipt by any Holder or any person controlling such Holder
of notice of the commencement of any action in respect of which indemnity
may be sought against the Company, such Holder or such controlling person,
as the case may be, will notify the Company in writing of the commencement
thereof, and, subject to the provisions hereinafter stated, receipt of
such notice and the Holder's reasonable cooperation, the Company shall
assume the defense of such action (including the employment of counsel,
who shall be counsel reasonably Satisfactory to such Holder or controlling
person, as the case may be, and the payment of expenses and such counsel's
fees) insofar as such action shall relate to any alleged liability in
respect of which indemnity may be sought against the Company. Such Holder
or any such controlling person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but
the fees and expenses of such counsel shall not be at the expense of the
Company unless the employment of such counsel has been specifically
authorized by the Company or unless the Holder shall have in good faith
reasonably concluded that there may be a conflict of interest between the
Company and the Holder in the conduct of the defense of the action.
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<PAGE> 24
In connection with any offering under this Section 8 which is to be
underwritten, the Company further agrees to enter into an underwriting
agreement in usual and standard form respecting such offering; provided
that the terms of such underwriting agreement shall not be inconsistent or
conflict with the -- provisions of this Agreement.
8.7.2. The obligations of the Company under Section 8.2 and Section 8.3
are subject to the following conditions, which each such Holder hereby
agrees to fulfill: (a) that each Holder whose Shares are to be included in
any registration or qualification referred to in this Section 8 agrees, in
writing, prior to the filing of such registration or qualification,and
hereby does agree to indemnify and hold harmless the Company, each person,
if any, who controls the Company within the meaning of the Securities Act
and the officers and directors of the Company, against any and all losses,
claims, damages, liabilities or expenses arising out of or based upon any
untrue statement or alleged untrue statement of a material fact in any
related registration statement, prospectus,offering circular, notification
or other document or alleged omission of any material fact required to be
stated therein or necessary to make the statements therein not misleading,
but only with reference to statements or omissions made in reliance upon a
statement in writing furnished by or on behalf of such Holder for
inclusion therein and with reference to statements or omissions made in
reliance upon an omission or failure by such Holder to furnish any
statement with respect to such Holder required to be included therein;
provided that (i) the maximum amount of liability in respect of such
indemnification shall be limited, in the case of each Holder whose Shares
are so included, to an amount equal to the net proceeds (A) actually
received by such Holder from the sale of the Shares effected-pursuant to
such registration or (B) which would have been received had the sale of
Shares pursuant to such registration occurred and (ii) if such
registration or qualification relates to an offering which is to be
underwritten, that such Holder enters into an underwriting agreement in
usual and standard form respecting such offering; Provided that the terms
of such underwriting agreement shall not be inconsistent or conflict with
the provisions of this Agreement. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought
against such Holder the Company will notify such Holder in writing of the
commencement thereof, and such Holder shall, subject to the provisions
hereinafter stated, assume the defense of such action (including the
employment of counsel, who shall be counsel reasonably satisfactory to the
Company, and the payment of expenses and such counsel's fees) insofar as
such action shall relate to the alleged liability in respect of which
indemnity may besought against such Holder. The Company and each such
director, officer, or controlling person shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof but the fees and expenses of such counsel shall not be at the
expense of such Holder unless employment of such counsel has been
specifically authorized by such Holder or unless an indemnified party
shall have in good faith reasonably concluded that there may be a conflict
of interest between the indemnified party and the Holder in the conduct of
the defense of the action.
8.7.3. A party required to indemnify another party pursuant to this 8.7
(an
24
<PAGE> 25
"Indemnifying Party") shall not be liable for any settlement of any action
or claim relating to such liability or expense effected without its
consent, but if any settlement is effected with its consent or if a final
judgment for the plaintiff is entered in any such action, such
Indemnifying Party agrees to indemnify and hold harmless the party so
indemnified (the "Indemnified Party") from and against any loss or
liability by reason of any such settlement or judgment. The Indemnifying
Party shall indemnify the Indemnified Party for expenses, including but
not limited to reasonable fees and disbursements of counsel, incurred by
the indemnified party in connection with the indemnification proceeding as
such expenses are incurred.
8.8. Registration Under the Securities Exchange Act. Within one hundred
twenty (120) days following the end of the fiscal year of the Company in which
it consummates its initial sale of shares pursuant to a registration statement
under the Securities Act, whether or not such sale constitutes the Initial
Public Offering (as defined in Section 7), the Company will cause an effective
registration with respect to its Common Stock to be filed and maintained in
accordance with the provisions of the Securities Exchange Act of 1934 if the
same is then required.
8.9. Transfer of Registration Rights. The registration rights of the
Holders under this Section 8 may be transferred to any transferee of Shares or
Registrable Shares who acquires at least five percent (5%) in the aggregate of
the Shares of such Holder or an equivalent amount of Registrable Shares issued
upon conversion thereof. Each such transferee shall be deemed to be Holder of
Registrable Shares for purposes of this Section 8.
8.10. Mergers, Etc. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Section 8, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which such Holders would be entitled to receive in exchange for
Registrable Shares under any such merger, consolidation or reorganization and
other securities to which they subsequently give rise; provided, that this
Section 8.10 shall not apply if the Holders shall receive, pursuant to such
merger, consolidation or reorganization, in exchange for the Registrable Shares,
(a) registered securities listed on the New York Stock Exchange or the American
Stock Exchange, or with respect to which prices are reported by the National
Association of Securities Dealers Automated Quotation System, Inc. or (b)
registration and related rights on terms no less favorable to the Holders than
those contained in this Section 8 and no less favorable to the Holders than any
other shareholder of the Company receives in connection with such merger,
consolidation or reorganization.
8.11. Limitations on Registration Rights Granted With Respect to Other
Securities. From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of at least a majority of the
Shares, voting as a single class, enter into any agreement with any holder or
prospective holder of any securities of the Company giving
25
<PAGE> 26
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company or the right to require the
Company, upon any registration of any of its securities, to include, among the
securities which the Company is then registering, securities owned by such
holder, except for such rights (including required registration rights similar
to those contained in Section 8.3 hereof) which are no more favorable to the
holders thereof than the rights of the Holders contained in this Section 8. Any
right given by the Company to any holder or prospective holder of the Company's
securities in connection with the registration of securities shall be
conditioned such that it shall be consistent with the provisions of this
Agreement and with the rights of the Holders provided in this Agreement.
8.12. Market Stand-off. Each Holder agrees, if requested by the Company
and/or the representative of the underwriters underwriting an offering of the
Common Stock (or other securities) of the Company, not to sell or otherwise
transfer or dispose of any Registrable Shares held by such Holder during the one
hundred eighty (180) day period following the effective date of a registration
statement of the Company filed under the Securities Act, provided that the
directors and officers of the Company, all Other Holders and all holders of
Additional Registrable Securities participating in the underwriting enter into
similar agreements. Such agreement shall be in writing in a form satisfactory to
the Company and such representative. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said one hundred twenty (120) day period.
8.13. Termination of Registration Rights. The registration rights granted
to the Holders pursuant to this Section 8 shall terminate as to any Holder at
such time as such Holder may sell all Registrable Securities held by or issuable
to such Holder under Rule 144 (other than Rule 144(k), or any successor to Rule
144, in any two successive three-month periods.
8.14. Other Registration Rights. The registration rights granted to
Warburg pursuant to paragraph five of the Stock Purchase Agreement dated July,
1988 between the Company and Warburg (the 1988 Agreement") shall remain in full
force and effect--provided that the provisions of this Agreement shall govern
all Registrable Shares (as defined herein) of Warburg and provided further that
the Market Stand-off provisions of paragraph 5.9 of the 1988 Agreement shall be
amended to restate the ninety day standstill period to one hundred eighty (180)
days.
9. PREEMPTIVE RIGHTS.
9.1. Until the occurrence of the Initial Public Offering, or, if earlier,
less than 2,000 shares of Class B Preferred Stock remain outstanding, the
Company will not offer any equity securities, or securities convertible into, or
options, warrants, or other rights to purchase such equity securities
(collectively, the Future Shares) to any third party or Purchaser without first
providing each Purchaser so long as such Purchaser continues to hold shares of
Preferred Stock (hereinafter a "Buyer") the right to subscribe for its
Preemptive Proportionate Percentage (as such term is defined in paragraph 9.6
below) of such Future Shares for cash at a price and on such other terms as
shall have been specified by the Company in writing delivered to each Buyer
26
<PAGE> 27
(the "Preemptive Offer"), which Preemptive Offer by its terms shall remain open
and irrevocable for a period of fifteen (15) days from the date it is delivered
by the Company to each Buyer (the "Preemptive Period"). The Preemptive Offer
shall also certify that the Company has either (a) received a firm offer from a
prospective purchaser, who shall be identified in such certification, so that
the Company in good faith believes a binding agreement of sale is obtainable for
consideration having a fair market, cash equivalent, or present value set forth
in such certification; or (b) intends to make an offering of its securities at
the price and on the terms set forth in such certification.
9.2. If any Buyer shall subscribe for less than its Preemptive
Proportionate Percentage of the Future Shares set forth in the Preemptive Offer
to it, then the Company at the end of the Preemptive Period shall give notice in
the same manner to each Buyer who did subscribe during the Preemptive Period for
its entire Preemptive Proportionate Percentage of the Future Shares of the
number of Future Shares which the Buyers had not elected to purchase during the
Preemptive Period (the "Remaining Future Shares") and stating that the Buyer may
elect to purchase at the same price any or all of the Remaining Future Shares
(the "Second Preemptive Offer"), which Second Preemptive Offer by its terms
shall remain open and irrevocable for a period of at least fifteen (15) days
from the date it is delivered by the Company to each Buyer. If the total number
of Remaining Future Shares is sufficient to satisfy the elections of Buyers who
received the Second Preemptive Offer, such Remaining Future Shares shall be
allocated to them in accordance with their elections; if not, the available
Remaining Future Shares shall be allocated among the Buyers according to their
respective Preemptive Proportionate Percentages (provided that such allocation
shall be adjusted if necessary so that no Buyer is allocated more Remaining
Future Shares than it has elected to purchase). For the purpose of avoiding
fractions as to Future Shares and Remaining Future Shares, the President of the
Company (or in his or her absence any responsible corporate officer of the
Company) may adjust upward or downward by not more than one full share the
number of Future Shares or Remaining Future Shares which any Buyer would
otherwise be entitled to purchase.
9.3. Notice of each Buyer's intention to accept, in whole or in part, a
Preemptive Offer or Second Preemptive Offer made pursuant to Sections 9.1 or 9.2
herein shall be evidenced by a writing signed by the Buyer and delivered to the
Company prior to the end of the Preemptive Period or the fifteen (15) day period
of the Second Preemptive Offer, as applicable, setting forth that portion of the
Future Shares or the Remaining Future Shares, as the case may be, which the
Buyer elects to purchase (the "Notice of Acceptance").
9.4. In the event that the Buyers elect not to purchase all of the Future
Shares or the Remaining Future Shares, the Company shall have one hundred twenty
(120) days from the expiration of the Preemptive Offer (or, if applicable, the
Second Preemptive Offer) to sell all or any part of such Remaining Future Shares
not purchased by the Buyers (the "Refused Future Shares") to the parties (or
their affiliates) identified in the Preemptive Offer, but only upon terms and
conditions in all material respects, including, without limitation, unit price
and interest rates, which are no more favorable, in the aggregate, to such other
party or parties or less favorable to the Company than those set forth in the
Preemptive Offer and the Second Preemptive Offer.
27
<PAGE> 28
Upon the closing of the sale of Refused Future Shares to such other parties, the
Buyers shall purchase from the Company and the Company shall sell to each Buyer
the Future Shares and the Remaining Future Shares in respect of which a Notice
of Acceptance was delivered to the Company by such Buyer, upon the terms
specified in the Preemptive Offer and the Second Preemptive Offer. The Company
may withdraw the Preemptive Offer and the Second Preemptive Offer at any time
prior to such closing.
9.5. Notwithstanding anything to the contrary stated above, the rights
of-the Buyers under this Section 9 shall not apply to (a) any sale of shares of
the Company's capital stock pursuant to the Initial Public Offering or (b) the
issuance by the Company of Common Stock or options or warrants for the purchase
thereof issued, sold or granted, in the past or future, by the Company to its
employees or consultants pursuant to bona fide employee stock purchase, option
or similar plans or as otherwise approved by the Board of Directors of the
Company or (c) equity securities issued in connection with the acquisition of at
least fifty percent (50%) of the voting securities of another corporation,
controlling interest in another business entity, or all or substantially all of
the assets of another corporation or business entity or (d) equity securities
issued for no consideration as dividends or pursuant to stock splits or (e) any
securities issued upon the conversion or exercise of presently issued securities
or (f) any shares of Class B Preferred Stock issued and sold pursuant to Section
l.l(b) of this Agreement or (g) any equity securities issued in connection with
a joint venture in which the Company is a participant or a license, marketing or
distribution agreement to which the Company is party, if such issuance does not
exceed twenty percent (20%) of the aggregate amount of equity securities of the
Company then outstanding (on an as converted basis).
9.6. The term "Preemptive Proportionate Percentage" shall mean, as to a
Buyer, that percentage figure which expresses the ratio which (a) the number of
shares of outstanding Common Stock then owned by such Buyer bears to (b) the
aggregate number of shares of outstanding Common Stock then owned by all Buyers
(for purposes solely of the computation required under clauses (a) and (b),
Buyers holding shares of Preferred Stock shall be treated as having converted
all such outstanding shares of Preferred Stock into shares of Common Stock at
the rate at which such shares of Preferred Stock are convertible or exercisable
for Common Stock pursuant to Article IV of the Certificate of Incorporation of
the Company in effect at the time of delivery by the Company of the Preemptive
Offer).
9.7. The preemptive rights provided under this Section 9 may be
transferred or assigned in whole (but not in part) (a) to any person or entity
that directly or indirectly controls, is controlled by or is under common
control with, the transferor Buyer (b) to any other person or entity approved by
the Company, provided, in each case, that no such transfer or assignment may be
made if, in the reasonable judgment of the Company's Board of Directors, after
consultation with the Company's counsel, such transfer or assignment would make
an exemption from the registration requirements of the Securities Act and/or
applicable state securities laws unavailable with respect to the offer and sale
of the Future Shares.
28
<PAGE> 29
10. MISCELLANEOUS.
10.1. Entire Agreement; Successors. This Agreement, together with the
Schedules and Exhibits hereto sets forth the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and commitments of the parties relating thereto, including,
but not limited to, the Stock Purchase Agreement dated July, 1988 between the
Company and Warburg, which agreement is hereby terminated with respect to all
but paragraph 5 of that agreement and the Exchange Agreement dated as of October
19, 1991 between the Company and Warburg, which agreement is hereby terminated.
All the terms and provisions of this Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and assigns of
the parties hereto subject to any restrictions on assignment stated herein.
Delivery of documents by the Company or its counsel to Hale & Dorr, Attn: John
A. Burgess, Esq., special counsel to the Purchasers, shall be deemed to
constitute for all purposes (with the exception of those required or
contemplated by Section 9) the furnishing of such documents by the Company to
the Purchasers under this Agreement or in connection with the offering
hereunder.
10.2. Notices. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by prepaid telegram, addressed as
follows:
(a) if to the Purchasers:
To the Addressees shown on Schedule A
with a copy to:
Hale & Dorr
60 State Street Boston, MA 02109
Attention: John A. Burgess, Esq.
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Chief Executive Officer
with a copy to:
29
<PAGE> 30
Bingham, Dana & Gould
150 Federal Street Boston, MA 02110
Attention: Leslie H. Shapiro, Esq.
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt (ii) five (5)
business days after deposit in the U.S. mails or delivery to a nationally
recognized courier service in accordance with this Section .
10.3. Expenses. Except as provided in Section 8, each party will bear its
own expenses in connection with this Agreement, provided that the Company will
bear the reasonable fees and out-of-pocket disbursements of Hale & Dorr, special
counsel to the Purchasers, in an amount not to exceed $20,000 in the aggregate.
10.4. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the Company or any of the
Purchasers in connection herewith shall survive the execution and delivery of
this Agreement and the Shares for a period (the "Survival Period") expiring on
the first to occur of (a) the Initial Public Offering, or (b) the date which is
five years after the Closing Date. No claim may be made for breach of any
representation or warranty contained herein unless notice of such claim is given
to the breaching party within the Survival Period.
10.5. Amendments; Waivers. Changes in or additions to this Agreement may
be made by written document executed by the Company and the holders of at least
fifty-one percent (51%) in the aggregate number of shares of Common Stock issued
or issuable upon conversion of the Shares and the Class A Shares (treated as a
single group) provided that the consent of such holders shall not be required
with respect to any supplement to this-Agreement relating to the sale and
issuance of additional shares of Class B Preferred Stock in accordance with
Section l.l(b) hereof. The holders of fifty-one percent (51%) in the aggregate
of the Shares and the Class A Shares then held by Holders (treated as a single
group) may, by written instrument, waive compliance by the Company with any of
the provisions of this Agreement. Notwithstanding the foregoing, no course of
dealing or delay on the part of the Holders in exercising any right shall
operate as a waiver thereof or otherwise prejudice the rights of the Holders.
10.6. Governing Law. This Agreement shall be construed and enforced as a
contract under seal in accordance with, and the rights of the parties hereunder
shall be governed by, the internal laws of the Commonwealth of Massachusetts.
30
<PAGE> 31
SIGNED, SEALED AND DELIVERED, as of the date first written above by the
parties hereto.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
-----------------------------------------------
Title: President and CEO
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co.,
-----------------------------------------------
General Partner
By: /s/ Peter Stalker
-----------------------------------------------
Title: Managing Director
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
-----------------------------------------------
Title: President
H&Q VENTURE INVESTORS L.P.
By: /s/ Jackie Berterrechte
-----------------------------------------------
Title: Attorney-in-Fact
/s/ Leighton Reed
--------------------------------------------------
Leighton Reed
/s/ Alejandro Zaffaroni
--------------------------------------------------
Alejandro Zaffaroni
31
<PAGE> 32
INTERHEALTH LIMITED
By: /s/ Alejandro Zaffaroni
---------------------------------------
Title: General Partner
HUMANA, INC.
By: /s/ W. Roger Drumm
---------------------------------------
Title: S.V.P. Finance
S-E- BANKENS LAKEMEDELSFOND
By: /s/ R. Haichter
---------------------------------------
Title:
/s/ R. Haichter
------------------------------------------
Aktiv Lakemedel
/s/ David Smith
------------------------------------------
By: Preston Tsao, Attorney-in -Fact
/s/ Fredrik Schreuder
------------------------------------------
Fredrik Schreuder
/s/ Robert Mailloux )
------------------------------------------)
Robert Mailloux )Joint
)Tenants
/s/ Minh Mailloux )
------------------------------------------)
Minh Mailloux
/s/ Jack W. Szostak
------------------------------------------
Jack W. Szostak
32
<PAGE> 33
INDEPENDENT ORDER OF FORESTERS
By: /s/ Walter Cafucell
-----------------------------------------------
Title: Vice President-Investments
MOUNTAIN ESTATES LTD.
By: /s/ Roderick L. McLean
-----------------------------------------------
Title: President
ENERTECH ASSOCIATES, LTD.
By: /s/ N. Conway
-----------------------------------------------
Title: General Partner
N.E. CORNING TRUST NO.8
By: /s/ Edward Herriot
-----------------------------------------------
Title: Trustee
/s/ Mark Arnold
--------------------------------------------------
Mark Arnold
A. CAREY ZESIGER REVOCABLE TRUST
By: BEA Associates
Title: Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------------
Title: Managing Director
/s/ Emilio Bassini
--------------------------------------------------
Emilio Bassini
Sheana Butler (120 Shares)*
Nicola Zesiger (60 Shares)*
33
<PAGE> 34
Albert L Zesiger custodian for
Alexa L. Zesiger (60 Shares)*
Albert L. Zesiger (800 Shares)*
Barrie Ramsay Zesiger (250 Shares)*
Lucy Butler Finley (60 Shares)*
Dean Witter Foundation (250 Shares)*
Domenic Mizio (250 Shares)*
Leonard Kingsley (120 Shares)*
Andrew Heiskell (250 Shares)*
Elizabeth Heller Mandell trustee
for Elizabeth Heller Mandell (175 Shares)*
Lewis Butler Finley (60 Shares)*
Serra Butler Finley (60 Shares)*
*By: BEA ASSOCIATES, ATTORNEY IN FACT
By: /s/ Albert L. Zesiger
-------------------------------------------
Name: Albert L. Zesiger
Title: Managing Director
34
<PAGE> 35
AMENDMENT
This Amendment dated as of April 20, 1993, is by and among Transkaryotic
Therapies, Inc. (the "Company"), a Delaware corporation, and the stockholders
who have executed counterparts of the signature pages hereto (the
"Stockholders").
The Company and the Stockholders and certain others are parties to a Class
B Preferred Stock Purchase Agreement dated as of February 14, l992 (the 1992
Purchase Agreement). The Stockholders are the holders of at least fifty-one
percent (51%) of the aggregate number of shares of the Common Stock of the
Company issued or issuable upon conversion of the shares of the Company's Class
B Preferred Stock issued and sold pursuant to the 1992 Purchase Agreement and of
the Company's Class A Preferred Stock, respectively (treated as a single group).
Simultaneously with the execution and delivery of this Agreement, the
Company and the Stockholders and certain others are entering into a Class B
Preferred Stock Purchase Agreement dated the date hereof (the "1993 Purchase
Agreement"), pursuant to which the Company will issue and sell certain shares of
its Class B Preferred Stock, $1.00 par value, to the Stockholders and such other
parties. In connection with the 1993 Purchase Agreement, the Company has
requested the Stockholders to consent to the amendment of the 1992 Purchase
Agreement, and the Stockholders have agreed to do so.
NOW, THEREFORE, to induce the Company to enter into the 1993 Purchase
agreement, and intending hereby to be legally bound, the Stockholders and the
Company hereby agree as follows:
1. The 1992 Purchase Agreement is hereby amended to delete Section 7.3
(entitled "Budget") thereof.
2. The Stockholders hereby waive and relinquish any rights and remedies
that they may have by reason of any prior breach by the Company of Section 7.3
of the 1992 Purchase Agreement.
3. Except as expressly amended hereby, the 1992 Purchase Agreement shall
not be affected hereby and shall remain in full force and effect in accordance
with its terms.
4. This Amendment shall be construed and enforced as a contract under seal
in accordance with, and the rights of the parties hereunder shall be governed
by, the internal laws of the Commonwealth of Massachusetts.
5. This Amendment may be executed in two or more counterparts, each of
which together shall constitute one and the same document.
35
<PAGE> 36
SIGNED, SEALED AND DELIVERED, as of the date first written above by the
parties hereto.
TRANSKARYOTIC THERAPIES, INC.
By:/s/ K. Michael Forrest
-------------------------------------------
Title:President and CEO
----------------------------------------
WARBURG PINCUS CAPITAL COMPANY, L.P.
BY: WARBURG PINCUS & CO.,
GENERAL PARTNER
By:/s/ Rodman W. Moorhead, III
-----------------------------------
Title:Partner
--------------------------------
H&Q HEALTHCARE INVESTORS**
By: /s/ Alan Carr
-------------------------------------------
Title:President
----------------------------------------
**Limitation of Liability. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&Q Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
Barrie Ramsay Zesiger
36
<PAGE> 37
By: *
-----------------------------------
Andrew Heiskel
By: *
-----------------------------------
/s/ Emilio Bassini
--------------------------------------
/s/ Mark Arnold
--------------------------------------
H&Q Venture Investors L.P.
By:/s/ Jackie Berterretche
-----------------------------------
Title:Attorney-in-Fact
--------------------------------
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni
INTERHEALTH LIMITED
By: /s/ Alejandro Zaffaroni
-----------------------------------
Title:General & Limited Partner
--------------------------------
/s/ Robert Mailloux )
--------------------------------------)
Robert Mailloux )
)Joint
)Tenants
Minh Mailloux )
--------------------------------------
Minh Mailloux
*By: BEA ASSOCIATES,
Attorney-in-Fact
37
<PAGE> 38
By: Albert L. Zesiger
-------------------------------------------
Albert L. Zesiger
Managing Director
38
<PAGE> 1
EXHIBIT 10.4
TRANSKARYOTIC THERAPIES, INC.
CLASS B PREFERRED STOCK PURCHASE AGREEMENT
This Class B Preferred Stock Purchase Agreement (the "Agreement") is
made as of April 20, 1993 by and among Transkaryotic Therapies, Inc., a Delaware
corporation (the "Company") and the purchasers listed on Schedule A hereto (each
individually, a "Purchaser" and together, the "Purchasers").
In consideration of the mutual promises and undertakings contained
herein the parties hereby agree as follows:
1. PURCHASE AND SALE OF CLASS B CONVERTIBLE PREFERRED STOCK.
1.1. Purchase and Sale of Shares.
(a) On the Closing Date (as defined in Section 1.2 below),
subject to the terms and conditions hereof and in reliance upon the
warranties, representations and agreements contained herein, the
Company agrees to sell to each of the Purchasers, and each of the
Purchasers agrees to purchase from the Company, the number of shares of
the Company's Class B Convertible Preferred Stock, $1.00 par value per
share ("Class B Preferred Stock"), set forth opposite the name of each
such Purchaser on Schedule A hereto at a price of $400.00 per share.
The aggregate or any portion of the shares of Class B Preferred Stock
to be purchased from the Company by the Purchasers pursuant to this
Agreement are herein referred to as the "Shares."
(b) To the extent that 12,500 Shares are not sold at the
Closing (as defined in Section 1.2 below), the Company may, up to 120
days after the Closing, sell and issue additional shares of Class B
Preferred Stock on substantially the same terms and conditions as the
sale of the Shares purchased pursuant to this Agreement, provided that
each person or entity acquiring such shares becomes a party to this
Agreement as a Purchaser prior to such acquisition by executing an
Instrument of Accession hereto in the form of Exhibit V hereto and an
Instrument of Accession to the Voting Rights Agreement referred to in
Section 5.5 of the Class B Preferred Stock Purchase Agreement dated
February 14, 1992, by and among the Company and the purchasers listed
in Schedule A thereto (the "1992 Purchase Agreement"). The closing of
each such sale of additional shares of Class B Preferred stock shall be
held at such time and place as may be agreed upon by the parties
thereto, upon the same terms and conditions as those applicable to the
initial sale of Shares hereunder, provided that the Company's
representations and warranties shall be subject to such changes and
additions as are necessary to reflect the consummation of the initial
sale of Shares hereunder and any and all intervening events occurring
between the date hereof and the date of such closing. From and after
any such sale of additional shares of Class B Preferred Stock, the
purchaser of such shares shall be deemed a "Purchasers under this
Agreement and the shares so purchased shall be
<PAGE> 2
deemed "Shares" for all purposes of this Agreement.
(c) The sale of Shares by the Company to each of the
Purchasers is a separate sale to the same extent as if set forth in a
separate agreement.
1.2. Closing. The closing of the initial purchase and sale of Shares
hereunder (the "Closing") shall take place at the offices of Bingham, Dana &
Gould, 150 Federal Street, Boston, Massachusetts at 2:00 p.m., Boston local
time, on April 20, 1993 or at such other time and date as the Company and the
Purchasers may agree upon in writing (the "Closing Date"). At the Closing, the
Company will deliver to each Purchaser certificates evidencing the Shares to be
purchased by such Purchaser, as set forth on Schedule A, against payment of the
entire purchase price for the Shares in lawful money of the United States of
America by cancellation of indebtedness, bank or certified check, wire-transfer
or such other form of payment as shall be mutually agreed upon by such Purchaser
and the Company.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants, to each of the Purchasers that, as of the date of this
Agreement, except as otherwise described on Schedule B hereto or in a letter
dated March 30, 1993, from Bingham, Dana & Gould to Hale & Dorr, the following
are true and correct:
2.1. Organization and Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business as a foreign
corporation in Massachusetts and is in good standing in each jurisdiction in
which failure to so qualify would have a materially adverse effect on the
business, assets or prospects of the Company. The copies of the Company's
Restated Certificate of Incorporation (the "Certificate of Incorporation"), and
By-laws which are attached as Exhibits I and II hereto, respectively, are true,
complete and correct as of the date of this Agreement. The Company has the
corporate power and authority to own and lease its property, to enter into,
deliver, and perform its obligations and undertakings under, this Agreement and
all other agreements referred to herein or contemplated hereby, to issue the
Shares, and to conduct its business as now conducted.
2.2. Subsidiaries. The Company has no subsidiaries and does not
control, directly or indirectly, any other corporation, association or business
organization.
2.3. Capitalization. The Company's entire authorized capital stock
consists of: 250,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"); and 66,000 shares of Preferred Stock, $1.00 par value per share
(the "Preferred Stock"), of which 6,000 shares have been designated as Class A
Convertible Preferred Stock (the "Class A Preferred Stock"), and 60,000 shares
have been designated as Class B Convertible Preferred Stock (the "Class B
Preferred Stock"), of the authorized shares of Common Stock, 87,241 shares are
issued to the persons named on Schedule D hereto under the heading "Common
Stock." All of the authorized shares of Preferred Stock, designated as Class A
Preferred Stock are issued to Warburg Pincus Capital Company, L.P. ("Warburg").
Of the authorized shares of Preferred Stock designated as Class B Preferred
Stock, 39,459 shares (the "Previous Shares") are issued to the persons named on
Schedule D hereto under the heading "Class B Preferred Stock" and were issued
and sold to such persons pursuant to the 1992 Purchase Agreement. No shares of
- 2 -
<PAGE> 3
Common Stock or Preferred Stock are held in the Company's treasury. The Company
has reserved 40,554 shares of Common Stock for issuance to management, employees
and consultants. In addition, the Company has reserved 10,000 shares of Common
Stock for issuance pursuant to an Exchange Agreement dated as of October 19,
1991, between the Company and Warburg Pincus Capital Company, L.P., relating to
exchange of shares of Class A Preferred Stock for shares of Common Stock, and
51,959 shares of Common Stock for issuance upon conversion of the Class B
Preferred Stock (such shares reserved for issuance upon conversion of the Class
B Preferred Stock to be issued hereunder are hereinafter referred to as the
Underlying Shares"). The Common Stock and the Preferred Stock are not entitled
to cumulative voting rights, preemptive rights, antidilutive rights or so-called
registration rights under the Securities Act of 1933, as amended (the
"Securities Act"), except as provided in this Agreement, the 1992 Purchase
Agreement, or Article IV of the Company's Certificate of Incorporation,
("Article IV"). The Common Stock and the Preferred Stock have the preferences,
voting powers, qualifications, and special or relative rights or privileges set
forth in Article IV. All outstanding shares of Common Stock and Preferred Stock
have been validly issued and are fully paid and nonassessable, and were issued
in accordance with applicable state and federal securities laws. The Shares,
when issued in accordance with this Agreement, and the Underlying Shares, when
issued in accordance with this Agreement and the Certificate of Incorporation,
will be validly authorized, issued and outstanding, fully paid and nonassessable
and, based in part upon representations of the Purchasers in Sections 3 and 4
hereof, will be issued in accordance with applicable state and federal
securities laws. The Company does not have outstanding any option, warrant or
other commitment to issue or to acquire any shares of its capital stock, or any
securities or obligations convertible into or exchangeable for its capital
stock, and the Company has not given any person any right to acquire from the
Company or sell to the Company any shares of its capital stock. There is, and
immediately upon consummation at the Closing of the transactions contemplated
hereby there will be, no agreement, restriction or encumbrance (such as a right
of first refusal, right of first offer, proxy, voting agreement, etc.) with
respect to the sale or voting of any shares of capital stock of the Company
(whether outstanding or issuable upon conversion or exercise of outstanding
securities) except as contemplated by the 1992 Purchase Agreement, this
Agreement, or the Certificate of Incorporation and By-laws of the Company and
the Company will not voluntarily place any restrictions on the transfer of the
Shares or the Underlying Shares except to the extent set forth herein or
contemplated hereby.
2.4. Financial Information. The Company has delivered to the Purchasers
a copy of (a) its audited balance sheet (the "Balance Sheet") as of December 31,
1991 and the related statements of income and retained earnings and changes in
financial position for the year then ended (with the Balance Sheet, the "Audited
Financials") and (b) its unaudited balance sheet as of December 31, 1992 (the
"Financial Statement Date") and the related statements of income and retained
earnings and changes in financial position for the period then ended (the
"Unaudited Financials," and together with the Audited Financials, the "Financial
Statements"). The Financial Statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial condition of the Company at the date thereof and
the results of the operations of the Company for the period then ended;
provided, however, that the Unaudited Financials are subject to year-end
adjustments and may not contain all footnotes required under generally accepted
accounting principles.
- 3 -
<PAGE> 4
2.5. Absence of Undisclosed Liabilities. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to the date hereof which are not
fully reflected or provided for on the Balance Sheet, except for obligations
arising after the Financial Statement Date in the ordinary course of business or
reflected in the Unaudited Financials.
2.6. Absence of Certain Changes. Since the Financial Statement Date,
other than as described in the Unaudited Financials, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that
shown by the Balance Sheet;
(b) any damage, destruction or loss of any of.the properties
or assets of the Company (whether or not covered by insurance)
materially adversely affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or
other distribution in respect of any of the Company's capital stock or
any direct or indirect redemption, purchase or other acquisition of any
of such stock by the Company;
(d) any labor trouble, or any other event, development, or
condition, of any character, or threat of the same, materially
adversely affecting the business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of
the Company;
(g) any sale, assignment or transfer of any material tangible
or intangible assets of the Company except with respect to tangible
assets in the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee
or stockholder of the Company, or any agreement or commitment therefor.
2.7. Taxes. For all periods ended on or prior to the Financial
Statement Date, the Company has filed or will file within the time prescribed by
law (including extensions of time approved by the appropriate taxing authority)
all tax returns and reports required to be filed with the United States Internal
Revenue Service, the State of Delaware, the Commonwealth of Massachusetts, any
other states, and all foreign countries and has paid or made adequate provision
in the Balance Sheet for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due (or, to the knowledge of the
Company, claimed by such authority or jurisdiction to be due) on or in respect
of such tax returns and reports. The Company does not know of any (a) other
federal, Delaware, Massachusetts, state or foreign taxes which are due and
payable by the Company which have not been so paid; (b) other federal, Delaware,
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Massachusetts, state or foreign tax returns or reports which are required to be
filed which have not been so filed; or (c) unpaid assessment for additional
taxes for any fiscal period or any basis thereof. The Company's federal or state
income tax returns have never been audited.
2.8. Title to Properties; Liens and Encumbrances. The Company has good
and marketable title to all of its properties and assets, real and personal,
including those reflected in the Balance Sheet (except as sold or otherwise
disposed of in the ordinary course of business since the Financial Statement
Date), subject to no mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance or charge except (a) as shown on the Balance Sheet or in
the notes thereto, (b) tax, materialmen's or like liens for obligations not yet
due or payable or being contested in good faith by appropriate proceedings, and
(c) vendors' interests in installment purchase obligations of the Company which
in the aggregate do not exceed $5,000.
2.9. Intellectual Property Rights. Attached hereto as Schedule C is a
true and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or licenses to use the same,
and any and all applications therefor, as well as all trade secrets and similar
proprietary information owned or held by the Company, are all such items
required to enable the Company to conduct its business as now conducted. The
Company has not received any formal or informal notice of infringement or other
complaint that the Company's operations violate or infringe rights under
patents, trademarks, service marks, trade names, trade secrets, copyrights or
licenses or any other proprietary rights of others, nor does the Company have
any reason to believe that there has been any such violation or infringement.
Except as set forth in Schedule C, no royalties, honoraria, or fees are or will
be payable by the Company to other persons by reason of the ownership or use by
the Company of said patents, trademarks, service marks, trade names, trade
secrets, copyrights or rights or licenses to use the same or similar proprietary
information, or any and all applications therefor.
2.10. Government Approvals and Licenses. The Company has all
governmental approvals, authorizations, consents, licenses and permits necessary
or required to conduct its business as presently conducted and will use its best
efforts to obtain all governmental approvals, authorizations, consents, licenses
and permits necessary or required to conduct its business as proposed to be
conducted.
2.11. Contracts. Other than as set forth in Schedule B or described
elsewhere in this Section 2, the Company has no presently existing contract,
obligation or commitment (a) involving payment by or to the Company of more than
$10,000 (other than employment or consulting agreements terminable at the option
of the Company without penalty on no more than thirty (30) days prior written
notice with employees of, or consultants to, the Company who are not officers or
directors thereof), or (b) which is material to the Company or its currently
contemplated business, including without limitation the following:
(i) any employment, bonus, commission or consulting agreements
or arrangements; pension, profit sharing, deferred compensation, stock
bonus, retirement, stock option, stock purchase, phantom stock or
similar plans, including agreements
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<PAGE> 6
evidencing rights to purchase securities of the Company; or agreements
with shareholders;
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money,
or mortgaging, pledging, or granting or creating a lien or security
interest or other encumbrance on any of the Company's property; or any
agreement or instrument evidencing any guaranty by the Company of
payment or performance by any other person;
(iii) any agreements with dealers, sales representatives,
brokers, and other distributors, jobbers, advertisers, sales agencies;
(iv) any agreements with any labor union or collective
bargaining organization;
(v) any contract or series of contracts with the same person
for the furnishing or purchase of machinery, equipment, goods or
services, including, without limitation, agreements with processors and
subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal
property, including motor vehicles, and real estate;
(vii) any indenture, agreement, or other document relating to
the sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses;
(ix) any agreements limiting the freedom of the Company or any
of its employees to compete in any line of business or in any
geographic area or with any person;
(x) any agreements providing for disposition of the business
and assets, or securities, of the Company; agreements of merger or
consolidation to which the Company is a party; or letters or intent
with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with
respect to, the acquisition of assets or securities of any other
business or entity.
True and complete copies of all contracts and other items listed on
Schedule B have been made available to the Purchasers. The Company has complied
with all the material provisions of said contracts and commitments set forth in
Schedule B hereto and of all other material contracts and commitments to which
it is a party, and is not in default under any thereof, except to the extent to
which any such noncompliance and defaults would not materially and adversely
affect the business or financial condition of the Company. There exists no
condition, event or act which constitutes, or which after notice, lapse of time
or both would constitute, a material default by the Company or, to the Company's
knowledge, by any third party, under any of said
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<PAGE> 7
contracts or commitments.
2.12. Shareholders, Directors, and Officers. Schedule D hereto contains
a true, correct and complete list showing the name of each shareholder of record
of the Company and the number of the shares of the Company's capital stock owned
by each shareholder. Schedule E hereto contains a true, correct and complete
list showing the name of each director and officer of the Company.
2.13. Litigation. There is no litigation or proceeding pending or, to
the Company's knowledge, threatened, against the Company, or the Company's
properties nor does the Company know or have reasonable grounds to know of any
basis for any such action, including, without limitation, any governmental
investigation relating to employee safety or discrimination matters. To the
Company's knowledge, there is no litigation or proceeding pending or threatened
against or relating to any present or former employee of the Company by reason
of the past employment or consulting relationships of any of such employees with
the Company. There are no outstanding judgments against the Company.
2.14. Authorization. The execution, delivery and performance by the
Company of this Agreement and the Exchange Agreement, the issue and sale of the
Shares and the issuance of the Underlying Shares upon the conversion of the
Class B Preferred Stock have been duly authorized and approved by all necessary
corporate action. This Agreement has been duly executed and delivered on behalf
of the Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors. The execution, delivery and performance of this Agreement, the
issuance and sale of the Shares and the issuance of the Underlying Shares upon
the conversion of the Class B Preferred Stock will not conflict with, or result
in a breach of any of the terms of, or constitute a default under, the
Certificate of Incorporation or By-laws of the Company or result in a material
breach of any of the terms of, or constitute a material default under, any
agreement, instrument or other restriction to which the Company is a party or by
which it or any of its properties or assets is bound.
2.15. Brokers. The Company has no contract, arrangement or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
2.16. Governmental Consents. Based in part on the representations made
by the Purchasers in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the execution and delivery of this Agreement or
the offer, issue, sale or delivery of the Shares pursuant to this Agreement or
the consummation of any other transactions contemplated hereby.
2.17. Securities Laws. Neither the Company nor any other person, firm
or corporation acting on its behalf has sold any of the Shares or other
securities of the Company to, or offered any thereof for sale to, or solicited
any offers to purchase any thereof from, or otherwise approached or negotiated
(nor will the Company or any other person,firm or corporation acting on its
behalf sell, offer, solicit or otherwise approach or negotiate) in respect
thereof with, such character or number of persons in the aggregate, or in such
manner, as would result in bringing
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<PAGE> 8
the Shares, or any part thereof, within the provisions of Section 5 of the
Securities Act. Assuming that the Purchasers' representations and warranties
contained in Sections 3 and 4 of this Agreement are true and correct at the
Closing and on the date of the issuance of the Underlying Shares, the offering
and sale of the Shares and the issuance of the Underlying Shares upon conversion
of the Shares are each exempt or will be exempt from registration and prospectus
delivery requirements of the Securities Act as in effect on the date hereof and
are also exempt or will be exempt from registration or qualification under
applicable state securities laws as in effect on the date hereof.
2.18. Legal Compliance. The Company is not in violation of any
provisions of its Certificate of Incorporation or By-laws, or of any provision
of any federal or state judgment, writ, decree, order, statute, rule or
governmental regulation applicable to the Company, which violation materially
and adversely affects the business or financial condition of the Company.
2.19. Insurance. The Company maintains insurance of the types and in
the amounts generally deemed adequate for its business and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, without limitation, insurance covering real and personal property
owned or leased by the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
2.20. Nondisclosure Agreements. The Company has entered into
nondisclosure and noncompete agreements in favor of the Company in such forms as
have been approved from time to time by the Board of Directors of the Company,
with each person employed by it or serving as a consultant to it with employment
or consulting responsibility requiring access to proprietary technical
information of the Company.
2.21. Disclosures. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate or instrument furnished to any of the
Purchasers or their special counsel in connection with the transactions
contemplated by this Agreement, when read together, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Company knows of no information or fact which has or would have a material
adverse effect on the business, prospects, assets or condition, financial or
otherwise, of the Company which has not been disclosed in Schedule B.
2.22. U.S. Real Property Holding Corporation. The Company is not now
and has never been a "United States Real Property Holding Corporation" as
defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as amended,
and Section 1.897-2(b) of the Regulations promulgated by the Internal Revenue
Service.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS. Each of the
Purchasers, severally and not jointly, represents and warrants to the Company
that the following are true and correct in all material respects:
3.1. Authority. Such Purchaser has all requisite power and authority to
enter into this
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<PAGE> 9
Agreement and perform its obligations hereunder. All necessary corporate and
other action has been taken by it or on its behalf to execute, deliver and
perform its obligations under this Agreement and to purchase the Shares. This
Agreement constitutes the valid and legally binding obligation of such
Purchaser, enforceable against the Purchaser in accordance with its terms.
3.2. Brokers. Such Purchaser has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.3. Accredited Investor Status. Such Purchaser is acquiring the Shares
for the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Shares; provided that the disposition of its property shall at
all times be and remain within its control. It further represents that it is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act. Such Purchaser further represents that it
is acquiring the Shares for its own account and with its general assets and not
with the assets of any separate account in which any employee benefit plan has
any interest. As used in this Section 3.3, the terms "separate account" and
"employee benefit plan" shall have the respective meanings assigned to them in
the Employee Retirement Income Security Act of 1974.
3.4. Formation. Such Purchaser was not organized for the purpose of
making an investment in the Company.
3.5. Receipt of Information. Such Purchaser has been furnished such
information and documents as such Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the Company, terms and conditions of this Agreement and
the purchase of the Shares.
4. SECURITIES LAWS.
4.1. Registration of Shares. Each Purchaser, severally and not jointly,
represents and warrants to the Company that it understands that the Shares have
not been registered under the Securities Act or the securities laws of any state
or other jurisdiction and that the Shares must be held indefinitely unless they
are subsequently registered thereunder or an exemption from registration
thereunder is available. Each Purchaser, severally and not jointly, further
represents and warrants to the Company that it will not transfer any of the
Shares in violation of the provisions of this Agreement or any applicable
federal or state securities laws or regulations.
4.2. Financial Matters. Each Purchaser, severally and not jointly,
represents and warrants to the Company that (a) it understands that the purchase
of the Shares involves substantial risk and that its financial condition and
investments are such that it is in a financial position to hold the Shares
purchased by it for an indefinite period of time and to bear the economic risk
of, and withstand a complete loss of, such Shares; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
such Purchaser has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
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<PAGE> 10
4.3. Transfer Legends and Restrictions. The Transfer (as defined in
Section 8.1 of the 1992 Purchase Agreement) of the Shares will be restricted in
accordance with the terms hereof. Each certificate evidencing the Shares,
including any certificate issued to any transferee thereof, shall be imprinted
with a legend in substantially the following form (unless otherwise permitted
under this Section 4 or unless such Shares shall have been effectively
registered and sold under the Securities Act and applicable state securities
laws):
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF - 1933. NO TRANSFER, SALE OR OTHER
DISPOSITION OF THESE SHARES SHALL BE MADE UNLESS A REGISTRATION
STATEMENT WITH RESPECT TO THESE SHARES UNDER THE SECURITIES ACT OF 1933
HAS BECOME EFFECTIVE OR THE ISSUER HAS BEEN FURNISHED WITH AN OPINION
OF COUNSEL SATISFACTORY TO IT TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED, UNLESS SUCH OPINION OF COUNSEL IS NOT REQUIRED BY THE
TERMS OF THE CLASS B PREFERRED STOCK PURCHASE AGREEMENT AMONG THE
ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED AS OF APRIL ___, 1993 (THE
"AGREEMENT"). TRANSFER OF THESE SHARES IS FURTHER RESTRICTED AS
PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS AVAILABLE AT THE ISSUER'S
OFFICES."
The Holder (as defined in Section 8.1 of the 1992 Purchase Agreement)
of any Shares by acceptance thereof agrees, so long as any legend described in
this Section 4.3 shall remain on the certificates evidencing the Shares, prior
to any Transfer of any of the Shares (except for a Transfer effected pursuant to
an effective registration statement under the Securities Act or in compliance
with Rule 144 thereunder), to give written notice to the Company of such
Holder's intention to effect such Transfer and agrees to comply in all respects
with the provisions of this Section 4.3. Such notice, if required, shall
describe the proposed method of Transfer of the Shares in question. Upon (but
only upon) receipt by the Company of such notice, and a written opinion of
counsel to such Holder (which counsel and opinion shall be reasonably
satisfactory to counsel for the Company) the proposed Transfer may be effected
without registration under the Securities Act or in compliance with Rule 144
thereunder and under applicable state securities laws, the proposed Transfer may
be effected, and the Holder of such Shares shall thereupon be entitled to
Transfer the same in accordance with the terms of the notice delivered by such
Holder to the Company. Each certificate evidencing the Shares issued upon any
such Transfer shall bear the same legend as set forth in this Section 4.3. Upon
the written request of a Holder of the Shares, the Company shall remove the
foregoing legend from the certificates evidencing such Shares and issue to such
Holder new certificates therefor free of any transfer legend if, with such
request, and at the request of the Company, the Company shall have received an
opinion of counsel selected by the Holder, such counsel and opinion to be
reasonably satisfactory to counsel to the Company, to the effect that any
Transfers by such Holder of such Shares may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws.
4.4. Rule 144. The Purchasers recognize that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company covenants that (a) at all times after the Company first
becomes subject to the reporting
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<PAGE> 11
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the Company will comply with the current public information
requirements of Rule 144(c)(1) under the Securities Act; and (b) at all such
times as Rule 144 is available for use by the Purchasers, the Company will
furnish any Purchaser upon request with all information within the possession of
the Company required for the preparation and filing of Form 144.
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligation
of each of the Purchasers to purchase and pay for the Shares is subject to the
following:
5.1. Representations and Warranties. The representations and warranties
of the Company made herein shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as if
they had been made on and as of the Closing Date.
5.2. Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3. Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate (to be signed by its chief executive officer) dated the
Closing Date certifying as to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 in all material respects.
5.4. Certificate as to Unaudited Financials. The Company shall have
delivered to the Purchasers a certificate (to be signed by its controller) dated
the Closing Date certifying the advice of its independent certified public
accountants that upon closing of the transactions hereby contemplated, such
accountants expect to deliver an unqualified report of their audit of the
Unaudited Financials.
5.5. Opinion of Company's Counsel. The Purchasers shall have received
an opinion of Bingham, Dana & Gould, counsel to the Company, substantially in
the form of Exhibit IV hereto and which opinion shall be satisfactory in form
and substance to the Purchasers' special counsel.
5.6. Restated Certificate of Incorporation. A Restated Certificate of
Incorporation for the Company in the form attached as Exhibit I hereto shall
have been duly filed with the Secretary of State of the State of Delaware and
shall have become effective.
5.7. Blue Sky Matters. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Shares, and the Underlying Shares shall have been obtained or effected (except
for the filing of any notice subsequent to the Closing which may be required
under applicable state securities laws which, if required, shall be filed on a
timely basis as may be so required).
5.8. Corporate Proceedings and Consents. All corporate and other
proceedings to be
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<PAGE> 12
taken and all waivers and consents to be obtained in connection with the
transactions contemplated by this Agreement shall have been taken or obtained
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers and their special counsel, each of whom shall have
received all such originals or certified or other copies of such documents as
each may reasonably request.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligation
of the Company to sell the Shares is subject to the following:
6.1. Representations and Warranties. The representations and warranties
of the Purchasers made herein shall be true, correct and complete in all
material respects on and as of the Closing Date with the same force and effect
as if they had been made on and as of the Closing Date.
6.2. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and substance to the Company and the Company's counsel, and
they each shall have received all such counterpart original or certified or
other copies of such documents as they may reasonably request.
6.3. Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchasers on or prior to
the Closing Date shall have been performed or complied with.
6.4. Authorizations. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States of America
or of any state required in connection with the lawful issuance and sale of the
Shares to the Purchasers as contemplated under this Agreement shall have been
duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with each of the
Purchasers as follows, such covenants to expire at such times as the Company
shall have consummated a firm commitment underwritten public offering pursuant
to an effective registration statement on Form S-1 or a successor form under the
Securities Act, covering the offer and sale by the Company of Common Stock to
the public at a price per share that is not less than $600.00 per share (as
adjusted for any stock dividends, stock splits, combinations, or similar
recapitalizations occurring after the date hereof), and which results in
aggregate net proceeds to the Company of not less than $10,000,000 (the "Initial
Public Offering"); provided, that the Company may refrain from compliance with
any such covenant to the extent that such compliance would, in the good faith
judgment of the Board of Directors of the Company, violate applicable securities
laws:
7.1. Quarterly Financial Statements. Within forty-five (45) days after
the end of each of the first three quarters in each fiscal year, the Company
will deliver to each Qualifying Holder (as hereinafter defined) copies of the
Company's unaudited, balance sheet as of the end of, and statements of income
and statements of cash flows for, such quarter, which shall be prepared in
accordance with generally accepted accounting principles consistently applied.
All such financial statements shall be certified as accurate and complete in all
material respects (subject to normal year-end adjustments) by the chief
financial officer of the Company and shall
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<PAGE> 13
be presented in form comparative to the similar period of the preceding year.
Further, if for any period the Company shall have any subsidiary or subsidiaries
whose accounts are consolidated with those of the Company, then in respect of
such period all such financial statements shall be the consolidated and
consolidating financial statements of the Company and all such consolidated
subsidiaries. In no event will any Purchaser make any use or disclosure of the
financial statements referred to in this Section 7.1 or Section 7.2 or go other
information acquired pursuant to Section 7.3 or 7.4, except in connection with
evaluating its investment in the Company. For purposes of this Agreement,
"Qualifying Holder" shall mean each Purchaser for so long as such Purchaser
holds at least fifteen percent (15%) of the aggregate number of Shares purchased
by it hereunder.
7.2. Annual Financial Statements. Within ninety (90) days after the end
of each fiscal year, the Company will deliver to each Qualifying Holder
financial statements analogous to those required by Section 7.1 as at the end of
and for such year, accompanied by a certification by independent public
accountants selected by the Company's Board of Directors, that (except as
otherwise stated therein) such statements have been prepared in accordance with
generally accepted accounting principles consistently applied.
7.3. Other Information. Upon the reasonable request of a Qualifying
Holder, the Company will deliver to such Qualifying Holder other information and
data, not proprietary in nature (in the good faith judgment of the Company),
pertaining to its business, financial and corporate affairs to the extent that
such delivery will not violate any then applicable law or any agreements of the
Company with third parties. The Company will permit each Qualifying Holder, at
the expense of such Qualifying Holder, to visit and inspect any of the
properties of the Company, including its books of account, and to discuss its
affairs, finances and accounts with the Company's officers or directors, all at
such reasonable times and as often as a Qualifying Holder may reasonably
request, in each case, in a manner consistent with the reasonable security and
confidentiality needs of the Company; provided, that the Company shall be under
no such obligation with respect to information deemed in good faith by the
Company to be proprietary or subject to third party restrictions on disclosure.
7.4. SEC Reports. Promptly after each such filing, the Company will
furnish each Purchaser with copies of all registration statements, and
amendments thereto, and all reports on Forms 8-K, 10-Q or 10-K (or any similar
form hereafter in use) which the Company shall file with the Securities and
Exchange Commission or any stock exchange on which securities of the Company may
be listed.
7.5. Use of Proceeds. The Company will use amounts paid for the Shares
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.6. Insurance. The Company will keep all its insurable properties
properly insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any premises occupied by it or arising
from equipment owned by the Company and teased to and located upon or in or
about any premises occupied by any other person; maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or
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<PAGE> 14
jurisdiction in which it may be engaged in business; and maintain such other
insurance as is usually maintained by persons engaged in the same or similar
business as is the Company. All such insurance shall be maintained against such
risks and in at least such amounts as such insurance is usually carried by
persons engaged in the same or similar businesses, and all insurance herein
provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance fund
operated by such state or other jurisdiction or by causing to be maintained a
system or systems of self-insurance which is in accord with applicable laws. In
addition, the Company shall within a reasonable period of time obtain "Key Man
Insurance' on the lives of K. Michael Forrest and Richard F. Selden in an
aggregate face amount of not less than $1,000,000 per person and shall maintain
such insurance on each such person for so long as such person is employed by the
Company.
7.7. Payment of Taxes. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind (including claims for labor,
materials and supplies), which, if unpaid, might by law become a lien or charge
upon its property; provided, however, that the Company shall not be required to
pay any tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books reserves deemed
by it adequate with respect thereto.
7.8. Corporate existence. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, provided, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.9. Maintenance of Properties. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.10. Reservation of Common Stock. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
Underlying Shares into which the Shares are convertible and the Company further
agrees that in the event that the conversion price applicable to the Shares set
forth in the Certificate of Incorporation is reduced below the initial price set
forth therein, it shall immediately cause to be set aside additional shares of
the Company's Common Stock so as to comply with the provisions of this Section
7.11.
- 14 -
<PAGE> 15
8. REGISTRATION OF SHARES; PREEMPTIVE RIGHTS.
The Company and the Purchasers hereby agree that (i) both (A) the
shares of Common Stock issued or issuable upon conversion of the Shares and (B)
any other shares of Common Stock issued in respect of any Shares or the shares
enumerated in clause (A) above by reason of stock dividends, stock splits,
recapitalizations, reorganizations, or similar corporate action, shall be deemed
to be "Registrable Securities" for all purposes of Section 8 of the 1992
Purchase Agreement and shall be entitled to all of the rights and benefits
described therein with respect to Registrable Shares; and (ii) the Purchasers
hereunder shall be deemed to be Purchasers for all purposes of Section 9 of the
1992 Purchase Agreement and shall be entitled to all of the preemptive rights
described therein with respect to future issuances and sales of securities by
the Company (other than issuances and sales pursuant to this Agreement).
9. MISCELLANEOUS.
9.1. Entire Agreement; Successors. This Agreement, together with the
Schedules and Exhibits hereto sets forth the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and commitments of the parties relating thereto; provided,
that nothing herein shall impair or otherwise affect the 1992 Purchase
Agreement, which shall remain in full force and effect. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto subject to any restrictions on assignment stated herein. Delivery of
documents by the Company or its counsel to Hale & Dorr, Attn: John A. Burgess,
Esq., special counsel to the Purchasers, shall be deemed to constitute for all
purposes the furnishing of such documents by the Company to the Purchasers under
this Agreement or in connection with the offering hereunder.
9.2. Notices. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by prepaid telegram, addressed as
follows:
(a) if to the Purchasers:
To the addresses of the Purchasers reflected in the
stock register of the Company
with a copy to:
Hale & Dorr
60 State Street
Boston, MA 02109
Attention: John A. Burgess, Esq.
- 15 -
<PAGE> 16
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Chief Executive Officer
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110
Attention: Leslie H. Shapiro, Esq.
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt (ii) five (5)
business days after deposit in the U.S. mails or delivery to a
nationally-recognized courier service in accordance with this Section .
9.3. Expenses. Except as provided in Section 8, each party will bear
its own expenses in connection with this Agreement, provided that the Company
will bear the reasonable fees and out-of-pocket disbursements of Hale & Dorr,
special counsel to the Purchasers, in an amount not to exceed $5,000 in the
aggregate.
9.4. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by the Company or any of the
Purchasers in connection herewith shall survive the execution and delivery of
this Agreement and the Shares for a period (the "Survival Period") expiring on
the first to occur of (a) the Initial Public Offering, or (b) the date which is
five years after the Closing Date. No claim may be made for breach of any
representation or warranty contained herein unless notice of such claim is given
to the breaching party within the Survival Period.
9.5. Amendments; Waivers. Changes in or additions to this Agreement may
be made by written document executed by the Company and the holders of at least
fifty-one percent (51%) in the aggregate number of shares of Common Stock issued
or issuable upon conversion of the Shares. The holders of fifty-one percent
(51%) in the aggregate of the Shares then held by Holders may, by written
document, waive compliance by the Company with any of the provisions of this
Agreement. Notwithstanding the foregoing, no course of dealing or delay on the
part of the Holders in exercising any right shall operate as a waiver thereof or
otherwise prejudice the rights of the Holders.
9.6. Governing Law. This Agreement shall be construed and enforced as a
contract under seal in accordance with, and the rights of the parties hereunder
shall be governed by, the internal laws of the Commonwealth of Massachusetts.
- 16 -
<PAGE> 17
9.7. Miscellaneous. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same document.
The headings herein are for convenience of reference only and shall not affect
the construction of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or unenforceability of any other
provision.
[The remainder of this page is intentionally left blank.]
- 17 -
<PAGE> 18
SIGNED, SEALED AND DELIVERED, as of the date first written above by the
parties hereto.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
---------------------------------
Title: President and CEO
WARBURG PINCUS CAPITAL
COMPANY, L.P. (5,875 shares)
By: Warburg Pincus & Co.,
General Partner
By: /s/ Rodman W. Moorhead
---------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS*
(708 shares)
By: /s/ Alan Carr
---------------------------------
Title: President
*Limitation of Liability. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&Q Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
- 18 -
<PAGE> 19
AMERICAN MEDICAL INTERNATIONAL, INC.
PENSION PLAN (600 shares)
By: **
-------------------------------------
ALZA CORPORATION RETIREMENT PLAN
(125 shares)
By: **
Title:
----------------------------------
Barrie Ramsey Zesiger (76 shares)
By: **
-------------------------------------
Andrew Heiskell (76 shares)
By: **
-------------------------------------
/s/ Emilio Bassini
----------------------------------------
Emilio Bassini (51 shares)
/s/ Mark Arnold
----------------------------------------
Mark Arnold (51 shares)
H&Q VENTURE INVESTORS L.P.
(119 shares)
By: /s/ Jackie Berterreteche
----------------------------------------
Title: Attorney-in-Fact
- 19 -
<PAGE> 20
H&Q LIFE SCIENCES INVESTORS***
(1,500 shares)
By: /s/ Alan Carr
-------------------------------------
Title: President
***Limitation of Liability. The name H&Q Life Sciences Investors is the
designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as amended. All persons dealing with H&Q Life sciences
Investors must look solely to the trust property for the enforcement of any
claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor
shareholders assume any personal liability for obligations entered into on
behalf of H&Q Life Sciences Investors.
- 20 -
<PAGE> 21
/s/ Alejandro Zaffaroni
---------------------------------------
Alejandro Zaffaroni (139 shares)
INTERHEALTH LIMITED
(188 shares)
By: /s/ Alejandro Zaffaroni
-----------------------------------
Title: General and Limited Partner
/s/ Robert Mailloux )
--------------------------------------
Robert Mailloux ) JOINT
) TENANTS
) (125
) shares)
/s/ Minh Mailloux )
--------------------------------------
Minh Mailloux
/s/ Michael Schmertzler
--------------------------------------
Michael Schmertzler (188 shares)
/s/ Michael Sorell
--------------------------------------
Dr. Michael Sorell (62 shares)
By: BEA ASSOCIATES,
Attorney-in-Fact
By: /s/ Albert L. Zesiger
---------------------------
Albert L. Zesiger
Managing Director
- 21 -
<PAGE> 22
SCHEDULES AND EXHIBITS
SCHEDULE
A List of Purchasers and number of Shares being
purchased at Closing
B Schedule of Exceptions
C List of Patents, Trademarks, Copyrights and Licenses
D List of current shareholders and number of shares
owned
E List of directors and officers
EXHIBIT
I Restated Certificate of Incorporation of the Company
II By-laws of the Company
III Form of Legal Opinion of Bingham, Dana & Gould
IV Form of Instrument of Accession
- 22 -
<PAGE> 1
EXHIBIT 10.5
================================================================================
CLASS C PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
by and among
TRANSKARYOTIC THERAPIES, INC.
and
THE PURCHASERS LISTED ON SCHEDULE A
Dated as of November 3, 1993
================================================================================
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
CLASS C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
1. PURCHASE AND SALE OF THE UNITS. ................................ 5
1.1. The Units.............................................. 5
1.2. Closing................................................ 6
1.3. Allocation of Purchase Price........................... 6
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY................... 6
2.1. Organization and Standing of the Company............... 6
2.2. Subsidiaries........................................... 7
2.3. Capitalization......................................... 7
2.4. Financial Information.................................. 8
2.5. Absence of Undisclosed Liabilities..................... 8
2.6. Absence of Certain Changes............................. 8
2.7. Taxes.................................................. 9
2.8. Title to Properties; Liens and Encumbrances............ 9
2.9. Intellectual Property Rights........................... 9
2.10. Government Approvals and Licenses...................... 10
2.11. Contracts.............................................. 10
2.12. Shareholders, Directors, and Officers.................. 11
2.13. Litigation............................................. 11
2.14. Authorization.......................................... 11
2.15. Brokers................................................ 12
2.16. Governmental Consents.................................. 12
2.17. Securities Laws........................................ 12
2.18. Legal Compliance....................................... 12
2.19. Insurance.............................................. 12
2.20. Nondisclosure Agreements............................... 13
2.21. Disclosures............................................ 13
2.22. U.S. Real Property Holding Corporation................. 13
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS................ 13
3.1. Authority.............................................. 13
3.2. Brokers................................................ 13
3.3. Accredited Investor Status............................. 13
3.4. Formation.............................................. 14
3.5. Receipt of Information................................. 14
4. SECURITIES LAWS................................................. 14
4.1. Registration of Securities............................. 14
4.2. Financial Matters...................................... 14
<PAGE> 3
4.3. Transfer Legends and Restrictions...................... 14
4.4. Rule 144............................................... 16
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING............ 16
5.1. Representations and Warranties......................... 16
5.2. Performance............................................ 16
5.3. Compliance Certificate................................. 16
5.4. Registration Rights Agreement.......................... 16
5.5. Opinion of Company's Counsel........................... 17
5.6. Restated Certificate of Incorporation.................. 17
5.7. Blue Sky Matters....................................... 17
5.8. Corporate Proceedings and Consents..................... 17
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.............. 17
6.1. Representations and Warranties......................... 17
6.2. Proceedings and Documents.............................. 17
6.3. Performance............................................ 17
6.4. Authorizations......................................... 17
7. AFFIRMATIVE COVENANTS........................................... 18
7.1. Quarterly Financial Statements......................... 18
7.2. Annual Financial Statements............................ 18
7.3. Other Information...................................... 18
7.4. SEC Reports............................................ 19
7.5. Use of Proceeds........................................ 19
7.6. Insurance.............................................. 19
7.8. Corporate Existence.................................... 19
7.7. Payment of Taxes....................................... 19
7.9. Maintenance of Properties.............................. 20
7.10. Reservation of Common Stock............................ 20
8. PREEMPTIVE RIGHTS............................................... 20
8.1. Right of First Offer................................... 20
8.2. Remaining Future Shares................................ 21
8.3. Buyer's Notice......................................... 21
8.4. Right of Company to Sell Refused Future Shares......... 21
8.5. Exceptions to Right of First Offer..................... 22
8.6. Preemptive Proportionate Percentage.................... 22
8.7. Transfer of Preemptive Rights.......................... 22
8.8. Termination of Preemptive Rights Provisions of
Class B Stock Purchase Agreements...................... 23
8.9. Waiver of Certain Preemptive Rights.................... 23
8.10. Amendments; Waivers.................................... 23
9. MISCELLANEOUS................................................... 23
9.1. Entire Agreement; Successors........................... 23
<PAGE> 4
9.2. Notices................................................ 23
9.3. Expenses............................................... 24
9.4. Survival of Representations and Warranties............. 24
9.5. Amendments; Waivers.................................... 24
9.6. Governing Law.......................................... 25
9.7. Amended and Restated Voting Rights Agreement........... 25
9.8. Miscellaneous.......................................... 25
<PAGE> 5
TRANSKARYOTIC THERAPIES, INC.
CLASS C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
This Class C Preferred Stock and Warrant Purchase Agreement (this
"AGREEMENT") is made as of the 3rd day of November, 1993 by and among
Transkaryotic Therapies, Inc., a Delaware corporation (the "COMPANY"), and the
purchasers listed on SCHEDULE A hereto (each individually, a "PURCHASER" and
together, the "PURCHASERS").
In consideration of the mutual promises and undertakings contained
herein the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE UNITS.
1.1. THE UNITS.
(a) On the Closing Date (as defined in Section 1.2 below), subject to
the terms and conditions hereof and in reliance upon the warranties,
representations and agreements contained herein, the Company agrees to sell
to each of the Purchasers, and each of the Purchasers agrees to purchase
from the Company, the number of Units (as hereinafter defined) set forth
opposite the name of each such Purchaser on SCHEDULE A hereto at a price of
$16.00 per Unit. Each "Unit" shall consist of (i) two shares of the Class C
Convertible Preferred Stock, par value $1.00 per share, of the Company (the
"CLASS C PREFERRED STOCK"), and (ii) one Common Stock Purchase Warrant,
substantially in the form of EXHIBIT I hereto (a "WARRANT") for the
purchase, upon the terms and conditions set forth therein, of one share of
the Common Stock, par value $.01 per share, of the Company (THE "COMMON
STOCK").
(b) To the extent that fewer than 937,500 Units are sold at the
Closing (as defined in Section 1.2 below), the Company may, on one or more
occasions during the 120 days following the Closing, sell and issue
additional Units on substantially the same terms and conditions as the sale
of the Units purchased pursuant to this Agreement, PROVIDED that each
person or entity acquiring such Units becomes a party to this Agreement as
a Purchaser prior to such acquisition by executing an Instrument of
Accession hereto in the form of EXHIBIT II hereto. The closing of each such
sale of additional Units shall be held at such time and place as may be
agreed upon by the parties thereto, upon the same terms and conditions as
those applicable to the initial sale of Units hereunder, PROVIDED that the
Company's representations and warranties shall be subject to such changes
and additions as are necessary to reflect the consummation of the initial
sale of Units hereunder and any and all intervening events occurring
between the date hereof and the date of such closing. From and after any
such sale of additional Units, the purchaser of such Units shall be deemed
a "Purchaser" under this Agreement, and the Units so purchased shall be
deemed "Units" for all purposes of this Agreement.
<PAGE> 6
(c) The sale of Units by the Company to each of the Purchasers is a
separate sale to the same extent as if set forth in a separate agreement.
(d) The aggregate or any portion of the shares of Class C Preferred
Stock to be purchased from the Company by the Purchasers pursuant to this
Agreement are herein referred to as the "SHARES." The aggregate or any
portion of the shares of Common Stock issuable upon conversion of the
Shares or exercise of the Warrants are herein referred to as the
"UNDERLYING SHARES." The Warrants, the Shares and the Underlying Shares,
collectively, are herein referred to as the "SECURITIES."
1.2. CLOSING. The closing of the initial purchase and sale of the Units
hereunder (the "CLOSING") shall take place at the offices of Bingham, Dana &
Gould, 150 Federal Street, Boston, Massachusetts at 10:00 a.m., Boston local
time, on November 3, 1993 or at such other time and date as the Company and the
Purchasers may agree upon in writing (the "CLOSING DATE"). At the Closing, the
Company will deliver to each Purchaser (i) certificates evidencing that number
of Shares which is equal to twice the number of Units purchased by such
Purchaser set forth on SCHEDULE A opposite the name of such Purchaser, and (ii)
a Warrant for the purchase of that number of shares of Common Stock as is equal
to one-half the number of Shares purchased by such Purchaser, against payment by
such Purchaser of the entire purchase price for the Units in lawful money of the
United States of America by cancellation of indebtedness, bank or certified
check, wire-transfer or such other form of payment as shall be mutually agreed
upon by such Purchaser and the Company.
1.3. ALLOCATION OF PURCHASE PRICE. The Company and the Purchasers, having
adverse interests and as a result of arm's length bargaining, agree that (i)
none of the Purchasers nor any of their affiliates or associates has rendered or
has agreed to render any services to the Company in connection with this
Agreement or the issuance of the Units; (ii) the Warrants are not being issued
as a form of compensation; and (iii) the assumed price at which the Units would
be issued if they were issued apart from the Warrants is $15.99 per unit.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby represents
and warrants to each of the Purchasers that, as of the date of this Agreement,
except as otherwise described on Schedule B hereto, the following are true and
correct:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to transact business as a foreign
corporation in the Commonwealth of Massachusetts and is in good standing in each
jurisdiction in which failure to so qualify would have a materially adverse
effect on the business, assets or prospects of the Company. The copy of the
Company's Amended and Restated Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION"), which is attached as EXHIBIT III hereto, is true, complete and
correct as of the date of this Agreement. The Company has the corporate power
and authority to own and lease its property, to enter into, deliver, and perform
its obligations and undertakings under, this Agreement and all other agreements
referred to herein or contemplated hereby, to issue the
2
<PAGE> 7
Units, and to conduct its business as now conducted.
2.2. SUBSIDIARIES. The Company has no subsidiaries and does not control,
directly or indirectly, any other corporation, association or business
organization.
2.3. CAPITALIZATION. The Company's entire authorized capital stock consists
of: 15,000,000 shares of Common Stock, and 1,941,000 shares of Preferred Stock,
$1.00 par value per share (the "PREFERRED STOCK"), of which 6,000 shares have
been designated as Class A Convertible Preferred Stock (the "CLASS A PREFERRED
STOCK"), 66,000 shares have been designated as Class B Convertible Preferred
Stock (the "CLASS B PREFERRED STOCK"), and 1,875,000 shares have been designated
as Class C Preferred Stock. Of the authorized shares of Common Stock, 4,117,635
shares are issued of record to the persons named on SCHEDULE C hereto under the
heading "Common Stock". Of the authorized shares of Class A Preferred Stock,
6,000 shares are issued of record to the party named on Schedule C hereto under
the heading "Class A Preferred Stock". Of the authorized shares of Class B
Preferred Stock, 49,339 shares are issued of record to the persons named on
SCHEDULE C hereto under the heading Class B Preferred Stock." Immediately prior
to the Closing, no shares of Class C Preferred Stock are issued or outstanding.
No shares of Common Stock or Preferred Stock are held in the Company's treasury.
The Company has reserved 1,250,000 shares of Common Stock for issuance to
employees and consultants under the 1993 Long-Term Incentive Plan (the
"INCENTIVE PLAN") and 180,000 shares of Common Stock for issuance to
non-employee directors under the 1993 Non-Employee Directors' Stock Option Plan
(the "DIRECTORS PLAN"). The Company has granted options under the Incentive Plan
for the purchase of 35,040 shares of Common Stock. No options have been granted
under the Directors' Plan. In addition, the Company has reserved 750,000 shares
of Common Stock for issuance upon conversion of the Class A Preferred Stock,
2,220,255 shares of Common Stock for issuance upon conversion of the Class B
Preferred Stock (which number will be adjusted subsequent to this offering) and
1,875,000 shares of Common Stock for issuance upon conversion of the Class C
Preferred Stock. The Common Stock and the Preferred Stock are not entitled to
cumulative voting rights, preemptive rights, antidilutive rights or so-called
registration rights under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), except as provided in this Agreement or Article IV of the
Company's Certificate of Incorporation ("ARTICLE IV"). The Common Stock and the
Preferred Stock have the preferences, voting powers, qualifications, and special
or relative rights or privileges set forth in Article IV. All outstanding shares
of Common Stock and Preferred Stock have been validly issued and are fully paid
and nonassessable, and were issued in accordance with applicable state and
federal securities laws. The Units, when issued in accordance with this
Agreement, and the Underlying Shares, when issued in accordance with this
Agreement and the Certificate of Incorporation, will be validly authorized,
issued and outstanding, fully paid and nonassessable and, based in part upon
representations of the Purchasers in Sections 3 and 4 hereof, will be issued in
accordance with applicable state and federal securities laws. The Company does
not have outstanding any option, warrant or other commitment to issue or to
acquire any shares of its capital stock, or any securities or obligations
convertible into or exchangeable for its capital stock, other than options
granted pursuant to the Incentive Plan listed on SCHEDULE C hereto, options it
is committed to grant annually under the Directors' Plan, or warrants listed on
SCHEDULE C hereto, and the
3
<PAGE> 8
Company has not given any person any right to acquire from the Company or sell
to the Company any shares of its capital stock. There is, and immediately upon
consummation at the Closing of the transactions contemplated hereby there will
be, no agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, etc.) with respect to the sale or
voting of any shares of capital stock of the Company (whether outstanding or
issuable upon conversion or exercise of outstanding securities) except as
contemplated by this Agreement, by the Certificate of Incorporation and By-laws
of the Company or as indicated on SCHEDULE B hereto, and the Company will not
voluntarily place any restrictions on the transfer of the Warrants, the Shares
or the Underlying Shares except to the extent set forth herein or contemplated
hereby.
2.4. FINANCIAL INFORMATION. The Company has delivered to the Purchasers a
copy of (a) its audited balance sheet (the "BALANCE SHEET") as of December 31,
1992 (the "FINANCIAL STATEMENT DATE") and the related statements of income and
retained earnings and changes in financial position for the year then ended
(with the Balance Sheet, the "Audited Financials") and (b) its unaudited balance
sheet as of June 30, 1993 and the related statements of income and retained
earnings and changes in financial position for the period then ended (the
"UNAUDITED FINANCIALS," and together with the Audited Financials, the
("FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis and fairly present the financial condition of the Company at the date
thereof and the results of the operations of the Company for the period then
ended, provided, however, that the Unaudited Financials are subject to year-end
adjustments and may not contain all footnotes required under generally accepted
accounting principles.
2.5. ABSENCE OF UNDISCLOSED LIABILITIES. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to the date hereof which are not
fully reflected or provided for on the Balance Sheet, except for obligations
arising after the Financial Statement Date in the ordinary course of business or
reflected in the Unaudited Financials.
2.6. ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date, other
than as described in the Unaudited Financials or as indicated on SCHEDULE B
hereto, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown
by the Balance Sheet;
(b) any damage, destruction or loss of any of the properties or assets
of the Company (whether or not covered by insurance) materially adversely
affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock or any direct
or indirect redemption, purchase or other acquisition of any of such stock
by the Company;
4
<PAGE> 9
(d) any labor trouble, or any other event, development, or condition,
of any character, or threat of the same, materially adversely affecting the
business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of the
Company;
(g) any sale, assignment or transfer of any material tangible or
intangible assets of the Company except with respect to tangible assets in
the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor.
2.7. TAXES. For all periods ended on or prior to the Financial Statement
Date, the Company has filed or will file within the time prescribed by law
(including extensions of time approved by the appropriate taxing authority) all
tax returns and reports required to be filed with the United States Internal
Revenue Service, the State of Delaware, the Commonwealth of Massachusetts, any
other states, and all foreign countries and has paid or made adequate provision
in the Balance Sheet for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due (or, to the knowledge of the
Company, claimed by such authority or jurisdiction to be due) on or in respect
of such tax returns and reports. The Company does not know of any (a) other
federal, Delaware, Massachusetts, state or foreign taxes which are due and
payable by the Company which have not been so paid; (b) other federal, Delaware,
Massachusetts, state or foreign tax returns or reports which are required to be
filed which have not been so filed; or (c) unpaid assessment for additional
taxes for any fiscal period or any basis thereof. The Company's federal or state
income tax returns have never been audited.
2.8. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Except as indicated on
SCHEDULE B hereto, the Company has good and marketable title to all of its
properties and assets, real and personal, including those reflected in the
Balance Sheet (except as sold or otherwise disposed of in the ordinary course of
business since the Financial Statement Date), subject to no mortgage, pledge,
lien, security interest, conditional sale agreement, encumbrance or charge
except (a) as shown on the Balance Sheet or in the notes thereto, (b) tax,
materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings, and (c) vendors' interests
in installment purchase obligations of the Company which in the aggregate do not
exceed $25,000.
2.9. INTELLECTUAL PROPERTY RIGHTS. Attached hereto as SCHEDULE D is a true
and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or
5
<PAGE> 10
licenses to use the same, and any and all applications therefor, as well as all
trade secrets and similar proprietary information owned or held by the Company,
are all such items required to enable the Company to conduct its business as now
conducted. The Company has not received any formal or informal notice of
infringement or other complaint that the Company's operations violate or
infringe rights under patents, trademarks, service marks, trade names, trade
secrets, copyrights or licenses or any other proprietary rights of others, nor
does the Company have any reason to believe that there has been any such
violation or infringement. Except as set forth in SCHEDULE D, no royalties,
honoraria, or fees are or will be payable by the Company to other persons by
reason of the ownership or use by the Company of said patents, trademarks,
service marks, trade names, trade secrets, copyrights or rights or licenses to
use the same or similar proprietary information, or any and all applications
therefor.
2.10. GOVERNMENT APPROVALS AND LICENSES. The Company has all governmental
approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as presently conducted and will use its best efforts to
obtain all governmental approvals, authorizations, consents, licenses and
permits necessary or required to conduct its business as proposed to be
conducted.
2.11. CONTRACTS. Other than as set forth in SCHEDULE B or D or described
elsewhere in this Section 2, the Company has no presently existing contract,
obligation or commitment (a) involving payment by or to the Company of more than
$25,000 (other than employment or consulting agreements terminable at the option
of the Company without penalty on no more than thirty (30) days prior written
notice with employees of, or consultants to, the Company who are not officers or
directors thereof), or (b) which is material to the Company or its currently
contemplated business, including without limitation the following:
(i) any employment, bonus, commission or consulting agreements or
arrangements; pension, profit sharing, deferred compensation, stock
bonus, retirement, stock option, stock purchase, phantom stock or
similar plans, including agreements evidencing rights to purchase
securities of the Company; or agreements with shareholders;
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money,
or mortgaging, pledging, or granting or creating a lien or security
interest or other encumbrance on any of the Company's property; or any
agreement or instrument evidencing any guaranty by the Company of
payment or performance by any other person;
(iii) any agreements with dealers, sales representatives,
brokers, and other distributors, jobbers, advertisers, sales agencies;
(iv) any agreements with any labor union or collective bargaining
organization;
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(v) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and
subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal property,
including motor vehicles, and real estate;
(vii) any indenture, agreement, or other document relating to the
sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses;
(ix) any agreements limiting the freedom of the Company or any of
its employees to compete in any line of business or in any geographic
area or with any person;
(x) any agreements providing for disposition of the business and
assets, or securities, of the Company; agreements of merger or
consolidation to which the Company is a party; or letters or intent
with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with respect
to, the acquisition of assets or securities of any other business or
entity.
True and complete copies of all contracts and other items listed on
SCHEDULE B have been made available to the Purchasers. The Company has complied
with all the material provisions of said contracts and commitments set forth in
SCHEDULE B hereto and of all other material contracts and commitments to which
it is a party, and is not in default under any thereof, except to the extent to
which any such noncompliance and defaults would not materially and adversely
affect the business or financial condition of the Company. There exists no
condition, event or act which constitutes, or which after notice, lapse of time
or both would constitute, a material default by the Company or, to the Company's
knowledge, by any third party, under any of said contracts or commitments.
2.12. SHAREHOLDERS, DIRECTORS, AND OFFICERS. SCHEDULE C hereto contains a
true, correct and complete list showing the name of each shareholder of record
of the Company and the number of the shares of the Company's capital stock owned
by each shareholder. SCHEDULE E hereto contains a true, correct and complete
list showing the name of each director and officer of the Company.
2.13. LITIGATION. There is no litigation or proceeding pending or, to the
Company's knowledge, threatened, against the Company or the Company's
properties, nor does the Company know or have reasonable grounds to know of any
basis for any such action, including,
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without limitation, any governmental investigation relating to employee safety
or discrimination matters. To the Company's knowledge, there is no litigation or
proceeding pending or threatened against or relating to any present or former
employee of the Company by reason of the past employment or consulting
relationships of any of such employees with the Company. There are no
outstanding jugments against the Company.
2.14. AUTHORIZATION. The execution, delivery and performance by the Company
of this Agreement and the issuance and sale of the Units and, upon conversion of
the Shares or exercise of the Warrants, the Underlying Shares, have been duly
authorized and approved by all necessary corporate action. This Agreement has
been duly executed and delivered on behalf of the Company and constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the rights of creditors. The execution, delivery and
performance of this Agreement, the issuance and sale of the Units and, upon
conversion of the Shares or exercise of the Warrants, the Underlying Shares,
will not conflict with, or result in a breach of any of the terms of, or
constitute a default under, the Certificate of Incorporation or By-laws of the
Company or result in a material breach of any of the terms of, or constitute a
material default under, any agreement, instrument or other restriction to which
the Company is a party or by which it or any of its properties or assets is
bound.
2.15. BROKERS. Except as described on SCHEDULE B, the Company has no
contract, arrangement or understanding with any broker, finder, or similar agent
with respect to the transactions contemplated by this Agreement.
2.16. GOVERNMENTAL CONSENTS. Based in part on the representations made by
the Purchasers in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Units pursuant to this Agreement or
the consummation of any other transactions contemplated hereby.
2.17. SECURITIES LAWS. Neither the Company nor any other person, firm or
corporation acting on its behalf has sold any of the Units or other securities
of the Company to, or offered any thereof for sale to, or solicited any offers
to purchase any thereof from, or otherwise approached or negotiated (nor will
the Company or any other person, firm or corporation acting on its behalf sell,
offer, solicit or otherwise approach or negotiate) in respect thereof with, such
character or number of persons in the aggregate, or in such manner, as would
result in bringing the Units, or any part thereof, within the provisions of
Section 5 of the Securities Act. Assuming that the Purchasers' representations
and warranties contained in Sections 3 and 4 of this Agreement are true and
correct at the Closing and on the date of the issuance of the Underlying Shares,
the offering and sale of the Units, and the issuance of the Underlying Shares
upon conversion of the Shares and exercise of the Warrants, are each exempt, or
will each be exempt, as the case may be, from registration and prospectus
delivery requirements of the Securities Act as in effect on the date hereof and
are also exempt or will be exempt from registration or qualification under
applicable state securities laws as in effect on the date hereof.
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2.18. LEGAL COMPLIANCE. The Company is not in violation of any provisions
of its Certificate of Incorporation or By-laws, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which violation materially and adversely
affects the business or financial condition of the Company.
2.19. INSURANCE. The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including,
without limitation, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
2.20. NONDISCLOSURE AGREEMENTS. The Company has entered into nondisclosure
and noncompete agreements in favor of the Company in such forms as have been
approved from time to time by the Board of Directors of the Company, with each
person employed by it or serving as a consultant to it with employment or
consulting responsibility requiring access to proprietary technical information
of the Company.
2.21. DISCLOSURES. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate or instrument furnished to any of the
Purchasers or their special counsel in connection with the transactions
contemplated by this Agreement, when read together, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Company knows of no information or fact which has or would have a material
adverse effect on the business, prospects, assets or condition, financial or
otherwise, of the Company which has not been disclosed in Schedule B.
2.22. U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not now and
has never been a "United States Real Property Holding Corporation" as defined in
Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and Section
1.897-2(b) of the Regulations promulgated by the Internal Revenue Service.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS. Each of the Purchasers,
severally and not jointly, represents and warrants to the Company that the
following are true and correct in all material respects:
3.1. AUTHORITY. Such Purchaser has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder. All necessary
corporate and other action has been taken by it or on its behalf to execute,
deliver and perform its obligations under this Agreement and to purchase the
Units. This Agreement constitutes the valid and legally binding obligation of
such Purchaser, enforceable against the Purchaser in accordance with its terms.
3.2. BROKERS. Such Purchaser has no contract, arrangement or understanding
with any
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broker, finder or similar agent with respect to the transactions contemplated by
this Agreement.
3.3. ACCREDITED INVESTOR STATUS. Such Purchaser is acquiring the Units for
the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Units or any portion thereof; provided that the disposition of
its property shall at all times be and remain within its control. It further
represents that, except as otherwise disclosed in writing to the Company, it is
an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act and that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Units. Such Purchaser further represents
that it is acquiring the Units for its own account and with its general assets
and not with the assets of any separate account in which any employee benefit
plan has any interest. As used in this Section 3.3, the terms "separate account"
and "employee benefit plan" shall have the respective meanings assigned to them
in the Employee Retirement Income Security Act of 1974.
3.4. FORMATION. Except as otherwise disclosed in writing to the Company,
such Purchaser was not organized for the purpose of making an investment in the
Company.
3.5. RECEIPT OF INFORMATION. Such Purchaser has been furnished such
information and documents as such Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the Company, terms and conditions of this Agreement and
the purchase of the Units. Each Purchaser who is not an accredited investor, by
signing the signature pages hereto, acknowledges that he, she or it, as the case
may be, has received a copy of the Company's prospectus dated July 26, 1993,
together with the Prospectus Supplement dated November 3, 1993.
4. SECURITIES LAWS.
4.1. REGISTRATION OF SECURITIES. Each Purchaser, severally and not jointly,
represents and warrants to the Company that it understands that the Securities
have not been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT") or the securities laws of any state or other jurisdiction and
that the Securities must be held indefinitely unless they are subsequently
registered thereunder or an exemption from registration thereunder is available.
Each Purchaser, severally and not jointly, further represents and warrants to
the Company that it will not transfer any of the Securities in violation of the
provisions of this Agreement or any applicable federal or state securities laws
or regulations.
4.2. FINANCIAL MATTERS. Each Purchaser, severally and not jointly,
represents and warrants to the Company that (a) it understands that the purchase
of the Securities involves substantial risk and that its financial condition and
investments are such that it is in a financial position to hold the Securities
purchased by it for an indefinite period of time and to bear the economic risk
of, and withstand a complete loss of, such Securities; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
such Purchaser has
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extensive knowledge and experience in financial and business matters,
investments, securities and private placements and the capability to evaluate
the merits and risks of the transactions contemplated by this Agreement.
4.3. TRANSFER LEGENDS AND RESTRICTIONS. The Transfer (as defined below) of
the Securities will be restricted in accordance with the terms hereof.
"Transfer" shall mean any pledge, sale, assignment, gift or other transfer of
any Securities or any interest therein, whether or not such transfer would
constitute a "sale" as that term is defined in Section 2(3) of the Securities
Act.
Each certificate evidencing the Shares or the Underlying Shares, including
any certificate issued to any transferee thereof, shall be imprinted with a
legend in substantially the following form (unless otherwise permitted under
this Section 4 or unless such Securities shall have been effectively registered
and sold under the Securities Act and applicable state securities laws):
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF THESE
SHARES SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO THESE
SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME EFFECTIVE OR THE ISSUER
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO IT TO THE
EFFECT TEAT SUCH REGISTRATION IS NOT REQUIRED, UNLESS SUCH OPINION OF
COUNSEL IS NOT REQUIRED BY THE TERMS OF THE CLASS C PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS
DATED AS OF NOVEMBER 3, 1993 (THE "AGREEMENT"). TRANSFER OF THESE SHARES IS
FURTHER RESTRICTED AS PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS
AVAILABLE AT THE ISSUER'S OFFICES."
Each Warrant, including any warrant issued to any transferee thereof, shall
be imprinted with a legend in substantially the following form (unless otherwise
permitted under this Section 4 or unless such Warrant shall have been
effectively registered and sold under the Securities Act and applicable state
securities laws):
"NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR
OTHER DISPOSITION OF THIS WARRANT OR THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO THIS
WARRANT OR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME
EFFECTIVE OR THE ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
SATISFACTORY TO IT TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED,
UNLESS SUCH OPINION OF COUNSEL IS NOT REQUIRED
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BY THE TERMS OF THE CLASS C PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED AS OF NOVEMBER 3,
1993 (THE "AGREEMENT"). TRANSFER OF THIS WARRANT AND THE SHARES ISSUABLE
UPON THE EXERCISE HEREOF IS FURTHER RESTRICTED AS PROVIDED IN THE
AGREEMENT, A COPY OF WHICH IS AVAILABLE AT THE ISSUER'S OFFICES."
The Holder (as defined below) of any Securities by acceptance thereof
agrees, so long as any legend described in this Section 4.3 shall remain on such
Securities, prior to any Transfer of any of the Securities (except for a
Transfer effected pursuant to an effective registration statement under the
Securities Act or in compliance with Rule 144 thereunder), to give written
notice to the Company of such Holder's intention to effect such Transfer and
agrees to comply in all respects with the provisions of this Section 4.3. Such
notice, if required, shall describe the proposed method of Transfer of the
Securities in question. Upon (but only upon) receipt by the Company of such
notice, and a written opinion of counsel to such Holder (which counsel and
opinion shall be reasonably satisfactory to counsel for the Company) that the
proposed Transfer may be effected without registration under the Securities Act
or in compliance with Rule 144 thereunder and under applicable state securities
laws, the proposed Transfer may be effected, and the Holder of such Securities
shall thereupon be entitled to Transfer the same in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate or warrant
evidencing the Securities issued upon any such Transfer shall bear the same
legend as set forth in this Section 4.3. Upon the written request of a Holder of
the Securities, the Company shall remove the foregoing legend from the
certificates or warrants evidencing such Securities and issue to such Holder new
certificates or warrants therefor free of any transfer legend if, with such
request, and at the request of the Company, the Company shall have received an
opinion of counsel selected by the Holder, such counsel and opinion to be
reasonably satisfactory to counsel to the Company, to the effect that any
Transfers by such Holder of such Securities may be made to the public without
compliance with either Section 5 of the Securities Act or Rule 144 thereunder
and applicable state securities laws. "HOLDER" shall mean any Purchaser (in its
capacity as holder of any Securities and for so long as it holds such
Securities), and such of its respective successors and assigns who acquire
Securities from Holders in accordance with the terms of this Agreement and who
agree in writing with the Company to acquire and hold the Securities subject to
all the restrictions hereof, but in no event shall "Holder" include any
transferee of any Securities pursuant to sales made under a registration
statement filed under the Securities Act.
4.4. RULE 144. The Purchasers recognize that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company covenants that (a) at all times after the Company first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company will comply with the
current public information requirements of Rule 144(c)(1) under the Securities
Act; and (b) at all such times as Rule 144 is available for use by the
Purchasers, the Company will furnish any Purchaser upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144.
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5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The obligation of each
of the Purchasers to purchase and pay for the Units is subject to the following:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company made herein shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as if
they had been made on and as of the Closing Date.
5.2. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3. COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate (to be signed by its chief executive officer) dated the
Closing Date certifying as to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 in all material respects.
5.4. REGISTRATION RIGHTS AGREEMENT. A Registration Rights Agreement
substantially in the form of EXHIBIT IV hereto (the "REGISTRATION RIGHTS
AGREEMENT") shall have been executed and delivered by the Company and the
Purchasers.
5.5. OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received an
opinion of Bingham, Dana & Gould, counsel to the Company, substantially in the
form of EXHIBIT V hereto, which opinion shall be satisfactory in form and
substance to the Purchasers' special counsel.
5.6. RESTATED CERTIFICATE OF INCORPORATION. An Amended and Restated
Certificate of Incorporation for the Company in the form attached as EXHIBIT III
hereto shall have been duly filed with the Secretary of State of the State of
Delaware and shall have become effective.
5.7. BLUE SKY MATTERS. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Units and the Underlying Shares shall have been obtained or effected (except for
the filing of any notice subsequent to the Closing which may be required under
applicable state securities laws which, if required, shall be filed on a timely
basis as may be so required).
5.8. CORPORATE PROCEEDINGS AND CONSENTS. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers and their special counsel,
each of whom shall have received all such originals or certified or other copies
of such documents as each may reasonably request.
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6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligation of the
Company to sell the Units is subject to the following:
6.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchasers made herein shall be true, correct and complete in all material
respects on and as of the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date.
6.2. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and substance to the Company and the Company's counsel, and
they each shall have received all such counterpart original or certified or
other copies of such documents as they may reasonably request.
6.3. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchasers on or prior to
the Closing Date shall have been performed or complied with.
6.4. AUTHORIZATIONS. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States of America or
of any state required in connection with the lawful issuance and sale of the
Units or any portion thereof to the Purchasers as contemplated under this
Agreement shall have been duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with each of the Purchasers as
follows, such covenants to expire at such times as the Company shall have
consummated a firm commitment underwritten public offering pursuant to an
effective registration statement on Form S-1 or a successor form under the
Securities Act, covering the offer and sale by the Company of Common Stock to
the public at an aggregate offering price of not less than $12.00 per share (as
adjusted for any stock dividends, stock splits, combinations or similar
recapitalizations occurring after the date hereof) and which results in
aggregate gross proceeds to the Company of not less than $10,000,000 (the
"INITIAL PUBLIC OFFERING"); provided, that the Company may refrain from
compliance with any such covenant to the extent that such compliance would, in
the good faith judgment of the Board of Directors of the Company, violate
applicable securities laws:
7.1. QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after the
end of each of the first three quarters in each fiscal year, the Company will
deliver to each Qualifying Holder (as hereinafter defined) copies of the
Company's unaudited balance sheet as of the end of, and unaudited statements of
income and statements of cash flows for, such quarter, which shall be prepared
in accordance with generally accepted accounting principles consistently
applied. All such financial statements shall be certified as accurate and
complete in all material respects (subject to normal year-end adjustments) by
the chief financial officer of the Company and shall be presented in form
comparative to the similar period of the preceding year. Further, if for any
period the Company shall have any subsidiary or subsidiaries whose accounts are
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consolidated with those of the Company, then in respect of such period all such
financial statements shall be the consolidated and consolidating financial
statements of the Company and all such consolidated subsidiaries. In no event
will any Purchaser make any use or disclosure of the financial statements
referred to in this Section 7.1 or Section 7.2 or other information acquired
pursuant to Section 7.3 or 7.4, except in connection with evaluating its
investment in the Company. For purposes of this Agreement, "QUALIFYING HOLDER"
shall mean each Purchaser for so long as such Purchaser holds at least fifteen
percent (15%) of the number of Shares purchased by it hereunder.
7.2. ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the end of
each fiscal year, the Company will deliver to each Qualifying Holder financial
statements analogous to those required by Section 7.1 as at the end of and for
such year, accompanied by a certification by independent public accountants
selected by the Company's Board of Directors, that (except as otherwise stated
therein) such statements have been prepared in accordance with generally
accepted accounting principles consistently applied.
7.3. OTHER INFORMATION. Upon the reasonable request of a Qualifying Holder,
the Company will deliver to such Qualifying Holder other information and data,
not proprietary in nature (in the good faith judgment of the Company),
pertaining to its business, financial and corporate affairs to the extent that
such delivery will not violate any then applicable law or any agreements of the
Company with third parties. The Company will permit each Qualifying Holder, at
the expense of such Qualifying Holder, to visit and inspect any of the
properties of the Company, including its books of account, and to discuss its
affairs, finances and accounts with the Company's officers or directors, all at
such reasonable times and as often as a Qualifying Holder may reasonably
request, in each case, in a manner consistent with the reasonable security and
confidentiality needs of the Company; PROVIDED, that the Company shall be under
no such obligation with respect to information deemed in good faith by the
Company to be proprietary or subject to third party restrictions on disclosure.
7.4. SEC REPORTS. Promptly after each such filing, the Company will furnish
each Purchaser with copies of all registration statements, and amendments
thereto, and all reports on Forms 8-K, 10-Q or 10-K (or any similar form
hereafter in use) which the Company shall file with the Securities and Exchange
Commission or any stock exchange on which securities or the Company may be
listed.
7.5. USE OF PROCEEDS. The Company will use amounts paid for the Units
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.6. INSURANCE. The Company will keep all its insurable properties properly
insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any premises occupied by it or arising
from equipment owned by the Company and leased to and located upon or in or
about any premises occupied by any other person; maintain all such
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worker's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which it may be engaged in business; and maintain
such other insurance as is usually ma Stained by persons engaged in the same or
similar business as is the Company. All such insurance shall be maintained
against such risks and in at least such amounts as such insurance is usually
carried by persons engaged in the same or similar businesses, and all insurance
herein provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance fund
operated by such state or other jurisdiction or by causing to be maintained a
system or systems of self-insurance which is in accord with applicable laws. In
addition, the Company shall within a reasonable period of time obtain "Key Man
Insurance" on of the lives of K. Michael Forrest and Richard F. Selden in an
aggregate face amount of not less than $1,000,000 per person and shall maintain
such insurance on each such person for so long as such person is employed by the
Company.
7.7. PAYMENT OF TAXES. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind (including claims for labor,
materials and supplies), which, if unpaid, might by law become a lien or charge
upon its property; PROVIDED, however, that the Company shall not be required to
pay any tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books reserves deemed
by it adequate with respect thereto.
7.8. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, PROVIDED, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.9. MAINTENANCE OF PROPERTIES. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.10. RESERVATION OF COMMON STOCK. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
Underlying Shares issuable upon conversion of the Shares and exercise of the
Warrants, and the Company further agrees that in the event that the conversion
price applicable to the Shares set forth in the Certificate of Incorporation is
reduced below the initial price set forth therein, it
16
<PAGE> 21
shall immediately cause to be set aside additional shares of the Company's
Common Stock so as to comply with the provisions of this Section 7.10.
8. PREEMPTIVE RIGHTS.
8.1. RIGHT OF FIRST OFFER.
(a) Until the occurrence of the Initial Public Offering, or, if
earlier, a "Terminating Class Event" (as hereinafter defined), the Company
will not offer any equity securities, or securities convertible into, or
options, warrants, or other rights to purchase such equity securities
(collectively, the "FUTURE SHARES") to any third party or Purchaser without
first providing (i) each Purchaser, and (ii) each person defined as a
"Purchaser" in the Class B Stock Purchase Agreements (as defined in Section
8.8 hereof) (each "Purchaser" under the foregoing (i) and (ii) hereinafter
a "Buyer"), so long as such Buyer continues to hold shares of Preferred
Stock, the right to subscribe for its Preemptive Proportionate Percentage
(as such term is defined in paragraph 8.6 below) of such Future Shares for
cash at a price and on such other terms as shall have been specified by the
Company in writing delivered to each Buyer (the "PREEMPTIVE OFFER"), which
Preemptive Offer by its terms shall remain open and irrevocable for a
period of fifteen (15) days from the date it is delivered by the Company to
each Buyer (the "PREEMPTIVE PERIOD"). The Preemptive Offer shall also
certify that the Company has either (a) received a firm offer from a
prospective purchaser, who shall be identified in such certification, so
that the Company in good faith believes a binding agreement of sale is
obtainable for consideration having a fair market, cash equivalent, or
present value set forth in such certification; or (b) intends to make an
offering of its securities at the price and on the terms set forth n such
certification.
(b) A "Terminating Class Event" shall mean, for the holders of the
Class B Preferred Stock, par value $1.00 per share, of the Company (the
"CLASS B PREFERRED STOCK") that fewer than 2,000 shares of Class B
Preferred Stock remain outstanding, and for the holders of the Class C
Preferred Stock, that fewer than 500,000 shares of the Class C Preferred
Stock remain outstanding. Upon the occurrence of a Terminating Class Event,
such class shall no longer have the preemptive rights set forth in this
Section 8. Upon the occurrence of a Terminating Class Event as to both such
classes of Preferred Stock, the Company shall have no remaining obligations
under this Section 8.
8.2. REMAINING FUTURE SHARES. If any Buyer shall subscribe for less than
its Preemptive Proportionate Percentage of the Future Shares set forth in the
Preemptive Offer to it, then the Company at the end of the Preemptive Period
shall give notice in the same manner to each Buyer who did subscribe during the
Preemptive Period for its entire Preemptive Proportionate Percentage of the
Future Shares of the number of Future Shares which the Buyers had not elected to
purchase during the Preemptive Period (the "REMAINING FUTURE SHARES") and
stating that the Buyer may elect to purchase at the same price any or all of the
Remaining Future Shares (the "SECOND PREEMPTIVE OFFER"), which Second Preemptive
Offer by its terms shall
17
<PAGE> 22
remain open and irrevocable for a period of at least fifteen (15) days from the
date it is delivered by the Company to each Buyer. If the total number of
Remaining Future Shares is sufficient to satisfy the elections of Buyers who
received the Second Preemptive Offer, such Remaining Future Shares shall be
allocated to them in accordance with their elections; if not, the available
Remaining Future Shares shall be allocated among the Buyers according to their
respective Preemptive Proportionate Percentages (provided that such allocation
shall be adjusted if necessary so that no Buyer is allocated more Remaining
Future Shares than it has elected to purchase). For the purpose of avoiding
fractions as to Future Shares and Remaining Future Shares, the President of the
Company (or in his or her absence any responsible corporate officer of the
Company) may adjust upward or downward by not more than one full share the
number of Future Shares or Remaining Future Shares which any Buyer would
otherwise be entitled to purchase.
8.3. BUYERS NOTICE. Notice of each Buyer's intention to accept, in whole or
in part, a Preemptive Offer or Second Preemptive Offer made pursuant to Sections
8.1 or 8.2 herein shall be evidenced by a writing signed by the Buyer and
delivered to the Company prior to the end of the Preemptive Period or the
fifteen (15) day period of the Second Preemptive Offer, as applicable, setting
forth that portion of the Future Shares or the Remaining Future Shares, as the
case may be, which the Buyer elects to purchase (the "NOTICE OF ACCEPTANCE").
8.4. RIGHT OF COMPANY TO SELL REFUSED FUTURE SHARES. In the event that the
Buyers elect not to purchase all of the Future Shares or the Remaining Future
Shares, the Company shall have one hundred twenty (120) days from the
expiration of the Second Preemptive Offer to sell all or any part of such
Remaining Future Shares not purchased by the Buyers (the "REFUSED FUTURE
SHARES") to the parties (or their affiliates) identified in the Preemptive
Offer, but only upon terms and conditions in all material respects, including,
without limitation, unit price and interest rates, which are no more favorable,
in the aggregate, to such other party or parties or less favorable to the
Company than those set forth in the Preemptive Offer and the Second Preemptive
Offer. Upon the closing of the sale of Refused Future Shares to such other
parties, the Buyers shall purchase from the Company and the Company shall sell
to each Buyer the Future Shares and the Remaining Future Shares in respect of
which a Notice of Acceptance was delivered to the Company by such Buyer, upon
the terms specified in the Preemptive Offer and the Second Preemptive Offer. The
Company may withdraw the Preemptive Offer and the Second Preemptive Offer at any
time prior to such closing.
8.5. EXCEPTIONS TO RIGHT OF FIRST OFFER. Notwithstanding anything to the
contrary stated above, the rights of the Buyers under this Section 8 shall not
apply to (a) any sale of shares of the Company's capital stock pursuant to the
Initial Public Offering or (b) the issuance by the Company of Common Stock or
options or warrants for the purchase thereof issued, sold or granted, in the
past or future, by the Company to its employees or consultants pursuant to bona
fide employee stock purchase, option or similar plans or as otherwise approved
by the Board of Directors of the Company or (c) equity securities issued in
connection with the acquisition of at least fifty percent (50%) of the voting
securities of another corporation, controlling interest in another business
entity, or all, or substantially all of the assets of another
18
<PAGE> 23
corporation or business entity or (d) equity securities issued for no
consideration as dividends or pursuant to stock splits or (e) any securities
issued upon the conversion or exercise of presently issued securities or
securities issued pursuant to Section l.l(a) or (b) hereof or (f) any Units
issued and sold pursuant to Section l.l(b) of this Agreement or (g) any equity
securities issued in connection with a joint venture in which the Company is a
participant or a license, marketing or distribution agreement to which the
Company is party, if such issuance does not exceed twenty percent (20%) of the
aggregate amount of equity securities of the Company then outstanding (on an as
converted basis).
8.6. PREEMPTIVE PROPORTIONATE PERCENTAGE. The term "Preemptive
Proportionate Percentages" shall mean, as to a Buyer, that percentage figure
which expresses the ratio which (a) the number of shares of outstanding Common
Stock then owned by such Buyer bears to (b) the aggregate number of shares of
outstanding Common Stock then owned by all Buyers (for purposes solely of the
computation required under clauses (a) and (b), Buyers holding shares of
Preferred Stock shall be treated as having converted all such outstanding shares
of Preferred Stock into shares of Common Stock at the rate at which such shares
of Preferred Stock are convertible or exercisable for Common Stock pursuant to
Article IV of the Certificate of Incorporation of the Company in effect at the
time of delivery by the Company of the Preemptive Offer).
8.7. TRANSFER OF PREEMPTIVE RIGHTS. The preemptive rights provided under
this Section 8 may be transferred or assigned in whole (but not in part) (a) to
any person or entity that directly or indirectly controls, is controlled by or
is under common control with, the transferor Buyer (b) to any other person or
entity approved by the Company, PROVIDED, in each case, that no such transfer or
assignment may be made if, in the reasonable judgment of the Company's Board of
Directors after consultation with the Company's counsel, such transfer or
assignment would make an exemption from the registration requirements of the
Securities Act and/or applicable state securities laws unavailable with respect
to the offer and sale of the Future Shares.
19
<PAGE> 24
8.8. TERMINATION OF PREEMPTIVE RIGHTS PROVISIONS OF CLASS B STOCK PURCHASE
AGREEMENTS. The "CLASS B STOCK PURCHASE AGREEMENTS are defined herein as (i) the
Class B Preferred Stock Purchase Agreement, dated as of February 14, 1992, among
the Company and the persons listed on Schedule A thereto (individually, the
"1992 CLASS B AGREEMENT"), and (il) the Class B Preferred Stock Purchase
Agreement, dated as of April 20, 1993, among the Company and the persons listed
on Schedule A thereto (individually, the "1993 CLASS B AGREEMENT"). The holders
of the Class B Preferred Stock listed on the signature pages hereof, by
executing this Agreement in their capacity as holders of Class B Preferred
Stock, do hereby vote as a class to terminate Section 9 of the 1992 Class B
Agreement and Section 8 of the 1993 Class B Agreement (insofar as such Section 8
relates to preemptive rights), which sections shall be of no further force and
effect, and do hereby consent and agree that Section 8 hereof amends and
restates the preemptive rights of the holders of the Class B Preferred Stock,
and do hereby vote and consent to make all holders of Class B Preferred Stock,
as a class, party to this Agreement for the sole purpose of being bound by and
party to Section 8 hereof.
8.9. WAIVER OF CERTAIN PREEMPTIVE RIGHTS. The Buyers hereby waive any
preemptive rights to the 'contemplated issuance by the Company to The First
National Bank of Boston of the common stock purchase warrants listed on Schedule
C hereto.
8.10. AMENDMENTS; WAIVERS. Changes in or additions to this Section 8, or
waiver of the Company's compliance with any of the provisions of this Section 8,
may be made by written amendment or waiver executed by the Company and the
holders of at least fifty-one percent (51%) in the aggregate number of shares of
Common Stock issued or issuable upon conversion of the shares of Class B
Preferred Stock and Class C Preferred Stock (counted as one class) then held by
the Buyers.
9. MISCELLANEOUS.
9.1. ENTIRE AGREEMENT; SUCCESSORS. This Agreement, together with the
Schedules and Exhibits hereto sets forth the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and commitments of the parties relating thereto. All the
tenons and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto subject to any restrictions on assignment stated herein. Delivery
of documents by the Company or its counsel to John Burgess, Esq., special
counsel to the Purchasers, shall be deemed to constitute for all purposes the
furnishing of such documents by the Company to the Purchasers under this
Agreement or in connection with the offering hereunder.
9.2. NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by prepaid telegram, addressed as
follows:
20
<PAGE> 25
(a) if to the Purchasers:
To the Addressees shown on SCHEDULE A
with a copy to:
Hale and Dorr
60 State Street
Boston, MA 02109
Attention: John Burgess, Esq.
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Chief Executive Officer
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110
Attention: Leslie H. Shapiro, Esq.
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (l) actual receipt and (ii) five
(5) business days after deposit in the U.S. mails or delivery to a
nationally-recognized courier service in accordance with this Section.
9.3. EXPENSES. Except as provided in the Registration Rights Agreement,
each party will bear its own expenses in connection with this Agreement,
PROVIDED that the Company will bear the reasonable fees and out-of-pocket
disbursements of Hale and Dorr, special counsel to the Purchasers, in an amount
not to exceed $5,000 in the aggregate.
9.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by the Company or any of the
Purchasers in connection herewith shall survive the execution and delivery of
this Agreement and the issuance of the Units for a period (the "SURVIVAL
PERIOD") expiring on the first to occur of (a) the Initial Public Offering, or
(b) the date which is five years after the Closing Date. No claim may be made
for breach of any representation or warranty contained herein unless notice of
such claim is given to the breaching party within the Survival Period.
21
<PAGE> 26
9.5. AMENDMENTS; WAIVERS. Subject to Section 8.10 hereof, changes in or
additions to this Agreement may be made by written document executed by the
Company and the holders of at least fifty-one percent (51%) in the aggregate
number of shares of Common Stock issued or issuable upon conversion of the
Shares, PROVIDED that the consent of such holders shall not be required with
respect to any supplement to this Agreement relating to the sale and issuance of
additional Units in accordance with Section l.l(b). Subject to Section 8.10
hereof, the holders of fifty-one percent (51%) in the aggregate of the Shares
then held by Holders may, by written instrument, waive compliance by the Company
with any of the provisions of this Agreement. Notwithstanding the foregoing, no
course of dealing or delay on the part of the Holders in exercising any right
shall operate as a waiver thereof or otherwise prejudice the rights of the
Holders.
9.6. GOVERNING LAW. This Agreement shall be construed and enforced as a
contract under seal in accordance with, and the rights of the parties hereunder
shall be governed by, the internal laws of the Commonwealth of Massachusetts.
9.7. AMENDED AND RESTATED VOTING RIGHTS AGREEMENT. The Company agrees that,
subsequent to the date of this Agreement, it will use its reasonable best
efforts to obtain the agreement to the Amended and Restated Voting Rights
Agreement, substantially in the form of Exhibit VI hereto, the holders of at
least 66 and 2/3% of the Class B Preferred Stock PROVIDED, HOWEVER, that the
Company will be under no obligation to request any such holder if, in the
Company's reasonable judgment, such request might damage the Company's
relationship with such shareholder.
9.8. MISCELLANEOUS. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same document.
The headings herein are for convenience of reference only and shall not affect
the construction of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or unenforceability of any other
provision.
This Preferred Stock and Warrant Purchase Agreement has been SIGNED, SEALED
AND DELIVERED, as of the date first written above by the parties hereto.
COMPANY:
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
------------------------------
Title:President and CEO
---------------------------
22
<PAGE> 27
PURCHASERS:
WARBURG PINCUS CAPITAL COMPANY, L.P.
(312,500 units)
By: Warburg Pincus & Co.,
General Partner
By: /s/ Rodman W. Moorhead
--------------------------------
Title:Managing Director
-----------------------------
TKT PARTNERS LIMITED PARTNERSHIP
(62,500 units)
By: Medical Portfolio Management, Inc.,
as General Partner
By: /s/ Ansbert Gadicke
--------------------------------
Title:Executive Vice President
-----------------------------
/s/ Alejandro Zaffaroni
----------------------------------------
Alejandro Zaffaroni, Ph.D.
(12,500 units)
23
<PAGE> 28
H&Q HEALTHCARE INVESTORS**
(12,500 units)
By: /s/ Kimberly L. Carroll
----------------------------------
Title:Treasurer
-------------------------------
**LIMITATION OF LIABILITY. The name H&O Healthcare Investors is the
designation of the Trustees for the tamp being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as Amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&O Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
H&O LIFE SCIENCES INVESTOR**
(6,250 shares)
By: /s/ Kimberly L. Carroll
----------------------------------
Title:Treasurer
-------------------------------
***LIMITATION OF LIABILITY. The name H&Q Life Sciences Investors is the
designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as amended. All persons dealing with H&Q Life Sciences
Investors must look solely to the trust property for the enforcement of any
claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor
shareholders assume any personal liability for obligations entered into on
behalf of H&Q Life Sciences Investors.
HUGO de NEUFVILLE & JOHN P.
de NEUFVILLE, TTEES, UAD 7/01/92,
HUGO de NEUFVILLE REVOCABLE TRUST
(6,500 units)
By: /s/ John P. de Neufville
----------------------------------
Title:Trustee
-------------------------------
MARGARET W. de NEUFVILLE & JOHN P. de
24
<PAGE> 29
NEUFVILLE, TTES, UAD 7/1/92,
MARGARET W. de NEUFVILLE
REVOCABLE TRUST
(6,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title:Trustee
------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO
CAROL de NEUFVILLE
(3,500 units)
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, U/A DTD 12/23/76, FBO
DAVID T. de NEUFVILLE
(6,500) units)
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, U/A DTD 12/23/76, FBO
JOHN HOWARD de NEUFVILLE
(3,500) units)
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
------------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, U/A DATED 12/23/76, FBO
JOHN P. de NEUFVILLE
(6,500 units)
25
<PAGE> 30
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
-----------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO
PETER BAYON de NEUFVILLE
(3,500 units)
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
-----------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO
SUSAN de NEUFVILLE
(3,500 units)
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
-----------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 12/2/70, FBO
THOMAS PIKE de NEUFVILLE
(3,500 units)
By:/s/ John P. de Neufville
---------------------------------
Title:Trustee
-----------------------------
/s/ John W. Jackson
-----------------------------------
John W. Jackson (3,000)
TAB PRODUCTS CO. PENSION PLAN
(4,500 units)
By: *
--------------------------------
26
<PAGE> 31
TEMPLE INLAND MASTER TRUST
(25,000 units)
By: *
--------------------------------------
*By: BEA ASSOCIATES,
Attorney-in-Fact
By: /s/ Albert L. Zesiger
---------------------------------
Title:Managing Director
------------------------------
ARTHUR D. LITTLE EMPLOYEE
INVESTMENT PLAN
(22,000 units)
By: #
--------------------------------------
#By: BEA ASSOCIATES, an Investment Advisor
as Investment Advisor
By:/s/ Albert L. Zesiger
---------------------------------
Title:Managing Director
------------------------------
CLASS B PREFERRED STOCKHOLDERS:
WARBURG PINCUS CAPITAL COMPANY, L.P.
(21,359)
By: Warburg Pincus & Co.,
General Partner
By:/s/ Rodman W. Moorhead
---------------------------------
Title:Managing Director
------------------------------
H&Q HEALTHCARE INVESTORS**
(3,268 shares)
27
<PAGE> 32
By: /s/ Kimberly L. Carroll
---------------------------------
Title:Treasurer
------------------------------
**LIMITATION OF LIABILITY. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&Q Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
H&Q LIFE SCIENCES INVESTORS***
(1,500 shares)
By: /s/ Kimberly L. Carroll
---------------------------------
Title:Treasurer
------------------------------
***LIMITATION OF LIABILITY. The name H&Q Life Sciences Investors is the
designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as amended. All persons dealing with H&Q Life Sciences
Investors must look solely to the trust property for the enforcement of any
claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor
shareholders assume any personal liability for obligations entered into on
behalf of H&Q Life Sciences Investors.
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni, Ph.D. (688 shares)
28
<PAGE> 1
EXHIBIT 10.6
===============================================================================
CLASS D PREFERRED STOCK
PURCHASE AGREEMENT
by and between
TRANSKARYOTIC THERAPIES, INC.
and
MARION MERRELL DOW INC.
Dated as of May 18, 1994
===============================================================================
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
CLASS D PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
PAGE
1. PURCHASE AND SALE OF THE SHARES............................ - 1 -
1.1. Purchase of Stock.................................... - 1 -
-----------------
1.2. Closing.............................................. - 1 -
-------
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.............. - 2 -
2.1. Organization and Standing of the Company............. - 2 -
----------------------------------------
2.2. Subsidiaries......................................... - 2 -
------------
2.3. Capitalization....................................... - 2 -
--------------
2.4. Financial Information................................ - 3 -
---------------------
2.5. Absence of Undisclosed Liabilities................... - 3 -
----------------------------------
2.6. Absence of Certain Changes........................... - 4 -
--------------------------
2.7. Taxes................................................ - 4 -
-----
2.8. Title to Properties; Liens and Encumbrances.......... - 5 -
-------------------------------------------
2.9. Intellectual Property Rights......................... - 5 -
----------------------------
2.10. Government Approvals and Licenses.................... - 5 -
---------------------------------
2.11. Contracts............................................ - 5 -
---------
2.12. Directors and Officers............................... - 7 -
----------------------
2.13. Litigation........................................... - 7 -
----------
2.14. Authorization........................................ - 7 -
-------------
2.15. Brokers.............................................. - 7 -
-------
2.16. Governmental Consents................................ - 7 -
---------------------
2.17. Securities Laws...................................... - 7 -
---------------
2.18. Legal Compliance..................................... - 8 -
----------------
2.19. Insurance............................................ - 8 -
---------
2.20. Nondisclosure Agreement.............................. - 8 -
-----------------------
2.21. Disclosures.......................................... - 8 -
-----------
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASER............ - 8 -
3.1. Authority............................................ - 8 -
---------
3.2. Accredited Investor Status........................... - 9 -
--------------------------
3.3. Formation............................................ - 9 -
---------
3.4. Receipt of Information............................... - 9 -
----------------------
4. SECURITIES LAWS............................................ - 9 -
4.1. Registration of Securities........................... - 9 -
--------------------------
4.2. Financial Matters.................................... - 9 -
-----------------
4.3. Transfer Legends and Restrictions.................... - 9 -
---------------------------------
- i -
<PAGE> 3
4.4. Rule 144............................................ - 11 -
--------
5. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING...... - 11 -
5.1. Representations and Warranties...................... - 11 -
------------------------------
5.2. Performance......................................... - 11 -
-----------
5.3. Compliance Certificate.............................. - 11 -
----------------------
5.4. Registration Rights Agreement....................... - 11 -
-----------------------------
5.5. Preemptive Rights................................... - 11 -
-----------------
5.6. License Agreement................................... - 12 -
-----------------
5.7. Supply Agreement.................................... - 12 -
----------------
5.8. Opinion of Company's Counsel........................ - 12 -
----------------------------
5.9. Amended Certificate................................. - 12 -
-------------------
5.10. Blue Sky Matters.................................... - 12 -
----------------
5.11. Corporate Proceedings and Consents.................. - 12 -
----------------------------------
5.12. Amended and Restated Voting Rights Agreement........ - 12 -
--------------------------------------------
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING........ - 12 -
6.1. Representations and Warranties...................... - 12 -
------------------------------
6.2. Proceedings and Documents........................... - 12 -
-------------------------
6.3. Performance......................................... - 13 -
-----------
6.4. Authorizations...................................... - 13 -
--------------
7. AFFIRMATIVE COVENANTS..................................... - 13 -
7.1. Issuance of Additional Shares....................... - 13 -
-----------------------------
7.2. Purchases of Common Stock Upon Initial Public Offering- 14 -
------------------------------------------------------
7.3. Standstill Agreement................................ - 14 -
--------------------
7.4. Quarterly Financial Statements...................... - 15 -
------------------------------
7.5. Annual Financial Statements......................... - 15 -
---------------------------
7.6. Other Information................................... - 16 -
-----------------
7.7. Use of Proceeds..................................... - 16 -
---------------
7.8. Insurance........................................... - 16 -
---------
7.9. Payment of Taxes.................................... - 16 -
----------------
7.10. Corporate Existence................................. - 17 -
-------------------
7.11. Maintenance of Properties........................... - 17 -
-------------------------
7.12. Reservation of Common Stock......................... - 17 -
---------------------------
7.13. SEC Reports......................................... - 17 -
-----------
8. MISCELLANEOUS............................................. - 17 -
-------------
8.1. Entire Agreement; Successors........................ - 17 -
----------------------------
8.2. Notices............................................. - 18 -
-------
8.3. Expenses............................................ - 19 -
--------
8.4. Survival of Representations and Warranties.......... - 19 -
------------------------------------------
8.5. Amendments; Waivers................................. - 19 -
-------------------
8.6. Governing Law....................................... - 19 -
-------------
8.7. Miscellaneous....................................... - 19 -
-------------
- ii -
<PAGE> 4
TRANSKARYOTIC THERAPIES, INC.
CLASS D PREFERRED STOCK PURCHASE AGREEMENT
This Class D Preferred Stock Purchase Agreement (this "AGREEMENT") is made
as of the 18th day of May, 1994 by and between Transkaryotic Therapies, Inc., a
Delaware corporation (the "COMPANY"), and Marion Merrell Dow Inc., a Delaware
corporation (the "PURCHASER").
WHEREAS, the Purchaser and the Company have entered into a License
Agreement dated as of the date hereof and a Supply Agreement dated as of the
date hereof; and
WHEREAS, the Purchaser desires to subscribe for and purchase, and the
Company desires to issue and sell, shares of the Company's Class D Preferred
Stock, $1.00 par value per share (the "CLASS D PREFERRED STOCK"), subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
contained herein the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES
1.1. PURCHASE OF STOCK. On the Closing Date (as defined in Section 1.2
below), subject to the terms and conditions hereof and in reliance upon the
warranties, representations and agreements contained herein, the Company agrees
to sell to the Purchaser, and the Purchaser agrees to purchase from the Company,
280,367 shares of Class D Preferred Stock at a price of $17.8338 per share (the
"Shares"). In the event that the Company's Initial Public Offering (as such term
is defined in Section 7) closes on or prior to March 31, 1995 at a pre-money
valuation of less than $120 million, the Company shall be required to issue to
the Purchaser additional shares of Common Stock of the Company (the "Common
Stock"), as described under Section 7.1 (the "Additional Shares"). The powers,
designations, preferences, rights and qualifications, limitations and
restrictions of the Class D Preferred Stock are as set forth in the Amended and
Restated Certificate of Incorporation (the "Amended Certificate") attached as
EXHIBIT A hereto.
1.2. CLOSING. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall take place at the offices of Shook, Hardy &
Bacon P.C. at 10:00 am., local time, on May 18, 1994 or at such other time and
date as the Company and the Purchaser may agree upon in writing (the "CLOSING
DATE"). At the Closing, the Company will deliver to the Purchaser a certificate
evidencing the number of Shares being purchased by the Purchaser pursuant to
Section 1.1, against payment by the Purchaser of the entire purchase price for
the Shares in lawful money of the United States of America by bank or certified
check, wire-transfer or such other form of payment as shall be mutually agreed
upon by the Purchaser and the Company.
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2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants to the Purchaser that, as of the date of this Agreement,
except as otherwise described on SCHEDULE A hereto, the following are true and
correct:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business as a foreign
corporation in the Commonwealth of Massachusetts and is in good standing in each
jurisdiction in which failure to so qualify would have a materially adverse
effect on the business, assets or prospects of the Company. The copy of the
Company's Amended and Restated Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION"), which has been delivered to the Purchaser, is true, complete
and correct as of the date of this Agreement. The Company has the corporate
power and authority to own and lease its property, to enter into, deliver, and
perform its obligations and undertakings under, this Agreement and all other
agreements referred to herein or contemplated hereby, to issue the Shares, and
to conduct its business as now conducted.
2.2. SUBSIDIARIES. The Company has no subsidiaries and does not control,
directly or indirectly, any other corporation, association or business
organization.
2.3. CAPITALIZATION. The Company's entire authorized capital stock will
consist, immediately after the filing of the Amended Certificate with the
Secretary of State of the State of Delaware, of 15,000,000 shares of Common
Stock (of which 4,102,188 shares have been issued), and 2,221,367 shares of
Preferred Stock, $1.00 par value per share (the "PREFERRED STOCK"), of which:
6,000 shares have been designated as Class A Convertible Preferred Stock (the
"CLASS A PREFERRED STOCK"), all of which have been issued; 60,000 shares have
been designated as Class B Convertible Preferred Stock (the "CLASS B PREFERRED
STOCK"), of which 49,339 shares have been issued; 1,875,000 shares have been
designated as Class C Preferred Stock (the "CLASS C PREFERRED STOCK"), of which
1,015,974 shares have been issued; and 280,367 shares have been designated as
Class D Preferred Stock, none of which were issued or outstanding immediately
prior to the Closing. 97,887 shares of Common Stock are held of record in the
Company's treasury. The number of shares and class of capital stock of the
Company which have been issued are listed on SCHEDULE A opposite the names of
the record holders thereof, excluding those record holders who are employees of
the Company, which employees hold, in the aggregate, 1,503,618 shares of the
outstanding capital stock of the Company. The Company has reserved 1,250,000
shares of Common Stock for issuance to employees and consultants under the 1993
Long-Term Incentive Plan (the "INCENTIVE PLAN") and 180,000 shares of Common
Stock for issuance to non-employee directors under the 1993 Non-Employee
Directors' Stock Option Plan (the "DIRECTORS' PLAN"). The Company has granted
options under the Incentive Plan for the purchase of 48,485 shares of Common
Stock. No options have been granted under the Directors' Plan. The Company has
granted warrants for the purchase of 635,517 shares of Common Stock. In
addition, the Company has reserved a sufficient number of shares of Common Stock
for the conversion of the Class A Preferred Stock, Class B Preferred Stock,
Class C Preferred Stock and Class D Preferred Stock. The Common Stock and the
Preferred Stock are not entitled to cumulative voting rights, preemptive rights,
antidilutive rights or so-called registration rights under the Securities Act of
1933, as amended (the "SECURITIES ACT"), except as provided in this Agreement or
Article IV
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of the Certificate of Incorporation. The Common Stock and the Preferred Stock
have the preferences, voting powers, qualifications, and special or relative
rights or privileges set forth in the Certificate of Incorporation and the
Amended Certificate. All outstanding shares of Common Stock and Preferred Stock
have been, and the Class D Preferred Stock and the Additional Shares, when
issued in accordance with this Agreement and the Certificate of Incorporation
will be, validly issued and fully paid and nonassessable, and issued in
accordance with applicable state and federal securities laws. The Company does
not have outstanding any option, warrant or other commitment to issue or to
acquire any shares of its capital stock, or any securities or obligations
convertible into or exchangeable for its capital stock, other than the 48,485
options granted pursuant to the Incentive Plan referred to above, options it is
committed to grant annually under the Directors' Plan to eligible Directors, or
warrants described above and listed on SCHEDULE A hereto, and the Company has
not given any person any right to acquire from the Company or sell to the
Company any shares of its capital stock. There is, and immediately upon
consummation at the Closing of the transactions contemplated hereby there will
be, no agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, etc.) with respect to the sale or
voting of any shares of capital stock of the Company (whether outstanding or
issuable upon conversion or exercise of outstanding securities) except as
contemplated by this Agreement, by the Certificate of Incorporation and By-laws
of the Company or as indicated on SCHEDULE A hereto, and the Company will not
voluntarily place any restrictions on the transfer of the Shares or the
Additional Shares except to the extent set forth herein or contemplated hereby.
2.4. FINANCIAL INFORMATION. The Company has delivered to the Purchaser a
copy of (a) its draft audited balance sheet (the "BALANCE SHEET") as of December
31, 1993 (the "FINANCIAL STATEMENT DATE") and the related draft statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended (with the Balance Sheet, the "DRAFT AUDITED FINANCIALS"), (b) its
unaudited balance sheet as of March 31, 1994 and the related statements of
operations and cash flows for the period then ended (the "UNAUDITED FINANCIALS")
and (c) its most recent audited balance sheet and related statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended (the "Audited Financials") the "Audited Financials," and together with the
Draft Audited Financials and the Unaudited Financials, the "Financial
Statements"). The Financial Statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial condition of the Company at the date thereof and
the results of the operations of the Company for the period then ended,
PROVIDED, however, that the Unaudited Financials are subject to year-end
adjustments and may not contain all footnotes required under generally accepted
accounting principles.
2.5. ABSENCE OF UNDISCLOSED LIABILITIES. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to the date hereof which are not
fully reflected or provided for on the Balance Sheet, except for obligations
arising after the Financial Statement Date in the ordinary course of business or
reflected in the Unaudited Financials.
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2.6. ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
other than as described in the Unaudited Financials or as indicated on SCHEDULE
A hereto, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown
by the Balance Sheet;
(b) any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock or any
direct or indirect redemption, purchase or other acquisition of any of
such stock by the Company;
(d) any labor trouble, or any other event, development, or
condition, of any character, or threat of the same, materially adversely
affecting the business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of the
Company;
(g) any sale, assignment or transfer of any material tangible or
intangible assets of the Company except with respect to tangible assets in
the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor.
2.7. TAXES. For all periods ended on or prior to the Financial Statement
Date, the Company has filed or will file within the time prescribed by law
(including extensions of time approved by the appropriate taxing authority) all
tax returns and reports required to be filed with the United States Internal
Revenue Service, the State of Delaware, the Commonwealth of Massachusetts, any
other states, and all foreign countries and has paid or made adequate provision
in the Balance Sheet for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due (or, to the knowledge of the
Company, claimed by such authority or jurisdiction to be due) on or in respect
of such tax returns and reports. The Company does not know of any (a) other
federal, Delaware, Massachusetts, state or foreign taxes which are due and
payable by the Company which have not been so paid; (b) other federal, Delaware,
Massachusetts, state or foreign tax returns or reports which are required to be
filed which have not been so filed; or (c) unpaid assessment for additional
taxes for any fiscal period or any basis thereof. The Company's federal or state
income tax returns have never been audited.
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2.8. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Except as indicated on
SCHEDULE A hereto, the Company has good and marketable title to all of its
properties and assets, real and personal, including those reflected in the
Balance Sheet (except as sold or otherwise disposed of in the ordinary course of
business since the Financial Statement Date), subject to no mortgage, pledge,
lien, security interest, conditional sale agreement, encumbrance or charge
except (a) as shown on the Balance Sheet or in the notes thereto, (b) tax,
materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings, and (c) vendors' interests
in installment purchase obligations of the Company which in the aggregate do not
exceed $25,000.
2.9. INTELLECTUAL PROPERTY RIGHTS. Attached hereto as SCHEDULE B is a
true and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or licenses to use the same,
and any and all applications therefor, as well as all trade secrets and similar
proprietary information owned or held by the Company (the "Intellectual
Property") are all such items required to enable the Company to conduct its
business as now conducted. The Company has not received any formal or informal
notice of infringement or other complaint that the Intellectual Property
violates or infringes rights under patents, trademarks, service marks, trade
names, trade secrets, copyrights or licenses or any other proprietary rights of
others, nor does the Company have any reason to believe that there has been any
such violation or infringement. Except as set forth in SCHEDULE B, no royalties,
honoraria, or fees are or will be payable by the Company to other persons by
reason of the ownership or use by the Company of the Intellectual Property.
2.10. GOVERNMENT APPROVALS AND LICENSES. The Company has all governmental
approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as presently conducted and will use its best efforts to
obtain all governmental approvals, authorizations, consents, licenses and
permits necessary or required to conduct its business as proposed to be
conducted.
2.11. CONTRACTS. Other than as set forth in SCHEDULE A or B or described
elsewhere in this Section 2, the Company has no presently existing contract,
obligation or commitment (a) involving the future payment by or to the Company
of more than $25,000 (other than employment or consulting agreements terminable
at the option of the Company without penalty on no more than thirty (30) days
prior written notice with employees of, or consultants to, the Company who are
not officers or directors thereof), or (b) which is material to the Company or
its currently contemplated business, including without limitation the following:
(i) any employment, bonus, commission or consulting agreements or
arrangements; pension, profit sharing, deferred compensation, stock bonus,
retirement, stock option, stock purchase, phantom stock or similar plans,
including agreements evidencing rights to purchase securities of the
Company; or agreements with shareholders;
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<PAGE> 9
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging, or granting or creating a lien or security interest
or other encumbrance on any of the Company's property; or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
(iii) any agreements with dealers, sales representatives, brokers
and other distributors, jobbers, advertisers, sales agencies;
(iv) any agreements with any labor union or collective bargaining
organization;
(v) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and
subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal property,
including motor vehicles, and real estate;
(vii) any indenture, agreement, or other document relating to the
sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses; or
(ix) any agreements limiting the freedom of the Company or any of
its employees to compete in any line of business or in any geographic area
or with any person;
(x) any agreements providing for disposition of the business and
substantially all of the assets, or securities, of the Company; agreements
of merger or consolidation to which the Company is a party; or letters of
intent with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with respect
to, the acquisition of assets or securities of any other business or
entity.
True and complete copies of all contracts and other items listed on
SCHEDULE A have been made available to the Purchaser. The Company has complied
with all the material provisions of said contracts and commitments set forth in
SCHEDULE A hereto and of all other material contracts and commitments to which
it is a party, and is not in material default under any thereof, except to the
extent to which any such noncompliance and defaults would not materially and
adversely affect the business or financial condition of the Company. There
exists no condition, event or act which constitutes, or which after notice,
lapse of time or both would constitute, a material default by the Company or, to
the Company's knowledge, by any third party, under any of said contracts or
commitments.
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<PAGE> 10
2.12 DIRECTORS AND OFFICERS. SCHEDULE A hereto contains a true, correct
and complete list showing the name of each director and officer of the Company.
2.13. LITIGATION. There is no litigation or proceeding pending or, to the
Company's knowledge, threatened, against the Company or the Company's
properties, nor does the Company know or have reasonable grounds to know of any
basis for any such action, including, without limitation, any governmental
investigation relating to employee safety or discrimination matters. To the
Company's knowledge, there is no litigation or proceeding pending or threatened
against or relating to any present or former employee of the Company by reason
of the past employment or consulting relationships of any of such employees with
the Company. There are no outstanding judgments against the Company.
2.14. AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and the issuance and sale of the Shares and the
Additional Shares and, upon conversion of the Shares, the Common Stock into
which the Shares are convertible, have been duly authorized and approved by all
necessary corporate action. This Agreement has been duly executed and delivered
on behalf of the Company and constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors. The execution, delivery and performance of this Agreement,
the issuance and sale of the Shares and the Additional Shares and, upon
conversion of the Shares, the Common Stock into which the Shares are
convertible, will not conflict with, or result in a breach of any of the terms
of, or constitute a default under, the Certificate of Incorporation or By-laws
of the Company or result in a material breach of any of the terms of, or
constitute a material default under, any agreement, instrument or other
restriction to which the Company is a party or by which it or any of its
properties or assets is bound.
2.15. BROKERS. Except as described on SCHEDULE A, the Company has no
contract, arrangement or understanding with any broker, finder, or similar agent
with respect to the transactions contemplated by this Agreement.
2.16. GOVERNMENTAL CONSENTS. Based in part on the representations made by
the Purchaser in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Shares or the Additional Shares
pursuant to this Agreement or the consummation of any other transactions
contemplated hereby.
2.17. SECURITIES LAWS. Neither the Company nor any other person, firm or
corporation acting on its behalf has sold any of the Shares or the Additional
Shares or other securities of the Company to, or offered any thereof for sale
to, or solicited any offers to purchase any thereof from, or otherwise
approached or negotiated (nor will the Company or any other person, firm or
corporation acting on its behalf sell, offer, solicit or otherwise approach or
negotiate) in respect thereof with, such character or number of persons in the
aggregate, or in such manner, as would result in bringing the Shares or the
Additional Shares, or any part thereof, within the provisions of Section 5 of
the Securities Act. Assuming that the Purchaser's representations and warranties
contained in Sections 3 and 4 of this
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<PAGE> 11
Agreement are true and correct at the Closing and on the date of the issuance of
the shares of Common Stock comprising the Additional Shares and the shares of
Common Stock into which the Shares are convertible, the offering and sale of the
Shares and the Additional Shares, and the issuance of the shares of Common Stock
upon conversion of the Shares, are each exempt, or will each be exempt, as the
case may be, from registration and prospectus delivery requirements of the
Securities Act as in effect on the date hereof and are also exempt or will be
exempt from registration or qualification under applicable state securities laws
as in effect on the date hereof.
2.18. LEGAL COMPLIANCE. The Company is not in violation of any provisions
of its Certificate of Incorporation or By-laws, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which violation materially and adversely
affects the business or financial condition of the Company.
2.19. INSURANCE. The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including,
without limitation, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
2.20. NONDISCLOSURE AGREEMENT. The Company has entered into nondisclosure
and invention ownership agreements in favor of the Company in such forms as have
been approved from time to time by the Board of Directors of the Company, with
each person employed by it or serving as a consultant to it with employment or
consulting responsibility requiring access to proprietary technical information
of the Company.
2.21. DISCLOSURES. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate, or instrument furnished to the Purchaser or
its agents in connection with the transactions contemplated by this Agreement,
when read together, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company knows of no information or
fact which has or would have a material adverse effect on the business,
prospects, assets or condition, financial or otherwise, of the Company which has
not been disclosed in SCHEDULE A.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASER. The Purchaser
represents and warrants to the Company that the following are true and correct
in all material respects:
3.1. AUTHORITY. The Purchaser has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder. All necessary
corporate and other action has been taken by it or on its behalf to execute,
deliver and perform its obligations under this Agreement and to purchase the
Shares. This Agreement constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms.
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<PAGE> 12
3.2. ACCREDITED INVESTOR STATUS. The Purchaser is acquiring the Shares
for the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Shares or any portion thereof; PROVIDED that the disposition of
its property shall at all times be and remain within its control. It further
represents that, except as otherwise disclosed in writing to the Company, it is
an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act and that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Shares. The Purchaser further represents
that it is acquiring the Shares for its own account and with its general assets
and not with the assets of any separate account in which any employee benefit
plan has any interest. As used in this Section 3.2, the terms "separate account"
and "employee benefit plan" shall have the respective meanings assigned to them
in the Employee Retirement Income Security Act of 1974.
3.3. FORMATION. The Purchaser was not organized for the purpose of
making an investment in the Company.
3.4. RECEIPT OF INFORMATION. The Purchaser has been furnished such
information and documents as the Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the Company, terms and conditions of this Agreement and
the purchase of the Shares.
4. SECURITIES LAWS.
4.1. REGISTRATION OF SECURITIES. The Purchaser represents and warrants to
the Company that it understands that the Shares have not been registered under
the Securities Act or the securities laws of any state or other jurisdiction and
that the Shares must be held indefinitely unless they are subsequently
registered thereunder or an exemption from registration thereunder is available.
The Purchaser further represents and warrants to the Company that it will not
transfer any of the Shares in violation of the provisions of this Agreement or
any applicable federal or state securities laws or regulations.
4.2. FINANCIAL MATTERS. The Purchaser represents and warrants to the
Company that (a) it understands that the purchase of the Shares involves
substantial risk and that its financial condition and investments are such that
it is in a financial position to hold the Shares purchased by it for an
indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, its investment in such Shares; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
the Purchaser has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
4.3. TRANSFER LEGENDS AND RESTRICTIONS. The Transfer (as defined below)
the Shares will be restricted in accordance with the terms hereof. "TRANSFER"
shall mean any pledge, sale, assignment, gift or other transfer of any Shares or
any interest therein, whether or not such transfer would constitute a "sale" as
that term is defined in Section 2(3) of the Securities Act.
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<PAGE> 13
Each certificate evidencing the Shares, the Additional Shares or the
Common Stock issuable upon conversion of the Shares (collectively, the
"SECURITIES"), including any certificate issued to any transferee thereof, shall
be imprinted with a legend in substantially the following form (unless otherwise
permitted under this Section 4 or unless such securities shall have been
effectively registered and sold under the Securities Act and applicable state
securities laws):
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF
THESE SHARES SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO
THESE SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME EFFECTIVE OR THE
ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED, UNLESS SUCH OPINION OF
COUNSEL IS NOT REQUIRED BY THE TERMS OF THE CLASS D PREFERRED STOCK
PURCHASE AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED
AS OF MAY 18, 1994 (THE "AGREEMENT"). TRANSFER OF THESE SHARES IS FURTHER
RESTRICTED AS PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS AVAILABLE AT
THE ISSUER'S OFFICES."
The Holder (as defined below) of any Securities by acceptance thereof
agrees, so long as any legend described in this Section 4.3 shall remain on such
Securities, prior to any Transfer of any of the Securities (except for a
Transfer effected pursuant to an effective registration statement under the
Securities Act or in compliance with Rule 144 thereunder), to give written
notice to the Company of such Holder's intention to effect such Transfer and
agrees to comply in all respects with the provisions of this Section 4.3. Such
notice, if required, shall describe the proposed method of Transfer of the
Securities in question. Upon (but only upon) receipt by the Company of such
notice, and a written opinion of counsel to such Holder (which counsel and
opinion shall be reasonably satisfactory to counsel for the Company) that the
proposed Transfer may be effected without registration under the Securities Act
or in compliance with Rule 144 thereunder and under applicable state securities
laws, the proposed Transfer may be effected, and the Holder of such Securities
shall thereupon be entitled to Transfer the same in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the Securities issued upon any such Transfer shall bear the same legend as set
forth in this Section 4.3. Upon the written request of a Holder of the
Securities, the Company shall remove the foregoing legend from the certificates
evidencing such Securities and issue to such Holder new certificates free of any
transfer legend if, with such request, and at the request of the Company, the
Company shall have received an opinion of counsel satisfactory to the Company,
to the effect that any Transfers by such Holder of such Securities may be made
to the public without compliance with either Section 5 of the Securities Act or
Rule 144 thereunder and applicable state securities laws. "Holder" shall mean
the Purchaser (in its capacity as holder of any Securities and for so long as it
holds such Securities), and such of its respective successors and assigns who
acquire Securities from Holders in accordance with the terms of this Agreement
and who agree in writing with the Company to acquire and hold the Securities
subject to all the
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<PAGE> 14
restrictions hereof, but in no event shall "Holder" include any transferee of
any Securities pursuant to sales made under a registration statement filed under
the Securities Act.
4.4. RULE 144. The Purchaser recognizes that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company covenants that (a) at all times after the Company first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company will comply with the
current public information requirements of Rule 144(c) (1) under the Securities
Act; and (b) at all such times as Rule 144 is available for use by the
Purchaser, the Company will furnish the Purchaser upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144.
5. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING.
The obligation of the Purchaser to purchase and pay for the Shares is
subject to the following:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company made herein shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as if
they had been made on and as of the Closing Date.
5.2. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3. COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate (to be signed by its chief executive officer) dated the
Closing Date certifying as to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 in all material respects.
5.4. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
dated as of November 3, 1993 by and among the Company and the purchasers listed
on SCHEDULE A thereto (the "Registration Rights Agreement") shall have been
amended to include the Shares and the Additional Shares in the definition of
Registrable Shares in the Registration Rights Agreement.
5.5. PREEMPTIVE RIGHTS. The Class C Preferred Stock and Warrant Purchase
Agreement dated as of November 3, 1993 by and among the Company and the
purchasers listed on Schedule A thereto (the "CLASS C PURCHASE AGREEMENT") shall
have been amended to include the Purchaser as a "Buyer" under Section 8 of the
Class C Purchase Agreement. Such amendment shall further provide that (i) a
"Terminating Class Event," as defined in Section 8.1(b) of the Class C Purchase
Agreement, shall mean, for the holders of Class D Preferred Stock, that fewer
than 50,000 shares of the Class D Preferred Stock remain outstanding, and (ii)
Class D Preferred Stock shall be included in the classes of Preferred Stock of
the Company from which an amendment or waiver is required pursuant to Section
8.10 of the Class C Purchase Agreement.
- 11 -
<PAGE> 15
5.6. LICENSE AGREEMENT. The Company and the Purchaser shall have entered
into a License Agreement in the form set forth as EXHIBIT B.
5.7. SUPPLY AGREEMENT. The Company and the Purchaser shall have entered
into a Supply Agreement in the form set forth as EXHIBIT C.
5.8. OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received an
opinion of Palmer & Dodge, counsel to the Company, substantially in the form of
EXHIBIT D Hereto, which opinion shall be satisfactory in form and substance to
the Purchaser.
5.9. AMENDED CERTIFICATE. The Amended Certificate shall have been duly
filed with the Secretary of State of the State of Delaware and shall have become
effective.
5.10. BLUE SKY MATTERS. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Shares shall have been obtained or effected (except for the filing of any notice
subsequent to the Closing which may be required under applicable state
securities laws which, if required, shall be filed on a timely basis as may be
so required).
5.11. CORPORATE PROCEEDINGS AND CONSENTS. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel, each of
whom shall have received all such originals or certified or other copies of such
documents as each may reasonably request.
5.12. AMENDED AND RESTATED VOTING RIGHTS AGREEMENT. The Amended and
Restated Voting Rights Agreement dated November 3, 1993 among the Company, the
holders of the Class B Preferred Stock and Class C Purchasers (the "Voting
Agreement") shall be amended to include the Purchaser as a party thereto with
the right to designate a member of the Board of Directors with the holders of
the Class B Preferred Stock and the Class C Preferred Stock pursuant to Section
2(iii) thereof. The Voting Agreement shall be further amended to include the
Class D Preferred Stock in the definition of "Additional Preferred Stock".
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligation
of the Company to sell the Shares is subject to the following:
6.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser made herein shall be true, correct and complete in all material
respects on and as of the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date.
6.2. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and substance to the Company and the Company's counsel, and
they each shall have received all
- 12 -
<PAGE> 16
such counterpart original or certified or other copies of such documents as they
may reasonably request.
6.3. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchaser on or prior to
the Closing Date shall have been performed or complied with.
6.4. AUTHORIZATIONS. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States of America or
of any state required in connection with the lawful issuance and sale of the
Shares or any portion thereof to the Purchaser as contemplated under this
Agreement shall have been duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with the Purchaser as
follows, such covenants, other than as set forth in Section 7.1, 7.2 and 7.13,
to expire at such times as the Company shall have consummated a firm commitment
underwritten public offering pursuant to an effective registration statement on
Form S-1 or a successor form under the Securities Act, covering the offer and
sale by the Company of Common Stock to the public which results in aggregate
gross proceeds to the Company of not less than $10,000,000 (the "INITIAL PUBLIC
OFFERING").
7.1. ISSUANCE OF ADDITIONAL SHARES. In the event that an Initial Public
Offering closes on or before March 31, 1995 at a Pre-Money Valuation (as defined
below) of less than $100,000,000, then immediately after the closing of such
Initial Public Offering, the Company will issue 73,781 Additional Shares of
Common Stock to the Purchaser. If the Pre-Money Valuation of such Initial Public
Offering is greater than $100,000,000 but less than $120,000,000, then
immediately after the closing of such Initial Public Offering, the Company will
issue Additional Shares of Common Stock to the Purchaser in an amount computed
in accordance with the following formula:
Additional shares = Z x (( $150,000,000 )-1)
to be issued (( -----------------------------------------) )
(( (Pre-Money Valuation - $5,000,000) x 1.25) )
where: Z = Number of Shares of Common Stock issued upon
conversion of the Shares initially issued to the
Purchaser hereunder (280,367 Shares)
The Pre-Money Valuation of the Company at its Initial Public Offering
shall be computed by multiplying (A) the sum of (i) the number of shares listed
as owned by Existing Stockholders in the "Dilution" section of the final
Prospectus for the Company's Initial Public Offering plus (ii) the number of
shares of Common Stock issuable upon exercise of all options, warrants or other
rights to acquire Common Stock or upon conversion or exchange of all securities
convertible into or exchangeable for Common Stock issued and outstanding at the
effective date of the registration statement for the Company's Initial Public
Offering times (B) the "Price to Public" stated in the final Prospectus for the
Company's Initial Public Offering.
- 13 -
<PAGE> 17
7.2. PURCHASES OF COMMON STOCK UPON INITIAL PUBLIC OFFERING. At the
closing of its Initial Public Offering, the Company will sell to the Purchaser
and the Purchaser will purchase from the Company, at the "Price to Public"
established for such Initial Public Offering, a number of shares of Common Stock
of the Company equal to $5,000,000 divided by such "Price to Public"; provided,
however, that at the option of the Company, all or any portion of such purchase
and sale shall take place between the Purchaser and the Company's underwriters
as part of its Initial Public Offering. In addition to the shares of Common
Stock described in the preceding sentence, at the option of the Company upon
consultation with the representatives of the underwriters of the Company's
Initial Public Offering, the Purchaser will purchase from the Company, at the
"Price to Public" established for such Initial Public Offering, an additional
number of shares of Common Stock of the Company equal to $5,000,000 divided by
such "Price to Public"; provided, however, that at the option of the Company,
all or any portion of such purchase and sale shall also take place between the
Purchaser and the Company's underwriters as part of its Initial Public Offering.
Any shares of Common Stock sold pursuant to this Section 7.2 will be covered by
an effective registration statement permitting resale of such shares by the
Purchaser in the public market.
7.3. STANDSTILL AGREEMENT. The Purchaser agrees that, unless it has
obtained the prior written consent of the Company or the restrictions contained
in this Section 7.3 have otherwise been released or suspended as provided below,
it will not
(a) acquire, directly or indirectly, by purchase or otherwise, of
record or beneficially, any voting securities of the Company, or rights or
options to acquire voting securities of the Company, if after such acquisition
(and giving effect to the exercise of any such rights or options) the Purchaser
would own of record or beneficially in the aggregate more than 19.9% of the
voting securities of the Company (assuming the exercise of all outstanding
rights or options to acquire voting securities) (the "Limit"); provided that
notwithstanding the provisions of this clause (a), if the number of shares of
outstanding voting securities is reduced or if the aggregate ownership of the
Purchaser is increased as a result of a recapitalization of the Company or as a
result of any other action taken by the Company, the Purchaser will not be
required to dispose of any of its holdings of voting securities which the
Purchaser would then be permitted to own. In the event that the Purchaser owns
in the aggregate more than the Limit due to a repurchase by the Company of any
of its Common Stock, the Company shall, at its option, have the right to
repurchase that number of shares of its Common Stock from the Purchaser
necessary to reduce the Purchaser's ownership of the Company's Common Stock
below the Limit, at the current market price. Except as otherwise provided
above, and except for any voting securities acquired by the Purchaser during any
period that the restrictions contained in this Section 7.3 are suspended as
provided below, if the Purchaser shall at any time own in the aggregate in
excess of the maximum percentage of the voting securities at the time permitted
by this clause (a), the Purchaser shall sell as promptly as practicable under
the circumstances sufficient voting securities so that after such sale the
Purchaser shall not own in the aggregate more than the applicable maximum
permitted percentage of voting securities (provided, however, that the foregoing
paragraph shall not be deemed to limit the Company's remedies in the event that
the excess voting securities were acquired in violation of this Section);
- 14 -
<PAGE> 18
(b) "solicit" proxies with respect to voting securities under any
circumstances or become a "participant" in any "election contest" relating to
the election of directors of the Company, as such terms are defined in
Regulation 14A under the Securities and Exchange Act of 1934, as amended;
deposit any voting securities in a voting trust or subject them to a voting
agreement or other agreement of similar effect;
(c) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals at any time, or induce or attempt
to induce any other person to initiate any stockholder proposal; or
(d) take any action individually or jointly with any partnership,
limited partnership, syndicate, or other group or assist any other person,
corporation, entity or group in taking any action it could not take individually
under the terms of this Agreement.
Notwithstanding the foregoing, the restrictions contained in this S
ection 7.3
(i) shall be released at such time as the Board of Directors of
the Company determines to accept bids from any responsible
bidder to obtain the best price for the sale of the Company;
or
(ii) shall be suspended at such time as any third party makes an
unsolicited offer to acquire more than fifty percent (50%) of
the outstanding securities of the Company, but only so long as
such offer is outstanding; and
(iii) shall be released in any event, on the tenth anniversary of
the date hereof.
7.4. QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after
the end of each of the first three quarters in each fiscal year, the Company
will deliver to the Purchaser, for so long as the Purchaser holds at least
fifteen percent (15%) of the number of Shares purchased by it hereunder (in
which case, the Purchaser shall be deemed to be "Qualified") copies of the
Company's unaudited balance sheet as of the end of, and unaudited statements of
income and statements of cash flows for, such quarter, which shall be prepared
in accordance with generally accepted accounting principles consistently
applied. All such financial statements shall be certified as accurate and
complete in all material respects (subject to normal year-end adjustments) by
the chief financial officer of the Company and shall be presented in form
comparative to the similar period of the preceding year. Further, if for any
period the Company shall have any subsidiary or subsidiaries whose accounts are
consolidated with those of the Company, then in respect of such period all such
financial statements shall be the consolidated financial statements of the
Company and all such consolidated subsidiaries. In no event will the Purchaser
make any use or disclosure of the financial statements referred to in this
Section 7.4 or Section 7.5 or other information acquired pursuant to Section
7.6, except in connection with evaluating its investment in the Company.
7.5. ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the end
of each fiscal year, the Company will deliver to Purchaser, for so long as the
Purchaser Qualifies,
- 15 -
<PAGE> 19
audited financial statements analogous to those required by Section 7.4 as at
the end of and for such year, accompanied by a certification by independent
public accountants selected by the Company's Board of Directors, that (except as
otherwise stated therein) such statements have been prepared in accordance with
generally accepted accounting principles consistently applied.
7.6. OTHER INFORMATION. Upon the reasonable request of the Purchaser, if
the Purchaser then Qualifies, the Company will deliver to the Purchaser other
information and data, not proprietary in nature (in the good faith judgment of
the Company), pertaining to its business, financial and corporate affairs to the
extent that such delivery will not violate any then applicable law or any
agreements of the Company with third parties. The Company will permit the
Purchaser, if the Purchaser then Qualifies, at the expense of the Purchaser, to
visit and inspect any of the properties of the Company, including its books of
account, and to discuss its affairs, finances and accounts with the Company's
officers or directors, all at such reasonable times and as often as the
Purchaser may reasonably request, in each case, in a manner consistent with the
reasonable security and confidentiality needs of the Company; provided, that the
Company shall be under no such obligation with respect to information deemed in
good faith by the Company to be proprietary or subject to third party
restrictions on disclosure.
7.7. USE OF PROCEEDS. The Company will use amounts paid for the Shares
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.8. INSURANCE. The Company will keep all its insurable properties
properly insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any premises occupied by it or arising
from equipment owned by the Company and leased to and located upon or in or
about any premises occupied by any other person; maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which it may be engaged in business; and maintain such other
insurance as is usually maintained by persons engaged in the same or similar
business as is the Company. All such insurance shall be maintained against such
risks and in at least such amounts as such insurance is usually carried by
persons engaged in the same or similar businesses, and all insurance herein
provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance fund
operated by such state or other jurisdiction or by causing to be maintained a
system or systems of self-insurance which is in accord with applicable laws. In
addition, the Company shall maintain "Key Man Insurance" on the lives of K.
Michael Forrest and Richard F. Selden in an aggregate face amount of not less
than $1,000,000 per person for so long as such person is employed by the
Company.
7.9. PAYMENT OF TAXES. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind
- 16 -
<PAGE> 20
(including claims for labor, materials and supplies), which, if unpaid, might by
law become a lien or charge upon its property; PROVIDED, however, that the
Company shall not be required to pay any tax, assessment, charge, levy or claim
if the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company shall have set aside on
its books reserves deemed by it adequate with respect thereto.
7.10. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, provided, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.11. MAINTENANCE OF PROPERTIES. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.12. RESERVATION OF COMMON STOCK. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
shares of Common Stock issuable upon conversion of the Shares and the number of
Additional Shares, and the Company further agrees that in the event that the
conversion price applicable to the Shares set forth in the Certificate of
Incorporation is reduced below the initial price set forth therein, including
without limitation pursuant to Section 4.5 of the Certificate of Incorporation,
it shall immediately cause to be set aside additional shares of the Company's
Common Stock so as to comply with the provisions of this Section 7.12.
7.13. SEC REPORTS. Promptly after each such filing, the Company will
furnish the Purchaser with copies of all proxy statements and annual reports and
all reports on Forms 8-K, 10-Q or 10-K (or any similar form hereafter in use)
which the Company shall file with the Securities and Exchange Commission or any
stock exchange on which securities of the Company may be listed.
8. MISCELLANEOUS.
8.1. ENTIRE AGREEMENT; SUCCESSORS. This Agreement, together with the
Schedules and Exhibits hereto sets forth the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and commitments of the parties relating thereto. All the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto subject to any restrictions on assignment stated herein. Delivery
of documents by the Company or its counsel to the Purchaser shall be deemed to
constitute for all purposes the furnishing of such documents by the Company to
the Purchaser under this Agreement or in connection with the offering hereunder.
- 17 -
<PAGE> 21
8.2. NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered by facsimile (and promptly confirmed
by telephone, personal delivery or courier) or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by telecopier, addressed as
follows:
(a) if to the Purchaser:
Marion Merrell Dow Inc.
9300 Ward Parkway, P.O. Box 8480
Kansas City, Missouri 64114-0480
Attention: General Counsel
Telephone: (816) 966-4000
Telecopy: (816) 966-3805
with copies to:
Marion Merrell Dow Inc.
2110 E. Galbraith Road
Cincinnati, OH 45215
Attention: Patent Counsel
Telephone: (513) 948-7960
Telecopy: (513) 948-7961
and
Shook, Hardy & Bacon, P.C.
One Kansas City Place
1200 Main Street, Suite 3100
Kansas, City, Missouri 64105
Attention: Randall B. Sunberg, Esq.
Telephone: (816) 474-6550
Telecopy: (816) 421-5547
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Chief Executive Officer
Telephone: (617) 349-0200
Telecopy: (617) 491-7903
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<PAGE> 22
with a copy to:
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt, with
telephonic confirmation in the case of facsimile and (ii) three (3) business
days after deposit in the U.S. mails or delivery to a nationally-recognized
overnight courier service in accordance with this Section.
8.3. EXPENSES. Except as provided in the Registration Rights Agreement,
each party will bear its own expenses in connection with this Agreement.
8.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by the Company or the Purchaser
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance of the Shares for a period (the "Survival Period")
expiring on the first to occur of (a) the Initial Public Offering, or (b) the
date which is five years after the Closing Date. No claim may be made for breach
of any representation or warranty contained herein unless notice of such claim
is given to the breaching party within the Survival Period.
8.5. AMENDMENTS; WAIVERS. Changes in or additions to this Agreement may
be made by written document executed by the Company and the Purchaser. The
Purchaser may, by written instrument, waive compliance by the Company with any
of the provisions of this Agreement. Notwithstanding the foregoing, no course of
dealing or delay on the part of the Purchaser in exercising any right shall
operate as a waiver thereof or otherwise prejudice the rights of the Purchaser.
8.6. GOVERNING LAW. This Agreement shall be construed and enforced under
the laws of the State of Delaware, without giving effect to the choice of law
provisions thereof.
8.7. MISCELLANEOUS. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same document.
The headings herein are for convenience of reference only and shall not affect
the construction of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or unenforceability of any other
provision.
- 19 -
<PAGE> 23
This Class D Preferred Stock Purchase Agreement has been SIGNED, SEALED
AND DELIVERED, as of the date first written above by the parties hereto.
COMPANY:
--------
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
----------------------------------------
Title: President and CEO
-------------------------------------
PURCHASER:
----------
MARION MERRELL DOW INC.
By: /s/ Terry J. Shelton
------------------------------------------
Title: Vice President, Licensing and Business
--------------------------------------
Development
--------------------------------------
- 20 -
<PAGE> 1
EXHIBIT 10.7
===============================================================================
CLASS E PREFERRED STOCK
PURCHASE AGREEMENT
by and between
TRANSKARYOTIC THERAPIES, INC.
and
MARION MERRELL DOW INC.
Dated as of March 1, 1995
===============================================================================
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
CLASS E PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
PAGE
1. PURCHASE AND SALE OF THE SHARES................................ 1
1.1. Purchase of Stock........................................ 1
1.2. Closing.................................................. 1
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.................. 2
2.1. Organization and Standing of the Company................. 2
2.2. Subsidiaries............................................. 2
2.3. Capitalization........................................... 2
2.4. Financial Information.................................... 3
2.5. Absence of Undisclosed Liabilities....................... 3
2.6. Absence of Certain Changes............................... 4
2.7. Taxes.................................................... 4
2.8. Title to Properties; Liens and Encumbrances.............. 5
2.9. Intellectual Property Rights............................. 5
2.10. Government Approvals and Licenses........................ 5
2.11. Contracts................................................ 5
2.12. Directors and Officers................................... 7
2.13. Litigation............................................... 7
2.14. Authorization............................................ 7
2.15. Brokers.................................................. 7
2.16. Governmental Consents.................................... 7
2.17. Securities Laws.......................................... 8
2.18. Legal Compliance......................................... 8
2.19. Insurance................................................ 8
2.20. Nondisclosure Agreement.................................. 8
2.21. Disclosures.............................................. 8
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASER................ 9
3.1. Authority................................................ 9
3.2. Accredited Investor Status............................... 9
3.3. Formation................................................ 9
3.4. Receipt of Information................................... 9
4. SECURITIES LAWS................................................ 9
4.1. Registration of Securities............................... 9
4.2. Financial Matters........................................ 10
(i)
<PAGE> 3
4.3. Transfer Legends and Restrictions........................ 10
4.4. Rule 144................................................. 11
5. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING........... 11
5.1. Representations and Warranties........................... 11
5.2. Performance.............................................. 12
5.3. Compliance Certificate................................... 12
5.4. Registration Rights Agreement............................ 12
5.5. Preemptive Rights........................................ 12
5.6. Amended and Restated Voting Rights Agreement............. 12
5.7. Amended and Restated License Agreement................... 12
5.8. License Agreement........................................ 12
5.9. Opinion of Company's Counsel............................. 12
5.10. Termination of Supply Agreement.......................... 12
5.11. Amended Certificate...................................... 13
5.12. Blue Sky Matters......................................... 13
5.13. Corporate Proceedings and Consents....................... 13
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING............. 13
6.1. Representations and Warranties........................... 13
6.2. Proceedings and Documents................................ 13
6.3. Performance.............................................. 13
6.4. Authorizations........................................... 13
7. AFFIRMATIVE COVENANTS.......................................... 13
7.1. Standstill Agreement..................................... 14
7.2. Quarterly Financial Statements........................... 15
7.3. Annual Financial Statements.............................. 15
7.4. Other Information........................................ 15
7.5. Use of Proceeds.......................................... 16
7.6. Insurance................................................ 16
7.7. Payment of Taxes......................................... 16
7.8. Corporate Existence...................................... 17
7.9. Maintenance of Properties................................ 17
7.10. Reservation of Common Stock.............................. 17
7.11. SEC Reports.............................................. 17
8. MISCELLANEOUS.................................................. 17
8.1. Entire Agreement; Successors............................. 17
8.2. Notices.................................................. 18
8.3. Expenses................................................. 19
8.4. Survival of Representations and Warranties............... 19
8.5. Amendments; Waivers...................................... 19
8.6. Governing Law............................................ 19
(ii)
<PAGE> 4
8.7. Miscellaneous............................................ 19
(iii)
<PAGE> 5
TRANSKARYOTIC THERAPIES, INC.
CLASS E PREFERRED STOCK PURCHASE AGREEMENT
This Class E Preferred Stock Purchase Agreement (this "AGREEMENT") is made
as of the 1st day of March, 1995 by and between Transkaryotic Therapies, Inc., a
Delaware corporation (the "COMPANY"), and Marion Merrell Dow Inc., a Delaware
corporation (the "PURCHASER").
WHEREAS, the Purchaser and the Company have entered into a License
Agreement dated as of the date hereof; and
WHEREAS, the Purchaser desires to subscribe for and purchase, and the
Company desires to issue and sell, shares of the Company's Class E Preferred
Stock, $1.00 par value per share (the "CLASS E PREFERRED STOCK"), subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
contained herein the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES
1.1. PURCHASE OF STOCK. On the Closing Date (as defined in Section 1.2
below), subject to the terms and conditions hereof and in reliance upon the
warranties, representations and agreements contained herein, the Company agrees
to sell to the Purchaser, and the Purchaser agrees to purchase from the Company,
523,560 shares of Class E Preferred Stock at a price of $19.10 per share (the
"Shares"). The powers, designations, preferences, rights and qualifications,
limitations and restrictions of the Class E Preferred Stock are as set forth in
the Certificate of Amendment of the Amended and Restated Certificate of
Incorporation (the "AMENDED CERTIFICATE") attached as EXHIBIT A hereto.
1.2. CLOSING. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") shall take place at the offices of Palmer & Dodge at
10:00 am., local time, on March 1, 1995 or at such other time and date as the
Company and the Purchaser may agree upon in writing (the "CLOSING DATE"). At the
Closing, the Company will deliver to the Purchaser a certificate evidencing the
number of Shares being purchased by the Purchaser pursuant to Section 1.1,
against payment by the Purchaser of the entire purchase price for the Shares in
lawful money of the United States of America by bank or certified check, wire-
transfer or such other form of payment as shall be mutually agreed upon by the
Purchaser and the Company.
-1-
<PAGE> 6
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company hereby
represents and warrants to the Purchaser that, as of the date of this Agreement,
except as otherwise described on SCHEDULE A hereto, the following are true and
correct:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business as a foreign
corporation in the Commonwealth of Massachusetts and is in good standing in each
jurisdiction in which failure to so qualify would have a materially adverse
effect on the business, assets or prospects of the Company. The copy of the
Company's Amended and Restated Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION"), which has been delivered to the Purchaser, is true, complete
and correct as of the date of this Agreement. The Company has the corporate
power and authority to own and lease its property, to enter into, deliver, and
perform its obligations and undertakings under, this Agreement and all other
agreements referred to herein or contemplated hereby, to issue the Shares, and
to conduct its business as now conducted.
2.2. SUBSIDIARIES. The Company has no subsidiaries and does not control,
directly or indirectly, any other corporation, association or business
organization.
2.3. CAPITALIZATION. The Company's entire authorized capital stock will
consist, immediately after the filing of the Amended Certificate with the
Secretary of State of the State of Delaware, of 15,000,000 shares of Common
Stock (of which 4,020,230 shares have been issued), and 2,744,927 shares of
Preferred Stock, $1.00 par value per share (the "PREFERRED STOCK"), of which:
6,000 shares have been designated as Class A Preferred Stock (the "CLASS A
PREFERRED STOCK"), all of which have been issued; 60,000 shares have been
designated as Class B Preferred Stock (the "CLASS B PREFERRED STOCK"), of which
49,339 shares have been issued; 1,875,000 shares have been designated as Class C
Preferred Stock (the "CLASS C PREFERRED STOCK"), of which 1,015,974 shares have
been issued; 280,367 shares have been designated as Class D Preferred Stock (the
"CLASS D PREFERRED STOCK"), of which 280,367 shares have been issued; and
523,560 shares of Class E Preferred Stock, none of which are issued and
outstanding immediately prior to the Closing. 179,845 shares of Common Stock are
held of record in the Company's treasury. The number of shares and class of
capital stock of the Company which have been issued are listed on SCHEDULE A
opposite the names of the record holders thereof, excluding those record holders
who are employees of the Company, which employees hold, in the aggregate,
1,421,660 shares of the outstanding capital stock of the Company. The Company
has reserved 1,250,000 shares of Common Stock for issuance to employees and
consultants under the 1993 Long-Term Incentive Plan (the "INCENTIVE PLAN") and
180,000 shares of Common Stock for issuance to non-employee directors under the
1993 Non-Employee Directors' Stock Option Plan (the "DIRECTORS' PLAN"). The
Company has granted options under the Incentive Plan for the purchase of 126,145
shares of Common Stock. No options have been granted under the Directors' Plan.
The Company has granted warrants for the purchase of 635,517 shares of Common
Stock. In addition, the
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Company has reserved a sufficient number of shares of Common Stock for the
conversion of the Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock, Class D Preferred Stock and Class E Preferred Stock. The Common
Stock and the Preferred Stock are not entitled to cumulative voting rights,
preemptive rights, antidilutive rights or so-called registration rights under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), except as
provided in this Agreement or Article IV of the Certificate of Incorporation.
The Common Stock and the Preferred Stock have the preferences, voting powers,
qualifications, and special or relative rights or privileges set forth in the
Certificate of Incorporation and the Amended Certificate. All outstanding shares
of Common Stock and Preferred Stock have been, and the Class E Preferred Stock
when issued in accordance with this Agreement, the Certificate of Incorporation
and the Amended Certificate will be, validly issued and fully paid and
nonassessable, and issued in accordance with applicable state and federal
securities laws. The Company does not have outstanding any option, warrant or
other commitment to issue or to acquire any shares of its capital stock, or any
securities or obligations convertible into or exchangeable for its capital
stock, other than the 126,145 options granted pursuant to the Incentive Plan
referred to above, options it is committed to grant annually under the
Directors' Plan to eligible Directors, or warrants described above and listed on
SCHEDULE A hereto, and the Company has not given any person any right to acquire
from the Company or sell to the Company any shares of its capital stock. There
is, and immediately upon consummation at the Closing of the transactions
contemplated hereby there will be, no agreement, restriction or encumbrance
(such as a right of first refusal, right of first offer, proxy, voting
agreement, etc.) with respect to the sale or voting of any shares of capital
stock of the Company (whether outstanding or issuable upon conversion or
exercise of outstanding securities) except as contemplated by this Agreement, by
the Certificate of Incorporation and By-laws of the Company or as indicated on
SCHEDULE A hereto, and the Company will not voluntarily place any restrictions
on the transfer of the Shares except to the extent set forth herein or
contemplated hereby.
2.4. FINANCIAL INFORMATION. The Company has delivered to the Purchaser a
copy of (a) its draft audited balance sheet (the "BALANCE SHEET") as of December
31, 1994 (the "FINANCIAL STATEMENT DATE") and the related draft statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended (with the Balance Sheet, the "DRAFT AUDITED FINANCIALS"), and (b) its most
recent audited balance sheet and related statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended (the "Audited
Financials") the "Audited Financials," and together with the Draft Audited
Financials, the "Financial Statements"). The Financial Statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis and fairly present the financial condition of the Company at
the date thereof and the results of the operations of the Company for the period
then ended.
2.5. ABSENCE OF UNDISCLOSED LIABILITIES. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to
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the date hereof which are not fully reflected or provided for on the Balance
Sheet, except for obligations arising after the Financial Statement Date in the
ordinary course of business.
2.6. ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
other than as indicated on SCHEDULE A hereto, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown
by the Balance Sheet;
(b) any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock or any
direct or indirect redemption, purchase or other acquisition of any of
such stock by the Company;
(d) any labor trouble, or any other event, development, or
condition, of any character, or threat of the same, materially adversely
affecting the business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of the
Company;
(g) any sale, assignment or transfer of any material tangible or
intangible assets of the Company except with respect to tangible assets in
the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor.
2.7. TAXES. For all periods ended on or prior to the Financial Statement
Date, the Company has filed or will file within the time prescribed by law
(including extensions of time approved by the appropriate taxing authority) all
tax returns and reports required to be filed with the United States Internal
Revenue Service, the State of Delaware, the Commonwealth of Massachusetts, any
other states, and all foreign countries and has paid or made adequate provision
in the Balance Sheet for the payment of all taxes, interest, penalties,
assessments or deficiencies shown to be due (or, to the knowledge of the
Company, claimed by such authority or jurisdiction to be due) on or in respect
of such tax returns and reports. The Company does not know of any (a) other
federal, Delaware, Massachusetts, state or foreign taxes which are due and
payable by the Company which have not been so paid; (b) other federal, Delaware,
Massachusetts, state or foreign tax returns or reports which are required to
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be filed which have not been so filed; or (c) unpaid assessment for additional
taxes for any fiscal period or any basis thereof. The Company's federal or state
income tax returns have never been audited.
2.8. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Except as indicated on
SCHEDULE A hereto, the Company has good and marketable title to all of its
properties and assets, real and personal, including those reflected in the
Balance Sheet (except as sold or otherwise disposed of in the ordinary course of
business since the Financial Statement Date), subject to no mortgage, pledge,
lien, security interest, conditional sale agreement, encumbrance or charge
except (a) as shown on the Balance Sheet or in the notes thereto, (b) tax,
materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings, and (c) vendors' interests
in installment purchase obligations of the Company which in the aggregate do not
exceed $25,000.
2.9. INTELLECTUAL PROPERTY RIGHTS. Attached hereto as SCHEDULE B is a
true and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or licenses to use the same,
and any and all applications therefor, as well as all trade secrets and similar
proprietary information owned or held by the Company (the "Intellectual
Property") are all such items required to enable the Company to conduct its
business as now conducted. The Company has not received any formal or informal
notice of infringement or other complaint that the Intellectual Property
violates or infringes rights under patents, trademarks, service marks, trade
names, trade secrets, copyrights or licenses or any other proprietary rights of
others, nor does the Company have any reason to believe that there has been any
such violation or infringement. Except as set forth in SCHEDULE B, no royalties,
honoraria, or fees are or will be payable by the Company to other persons by
reason of the ownership or use by the Company of the Intellectual Property.
2.10. GOVERNMENT APPROVALS AND LICENSES. The Company has all governmental
approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as presently conducted and will use its best efforts to
obtain all governmental approvals, authorizations, consents, licenses and
permits necessary or required to conduct its business as proposed to be
conducted.
2.11. CONTRACTS. Other than as set forth in SCHEDULE A or B or described
elsewhere in this Section 2, the Company has no presently existing contract,
obligation or commitment (a) involving the future payment by or to the Company
of more than $25,000 (other than employment or consulting agreements terminable
at the option of the Company without penalty on no more than thirty (30) days
prior written notice with employees of, or consultants to, the Company who are
not officers or directors thereof), or (b) which is material to the Company or
its currently contemplated business, including without limitation the following:
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(i) any employment, bonus, commission or consulting agreements or
arrangements; pension, profit sharing, deferred compensation, stock bonus,
retirement, stock option, stock purchase, phantom stock or similar plans,
including agreements evidencing rights to purchase securities of the
Company; or agreements with shareholders;
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging, or granting or creating a lien or security interest
or other encumbrance on any of the Company's property; or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
(iii) any agreements with dealers, sales representatives, brokers
and other distributors, jobbers, advertisers, sales agencies;
(iv) any agreements with any labor union or collective bargaining
organization;
(v) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and
subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal property,
including motor vehicles, and real estate;
(vii) any indenture, agreement, or other document relating to the
sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses; or
(ix) any agreements limiting the freedom of the Company or any of
its employees to compete in any line of business or in any geographic area
or with any person;
(x) any agreements providing for disposition of the business and
substantially all of the assets, or securities, of the Company; agreements
of merger or consolidation to which the Company is a party; or letters of
intent with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with respect
to, the acquisition of assets or securities of any other business or
entity.
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True and complete copies of all contracts and other items listed on
SCHEDULE A have been made available to the Purchaser. The Company has complied
with all the material provisions of said contracts and commitments set forth in
SCHEDULE A hereto and of all other material contracts and commitments to which
it is a party, and is not in material default under any thereof, except to the
extent to which any such noncompliance and defaults would not materially and
adversely affect the business or financial condition of the Company. There
exists no condition, event or act which constitutes, or which after notice,
lapse of time or both would constitute, a material default by the Company or, to
the Company's knowledge, by any third party, under any of said contracts or
commitments.
2.12. DIRECTORS AND OFFICERS. SCHEDULE A hereto contains a true, correct
and complete list showing the name of each director and officer of the Company.
2.13. LITIGATION. There is no litigation or proceeding pending or, to the
Company's knowledge, threatened, against the Company or the Company's
properties, nor does the Company know or have reasonable grounds to know of any
basis for any such action, including, without limitation, any governmental
investigation relating to employee safety or discrimination matters. To the
Company's knowledge, there is no litigation or proceeding pending or threatened
against or relating to any present or former employee of the Company by reason
of the past employment or consulting relationships of any of such employees with
the Company. There are no outstanding judgments against the Company.
2.14. AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and the issuance and sale of the Shares, upon
conversion of the Shares, the Common Stock into which the Shares are
convertible, have been duly authorized and approved by all necessary corporate
action. This Agreement has been duly executed and delivered on behalf of the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors. The execution, delivery and performance of this Agreement, the
issuance and sale of the Shares, upon conversion of the Shares, the Common Stock
into which the Shares are convertible, will not conflict with, or result in a
breach of any of the terms of, or constitute a default under, the Certificate of
Incorporation or By-laws of the Company or result in a material breach of any of
the terms of, or constitute a material default under, any agreement, instrument
or other restriction to which the Company is a party or by which it or any of
its properties or assets is bound.
2.15. BROKERS. Except as described on SCHEDULE A, the Company has no
contract, arrangement or understanding with any broker, finder, or similar agent
with respect to the transactions contemplated by this Agreement.
2.16. GOVERNMENTAL CONSENTS. Based in part on the representations made
by the Purchaser in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the
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execution and delivery of this Agreement or the offer, issuance, sale or
delivery of the Shares pursuant to this Agreement or the consummation of any
other transactions contemplated hereby.
2.17. SECURITIES LAWS. Neither the Company nor any other person, firm or
corporation acting on its behalf has sold any of the Shares or other securities
of the Company to, or offered any thereof for sale to, or solicited any offers
to purchase any thereof from, or otherwise approached or negotiated (nor will
the Company or any other person, firm or corporation acting on its behalf sell,
offer, solicit or otherwise approach or negotiate) in respect thereof with, such
character or number of persons in the aggregate, or in such manner, as would
result in bringing the Shares, or any part thereof, within the provisions of
Section 5 of the Securities Act. Assuming that the Purchaser's representations
and warranties contained in Sections 3 and 4 of this Agreement are true and
correct at the Closing and on the date of the issuance of the shares of Common
Stock into which the Shares are convertible, the offering and sale of the
Shares, and the issuance of the shares of Common Stock upon conversion of the
Shares, are each exempt, or will each be exempt, as the case may be, from
registration and prospectus delivery requirements of the Securities Act as in
effect on the date hereof and are also exempt or will be exempt from
registration or qualification under applicable state securities laws as in
effect on the date hereof.
2.18. LEGAL COMPLIANCE. The Company is not in violation of any provisions
of its Certificate of Incorporation or By-laws, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which violation materially and adversely
affects the business or financial condition of the Company.
2.19. INSURANCE. The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including,
without limitation, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
2.20. NONDISCLOSURE AGREEMENT. The Company has entered into nondisclosure
and invention ownership agreements in favor of the Company in such forms as have
been approved from time to time by the Board of Directors of the Company, with
each person employed by it or serving as a consultant to it with employment or
consulting responsibility requiring access to proprietary technical information
of the Company.
2.21. DISCLOSURES. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate, or instrument furnished to the Purchaser or
its agents in connection with the transactions contemplated by this Agreement,
when read together, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company knows of no
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information or fact which has or would have a material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the Company
which has not been disclosed in SCHEDULE A.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASER. The Purchaser
represents and warrants to the Company that the following are true and correct
in all material respects:
3.1. AUTHORITY. The Purchaser has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder. All necessary
corporate and other action has been taken by it or on its behalf to execute,
deliver and perform its obligations under this Agreement and to purchase the
Shares. This Agreement constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms.
3.2. ACCREDITED INVESTOR STATUS. The Purchaser is acquiring the Shares
for the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Shares or any portion thereof; PROVIDED that the disposition
of its property shall at all times be and remain within its control. It further
represents that, except as otherwise disclosed in writing to the Company, it is
an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act and that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Shares. The Purchaser further represents
that it is acquiring the Shares for its own account and with its general assets
and not with the assets of any separate account in which any employee benefit
plan has any interest. As used in this Section 3.2, the terms "separate
account" and "employee benefit plan" shall have the respective meanings
assigned to them in the Employee Retirement Income Security Act of 1974.
3.3. FORMATION. The Purchaser was not organized for the purpose of making
an investment in the Company.
3.4. RECEIPT OF INFORMATION. The Purchaser has been furnished such
information and documents as the Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the Company, terms and conditions of this Agreement and
the purchase of the Shares.
4. SECURITIES LAWS.
4.1. REGISTRATION OF SECURITIES. The Purchaser represents and warrants to
the Company that it understands that the Shares have not been registered under
the Securities Act or the securities laws of any state or other jurisdiction and
that the Shares must be held indefinitely unless they are subsequently
registered thereunder or an exemption from registration thereunder is available.
The Purchaser further represents and warrants to the
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Company that it will not transfer any of the Shares in violation of the
provisions of this Agreement or any applicable federal or state securities laws
or regulations.
4.2. FINANCIAL MATTERS. The Purchaser represents and warrants to the
Company that (a) it understands that the purchase of the Shares involves
substantial risk and that its financial condition and investments are such that
it is in a financial position to hold the Shares purchased by it for an
indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, its investment in such Shares; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
the Purchaser has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
4.3. TRANSFER LEGENDS AND RESTRICTIONS. The Transfer (as defined below)
of the Shares will be restricted in accordance with the terms hereof. "TRANSFER"
shall mean any pledge, sale, assignment, gift or other transfer of any Shares or
any interest therein, whether or not such transfer would constitute a "sale" as
that term is defined in Section 2(3) of the Securities Act.
Each certificate evidencing the Shares or the Common Stock issuable upon
conversion of the Shares (collectively, the "SECURITIES"), including any
certificate issued to any transferee thereof, shall be imprinted with a legend
in substantially the following form (unless otherwise permitted under this
Section 4 or unless such securities shall have been effectively registered and
sold under the Securities Act and applicable state securities laws):
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF
THESE SHARES SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO
THESE SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME EFFECTIVE OR THE
ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED, UNLESS SUCH OPINION OF
COUNSEL IS NOT REQUIRED BY THE TERMS OF THE CLASS E PREFERRED STOCK
PURCHASE AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED
AS OF MARCH 1, 1995 (THE "AGREEMENT"). TRANSFER OF THESE SHARES IS FURTHER
RESTRICTED AS PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS AVAILABLE AT
THE ISSUER'S OFFICES."
The Holder (as defined below) of any Securities by acceptance thereof
agrees, so long as any legend described in this Section 4.3 shall remain on such
Securities, prior to any Transfer of any of the Securities (except for a
Transfer effected pursuant to an effective registration statement under the
Securities Act or in compliance with Rule 144 thereunder), to give written
notice to the Company of such Holder's intention to effect such Transfer and
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agrees to comply in all respects with the provisions of this Section 4.3. Such
notice, if required, shall describe the proposed method of Transfer of the
Securities in question. Upon (but only upon) receipt by the Company of such
notice, and a written opinion of counsel to such Holder (which counsel and
opinion shall be reasonably satisfactory to counsel for the Company) that the
proposed Transfer may be effected without registration under the Securities Act
or in compliance with Rule 144 thereunder and under applicable state securities
laws, the proposed Transfer may be effected, and the Holder of such Securities
shall thereupon be entitled to Transfer the same in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the Securities issued upon any such Transfer shall bear the same legend as set
forth in this Section 4.3. Upon the written request of a Holder of the
Securities, the Company shall remove the foregoing legend from the certificates
evidencing such Securities and issue to such Holder new certificates free of any
transfer legend if, with such request, and at the request of the Company, the
Company shall have received an opinion of counsel satisfactory to the Company,
to the effect that any Transfers by such Holder of such Securities may be made
to the public without compliance with either Section 5 of the Securities Act or
Rule 144 thereunder and applicable state securities laws. "HOLDER" shall mean
the Purchaser (in its capacity as holder of any Securities and for so long as it
holds such Securities), and such of its respective successors and assigns who
acquire Securities from Holders in accordance with the terms of this Agreement
and who agree in writing with the Company to acquire and hold the Securities
subject to all the restrictions hereof, but in no event shall "Holder" include
any transferee of any Securities pursuant to sales made under a registration
statement filed under the Securities Act.
4.4. RULE 144. The Purchaser recognizes that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company covenants that (a) at all times after the Company first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company will comply with the
current public information requirements of Rule 144(c) (1) under the Securities
Act; and (b) at all such times as Rule 144 is available for use by the
Purchaser, the Company will furnish the Purchaser upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144.
5. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT CLOSING.
The obligation of the Purchaser to purchase and pay for the Shares is
subject to the following:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company made herein shall be true, correct and complete in all material
respects on and as of the Closing Date, with the same force and effect as if
they had been made on and as of the Closing Date.
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5.2. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3. COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate (to be signed by its chief executive officer) dated the
Closing Date certifying as to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 in all material respects.
5.4. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
dated as of November 3, 1993, as amended, by and among the Company, the
purchasers listed on SCHEDULE A thereto and the Purchaser (the "Registration
Rights Agreement") shall have been amended further to include the Shares in the
definition of Registrable Shares in the Registration Rights Agreement.
5.5. PREEMPTIVE RIGHTS. The Class C Preferred Stock and Warrant Purchase
Agreement dated as of November 3, 1993, as amended, by and among the Company,
the purchasers listed on Schedule A thereto and the Purchaser (the "CLASS C
PURCHASE AGREEMENT") shall have been amended further to provide that (i) a
"Terminating Class Event," as defined in Section 8.1(b) of the Class C Purchase
Agreement, shall mean, for the holders of Class E Preferred Stock, that fewer
than 50,000 shares of the Class E Preferred Stock remain outstanding, and (ii)
Class E Preferred Stock shall be included in the classes of Preferred Stock of
the Company from which an amendment or waiver is required pursuant to Section
8.10 of the Class C Purchase Agreement.
5.6. AMENDED AND RESTATED VOTING RIGHTS AGREEMENT. The Amended and
Restated Voting Rights Agreement dated November 3, 1993, as amended, among the
Company, the holders of the Class B Preferred Stock and Class C Purchasers and
the Purchaser (the "Voting Agreement") shall be amended further to include the
Class E Preferred Stock in the definitions of "Additional Preferred Stock" and
"Voting Securities".
5.7. AMENDED AND RESTATED LICENSE AGREEMENT. The Company and the
Purchaser shall have entered into a Amended and Restated License Agreement in
the form set forth as Exhibit B.
5.8. LICENSE AGREEMENT. The Company and the Purchaser shall have entered
into a License Agreement in the form set forth as EXHIBIT C.
5.9. OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received an
opinion of Palmer & Dodge, counsel to the Company, substantially in the form of
EXHIBIT D hereto, which opinion shall be satisfactory in form and substance to
the Purchaser.
5.10. TERMINATION OF SUPPLY AGREEMENT. The Supply Agreement dated May 18,
1994 between the Company and the Purchaser shall have been terminated.
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5.11. AMENDED CERTIFICATE. The Amended Certificate shall have been duly
filed with the Secretary of State of the State of Delaware and shall have become
effective.
5.12. BLUE SKY MATTERS. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Shares shall have been obtained or effected (except for the filing of any notice
subsequent to the Closing which may be required under applicable state
securities laws which, if required, shall be filed on a timely basis as may be
so required).
5.13. CORPORATE PROCEEDINGS AND CONSENTS. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchaser and its counsel, each of
whom shall have received all such originals or certified or other copies of such
documents as each may reasonably request.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligation
of the Company to sell the Shares is subject to the following:
6.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser made herein shall be true, correct and complete in all material
respects on and as of the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date.
6.2. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and substance to the Company and the Company's counsel, and
they each shall have received all such counterpart original or certified or
other copies of such documents as they may reasonably request.
6.3. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchaser on or prior to
the Closing Date shall have been performed or complied with.
6.4. AUTHORIZATIONS. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States of America or
of any state required in connection with the lawful issuance and sale of the
Shares or any portion thereof to the Purchaser as contemplated under this
Agreement shall have been duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with the Purchaser
as follows, such covenants, other than as set forth in Section 7.11, to expire
at such times as the Company shall have consummated a firm commitment
underwritten public offering
-13-
<PAGE> 18
pursuant to an effective registration statement on Form S-1 or a successor form
under the Securities Act, covering the offer and sale by the Company of Common
Stock to the public which results in aggregate gross proceeds to the Company of
not less than $10,000,000 (the "INITIAL PUBLIC OFFERING").
7.1. STANDSTILL AGREEMENT. The Purchaser agrees that, unless it has
obtained the prior written consent of the Company or the restrictions contained
in this Section 7.1 have otherwise been released or suspended as provided below,
it will not
(a) acquire, directly or indirectly, by purchase or otherwise, of
record or beneficially, any voting securities of the Company, or rights or
options to acquire voting securities of the Company, if after such acquisition
(and giving effect to the exercise of any such rights or options) the Purchaser
would own of record or beneficially in the aggregate more than 19.9% of the
voting securities of the Company (assuming the exercise of all outstanding
rights or options to acquire voting securities) (the "Limit"); provided that
notwithstanding the provisions of this clause (a), if the number of shares of
outstanding voting securities is reduced or if the aggregate ownership of the
Purchaser is increased as a result of a recapitalization of the Company or as a
result of any other action taken by the Company, the Purchaser will not be
required to dispose of any of its holdings of voting securities which the
Purchaser would then be permitted to own. In the event that the Purchaser owns
in the aggregate more than the Limit due to a repurchase by the Company of any
of its Common Stock, the Company shall, at its option, have the right to
repurchase that number of shares of its voting securities from the Purchaser
necessary to reduce the Purchaser's ownership of the Company's voting securities
below the Limit, at the greater of the purchase price paid by the Purchaser for
the Shares or the current market price of the Shares. Except as otherwise
provided above, and except for any voting securities acquired by the Purchaser
during any period that the restrictions contained in this Section 7.1 are
suspended as provided below, if the Purchaser shall at any time own in the
aggregate in excess of the maximum percentage of the voting securities at the
time permitted by this clause (a), the Purchaser shall sell as promptly as
practicable under the circumstances sufficient voting securities so that after
such sale the Purchaser shall not own in the aggregate more than the applicable
maximum permitted percentage of voting securities (provided, however, that the
foregoing paragraph shall not be deemed to limit the Company's remedies in the
event that the excess voting securities were acquired in violation of this
Section);
(b) "solicit" proxies with respect to voting securities under any
circumstances or become a "participant" in any "election contest" relating to
the election of directors of the Company, as such terms are defined in
Regulation 14A under the Securities and Exchange Act of 1934, as amended;
deposit any voting securities in a voting trust or subject them to a voting
agreement or other agreement of similar effect;
(c) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals at any time, or induce or attempt
to induce any other person to initiate any stockholder proposal; or
-14-
<PAGE> 19
(d) take any action individually or jointly with any partnership,
limited partnership, syndicate, or other group or assist any other person,
corporation, entity or group in taking any action it could not take individually
under the terms of this Agreement.
Notwithstanding the foregoing, the restrictions contained in this
Section 7.1
(i) shall be released at such time as the Board of Directors of
the Company determines to accept bids from any responsible
bidder to obtain the best price for the sale of the Company;
or
(ii) shall be suspended at such time as any third party makes an
unsolicited offer to acquire more than fifty percent (50%) of
the outstanding securities of the Company, but only so long as
such offer is outstanding; and
(iii) shall be released in any event, on May 18, 2004.
7.2. QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after
the end of each of the first three quarters in each fiscal year, the Company
will deliver to the Purchaser, for so long as the Purchaser holds at least
fifteen percent (15%) of the number of Shares purchased by it hereunder (in
which case, the Purchaser shall be deemed to be "Qualified") copies of the
Company's unaudited balance sheet as of the end of, and unaudited statements of
income and statements of cash flows for, such quarter, which shall be prepared
in accordance with generally accepted accounting principles consistently
applied. All such financial statements shall be certified as accurate and
complete in all material respects (subject to normal year-end adjustments) by
the chief financial officer of the Company and shall be presented in form
comparative to the similar period of the preceding year. Further, if for any
period the Company shall have any subsidiary or subsidiaries whose accounts are
consolidated with those of the Company, then in respect of such period all such
financial statements shall be the consolidated financial statements of the
Company and all such consolidated subsidiaries. In no event will the Purchaser
make any use or disclosure of the financial statements referred to in this
Section 7.2 or Section 7.3 or other information acquired pursuant to Section
7.4, except in connection with evaluating its investment in the Company.
7.3. ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the end
of each fiscal year, the Company will deliver to Purchaser, for so long as the
Purchaser Qualifies, audited financial statements analogous to those required by
Section 7.2 as at the end of and for such year, accompanied by a certification
by independent public accountants selected by the Company's Board of Directors,
that (except as otherwise stated therein) such statements have been prepared in
accordance with generally accepted accounting principles consistently applied.
7.4. OTHER INFORMATION. Upon the reasonable request of the Purchaser,
if the Purchaser then Qualifies, the Company will deliver to the Purchaser other
information and
-15-
<PAGE> 20
data, not proprietary in nature (in the good faith judgment of the Company),
pertaining to its business, financial and corporate affairs to the extent that
such delivery will not violate any then applicable law or any agreements of the
Company with third parties. The Company will permit the Purchaser, if the
Purchaser then Qualifies, at the expense of the Purchaser, to visit and inspect
any of the properties of the Company, including its books of account, and to
discuss its affairs, finances and accounts with the Company's officers or
directors, all at such reasonable times and as often as the Purchaser may
reasonably request, in each case, in a manner consistent with the reasonable
security and confidentiality needs of the Company; PROVIDED, that the Company
shall be under no such obligation with respect to information deemed in good
faith by the Company to be proprietary or subject to third party restrictions on
disclosure.
7.5. USE OF PROCEEDS. The Company will use amounts paid for the Shares
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.6. INSURANCE. The Company will keep all its insurable properties
properly insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any premises occupied by it or arising
from equipment owned by the Company and leased to and located upon or in or
about any premises occupied by any other person; maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which it may be engaged in business; and maintain such other
insurance as is usually maintained by persons engaged in the same or similar
business as is the Company. All such insurance shall be maintained against such
risks and in at least such amounts as such insurance is usually carried by
persons engaged in the same or similar businesses, and all insurance herein
provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance fund
operated by such state or other jurisdiction or by causing to be maintained a
system or systems of self-insurance which is in accord with applicable laws. In
addition, the Company shall maintain "Key Man Insurance" on the life of Richard
F. Selden in an aggregate face amount of not less than $1,000,000 for so long as
Dr. Selden is employed by the Company.
7.7. PAYMENT OF TAXES. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind (including claims for labor,
materials and supplies), which, if unpaid, might by law become a lien or charge
upon its property; PROVIDED, however, that the Company shall not be required to
pay any tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books reserves deemed
by it adequate with respect thereto.
-16-
<PAGE> 21
7.8. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, PROVIDED, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.9. MAINTENANCE OF PROPERTIES. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.10. RESERVATION OF COMMON STOCK. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
shares of Common Stock issuable upon conversion of the Shares, and the Company
further agrees that in the event that the conversion price applicable to the
Shares set forth in the Certificate of Incorporation is reduced below the
initial price set forth therein, including without limitation pursuant to
Section 4.5 of the Certificate of Incorporation, it shall immediately cause to
be set aside additional shares of the Company's Common Stock so as to comply
with the provisions of this Section 7.10.
7.11. SEC REPORTS. Promptly after each such filing, the Company will
furnish the Purchaser with copies of all proxy statements and annual reports and
all reports on Forms 8-K, 10-Q or 10-K (or any similar form hereafter in use)
which the Company shall file with the Securities and Exchange Commission or any
stock exchange on which securities of the Company may be listed.
8. MISCELLANEOUS.
8.1. ENTIRE AGREEMENT; SUCCESSORS. This Agreement, together with the
Schedules and Exhibits hereto sets forth the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and commitments of the parties relating thereto. All the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto subject to any restrictions on assignment stated herein. Delivery
of documents by the Company or its counsel to the Purchaser shall be deemed to
constitute for all purposes the furnishing of such documents by the Company to
the Purchaser under this Agreement or in connection with the offering hereunder.
8.2. NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered by facsimile (and promptly confirmed
by telephone, personal delivery or courier) or
-17-
<PAGE> 22
given by prepaid nationally-recognized overnight courier service or by prepaid
certified or registered mail, return receipt requested, or by telecopier,
addressed as follows:
(a) if to the Purchaser:
Marion Merrell Dow Inc.
9300 Ward Parkway, P.O. Box 8480
Kansas City, Missouri 64114-0480
Attention: General Counsel
Telephone: (816) 966-4000
Telecopy: (816) 966-3805
with copies to:
Marion Merrell Dow Inc.
2110 E. Galbraith Road
Cincinnati, OH 45215
Attention: Patent Counsel
Telephone: (513) 948-7960
Telecopy: (513) 948-7961
and
Shook, Hardy & Bacon, P.C.
One Kansas City Place
1200 Main Street, Suite 3100
Kansas, City, Missouri 64105
Attention: Randall B. Sunberg, Esq.
Telephone: (816) 474-6550
Telecopy: (816) 421-5547
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Chief Executive Officer
Telephone: (617) 349-0200
Telecopy: (617) 491-7903
with a copy to:
-18-
<PAGE> 23
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt, with
telephonic confirmation in the case of facsimile and (ii) three (3) business
days after deposit in the U.S. mails or delivery to a nationally-recognized
overnight courier service in accordance with this Section.
8.3. EXPENSES. Except as provided in the Registration Rights Agreement,
each party will bear its own expenses in connection with this Agreement.
8.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by the Company or the Purchaser
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance of the Shares for a period (the "Survival Period")
expiring on the first to occur of (a) the Initial Public Offering, or (b) the
date which is five years after the Closing Date. No claim may be made for breach
of any representation or warranty contained herein unless notice of such claim
is given to the breaching party within the Survival Period.
8.5. AMENDMENTS; WAIVERS. Changes in or additions to this Agreement may
be made by written document executed by the Company and the Purchaser. The
Purchaser may, by written instrument, waive compliance by the Company with any
of the provisions of this Agreement. Notwithstanding the foregoing, no course of
dealing or delay on the part of the Purchaser in exercising any right shall
operate as a waiver thereof or otherwise prejudice the rights of the Purchaser.
8.6. GOVERNING LAW. This Agreement shall be construed and enforced under
the laws of the State of Delaware, without giving effect to the choice of law
provisions thereof.
8.7. Miscellaneous. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same document.
The headings herein are for convenience of reference only and shall not affect
the construction of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or unenforceability of any other
provision.
-19-
<PAGE> 24
This Class E Preferred Stock Purchase Agreement has been SIGNED, SEALED
AND DELIVERED, as of the date first written above by the parties hereto.
COMPANY:
--------
TRANSKARYOTIC THERAPIES, INC.
By: /s/ Richard F. Selden
----------------------------------------
Title: President and CEO
PURCHASER:
----------
MARION MERRELL DOW INC.
By: /s/ Terry J. Shelton
-----------------------------------------
Title: Vice President, Licensing and Business
--------------------------------------
Devlopment
--------------------------------------
-20-
<PAGE> 1
EXHIBIT 10.8
===============================================================================
CLASS F PREFERRED STOCK
PURCHASE AGREEMENT
by and between
TRANSKARYOTIC THERAPIES, INC.
and
THE PURCHASERS LISTED ON SCHEDULE A HERETO
Dated as of October 26, 1995
===============================================================================
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
CLASS F PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
PAGE
1. PURCHASE AND SALE OF THE SHARES................................-1-
1.1. Purchase of Stock........................................-1-
-----------------
1.2. Closing..................................................-1-
-------
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY..................-2-
2.1. Organization and Standing of the Company.................-2-
----------------------------------------
2.2. Subsidiaries.............................................-2-
------------
2.3. Capitalization...........................................-2-
--------------
2.4. Financial Information....................................-3-
---------------------
2.5. Absence of Undisclosed Liabilities.......................-4-
----------------------------------
2.6. Absence of Certain Changes...............................-4-
--------------------------
2.7. Taxes....................................................-5-
-----
2.8. Title to Properties; Liens and Encumbrances..............-5-
-------------------------------------------
2.9. Intellectual Property Rights.............................-5-
----------------------------
2.10. Government Approvals and Licenses........................-5-
---------------------------------
2.11. Contracts................................................-6-
---------
2.12. Directors and Officers...................................-7-
----------------------
2.13. Litigation...............................................-7-
----------
2.14. Authorization............................................-7-
-------------
2.15. Brokers..................................................-8-
-------
2.16. Governmental Consents....................................-8-
---------------------
2.17. Securities Laws..........................................-8-
---------------
2.18. Legal Compliance.........................................-8-
----------------
2.19. Insurance................................................-8-
---------
2.20. Nondisclosure Agreement..................................-9-
-----------------------
2.21. Disclosures..............................................-9-
-----------
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS...............-9-
3.1. Authority................................................-9-
---------
3.2. Accredited Investor Status...............................-9-
--------------------------
3.3. Formation; Status.......................................-10-
-----------------
3.4. Receipt of Information..................................-10-
----------------------
4. SECURITIES LAWS...............................................-10-
4.1. Registration of Securities..............................-10-
--------------------------
(i)
<PAGE> 3
4.2. Financial Matters.......................................-10-
-----------------
4.3. Transfer Legends and Restrictions.......................-10-
---------------------------------
4.4. Rule 144................................................-11-
--------
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING..........-12-
5.1. Representations and Warranties..........................-12-
------------------------------
5.2. Performance.............................................-12-
-----------
5.3. Compliance Certificate..................................-12-
----------------------
5.4. Registration Rights Agreement...........................-12-
-----------------------------
5.5. Preemptive Rights.......................................-12-
-----------------
5.6. Amended and Restated Voting Rights Agreement............-12-
--------------------------------------------
5.7. Opinion of Company's Counsel............................-13-
----------------------------
5.8. Amended Certificate.....................................-13-
-------------------
5.9. Blue Sky Matters........................................-13-
----------------
5.10. Corporate Proceedings and Consents......................-13-
----------------------------------
5.11. No Material Adverse Change..............................-13-
--------------------------
5.12. Hart-Scott-Rodino Filing................................-13-
------------------------
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING............-13-
6.1. Representations and Warranties..........................-13-
------------------------------
6.2. Proceedings and Documents...............................-13-
-------------------------
6.3. Performance.............................................-14-
-----------
6.4. Authorizations..........................................-14-
--------------
7. AFFIRMATIVE COVENANTS.........................................-14-
7.1. Quarterly Financial Statements..........................-14-
------------------------------
7.2. Annual Financial Statements.............................-14-
---------------------------
7.3. Other Information.......................................-15-
-----------------
7.4. Use of Proceeds.........................................-15-
---------------
7.5. Insurance...............................................-15-
---------
7.6. Payment of Taxes........................................-15-
----------------
7.7. Corporate Existence.....................................-16-
-------------------
7.8. Maintenance of Properties...............................-16-
-------------------------
7.9. Reservation of Common Stock.............................-16-
---------------------------
7.10. SEC Reports.............................................-16-
-----------
8. MISCELLANEOUS.................................................-16-
8.1. Entire Agreement; Successors............................-16-
----------------------------
8.2. Notices.................................................-17-
-------
8.3. Expenses................................................-18-
--------
8.4. Survival of Representations and Warranties..............-18-
------------------------------------------
8.5. Amendments; Waivers.....................................-18-
-------------------
8.6. Governing Law...........................................-18-
-------------
8.7. Miscellaneous...........................................-18-
-------------
(ii)
<PAGE> 4
(iii)
<PAGE> 5
TRANSKARYOTIC THERAPIES, INC.
CLASS F PREFERRED STOCK PURCHASE AGREEMENT
This Class F Preferred Stock Purchase Agreement (this "AGREEMENT") is made
as of the 26th day of October, 1995 by and between Transkaryotic Therapies,
Inc., a Delaware corporation (the "COMPANY"), and the Purchasers listed on
SCHEDULE A hereto (the "Purchasers").
WHEREAS, the Purchasers desire to subscribe for and purchase, and the
Company desires to issue and sell, shares of the Company's Class F Preferred
Stock, $1.00 par value per share (the "CLASS F PREFERRED STOCK"), subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
contained herein the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES
1.1. PURCHASE OF STOCK. On the First Closing Date and the Second Closing
Date (each as defined in Section 1.2 below), subject to the terms and conditions
hereof and in reliance upon the warranties, representations and agreements
contained herein, the Company agrees to sell to each of the Purchasers, and each
of the Purchasers agree to purchase from the Company, on Closing Date (as
defined in Section 1.2 below) indicated on SCHEDULE A hereto for each Purchaser,
the number of shares of Class F Preferred Stock set forth opposite the name of
each such Purchaser on SCHEDULE A hereto at a price of $14.00 per share (the
"Shares"). The powers, designations, preferences, rights and qualifications,
limitations and restrictions of the Class F Preferred Stock are as set forth in
the Certificate of Amendment of the Amended and Restated Certificate of
Incorporation (the "AMENDED CERTIFICATE") attached as Exhibit A hereto.
1.2. CLOSING. The initial closing of the purchase and sale of the Shares
hereunder (the "FIRST CLOSING") shall take place at the offices of Palmer &
Dodge at 10:00 am., local time, on October 26, 1995 or at such other time and
date as the Company and the Purchasers may agree upon in writing (the "FIRST
CLOSING DATE"). The second closing of the purchase and sale of the Shares
hereunder (the "SECOND CLOSING" and, together with the First Closing, a
"Closing") shall take place at the offices of Palmer & Dodge as soon as is
practicable following the satisfaction of the condition described in Section
5.12 hereof (the "SECOND CLOSING DATE" and, together with the First Closing
Date, a "CLOSING DATE"). At each Closing, the Company will deliver to each
Purchaser participating in such Closing a certificate
1
<PAGE> 6
evidencing the number of Shares being purchased by such Purchaser at such
Closing pursuant to Section 1.1, against payment by such Purchaser of the entire
purchase price for the Shares being purchased by such Purchaser in lawful money
of the United States of America by bank or certified check, wire-transfer or
such other form of payment as shall be mutually agreed upon by such Purchaser
and the Company.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company hereby represents and warrants to the Purchasers that, as of
the date of this Agreement, except as otherwise described on SCHEDULE B hereto,
the following are true and correct:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business as a foreign
corporation in the Commonwealth of Massachusetts and is in good standing in each
jurisdiction in which failure to so qualify would have a materially adverse
effect on the business, assets or prospects of the Company. The copy of the
Company's Amended and Restated Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION"), which has been delivered to the Purchaser, is true, complete
and correct as of the date of this Agreement. The Company has the corporate
power and authority to own and lease its property, to enter into, deliver, and
perform its obligations and undertakings under, this Agreement and all other
agreements referred to herein or contemplated hereby, to issue the Shares, and
to conduct its business as now conducted.
2.2. SUBSIDIARIES. The Company has no subsidiaries and does not control,
directly or indirectly, any other corporation, association or business
organization.
2.3. CAPITALIZATION. The Company's entire authorized capital stock will
consist, immediately after the filing of the Amended Certificate with the
Secretary of State of the State of Delaware, of 15,000,000 shares of Common
Stock (of which 4,043,032 shares have been issued), and 3,816,356 shares of
Preferred Stock, $1.00 par value per share (the "PREFERRED STOCK"), of which:
6,000 shares have been designated as Class A Preferred Stock (the "CLASS A
PREFERRED STOCK"), all of which have been issued; 60,000 shares have been
designated as Class B Preferred Stock (the "Class B Preferred Stock"), of which
49,339 shares have been issued; 1,875,000 shares have been designated as Class C
Preferred Stock (the "CLASS C PREFERRED STOCK"), of which 1,015,974 shares have
been issued; 280,367 shares have been designated as Class D Preferred Stock (the
"CLASS D PREFERRED STOCK"), of which 280,367 shares have been issued; 523,560
shares have been designated as Class E Preferred Stock (the "CLASS E PREFERRED
STOCK"), of which 523,560 shares have been issued; and 1,071,429 shares have
been designated as Class F Preferred Stock, none of which are issued and
outstanding immediately prior to the Closing. 181,121 shares of Common Stock are
held of record in the Company's treasury. The number of shares and class of
capital stock of the Company which have been issued are listed on SCHEDULE B
opposite the names of the record holders thereof,
2
<PAGE> 7
excluding those record holders who are current or former employees of the
Company, which current and former employees hold, in the aggregate, 1,426,462
shares of the outstanding capital stock of the Company. The Company has reserved
1,250,000 shares of Common Stock for issuance to employees and consultants under
the 1993 Long-Term Incentive Plan (the "INCENTIVE PLAN") and 180,000 shares of
Common Stock for issuance to non-employee directors under the 1993 Non-Employee
Directors' Stock Option Plan (the "DIRECTORS' PLAN"). The Company has granted
options under the Incentive Plan for the purchase of 137,795 shares of Common
Stock, of which options to purchase 112,170 shares are currently outstanding. No
options have been granted under the Directors' Plan. The Company has granted
warrants for the purchase of 635,517 shares of Common Stock which are currently
outstanding. In addition, the Company has reserved a sufficient number of shares
of Common Stock for the conversion of the Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock, Class E
Preferred Stock and Class F Preferred Stock. The Common Stock and the Preferred
Stock are not entitled to cumulative voting rights, preemptive rights,
antidilutive rights or so-called registration rights under the Securities Act of
1933, as amended (the "SECURITIES ACT"), except as provided in this Agreement,
the Registration Rights Agreement dated November 3, 1993, as amended, or Article
IV of the Certificate of Incorporation. The Common Stock and the Preferred Stock
have the preferences, voting powers, qualifications, and special or relative
rights or privileges set forth in the Certificate of Incorporation and the
Amended Certificate. All outstanding shares of Common Stock and Preferred Stock
have been, and the Class F Preferred Stock when issued in accordance with this
Agreement, the Certificate of Incorporation and the Amended Certificate will be,
validly issued and fully paid and nonassessable, and issued in accordance with
applicable state and federal securities laws. The Company does not have
outstanding any option, warrant or other commitment to issue or to acquire any
shares of its capital stock, or any securities or obligations convertible into
or exchangeable for its capital stock, other than the 112,170 currently
outstanding options granted pursuant to the Incentive Plan referred to above,
options it is committed to grant annually under the Directors' Plan to eligible
Directors, or warrants described above and listed on SCHEDULE B hereto, and the
Company has not given any person any right to acquire from the Company or sell
to the Company any shares of its capital stock. There is, and immediately upon
consummation at each Closing of the transactions contemplated hereby there will
be, no agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, etc.) with respect to the sale or
voting of any shares of capital stock of the Company (whether outstanding or
issuable upon conversion or exercise of outstanding securities) except as
contemplated by this Agreement, by the Certificate of Incorporation and By-laws
of the Company or as indicated on SCHEDULE B hereto, and the Company will not
voluntarily place any restrictions on the transfer of the Shares except to the
extent set forth herein or contemplated hereby.
2.4. FINANCIAL INFORMATION. The Company has delivered to the Purchasers a
copy of (a) its audited balance sheet (the "BALANCE SHEET") as of December 31,
1994 (the "FINANCIAL STATEMENT DATE") and the related statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended (with the
Balance Sheet, the "AUDITED FINANCIALS"), and (b) its unaudited balance sheet as
of August 31, 1995 and the related statements of operations for
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the period then ended (the "UNAUDITED FINANCIALS," and together with the Audited
Financials, the "FINANCIAL STATEMENTS"). The Financial Statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis and fairly present the financial condition of the Company at
the date thereof and the results of the operations of the Company for the period
then ended, provided, however, that the Unaudited Financials are subject to year
end adjustments and may not contain all footnotes required under generally
accepted accounting principles.
2.5. ABSENCE OF UNDISCLOSED LIABILITIES. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to the date hereof which are not
fully reflected or provided for on the Balance Sheet, except for obligations
arising after the Financial Statement Date in the ordinary course of business.
2.6. ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
other than as indicated on Schedule B hereto, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown
by the Balance Sheet;
(b) any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock or any
direct or indirect redemption, purchase or other acquisition of any of
such stock by the Company;
(d) any labor trouble, or any other event, development, or
condition, of any character, or threat of the same, materially adversely
affecting the business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of the
Company;
(g) any sale, assignment or transfer of any material tangible or
intangible assets of the Company except with respect to tangible assets in
the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor.
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2.7. TAXES. For all periods ended on or prior to the date hereof, the
Company has filed or will file within the time prescribed by law (including
extensions of time approved by the appropriate taxing authority) all tax returns
and reports required to be filed with the United States Internal Revenue
Service, the State of Delaware, the Commonwealth of Massachusetts, any other
states, and all foreign countries and has paid or made adequate provision in the
Balance Sheet for the payment of all taxes, interest, penalties, assessments or
deficiencies shown to be due (or, to the knowledge of the Company, claimed by
such authority or jurisdiction to be due) on or in respect of such tax returns
and reports. The Company does not know of any (a) other federal, Delaware,
Massachusetts, state or foreign taxes which are due and payable by the Company
which have not been so paid; (b) other federal, Delaware, Massachusetts, state
or foreign tax returns or reports which are required to be filed which have not
been so filed; or (c) unpaid assessment for additional taxes for any fiscal
period or any basis thereof. The Company's federal or state income tax returns
have never been audited.
2.8. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Except as indicated on
SCHEDULE B hereto, the Company has good and marketable title to all of its
properties and assets, real and personal, including those reflected in the
Balance Sheet (except as sold or otherwise disposed of in the ordinary course of
business since the Financial Statement Date), subject to no mortgage, pledge,
lien, security interest, conditional sale agreement, encumbrance or charge
except (a) as shown on the Balance Sheet or in the notes thereto, (b) tax,
materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings, and (c) vendors' interests
in installment purchase obligations of the Company which in the aggregate do not
exceed $25,000.
2.9. INTELLECTUAL PROPERTY RIGHTS. Attached hereto as SCHEDULE C Is a
true and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or licenses to use the same,
and any and all applications therefor, as well as all trade secrets and similar
proprietary information owned or held by the Company (the "Intellectual
Property") are all such items required to enable the Company to conduct its
business as now conducted. The Company has not received any formal or informal
notice of infringement or other complaint that the Intellectual Property
violates or infringes rights under patents, trademarks, service marks, trade
names, trade secrets, copyrights or licenses or any other proprietary rights of
others, nor does the Company have any reason to believe that there has been any
such violation or infringement. Except as set forth in SCHEDULE C, no royalties,
honoraria, or fees are or will be payable by the Company to other persons by
reason of the ownership or use by the Company of the Intellectual Property.
2.10. GOVERNMENT APPROVALS AND LICENSES. The Company has all governmental
approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as presently conducted and will use its best efforts to
obtain all governmental
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approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as proposed to be conducted.
2.11. CONTRACTS. Other than as set forth in SCHEDULE B or C, the Company
has no presently existing contract, obligation or commitment (a) involving the
future payment by or to the Company of more than $100,000 (other than employment
or consulting agreements terminable at the option of the Company without penalty
on no more than thirty (30) days prior written notice with employees of, or
consultants to, the Company who are not officers or directors thereof), or (b)
which is material to the Company or its currently contemplated business,
including without limitation the following:
(i) any employment, bonus, commission or consulting agreements or
arrangements; pension, profit sharing, deferred compensation, stock bonus,
retirement, stock option, stock purchase, phantom stock or similar plans,
including agreements evidencing rights to purchase securities of the
Company; or agreements with shareholders;
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging, or granting or creating a lien or security interest
or other encumbrance on any of the Company's property; or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
(iii) any agreements with dealers, sales representatives, brokers
and other distributors, jobbers, advertisers, sales agencies;
(iv) any agreements with any labor union or collective bargaining
organization;
(v) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and
subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal property,
including motor vehicles, and real estate;
(vii) any indenture, agreement, or other document relating to the
sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses; or
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(ix) any agreements limiting the freedom of the Company or any of
its employees to compete in any line of business or in any geographic area
or with any person;
(x) any agreements providing for disposition of the business and
substantially all of the assets, or securities, of the Company; agreements
of merger or consolidation to which the Company is a party; or letters of
intent with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with respect
to, the acquisition of assets or securities of any other business or
entity.
True and complete copies of all contracts and other items listed on
SCHEDULE B have been made available to counsel for the Purchasers. The Company
has complied with all the material provisions of said contracts and commitments
set forth in SCHEDULE B hereto and of all other material contracts and
commitments to which it is a party, and is not in material default under any
thereof, except to the extent to which any such noncompliance and defaults would
not materially and adversely affect the business or financial condition of the
Company. There exists no condition, event or act which constitutes, or which
after notice, lapse of time or both would constitute, a material default by the
Company or, to the Company's knowledge, by any third party, under any of said
contracts or commitments.
2.12. DIRECTORS AND OFFICERS. SCHEDULE B hereto contains a true, correct
and complete list showing the name of each director and officer of the Company.
2.13. LITIGATION. There is no litigation or proceeding pending or, to the
Company's knowledge, threatened, against the Company or the Company's
properties, nor does the Company know or have reasonable grounds to know of any
basis for any such action, including, without limitation, any governmental
investigation relating to employee safety or discrimination matters. To the
Company's knowledge, there is no litigation or proceeding pending or threatened
against or relating to any present or former employee of the Company by reason
of the past employment or consulting relationships of any of such employees with
the Company. There are no outstanding judgments against the Company.
2.14. AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and the issuance and sale of the Shares, upon
conversion of the Shares, the Common Stock into which the Shares are
convertible, have been duly authorized and approved by all necessary corporate
action. This Agreement has been duly executed and delivered on behalf of the
Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors. The execution, delivery and performance of this Agreement, the
issuance and sale of the Shares, upon conversion of the Shares, the Common Stock
into which the Shares are convertible, will not conflict with, or result in a
breach of any of the terms of, or constitute a default under,
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<PAGE> 12
the Certificate of Incorporation or By-laws of the Company or result in a
material breach of any of the terms of, or constitute a material default under,
any agreement, instrument or other restriction to which the Company is a party
or by which it or any of its properties or assets is bound.
2.15. BROKERS. Except as described on SCHEDULE B, the Company has no
contract, arrangement or understanding with any broker, finder, or similar agent
with respect to the transactions contemplated by this Agreement.
2.16. GOVERNMENTAL CONSENTS. Based in part on the representations made by
the Purchasers in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Shares pursuant to this Agreement
or the consummation of any other transactions contemplated hereby.
2.17. SECURITIES LAWS. Neither the Company nor any other person, firm or
corporation acting on its behalf has sold any of the Shares or other securities
of the Company to, or offered any thereof for sale to, or solicited any offers
to purchase any thereof from, or otherwise approached or negotiated (nor will
the Company or any other person, firm or corporation acting on its behalf sell,
offer, solicit or otherwise approach or negotiate) in respect thereof with, such
character or number of persons in the aggregate, or in such manner, as would
result in bringing the Shares, or any part thereof, within the provisions of
Section 5 of the Securities Act. Assuming that the Purchasers' representations
and warranties contained in Sections 3 and 4 of this Agreement are true and
correct at each Closing and on the date of the issuance of the shares of Common
Stock into which the Shares are convertible, the offering and sale of the
Shares, and the issuance of the shares of Common Stock upon conversion of the
Shares, are each exempt, or will each be exempt, as the case may be, from
registration and prospectus delivery requirements of the Securities Act as in
effect on the date hereof and are also exempt or will be exempt from
registration or qualification under applicable state securities laws as in
effect on the date hereof.
2.18. LEGAL COMPLIANCE. The Company is not in violation of any provisions
of its Certificate of Incorporation or By-laws, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which violation materially and adversely
affects the business or financial condition of the Company.
2.19. INSURANCE. The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including,
without limitation, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
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2.20. NONDISCLOSURE AGREEMENT. The Company has entered into nondisclosure
and invention ownership agreements in favor of the Company in such forms as have
been approved from time to time by the Board of Directors of the Company, with
each person employed by it or serving as a consultant to it with employment or
consulting responsibility requiring access to proprietary technical information
of the Company.
2.21. DISCLOSURES. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate, or instrument furnished to the Purchasers
or their agents in connection with the transactions contemplated by this
Agreement, when read together, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company knows of
no information or fact which has or would have a material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the Company
which has not been disclosed in SCHEDULE B.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS.
Each Purchaser represents and warrants to the Company that the following
are true and correct in all material respects:
3.1. AUTHORITY. The Purchaser has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder. All necessary
corporate and other action has been taken by it or on its behalf to execute,
deliver and perform its obligations under this Agreement and to purchase the
Shares. This Agreement constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms.
3.2. ACCREDITED INVESTOR STATUS. The Purchaser is acquiring the Shares
for the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Shares or any portion thereof; PROVIDED that the disposition of
its property shall at all times be and remain within its control. It further
represents that, except as otherwise disclosed in writing to the Company, it is
an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act and that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Shares. The Purchaser further represents
that it is acquiring the Shares for its own account and with its general assets
and not with the assets of any separate account in which any employee benefit
plan has any interest. As used in this Section 3.2, the terms "separate account"
and "employee benefit plan" shall have the respective meanings assigned to them
in the Employee Retirement Income Security Act of 1974.
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3.3. FORMATION; STATUS. The Purchaser was not organized for the purpose
of making an investment in the Company, or if it was organized for such purpose,
each equity owner of the Purchaser is an accredited investor. No authorization
or other action is required to be taken in connection with an investment in the
Company, as a result of Purchaser's regulatory, statutory or other legal status.
3.4. RECEIPT OF INFORMATION. The Purchaser has been furnished such
information and documents as the Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the Company, terms and conditions of this Agreement and
the purchase of the Shares.
4. SECURITIES LAWS.
4.1. REGISTRATION OF SECURITIES. Each Purchaser represents and warrants
to the Company that it understands that the Shares have not been registered
under the Securities Act or the securities laws of any state or other
jurisdiction and that the Shares must be held indefinitely unless they are
subsequently registered thereunder or an exemption from registration thereunder
is available. Each Purchaser further represents and warrants to the Company that
it will not transfer any of the Shares in violation of the provisions of this
Agreement or any applicable federal or state securities laws or regulations.
4.2. FINANCIAL MATTERS. Each Purchaser represents and warrants to the
Company that (a) it understands that the purchase of the Shares involves
substantial risk and that its financial condition and investments are such that
it is in a financial position to hold the Shares purchased by it for an
indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, its investment in such Shares; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
the Purchaser has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
4.3. TRANSFER LEGENDS AND RESTRICTIONS. The Transfer (as defined below)
of the Shares will be restricted in accordance with the terms hereof. "TRANSFER"
shall mean any pledge, sale, assignment, gift or other transfer of any Shares or
any interest therein, whether or not such transfer would constitute a "sale" as
that term is defined in Section 2(3) of the Securities Act.
Each certificate evidencing the Shares or the Common Stock issuable upon
conversion of the Shares (collectively, the "SECURITIES"), including any
certificate issued to any transferee thereof, shall be imprinted with a legend
in substantially the following form (unless otherwise permitted under this
Section 4 or unless such securities shall have been effectively registered and
sold under the Securities Act and applicable state securities laws):
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<PAGE> 15
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF
THESE SHARES SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO
THESE SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME EFFECTIVE OR THE
ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED, UNLESS SUCH OPINION OF
COUNSEL IS NOT REQUIRED BY THE TERMS OF THE CLASS F PREFERRED STOCK
PURCHASE AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED
AS OF OCTOBER 26, 1995 (THE "AGREEMENT"). TRANSFER OF THESE SHARES IS
FURTHER RESTRICTED AS PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS
AVAILABLE AT THE ISSUER'S OFFICES."
The Holder (as defined below) of any Securities by acceptance thereof
agrees, so long as any legend described in this Section 4.3 shall remain on such
Securities, prior to any Transfer of any of the Securities (except for a
Transfer effected pursuant to an effective registration statement under the
Securities Act or in compliance with Rule 144 thereunder), to give written
notice to the Company of such Holder's intention to effect such Transfer and
agrees to comply in all respects with the provisions of this Section 4.3. Such
notice, if required, shall describe the proposed method of Transfer of the
Securities in question. Upon (but only upon) receipt by the Company of such
notice, and a written opinion of counsel to such Holder (which counsel and
opinion shall be reasonably satisfactory to counsel for the Company) that the
proposed Transfer may be effected without registration under the Securities Act
or in compliance with Rule 144 thereunder and under applicable state securities
laws, the proposed Transfer may be effected, and the Holder of such Securities
shall thereupon be entitled to Transfer the same in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the Securities issued upon any such Transfer shall bear the same legend as set
forth in this Section 4.3. Upon the written request of a Holder of the
Securities, the Company shall remove the foregoing legend from the certificates
evidencing such Securities and issue to such Holder new certificates free of any
transfer legend if, with such request, and at the request of the Company, the
Company shall have received an opinion of counsel satisfactory to the Company,
to the effect that any Transfers by such Holder of such Securities may be made
to the public without compliance with either Section 5 of the Securities Act or
Rule 144 thereunder and applicable state securities laws. "HOLDER" shall mean
any Purchaser (in its capacity as holder of any Securities and for so long as it
holds such Securities), and such of its respective successors and assigns who
acquire Securities from Holders in accordance with the terms of this Agreement
and who agree in writing with the Company to acquire and hold the Securities
subject to all the restrictions hereof, but in no event shall "Holder" include
any transferee of any Securities pursuant to sales made under a registration
statement filed under the Securities Act.
4.4. RULE 144. Each Purchaser recognizes that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company
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covenants that (a) at all times after the Company first becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Company will comply with the current public information
requirements of Rule 144(c) (1) under the Securities Act; and (b) at all such
times as Rule 144 is available for use by a Purchaser, the Company will furnish
the Purchaser upon request with all information within the possession of the
Company required for the preparation and filing of Form 144.
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING.
The obligation of each Purchaser to purchase and pay for the Shares is
subject to the following:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company made herein shall be true, correct and complete in all material
respects on and as of the First Closing Date, with the same force and effect as
if they had been made on and as of the First Closing Date.
5.2. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the First Closing Date shall have been performed or complied with.
5.3. COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate (to be signed by its chief executive officer) dated the
actual Closing Date certifying as to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 in all material respects.
5.4. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
dated as of November 3, 1993, as amended, by and among the Company, the
purchasers listed on SCHEDULE A thereto and the Purchasers (the "Registration
Rights Agreement") shall have been amended further to include the Shares in the
definition of Registrable Shares in the Registration Rights Agreement.
5.5. PREEMPTIVE RIGHTS. The Class C Preferred Stock and Warrant Purchase
Agreement dated as of November 3, 1993, as amended, by and among the Company,
the purchasers listed on Schedule A thereto and the Purchasers (the "CLASS C
PURCHASE AGREEMENT") shall have been amended further to provide that (i) a
"Terminating Class Event," as defined in Section 8.1(b) of the Class C Purchase
Agreement, shall mean, for the holders of Class F Preferred Stock, that fewer
than 50,000 shares of the Class F Preferred Stock remain outstanding, and (ii)
Class F Preferred Stock shall be included in the classes of Preferred Stock of
the Company from which an amendment or waiver is required pursuant to Section
8.10 of the Class C Purchase Agreement.
5.6. AMENDED AND RESTATED VOTING RIGHTS AGREEMENT. The Amended and
Restated Voting Rights Agreement dated November 3, 1993, as amended, among the
Company, the holders of the Class B Preferred Stock and the Class C Preferred
Stock and Marion Merrell
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Dow Inc. (now called Hoechst Marion Roussel, Inc.) (the "Voting Agreement")
shall be amended further to include the Class F Preferred Stock in the
definitions of "Additional Preferred Stock" and "Voting Securities".
5.7. OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received an
opinion of Palmer & Dodge, counsel to the Company, substantially in the form of
EXHIBIT B hereto, which opinion shall be satisfactory in form and substance to
the Purchaser.
5.8. AMENDED CERTIFICATE. The Amended Certificate shall have been duly
filed with the Secretary of State of the State of Delaware and shall have become
effective.
5.9. BLUE SKY MATTERS. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Shares shall have been obtained or effected (except for the filing of any notice
subsequent to the Closing which may be required under applicable state
securities laws which, if required, shall be filed on a timely basis as may be
so required).
5.10. CORPORATE PROCEEDINGS AND CONSENTS. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers and their counsel, each of
whom shall have received all such originals or certified or other copies of such
documents as each may reasonably request.
5.11. NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, prospects, operations or assets of the Company
on and as of the First Closing Date.
5.12. HART-SCOTT-RODINO FILING. The obligation of Hoechst Marion
Roussel, Inc. to purchase and pay for the Shares is subject to the additional
condition that any waiting period or extension thereof applicable to such
purchase under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, shall have expired or been terminated.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligation of the Company to sell the Shares is subject to the following:
6.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers made herein shall be true, correct and complete in all
material respects on and as of relevant Closing Date with the same force and
effect as if they had been made on and as of such Closing Date.
6.2. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and
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substance to the Company and the Company's counsel, and they each shall have
received all such counterpart original or certified or other copies of such
documents as they may reasonably request.
6.3. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchasers on or prior to
relevant Closing Date shall have been performed or complied with.
6.4. AUTHORIZATIONS. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States of America or
of any state required in connection with the lawful issuance and sale of the
Shares or any portion thereof to the Purchasers as contemplated under this
Agreement shall have been duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with the Purchasers as
follows, such covenants, other than as set forth in Section 7.11, to expire at
such times as the Company shall have consummated a firm commitment underwritten
public offering pursuant to an effective registration statement on Form S-1 or a
successor form under the Securities Act, covering the offer and sale by the
Company of Common Stock to the public which results in aggregate gross proceeds
to the Company of not less than $10,000,000 (the "INITIAL PUBLIC OFFERING").
7.1. QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after
the end of each of the first three quarters in each fiscal year, the Company
will deliver to each Purchaser, for so long as such Purchaser holds at least
five percent (5%) of the Shares purchased by it hereunder (in which case, the
Purchaser shall be deemed to be "Qualified") copies of the Company's unaudited
balance sheet as of the end of, and unaudited statements of income and
statements of cash flows for, such quarter, which shall be prepared in
accordance with generally accepted accounting principles consistently applied.
All such financial statements shall be certified as accurate and complete in all
material respects (subject to normal year-end adjustments) by the chief
financial officer of the Company and shall be presented in form comparative to
the similar period of the preceding year. Further, if for any period the Company
shall have any subsidiary or subsidiaries whose accounts are consolidated with
those of the Company, then in respect of such period all such financial
statements shall be the consolidated financial statements of the Company and all
such consolidated subsidiaries. In no event will the Purchaser make any use or
disclosure of the financial statements referred to in this Section 7.1 or
Section 7.2 or other information acquired pursuant to Section 7.3, except in
connection with evaluating its investment in the Company.
7.2. ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the end
of each fiscal year, the Company will deliver to each Purchaser, for so long as
such Purchaser Qualifies, audited financial statements analogous to those
required by Section 7.1 as at the end of and for such year, accompanied by a
certification by independent public accountants selected by the Company's Board
of Directors, that (except as otherwise stated therein) such
14
<PAGE> 19
statements have been prepared in accordance with generally accepted accounting
principles consistently applied.
7.3. OTHER INFORMATION. Upon the reasonable request of a Purchaser, if
such Purchaser then Qualifies, the Company will deliver to the Purchaser other
information and data, not proprietary in nature (in the good faith judgment of
the Company), pertaining to its business, financial and corporate affairs to the
extent that such delivery will not violate any then applicable law or any
agreements of the Company with third parties. The Company will permit a
Purchaser, if the Purchaser then Qualifies, at the expense of the Purchaser, to
visit and inspect any of the properties of the Company, including its books of
account, and to discuss its affairs, finances and accounts with the Company's
officers or directors, all at such reasonable times and as often as the
Purchaser may reasonably request, in each case, in a manner consistent with the
reasonable security and confidentiality needs of the Company; PROVIDED, that the
Company shall be under no such obligation with respect to information deemed in
good faith by the Company to be proprietary or subject to third party
restrictions on disclosure.
7.4. USE OF PROCEEDS. The Company will use amounts paid for the Shares
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.5. INSURANCE. The Company will keep all its insurable properties
properly insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any premises occupied by it or arising
from equipment owned by the Company and leased to and located upon or in or
about any premises occupied by any other person; maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which it may be engaged in business; and maintain such other
insurance as is usually maintained by persons engaged in the same or similar
business as is the Company. All such insurance shall be maintained against such
risks and in at least such amounts as such insurance is usually carried by
persons engaged in the same or similar businesses, and all insurance herein
provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance fund
operated by such state or other jurisdiction or by causing to be maintained a
system or systems of self-insurance which is in accord with applicable laws. In
addition, the Company shall maintain "Key Man Insurance" on the life of Richard
F. Selden in an aggregate face amount of not less than $1,000,000 for so long as
Dr. Selden is employed by the Company.
7.6. PAYMENT OF TAXES. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind
15
<PAGE> 20
(including claims for labor, materials and supplies), which, if unpaid, might by
law become a lien or charge upon its property; PROVIDED, however, that the
Company shall not be required to pay any tax, assessment, charge, levy or claim
if the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company shall have set aside on
its books reserves deemed by it adequate with respect thereto.
7.7. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, PROVIDED, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.8. MAINTENANCE OF PROPERTIES. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.9. RESERVATION OF COMMON STOCK. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
shares of Common Stock issuable upon conversion of the Shares, and the Company
further agrees that in the event that the conversion price applicable to the
Shares set forth in the Certificate of Incorporation is reduced below the
initial price set forth therein, it shall immediately cause to be set aside
additional shares of the Company's Common Stock so as to comply with the
provisions of this Section 7.9.
7.10. SEC REPORTS. Promptly after each such filing, the Company will
furnish the Purchaser with copies of all proxy statements and annual reports and
all reports on Forms 8-K, 10-Q or 10-K (or any similar form hereafter in use)
which the Company shall file with the Securities and Exchange Commission or any
stock exchange on which securities of the Company may be listed.
8. MISCELLANEOUS.
8.1. ENTIRE AGREEMENT; SUCCESSORS. This Agreement, together with the
Schedules and Exhibits hereto, sets forth the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements and commitments of the parties relating thereto. All the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto subject to any restrictions on assignment stated herein. Delivery
of documents by the Company or its counsel to counsel for the Purchasers shall
be deemed to
16
<PAGE> 21
constitute for all purposes the furnishing of such documents by the Company to
the Purchasers under this Agreement or in connection with the offering
hereunder.
8.2. NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered by facsimile (and promptly confirmed
by telephone, personal delivery or courier) or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by telecopier, addressed as
follows:
(a) if to the Purchasers:
at the address set forth beneath each Purchaser's name on
SCHEDULE A hereto
with copies to:
Shook, Hardy & Bacon, P.C.
One Kansas City Place
1200 Main Street, Suite 3100
Kansas City, Missouri 64105
Attention: Randall B. Sunberg, Esq.
Telephone: (816) 474-6550
Telecopy: (816) 421-5547
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Richard F. Selden, M.D., Ph.D.
Telephone: (617) 349-0200
Telecopy: (617) 491-7903
with a copy to:
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
17
<PAGE> 22
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt, with
telephonic confirmation in the case of facsimile and (ii) three (3) business
days after deposit in the U.S. mails or delivery to a nationally-recognized
overnight courier service in accordance with this Section.
8.3. EXPENSES. Except as provided in the Registration Rights Agreement,
each party will bear its own expenses in connection with this Agreement, except
that the Company shall pay the reasonable fees and expenses of Shook, Hardy &
Bacon P.C., special counsel to the Purchasers.
8.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by the Company or the Purchasers
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance of the Shares for a period (the "Survival Period")
expiring on the first to occur of (a) the Initial Public Offering, or (b) the
date which is five years after the relevant Closing Date. No claim may be made
for breach of any representation or warranty contained herein unless notice of
such claim is given to the breaching party within the Survival Period.
8.5. AMENDMENTS; WAIVERS. Changes in or additions to this Agreement may
be made by written document executed by the Company and the holders of greater
than 50% of the Shares. Purchasers holding greater than 50% of the Shares may,
by written instrument, waive compliance by the Company with any of the
provisions of this Agreement. Notwithstanding the foregoing, no course of
dealing or delay on the part of the Purchasers in exercising any right shall
operate as a waiver thereof or otherwise prejudice the rights of the Purchasers.
8.6. GOVERNING LAW. This Agreement shall be construed and enforced under
the laws of the State of Delaware, without giving effect to the choice of law
provisions thereof.
8.7. MISCELLANEOUS. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same document.
The headings herein are for convenience of reference only and shall not affect
the construction of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or unenforceability of any other
provision.
18
<PAGE> 23
This Class F Preferred Stock Purchase Agreement has been SIGNED, SEALED
AND DELIVERED, as of the date first written above by the parties hereto.
COMPANY:
--------
TRANSKARYOTIC THERAPIES, INC.
By: /s/ Richard F. Selden
------------------------------------------
Title: President and CEO
PURCHASERS:
-----------
HOECHST MARION ROUSSEL, INC.
By: /s/ Terry J. Shelton
---------------------------------------------
Title: Vice President, Licensing and Business
--------------------------------------
Development
--------------------------------------
/s/ Klaus Neugebauer
---------------------------------------------
Dr. Klaus Neugebauer
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc.,
as General Partner
By: /s/ Ansbert Gadicke
---------------------------------------------
Title: President
AUDA SECURITIES GmbH
By: /s/ Marcel Giacommetti
---------------------------------------------
Title:
19
<PAGE> 24
/s/ Franz Burda /s/ M. Bacher
---------------------------------------------
Franz Burda
Frieder Burda
HANSEATIC CORPORATION
By: /s/ Paul Biddelman
---------------------------------------------
Title: Treasurer
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
---------------------------------------------
Title: Partner
/s/ J. Frances /s/ D. Rush
---------------------------------------------
Oppenheim Vermogenstreuhand GmbH
20
<PAGE> 25
<TABLE>
Schedule A
----------
<CAPTION>
Number
Name and Address of Shares Purchase Price
- ---------------- --------- --------------
<S> <C> <C>
Hoechst Marion Rousell, Inc.
9300 Ward Parkway
Kansas City, Missouri 64114-0480 564,286 $ 7,900,004
Dr. Klaus Neugebauer
Widenmayerstrasse 38
D-80538 Munich
Germany 107,143 $ 1,500,002
KTK Partners Limited Partnership
c/o Medical Portfolio Management, Inc.
One Cambridge Center
Cambridge, Massachusetts 02142 78,571 $ 1,099,994
Auda Securities GmbH
Am Pilgerrain 17
61352 Bad Homburg
Germany 71,429 $ 1,000,006
Franz and Frieder Burda
Lichtenthaler Allee 74
76530 Baden Baden
Germany 71,429 $ 1,000,006
Hanseatic Corporation
450 Park Avenue
New York, New York 10022 71,429 $ 1,000,006
Warburg Pincus Capital Company, L.P.
466 Lexington Avenue, 10th Floor
New York, New York 10017-3147 71,429 $ 1,000,006
Oppenheim Vermogenstreuhand GmbH
Postfach 10 27 43
50467 Koln
Germany 35,713 $ 499,982
========= ===========
TOTAL 1,071,429 $15,000,006
</TABLE>
21
<PAGE> 1
EXHIBIT 10.9
===============================================================================
CLASS G PREFERRED STOCK
PURCHASE AGREEMENT
by and between
TRANSKARYOTIC THERAPIES, INC.
and
THE PURCHASERS LISTED ON SCHEDULE A HERETO
Dated as of July 10, 1996
===============================================================================
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
CLASS G PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
-----------------
PAGE
1. PURCHASE AND SALE OF THE SHARES................................-1-
1.1. Purchase of Stock........................................-1-
1.2. Closing..................................................-1-
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY..................-2-
2.1. Organization and Standing of the Company.................-2-
2.2. Subsidiaries.............................................-2-
2.3. Capitalization...........................................-2-
2.4. Financial Information....................................-3-
2.5. Absence of Undisclosed Liabilities.......................-4-
2.6. Absence of Certain Changes...............................-4-
2.7. Taxes....................................................-5-
2.8. Title to Properties; Liens and Encumbrances..............-5-
2.9. Intellectual Property Rights.............................-5-
2.10. Government Approvals and Licenses........................-6-
2.11. Contracts................................................-6-
2.12. Directors and Officers...................................-7-
2.13. Litigation...............................................-7-
2.14. Authorization............................................-7-
2.15. Brokers..................................................-8-
2.16. Governmental Consents....................................-8-
2.17. Securities Laws..........................................-8-
2.18. Legal Compliance.........................................-8-
2.19. Insurance................................................-8-
2.20. Nondisclosure Agreement..................................-9-
2.21. Disclosures..............................................-9-
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS...............-9-
3.1. Authority................................................-9-
3.2. Accredited Investor Status...............................-9-
3.3. Formation; Status.......................................-10-
3.4. Receipt of Information..................................-10-
4. SECURITIES LAWS...............................................-10-
4.1. Registration of Securities..............................-10-
4.2. Financial Matters.......................................-10-
4.3. Transfer Legends and Restrictions.......................-10-
(i)
<PAGE> 3
4.4. Rule 144................................................-11-
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING..........-12-
5.1. Representations and Warranties..........................-12-
5.2. Performance.............................................-12-
5.3. Compliance Certificate..................................-12-
5.4. Registration Rights Agreement...........................-12-
5.5. Preemptive Rights.......................................-12-
5.6. Amended and Restated Voting Rights Agreement............-12-
5.7. Opinion of Company's Counsel............................-13-
5.8. Amended Certificate.....................................-13-
5.9. Blue Sky Matters........................................-13-
5.10. Corporate Proceedings and Consents......................-13-
5.11. No Material Adverse Change..............................-13-
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING............-13-
6.1. Representations and Warranties..........................-13-
6.2. Proceedings and Documents...............................-13-
6.3. Performance.............................................-14-
6.4. Authorizations..........................................-14-
7. AFFIRMATIVE COVENANTS.........................................-14-
7.1. Quarterly Financial Statements..........................-14-
7.2. Annual Financial Statements.............................-14-
7.3. Other Information.......................................-15-
7.4. Use of Proceeds.........................................-15-
7.5. Insurance...............................................-15-
7.6. Payment of Taxes........................................-15-
7.7. Corporate Existence.....................................-16-
7.8. Maintenance of Properties...............................-16-
7.9. Reservation of Common Stock.............................-16-
7.10. SEC Reports.............................................-16-
8. MISCELLANEOUS.................................................-16-
8.1. Entire Agreement; Successors............................-16-
8.2. Notices.................................................-17-
8.3. Expenses................................................-18-
8.4. Survival of Representations and Warranties..............-18-
8.5. Amendments; Waivers.....................................-18-
8.6. Governing Law...........................................-18-
8.7. Miscellaneous...........................................-18-
(ii)
<PAGE> 4
TRANSKARYOTIC THERAPIES, INC.
CLASS G PREFERRED STOCK PURCHASE AGREEMENT
This Class G Preferred Stock Purchase Agreement (this "AGREEMENT") is made
as of the 10th day of July, 1996 by and between Transkaryotic Therapies, Inc., a
Delaware corporation (the "COMPANY"), and the Purchasers listed on SCHEDULE A
hereto (the "PURCHASERS").
WHEREAS, the Purchasers desire to subscribe for and purchase, and the
Company desires to issue and sell, shares of the Company's Class G Preferred
Stock, $1.00 par value per share (the "CLASS G PREFERRED STOCK"), subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
contained herein the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE SHARES
1.1. PURCHASE OF STOCK. On the First Closing Date and the Second Closing
Date (each as defined in Section 1.2 below), subject to the terms and conditions
hereof and in reliance upon the warranties, representations and agreements
contained herein, the Company agrees to sell to each of the Purchasers, and each
of the Purchasers agree to purchase from the Company, on Closing Date (as
defined in Section 1.2 below) indicated on SCHEDULE A hereto for each Purchaser,
the number of shares of Class G Preferred Stock set forth opposite the name of
each such Purchaser on SCHEDULE A hereto at a price of $22.00 per share (the
"SHARES"). The powers, designations, preferences, rights and qualifications,
limitations and restrictions of the Class G Preferred Stock are as set forth in
the Certificate of Amendment of the Amended and Restated Certificate of
Incorporation (the "AMENDED CERTIFICATE") attached as Exhibit A hereto.
1.2. CLOSING. The initial closing of the purchase and sale of the Shares
hereunder (the "FIRST CLOSING") shall take place at the offices of Palmer &
Dodge LLP at _______ am., local time, on _____________ or at such other time and
date as the Company and the Purchasers may agree upon in writing (the "FIRST
CLOSING DATE"). The second closing of the purchase and sale of the Shares
hereunder (the "SECOND CLOSING" and, together with the First Closing, a
"closing") shall take place at the offices of Palmer & Dodge as soon as is
practicable following the First Closing Date (the "SECOND CLOSING DATE" and,
together with the First Closing Date, a "CLOSING DATE"). At each Closing, the
Company will deliver to each Purchaser participating in such Closing a
certificate evidencing the number of Shares being purchased by such Purchaser at
such Closing pursuant to Section 1.1, against payment by such
1
<PAGE> 5
Purchaser of the entire purchase price for the Shares being purchased by such
Purchaser in lawful money of the United States of America by bank or certified
check, wire-transfer or such other form of payment as shall be mutually agreed
upon by such Purchaser and the Company.
2. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company hereby represents and warrants to the Purchasers that, as of
the date of this Agreement, except as otherwise described on SCHEDULE B hereto,
the following are true and correct:
2.1. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business as a foreign
corporation in the Commonwealth of Massachusetts and is in good standing in each
jurisdiction in which failure to so qualify would have a materially adverse
effect on the business, assets or prospects of the Company. The copy of the
Company's Amended and Restated Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION"), which has been delivered to the Purchaser, is true, complete
and correct as of the date of this Agreement. The Company has the corporate
power and authority to own and lease its property, to enter into, deliver, and
perform its obligations and undertakings under, this Agreement and all other
agreements referred to herein or contemplated hereby, to issue the Shares, and
to conduct its business as now conducted.
2.2. SUBSIDIARIES. The Company has no subsidiaries and does not control,
directly or indirectly, any other corporation, association or business
organization.
2.3. CAPITALIZATION. The Company's entire authorized capital stock will
consist, immediately after the filing of the Amended Certificate with the
Secretary of State of the State of Delaware, of 15,000,000 shares of Common
Stock (of which 4,042,627 shares have been issued), and 4,952,720 shares of
Preferred Stock, $1.00 par value per share (the "PREFERRED STOCK"), of which:
6,000 shares have been designated as Class A Preferred Stock (the "CLASS A
PREFERRED STOCK"), all of which have been issued; 60,000 shares have been
designated as Class B Preferred Stock (the "CLASS B PREFERRED STOCK"), of which
49,339 shares have been issued; 1,875,000 shares have been designated as Class C
Preferred Stock (the "CLASS C PREFERRED STOCK"), of which 1,015,974 shares have
been issued; 280,367 shares have been designated as Class D Preferred Stock (the
"CLASS D PREFERRED STOCK"), of which 280,367 shares have been issued; 523,560
shares have been designated as Class E Preferred Stock (the "CLASS E PREFERRED
STOCK"), of which 523,560 shares have been issued; and 1,071,429 shares have
been designated as Class F Preferred Stock, (the "CLASS F PREFERRED STOCK") of
which 1,071,429 shares have been issued; and 1,136,364 shares have been
designated as Class G Preferred Stock, and none of which are issued outstanding
immediately prior to the Closing. 181,751 shares of Common Stock are held of
record in the Company's treasury. The number of shares and class of capital
stock of the Company which have been issued are listed on
2
<PAGE> 6
SCHEDULE B opposite the names of the record holders thereof, excluding those
record holders who are current or former employees of the Company, which current
and former employees hold, in the aggregate, 1,426,057 shares of the outstanding
capital stock of the Company. The Company has reserved 1,250,000 shares of
Common Stock for issuance to employees and consultants under the 1993 Long-Term
Incentive Plan (the "INCENTIVE PLAN") and [180,000] shares of Common Stock for
issuance to non-employee directors under the 1993 Non- Employee Directors' Stock
Option Plan (the "DIRECTORS' PLAN"). The Company has granted options under the
Incentive Plan for the purchase of 629,145 shares of Common Stock, of which
options to purchase 590,145 shares are currently outstanding. No options have
been granted under the Directors' Plan. The Company has granted warrants for the
purchase of 635,517 shares of Common Stock which are currently outstanding. In
addition, the Company has reserved a sufficient number of shares of Common Stock
for the conversion of the Class A Preferred Stock, Class B Preferred Stock,
Class C Preferred Stock, Class D Preferred Stock, Class E Preferred Stock, Class
F Preferred Stock and Class G Preferred Stock. The Common Stock and the
Preferred Stock are not entitled to cumulative voting rights, preemptive rights,
antidilutive rights or so-called registration rights under the Securities Act of
1933, as amended (the "SECURITIES ACT"), except as provided in this Agreement,
the Registration Rights Agreement dated November 3, 1993, as amended, the Class
C Preferred Stock and Warrant Purchase Agreement dated as of November 3, 1993,
as amended, by and among the Company, the purchasers listed on Schedule A
thereto and the Purchasers (the "Class C Purchase Agreement") or Article IV of
the Amended Certificate. The Common Stock and the Preferred Stock have the
preferences, voting powers, qualifications, and special or relative rights or
privileges set forth in the Certificate of Incorporation and the Amended
Certificate. All outstanding shares of Common Stock and Preferred Stock have
been, and the Class G Preferred Stock when issued in accordance with this
Agreement, the Certificate of Incorporation and the Amended Certificate will be,
validly issued and fully paid and nonassessable, and issued in accordance with
applicable state and federal securities laws. The Company does not have
outstanding any option, warrant or other commitment to issue or to acquire any
shares of its capital stock, or any securities or obligations convertible into
or exchangeable for its capital stock, other than the 590,145 currently
outstanding options granted pursuant to the Incentive Plan referred to above,
options it is committed to grant annually under the Directors' Plan to eligible
Directors, or warrants described above and listed on Schedule B hereto and the
Company has not given any person any right to acquire from the Company or sell
to the Company any shares of its capital stock. There is, and immediately upon
consummation at each Closing of the transactions contemplated hereby there will
be, no agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, etc.) with respect to the sale or
voting of any shares of capital stock of the Company (whether outstanding or
issuable upon conversion or exercise of outstanding securities) except as
contemplated by this Agreement, by the Certificate of Incorporation and By-laws
of the Company or as indicated on SCHEDULE B hereto, and the Company will not
voluntarily place any restrictions on the transfer of the Shares except to the
extent set forth herein or contemplated hereby.
3
<PAGE> 7
2.4. FINANCIAL INFORMATION. The Company has delivered to the Purchasers a
copy of (a) its audited balance sheet (the "Balance Sheet") as of December 31,
1995 (the "Financial Statement Date") and the related statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended (with the
Balance Sheet, the "Audited Financials"), and (b) its unaudited balance sheet as
of May 31, 1996 and the related statements of operations for the period then
ended (the "Unaudited Financials," and together with the Audited Financials, the
"Financial Statements"). The Financial Statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis and fairly present the financial condition of the Company at the date
thereof and the results of the operations of the Company for the period then
ended, provided, however, that the Unaudited Financials are subject to year end
adjustments and may not contain all footnotes required under generally accepted
accounting principles.
2.5. ABSENCE OF UNDISCLOSED LIABILITIES. As of the Financial Statement
Date, the Company had (and on the date hereof the Company has) no material
liabilities (matured or unmatured, fixed or contingent) arising out of any
transaction or state of facts existing prior to the date hereof which are not
fully reflected or provided for on the Balance Sheet, except for obligations
arising after the Financial Statement Date in the ordinary course of business.
2.6. ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
other than as indicated on Schedule B hereto, there has not been:
(a) any material adverse change in the condition (financial or
otherwise), assets, liabilities or business of the Company from that shown
by the Balance Sheet;
(b) any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business of the Company;
(c) any dividend, declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock or any
direct or indirect redemption, purchase or other acquisition of any of
such stock by the Company;
(d) any labor trouble, or any other event, development, or
condition, of any character, or threat of the same, materially adversely
affecting the business of the Company;
(e) any waiver of any material right of the Company, or the
cancellation of any material debt or claim held by the Company;
(f) any issuance of any stock, bonds or other securities of the
Company;
4
<PAGE> 8
(g) any sale, assignment or transfer of any material tangible or
intangible assets of the Company except with respect to tangible assets in
the ordinary course of business; or
(h) any loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor.
2.7. TAXES. For all periods ended on or prior to the date hereof, the
Company has filed or will file within the time prescribed by law (including
extensions of time approved by the appropriate taxing authority) all tax returns
and reports required to be filed with the United States Internal Revenue
Service, the State of Delaware, the Commonwealth of Massachusetts, any other
states, and all foreign countries and has paid or made adequate provision in the
Balance Sheet for the payment of all taxes, interest, penalties, assessments or
deficiencies shown to be due (or, to the knowledge of the Company, claimed by
such authority or jurisdiction to be due) on or in respect of such tax returns
and reports. The Company does not know of any (a) other federal, Delaware,
Massachusetts, state or foreign taxes which are due and payable by the Company
which have not been so paid; (b) other federal, Delaware, Massachusetts, state
or foreign tax returns or reports which are required to be filed which have not
been so filed; or (c) unpaid assessment for additional taxes for any fiscal
period or any basis thereof. The Company's federal or state income tax returns
have never been audited.
2.8. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company has good
and marketable title to all of its properties and assets, real and personal,
including those reflected in the Balance Sheet (except as sold or otherwise
disposed of in the ordinary course of business since the Financial Statement
Date), subject to no mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance or charge except (a) as shown on the Balance Sheet or in
the notes thereto, (b) tax, materialmen's or like liens for obligations not yet
due or payable or being contested in good faith by appropriate proceedings, and
(c) vendors' interests in installment purchase obligations of the Company which
in the aggregate do not exceed $25,000.
2.9. INTELLECTUAL PROPERTY RIGHTS. Attached hereto as SCHEDULE C is a
true and complete list of all patents, trademarks, service marks, trade names,
copyrights and rights or licenses to use the same, and any and all applications
therefor, presently owned or held by the Company. Such patents, trademarks,
service marks, trade names, copyrights and rights or licenses to use the same,
and any and all applications therefor, as well as all trade secrets and similar
proprietary information owned or held by the Company (the "Intellectual
Property") are all such items required to enable the Company to conduct its
business as now conducted. The Company has not received any formal or informal
notice of infringement or other complaint that the Intellectual Property
violates or infringes rights under patents, trademarks, service marks, trade
names, trade secrets, copyrights or licenses or any other proprietary rights of
others, nor does the Company have any reason to believe that there has been any
such violation or infringement. Except as set forth in SCHEDULE C, no royalties,
honoraria, or fees
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are or will be payable by the Company to other persons by reason of the
ownership or use by the Company of the Intellectual Property.
2.10. GOVERNMENT APPROVALS AND LICENSES. The Company has all governmental
approvals, authorizations, consents, licenses and permits necessary or required
to conduct its business as presently conducted and will use its best efforts to
obtain all governmental approvals, authorizations, consents, licenses and
permits necessary or required to conduct its business as proposed to be
conducted.
2.11. CONTRACTS. Other than as set forth in SCHEDULE B or C, the Company
has no presently existing contract, obligation or commitment (a) involving the
future payment by or to the Company of more than $100,000 (other than employment
or consulting agreements terminable at the option of the Company without penalty
on no more than thirty (30) days prior written notice with employees of, or
consultants to, the Company who are not officers or directors thereof), or (b)
which is material to the Company or its currently contemplated business,
including without limitation the following:
(i) any employment, bonus, commission or consulting agreements or
arrangements; pension, profit sharing, deferred compensation, stock bonus,
retirement, stock option, stock purchase, phantom stock or similar plans,
including agreements evidencing rights to purchase securities of the
Company; or agreements with shareholders;
(ii) any loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging, or granting or creating a lien or security interest
or other encumbrance on any of the Company's property; or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
(iii) any agreements with dealers, sales representatives, brokers
and other distributors, jobbers, advertisers, sales agencies;
(iv) any agreements with any labor union or collective bargaining
organization;
(v) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and
subcontractors and agreements requiring development of products;
(vi) any lease of machinery, equipment, other personal property,
including motor vehicles, and real estate;
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(vii) any indenture, agreement, or other document relating to the
sale or repurchase of securities of the Company;
(viii) any joint venture contract or arrangement or other
agreements involving a sharing of profits or expenses; or
(ix) any agreements limiting the freedom of the Company or any of
its employees to compete in any line of business or in any geographic area
or with any person;
(x) any agreements providing for disposition of the business and
substantially all of the assets, or securities, of the Company; agreements
of merger or consolidation to which the Company is a party; or letters of
intent with respect to the foregoing; or
(xi) any agreements involving, or letters of intent with respect to,
the acquisition of assets or securities of any other business or entity.
True and complete copies of all contracts and other items listed on
SCHEDULE B have been made available to counsel for the Purchasers. The Company
has complied with all the material provisions of said contracts and commitments
set forth in SCHEDULE B hereto and of all other material contracts and
commitments to which it is a party, and is not in material default under any
thereof, except to the extent to which any such noncompliance and defaults would
not materially and adversely affect the business or financial condition of the
Company. There exists no condition, event or act which constitutes, or which
after notice, lapse of time or both would constitute, a material default by the
Company or, to the Company's knowledge, by any third party, under any of said
contracts or commitments.
2.12. DIRECTORS AND OFFICERS. SCHEDULE B hereto contains a true, correct
and complete list showing the name of each director and officer of the Company.
2.13. LITIGATION. There is no litigation or proceeding pending or, to the
Company's knowledge, threatened, against the Company or the Company's
properties, nor does the Company know or have reasonable grounds to know of any
basis for any such action, including, without limitation, any governmental
investigation relating to employee safety or discrimination matters. To the
Company's knowledge, there is no litigation or proceeding pending or threatened
against or relating to any present or former employee of the Company by reason
of the past employment or consulting relationships of any of such employees with
the Company. There are no outstanding judgments against the Company.
2.14. AUTHORIZATION. The execution, delivery and performance by the
Company of this Agreement and the issuance and sale of the Shares, and upon
conversion of the Shares, the Common Stock into which the Shares are
convertible, have been duly authorized and approved by all necessary corporate
action. This Agreement has been duly executed and
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delivered on behalf of the Company and constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors. The execution, delivery and performance of
this Agreement, the issuance and sale of the Shares, and upon conversion of the
Shares, the Common Stock into which the Shares are convertible, will not
conflict with, or result in a breach of any of the terms of, or constitute a
default under, the Certificate of Incorporation or By-laws of the Company or
result in a material breach of any of the terms of, or constitute a material
default under, any agreement, instrument or other restriction to which the
Company is a party or by which it or any of its properties or assets is bound.
2.15. BROKERS. Except as described on SCHEDULE B, the Company has no
contract, arrangement or understanding with any broker, finder, or similar agent
with respect to the transactions contemplated by this Agreement.
2.16. GOVERNMENTAL CONSENTS. Based in part on the representations made by
the Purchasers in Sections 3 and 4 of this Agreement, no consent, approval or
authorization of any governmental authority is required under existing law or
regulation in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Shares pursuant to this Agreement
or the consummation of any other transactions contemplated hereby.
2.17. SECURITIES LAWS. Neither the Company nor any other person, firm or
corporation acting on its behalf has sold any of the Shares or other securities
of the Company to, or offered any thereof for sale to, or solicited any offers
to purchase any thereof from, or otherwise approached or negotiated (nor will
the Company or any other person, firm or corporation acting on its behalf sell,
offer, solicit or otherwise approach or negotiate) in respect thereof with, such
character or number of persons in the aggregate, or in such manner, as would
result in bringing the Shares, or any part thereof, within the provisions of
Section 5 of the Securities Act. Assuming that the Purchasers' representations
and warranties contained in Sections 3 and 4 of this Agreement are true and
correct at each Closing and on the date of the issuance of the shares of Common
Stock into which the Shares are convertible, the offering and sale of the
Shares, and the issuance of the shares of Common Stock upon conversion of the
Shares, are each exempt, or will each be exempt, as the case may be, from
registration and prospectus delivery requirements of the Securities Act as in
effect on the date hereof and are also exempt or will be exempt from
registration or qualification under applicable state securities laws as in
effect on the date hereof.
2.18. LEGAL COMPLIANCE. The Company is not in violation of any provisions
of its Certificate of Incorporation or By-laws, or of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, which violation materially and adversely
affects the business or financial condition of the Company.
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2.19. INSURANCE. The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business and consistent with insurance
coverage maintained by similar companies in similar businesses, including,
without limitation, insurance covering real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
2.20. NONDISCLOSURE AGREEMENT. The Company has entered into nondisclosure
and invention ownership agreements in favor of the Company in such forms as have
been approved from time to time by the Board of Directors of the Company, with
each person employed by it or serving as a consultant to it with employment or
consulting responsibility requiring access to proprietary technical information
of the Company.
2.21. DISCLOSURES. Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, certificate, or instrument furnished to the Purchasers
or their agents in connection with the transactions contemplated by this
Agreement, when read together, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company knows of
no information or fact which has or would have a material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the Company
which has not been disclosed in Schedule B.
3. REPRESENTATIONS AND WARRANTIES BY THE PURCHASERS.
Each Purchaser represents and warrants to the Company that the following
are true and correct in all material respects:
3.1. AUTHORITY. The Purchaser has all requisite power and authority to
enter into this Agreement and perform its obligations hereunder. All necessary
corporate and other action has been taken by it or on its behalf to execute,
deliver and perform its obligations under this Agreement and to purchase the
Shares. This Agreement constitutes the valid and legally binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms.
3.2. ACCREDITED INVESTOR STATUS. The Purchaser is acquiring the Shares
for the purpose of investment and not with a view to the resale or distribution
thereof, and it has no present intention of selling, negotiating or otherwise
disposing of the Shares or any portion thereof; PROVIDED that the disposition of
its property shall at all times be and remain within its control. It further
represents that, except as otherwise disclosed in writing to the Company, it is
an "ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act and that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Shares. The Purchaser further represents
that it is acquiring the Shares for its own account and with
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its general assets and not with the assets of any separate account in which any
employee benefit plan has any interest. As used in this Section 3.2, the terms
"separate account" and "employee benefit plan" shall have the respective
meanings assigned to them in the Employee Retirement Income Security Act of
1974.
3.3. FORMATION; STATUS. The Purchaser was not organized for the purpose
of making an investment in the Company, or if it was organized for such purpose,
each equity owner of the Purchaser is an accredited investor. No authorization
or other action is required to be taken in connection with an investment in the
Company, as a result of Purchaser's regulatory, statutory or other legal status.
3.4. RECEIPT OF INFORMATION. The Purchaser has been furnished such
information and documents as the Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the Company, terms and conditions of this Agreement and
the purchase of the Shares.
4. SECURITIES LAWS.
4.1. REGISTRATION OF SECURITIES. Each Purchaser represents and warrants
to the Company that it understands that the Shares have not been registered
under the Securities Act or the securities laws of any state or other
jurisdiction and that the Shares must be held indefinitely unless they are
subsequently registered thereunder or an exemption from registration thereunder
is available. Each Purchaser further represents and warrants to the Company that
it will not transfer any of the Shares in violation of the provisions of this
Agreement or any applicable federal or state securities laws or regulations.
4.2. FINANCIAL MATTERS. Each Purchaser represents and warrants to the
Company that (a) it understands that the purchase of the Shares involves
substantial risk and that its financial condition and investments are such that
it is in a financial position to hold the Shares purchased by it for an
indefinite period of time and to bear the economic risk of, and withstand a
complete loss of, its investment in such Shares; and (b) by virtue of its
expertise, the advice available to it and its previous investment experience,
the Purchaser has extensive knowledge and experience in financial and business
matters, investments, securities and private placements and the capability to
evaluate the merits and risks of the transactions contemplated by this
Agreement.
4.3. TRANSFER LEGENDS AND RESTRICTIONS. The Transfer (as defined below)
of the Shares will be restricted in accordance with the terms hereof. "TRANSFER"
shall mean any pledge, sale, assignment, gift or other transfer of any Shares or
any interest therein, whether or not such transfer would constitute a "sale" as
that term is defined in Section 2(3) of the Securities Act.
Each certificate evidencing the Shares or the Common Stock issuable upon
conversion of the Shares (collectively, the "SECURITIES"), including any
certificate issued to any transferee
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thereof, shall be imprinted with a legend in substantially the following form
(unless otherwise permitted under this Section 4 or unless such securities shall
have been effectively registered and sold under the Securities Act and
applicable state securities laws):
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. NO TRANSFER, SALE OR OTHER DISPOSITION OF
THESE SHARES SHALL BE MADE UNLESS A REGISTRATION STATEMENT WITH RESPECT TO
THESE SHARES UNDER THE SECURITIES ACT OF 1933 HAS BECOME EFFECTIVE OR THE
ISSUER HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL SATISFACTORY TO IT TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED, UNLESS SUCH OPINION OF
COUNSEL IS NOT REQUIRED BY THE TERMS OF THE CLASS G PREFERRED STOCK
PURCHASE AGREEMENT AMONG THE ISSUER AND CERTAIN OF ITS SHAREHOLDERS DATED
AS OF JULY ___, 1996 (THE "AGREEMENT"). TRANSFER OF THESE SHARES IS
FURTHER RESTRICTED AS PROVIDED IN THE AGREEMENT, A COPY OF WHICH IS
AVAILABLE AT THE ISSUER'S OFFICES."
The Holder (as defined below) of any Securities by acceptance thereof
agrees, so long as any legend described in this Section 4.3 shall remain on such
Securities, prior to any Transfer of any of the Securities (except for a
Transfer effected pursuant to an effective registration statement under the
Securities Act or in compliance with Rule 144 thereunder), to give written
notice to the Company of such Holder's intention to effect such Transfer and
agrees to comply in all respects with the provisions of this Section 4.3. Such
notice, if required, shall describe the proposed method of Transfer of the
Securities in question. Upon (but only upon) receipt by the Company of such
notice, and a written opinion of counsel to such Holder (which counsel and
opinion shall be reasonably satisfactory to counsel for the Company) that the
proposed Transfer may be effected without registration under the Securities Act
or in compliance with Rule 144 thereunder and under applicable state securities
laws, the proposed Transfer may be effected, and the Holder of such Securities
shall thereupon be entitled to Transfer the same in accordance with the terms of
the notice delivered by such Holder to the Company. Each certificate evidencing
the Securities issued upon any such Transfer shall bear the same legend as set
forth in this Section 4.3. Upon the written request of a Holder of the
Securities, the Company shall remove the foregoing legend from the certificates
evidencing such Securities and issue to such Holder new certificates free of any
transfer legend if, with such request, and at the request of the Company, the
Company shall have received an opinion of counsel satisfactory to the Company,
to the effect that any Transfers by such Holder of such Securities may be made
to the public without compliance with either Section 5 of the Securities Act or
Rule 144 thereunder and applicable state securities laws. "HOLDER" shall mean
any Purchaser (in its capacity as holder of any Securities and for so long as it
holds such Securities), and such of its respective successors and assigns who
acquire Securities from Holders in accordance with the terms of this Agreement
and who agree in writing with the Company to acquire and hold the Securities
subject to all the
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restrictions hereof, but in no event shall "Holder" include any transferee of
any Securities pursuant to sales made under a registration statement filed under
the Securities Act.
4.4. RULE 144. Each Purchaser recognizes that the provisions of Rule 144
under the Securities Act are not presently applicable to securities of the
Company. The Company covenants that (a) at all times after the Company first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company will comply with the
current public information requirements of Rule 144(c) (1) under the Securities
Act; and (b) at all such times as Rule 144 is available for use by a Purchaser,
the Company will furnish the Purchaser upon request with all information within
the possession of the Company required for the preparation and filing of Form
144.
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING.
The obligation of each Purchaser to purchase and pay for the Shares is
subject to the following:
5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the
Company made herein shall be true, correct and complete in all material respects
on and as of the First Closing Date, with the same force and effect as if they
had been made on and as of the First Closing Date.
5.2. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the First Closing Date shall have been performed or complied with.
5.3. COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchasers a certificate (to be signed by its chief executive officer) dated the
actual Closing Date certifying as to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 in all material respects.
5.4. REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
dated as of November 3, 1993, as amended, by and among the Company, the
purchasers listed on Schedule A thereto and the Purchasers (the "Registration
Rights Agreement") shall have been amended further to include the Shares in the
definition of Registrable Shares in the Registration Rights Agreement.
5.5. PREEMPTIVE RIGHTS. The Class C Purchase Agreement shall have been
amended further to provide that (i) the "Buyer", as defined in Section 8.1 of
the Class C Purchase Agreement shall include the Purchaser, (ii) a "Terminating
Class Event," as defined in Section 8.1(b) of the Class C Purchase Agreement,
shall mean, for the holders of Class G Preferred Stock, that fewer than 50,000
shares of the Class G Preferred Stock remain outstanding, and (iii) Class G
Preferred Stock shall be included in the classes of Preferred Stock of the
Company from which an amendment or waiver is required pursuant to Section 8.10
of the Class C Purchase Agreement.
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5.6. AMENDED AND RESTATED VOTING RIGHTS AGREEMENT. The Amended and
Restated Voting Rights Agreement dated November 3, 1993, as amended, among the
Company, the holders of the Class B, the Class C, the Class D, the Class E and
the Class F Preferred Stock (the "Voting Agreement") shall be amended further to
include the Class G Preferred Stock in the definitions of "Additional Preferred
Stock" and "Voting Securities".
5.7. OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received an
opinion of Palmer & Dodge, counsel to the Company, substantially in the form of
EXHIBIT B hereto, which opinion shall be satisfactory in form and substance to
the Purchaser.
5.8. AMENDED CERTIFICATE. The Amended Certificate shall have been duly
filed with the Secretary of State of the State of Delaware and shall have become
effective.
5.9. BLUE SKY MATTERS. All consents, approvals, filings, qualifications
and/or registrations required to be obtained or effected under any applicable
state securities laws in connection with the issuance, sale and delivery of the
Shares shall have been obtained or effected (except for the filing of any notice
subsequent to the Closing which may be required under applicable state
securities laws which, if required, shall be filed on a timely basis as may be
so required).
5.10. CORPORATE PROCEEDINGS AND CONSENTS. All corporate and other
proceedings to be taken and all waivers and consents to be obtained in
connection with the transactions contemplated by this Agreement shall have been
taken or obtained and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers and their counsel, each of
whom shall have received all such originals or certified or other copies of such
documents as each may reasonably request.
5.11. No Material Adverse Change. There shall have been no material
adverse change in the business, prospects, operations or assets of the Company
on and as of the First Closing Date.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligation of the Company to sell the Shares is subject to the following:
6.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchasers made herein shall be true, correct and complete in all
material respects on and as of relevant Closing Date with the same force and
effect as if they had been made on and as of such Closing Date.
6.2. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing shall be
satisfactory in form and substance to the Company and the Company's counsel, and
they each shall have received all such counterpart original or certified or
other copies of such documents as they may reasonably request.
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6.3. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchasers on or prior to
relevant Closing Date shall have been performed or complied with.
6.4. AUTHORIZATIONS. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States of America
or of any state required in connection with the lawful issuance and sale of the
Shares or any portion thereof to the Purchasers as contemplated under this
Agreement shall have been duly obtained and in effect.
7. AFFIRMATIVE COVENANTS. The Company covenants with the Purchasers as
follows, such covenants, other than as set forth in Section 7.11, to expire at
such times as the Company shall have consummated a firm commitment underwritten
public offering pursuant to an effective registration statement on Form S-1 or a
successor form under the Securities Act, covering the offer and sale by the
Company of Common Stock to the public which results in aggregate gross proceeds
to the Company of not less than $10,000,000 (the "INITIAL PUBLIC OFFERING").
7.1. QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after
the end of each of the first three quarters in each fiscal year, the Company
will deliver to each Purchaser, for so long as such Purchaser holds at least
five percent (5%) of the Shares purchased by it hereunder (in which case, the
Purchaser shall be deemed to be "Qualified") copies of the Company's unaudited
balance sheet as of the end of, and unaudited statements of income and
statements of cash flows for, such quarter, which shall be prepared in
accordance with generally accepted accounting principles consistently applied.
All such financial statements shall be certified as accurate and complete in all
material respects (subject to normal year-end adjustments) by the chief
financial officer of the Company and shall be presented in form comparative to
the similar period of the preceding year. Further, if for any period the Company
shall have any subsidiary or subsidiaries whose accounts are consolidated with
those of the Company, then in respect of such period all such financial
statements shall be the consolidated financial statements of the Company and all
such consolidated subsidiaries. In no event will the Purchaser make any use or
disclosure of the financial statements referred to in this Section 7.1 or
Section 7.2 or other information acquired pursuant to Section 7.3, except in
connection with evaluating its investment in the Company.
7.2. ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the end
of each fiscal year, the Company will deliver to each Purchaser, for so long as
such Purchaser Qualifies, audited financial statements analogous to those
required by Section 7.1 as at the end of and for such year, accompanied by a
certification by independent public accountants selected by the Company's Board
of Directors, that (except as otherwise stated therein) such statements have
been prepared in accordance with generally accepted accounting principles
consistently applied.
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7.3. OTHER INFORMATION. Upon the reasonable request of a Purchaser, if
such Purchaser then Qualifies, the Company will deliver to the Purchaser other
information and data, not proprietary in nature (in the good faith judgment of
the Company), pertaining to its business, financial and corporate affairs to the
extent that such delivery will not violate any then applicable law or any
agreements of the Company with third parties. The Company will permit a
Purchaser, if the Purchaser then Qualifies, at the expense of the Purchaser, to
visit and inspect any of the properties of the Company, including its books of
account, and to discuss its affairs, finances and accounts with the Company's
officers or directors, all at such reasonable times and as often as the
Purchaser may reasonably request, in each case, in a manner consistent with the
reasonable security and confidentiality needs of the Company; PROVIDED, that the
Company shall be under no such obligation with respect to information deemed in
good faith by the Company to be proprietary or subject to third party
restrictions on disclosure.
7.4. USE OF PROCEEDS. The Company will use amounts paid for the Shares
hereunder to fund research and development activities and for working capital
and other corporate purposes.
7.5. INSURANCE. The Company will keep all its insurable properties
properly insured against loss or damage by fire and other risks; maintain public
liability insurance against claims for personal injury, death or property damage
suffered by others upon or in or about any premises occupied by it or arising
from equipment owned by the Company and leased to and located upon or in or
about any premises occupied by any other person; maintain all such worker's
compensation or similar insurance as may be required under the laws of any state
or jurisdiction in which it may be engaged in business; and maintain such other
insurance as is usually maintained by persons engaged in the same or similar
business as is the Company. All such insurance shall be maintained against such
risks and in at least such amounts as such insurance is usually carried by
persons engaged in the same or similar businesses, and all insurance herein
provided for shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company may effect worker's compensation or similar insurance in respect of
operations in any state or other jurisdiction either through an insurance fund
operated by such state or other jurisdiction or by causing to be maintained a
system or systems of self-insurance which is in accord with applicable laws. In
addition, the Company shall maintain "Key Man Insurance" on the life of Richard
F. Selden in an aggregate face amount of not less than $1,000,000 for so long as
Dr. Selden is employed by the Company.
7.6. PAYMENT OF TAXES. The Company will pay and discharge promptly, or
cause to be paid and discharged promptly, when due and payable, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, real, personal and mixed, or upon any part
thereof, as well as all claims of any kind (including claims for labor,
materials and supplies), which, if unpaid, might by law become a lien or charge
upon its property; PROVIDED, however, that the Company shall not be required to
pay any tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof
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shall currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books reserves deemed by it adequate with
respect thereto.
7.7. CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, and material rights and franchisees, provided, however, that nothing
in this section shall (a) prevent the abandonment or termination of the
Company's authorization to do business in any foreign state or jurisdiction if,
in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (b) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
7.8. MAINTENANCE OF PROPERTIES. The Company will maintain and keep, or
cause to be maintained and kept, its properties in good repair, working order
and condition, and from time to time make, or cause to be made, all repairs,
renewals and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be properly
and advantageously conducted at all times.
7.9. RESERVATION OF COMMON STOCK. The Company agrees to continue to
reserve a number of shares of the Company's Common Stock equal to the number of
shares of Common Stock issuable upon conversion of the Shares, and the Company
further agrees that in the event that the conversion price applicable to the
Shares set forth in the Certificate of Incorporation is reduced below the
initial price set forth therein, it shall immediately cause to be set aside
additional shares of the Company's Common Stock so as to comply with the
provisions of this Section 7.9.
7.10. SEC REPORTS. Promptly after each such filing, the Company will
furnish the Purchaser with copies of all proxy statements and annual reports and
all reports on Forms 8-K, 10-Q or 10-K (or any similar form hereafter in use)
which the Company shall file with the Securities and Exchange Commission or any
stock exchange on which securities of the Company may be listed.
8. MISCELLANEOUS.
8.1. ENTIRE AGREEMENT; SUCCESSORS. This Agreement, together with the
Schedules and Exhibits hereto, sets forth the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior oral
or written agreements and commitments of the parties relating thereto. All the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto subject to any restrictions on assignment stated herein. Delivery
of documents by the Company or its counsel to counsel for the Purchasers shall
be deemed to constitute for all purposes the furnishing of such documents by the
Company to the Purchasers under this Agreement or in connection with the
offering hereunder.
16
<PAGE> 20
8.2. NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered by facsimile (and promptly confirmed
by telephone, personal delivery or courier) or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by telecopier, addressed as
follows:
(a) if to the Purchasers:
Biotech Target, S.A.
Swiss Bank Tower
Pananma 1
Republic of Pananma
with copies to:
BB Biotech AG
c/o Bellevue Asset Management AG
Grundstrasse 12
CH-6343 Rotkreuz
Switzerland
Attn: Dr. Andreas Bremer
Telephone: 011 41 41 790 3080
Telecopy: 011 41 41 790 3081
AND
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
Attn: Daniel L. Goelzer, Esq.
Diane Mage Roberts, Esq.
Telephone: 202-452-7072
Telecopy: 202-452-7000
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Richard F. Selden, M.D., Ph.D.
Telephone: (617) 349-0200
Telecopy: (617) 491-7903
17
<PAGE> 21
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt, with
telephonic confirmation in the case of facsimile and (ii) three (3) business
days after deposit in the U.S. mails or delivery to a nationally-recognized
overnight courier service in accordance with this Section.
8.3. EXPENSES. Except as provided in the Registration Rights Agreement,
each party will bear its own expenses in connection with this Agreement.
8.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by the Company or the Purchasers
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance of the Shares for a period (the "Survival Period")
expiring on the first to occur of (a) the Initial Public Offering, or (b) the
date which is five years after the relevant Closing Date. No claim may be made
for breach of any representation or warranty contained herein unless notice of
such claim is given to the breaching party within the Survival Period.
8.5. AMENDMENTS; WAIVERS. Changes in or additions to this Agreement may
be made by written document executed by the Company and the holders of greater
than 50% of the Shares. Purchasers holding greater than 50% of the Shares may,
by written instrument, waive compliance by the Company with any of the
provisions of this Agreement. Notwithstanding the foregoing, no course of
dealing or delay on the part of the Purchasers in exercising any right shall
operate as a waiver thereof or otherwise prejudice the rights of the
Purchasers.
8.6. GOVERNING LAW. This Agreement shall be construed and enforced under
the laws of the State of Delaware, without giving effect to the choice of law
provisions thereof.
8.7. MISCELLANEOUS. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same document.
The headings herein are for convenience of reference only and shall not affect
the construction of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or unenforceability of any other
provision.
18
<PAGE> 22
[The remainder of this page has been intentionally left blank.]
19
<PAGE> 23
This Class G Preferred Stock Purchase Agreement has been SIGNED, SEALED
AND DELIVERED, as of the date first written above by the parties hereto.
COMPANY:
--------
TRANSKARYOTIC THERAPIES, INC.
By: /s/ Richard F. Selden
--------------------------------------
Title: President and CEO
PURCHASERS:
-----------
BIOTECH TARGET, S.A.
By: /s/ Hans Jorge Graf
--------------------------------------
Title:
By: /s/ Andreas Bremer
--------------------------------------
Title:
20
<PAGE> 24
<TABLE>
Schedule A
----------
<CAPTION>
Number
Name and Address of Shares Purchase Price
- ---------------- --------- --------------
<S> <C> <C>
Biotech Target, S.A. 909,091 $22.00/share
Additional Purchasers
TOTAL [ ] [ ]
</TABLE>
21
<PAGE> 1
SUPPLEMENTAL CLASS G PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
THIS SUPPLEMENTAL CLASS G PREFERRED STOCK PURCHASE AGREEMENT dated as of
August 7, 1996 is entered into by and among Transkaryotic Therapies, Inc., a
Delaware Corporation, (the "Company"), the holder of the Company's Class G
Preferred Stock (the "Initial Purchaser") and the purchasers listed on SCHEDULE
A hereto (collectively the "Subsequent Purchasers").
WHEREAS the Company and the Initial Purchaser entered into a Class G
Preferred Stock Purchase Agreement dated as of July 10, 1996 (the "Agreement"),
attached hereto as EXHIBIT A, for the issuance and sale of 909,091 shares of the
Company's Class G Preferred Stock, $1.00 par value per share (the "Preferred
Stock");
WHEREAS the Company seeks to sell and the Subsequent Purchasers seek to buy
an aggregate of 224,498 shares of Preferred Stock (the "Additional Shares") at a
price per share of $22.00 upon the same terms and conditions set forth in the
Agreement;
WHEREAS the Company and the Subsequent Purchasers seek to include the
Subsequent Purchasers as parties to the Fourth Amendment to the Class C
Preferred Stock and Warrant Purchase Agreement, attached hereto as EXHIBIT B,
the Fourth Amendment to the Registration Rights Agreement, attached hereto as
EXHIBIT C, and the Fourth Amendment to the Amended and Restated Voting Rights
Agreement, attached hereto as EXHIBIT D, (collectively, the "Ancillary
Agreements");
NOW THEREFORE, each of the parties hereto agree as follows:
1. Definitions
-----------
1.1 Capitalized terms used herein but not otherwise defined herein shall
have the respective meanings set forth in the Agreement.
1.2 The Agreement shall be deemed amended to include the defined terms
"Additional Shares" and "Subsequent Purchasers" as defined above.
1.3 The terms "Purchaser" and "Purchasers" in the Agreement and this
Supplemental Agreement shall include the Subsequent Purchasers for all purposes
under the Agreement and this Supplemental Agreement.
1.4 The term "Shares" in the Agreement and this Supplemental Agreement
shall include all Additional Shares for all purposes under the Agreement or this
Supplemental Agreement.
<PAGE> 2
2. Purchase and Sale of the Shares
-------------------------------
On August 7, 1996, or at such other date as the Company and the Subsequent
Purchasers may agree upon, subject to the terms and conditions hereof and in
reliance upon the warranties, representations and agreements contained herein,
the Company agrees to sell to each of the Subsequent Purchasers, and each of the
Subsequent Purchasers agrees to purchase from the Company the number of shares
of Class G Preferred Stock set forth opposite the name of each such Subsequent
Purchaser on SCHEDULE A hereto, at a price of $22.00 per share. The powers,
designations, preferences, rights and qualifications, limitations and
restrictions of the Class G Preferred Stock are as set forth in the Certificate
of Amendment of the Amended and Restated Certificate of Incorporation attached
as EXHIBIT A to the Agreement.
3. Amendments to the Agreement
---------------------------
3.1 SCHEDULE A is amended to conform to SCHEDULE A attached hereto.
3.2 The first sentence of Section 2.3 shall be, and hereby is, deleted in
its entirety, and the following substituted therefor:
"The Company's entire authorized capital stock (immediately prior to
the Closing) consists of 15,000,000 shares of Common Stock, of which
4,042,627 shares have been issued, and 4,952,720 shares of Preferred Stock,
$1.00 par value per share (the "PREFERRED STOCK"), of which 6,000 shares
have been designated as Class A Convertible Preferred Stock (the "CLASS A
PREFERRED STOCK"), all of which have been issued; 60,000 shares have been
designated as Class B Preferred Stock (the "CLASS B PREFERRED STOCK"), of
which 49,339 shares have been issued; 1,875,000 shares have been designated
as Class C Preferred Stock (the "CLASS C PREFERRED STOCK") of which
1,015,974 shares have been issued; 280,367 shares have been designated as
Class D Preferred Stock (the "CLASS D PREFERRED STOCK"), of which 280,367
shares have been issued; 523,560 shares have been designated as Class E
Preferred Stock (the "CLASS E PREFERRED STOCK"), of which 523,560 shares
have been issued; 1,071,429 shares have been designated as Class F
Preferred Stock (the "CLASS F PREFERRED STOCK") of which 1,071,429 shares
have been issued; and 1,136,364 shares have been designated as Class G
Preferred Stock, 909,091 shares of which are issued and outstanding
immediately prior to the Closing."
3.3 Section 8.2 of the Agreement shall be deleted in its entirety and the
following shall be substituted therefor:
"NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands and other communications hereunder shall be in
writing and shall be personally delivered by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or given by pre-paid
nationally recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by telecopier, addressed as
follows:
- 2 -
<PAGE> 3
(a) if to the Purchasers, at the address set forth below each
Purchaser's name on SCHEDULE A hereto.
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Richard F. Selden, M.D., Ph.D.
Telephone:(617) 349-0200
Telecopy: (617) 491-7903
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
or to such other address as shall have been designated in writing by
any party pursuant hereto. All notices, requests, demands and other
communications hereunder shall be effective on the earlier of (i)
actual receipt, with telephonic confirmation in the case of facsimile
and (ii) three (3) business days after deposit in the U.S. mails or
delivery to a nationally-recognized overnight courier service in
accordance with this Section."
4. REPRESENTATIONS OF THE COMPANY. The Company hereby represents and warrants to
the Subsequent Purchasers as follows:
4.1 This Supplemental Agreement and the Agreement are valid and legally
binding and are enforceable in accordance with their respective terms.
4.2 Each of the representations and warranties contained in Section 2 of
the Agreement (such Section 2 being incorporated herein by reference) is true
and correct on the date hereof with the same force and effect as if made on the
date hereof.
5. REPRESENTATIONS OF THE SUBSEQUENT PURCHASERS. Each Subsequent Purchaser
represents and warrants to the Company that each of the representations and
warranties contained in Section 3 of the Agreement (such Section 3 being
incorporated herein by reference) is true and correct with respect to such
Subsequent Purchaser as of the date hereof.
6. CONDITIONS TO THE OBLIGATIONS OF THE SUBSEQUENT PURCHASERS. The obligation of
each Subsequent Purchaser to purchase Additional Shares at the Subsequent
Closing is subject to the fulfillment, or the waiver by each such Subsequent
Purchaser, of the conditions to Closing set forth in Section 5 of the Agreement
(such Section 5 being herein incorporated by reference), provided that:
- 3 -
<PAGE> 4
6.1 REFERENCES TO CLOSING. The conditions set forth in Section 5 of the
Agreement shall be modified to apply to the Subsequent Closing, and all
references to the "Closing" contained in that Section shall mean the Subsequent
Closing for the purpose of this Section 5.
6.2 OPINION OF COUNSEL. The Subsequent Purchasers shall have received from
Palmer & Dodge LLP, counsel to the Company, an opinion addressed to the
Subsequent Purchasers, dated the Subsequent Closing Date in substantially the
form referred to in Section 5.7 of the Agreement.
7. CONDITION TO OBLIGATIONS OF THE COMPANY. The Company's obligation to sell the
Additional Shares is subject to the fulfillment of the following condition:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each of the Subsequent Purchasers pursuant to Section 4 of this
Supplemental Agreement shall be true and correct when made, and true and correct
on the Subsequent Closing Date.
8. THE ANCILLARY AGREEMENTS. Upon execution of this Supplemental Agreement, the
Company and the Subsequent Purchasers agree that the Subsequent Purchasers shall
become parties to the Ancillary Agreements and shall be considered "Purchasers"
as that term is defined in each of the Ancillary Agreements.
9. WAIVER OF RIGHTS TO PURCHASE ADDITIONAL SHARES. Solely with respect to the
offer and sale by the Company of shares of Class G Preferred Stock, each
Purchaser hereby waives any and all rights that may permit each such Purchaser
to purchase more than the number of shares of the Class G Preferred Stock set
forth opposite such Purchaser's name on Schedule A hereto.
10. MISCELLANEOUS.
10.1 Except as specifically amended hereby, the remaining terms and
provisions of the Agreement shall not be affected by this Supplemental Agreement
and shall remain in full force and effect.
10.2 This Supplemental Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same Agreement.
[The remainder of this page has been intentionally left blank.]
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Supplemental
Agreement as of the day first written above.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ Richard F. Selden
---------------------------------------------------
Name: Richard F. Selden, M.D., Ph.D.
Title: President and Chief Executive Officer
BIOTECH TARGET, S.A.
By: /s/ Andreas Bremer /s/ Hans Jorge Graf
----------------------------------------------------
Name: Andreas Bremer and Hans Jorge Graf
Title:
HANSEATIC CORPORATION
By: /s/ Benjamin Schliemann
----------------------------------------------------
Name: Benjamin Schliemann
Title: Vice President
/s/ F. Burda /s/ F. Burda
-------------------------------------------------------
Franz & Frieder Burda
OPPENHEIM VERMOGENSTREUHAND
By: /s/ R. Lagemann /s/ L. Schubert
----------------------------------------------------
Name: R. Lagemann and L. Schubert
Title: Holder of Procuration; Managing Director
- 5 -
<PAGE> 6
AUDA SECURITIES GMBH
By: /s/ Dr. Axel May /s/ Dr. B Wunderlin
----------------------------------------------------
Name: Dr. Axel May and Dr. B Wunderlin
Title: Geschaftstfuhrer
/s/ Klaus Neugebauer
----------------------------------------------------
Dr. Klaus Neugebauer
PUBLIC EMPLOYEE RETIREMENT SYSTEM OF
IDAHO
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
STATE OF OREGON PERS/ZCG
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
ARTHUR D. LITTLE EMPLOYEE INVESTMENT
PLAN
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
- 6 -
<PAGE> 7
WELLS FAMILY LLC
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
CITY OF MILFORD PENSION & RETIREMENT
PLAN
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zeisger
----------------------------------
Name:
Title:
VAN LOBEN SELS FOUNDATION
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
ROANOKE COLLEGE
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
- 7 -
<PAGE> 8
NFIB EMPLOYEE PENSION TRUST
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
CITY OF STAMFORD FIREMEN'S PENSION FUND
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
CHAPIN SCHOOL LTD. ENDOWMENT FUND
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
MORGAN TRUST CO. OF THE BAHAMAS LTD.
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
- 8 -
<PAGE> 9
DEMVEST EQUITIES, L.P.
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
HELEN B. LAZAR
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
HAROLD & GRACE WILLENS JTWROS
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
DAVID W. WORTHINGTON
By: ZESIGER CAPITAL GROUP LLC
Agent and Attorney-in-Fact
By: /s/ Albert L. Zesiger
----------------------------------
Name:
Title:
/s/ David Baltimore
--------------------------------------------------------
David Baltimore
- 9 -
<PAGE> 10
<TABLE>
Schedule A
----------
<CAPTION>
Number
Name and Address of Shares Purchase Price
- ---------------- --------- --------------
Initial Purchaser
- -----------------
<S> <C> <C>
Biotech Target, S.A 909,091 $20,000,002
c/o BB Biotech AG
c/o Bellevue Asset Management AG
Grundstrasse 12
CH-6364 Rotkreuz, Switzerland
Subsequent Purchasers
- ---------------------
Public Employee Retirement 26,200 $ 576,400
System of Idaho
c/o Zeisger Capital Group LLC
320 Park Avenue
New York, NY 10022
State of Oregon PERS/ZCG 90,900 $ 1,999,800
c/o Zesiger Capital Group LLC
Arthur D. Little Employee 15,900 $ 349,800
Investment Plan
c/o Zesiger Capital Group LLC
Wells Family LLC 6,800 $ 149,600
c/o Zesiger Capital Group LLC
City of Milford Pension and 5,700 $ 125,400
Retirement Plan
c/o Zesiger Capital Group LLC
Van Loben Sels Foundation 4,500 $ 99,000
c/o Zesiger Capital Group LLC
Roanoke College 4,500 $ 99,000
c/o Zeisger Capital Group
NFIB Employee Pension Trust 4,500 $ 99,000
c/o Zesiger Capital Group LLC
</TABLE>
- 10 -
<PAGE> 11
<TABLE>
<S> <C> <C>
City of Stamford Firemen's 4,500 $ 99,000
Pension Fund
c/o Zesiger Capital Group LLC
Chapin School Ltd. Endowment Fund 3,400 $ 74,800
c/o Zesiger Capital Group LLC
Morgan Trust Co. of the Bahamas Ltd. 2,300 $ 50,600
c/o Zesiger Capital Group LLC
Demvest Equities, L.P. 2,300 $ 50,600
c/o Zesiger Capital Group LLC
Helen B. Lazar 2,300 $ 50,600
c/o Zesiger Capital Group LLC
Harold and Grace Willens JTWROS 1,800 $ 39,600
c/o Zeisger Capital Group LLC
David W. Worthington 1,600 $ 35,200
c/o Zesiger Capital Group LLC
Dr. Klaus Neugebauer 12,857 $282,854
Widenmayerstrasse 38
D-80538 Munich
Germany
Hanseatic Corporation 8,503 $187,066
450 Park Avenue
New York, NY 10022
Franz & Frieder Burda 8,571 $188,562
Lichtenthaler Allee 74
76530 Baden Baden
Germany
Auda Securities GmbH 8,571 $188,562
Am Pilgerrain 17
61352 Bad Homberg
Germany
</TABLE>
- 11 -
<PAGE> 12
<TABLE>
<S> <C> <C>
Oppenheim Vermogenstreuhand 4,251 $ 93,522
Postfach 10 27 43
50467 Koln
Germany
David Baltimore 4,545 $ 99,990
508 Union Wharf
Boston, MA 02109
TOTAL 1,133,589 $24,938,958
</TABLE>
- 12 -
<PAGE> 1
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of November
3, 1993 by and among Transkaryotic Therapies, Inc., a Delaware corporation (the
"Company"), and the purchasers listed on Schedule A hereto (each individually, a
"Purchaser" and together, the "Purchasers").
WHEREAS, it is a condition precedent to the effectiveness of the Class C
Preferred Stock and Warrant Purchase Agreement, dated as of the date hereof (the
"Class C Purchase Agreement"), that the Company enter into this Registration
Rights Agreement with the holders of the Class C Preferred Stock, par value
$1.00 per share, of the Company (the "Class C Preferred Stock"); and
WHEREAS, the holders of at least a majority of the Class B Preferred Stock,
par value $1.00 per share, of the Company (the "Class B Preferred Stock"),
purchased by the holders thereof pursuant to (i) the Class B Preferred Stock
Purchase Agreement, dated as of February 14, 1992 (the "1992 Class B Agreement")
and (ii) the Class B Preferred Stock Purchase Agreement, dated as of April 20,
1993 (the "1993 Class B Agreement," and together, the "Class B Purchase
Agreements") have agreed to amend each of the Class B Purchase Agreements to the
extent necessary to terminate all provisions therein relating to registration
rights and to deem this Agreement to be an amendment and restatement of all such
provisions.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. All capitalized terms used in this Agreement and
not otherwise defined herein shall have the meaning given therefor in the Class
C Purchase Agreement.
(a) "SHARES" shall mean the shares of the Class B Preferred Stock
purchased pursuant to the Class B Purchase Agreement and the shares of the
Class C Preferred Stock purchased pursuant to the Class C Purchase
Agreement, collectively.
(b) "REGISTRABLE SHARES" shall mean (i) the shares of Common Stock
issued or issuable upon any conversion of the Class B Preferred Stock or
Class C Preferred Stock, (ii) any shares of Common Stock, par value $.01
per share, of the Company (the "Common Stock") issued or issuable upon any
exercise of the Warrants issued pursuant to the Class C Purchase Agreement
(the "Warrants"), (iii) any shares of Common Stock issuable to the holders
of Class B Preferred Stock or Class C Preferred Stock pursuant to any
preemptive rights of the holders of such Preferred Stock (unless such
shares are subject to an agreement with the Company granting registration
rights to the holder thereof on terms no less favorable to Holders (as
defined below) than those contained herein), and (iv) any other shares of
Common Stock issued with respect to the shares enumerated in clauses (i),
(ii) and (iii) above by reason of stock dividends, stock splits,
recapitalizations, reorganizations, or similar corporate action.
<PAGE> 2
Wherever reference is made in this Agreement to a request or consent of
holders of a certain percentage of Registrable Shares, or to a number or
percentage of Registrable Shares held by a Holder, such reference shall
include shares of Common Stock issuable upon conversion of the Shares even
though such conversion has not yet been effected and shares of Common Stock
issued upon exercise of the Warrants, but shall not include shares of
Common Stock issuable upon exercise of the Warrants but not yet issued.
(c) "HOLDERS" shall mean any Purchaser (in its capacity as holder of
any Shares or Registrable Shares and for so long as it holds such Shares or
Registrable Shares), and such of its respective successors and assigns who
acquire Shares or Registrable Shares from Holders in accordance with the
terms of this Agreement and who agree in writing with the Company to
acquire and hold the Shares or Registrable Shares subject to all the
restrictions hereof but in no event shall "Holders" include any transferee
of Registrable Shares pursuant to sales made under a registration statement
filed under the Securities Act.
(d) "COMMISSION" shall mean the Securities and Exchange Commission or
other successor federal agency.
(e) "REGISTRATION EXPENSES" and "SELLING EXPENSES" shall mean the
expenses so described in Section 6.
(f) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
(g) "TRANSFER" or "TRANSFERS" shall mean any pledge, sale, assignment,
gift or other transfer of any Shares or Registrable Shares or any interest
therein, whether or not such transfer would constitute a "SALE" as that
term is defined in Section 2(3) of the Securities Act.
(h) "OTHER HOLDERS" shall mean all holders of the Company's securities
except the Holders and except the holders of Additional Registrable
Securities.
(i) "ADDITIONAL REGISTRABLE SECURITIES" shall mean (1) any shares of
the capital stock of the Company that are held by persons or entities who
are parties to, or assignees of a party to, an agreement (other than this
Agreement) with the Company granting registration rights to such holder and
that were sold pursuant to such agreement, and (2) any securities issued
with respect to the capital stock referred to in clause (1) above, by
reason of stock dividends, stock splits or combinations, recapitalizations,
reorganizations or other similar corporate action.
2. COMPANY ("PIGGYBACK") REGISTRATION. If (but without any obligation to do
so) the Company for itself or any of its security holders shall at any time or
times determine to register under the Securities Act any shares of its capital
stock or other securities (other than
<PAGE> 3
(a) the registration of an offer, sale or other disposition of securities to
employees of, or other persons providing services to, the Company or any
subsidiary pursuant to an employee or similar benefit plan, registered on Form
S-8, a comparable or successor form or another form which is used solely for the
purpose of registering such plan, or exempt from registration pursuant to
Regulation A or a comparable or successor rule; or (b) relating to a merger,
acquisition or other transaction of the type described in Rule 145 or comparable
or successor rule, registered on Form S-4 or similar or successor forms) the
Company will notify each Holder of such determination at least thirty (30) days
prior to the filing of such registration statement, and upon the request of any
Holder given in writing within twenty (20) days after the effective date of such
notice, the Company will use its best efforts as soon as practicable thereafter
to cause any of the Registrable Shares specified by such Holder to be included
in such registration statement to the extent and under the conditions such
registration is permissible under the Securities Act. Notwithstanding the
foregoing, in the event the proposed registration is in whole or in part an
underwritten public offering and if the managing underwriter(s) determines and
advises in writing that the inclusion of some or all of the Registrable Shares
of such Holders, the Additional Registrable Securities and all shares of the
Company's capital stock to be offered by the Company and by Other Holders,
whether originally covered by requests for registration or otherwise included,
would interfere with the successful marketing of such securities, then the
number of shares of capital stock otherwise to be included in the registration
statement by Holders, holders of Additional Registrable Securities and Other
Holders shall be reduced as follows: (i) there shall first be excluded shares
proposed to be included by Other Holders; (ii) any further reduction shall be
pro rata among Holders and holders of Additional Registrable Securities in the
proportion of the number of shares of the Company's capital stock then owned by
each, except, however, in the event of a registration initiated by Warburg
Pincus Capital Company, L.P. ("Warburg") pursuant to the terms of the Stock
Purchase Agreement, dated as of July 1988 between the Company and Warburg, in
which case the shares of Common Stock issued or issuable upon conversion of the
Class A Preferred Stock held by Warburg shall be the last to be excluded. For
purposes of apportionment in the immediately preceding sentence, for any Holder
which is a partnership, the partners and retired partners of such Holder, or the
estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "Holder", and any pro rata reduction with respect to such "Holder" shall
be based upon the aggregate amount of Shares and Registrable Shares carrying
registration rights owned by all entities and individuals included with such
"Holder", as defined in this sentence. Any Holder whose Registrable Shares are
registered shall, as a condition to participation, comply with Section 4 hereof
and such other reasonable requirements as may be imposed by the managing
underwriters to effect an orderly distribution of the Registrable Shares. If any
Holder disapproves of the terms of any such underwriting, such Holder may elect
to withdraw therefrom by written notice to the Company and the managing
underwriters. Any Registrable Shares withdrawn from such underwriting shall be
withdrawn from such registration. The Company shall be under no obligation to
complete any offering of its securities described in this Section 2 and shall
incur no liability to any Holder for its failure to do so. The Company shall not
be obligated to offer the Holders the right to participate in more than three
registrations pursuant to this Section 2.
<PAGE> 4
3. DEMAND REGISTRATION. At any time after February 14, 1995, the Holder(s)
of at least thirty percent (30%) of the then outstanding Registrable Shares may
notify the Company in writing that such Holders intend to offer or cause to be
offered for sale a number of Registrable Shares which represents not less than
fifteen percent (15%) of the Registrable Shares held by such Holder(s), and may
request the Company to cause such Registrable Shares to be registered under the
Securities Act. Such rights to request the Company to register the applicable
Holders' Registrable Shares shall be available to such Holders no more than once
during any consecutive twelve month period. To the extent and under the
condition that such registration is permissible under the Securities Act, the
Company will use its best efforts as soon as practicable after such notification
and request by such Holder(s) to prepare and file a registration statement
covering such Registrable Shares (together with any other Registrable Shares
requested by the Holders, or the holders of Additional Registrable Securities or
the Other Holders to be included in such registration pursuant to Section 2
within twenty (20) days after receipt of a notice from the Company pursuant to
said Section 2). Such right to require registration shall be in addition to the
rights of the Holders under Section 2, provided that no such request shall be
made, or if made shall not be effective, during the period commencing with the
date of notice, if any, by the Company under Section 2 of an intention to
register its securities and ending three months after the earlier of the
effective date of such registration or the abandonment by the Company of its
intent to register such securities, and shall be available to applicable Holders
on not more than two occasions (exclusive of registration statements on Form S-3
or comparable or successor form, as provided below). Except as otherwise
provided in Section 6.1 hereof, any such right to require registration shall be
deemed to have been used only (i) if the Holders requesting registration have at
least seventy-five percent (75%) of the Registrable Shares which they have
requested in good faith to be registered included in such registration
statement; and (ii) upon such registration statement becoming and remaining
effective in accordance with the provisions hereof. Notwithstanding the
foregoing, in no event shall the Holders' right to require registration under
this Section 3 be available to the applicable class of Holders on more than two
occasions (exclusive of registration statements on Form S-3 or comparable or
successor form, as provided below). Anything contained herein to the contrary
notwithstanding, with respect to each registration requested pursuant to this
Section 3, the Company may, in its discretion, include in any registration
pursuant to this Section 3 any authorized but unissued shares of Common Stock
for sale by the Company or any securities for sale by Other Holders or holders
of Additional Registrable Securities. However, neither the Company, the holders
of Additional Registrable Securities, nor any Other Holder(s) may include any
securities in any registration statement requested pursuant to this Section 3
unless in the case of an underwritten offering, the managing underwriters shall
determine and advise that such inclusion will not interfere with the successful
marketing of the securities to be offered by the requesting Holder(s). In the
event that the managing underwriter(s) fails to approve the inclusion of any
Additional Registrable Securities in any registration under this Section 3 or
limits the number of shares which may be included in any registration pursuant
to this Section 3, then the number of shares of capital stock otherwise to be
included in the registration statement by Holders, holders of Additional
Registrable Securities, other Holders and the Company shall be reduced as
follows: (i) there shall first be excluded shares proposed to be included by the
Company and Other Holders; (ii) any further reduction shall be pro rata among
Holders and holders of Additional Registrable Securities in the proportion of
the
<PAGE> 5
number of shares of the Company's Capital stock then owned by each, except,
however, that the Registrable Securities of the Holders requesting such demand
registration shall be the last to be excluded. For purposes of apportionment in
the immediately preceding sentence, for any Holder which is a partnership, the
partners and retired partners of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any
of the foregoing persons shall be deemed to be a single "Holder", and any pro
rata reduction with respect to such "Holder" shall be based upon the aggregate
amount of Shares and Registrable Shares carrying registration rights owned by
all entities and individuals included with such "Holder", as defined in this
sentence. The Company shall have the privilege of postponing action under this
Section 3 for a reasonable period of time (not exceeding ninety (90) days) if
the filing of such registration statement would, in the opinion of the Board of
Directors of the Company, adversely affect a material financing project or a
material proposed or pending acquisition, merger or other similar corporate
event to which the Company is or expects to be a party.
Further, at any time after the Company's consummation of an underwritten
public offering pursuant to an effective registration statement on Form S-1 (or
successor form) covering the offer and sale of its Common Stock, Holders of at
least fifteen percent (15%) of the then outstanding Registrable Shares shall
have the right to require the Company to file an unlimited number of
registration statements on Form S-3, if available, or comparable or successor
form under the Securities Act (in which case the minimum number of Registrable
Shares to be covered by any such registration statement shall be such number of
Registrable Shares having probable gross proceeds to the Holders of at least
$l,000,000, as such probable gross proceeds are determined in good faith by the
managing underwriters of the offering (or, if there is none, by the Board of
Directors of the Company)); and provided, further, that such rights to request
the Company to file registration statements on Form S-3 shall be available to
the Holders no more than ones during any consecutive twelve (12) month period.
Any registration pursuant to this Section 3 (other than registration statements
on Form S-3 and other registrations in connection with distributions by Holders
to their respective affiliates) shall be by means of a firm commitment
underwriting managed by one or more underwriters chosen by the Company and
reasonably satisfactory to the Holder exercising rights contained in this
Section 3 or if more than one such Holder is exercising such rights, reasonably
satisfactory to the Holder of the greatest number of Registrable Shares
requested to be included. Any Holder(s) intending to request a registration
pursuant to this Section 3 shall notify all other Holders in writing of such
request at least ten (10) days prior to making the request and permit each other
Holder to join such request; provided, that such other Holder(s), within five
(5) days of receipt of such notification, so indicates such other Holder's
intention in writing to the Holder (or Holders) from which such notification was
received.
4. CONDITIONS TO OBLIGATION TO REGISTER REGISTRABLE SHARES. As conditions
to the Company's obligation hereunder to cause a registration statement to be
filed or Registrable Shares to be included in a registration statement, each
selling Holder shall (a) provide such information and execute such documents as
may reasonably be required in connection with such registration, (b) have agreed
to convert that number of Shares or exercise that number of Warrants as is
necessary so that it will have available the Registrable Shares to be included
(such conversion or exercise, as the case may be, to be effective prior to or
simultaneously
<PAGE> 6
with the closing of the sale of the Registrable Shares pursuant to such
registration statement), (c) agree to sell its Registrable Shares on the basis
provided in any underwriting arrangements, and (d) on a timely basis, complete
and execute all questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up agreements and other documents required under the terms of
such underwriting arrangements, which arrangements shall not be inconsistent
herewith.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by the
provisions of this Section 5 to use its best efforts to include any of the
Registrable Shares in a registration statement filed under the Securities Act,
the Company shall, as expeditiously as possible:
5.1. Prepare and file with the Commission a registration statement
with respect to such Registrable Shares and use its best efforts to cause
such registration statement to become and remain effective.
5.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for not more than three months from the date of its
effectiveness (plus such additional time during which any Holder must cease
making offers and sales, as provided in Section 5.5) or (unless otherwise
required by the Securities Act) until the Registrable Shares covered
thereunder have been sold, whichever is earlier.
5.3. Furnish to each selling Holder such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Shares
owned by such Holder.
5.4. Use its best efforts to register or qualify the Registrable
Shares covered by such registration statement under the securities or blue
sky laws of such jurisdictions as the managing underwriter(s) shall
reasonably request, and use its best efforts to do any and all other acts
and things which may be necessary or advisable so to register or qualify
the Registrable Shares to enable such Holder to consummate the disposition
of the Registrable Shares owned by such Holder in such jurisdictions during
the period covered in Section 5.2; provided that the Company shall not be
obligated to qualify to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of the offer or
sale of the securities covered by the registration statement in any
jurisdiction where it is not then so subject.
5.5. Notify each selling Holder of any Registrable Shares covered by
such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening of
any event as a result or which the prospectus contained in such
registration statement, as then in effect, includes an
<PAGE> 7
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing. Each Holder
agrees, upon receipt of such notice, forthwith to cease making offers and
sales of the Registrable Shares pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose and to
return to the Company, for modification and exchange, the copies of such
prospectus not theretofore delivered by such Holder; provided, that the
Company shall forthwith prepare and furnish to such Holder, after securing
such approvals as may be necessary, a reasonable number of copies of any
supplement to or amendment of such prospectus that may be necessary so
that, as thereafter delivered to the purchasers of such Registrable Shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing.
5.6. Provide an institutional transfer agent for the Registrable
Shares no later than the effective date of the first registration of any of
such Registrable Shares under the Securities Act.
5.7. Immediately notify all selling Holders of any stop order or
similar proceeding initiated by state or federal regulatory bodies and use
its best efforts to take all steps necessary to expeditiously remove such
stop order or similar proceeding.
5.8. Furnish, at the request of any Holder requesting registration of
Registrable Shares pursuant to Section 3, on the date that such Registrable
Shares are delivered to the underwriters for sale in connection with a
registration pursuant to Section 3, if such securities are being sold
through underwriters, or, if such securities are not sold through
underwriters, on the date that the registration statement with respect to
such securities becomes effective: (a) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to
the Holder making such request; and (b) two letters, one dated the
effective date and one dated the closing date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and, if none, then to the Holder making such request.
6. DESCRIPTION OF EXPENSES. All expenses incurred by the Company in
complying with any of the foregoing provisions of this Agreement, including
without limitation all federal (including Securities and Exchange Commission and
National Association of Securities Dealers, Inc.) and state registration,
qualification and filing fees, printing expenses, any premium involved in
securing a policy or policies of registration insurance (but only if the Company
in its sole discretion shall choose to secure such a policy or policies, such
policy or policies to be herein referred to as "registration insurance"), fees
and disbursements of counsel for the Company, and accountants fees and expenses
(but excluding the compensation of
<PAGE> 8
regular employees of the Company which shall be paid in any event by the
Company), incident to or required by any such registration are herein called
"Registration Expenses". Registration Expenses shall also include (a) in the
case of a registration pursuant to Section 2, the reasonable fees and
disbursements of one firm selected by the Holder or Holders of a majority of the
Registrable Shares to be included, and serving as counsel to the selling Holder
or Holders and other selling shareholders, if any, with respect to such
registration and (b) in the case of a registration pursuant to Section 3 other
than on Form S-3, the reasonable fees and disbursements of one firm selected by
the Holder or Holders of a majority of the Registrable Shares to be included
requesting such registration and serving as counsel to the selling Holder or
Holders and other selling shareholders, if any, with respect to such
registration. All underwriting discounts, selling commissions and transfer taxes
applicable to the sale of the Registrable Shares hereunder are herein called
"Selling Expenses". If the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of any of the
Registrable Shares under the Securities Act, the Registration Expenses and
Selling Expenses in connection with such registration shall be borne as follows:
6.1. All Registration Expenses incurred in connection with (a) all
registrations under Section 2, (b) all registrations under Section 3
(excluding the second demand registration under Section 3 and all
registrations on Form S-3), and (c) securing registration insurance, shall
be borne by the Company, provided that the Company shall not be required to
pay any such Registration Expenses relating to a demand registration under
Section 3 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such
Registration Expenses pro rata based on the number of Registrable
Securities to have been registered) unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to as one demand
registration under Section 3.
6.2. All Registration Expenses other than those described in Section
6.1 above and all Selling Expenses shall be borne pro rata by the Holders
including shares in the registration statement in question; provided,
however that if other shares of capital stock are included in such
registration statement, such Registration Expenses shall be borne by the
Holders pro rata with all other persons (including the Company) for whose
account the securities covered by such registration statement are offered
in accordance with the amount of securities being so offered for the
account of each such party.
7. INDEMNIFICATION; UNDERWRITING AGREEMENTS. In the event that the Company
registers under the Securities Act any shares held by a Holder pursuant to the
provisions of this Agreement:
7.1. The Company agrees to indemnify and hold harmless such Holder,
and each person, if any, who controls such Holder within the meaning of the
Securities Act, against any and all losses, claims, damages, liabilities or
expenses, joint or several, arising out of or based upon any violation of
the Securities Act, the Securities Exchange Act of 1934, as amended, any
rules and regulations promulgated thereunder
<PAGE> 9
or any untrue statement or alleged untrue statement of a material fact in
any related registration statements prospectus, offering circular
notification or other document or any omission or alleged omission of any
material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon a statement in writing furnished by or on behalf of
the Holder or any other Holder for inclusion therein or an omission or
failure by any such Holder to furnish any statement with respect to such
Holder required to be included therein. Promptly after receipt by any
Holder or any person controlling such Holder of notice of the commencement
of any action in respect of which indemnity may be sought against the
Company, such Holder or such controlling person, as the case may be, will
notify the Company in writing of the commencement thereof, and, subject to
the provisions hereinafter stated, receipt of such notice and the Holder's
reasonable cooperation, the Company shall assume the defense of such action
(including the employment of counsel, who shall be counsel reasonably
satisfactory to such Holder or controlling person, as the case may be, and
the payment of expenses and such counsel's fees) insofar as such action
shall relate to any alleged liability in respect of which indemnity may be
sought against the Company. Such Holder or any such controlling person
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall not be at the expense of the Company unless the employment of
such counsel has been specifically authorized by the Company or unless the
Holder shall have in good faith reasonably concluded that there may be a
conflict of interest between the Company and the Holder in the conduct of
the defense of the action. In connection with any offering under this
Agreement which is to be underwritten, the Company further agrees to enter
into an underwriting agreement in usual and standard form respecting such
offering; provided that the terms of such underwriting agreement shall not
be inconsistent or conflict with the provisions of this Agreement.
7.2. The obligations of the Company under Section 2 and Section 3 are
subject to the following conditions, which each such Holder hereby agrees
to fulfill: (a) that each Holder whose Registrable Shares are to be
included in any registration or qualification ,referred to in this
Agreement agrees, in writing, prior to the filing of such registration or
qualification, and hereby does agree to indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning
of the securities Act and the officers and directors of the Company,
against any and all losses, claims, damages, liabilities or expenses
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact in any related registration statement,
prospectus, offering circular, notification or other document or alleged
omission of any material fact required to be stated therein or necessary to
make the statements therein not misleading, but only with reference to
statements or omissions made in reliance upon a statement in writing
furnished by or on behalf of such Holder for inclusion therein and with
reference to statements or omissions made in reliance upon an omission or
failure by such Holder to furnish any statement with respect- to such
Holder required to be included therein; provided that (i) the maximum
amount of liability in respect of such indemnification shall be limited, in
the case of each Holder whose Registrable Shares are so included, to an
amount equal to the net
<PAGE> 10
proceeds (A) actually received by such Holder from the sale of the
Registrable Shares effected pursuant to such registration or (B) which
would have been received had the sale of Registrable Shares pursuant to
such registration occurred and (ii) if such registration or qualification
relates to an offering which is to be underwritten, that such Holder enters
into an underwriting agreement in usual and standard form respecting such
offering; provided that the terms of such underwriting agreement shall not
be inconsistent or conflict with the provisions of this Agreement. Promptly
after receipt of notice of the commencement of any action in respect of
which indemnity may be sought against such Holder the Company will notify
such Holder in writing of the commencement thereof, and such Holder shall,
subject to the provisions hereinafter stated, assume the defense of such
action (including the employment of counsel, who shall be counsel
reasonably satisfactory to the Company, and the payment of expenses and
such counsel's fees) insofar as such action shall relate to the alleged
liability in respect of which indemnity may be sought against such Holder.
The Company and each such director, officer, or controlling person shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such
counsel shall not be at the expense of such Holder unless employment of
such counsel has been specifically authorized by such Holder or unless an
indemnified party shall have in good faith reasonably concluded that there
may be a conflict of interest between the indemnified party and the Holder
in the conduct of the defense of the action.
7.3. A party required to indemnify another party pursuant to this
Section 7 (an "Indemnifying Party") shall not be liable for any settlement
of any action or claim relating to such liability or expense effected
without its consent, but if any settlement is effected with its consent or
if a final judgment for the plaintiff is entered in any such action, such
Indemnifying Party agrees to indemnify and hold harmless the party so
indemnified (the "Indemnified Party") from and against any loss or
liability by reason of any such settlement or judgment. The Indemnifying
Party shall indemnify the Indemnified Party for expenses, including but not
limited to reasonable fees and disbursements of counsel, incurred by the
indemnified party in connection with the indemnification proceeding as such
expenses are incurred.
8. REGISTRATION UNDER THE SECURITIES EXCHANGE ACT. Within one hundred
twenty (120) days following the end of the fiscal year of the Company in which
it consummates its initial sale of shares pursuant to a registration statement
under the Securities Act, whether or not such sale constitutes the Initial
Public Offering (as defined in the Class C Purchase Agreement), the Company will
cause an effective registration with respect to its Common Stock to be filed and
maintained in accordance with the provisions of the Securities Exchange Act of
1934 if the same is then required.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights of the Holders
under this Agreement may be transferred to any transferee of Shares or
Registrable Shares who acquires at least five percent (5%) in the aggregate of
the Shares of such Holder or an equivalent amount of Registrable Shares issued
upon conversion thereof. Each such transferee shall be deemed to be Holder of
Registrable Shares for purposes of this Agreement.
<PAGE> 11
10. MERGERS, ETC. The Company shall not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation or reorganization agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Shares" shall be deemed to be references to the
securities which such Holders would be entitled to receive in exchange for
Registrable Shares under any such merger, consolidation or reorganization and
other securities to which they subsequently give rise; provided, that this
Section 10 shall not apply if the Holders shall receive, pursuant to such
merger, consolidation or reorganization, in exchange for the Registrable Shares,
(a) registered securities listed on the New York Stock Exchange or the American
Stock Exchange, or with respect to which prices are reported by the National
Association of Securities Dealers Automated Quotation System, Inc. or (b)
registration and related rights on terms no less favorable to the Holders than
those contained in this Agreement and no less favorable to the Holders than any
other shareholder of the Company receives in connection with such merger,
consolidation or reorganization.
11. LIMITATIONS ON REGISTRATION RIGHTS GRANTED WITH RESPECT TO OTHER
SECURITIES. From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of at least a majority of the
Registrable Shares, enter into any agreement with any holder or prospective
holder of any securities of the Company giving such holder or prospective holder
the right to require the Company to initiate any registration of any securities
of the Company or the right to require the Company, upon any registration of any
of its securities, to include, among the securities which the Company is then
registering, securities owned by such holder, except for such rights (including
required registration rights similar to those contained in Section 3 hereof)
which are no more favorable to the holders thereof than the rights of the
Holders contained in this Agreement. Any right given by the Company to any
holder or prospective holder of the Company's securities in connection with the
registration of securities shall be conditioned such that it shall be consistent
with the provisions of this Agreement and with the rights of the Holders
provided in this Agreement.
12. MARKET STAND-OFF. Each Holder agrees, if requested by the Company
and/or the representative of the underwriters underwriting an offering of the
Common Stock (or other securities) of the Company, not to sell or otherwise
transfer or dispose of any Registrable Shares held by such Holder during the one
hundred eighty (180) day period following the effective date of a registration
statement of the Company filed under the Securities Act, provided, that (i) the
directors and officers of the Company, and (ii) all Other Holders and holders of
Additional Registrable Securities that are participating as selling holders in
the underwriting, enter into similar agreements. Such agreement shall be in
writing in a form satisfactory to the Company and such representative. The
Company may impose stop-transfer instructions with respect to the shares (or
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
13. TERMINATION OF REGISTRATION RIGHTS. The registration rights granted to
the Holders pursuant to this Agreement shall terminate as to any Holder at such
time as such Holder may sell all Registrable Securities held by or as issuable
to such Holder under Rule
<PAGE> 12
144 (other than Rule 144(k), or any successor to Rule 144, in any two successive
three-month periods.
14. TERMINATION OF REGISTRATION RIGHTS PROVISIONS OF CLASS STOCK PURCHASE
AGREEMENTS. The holders of the Class B Preferred Stock listed on the signature
pages hereof, by executing this Agreement in their capacity as holders of Class
B Preferred Stock, do hereby vote as a class to terminate Section 8 of the 1992
Class B Agreement and Section 9 of the 1993 Class B Agreement (insofar as such
latter Section 8 relates to registration rights), both of which sections shall
be of no further force and effect, and do hereby consent and agree that this
Agreement amends and restates the registration rights of the holders of the
Class B Preferred Stock previously set forth in the Class B Purchase Agreements,
and do hereby vote and consent to make all holders of Class B Preferred Stock,
as a class, party to this Agreement and bound hereby.
15. EFFECTIVENESS OF WARBURG REGISTRATION RIGHTS. The registration rights
granted to Warburg pursuant to paragraph five of the Stock Purchase Agreement
dated July, 1988 between the Company and Warburg (the "1988 Agreements") shall
remain in full force and effect, provided that the provisions of this Agreement
shall govern all Registrable Shares (as defined herein) of Warburg, and provided
further that the "Market Stand-off" provisions of paragraph 5.9 of the 1988
Agreement shall be amended to restate the ninety day standstill period to one
hundred eighty (180) days.
16. MISCELLANEOUS.
16.1. ENTIRE AGREEMENT; SUCCESSORS. This Agreement sets forth the
entire understanding of the parties with respect to the subject matter
hereof and supersedes all prior oral or written agreements and commitments
of the parties relating thereto except as otherwise set forth in Section 15
hereof. All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto subject to any restrictions on
assignment stated herein.
16.2. NOTICES. Except as otherwise specifically provided herein, all
notices, requests, demands, and other communications hereunder shall be in
writing and shall be personally delivered or given by prepaid
nationally-recognized overnight courier service or by prepaid certified or
registered mail, return receipt requested, or by prepaid telegram,
addressed as follows:
(a) if to the Holders:
To the Purchasers shown on Schedule A and to the address of
the holders of the Class B Preferred Stock on record with
the Company
with a copy to:
<PAGE> 13
Hale and Dorr
60 State Street
Boston, MA 02109
Attention: John Burgess, Esq.
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
Attention: Chief Executive Officer
with a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, MA 02110
Attention: Leslie H. Shapiro, Esq.
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt (ii) five (5)
business days after deposit in the U.S. mails or delivery to a
nationally-recognized courier service in accordance with this Section.
16.3. AMENDMENTS; WAIVERS. Changes in or additions to this Agreement
may be made by written document executed by the Company and the holders of
at least fifty-one percent in the aggregate number of shares of Common
Stock issued or issuable upon conversion of the Shares. The holders of
fifty-one percent (51%) in the aggregate of the Shares then held by Holders
may, by written instrument, waive compliance by the Company with any of the
provisions of this Agreement. Notwithstanding the foregoing, no course of
dealing or delay on the part of the Holders in exercising any right shall
operate as a waiver thereof or otherwise prejudice the rights of the
Holders.
16.4. GOVERNING LAW. This Agreement shall be construed and enforced as
a contract under seal in accordance with, and the rights of the parties
hereunder shall be governed by, the internal laws of the Commonwealth of
Massachusetts.
16.5. MISCELLANEOUS. This Agreement may be executed in two or more
counterparts, each of which together shall constitute one and the same
document. The headings herein are for convenience of reference only and
shall not affect the construction of this Agreement. The invalidity or
unenforceability of any provision hereof shall not affect the validity or
unenforceability of any other provision.
SIGNED, SEALED AND DELIVERED, as of the date first written above by the
parties hereto.
<PAGE> 14
COMPANY:
-------
TRANSTARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
--------------------------------
Title: President and CEO
-------------------------
PURCHASERS:
----------
WARBURG PINCUS CAPITAL COMPANY,
L.P.
(312,500 units)
By: Warburg Pincus & Co.,
General Partner
By: /s/ R. W. Moorhead
---------------------------------
Title: Managing Director
-------------------------
TKT PARTNERS LIMITED PARTNERSHIP
(62,500 units)
By: Medical Portfolio Management, Inc.,
as General Partner
By: /s/ P.T. Henney
---------------------------------
Title: Executive Vice President
-------------------------
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni, Ph.D.
(12,500 units)
H&Q HEALTHCARE INVESTORS**
(12,500 units)
By: /s/ Kimberley L. Carroll
---------------------------------
Title: Treasurer
-------------------------
<PAGE> 15
**LIMITATION OF LIABILITY. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&Q Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
H&Q LIFE SCIENCES INVESTORS***
(6,250 units)
By: /s/ Kimberley L. Carroll
---------------------------------
Title: Treasurer
-------------------------
***LIMITATION OF LIABILITY. The name H&Q Life Sciences Investors is the
designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as amended. All persons dealing with H&Q Life Sciences
Investors must look solely to the trust property for the enforcement of any
claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor
shareholders assume any personal liability for obligations entered into on
behalf of H&Q Life Sciences Investors.
HUGO de NEUFVILLE & JOHN P.
de NEUFVILLE, TTEES, UAD 7/01/92, HUGO
de NEUFVILLE REVOCABLE TRUST
(6,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
MARGARET W. de NEUFVILLE & JOHN P.
de NEUFVILLE, TTEES, UAD 7/1/92,
MARGARET W. de NEUFVILLE REVOCABLE
TRUST
(6,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
<PAGE> 16
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO CAROL
de NEUFVILLE
(3,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, UA DTD 12/23/76, FBO DAVID T.
de NEUFVILLE
(6,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, UAD 12/23/76, FBO JOHN
HOWARD de NEUFVILLE
(3,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TRUSTEES, U/A DATED 12/23/76, FBO
JOHN P. de NEUFVILLE
(6,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
<PAGE> 17
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO PETER BAYON
de NEUFVILLE
(3,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 4/13/70, FBO SUSAN
de NEUFVILLE
(3,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
JOHN P. de NEUFVILLE & MELY RAHN,
TTEES, UAD 12/2/70, FBO THOMAS PIKE
de NEUFVILLE
(3,500 units)
By: /s/ John P. de Neufville
---------------------------------
Title: Trustee
-------------------------
--------------------------------------
John W. Jackson (3,000 units)
TAB PRODUCTS CO. PENSION PLAN
(4,500 units)
By: *
---------------------------------
<PAGE> 18
TEMPLE INLAND MASTER TRUST
(25,000 units)
By: *
---------------------------------
*By: BEA ASSOCIATES,
Attorney-in-Fact
By: /s/ Albert L. Zesiger
-----------------------------
Title: Managing Director
-------------------------
ARTHUR D. LITTLE EMPLOYEE
INVESTMENT PLAN
(22,000 units)
By: #
---------------------------------
#By: BEA ASSOCIATES,
as Investment Advisor
By: /s/ Albert L. Zesiger
-----------------------------
Title: Managing Director
-------------------------
<PAGE> 19
CLASS B PREFERRED STOCKHOLDERS:
------------------------------
WARBURG PINCUS CAPITAL COMPANY,
L.P.
(21,359 shares)
By: Warburg Pincus & Co.,
General Partner
By: /s/ R. W. Moorhead
---------------------------------
Title: Managing Director
-------------------------
H&Q HEALTHCARE INVESTORS**
(3,268 units)
By: /s/ Kimberley L. Carroll
---------------------------------
Title: Treasurer
-------------------------
**LIMITATION OF LIABILITY. The name H&Q Healthcare Investors is the
designation of the Trustees for the time being under an Amended and Restated
Declaration of Trust dated April 21, 1987, as amended. All persons dealing with
H&Q Healthcare Investors must look solely to the trust property for the
enforcement of any claim against H&Q Healthcare Investors, as neither the
Trustees, officers nor shareholders assume any personal liability for
obligations entered into on behalf of H&Q Healthcare Investors.
H&Q LIFE SCIENCES INVESTORS***
(1,500 units)
By: /s/ Kimberley L. Carroll
---------------------------------
Title: Treasurer
-------------------------
***LIMITATION OF LIABILITY. The name H&Q Life Sciences Investors is the
designation of the Trustees for the time being under a Declaration of Trust
dated February 20, 1992, as amended. All persons dealing with H&Q Life Sciences
Investors must look solely to the trust property for the enforcement of any
claim against H&Q Life Sciences Investors, as neither the Trustees, officers nor
shareholders assume any personal liability for obligations entered into on
behalf of H&Q Life Sciences Investors.
/s/ Alejandro Zaffaroni
--------------------------------------
Alejandro Zaffaroni, Ph.D. (688 shares)
<PAGE> 20
Amendment to Registration Rights Agreement
This Amendment to the Registration Rights Agreement dated as of November 3,
1993 by and among Transkaryotic Therapies, Inc., a Delaware corporation (the
"Company"), and the Purchasers listed on Schedule A thereto, as amended by the
Consent and Amendment dated as of November 18, 1993 (the "Registration Rights
Agreement") is dated as of May 18, 1994 (the "Amendment") by and among the
Company, Marion Merrell Dow Inc., a Delaware corporation ("MMD"), and the
holders (the "Holders") of at least 51% of the Registrable Shares, as such term
is defined in the Registration Rights Agreement.
WHEREAS, pursuant to the Registration Rights Agreement, the Company has
granted certain registration rights to the Holders (the "Registration Rights");
and
WHEREAS, in connection with the purchase of shares of the Company's Class D
Preferred Stock, $1.00 par value per share (the "Class D Preferred Stock") by
MMD, the Company and the Holders desire to amend the Registration Rights
Agreement to include the Class D Preferred Stock purchased by MMD as Registrable
Shares under the Registration Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement is hereby amended as follows:
1.1 The term "Registrable Shares", as defined in Section 1(b) of the
Registration Rights Agreement, is hereby amended to include (i) any shares of
Common Stock, $.01 par value per share, of the Company issued or issuable upon
any Conversion of the Class D Preferred Stock, (ii) any shares of Common Stock
issuable to the holder of Class D Preferred Stock pursuant to any preemptive
rights of the holder of such Class D Preferred Stock (unless such shares are
subject to an agreement with the Company granting registration rights to the
holder thereof on terms no less favorable to Holders (as defined in the
Registration Rights Agreement) than those contained in the Registration Rights
Agreement and (iii) any other shares of Common Stock issued with respect to the
shares enumerated in clauses (i) and (ii) above by reason of stock dividends,
stock splits, recapitalizations, reorganization, or similar corporate action.
1.2 Section 1(c) of the Registration Rights Agreement, is hereby deleted in
its entirety and the following is substituted therefor:
(c) "HOLDERS" shall mean Marion Merrell Dow Inc. and any Purchaser
(each, in its capacity as holder of any Shares or Registrable Shares and
for so long as it holds such Shares or Registrable Shares), and such of its
respective successors and assigns who acquire Shares or Registrable Shares
from Holders in accordance with the terms of this Agreement and who agree
in writing with the Company to acquire and hold the Shares or Registrable
Shares subject to all the restrictions hereof but in no
<PAGE> 21
event shall "HOLDERS" include any transferee of Regitrable Shares pursuant
to sales made under a registration statement filed under the Securities
Act.
1.3 Except as expressly amended hereby, the Registration Rights Agreement
shall remain in full force and effect.
2 MISCELLANEOUS.
2.1 NOTICES. Except as otherwise specifically provided herein, all notices,
requests, demands, and other communications hereunder shall be delivered
personally or by facsimile (and promptly confirmed by telephone, personal
delivery or courier) or given by prepaid nationally-recognized overnight courier
service or by prepaid certified or registered mail, return receipt requested, or
by prepaid telegram, addressed as follows:
(a) if to MMD:
Marion Merrell Dow Inc.
9300 Ward Parkway, P.O. Box 8480
Kansas City, Missouri 64114-0480
Attention: General Counsel
Telephone: (816) 966-4000
Telecopy: (816) 966-3805
with copies to:
Shook, Hardy & Bacon P.C.
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attention: Randall B. Sunberg, Esq.
Telephone: (816) 474-6550
Telecopy: (816) 421-5547
(b) if to the Company:
Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, Massachusetts 02139
Attention: Chief Executive Officer
Telephone: (617) 349-0200
Telecopy: (617)
- 2 -
<PAGE> 22
with a copy to:
Palmer & Dodge
One Beacon Street
Boston, Massachusetts 02108
Attention: Peter Wirth, Esq.
Telephone: (617) 573-0100
Telecopy: (617) 227-4420
(c) if to the Holders:
at the addresses indicated in the Registration Rights Agreement
or to such other address as shall have been designated in writing by any party
pursuant hereto. All notices, requests, demands and other communications
hereunder shall be effective on the earlier of (i) actual receipt, with
telephonic confirmation in the case of a facsimile, and (ii) three (3) business
days after deposit in the U.S. mails or delivery to a nationally-recognized
overnight courier service in accordance with this Section.
2.2 GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
2.3 HEADINGS. The headings contained in this Amendment are for reference
purposes only and shall not affect the meaning, interpretation, enforceability
or validity of this Amendment.
2.4 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 3 -
<PAGE> 23
IN WITNESS WHEREOF, the Company, the Holders and MMD have each caused this
Amendment to Registration Rights Agreement to be executed by their duly
authorized officers as of the date first written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ K. Michael Forrest
----------------------------------
By:
Its: President and CEO
MARION MERRELL DOW INC.
/s/ Terry J. Shelton
----------------------------------
By:
Its: V.P., Licensing and Business
Development
HOLDERS
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
-------------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS
By: /s/ Kimberley L. Carroll
-------------------------------
Title: Treasurer
- 4 -
<PAGE> 24
H&Q LIFE SCIENCES INVESTORS
By: /s/ Kimberley L. Carroll
-------------------------------
Title: Treasurer
TAB PRODUCTS CO. PENSION PLAN
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
-------------------------------
Title: Managing Director
TEMPLE INLAND MASTER TRUST
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
-------------------------------
Title: Managing Director
ARTHUR D. LITTLE EMPLOYEE
INVESTMENT PLAN
By: BEA Associates, as Investment Advisor
By: /s/ Albert L. Zesiger
-------------------------------
Title: Managing Director
- 5 -
<PAGE> 25
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ Ansbert Gadicke
-------------------------------
Title: Managing Director
- 6 -
<PAGE> 26
Second Amendment to Registration Rights Agreement
This Second Amendment to the Registration Rights Agreement dated as of
November 3, 1993 by and among Transkaryotic Therapies, Inc., a Delaware
corporation (the "Company"), and the Purchasers listed on Schedule A thereto, as
amended by the Consent and Amendment dated as of November 18, 1993 and as
further amended by the Amendment to Registration Rights Agreement dated as of
May 18, 1994 (the "Registration Rights Agreement"), is dated as of March 1, 1995
(the "Second Amendment") by and among the Company and the holders (the
"Holders") of at least 51% of the Registrable Shares, as such term is defined in
the Registration Rights Agreement.
WHEREAS, pursuant to the Registration Rights Agreement, the Company has
granted certain registration rights to the Holders (the "Registration Rights");
and
WHEREAS, in connection with the purchase of shares of the Company's Class E
Preferred Stock, $1.00 par value per share (the "Class E Preferred Stock") by
Marion Merrell Dow Inc. ("MMD") the Company and the Holders desire to amend the
Registration Rights Agreement to include the Class E Preferred Stock purchased
by MMD as Registrable Shares under the Registration Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement is hereby amended as follows:
1.1 Section 1(a) of the Registration Rights Agreement shall be deleted in
its entirety, and the following shall be substituted therefor:
"SHARES" shall mean the shares of Class B Preferred Stock purchased
pursuant to the Class B Purchase Agreement, the shares of Class C Preferred
Stock purchased pursuant to the Class C Purchase Agreement, the shares of Class
D Preferred Stock purchased pursuant to the Class D Purchase Agreement and the
shares of Class E Preferred Stock purchased pursuant to the Class E Preferred
Stock Purchase Agreement, collectively.
1.2 The term "Registrable Shares", as defined in Section 1(b) of the
Registration Rights Agreement, is hereby amended to include (i) any shares of
Common Stock, $.01 par value per share, of the Company issued or issuable upon
any Conversion of the Class E Preferred Stock, (ii) any shares of Common Stock
issuable to the holder of Class E Preferred Stock pursuant to any preemptive
rights of the holder of such Class E Preferred Stock (unless such shares are
subject to an agreement with the Company granting registration rights to the
holder thereof on terms no less favorable to the Holders (as defined in the
Registration Rights Agreement) than those contained in the Registration Rights
Agreement) and (iii) any other shares of Common Stock issued with respect to the
shares enumerated in clauses (i) and (ii) above by reason of stock dividends,
stock splits, recapitalizations, reorganization, or similar corporate action.
- 1 -
<PAGE> 27
1.3 Except as expressly amended hereby, the Registration Rights Agreement
shall remain in full force and effect.
2 MISCELLANEOUS.
2.1 GOVERNING LAW. This Second Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
2.2 HEADINGS. The headings contained in this Second Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Second Amendment.
2.3 COUNTERPARTS. This Second Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 2 -
<PAGE> 28
IN WITNESS WHEREOF, the Company and the Holders have each caused this
Second Amendment to Registration Rights Agreement to be executed by their duly
authorized officers as of the date first written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden
------------------------------------
By:
Its: President and CEO
HOLDERS
MARION MERRELL DOW INC.
/s/ Terry J. Shelton
------------------------------------
By:
Its: V.P.
WARBURG PINCUS CAPITAL COMPANY, LP
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
---------------------------------
Title: Managing Director
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
---------------------------------
Title: President
- 3 -
<PAGE> 29
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan Carr
---------------------------------
Title: President
TAB PRODUCTS CO. PENSION PLAN
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
---------------------------------
Title: Managing Director
TEMPLE INLAND MASTER TRUST
By: BEA Associates, Attorney-in-Fact
By: /s/ Albert L. Zesiger
---------------------------------
Title: Managing Director
ARTHUR D. LITTLE EMPLOYEE
INVESTMENT PLAN
By: BEA Associates, as Investment Advisor
By: /s/ Albert L. Zesiger
---------------------------------
Title: Managing Director
- 4 -
<PAGE> 30
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ A.S. Gadicke
---------------------------------
Title: President
- 5 -
<PAGE> 31
Third Amendment to Registration Rights Agreement
This Third Amendment to the Registration Rights Agreement dated as of
November 3, 1993 by and among Transkaryotic Therapies, Inc., a Delaware
corporation (the "COMPANY"), and the Purchasers listed on Schedule A thereto, as
amended by the Consent and Amendment dated as of November 18, 1993 and as
further amended by the Amendment to Registration Rights Agreement dated as of
May 18, 1994 and the Second Amendment to the Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT"), is dated as of October 26, 1995 (the "THIRD
AMENDMENT") by and among the Company and the holders (the "HOLDERS") of at least
51% of the Registrable Shares, as such term is defined in the Registration
Rights Agreement.
WHEREAS, pursuant to the Registration Rights Agreement, the Company has
granted certain registration rights to the Holders (the "REGISTRATION RIGHTS");
and
WHEREAS, in connection with the purchase of shares of the Company's Class F
Preferred Stock, $1.00 par value per share (the "CLASS F PREFERRED STOCK") by
the Purchasers (the "PURCHASERS") listed on SCHEDULE A thereto, the Company and
the Holders desire to amend the Registration Rights Agreement to include the
Class F Preferred Stock purchased by the Purchasers as Registrable Shares under
the Registration Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement is hereby amended as follows:
1.1 Section 1(a) of the Registration Rights Agreement shall be deleted in
its entirety, and the following shall be substituted therefor:
"SHARES" shall mean the shares of Class B Preferred Stock purchased
pursuant to the Class B Purchase Agreement, the shares of Class C Preferred
Stock purchased pursuant to the Class C Purchase Agreement, the shares of Class
D Preferred Stock purchased pursuant to the Class D Purchase Agreement, the
shares of Class E Preferred Stock purchased pursuant to the Class E Preferred
Stock Purchase Agreement and the shares of Class F Preferred Stock purchased
pursuant to the Class F Preferred Stock Purchase Agreement, collectively.
1.2 The term "REGISTRABLE SHARES", as defined in Section 1(b) of the
Registration Rights Agreement, is hereby amended to include (i) any shares of
Common Stock, $.01 par value per share, of the Company issued or issuable upon
any Conversion of the Class F Preferred Stock, (ii) any shares of Common Stock
issuable to the holder of Class F Preferred Stock pursuant to any preemptive
rights of the holder of such Class F Preferred Stock (unless such shares are
subject to an agreement with the Company granting registration rights to the
holder thereof on terms no less favorable to the Holders (as defined in the
Registration Rights Agreement) than those contained in the Registration Rights
Agreement) and (iii) any other shares of Common Stock issued with respect to the
shares enumerated in clauses (i) and (ii) above by reason of stock dividends,
stock splits, recapitalizations, reorganization, or similar corporate action.
<PAGE> 32
1.3 Except as expressly amended hereby, the Registration Rights Agreement
shall remain in full force and effect.
2 MISCELLANEOUS.
2.1 GOVERNING LAW. This Third Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
2.2 HEADINGS. The headings contained in this Third Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Third Amendment.
2.3 COUNTERPARTS. This Third Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 2 -
<PAGE> 33
IN WITNESS WHEREOF, the Company, the Holders and the Purchasers have each
caused this Third Amendment to Registration Rights Agreement to be executed by
their duly authorized officers as of the date first written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden
----------------------------------
By:
Its: President and CEO
HOLDERS
HOECHST MARION ROUSSEL, INC.
/s/ Terry J. Shelton
----------------------------------
By:
Its: V.P.
WARBURG PINCUS CAPITAL COMPANY, LP
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
-------------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
-------------------------------
Title: President
- 3 -
<PAGE> 34
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan Carr
-------------------------------
Title: President
TAB PRODUCTS CO. PENSION PLAN
By: BEA Associates, Attorney-in-Fact
By: /s/ Michael E. Guarasici
-------------------------------
Title: V.P. Finance
TEMPLE INLAND MASTER TRUST
By: BEA Associates, Attorney-in-Fact
By: /s/ Michael E. Guarasici
-------------------------------
Title: V.P. Finance
ARTHUR D. LITTLE EMPLOYEE
INVESTMENT PLAN
By: Zesiger Capital Group, Attorney-in-Fact
By: /s/ Mary Estabil
-------------------------------
Title: Private Placement Administrator
- 4 -
<PAGE> 35
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc., as
General Partner
By: /s/ A.S. Gadicke
-------------------------------
Title: President
AUDA SECURITIES GmbH
By: /s/ Marcel Giacommetti
-------------------------------
Title:
----------------------------
/s/ F. Burda /s/ M. Bacher
----------------------------------
Franz Burda
Frieder Burda
HANSEATIC CORPORATION
By: /s/ Paul Biddleman
-------------------------------
Title: Treasurer
/s/ J. Frances /s/ D. Rush
----------------------------------
Oppenheim Vermogenstreuhand GmbH
/s/ Klaus Neugebauer
----------------------------------
Dr. Klaus Neugebauer
- 5 -
<PAGE> 36
Fourth Amendment to Registration Rights Agreement
This Fourth Amendment to the Registration Rights Agreement dated as of
November 3, 1993 by and among Transkaryotic Therapies, Inc., a Delaware
corporation (the "COMPANY"), and the Purchasers listed on Schedule A thereto, as
amended by the Consent and Amendment dated as of November 18, 1993, as amended
by the Amendment to Registration Rights Agreement dated as of May 18, 1994, as
amended by the Second Amendment to the Registration Rights Agreement dated March
1, 1995 as further amended by the Third Amendment to the Registration Rights
Agreement dated as of October 26, 1995 (the "REGISTRATION RIGHTS AGREEMENT"), is
dated as of July ___, 1996 (the "FOURTH AMENDMENT") by and among the Company and
the holders (the "HOLDERS") of at least 51% of the Registrable Shares, as such
term is defined in the Registration Rights Agreement.
WHEREAS, pursuant to the Registration Rights Agreement, the Company has
granted certain registration rights to the Holders (the "REGISTRATION RIGHTS");
and
WHEREAS, in connection with the purchase of shares of the Company's Class G
Preferred Stock, $1.00 par value per share (the "CLASS G PREFERRED STOCK") by
the Purchasers (the "PURCHASERS") listed on SCHEDULE A thereto, the Company and
the Holders desire to amend the Registration Rights Agreement to include the
Class G Preferred Stock purchased by the Purchasers as Registrable Shares under
the Registration Rights Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows.
1 AMENDMENT OF REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement is hereby amended as follows:
1.1 Section 1(a) of the Registration Rights Agreement shall be deleted in
its entirety, and the following shall be substituted therefor:
"SHARES" shall mean the shares of Class B Preferred Stock purchased
pursuant to the Class B Purchase Agreement, the shares of Class C Preferred
Stock purchased pursuant to the Class C Purchase Agreement, the shares of Class
D Preferred Stock purchased pursuant to the Class D Purchase Agreement, the
shares of Class E Preferred Stock purchased pursuant to the Class E Preferred
Stock Purchase Agreement, the shares of Class F Preferred Stock purchased
pursuant to the Class F Preferred Stock Purchase Agreement and the shares of
Class G Preferred Stock purchased pursuant to the Class G Preferred Stock
Purchase Agreement, collectively.
1.2 The term "REGISTRABLE SHARES", as defined in Section 1(b) of the
Registration Rights Agreement, is hereby amended to include (i) any shares of
Common Stock, $.01 par value per share, of the Company issued or issuable upon
any Conversion of the Class G Preferred Stock, (ii) any shares of Common Stock
issuable to the holder of Class G Preferred Stock pursuant to any preemptive
rights of the holder of such Class G Preferred Stock (unless such shares are
subject to an agreement with the Company granting registration rights to the
holder thereof on terms no less favorable to the Holders (as defined in the
Registration Rights Agreement) than those contained in the Registration Rights
Agreement) and (iii) any other shares of Common Stock issued with respect to the
shares enumerated in clauses (i) and (ii)
- 1 -
<PAGE> 37
above by reason of stock dividends, stock splits, recapitalizations,
reorganization, or similar corporate action.
1.3 Except as expressly amended hereby, the Registration Rights Agreement
shall remain in full force and effect.
2 MISCELLANEOUS.
2.1 GOVERNING LAW. This Fourth Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
2.2 HEADINGS. The headings contained in this Fourth Amendment are for
reference purposes only and shall not affect the meaning, interpretation,
enforceability or validity of this Fourth Amendment.
2.3 COUNTERPARTS. This Fourth Amendment may be executed in any number of
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same document.
[Remainder of page intentionally left blank]
- 2 -
<PAGE> 38
IN WITNESS WHEREOF, the Company, the Holders and the Purchasers have each
caused this Fourth Amendment to Registration Rights Agreement to be executed by
their duly authorized officers as of the date first written above.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden
------------------------------------
By:
Title: President and CEO
HOLDERS
HOECHST MARION ROUSSEL, INC.
/s/ Charles W. Dalton
------------------------------------
By:
Title: V.P.
WARBURG PINCUS CAPITAL COMPANY, L.P.
By: Warburg Pincus & Co., General Partner
By: /s/ James E. Thomas
--------------------------------
Title: Partner
H&Q HEALTHCARE INVESTORS
By: /s/ Alan Carr
--------------------------------
Title: President
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan Carr
--------------------------------
Title: President
- 3 -
<PAGE> 39
H&Q VENTURE INVESTORS
By:
---------------------------------
Title:
------------------------------
KTK PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc. as
General Partner
By: /s/ Elline Hildebrandt
--------------------------------
Title: Vice President
PURCHASERS:
BIOTECH TARGET, S.A.
By: /s/ Hans Jorge Graf
--------------------------------
Title:
------------------------------
By: /s/ Andreas Bremer
--------------------------------
Title:
------------------------------
- 4 -
<PAGE> 1
EXHIBIT 10.12
LEASE BETWEEN BENJAMIN L. WILSON JR., T/U/W/ EDWARD S. STIMPSON,
T/U/W HARRY F. STIMPSON AND HARRY F. STIMPSON, JR.
AS LANDLORD AND TRANSKARYOTIC THERAPIES, INC. AS TENANT
TABLE OF CONTENTS
<TABLE>
ARTICLE I
Reference Data
<S> <C>
1.1 Subjects Referred To ...................................................... 4
1.2 Exhibits .................................................................. 6
ARTICLE II
Premises and Term
2.2 Premises .................................................................. 6
2.2.1 Parking ............................................................. 7
2.2.2 Common Areas ........................................................ 7
2.2.3 Landlord's Reservations ............................................. 8
2.3 Term ...................................................................... 8
2.4 Option to Extend .......................................................... 8
2.5 Right to Negotiate Purchase of Premises and Adjacent Building ............. 8
2.6 Right to Negotiate Lease .................................................. 10
ARTICLE III
Rent
3.1 Annual Fixed Rent ......................................................... 10
3.2 Adjustments to Annual Fixed Rent .......................................... 11
3.2.1 Adjustment to Annual Fixed Rent For Extension Term .................. 11
3.2.2 Adjustment to Annual Fixed Rent Based Upon Consumer Price Index ..... 12
3.3 Additional Rent ........................................................... 13
3.4 Real Estate Taxes ......................................................... 13
3.4.1 Building ............................................................ 13
3.4.2 Parking Lot ......................................................... 14
3.5 Betterment Assessments .................................................... 14
3.5.1 Premises ............................................................ 14
3.5.2 Parking Lot ......................................................... 14
3.6 Tax Fund Payments ......................................................... 15
3.7 Insurance ................................................................. 15
3.8 Utilities and Services .................................................... 15
3.9 Additional Expenses ....................................................... 15
3.10 Late Charge ............................................................... 16
3.11 Net Lease ................................................................. 16
3.12 No Offsets ................................................................ 16
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE IV
MAINTENANCE AND REPAIR, ALTERATIONS; SURRENDER; HOLDING OVER
4.1 Tenant's Maintenance and Repair ........................................... 16
4.2 Landlord's Maintenance and Repair ......................................... 17
4.3 Alterations ............................................................... 17
4.4 Alterations Requirements .................................................. 18
4.5 Entry by Landlord ......................................................... 18
4.6 Surrender ................................................................. 19
4.7 Holding Over .............................................................. 19
ARTICLE V
ADDITIONAL TENANT COVENANTS
5.1 Payment and Performance ................................................... 19
5.2 Use ....................................................................... 20
5.3 Compliance with Law ....................................................... 20
5.4 Personal Property Taxes ................................................... 20
5.5 Assignment and Subletting ................................................. 20
ARTICLE VI
INDEMNITY AND INSURANCE
6.1 Indemnity ................................................................. 22
6.2 Tenant's Insurance ........................................................ 23
6.3 Tenant's Risk ............................................................. 25
6.4 Subrogation ............................................................... 25
ARTICLE VII
CASUALTY AND EMINENT DOMAIN
7.1 Casualty During Term ...................................................... 25
7.2 Condemnation .............................................................. 26
7.3 Abatement of Rent ......................................................... 26
7.4 Condemnation Award ........................................................ 27
ARTICLE VIII
DEFAULT
8.1 Tenant's Default .......................................................... 28
8.2 Damages ................................................................... 28
8.3 Remedies Cumulative ....................................................... 28
8.4 Landlord's Election ....................................................... 28
8.5 Effect of Waivers of Default .............................................. 28
8.6 No Waiver ................................................................. 28
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
8.7 No Accord and Satisfaction ................................................ 28
8.8 Delivery of Keys .......................................................... 28
8.9 Attorneys' Fees ........................................................... 28
ARTICLE IX
MORTGAGEES' AND GROUND LESSORS' RIGHTS
9.1 Superiority of Lease ...................................................... 28
9.2 Subordination ............................................................. 29
9.3 Limitation on Tenant's Rights ............................................. 29
9.4 Exercise of Mortgagee's Remedies .......................................... 29
9.5 Further Assurances ........................................................ 29
9.6 No Prepaid Rent ........................................................... 29
ARTICLE X
MISCELLANEOUS
10.1 Estoppel Certificates ..................................................... 29
10.2 No Recordation ............................................................ 29
10.3 Notices ................................................................... 29
10.4 Successors and Assigns .................................................... 29
10.5 Limitation of Liability ................................................... 29
10.6 Covenants and Conditions .................................................. 29
10.7 Severability .............................................................. 29
10.8 Quiet Enjoyment ........................................................... 29
10.9 Entire Agreement .......................................................... 29
10.10 Brokers ................................................................... 29
10.11 Applicable Law and Construction ........................................... 29
10.12 Time of Essence ........................................................... 29
10.13 Authorization ............................................................. 29
10.14 Security Deposit .......................................................... 29
</TABLE>
<PAGE> 4
THIS LEASE is made and entered into as of the 28th day of November,
1993 by and between Benjamin L. Wilson, Jr.; Margaret W. Stimpson, Edward S.
Stimpson, III, Harry F. Stimpson, III, and Nicholas U. Sommerfeld, trustees
under the will of Edward S. Stimpson; Harry F. Stimpson, III, trustee under the
will of Harry F. Stimpson; and Harry F. Stimpson, Jr.; as tenants in common
(collectively, the "Landlord"), and TRANSKARYOTIC THERAPIES, INC., a Delaware
corporation ("Tenant").
In consideration of the mutual covenants herein set forth, Landlord and
Tenant do hereby agree to the terms and conditions set forth in this Lease.
ARTICLE I
Reference Data
1.1 Subjects Referred To. Each reference in this Lease to any of the
following shall be construed to incorporate the following data:
Annual Fixed Rent: $1,028,000.00, as that amount may
be increased pursuant to the terms
of this Lease, which amount
reflects the sum of (i) $8.25 per
square foot of Premises located on
the second floor of the Building
and (ii) $28.00 per square foot of
Premises located on the first floor
and lower level of the Building.
Building: The building known as and
numbered 195 Albany Street,
Cambridge, Massachusetts
Common Area: See Section 2.1.2
Extension Term: Two (2) periods of five (5) years
each as provided in Section 2.3.
External Causes: See Section 7.1
Initial Public Liability Insurance Limits:
Bodily Injury: $1,000,000
Property Damage: $1,000,000
Umbrella Coverage: $5,000,000
<PAGE> 5
Land: A parcel of land located
at 195 Albany Street,
Cambridge, Massachusetts,
as more particularly
described on Exhibit A
attached hereto
Landlord's Address: c/o Meredith & Grew, Incorporated
160 Federal Street
Boston, MA 02110-1701
Lease Commencement Date: January 1, 1994
Lease Year: Any period of one year during
the Term commencing on the
Lease Commencement Date or on
any anniversary thereof.
Original Term: Five (5) years starting on the
Lease Commencement Date and
expiring on December 31, 1998,
unless extended pursuant to Section
2.3.
Permitted Uses: See Section 5.2
Premises: 1.1.1 16,000 square feet on
the second floor of the
Building (the "Second Floor");
1.1.2 16,000 square feet on
each of the first floor (the
"First Floor") and lower level
("Lower Level") of the
Building (total of 32,000
square feet on the First Floor
and Lower Level);
1.1.3 64 parking spaces in the
parking, lot located at the
corner of Albany and Pacific
Streets, Cambridge,
Massachusetts; and
1.1.4 Access to and the
periodic use of the Common
Areas, as defined in Section
2.1.2
5
<PAGE> 6
Rent Commencement Date: January 1, 1994
Tenant's Address: 195 Albany Street
Cambridge, MA 02139
Attn: Director of Operations
Term: The Original Term and any
Extension Term as to
which Tenant properly
exercises its option to
extend as set forth in
Section 2.3.
1.2 Exhibits. The exhibits listed below are attached hereto and
incorporated in this Lease by reference and are to be construed as a part of
this Lease:
Exhibit A - Legal Description of Land
Exhibit B - Encumbrances
Exhibit C - Equipment Remaining
Exhibit D - Insurance
ARTICLE II
Premises and Term
2.2 Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, to have and to hold for the Term provided for by Section 2.2
below, subject to and with the benefit of the terms, covenants, conditions and
provisions of this Lease, the Premises. Tenant is currently in possession of the
portion of the Premises located on the Second Floor of the Building under a
sublease arrangement which terminates on the Lease Commencement Date and Tenant
is fully aware of the existing conditions of the Premises and the Building and
agrees to take the same on a strictly "as is" basis without warranty or
representation express or implied and without any further obligation whatsoever
on the part of Landlord with respect thereto except as follows:
Landlord hereby represents and warrants to Tenant:
(i) that it has good and clear record title to the Building free from
all encumbrances other than those listed on Exhibit B attached hereto
and that the execution of this Lease by the undersigned on behalf of
the Landlord has been duly authorized and consented to by all required
parties; and
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<PAGE> 7
(ii) that the Landlord shall deliver the Premises to Tenant on January
1, 1994, free of all prior tenants and occupants thereof, including
without limitation, all equipment and other personal property of such
parties other than those items listed on Exhibit C attached hereto.
2.2.1 Parking. Landlord shall provide sixty-four (64) parking spaces
for use by Tenant and Tenant's employees in the parking lot located on the
corner of Albany Street and Pacific Street, Cambridge, Massachusetts currently
consisting of one hundred sixteen (116) parking spaces (the "Parking Lot") at no
additional cost to Tenant other than Annual Fixed Rent and additional rent.
Landlord shall also grant Tenant a monthly license to use up to thirty-two (32)
additional parking spaces (the "Additional Parking Spaces") for a fee equal to
the then current fair market value for such parking spaces, which on the
Commencement Date shall equal fifty dollars ($50) per space, payable monthly in
advance. In the event Landlord requires use of any of the Additional Parking
Spaces, Landlord shall provide Tenant with thirty (30) days advance written
notice and Landlord shall thereafter be under no obligation to continue to
license the Additional Parking Spaces to the Tenant. Tenant agrees that it and
all persons claiming by, through and under it shall at times cooperate with the
manager of the Parking Lot which Landlord may designate from time to time, as to
use of said Parking Lot and shall abide by the reasonable rules and regulations
imposed on the use of the Parking Lot, from time to time. Landlord shall have
the right to designate, from time to time, and to change, from time to time, the
designation of managers, parking spaces and total number of parking spaces
within the Parking Lot. Tenant shall use the designated parking spaces only for
parking of vehicles, which parking shall be available to Tenant at all hours.
2.2.2 Common Areas. The term "Common Areas" is defined as all areas and
facilities outside the Premises which Common Areas may be used in common by
lessees of the Building and the building located at 185 Albany Street (the
"Adjacent Building") and each of their employees and invitees, including, but
not limited to, the entranceway, courtyard, lobby, emergency exits, driveway and
corridors.
Tenant, its employees and invitees agree to abide by and conform to the
reasonable rules and regulations governing the Common Areas. Landlord or such
other person(s) as Landlord may appoint shall have the exclusive control and
management of the Common Areas and shall have the right to modify, amend and
enforce said rules and regulations. Landlord shall not be responsible to Tenant
for the non-compliance of said rules and regulations by other tenants or their
invitees, but shall uniformly enforce all such rules and regulations against all
such parties.
Landlord shall have the right:
(a) to make changes, at its sole cost and expense (unless
otherwise properly allocable to the Tenant under the terms of this
Lease), to the Building exterior and the Common Areas, including,
without limitation, changes in the location, size, shape,
7
<PAGE> 8
number and appearance thereof, including, but not limited to, the
lobbies, windows, stairways, air-shafts, elevators, driveways,
entranceways, parking spaces, parking areas (but not off of the Parking
Lot), loading and unloading areas, loading bays, trash areas, ingress,
egress, decorative walls, signs, landscaped areas and walkways with
reasonable notice to Tenant (except in the case of an emergency)
provided, however, that any such relocation of Parking Spaces shall not
be off of the Parking Lot or the Premises; and provided further that
the implementation of such changes will not (i) materially interfere
with the Tenant's conduct of its business at the Premises; or (ii)
alter the number of parking spaces leased to Tenant pursuant to the
terms of this Lease; or (iii) materially alter the percentage of
Tenant's share of operating and tax expenses applicable to the Parking
Lot; provided that if such changes are made to the Parking Lot Tenant
shall only be responsible for its share of operating and tax expenses
prior to such change.
(b) for maintenance, repair or construction purposes, to use or
to close temporarily any of the Common Areas so long as reasonable
access to the Premises remains available.
2.2.3 Landlord's Reservations. Landlord reserves the right, from time
to time, with reasonable notice to Tenant (except in the case of an emergency)
and without unreasonable interference with Tenant's use to gain access to the
Premises for any purpose permitted under this Lease as provided in Section 4.5
below.
2.3 Term. The Term of this Lease shall begin on the Lease Commencement
Date and continue for the Term, unless sooner terminated or extended as provided
in this Lease.
2.4 Option to Extend. Provided that (i) this Lease remains in full
force and effect; (ii) Tenant is not in default hereunder beyond any applicable
period of notice and grace, if any; and (iii) Tenant is in actual occupancy of
at least thirty-three percent (33%) of the Premises, Tenant shall have the
option, to be exercised as hereinafter provided, to extend the Original Term of
this Lease for two (2) periods of five (5) years each following the expiration
of the Original Term (each, an "Extension Term"). Each Extension Term shall be
upon the same terms and conditions as provided in this Lease, except for the
Annual Fixed Rent, which shall be determined in accordance with Section 3.2.1
below and except that Tenant shall have no further option to extend the Term.
Tenant shall exercise this option to extend for an Extension Term by notifying
Landlord in writing at least one year prior to the expiration of the Original
Term or the first Extension Term, as the case may be. In the event Tenant does
not exercise the first option to extend the Term there shall be no second option
to extend.
2.5 Right to Negotiate Purchase of Premises and Adjacent Building.
Provided that (i) this Lease remains in full force and effect; (ii) Tenant is
not in default hereunder beyond any applicable period of notice and grace, if
any, and (iii) Tenant is in actual occupancy of at least sixty-seven percent
(67%) of the Premises, Tenant shall have the right to negotiate for
8
<PAGE> 9
the acquisition of the Premises, Land and Building and the Adjacent Building
(the "Right to Negotiate") during the Original Term and the Extension Terms on
the following terms and conditions. If Landlord determines to sell the Premises,
Land and Building or any part thereof or the Adjacent Building, or any part
thereof, at any time during the Original Term or the Extension Term, Landlord
shall notify Tenant of the terms on which Landlord will be willing to sell after
the expiration of time for performance by Massachusetts Institute of Technology
(together with its successors and assigns, "MIT") under its right of first
refusal with respect to the Adjacent Building and after first offering the
Premises, Land and Building to MIT and MIT declining to so purchase the
Premises, Land and Building. If Tenant, within fifteen (15) days after receipt
of Landlord's notice, indicates in writing its desire to acquire the Premises,
Land, Building or the Adjacent Building, or any part thereof, as the case may
be, Landlord and Tenant shall, for a period of thirty (30) days after receipt of
said notice, negotiate the necessary documentation regarding Tenant's agreement
to so purchase the Premises, Land and Building or the Adjacent Building or such
part thereof, as the case may be, subject to and in accordance with the
principal terms stated in Landlord's notice. If written agreement is reached
between Landlord and Tenant, Landlord shall sell and convey the Premises, Land
and Building or the Adjacent Building or the part thereof, as the case may be,
to Tenant on the terms in the signed written agreement. If Landlord and Tenant
so enter into a written agreement regarding the Tenant's purchase of the
Premises, Land and Building or the Adjacent Building or part thereof, as they
case may be, and thereafter Tenant defaults in its obligation, the Right to
Negotiate shall expire and terminate for all purposes. If Tenant does not
indicate its interest within the initial fifteen (15) day period, or if Landlord
and Tenant fail to enter into a signed written agreement regarding Tenant's
acquisition of the Premises, Land and Building or the Adjacent Building, or a
part thereof, as they case may be, within the additional thirty (30) day period
which begins upon receipt of Tenant's notice of intent, Landlord thereafter
shall have the right to sell and convey the Premises, Land and Building, or the
Adjacent Building or such part thereof, as the case may be, to any third party,
and upon the closing of such sale, the Right to Negotiate shall expire and
terminate for all purposes. If Landlord does not so sell and convey the
Premises, Land and Building or the Adjacent Building or such part thereof as the
case may be, within one year, any further transaction shall be deemed a new
determination by Landlord to sell and convey the Premises, Land and Building or
the Adjacent Building or such part thereof, as the case may be, and the
provisions of this Section 2.4 shall be applicable. If Tenant purchases all of
the Premises, Land and Building this Lease shall terminate on the date title
vests in Tenant, and Landlord shall remit to Tenant all prepaid and unearned
rent. If Tenant purchases a part thereof, this Lease as to the part purchased
shall terminate on the date title vests in Tenant, and the Annual Fixed Rent and
additional rent shall be reduced so that Tenant continues to pay $8.25 per
square foot, triple net, for the Second Floor of the Building, and $28.00 per
square foot, triple net, for the First Floor and Lower Level of the Building as
the same may be adjusted pursuant to Section 3.2 below during the Original Term,
or the corresponding rent per square foot during the Extension Terms based on
the adjustment(s) contained in Section 3.2 below. The Right to Negotiate shall
not apply to a transfer (either outright or in trust) between any of those
persons who constitute the beneficial owners or principals of Landlord, the
relatives by blood or marriage of any of
9
<PAGE> 10
those persons, or to a legal entity (i.e., partnership, corporation, trust, or
like entity) when the majority interest is owned by all or some of such persons,
or any transfer by gift or for nominal consideration, so long as the Premises
continue to be subject to this Lease, including this Section 2.4. An affidavit
of an officer, trustee or principal of Landlord recorded with the Middlesex
South District Registry of Deeds stating that the provisions of this Section 2.4
have been complied with or met as to any conveyance of all or any portion of the
Premises shall conclusively establish compliance therewith as to any third party
or parties.
2.6 Right to Negotiate Lease. Provided that (i) this Lease remains in
full force and effect; (ii) Tenant is not in default hereunder beyond any
applicable period of notice and grace, if any; and (iii) Tenant is in actual
occupancy of at least sixty-seven percent (67%) of the Premises, Tenant shall
have the right to negotiate for any space which becomes available and is under
Landlord's exclusive control in the Adjacent Building. Tenant acknowledges and
recognizes that the Adjacent Building is currently leased to MIT and Landlord
does not have control over MIT's sublet rights. If Landlord determines to lease
all or any portion of the Adjacent Building at anytime during the Original Term
or the Extension Terms, Landlord shall so notify Tenant. If Tenant, within
fifteen (15) days after the receipt of Landlord's notice indicates in writing
its agreement to enter into lease negotiations for such space in the Adjacent
Building, Landlord and Tenant shall each thereafter negotiate in good faith and
attempt to reach mutually acceptable lease terms within fifteen (15) days from
the date of such notice from Tenant to Landlord regarding the Tenant's desire to
so lease the Adjacent Building and if such terms are reached within said fifteen
(15) days, thereafter enter into a lease within thirty (30) days from the date
of such agreement for such Adjacent Building substantially in the form of this
Lease but on the terms reached by mutual agreement. If Landlord and Tenant enter
into a written lease agreement pursuant to which Tenant agrees to lease the
Adjacent Building and Tenant thereafter defaults in its obligation to so lease
space, the negotiation right contained in this Section 2.5 shall expire and
terminate for all purposes. If Tenant does not indicate its agreement within
said fifteen (15) days or if Landlord and Tenant do not enter into a written
lease agreement within the time frame provided in this Section 2.5, Landlord
thereafter shall have the right to lease the Adjacent Building to any third
party and Tenant's rights under this Section 2.5 shall expire and terminate for
all purposes.
ARTICLE III
Rent
3.1 Annual Fixed Rent. Tenant covenants and agrees to pay rent to
Landlord, at the Original Address of Landlord or such other place as Landlord
may by notice in writing to Tenant from time to time direct during the Term, in
the amount of the Annual Fixed Rent as set forth in Section 1.1 above and as
adjusted pursuant to this Article III, in equal monthly installments in advance
on the first day of each calendar month during the Term, commencing on the Rent
Commencement Date. Annual Fixed Rent for any portion of a
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<PAGE> 11
calendar month at the beginning or the end of such period shall be prorated
accordingly. Notwithstanding any provision of this Section 3.1 to the contrary,
Annual Fixed Rent for the period from the Lease Commencement Date throughout
December 31, 1994 shall be ~$580,000 (the "First Year Fixed Rent"). First Year
Fixed Rent is a base rent for calendar year 1994 and Tenant remains liable and
responsible for all additional rent or parking license fees otherwise due under
the terms and conditions of this Lease.
3.2 Adjustments to Annual Fixed Rent. The Annual Fixed Rent provided
for in Section 1.1 shall be subject to adjustment as provided in Section 3.2.1
and Section 3.2.2 below. On adjustment of the Annual Fixed Rent as provided in
Section 3.2.1 and Section 3.2.2, the parties hereto shall immediately execute an
amendment to this Lease stating the new Annual Fixed Rent.
3.2.1 Adjustment to Annual Fixed Rent For Extension Term. Not less than
eighteen (18) months nor more than twenty (20) months prior to the commencement
of the Extension Terms, Tenant may notify Landlord that it desires to establish
Annual Fixed Rent for the applicable Extension Term; whereupon Landlord shall
immediately enter into negotiations with Tenant to set such Annual Fixed Rent.
If within thirty (30) days after said notification Landlord and Tenant have not
reached agreement on the Annual Fixed Rent for the applicable Extension Term,
then within ten (10) days after said thirty (30) day period, Landlord and Tenant
shall each name an appraiser and the Annual Fixed Rent for the Extension Term
shall be determined by appraisal in the following manner: The two appraisers
thus named shall promptly name a third appraiser. If the two appraisers shall
not have agreement upon a third appraiser within ten (10) days after the end of
the previous ten (10) day period, either Landlord or Tenant may request the then
President of the Greater Boston Real Estate Board or the successor of such Board
to appoint the third appraiser. The third appraiser shall be a member of the
Appraiser's Institute or otherwise qualify as an expert in the appraisal of
commercial real estate. The three appraisers thus selected shall promptly
proceed to determine:
A. with respect to the first Extension Term:
(i) with respect to the Second Floor of the Building the fair
and equitable Annual Fixed Rent for the Extension Term, such determination to be
based on the fair rental value of the leasehold interest demised hereby on
January 1, 1997. In determining such rental value the appraisers shall consider
commercial real estate in Cambridge, Massachusetts in general and specifically
those properties which have been renovated to office, research and development,
laboratory and manufacturing use, provided, however that the appraisers shall
not consider the value of any improvements which have been installed in or added
to the Second Floor which have been paid for by Tenant, whether during or prior
to the term of this Lease; and (ii) with respect to the First Floor and Lower
Level of the Building the fair and equitable Annual Fixed Rent for the extension
term, such determination to be based on 95% of the then current fair market rent
for first-class laboratory, research and development space in Cambridge,
Massachusetts leased for similar periods and upon substantially similar
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terms and conditions as provided in this Lease, excluding the value of any
additional improvements to the First Floor and Lower Level of the Building paid
for by Tenant but specifically including replacements of all improvements
existing on the Lease Commencement Date (including, but not limited to the
equipment listed on Exhibit C). The appraisers shall make such a determination
in writing to Landlord and Tenant no later than sixty (60) days prior to January
1, 1998.
B. with respect to the Second Extension Term
(i) with respect to the Second Floor of the Building the fair
and equitable Annual Fixed Rent for the Extension Term, such determination to be
based on the fair rental value of the leasehold interest demised hereby on
January 1, 2002. In determining such rental value the appraisers shall consider
commercial real estate in Cambridge, Massachusetts in general and specifically
those properties which have been renovated to first class research and
development, laboratory and manufacturing use, in comparable condition and
equipped comparably to the Second Floor of the Building on January 1, 2002
leased for similar periods and upon substantially similar terms and conditions
as provided in this Lease; and (ii) with respect to the First Floor and Lower
Level of the Building the fair and equitable Annual Fixed Rent for the extension
term, such determination to be based on 95% of the then current fair market rent
for first-class laboratory, research and development space in Cambridge,
Massachusetts leased for similar periods and upon substantially similar terms
and conditions as provided in this Lease, excluding the value of any additional
improvements to the First Floor and Lower Level of the Building paid for by
Tenant but specifically including replacements of all improvements existing on
the Lease Commencement Date (including, but not limited to the equipment listed
on Exhibit C). The appraisers shall make such a determination in writing to
Landlord and Tenant no later than sixty (60) days prior to January 1, 2003.
The parties agree to provide appropriate relevant information and
otherwise to assist the appraisers in arriving in a prompt determination. The
expenses of appraisal shall be shared equally between Landlord and Tenant but
each party shall pay its own counsel fees. The appraisers shall determine a fair
and equitable annual base rent which may be greater but not less than Annual
Fixed Rent for the Original Term, as adjusted by Section 3.2.2. below with
respect to the First Extension Term and not less than Annual Fixed Rent for the
first Extension Term, as adjusted by Section 3.2.2 below with respect to the
second Extension Term. If, following the determination of Annual Fixed Rent for
the extended term whether by agreement of the parties or by appraisal hereunder,
Tenant exercises its option to extend the Term granted under Section 2.3 above,
the fair and equitable Annual Fixed Rent so determined shall be and become the
Annual Fixed Rent hereunder in effect beginning with the first day of the
Extension Term.
3.2.2 Adjustment to Annual Fixed Rent Based Upon Consumer Price Index.
Beginning on January 1, 1996 and at the commencement of every second calendar
year thereafter during the Term and the first Extension Term (specifically
excluding the second
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Extension Term) the Annual Fixed Rent provided for in Section 1.1 applicable to
the Second Floor of the Building shall be adjusted as follows:
The base for computing the adjustment is the Consumer Price Index for
All Urban Consumers - All Items for the Boston metropolitan area, published by
the United States Department of Labor, Bureau of Labor Statistics ("Index"),
which is in effect on November 1, 1993 ("Beginning Index"). The Index published
most immediately preceding the Adjustment Date ("Extension Index") is to be used
in determining the amount of the adjustment. If the Extension Index has
increased over the Beginning Index, the Annual Fixed Rent for the Extension Term
shall be set as follows:
(a) the Annual Fixed Rent set forth in Section 1.1 applicable to
the Second Floor of the Building shall be multiplied by the figure obtained by
dividing the Extension Index by the Beginning Index (the total of which shall be
the "CPI Rent"); and
(b) the difference between the CPI Rent and the Annual Fixed
Rent set forth in Section 1.1 applicable to the Second Floor of the Building
shall be multiplied by seventy percent (70%), the product of which shall be
added to Annual Fixed Rent set forth in Section 1.1 applicable to the Second
Floor of the Building to determine Annual Fixed Rent and the total Annual Fixed
Rent shall be adjusted accordingly.
In no event whatsoever shall the Annual Fixed Rent by way of a CPI
adjustment be less than the Annual Fixed Rent set forth in Section 1.1, as
adjusted pursuant to this Section 3.2.2. If the Index is discontinued or revised
during the Term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same result as would
be obtained if the Index had not been discontinued or revised.
3.3 Additional Rent. In order that the Annual Fixed Rent shall be
absolutely net to Landlord, Tenant covenants and Agrees to pay either directly
or to Landlord, as additional rent, all real estate taxes, betterment
assessments, insurance costs, and charges for utilities and other services with
respect to the Building as hereinafter provided in this Lease. All amounts
payable by Tenant to Landlord under this Lease shall be deemed to be additional
rent and shall be paid within twenty (20) days after Tenant's receipt of
Landlord's statement itemizing such charges together with invoices therefor. In
the event Tenant pays such real estate taxes betterment assessments insurance
costs and charges for utilities and other services with respect to the building
directly to the authority charged with the collection thereof, Tenant shall
provide Landlord written evidence of the payment thereof within ten (10)
business days after receipt of Landlord's request for such evidence with respect
to all items other than real estate taxes and municipal betterments, which
Tenant shall provide to Landlord within ten (10) days of the payment thereof.
3.4 Real Estate Taxes.
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3.4.1 Building. Tenant shall pay, subject to Tenant's right to contest
any such tax in good faith, all taxes levied or assessed by or becoming payable
to any municipality or any other governmental authority having jurisdiction of
the Land and Building, for or in respect of the ownership, leasing or operation
of the Land and Building or which may become a lien on the Land and Building,
for each tax period wholly included in the Term, all such payments to be made at
least ten (10) days before the last date on which the same may be paid without
interest or penalty; provided that for any fraction of a tax period included in
the Term at the beginning (beginning on the Lease Commencement Date) or end
thereof, Tenant shall pay to Landlord, within twenty (20) days after receipt of
Landlord's invoice therefor, the fraction of taxes so levied or assessed or
becoming payable which is allocable to such included period. Nothing contained
in this Lease shall, however, require Tenant to pay any franchise, corporate,
estate, inheritance, succession, capital levy or transfer tax of Landlord, or
any net income, profits or revenue tax or charge upon the rent payable by Tenant
under this Lease.
3.4.2 Parking Lot. Tenant shall pay to Landlord as additional rent,
Tenant's proportionate share of real estate taxes applicable to the Parking Lot.
For purposes of this section, Tenant's proportionate share of taxes for the
Parking Lot shall equal the total number of parking spaces which Tenant is
leasing under the terms of this Lease and any Additional Parking Spaces licensed
by Tenant for the applicable period over the total number of parking spaces in
the Parking Lot. If the number of Additional Parking Spaces licensed by Tenant
during a tax year fluctuates, the proportionate share shall be Calculated on a
pro rata basis.
3.5 Betterment Assessments.
3.5.1 Premises. Tenant shall pay, 100% of each installment of any
public, special or municipal betterment assessment levied or assessed by or
becoming payable to any municipality or other governmental authority having
jurisdiction of the Land and Building, for or in respect of the ownership,
leasing or operation of the Land and Building or which may become a lien on the
Land and Building, for each installment period wholly included in the Term, all
such payments to be made at least ten (10) days before the last date on which
the same may be made without interest or penalty; provided that for any fraction
of an installment period included in the Term at the beginning (beginning on the
Rent Commencement Date) or end thereof, Tenant shall pay to Landlord, within
twenty (20) days after receipt of Landlord's invoice therefor, the fraction of
such installment which is allocable to such included period. Landlord shall
elect to pay any such assessment in installments over the longest period
permitted by law.
3.5.2 Parking Lot. Tenant shall pay to Landlord as additional rent,
Tenant's proportionate share of such installments of municipal betterment
assessments applicable to the Parking Lot for each installment period wholly
within the Term or with respect to periods at the beginning or end of the Term,
apportioned accordingly for the applicable installment period. For purposes of
this Section, Tenant's proportionate share of betterment assessments
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applicable to the Parking Lot shall equal the total number of parking spaces
which Tenant is leasing under the terms of this Lease and any Additional Parking
Spaces licensed by Tenant for the applicable period over the total number of
parking spaces in the Parking Lot. If the number of Additional Parking Spaces
licensed by Tenant during an applicable assessment period fluctuates, the
proportionate share shall be calculated on a pro rata basis. Landlord shall
elect to pay any such installment over the longest period permitted by law.
3.6 Tax Fund Payments. If any holder of a first mortgage on the Land,
Building or Parking Lot requires Landlord to make tax fund payments to it,
Tenant shall, as additional rent, on the first day of each month of the Term,
make Tax Fund Payments to Landlord in lieu of making such payment directly as
provided under Section 3.4 above. "Tax Fund Payments" refer to such payments as
the holder of such first Mortgage shall reasonably determine to be sufficient to
provide in the aggregate a fund adequate to pay all taxes and assessments
referred to in Sections 3.4 and 3.5 when they become due and payable. If the
aggregate of said Tax Fund Payments is not adequate to pay all Said taxes and
assessments, Tenant shall pay to Landlord the amount by which such aggregate is
less than the amount equal to all said taxes and assessments, such payment to be
made on or before the later of (a) twenty (20) days after receipt by Tenant of
written notice from Landlord of such amount, or (b) the 30th day prior to the
last day on which such taxes and assessments may be paid without interest or
penalty. If Tenant shall have made the foresaid payments, Landlord shall on or
before the last day on which the same may be paid without interest or penalty,
pay or cause to be paid to the proper authority charged with the collection
thereof all taxes and assessments referred to in said Sections 3.4 and 3.5 and
furnish Tenant, upon request, with reasonable evidence of such payment. Any
balance remaining after such payment by Landlord shall be accounted for to
Tenant annually. All payments made by Tenant pursuant to this Section 3.6 shall
to the extent thereof relieve Tenant of its obligations under said sections 3.4
and 3.5.
3.7 Insurance. Tenant shall obtain insurance for the Premises and the
Parking Lot as provided for by Section 6.2.
3.8 Utilities and Services. Tenant shall pay directly to the proper
authorities charged with the collection thereof all charges for water, sewer,
gas, electricity, telephone and other utilities or services used or consumed on
the Premises during the Term.
3.9 Additional Expenses. Tenant shall pay to Landlord as additional
rent:
(a) One half of all operating and maintenance expenses
attributable to the Common Areas including, without limitation, landscape,
snowplowing and any and all other costs and expenses attributable to the
maintenance of said Common Areas.
(b) Tenant's proportionate share of operating and maintenance
expenses attributable to the Parking Lot. For purposes of this Section, Tenant's
proportionate share of maintenance expenses applicable to the Parking Lot shall
equal the total number of parking
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spaces which Tenant is leasing under the terms of this Lease and any Additional
Parking Spaces licensed by Tenant for the applicable period over the total
number of parking spaces in the Parking Lot. If the number of Additional Parking
Spaces licensed by Tenant during an applicable operating year fluctuates, the
proportionate share shall be calculated on a pro rata basis.
3.10 Late Charge. In the event that any payment of Annual Fixed Rent or
additional rent shall remain unpaid for a period of five (5) business days after
due, there shall become due to landlord from Tenant, as additional rent and as
compensation for Landlord's extra administrative costs in investigating the
circumstances of late rent, a late charge of three percent (3%) of the amount
overdue. Payment of any late charge shall not constitute a cure of any default
with respect to the amount as to which such late charge is paid.
3.11 Net Lease. It is understood and agreed that this Lease is a net
lease and that the Annual Fixed Rent is absolutely net to Landlord, excepting
only those matters which Landlord is required to pay under this Lease.
3.12 No Offsets. All payments to be made by Tenant to Landlord in
accordance with the terms of this Lease, including, but not limited to, Annual
Fixed Rent and additional rent, shall be paid by Tenant without offset,
abatement or deduction other than as expressly provided for in Section 3.1 above
and in Article VII below.
ARTICLE IV
MAINTENANCE AND REPAIR, ALTERATIONS;
SURRENDER; HOLDING OVER
4.1 Tenant's Maintenance and Repair. Except as otherwise provided in
Section 4.2 or Article VII below, Tenant, at Tenant's expense, shall keep neat
and clean and maintain and repair in good order, condition and repair the
Premises and every part thereof (including, without limitation, maintenance of
the electrical, plumbing and HVAC systems and equipment serving the Premises and
the other fixtures and equipment therein and the cleaning of and trash removal
from the Premises), reasonable wear and tear excepted. Without limiting the
generality of the foregoing, Tenant, at Tenant's expense, shall provide or cause
to be provided landscape care to and maintenance of the portion of the Land not
included in the Common Areas and used exclusively by Tenant, and maintenance
(including snow plowing and removal of ice) of the walkways on the Premises not
included in the Common Areas and used exclusively by Tenant. Tenant hereby
covenants and agrees to remove all trash from the Premises in compliance with
all federal, state, and local laws, rules, ordinances and regulations. If
maintenance or repairs are required to be done or made by Tenant pursuant to the
terms hereof, Landlord may demand that Tenant do or make the same forthwith,
and, if Tenant refuses or neglects to commence such repairs and complete the
same with reasonable dispatch after such demand, Landlord may (but shall not be
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required to do so) make or cause such repairs to be made and shall not be
responsible to Tenant for any loss or damage that may accrue to Tenant's
property or business by reason thereof, so long as Landlord makes or causes Such
repairs to be made in a reasonable manner. If Landlord makes or causes such
repairs to be made, Tenant agrees that Tenant will forthwith on demand pay to
Landlord the cost thereof as additional rent pursuant to Section 8.4. Tenant
shall receive the benefit of all warranties and guaranties with respect to those
portions of the Premises that Tenant is obligated to maintain, as well as, at
Tenant's election and Tenant's expense, any options to extend or similar rights
with respect to the warranties and guaranties.
4.2 Landlord's Maintenance and Repair. Except as otherwise provided in
Article VII below, Landlord, at Landlord's expense, shall keep, maintain and
repair in good order, condition and repair the structural parts of the Building,
which structural parts include only the foundations, bearing and exterior walls
(excluding glass and doors), subflooring, support columns, support beams and
roof (excluding skylights), except for (i) any damage caused to any of the
foregoing by the negligence or neglect of Tenant, its agents, contractors,
employees or invitees or (ii) any maintenance or repair required as a result of
damage caused to any of the foregoing by any alterations or other work performed
by or on behalf of the Tenant. Except as set forth in this Section 4.2 and in
Article VII below, Tenant shall be responsible for the cost of all replacements
and repairs to the Premises, including any maintenance or repair required as a
result of damage caused to any structural element or system of the Building by
any alterations or other work performed by or on behalf of the Tenant.
4.3 Alterations. Tenant shall not make alterations and additions to the
Premises except in accordance with plans and specifications therefor first
approved by Landlord, which approval shall be requested in writing and shall not
be unreasonably withheld or delayed, provided, however, no such approval shall
be required for alterations or additions costing less than fifteen thousand
dollars ($15,000) individually or seventy-five thousand dollars ($75,000) in the
aggregate in any calendar year. Landlord shall not be deemed unreasonable for
withholding approval of any alterations or additions that (a) might adversely
affect any structural or exterior element of the Building, or any area or
element outside of the Premises, or (b) will require unusual expense to readapt
the Premises to normal office or laboratory use on expiration or earlier
termination of the Term, unless Tenant first provides assurances acceptable to
Landlord that such readaptation will be made prior to such expiration or
termination without expense to Landlord. All alterations and additions other
than Tenant's moveable equipment shall become part of the Building and shall
become the property of Landlord upon expiration or earlier termination of the
Term unless (i) Tenant shall remove the same prior to such expiration or earlier
termination and replace, repair and restore any such alterations or additions,
or (ii) Landlord shall notify Tenant in writing that the same must be removed.
Such notice by Landlord shall be given no later than in response to Tenant's
written request for Landlord's approval of the alterations or additions prior to
their installation, and in such event Tenant shall remove such alterations or
additions and any
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damage caused by removal shall be repaired by Tenant at Tenant's expense upon
expiration or earlier termination of this Lease.
4.4 Alterations Requirements. Landlord may (but shall not be obligated
to) inspect any construction work of Tenant under this Lease at reasonable times
after notice to Tenant (other than in the case of an emergency). Tenant, before
its work is started, shall secure all licenses and permits necessary therefor;
deliver to Landlord a statement of the names of all its contractors and
subcontractors; and shall cause each contractor to carry such workmen's
compensation insurance and comprehensive general public liability insurance as
Landlord may reasonably require insuring Landlord and Tenant as well as the
contractors, and to deliver to Landlord certificates of all such insurance.
Tenant agrees to pay promptly when due the entire cost of any work done on or
about the Premises by or on behalf of Tenant, its agents, employees or
independent contractors, not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises and
promptly to discharge or bond off in form and substance satisfactory to Landlord
in Landlord's sole and absolute discretion any such liens which may so attach.
Tenant shall hold Landlord harmless and indemnify Landlord from and against all
injury, loss, claims or damage to any person or property ("Claims") occasioned
by or growing out of any such work other than with respect to Claims arising
from the gross negligence or willful misconduct of Landlord, its agents,
contractors or employees.
4.5 Entry by Landlord. Tenant shall permit Landlord and its agents,
after reasonable notice (except in the case of emergencies in which case no
notice is required), to enter the Premises (other than the Manufacturing
Facility Clean Room, as hereinafter defined, as provided in the immediately
succeeding sentence) at all reasonable hours for the purpose of inspecting,
testing, or of making repairs to the same, or otherwise carrying out Landlord's
rights or obligations under this Lease, and to show the Premises to prospective
tenants during the year preceding expiration of the Term and to prospective
purchasers and mortgagees at all reasonable times. In case of emergency, or if
Landlord reasonably suspects that there is any violation of law, rule, ordinance
or regulation in connection with the Manufacturing Facility Clean Room, as
hereinafter defined, or the use and/or operation thereof, Tenant shall permit
Landlord and its agents to enter the Manufacturing Facility Clean Room without
prior notice after flaking reasonable precautions (if appropriate under the
circumstances) requested by Tenant. In the event Landlord requires access to the
Manufacturing Facility Clean Room, as hereinafter defined, for the purpose of
making repairs which Landlord is required or permitted to make under the terms
and conditions of this Lease, Tenant shall permit Landlord and its agents, after
72 hours advance written notice, to enter the Manufacturing Facility Clean Room
after taking all reasonable precautions which Tenant may require. The phrase
Manufacturing Facility Clean Room shall mean the 25' x 40' class 100 clean room
facility to be located on the second floor of the Premises. Landlord shall not
be liable to Tenant for any compensation or reduction of rent by reason of
inconvenience or annoyance or for loss of business arising from Landlord or its
agents entering the Premises (including the Manufacturing Facility Clean Room)
for any purposes authorized in this Lease. Notwithstanding Landlord's right to
enter the Premises or
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other rights reserved by Landlord pursuant to any other provision of this Lease,
Landlord hereby covenants and agrees in the exercise of any such rights not to
disclose, photograph or otherwise reveal to any party information related to
Tenant's business operation at the Premises, including in particular Tenant's
manufacturing processes, provided, however, that Landlord may disclose any such
information to its counsel and as directed by a court of competent jurisdiction
or by subpoena.
4.6 Surrender. Tenant shall surrender the Premises, and all alterations
and additions thereto as hereinabove provided, at the expiration or earlier
termination of the Term, in the condition described in Section 4.1, first
removing all personal property and trade fixtures of Tenant and, to the extent
specified by Landlord by notice to Tenant as hereinabove provided or as
otherwise agreed by Landlord and Tenant, alterations and additions made by
Tenant, and repairing any damage caused by such removal and restoring the
Premises and leaving them clean and neat. Tenant waives all claims against
Landlord for any damage to Tenant resulting from Landlord's retention or
disposition of any of Tenant's personal property or trade fixtures remaining on
the Premises on expiration or earlier termination of the Term. Tenant shall be
liable to Landlord for Landlord's costs for storing, removing, and disposing of
any alterations or additions that Tenant is obligated to remove but fails to
remove or Tenant's personal property or trade fixtures. If Tenant fails to
surrender the Premises to Landlord on expiration or earlier termination of the
Term in the condition and otherwise as required by this Section, Tenant shall
hold Landlord harmless from all damages resulting from Tenant's failure to
surrender the Premises, including, without limitation, claims made by succeeding
tenants resulting from Tenant's failure to surrender the Premises.
4.7 Holding Over. If Tenant, without Landlord's consent remains in
possession of the Premises after expiration or earlier termination of Term, such
possession by Tenant shall be deemed to be a month-to-month tenancy terminable
on thirty days' notice given at any time by either party. During any such
month-to-month tenancy, Tenant shall pay all rent and other sums required by
this Lease, and all provisions of this Lease, except those pertaining to Term,
option to extend and rights of refusal shall apply to the month-to-month
tenancy, and the monthly base rent (excluding additional rent) shall be
$40,000.00 for the Second Floor of the Building and shall be one hundred fifty
percent (150%) of the Annual Fixed Rent applicable to the First Floor and Lower
Level of the Building then in effect at the expiration or earlier termination of
the Term. This provision shall not be construed as a consent by Landlord to any
such holding over.
ARTICLE V
ADDITIONAL TENANT COVENANTS
5.1 Payment and Performance. Tenant agrees to pay when due all Annual
Fixed Rent and additional rent, all charges for utility and other services
rendered to the Premises, and all other monies required to be paid by Tenant
pursuant to this Lease and to promptly perform all obligations of Tenant
pursuant to this Lease. Annual Fixed Rent and additional
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rent payments required under this Lease shall be deemed sufficiently paid if
made by check collected on first presentation.
5.2 Use. Tenant agrees, from the Commencement Date to the end of the
Term, to use and occupy the Premises for general office, research and
development, laboratory and manufacturing or other purposes permitted by
federal, state and local laws and ordinances. Tenant agrees not to injure,
overload or deface the Premises, nor to permit on the Premises any auction sale.
Tenant shall comply with all requirements of public authorities and of the Board
of Fire Underwriters in connection with methods of storage, use and disposal.
Tenant shall not permit in the Premises any nuisance, or the emission from the
Premises of any objectionable noise, odor or vibration, nor use or devote the
Premises or any part thereof for any purpose which is contrary to law or
ordinance or liable to invalidate or increase premiums for any insurance on the
Building or its contents or liable to render necessary any unpermitted
alteration or addition to the Building, nor commit or permit any waste in or
with respect to the Premises, nor generate, store or dispose of any oil, toxic
substances, hazardous wastes, or hazardous materials (each a, "Hazardous
Material"), or permit the same in or on the Premises provided for under this
Lease, except in compliance with applicable law. Tenant shall not dump, flush or
in any way introduce any Hazardous Material into septic, sewage or other waste
disposal systems serving the Premises provided for under this Lease. Tenant
shall permit Landlord to enter the Premises for the purpose of testing and to
determine Tenant's compliance with the covenants herein contained, each such
entry shall be made in accordance with Section 4.5 above. Tenant will indemnify
the Landlord and its successors and assigns against all claims, loss, cost, and
expenses, including, without limitation, attorneys' fees, incurred as a result
of any contamination of the Building or any portion of the Land with Hazardous
Materials by the Tenant or Tenant's contractors, licensees, invitees, agents,
servants or employees, and this indemnity shall survive the expiration of the
Term or any other termination of this Lease.
5.3 Compliance with Law. Tenant agrees to comply with all federal,
state and local laws, regulations, ordinances, executive orders and similar
requirements applicable to the Premises or the Parking Lot or Tenant's use
thereof in effect from time to time during the Term, including, without
limitation, City of Cambridge ordinances with respect to zoning, smoking, animal
experiments and hazardous waste and any such requirements pertaining to
employment opportunity, anti-discrimination and affirmative action. Tenant
agrees, at its sole cost, to comply with the aforesaid laws regulations and
ordinances, and to keep the Premises equipped with all safety appliances
required by law or ordinance or any other regulations of any public authority,
and to procure all licenses and permits required for the Premises or Tenant's
use thereof, it being understood that the foregoing provisions shall not be
construed to broaden in any way the Permitted Uses.
5.4 Personal Property Taxes. Tenant agrees to pay promptly when due all
taxes which may be imposed upon personal property (including, without
limitation, fixtures and equipment) on the Premises.
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5.5 Assignment and Subletting. Any assignment, mortgage, pledge,
hypothecation or transfer of all or any portion of Tenant's interest under this
Lease or any subletting of all or any portion of the Premises shall be subject
to the provisions of this Section.
(a) Except in the cases of Permitted Transfers (as defined
below) Tenant agrees not to assign, mortgage, pledge, hypothecate or otherwise
transfer this Lease, or sublet (which term, without limitation, shall include
granting of concessions, licenses and the like) the whole or any part of the
Premises without, in each instance, having first received the consent of
Landlord, which shall not be unreasonably withheld or delayed. Any assignment or
sublease made without such consent shall be void, and in any case where Landlord
consents to such assignment or subletting or such assignment is permitted by
this Lease, Tenant shall remain fully and primarily liable for the obligations
of the tenant hereunder, including, without limitation, the obligation to pay
Annual Fixed Rent and additional rent as provided under this Lease. Except as
otherwise permitted by Permitted Transfers, any transfer of control of Tenant by
means of one or more transfers of stock or partnership interests shall be deemed
an assignment for purposes of this Section.
(b) In the event that any sublease or assignment of the Second
Floor is permitted under this Lease (other than with respect to Permitted
Transfers and the sublease described in subsection (e) below), Tenant shall pay
to Landlord as additional rent one half of the amount Tenant receives from any
subtenant or assignee as rent, additional rent or other form of compensation or
reimbursement in excess of (i) the Annual Fixed Rent applicable to the space so
sublet or assigned, additional rent and other monies otherwise due to Landlord
pursuant to this Lease (allocable in the case of a sublease to that portion of
the Premises being subleased), and (ii) any reasonable expenses incurred and
paid by Tenant in connection with such sublease or assignment such as brokerage
commissions, fees for legal services and expenses of preparing the Premises for
occupancy by such subtenant or assignee and specifically including Tenant's
recovery of the unamortized value of the improvements to the second floor made
by Tenant based on a ten-year useful life utilizing the so-called "straight
line" method of cost recovery.
(c) If this Lease is assigned, or if the Premises or any part
thereof is sublet or occupied by anyone other than Tenant (other than as a
result of a Permitted Transfer), Landlord may, at any time and from time to
time, collect rent and other charges from the assignee, sublessee or occupant
and apply the net amount collected to the rent and other charges herein
reserved, but no such assignment, subletting, occupancy or collection shall be
deemed a waiver of the prohibitions contained in this Section 5.5, or the
acceptance of the assignee, sublessee or occupant as a tenant, or a release of
Tenant from the further performance by Tenant of the covenants herein contained
to be performed by Tenant. The consent by Landlord to one assignment or
subletting shall not be construed to relieve Tenant from obtaining the express
consent in writing of Landlord to any further assignment or subletting.
(d) Notwithstanding any provision of this Section 5.5 to the
contrary, in the event that (i) all of the Premises is to be sublet, or (ii) all
of the Second Floor of the
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Building is to be sublet, Landlord may elect to terminate this Lease with
respect to either the entire Premises or the entire Second Floor of the Building
being sublet, as the case may be, by giving Tenant 30 days' prior written
notice.
(e) As used in this Lease, the term "Permitted Transfers" shall
mean any of the following transactions:
(i) any transaction pursuant to which Tenant is merged
or consolidated with any other entity or pursuant to which all or substantially
all of Tenant's assets, including without limitation, Tenant's interest under
the Lease (the "Tenant Interest") are sold or transferred, provided in each case
that the resulting entity assumes all of Tenant's obligations and agrees to be
bound by all of the terms and conditions of this Lease and provided further that
the Landlord is reasonably satisfied with the financial status of each such
entity; or
(ii) the sublease or assignment of the Tenant Interest
to any entity which controls, is controlled by or is under common control with
Tenant, provided in each case that the resulting entity assumes all of Tenant's
obligations and agrees to be bound by all of the terms and conditions of this
lease and provided further that the Landlord is reasonably satisfied with the
financial status of each such entity; or
(iii) a collateral assignment of this Lease by Tenant to
an institutional lender; provided, that in such collateral assignment said
Lender agrees that upon exercise of its rights thereunder it shall assume and be
bound by all the terms and conditions of this Lease.
ARTICLE VI
INDEMNITY AND INSURANCE
6.1 Indemnity. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to defend with counsel, save harmless,
and indemnify Landlord and any manager of the Premises, from time to time, from
any liability or injury, loss, accident or damage to any person or property, and
from any claims, actions, proceedings and expenses and costs in connection
therewith (including without limitation reasonable attorneys' fees and costs),
(i) caused by Tenant, its contractors, agents, employees or invitees, or arising
or claimed to arise from any use made or thing done or occurring on the Premises
during the Term, or the Extension Term, or during Tenant's possession of any
part of the Premises not due to the willful act, active negligence or other
misconduct of Landlord or any manager or (ii) caused by Tenant, its contractors,
agents, employees or invitees, and arising or claimed to arise from any use made
or thing done or occurring on the Parking Lot during the Term or the Extension
Term, or during Tenant's possession of any part of the Premises or Parking Lot
not due to the willful act, active negligence or other misconduct of Landlord or
any manager or the negligence of any co-tenant of the Parking
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Lot and their respective contractors, agents and employees or (iii) resulting
from the failure of Tenant to perform and discharge its covenants and
obligations under this Lease, including, without limitation, the violation of
any environmental law or other governmental requirement by Tenant. This
indemnity and hold harmless agreement shall include indemnity against all costs,
expenses and liabilities incurred in connection with any such claim or
proceeding brought thereon for which Tenant is responsible, and the defense
thereof, and shall survive expiration or termination of the Term for a period of
five (5) years. Landlord acknowledges that as between Landlord and Tenant,
Landlord shall be responsible for the two underground oil storage tanks (the
"Tanks") located in the Courtyard of the Building. Landlord agrees to defend
with counsel, save harmless and indemnify Tenant from any liability or injury,
loss, accident or damage to any person or property from any claims, actions,
proceedings and expenses and costs in connection therewith (including, without
limitation attorneys' fees and costs) caused by any leaks in the Tanks or
removal of the Tanks.
6.2 Tenant's Insurance. Tenant shall, as additional rent, take out and
maintain in full force from the date upon which Tenant or its contractors or
agents first enter the Premises for any reason and continuing throughout the
Term and the Extension Term, if so exercised, unless earlier terminated, and
thereafter so long as Tenant is in occupancy of any part of the Premises, the
following insurance protecting Landlord:
(a) "All Risk" insurance on the Building, expressly including
rental interruption coverage in amounts sufficient to prevent Landlord or Tenant
from becoming a co-insurer of any loss, but in any event, in amounts not less
than the actual replacement value determined from time to time of the
improvements on the Premises exclusive of foundations, site preparation and
other non-recurring construction costs all as more particularly described in
Exhibit D attached hereto.
(b) A policy of comprehensive public liability and property
damage insurance with broad form comprehensive general liability endorsement
attached under which Landlord and Tenant (and, at Landlord's request, any
mortgagee of the Premises and any manager of the Parking Lot) are named as
insureds, and under which the insurer provides a contractual liability
endorsement insuring against all cost, expense and liability arising out of or
based upon any and all claims, accidents, injuries and damages described in
Section 6.1, in the broadest form of such coverage from time to time available.
Each such policy shall be non-cancelable and non-amendable (to the extent that
any proposed amendment reduces the limits or the scope of the insurance required
in this Lease) with respect to Landlord without thirty (30) days' prior written
notice to Landlord, and a duplicate certificate thereof shall be delivered to
Landlord. As of the Commencement Date hereof, the minimum limits of liability of
such insurance for each year shall be as set forth in Section l.l, and from time
to time during the Term for such higher limits as may be designated by Landlord,
if any, as are carried customarily in the Boston area with respect to similar
properties. Tenant shall deliver a certificate evidencing such coverage to
Landlord, and at Landlord's request any mortgagee of the premises or any manager
of the Parking Lot, which certificate shall state that the
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coverage may not be amended or cancelled without at least a thirty (30) days'
prior written notice to Landlord, any mortgagee, or any manager of the Parking
Lot, as the case may be.
(c) At any time when Tenant is performing construction work in
or on the Premises, Tenant shall carry builder's risk insurance reasonably
satisfactory to Landlord. Tenant shall provide Landlord and at Landlord's
request any mortgagee, with a certificate evidencing such coverage, which shall
state that the coverage cannot be canceled or amended without thirty (30) days'
prior written notice to Landlord and any mortgagee.
(d) Tenant shall maintain on all its personal property, tenant
improvements, and alterations, in, on, or about the Premises, a policy of
physical hazard insurance on an "all risks" basis covering the perils of fire
and extended coverage, with vandalism and malicious mischief endorsements, to
the extent of their full replacement cost. In the event of casualty causing
damage to the Premises, the proceeds from any such policy shall be used by
Tenant for the replacement of personal property or the restoration of tenant
improvements or alterations, unless this Lease is terminated as a result of the
casualty as hereinafter provided. Tenant shall deliver a certificate evidencing
such coverage to Landlord and at Landlord's request any mortgagee, which shall
state that the coverage may not be amended or canceled without at least thirty
(30) days' prior written notice to Landlord and any mortgagee.
(e) All insurance required to be maintained by Tenant shall be
effected by valid and enforceable policies insured by insurers of recognized
responsibility qualified to do business in The Commonwealth of Massachusetts,
and reasonably satisfactory to Landlord and any mortgagee. Upon the Lease
Commencement Date and thereafter, not less than thirty (30) days prior to the
expiration dates of the existing policies theretofore furnished pursuant to this
paragraph, certificates of insurance shall be delivered by Tenant to Landlord
and at Landlord's request any mortgagee. All such policies shall provide at
least thirty (30) days written notice to Landlord and any mortgagee prior to any
termination thereof.
(f) All policies of insurance required to be maintained by
Tenant shall name Tenant and Landlord as the insured as their respective
interests may appear. If Landlord so requires, the proceeds of insurance
covering damage to the Building (excluding Tenant's trade fixtures and
equipment) shall be payable to the holder of any mortgage as the interests of
such holder may appear pursuant to the standard mortgagee clause. All such
policies shall provide that any loss shall be payable to Landlord or to the
holder of any mortgage notwithstanding any act or negligence of Tenant which
might otherwise result in forfeiture of such insurance. All such policies shall
contain an agreement by the insurers that such policies shall not be cancelled
without at least thirty (30) days prior written notice to the Landlord and to
the holder of any mortgage to whom loss hereunder may be payable.
(g) Landlord may from time to time request Tenant to obtain
additional or alternative insurance. So long as said coverage is reasonable and
customary Tenant shall obtain such insurance.
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(h) In the event Tenant breaches any covenant or condition set
forth in this Section 6.2, then without limiting any other right or remedy and
not withstanding any other provision herein concerning notice or cure of
defaults, Landlord may, after ten (10) days written notice to Tenant, obtain
such insurance as Tenant is required to obtain and maintain, and Tenant shall
pay the cost thereof and Landlord's reasonable expenses thereto to Landlord as
additional rent.
6.3 Tenant's Risk. Tenant agrees that all of the furnishings, fixtures,
equipment, effects and property of every kind, nature and description of Tenant
and of all persons claiming by, through or under Tenant which, during the
continuance of this Lease or any occupancy of the Premises by Tenant or anyone
claiming under Tenant, may be on the Premises or the Parking Lot, shall be at
the sole risk and hazard of Tenant, and if the whole or any part thereof shall
be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of pipes or by theft or from any other cause, no part of said loss or
damage is to be charged to or be borne by Landlord, except that Landlord shall
in no event be exonerated from any liability to Tenant or to any person, for any
injury, loss, damage or liability to the extent such exoneration is prohibited
by law.
6.4 Subrogation. Any insurance carried by either party with respect to
the Premises, or any property therein or occurrences thereon, shall, without
further request by either party, if it can be so written without additional
premium, or with an additional premium which the other party elects to pay,
include a clause or endorsement denying to the insurer rights of subrogation
against the other party to the extent rights have been waived by the insured
prior to occurrence of injury or loss. Each party, notwithstanding any
provisions of this Lease to the contrary, hereby waives any rights of recovery
against the other for injury or loss, including, without limitation, injury or
loss caused by negligence of such other party, due to hazards covered by
insurance containing such clause or endorsement to the extent of the
indemnification received thereunder.
ARTICLE VII
CASUALTY AND EMINENT DOMAIN
7.1 Casualty During Term. If, during the Term, the Building shall be
damaged as a result of casualty, the following provisions shall apply.
(a) The term "Substantially Damaged," as used in this Article
VII, shall refer to damage of such a character that the same cannot, in ordinary
course, reasonably be expected to be repaired within 180 days from the time that
repair work would commence or which would cost in excess of seventy-five
thousand dollars ($75,000) to repair.
(b) If the Building shall be damaged, Tenant shall, subject to
the matters described in subparagraph (c) below and except as otherwise provided
in this Article VII, proceed promptly to restore the Building (consistent,
however, with governmental laws and
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codes then in existence) to substantially the condition thereof at the time of
such damage, but Tenant shall not be responsible for delay in such restoration
which may result from External Causes, as hereinafter defined. For purposes of
this Lease, External Causes shall mean (i) Acts of God, war, civil commotion,
fire, flood or other casualty, strikes or other extraordinary and unforeseeable
labor difficulties, extraordinary and unforeseeable shortages of labor or
materials or equipment, government order or regulations or other cause not
reasonably within Tenant's control and not due to the fault or neglect of
Tenant, and (ii) any act, failure to act or neglect of Landlord or Landlord's
servants, agents, employees, licensees or any person claiming by, through or
under Landlord, which actually delays Tenant in the performance of any act
required to be performed by Tenant under this Lease.
(c) Tenant's restoration obligations described in subparagraph
(b) above are conditioned upon Tenant receiving sufficient proceeds from
insurance covering the Building to repair the same (less any applicable
deductible for which Tenant shall be solely responsible) unless (i) insurance
proceeds are unavailable as a result of Tenant's failure to insure the Building
as required by the terms and conditions of this Lease or (ii) insurance proceeds
are unavailable as a result of Tenant's acts or omissions, in which cases Tenant
shall be obligated to either (x) restore the Building in accordance with the
terms and conditions hereof or (y) pay to or for the account of the Landlord the
full amount of insurance which would have been payable under the last policies
of insurance approved by Landlord. If the Building is not restored or is unable
to be restored, any insurance proceeds which are not on account of Tenant's
removable personal property shall be paid to or for the account of Landlord.
(d) If the Building shall be Substantially Damaged within the
last twelve (12) months of the Term (as the same may have been extended
hereunder), either party shall have the right, by giving notice to the other not
later than 90 days after such damage, to terminate this Lease, whereupon this
Lease shall terminate as of the date of such notice.
7.2 Condemnation. Except as hereinafter provided, if the Premises, or
such portion thereof as to render the balance (if reconstructed to the maximum
extent practicable in the circumstances) unsuitable for Tenant's purposes, shall
be taken by eminent domain, Landlord and Tenant each shall have the right to
terminate this Lease by notice to the other of its desire to do so, provided
that such notice is given not later than thirty (30) days after the effective
date of such taking. Should any part of the Premises be so taken, and should
this Lease be not terminated in accordance with the foregoing provisions,
Landlord agrees to use due diligence to put what may remain of the Premises
(consistent, however, with governmental laws and codes then in existence) into
proper condition for use and occupation as nearly like the condition of the
Premises prior to such taking as shall be practicable, but Landlord shall not be
required to expend funds in excess of the damages recovered by Landlord as a
result of such taking.
7.3 Abatement of Rent. If the Premises shall be damaged by casualty,
the Annual Fixed Rent and additional rent shall be justly and equitably abated
and reduced according to
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the nature and extent of the loss of use thereof suffered by Tenant; and in case
of a taking which permanently reduces the area of the premises, a just
proportion of the Annual Fixed Rent and additional rent shall be so abated and
reduced for the remainder of the Term.
7.4 Condemnation Award. Landlord shall have and hereby reserves and
excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover
for damages to the Premises, and the leasehold interest hereby created, and all
rights to compensation accrued or hereafter to accrue by reason of such taking,
damage or destruction, as aforesaid, and by way of confirming the foregoing,
Tenant hereby grants and assigns to Landlord all rights to such damages or
compensation. Nothing contained herein shall be construed to prevent Tenant from
prosecuting in any condemnation proceedings a claim for relocation expenses,
provided that such action shall not affect the amount of compensation otherwise
recoverable by Landlord from the taking authority pursuant to the preceding
sentence.
ARTICLE VIII
DEFAULT
8.1 Tenant's Default. In the event that:
(a) Tenant shall fail to pay the Annual Fixed Rent, additional
rent or any other charges for which provision is made herein on or before the
date on which the same become due and payable, and such condition continues for
five (5) days after notice from Landlord to Tenant that the same are due, unless
the failure to pay the foregoing items when due occurs in any year during which
Landlord has previously given Tenant notice of default twice, in which event the
failure to pay when due shall constitute an event of default without notice; or
(b) Tenant shall fail to perform or observe any other term or
condition contained in this Lease and Tenant shall not cure such failure within
thirty (30) days after notice from Landlord to Tenant thereof or, if such
failure cannot be cured within such thirty (30) days, if Tenant shall fail to
commence to cure such failure within such thirty (30) days and promptly and
diligently complete the curing of the same, and shall in any event complete the
cure within ninety (90) days; or
(c) The estate hereby created shall be taken on execution or by
other process of law, or if Tenant shall be judicially declared bankrupt or
insolvent according to law, or if any assignment or trust mortgage arrangement,
so-called, shall be made of the property of Tenant for the benefit of creditors,
or if a receiver, guardian, conservator, trustee in bankruptcy or other similar
officer shall be appointed to take charge of all or any substantial part of
Tenant's property by a court of competent jurisdiction, or if a petition shall
be filed by Tenant under any provisions of the federal Bankruptcy Code or any
similar federal or state law now or hereafter enacted or if a petition shall be
filed against Tenant thereunder and the same is not dismissed within ninety (90)
days, or if Tenant shall
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file such a petition, then, in any such case, Landlord and the agents and
servants of Landlord lawfully may, in addition to and not in derogation of any
remedies for any preceding breach of covenant, immediately or at any time
thereafter and without demand or notice and with or without due process of law,
(forcibly if necessary) enter into and upon the Premises or any part thereof by
any lawful means or mail a notice of termination addressed to Tenant at the
Premises, and repossess the same as of Landlord's former estate, and expel
Tenant and those claiming by, through or under Tenant and remove its and their
effects by any lawful means (forcibly if necessary) without being deemed guilty
of any manner of trespass and without prejudice to any remedies that might
otherwise be used for arrears of rent (or prior breach of covenant), and upon
such entry or mailing as aforesaid this Lease shall terminate, as fully and
completely as if such date were the date herein originally fixed for the
expiration of the Term (Tenant hereby waiving any rights of redemption), and
Tenant will then quit and surrender the Premises to Landlord, but Tenant shall
remain liable as hereinafter provided.
8.2 Damages. In the event that this Lease is terminated under any of
the provisions contained in Section 8.1 or shall be otherwise terminated for
breach of any obligation of Tenant, Tenant covenants to pay to Landlord
forthwith on Landlord's demand, as compensation, in addition to any other
amounts to which Landlord may be entitled, an amount equal to the excess, if
any, of the discounted present value of the total rent reserved for the residue
of the Term or the Extension Term if so exercised, over the then discounted
present fair rental value of the Premises for the residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
Annual Fixed Rent and all additional rent, the value of all other considerations
agreed to be paid or performed by Tenant for said residue. Tenant further
covenants as an additional and cumulative obligation after any such termination
to pay punctually to Landlord all the sums and perform all the obligations which
Tenant covenants in this Lease to pay and to perform in the same manner and to
the same extent and at the same time as if this Lease had not been terminated.
In calculating the amounts to be paid by Tenant under the next foregoing
covenant, Tenant shall be credited with (a) any amount received from Tenant
under the first sentence of this Section 8.2; and (b) the net proceeds of any
rent obtained by reletting the Premises, after deducting all Landlord's expenses
in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, fees for legal services and expenses
of preparing the Premises for such reletting, it being agreed that Landlord may
(i) relet the Premises, or any part or parts thereof, for a term or terms which
may, at Landlord's option, be equal to or less than or exceed the period which
would otherwise have constituted the balance of the Term, and may grant such
concessions and free rent as Landlord in its reasonable commercial judgment
considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its
reasonable commercial judgment considers advisable or necessary to relet the
same, and no action of Landlord in accordance with the foregoing or failure to
relet or to collect rent under reletting shall operate or be construed to
release or reduce Tenant's liability as aforesaid. Landlord agrees to use
reasonable efforts to attempt to relet the Premises, but shall be entitled to
seek to rent other properties of Landlord prior to reletting the Premises.
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8.3 Remedies Cumulative. The specific remedies to which Landlord may
resort under the terms of this Lease are cumulative and are not intended to be
exclusive of each other or of any other remedies or means of redress to which
Landlord may be lawfully entitled in case of any breach or threatened breach by
Tenant of any provisions of this Lease. In addition to the other remedies
provided in this Lease, Landlord shall be entitled to the restraint by
injunction of the violation or attempted or threatened violation of any of the
covenants, conditions or provisions of this Lease or to a decree compelling
specific performance of any such covenants, conditions or provisions in the
event a legal remedy will be insufficient. Nothing contained in this Lease shall
limit or prejudice the right of Landlord to prove for and obtain in proceedings
for bankruptcy, insolvency or like proceedings, by reason of the termination of
this Lease, an amount equal to the maximum allowed by any statute or rule of law
in effect at the time when, and governing the proceedings in which, the damages
are to be proved, whether or not the amount be greater, equal to, or less than
the amount of the loss or damages referred to above.
8.4 Landlord's Election. If Tenant shall at any time default in the
performance of any obligation under this Lease, Landlord shall have the right,
but not the obligation, upon fifteen (15) days' notice to Tenant (except in case
of emergency in which case no notice need be given), to perform such obligation,
notwithstanding the fact that no specific provision for such substituted
performance is made in this Lease with respect to such default. In performing
such obligation, Landlord may (but shall not be required to) make any payment of
money or perform any other act, and all sums so paid by Landlord and all
necessary incidental costs and expenses thereof, including, without limitation,
reasonable legal fees in connection with enforcement of its rights under this
Section incurred by Landlord, together with interest on all such amounts at two
percent (2%) above the First National Bank of Boston's large business prime rate
from time to time in effect, shall be deemed to be additional rent under this
Lease and shall be payable to Landlord immediately on demand. Landlord may
exercise its rights under this Section without waiving any other of its rights
or releasing Tenant from any of its obligations under this Lease.
8.5 Effect of Waivers of Default. Any consent or permission by Landlord
to any act or omission which otherwise would be a breach of any covenant or
condition herein, or any waiver by Landlord of the breach of any covenant or
condition herein, shall not in any way be held or construed (unless expressly so
declared) to operate so as to impair the continuing obligation of any covenant
or condition herein, or otherwise, except as to the specific instance, or to
operate to permit similar acts of omission.
8.6 No Waiver. No waiver by Landlord shall be valid unless in writing
and signed by Landlord, and the failure of Landlord to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease shall not be deemed a waiver of such violation nor
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed to have been waiver of such breach by Landlord unless such
waiver be in
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writing signed by the party to be charged. No consent or waiver, express or
implied, by Landlord to or of any breach of any agreement or duty shall be
construed as a waiver or consent to or of any other breach of the same or any
other agreement or duty.
8.7 No Accord and Satisfaction. No acceptance by Landlord of a lesser
sum than the Annual Rent, additional rent or any other charge then due shall be
deemed to be other than on account of the earliest installment of such rent or
charge due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent or other charge be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
8.8 Delivery of Keys. The delivery of keys to any employee of Landlord
or to Landlord's agent or any employee thereof shall not operate as a
termination of this Lease or a surrender of the Premises.
8.9 Attorneys' Fees. Tenant agrees, as additional rent, to pay all
reasonable costs, counsel and other fees incurred by Landlord in connection with
the successful enforcement by Landlord of any obligations of Tenant under this
Lease.
ARTICLE IX
MORTGAGEES' AND GROUND LESSORS' RIGHTS
9.1 Superiority of Lease. Except as provided in Section 9.2 below, this
Lease shall be superior to and shall not be subordinated to any future mortgage,
lien or other encumbrance on the Premises. Upon entry and taking possession of
the Premises for the purpose of foreclosure the holder thereof shall have all
the rights of Landlord. No such holder shall be liable, either as mortgagee or
as assignee, to perform, or be liable in damages for failure to perform, any of
the obligations of Landlord unless and until such holder shall enter and take
possession of the Premises for the purpose of foreclosure. Upon entry for the
purpose of foreclosure, such holder shall be liable to perform all of the
obligations of Landlord accruing from and after such entry, but not before,
provided that a discontinuance of any foreclosure proceeding shall operate as a
transfer of all such liability to the owner of the equity of the Premises.
9.2 Subordination. Tenant shall, at the request of Landlord,
subordinate this Lease and all rights and options granted hereunder to any
mortgage, lien or other encumbrance now or hereafter on the Premises, so that
the lien thereof shall be superior to all rights hereby or hereafter vested in
Tenant, provided that the holder thereof enters into an agreement with Tenant by
the terms of which the holder will agree to recognize the rights of Tenant under
this Lease and to accept Tenant as tenant of the Premises under the terms and
conditions of this Lease in the event of acquisition of title by such holder
through foreclosure proceedings or otherwise and Tenant will agree to recognize
such holder as Landlord in such
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event, which agreement shall be made to expressly bind and inure to the benefit
of the successors and assigns of Tenant and of the holder and upon anyone
purchasing said Premises at any foreclosure sale and upon the further condition
that any such mortgagee agrees in its recognition agreement to make insurance
proceeds available to Tenant provided that Tenant shall be obligated to use such
proceeds solely to repair and restore the Building and provided further that
Tenant agrees to commence repair and restoration as soon as practical after the
event of casualty and to diligently pursue said repair and restoration until
completion.
9.3 Limitation on Tenant's Rights. Notwithstanding Sections 9.1 or 9.2
above, unless the holder of such a mortgage, lien or other encumbrance of the
Premises otherwise agrees in writing, no such holder shall be obligated to
recognize or accept any of Tenant's rights under Section 2.4 of this Lease.
Further, any such holder whose mortgage, or other encumbrance is superior to
this Lease pursuant to the terms of Section 9.1 may elect to subordinate only
those rights of Tenant under this Lease to purchase all or any portion of the
Premises, including, without limitation, the rights of Tenant under Sections 2.4
of this Lease, to such mortgage, or other encumbrance.
9.4 Exercise of Mortgagee's Remedies. Notwithstanding any other
provision of this Lease, in no event shall Tenant's rights under Section 2.4
apply to any exercise of remedies by any mortgagee, or holder of a similar
interest in the Premises, including, without limitation, any foreclosure sale or
any conveyance by deed in lieu of foreclosure.
9.5 Further Assurances. Tenant agrees, upon Landlord's request,
promptly (but in any event within fifteen (15) days after Landlord's request) to
execute and deliver such documents and instruments as Landlord may reasonably
request to carry out the agreements contained in this Article IX.
9.6 No Prepaid Rent. No Annual Fixed Rent, additional rent, or any
other charge payable to Landlord shall be paid more than thirty (30) days prior
to the due date thereof under the terms of this Lease, and payments made in
violation of this provision shall (except to the extent that such payments are
actually received by a mortgagee) be a nullity as against such mortgagee, and
Tenant shall be liable for the amount of such payments to such mortgagee.
ARTICLE X
MISCELLANEOUS
10.1 Estoppel Certificates. Tenant shall, from time to time, within
fifteen (15) days after a written request by Landlord, execute, acknowledge and
deliver to Landlord a statement in writing certifying to Landlord or an
independent third party designated by
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Landlord: that this Lease is unmodified and in full force and effect (or, if
there have been any modifications, that the same is in full force and effect as
modified and stating the modifications); that Tenant has no knowledge of any
defenses, offsets or counterclaims against its obligations to pay the Annual
Fixed Rent and additional rent and to perform its other covenants under this
Lease (or if there are any defenses, offsets, or counterclaims, setting them
forth in reasonable detail); that there are no known uncured defaults of
Landlord or Tenant under this Lease (or if there are known uncured defaults,
setting them forth in reasonable detail); the dates to which the Annual Fixed
Rent, additional rent and other charges payable hereunder have been paid; and
such other matters as Landlord may reasonably request. On the Commencement Date,
Tenant shall, at the request of Landlord, promptly execute, acknowledge and
deliver to Landlord a statement in writing that the Commencement Date has
occurred, stating the date that the Annual Fixed Rent will begin to accrue, and
that Tenant has taken occupancy of the Premises. Any such statement delivered
pursuant to this Section may be relied upon by any mortgagee or purchaser of the
Premises and shall be binding on Tenant.
10.2 No Recordation. Tenant agrees not to record this Lease, but both
parties shall execute and deliver a memorandum of this Lease in form appropriate
for recording, an instrument in such form acknowledging the Commencement Date of
the Term, and if this Lease is terminated before the Term expires, an instrument
in such form acknowledging the date of termination.
10.3 Notices. Whenever any notice, approval, consent, request,
election, offer or acceptance is given or made pursuant to this Lease, it shall
be in writing. Communications and payments shall be addressed, if to Landlord,
at Landlord's Original Address or at such other address as may have been
specified by prior notice to Tenant; and if to Tenant, at Tenant's Original
Address or at such other address as may have been specified by prior notice to
Landlord. Any communication so addressed shall be deemed duly served on the
earlier of (i) the date received, or (ii) the date of delivery, refusal or
non-delivery indicated on the return receipt, if deposited in a United States
Postal Service Depository, postage prepaid, sent by registered or certified
mail, return receipt requested or if sent by a recognized overnight delivery
service providing for a receipt. If Landlord by notice to Tenant at any time
designates some other person to receive payments or notices, all payments or
notices thereafter by Tenant shall be paid or given to the agent designated
until notice to the contrary is received by Tenant from Landlord.
10.4 Successors and Assigns. Subject to Section 6.5 regarding Tenant's
right to assign and sublet, this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the original Landlord named herein and each successive landlord
shall be liable only for obligations accruing during the period of its
ownership.
10.5 Limitation of Liability. The obligations of Landlord shall be
binding upon the assets of Landlord consisting of an equity ownership interest
in the Land and Building,
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but not upon any other assets of Landlord, and neither Tenant, nor anyone
claiming by, under or through Tenant, shall be entitled to obtain any judgment
creating personal liability on the part of Landlord or enforcing any obligations
of Landlord against any assets of Landlord other than an equity ownership in the
Premises.
10.6 Covenants and Conditions. All provisions, whether covenants or
conditions, on the part of Tenant to be performed under this Lease shall be
deemed to be both covenants and conditions.
10.7 Severability. If any term of this Lease, or the application
thereof to any person or circumstances, shall to any extent be invalid or
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term of this Lease shall
be valid and enforceable to the fullest extent permitted by law.
10.8 Quiet Enjoyment. So long as Tenant pays the Annual Fixed Rent and
additional rent and other charges provided for under this Lease, performs all
other covenants of this Lease to be-performed by Tenant and observes all
conditions of this Lease to be observed by Tenant, Tenant shall peaceably and
quietly have, hold and enjoy the Premises for the Term in accordance with the
terms of this Lease against all those claiming by, under or through Landlord.
10.9 Entire Agreement. This Lease contains all of the agreements of the
parties with respect to the subject matter hereof and supersedes all prior
dealings between them with respect to such subject matter, including, without
limitation, any letters of intent.
10.10 Brokers. Tenant represents and warrants that it has had no
dealings with any broker or agent other than Joseph Flaherty of Meredith & Grew
and Robert Richards of Fallon, Hines & O'Connor (collectively, the "Brokers") in
connection with this Lease and shall indemnify and hold harmless Landlord from
any claims for any brokerage commission as a result of the failure of this
warranty. Landlord represents and warrants that it has had no dealings with any
broker or agent other than the Brokers in connection with this Lease and shall
indemnify and hold harmless Tenant from any claims for any brokerage commission
as a result of the failure of this warranty. Tenant acknowledges that the fees
of Robert Richards of Fallon, Hines & O'Connor are its exclusive obligation and
agrees to indemnify and hold Landlord harmless from any claims for brokerage
commission from said broker. Landlord acknowledges that the fees of Joseph
Flaherty of Meredith & Grew are its exclusive obligation and agrees to indemnify
and hold Tenant harmless from any claims for a brokerage commission from said
broker.
10.11 Applicable Law and Construction. This Lease shall be . . governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts. This Lease may be amended, and the provisions hereof may be
waived or modified, only by instruments in writing executed by Landlord and
Tenant. The titles of the several Articles
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and Sections contained herein are for convenience only and shall not be
considered in construing this Lease.
10.12 Time of Essence. Time is of the essence of each provision of this
Lease.
10.13 Authorization. If either party is a corporation, that party shall
deliver to the other party on execution of this Lease a certified copy of a
resolution of its Board of Directors authorizing the execution of this Lease and
naming the officers that are authorized to execute this Lease on behalf of the
corporation.
10.14 Security Deposit. Landlord acknowledges receipt of a security
deposit in the amount of $147,000 as additional security for the full and
faithful performance of Tenant's obligations under this Lease, which security
deposit was tendered by Tenant in connection with its original Sublease of the
second floor on March 1, 1989. Landlord shall pay to Tenant, within ten (10)
days after the execution and delivery of this Lease by all of the parties
hereto, interest accrued on such security deposit in accordance with the terms
of the sublease described above. Such security deposit may be retained by
Landlord during the Term of the Lease and any extensions thereof and may (among
Landlord's other remedies allowed under this Lease and applicable law or equity)
be applied by Landlord toward payment of any damages which result in the event
Tenant fails to perform any of its obligations under this Lease. Provided Tenant
is not in default under the Lease, upon expiration of the Term or in the event
the Term is extended pursuant to Section 2.3 at the expiration of the Extended
Term, Landlord shall pay to Tenant an amount of interest on the security deposit
equivalent to the rate on the United States Treasury Note (as such rate is
reported in the Wall Street Journal) and invest in such Treasury Note in an
amount equal to the security deposit commencing five (5) business days after the
Commencement Date and maturing upon the expiration of the Term for the initial
term of this Lease (or, if no such rate is reported for such period or amount,
for the period an amount nearest thereto). Such rate shall be readjusted in the
event Tenant exercises its option to extend pursuant to Section 2.3.
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<PAGE> 35
TENANT:
Transkaryotic Therapies, Inc.
By: /s/ K. Michael Forrest
----------------------------------
Name: K. Michael Forrest
Title: President and CEO
EXECUTED as a sealed instrument on the day and year first above
written.
LANDLORD:
/s/ Benjamin L. Wilson
------------------------------------------
Benjamin L. WIlson, Jr.
Trust Under the Will of Edward S. Stimpson
/s/ Harry F. Stimpson
------------------------------------------
Trustee as aforesaid and not individually
/s/ Margaret W. Stimpson
------------------------------------------
Trustee as aforesaid and not individually
/s/ Edward Stimpson
------------------------------------------
Trustee as aforesaid and not individually
/s/ Edward Stimpson
------------------------------------------
Trustee as aforesaid and not individually
35
<PAGE> 36
Trust Under the Will of Harry F. Stimpson
/s/ Harry F. Stimpson
------------------------------------------
Harry F. Stimpson, III, Trustee as
aforesaid and not individually
/s/ Harry F. Stimpson
------------------------------------------
Harry F. Stimpson, Jr., individually
36
<PAGE> 37
EXHIBIT A
The land and the building at 195 Albany Street, Cambridge,
Massachusetts assessed by the City of Cambridge as Block 68 Lot 59 with a land
area of 24,477 square feet, being the same L property shown as parcel "B" on a
plan entitled "Plan of Land in Cambridge, Mass.", scale 1"=40', prepared by
Robert E. Anderson Inc., dated November 5, 1981 and the land at the corner of
Albany and Pacific Street, Cambridge, Massachusetts assessed by the City of
Cambridge as Block 68 - Lot 60 with a land area of 30,007 square feet, being the
same property shown as parcel "A" on the above mentioned plan, being further
described in a Notice of Lease recorded with Middlesex South District Registry
of Deeds in Book 14841, Page 555, as follows:
A parcel of land in Cambridge, Massachusetts, with the building thereon
known as 195 Albany Street, containing about 24,519 square feet of land and
shown as Lot B on "Plan of Land in Cambridge, Mass. surveyed for Stimpson
Investment Corp." dated October 22, 1947, by W.A. Mason & Son Co., Surveyors,
recorded with Middlesex South District Deeds as Plan No. 1566 of 1947 at the end
of Book 7206, bounded and described as follows:
SOUTHERLY on said Albany Street, One Hundred Nine
and 4/100 (109.04) feet;
SOUTHWESTERLY on land formerly of said Stimpson Investment
Corp. shown as Lot A on said plan, by a line
running through the middle of the common way
forth-five (45) feet wide shown on said plan,
Two Hundred Thirty and 69/100 (230.69) feet;
NORTHWESTERLY on Purrington Street by the Southeasterly
side-line thereof, One Hundred Nineteen and
73/100 (119.73) feet;
NORTHEASTERLY on land formerly of said Stimpson Investment
Corp. shown as Lot C on said plan, by a line
running through the middle of a twelve inch
brick wall, which shall be and remain a
common party wall, One Hundred Fifteen and
70/100 (115.70) feet;
SOUTHEASTERLY on the same, Seven and 2/100 (7.02) feet; and
NORTHEASTERLY on the same, by a line running through the
middle of the common area shown on said plan,
One Hundred Five and 64/100 (105.64) feet
The fee in Purrington Street is specifically excluded.
37
<PAGE> 38
Together with rights and easements as reserved in deed from Harry S.
Stimpson, III Trustee under the Will of Harry S. Stimpson to Massachusetts
Institute of Technology dated July 31, 1992 and recorded at Book 22453, Page
425.
Together with rights and easements as set forth in a deed from Edward
S. Stimpson et al, dated October 4, 1948 and recorded at Book 7370, Page 304.
38
<PAGE> 39
EXHIBIT B
ENCUMBRANCES
1. Mortgage and Security Agreement from Benjamin L. Wilson Jr.; Harry F.
Stimpson Jr.; Edward S. Stimpson III, Margaret W. Stimpson, Harry F.
Stimpson Jr., and Nicholas U. Sommerfeld trustees of the Edward S.
Stimpson Trust under declaration of trust dated January 24, 1985 and
recorded with the Middlesex County Registry of Deeds in Book 18515,
Page 407; and Harry F. Stimpson III trustee under the will of Harry F.
Stimpson to BayBank Boston, N.A. dated December _, 1993 and recorded
with said registry in Book ______, Page ______.
2. Collateral Assignment of Leases and Rents from Benjamin L. Wilson Jr.;
Harry F. Stimpson Jr.; Edward S. Stimpson III, Margaret W. Stimpson,
Harry F. Stimpson Jr., and Nicholas U. Sommerfeld trustees of the
Edward S. Stimpson Trust under declaration of trust dated January 24,
1985 and recorded with the Middlesex County Registry of Deeds in Book
18515, Page 407; and Harry F. Stimpson III trustee under the will of
Harry F. Stimpson to BayBank Boston, N.A. dated December , 1993 and
recorded with said registry in Book _____, Page _____.
3. Deed of Rights in Purrington Street subject to reservation of rights
from Landlord to Massachusetts Institute of Technology recorded at Book
22453, Page 423 and as shown on plan entitled "Plan of Land, owned by
Massachusetts Institute of Technology dated March 18, 1992 prepared by
Cullinan Engineering co., Inc." and recorded at Book 22453, Page 418.
4. Rights of others in common way as shown on plan entitled "Plan of Land
in Cambridge, Mass., surveyed for Stimpson Investment Corp., dated
October 22, 1947 and recorded at Book 7206 END
5. Rights and Easements set forth in a Deed recorded at Book 7370, Page
304 as disclosed on plan entitled "Plan of Land in Cambridge, Mass.,
surveyed for Stimpson Investment Corp., dated October 22, 1947 and
recorded at Book 7206 END
6. Taxes subsequent to the Commencement Date are a lien but are not yet
due and payable.
7. Rights of others in and to Purrington Street.
8. Terms and provisions of an agreement between Stimpson Terminal Company
and Stimpson Investment Corporation dated October 1, 1948, recorded
with said Deeds in Book 7344, Page 581.
9. Common law party wall rights.
39
<PAGE> 40
EXHIBIT C
Equipment and Other Items to Remain in Former BASF Space
All fixtures and equipment existing physically attached to the First
Floor or Lower Level of the Premises (collectively, the "BASF Space") on October
14, 1993 when the BASF space was viewed by the Tenant and representatives of the
Landlord, all as more particularly described on Schedule 1 hereto, which items
where situated, as of October 14, 1993, in the BASF Space in the various
locations identified on the floor plans included in Schedule 1.
To the extent that the BASF Space is not substantially equipped as
described above on the Commencement Date, the Tenant and the Landlord agree that
if the Landlord does not replace missing equipment with substantially similar
equipment, there will be an equitable adjustment in the Annual Fixed Rent
allocable to the BASF Space based on the fair market value of replacing any
missing fixtures or equipment.
40
<PAGE> 1
EXHIBIT 10.13
SUBLEASE
SUBLEASE made as of April 7, 1992 between MASSACHUSETTS INSTITUTE OF
TECHNOLOGY, c/o Treasurer's Office, 238 Main Street, Cambridge, MA 02142
("Sublandlord") and Transkaryotic Therapies, Inc., 195 Albany Street, Cambridge,
MA 02139 ("Subtenant").
RECITAL
(i) Sublandlord is the tenant under a lease agreement with the Trustee
under the will of Harry S. Stimpson as landlord ("Prime Landlord") for the land
and building at 185 Albany Street, Cambridge, MA (the "Prime Lease"). Subtenant
acknowledges receipt from Sublandlord of a copy of the Prime Lease.
(ii) Sublandlord and Subtenant have agreed that Sublandlord will sublet
to Subtenant a portion of said premises.
NOW THEREFORE, for consideration paid, the parties agree as follows:
1. GRANTING CLAUSE: Sublandlord, which expression shall include its
successors, and assigns where the context so admits, does hereby lease to
Subtenant, which expression shall include its successors and assigns where the
context so admits, and the Subtenant hereby leases the following described
premises:
7123 square feet of space on the second floor of the building at 185
Albany Street, Cambridge, MA as shown on a drawing dated 16 January,
1992 by Rojas Vogt (the "Plan"), a copy of which is annexed to this
agreement.
together with the right to use in common, with others entitled thereto, the
hallways and stairways necessary for access to said subleased premises, and
lavatories nearest thereto.
2. TERM: The term of this sublease shall commence on the last to occur
of substantial completion of the leasehold improvements described in paragraph 7
or May 1, 1992 and shall end on December 31, 1993.
3. BASE RENT: Subtenant shall pay to Sublandlord as base rent for the
term the sum of:
(a) $182,580; and
(b) an amount equal to the product of 1.0966 and the amount expended by
Sublandlord to construct leasehold improvements under paragraph 7, but
not more than $25,000.
<PAGE> 2
Base rent shall be payable in advance in equal monthly installments on the first
day of each month, prorated for any partial month at the beginning or end of the
term.
4. RENT ADJUSTMENT: The Subtenant shall pay to the Sublandlord as
additional rent 15% per cent of any increase in real estate taxes levied against
the land and building, of which the subleased premises are a part, over those
incurred or levied during the municipal fiscal year ending June 30, 1992.
Additional rent under this paragraph shall be pro-rated for any partial fiscal
year during the term. Subtenant shall pay to Sublandlord on each day that
payments of base rent are due hereunder, an amount equal to one-twelfth of the
amount which Sublandlord reasonably estimates to be the total amount of
Subtenant's obligation under this paragraph for that year, such estimate to be
predicated on the previous year's taxes. If the total amount paid hereunder with
respect to any year exceeds the amount due under this paragraph for such year,
such excess shall be credited by Sublandlord against the monthly installments on
account of taxes next falling due, if any, or if no further payments on account
of taxes will become due during the remainder of the term of this sublease,
Sublandlord shall promptly refund the amount of such excess to Subtenant upon
the expiration or termination of this sublease (unless such termination is the
result of a default by Subtenant, in which case such amount shall be set off
against amounts due Sublandlord from Subtenant). If the aggregate amount of
installments paid by Subtenant on account of taxes with respect to any year is
less than Subtenant's pro-rata share thereof for such year, Sublandlord shall
give written notice thereof to Subtenant, and Subtenant shall pay to Sublandlord
the amount of such deficiency, as additional rent, within ten (10) days of
receipt of such notice. Upon request by Subtenant, Sublandlord shall promptly
furnish to Subtenant a copy of the real estate tax bill for the entire premises,
but Subtenant's obligation to make payments on account of taxes shall not be
conditioned upon receipt by Subtenant of this bill.
5. UTILITIES: Sublandlord shall provide pay for all Subtenant's
utilities, water and sewer use charges, except that Subtenant shall provide and
pay for its own cleaning services and rubbish disposal. Sublandlord agrees to
furnish reasonable heat and air conditioning to the subleased premises, the
hallways, stairways and lavatories during normal business hours on regular
business days, all subject to interruption due to any accident, to the making of
repairs, alterations or improvements, to labor difficulties, to trouble in
obtaining fuel, electricity, service or supplies from the sources from which
they are usually obtained for said building, to failure of Prime Landlord to
fulfill its obligations under the Prime Lease, or to any cause beyond the
Sublandlord's control.
6. USE OF SUBLEASED PREMISES: The Subtenant shall use the subleased
premises only for office, research laboratory and related purposes permitted by
federal, state and local laws and ordinances.
COMPLIANCE WITH LAWS, HAZARDOUS MATERIALS: The Subtenant acknowledges that no
trade or occupation shall be conducted in the subleased premises or use made
thereof which will be unlawful, improper, noisy or offensive, or contrary to any
law or any municipal by-law or ordinance in force in the city or town in which
the subleased premises
2
<PAGE> 3
are situated.
Without limiting the foregoing, Subtenant agrees not to use, generate,
treat, store, or dispose of "oil" or "hazardous materials", as defined in M.G.L.
c. 21E, on the Subleased Premises or anywhere in the building or on the land on
which the building is located without prior written notification to Sublandlord
(which notification shall identify the materials which Subtenant proposes to
use), and in all events in full and complete accordance with all Legal
Requirements applicable thereto. Subtenant shall indemnify, defend (with counsel
reasonably satisfactory to Sublandlord) and hold Sublandlord harmless from and
against all claims, liabilities, losses, damages, costs and expenses arising
from such use, generation, treatment, storage, or disposal by Subtenant or by
anyone claiming under Subtenant, which indemnity shall survive the termination
or expiration of this Sublease.
7. SUBLANDLORD'S LEASEHOLD IMPROVEMENTS: Sublandlord will renovate the
subleased premises as shown on the Plan, including constructing an opening
between Subtenant's existing space and the subleased premises, constructing a
new men's room and a new women's room and all demolition and new partition work
to subdivide the subleased premises from the remainder of the second floor of
the building. Sublandlord agrees to commence the work promptly and use
reasonable efforts to complete the leasehold improvements by May 1, 1992.
Sublandlord and Subtenant each appoint the following named person as its
representative, with full authority to act on its behalf in connection with the
construction of said leasehold improvements:
Sublandlord's Representative: Philip A. Trussell
Tenant's Representative: Karen A. Hamlin
8. PARKING: Sublandlord shall provide twenty (20) parking spaces for
automobiles in the parking lot on the adjacent premises known as 195 Albany
Street. Subtenant shall pay to Sublandlord as additional rent the payments due
from Sublandlord to Prime Landlord for real estate taxes, betterments and
maintenance expenses attributable to the parking lot under sections 3.4.2, 3.5.2
and 3.9(b) of the Prime Lease.
9. FIRE INSURANCE: The Subtenant shall not permit any use of the
subleased premises which will make voidable any insurance on the property of
which the subleased premises are a part, or on the contents of said property or
which shall be contrary to any law or regulation from time to time established
by the New England Fire Insurance Rating Association, or any similar body
succeeding to its powers. The Subtenant shall on demand reimburse the
Sublandlord, and all other tenants, all extra insurance premiums caused by the
Subtenant's use of the premises.
10. MAINTENANCE: The Subtenant agrees to maintain the subleased
premises in the same condition as they are at the commencement of the term or as
they may be put in during the term of this sublease, reasonable wear and tear,
damage by fire and other casualty
3
<PAGE> 4
only excepted, and whenever necessary, to replace plate glass and other glass
therein. The Subtenant shall not permit the subleased premises to be overloaded,
damaged, stripped, or defaced, nor suffer any waste. Subtenant shall obtain
written consent of Sublandlord before erecting any sign on the premises.
Occupancy by Subtenant shall be deemed acknowledgement that the subleased
premises are in good and satisfactory condition.
11. ALTERATIONS-ADDITIONS: The Subtenant shall not make Structural
alterations or additions to the subleased premises, but may make non-structural
alterations provided the Sublandlord consents thereto in writing. All such
allowed alterations shall be at Subtenant's expense and shall be in quality at
least equal to the present construction. Subtenant shall not permit any
mechanics liens, or similar liens to remain upon the subleased premises for
labor and material furnished to Subtenant or claimed to have been furnished to
Subtenant in connection with work of any character performed or claimed to have
been performed at the direction of Subtenant and shall cause any such lien to be
released of record forthwith without cost to Sublandlord. Any alterations or
improvements made by the Subtenant shall become the property of the Sublandlord
at the termination of occupancy as provided herein.
12. ASSIGNMENT-SUBLEASING: The Subtenant shall not assign or sublet the
whole or any part of the subleased premises.
13. SUBLANDLORD'S ACCESS: The Sublandlord or agents of the Sublandlord
may, at reasonable times, enter to view the subleased premises and may remove
placards and signs not approved and affixed as herein provided, and make repairs
and alterations as Sublandlord should elect to do and may show the subleased
premises to others, and at any time within three (3) months before the
expiration of the term, may affix to any suitable part of the subleased premises
a notice for letting or selling the subleased premises or property of which the
subleased premises are a part and keep the same so affixed without hindrance or
molestation.
14. INDEMNIFICATION AND LIABILITY: To the maximum extent that this
agreement may be made effective according to law, Subtenant agrees that it will
protect and indemnify Sublandlord and save Sublandlord harmless from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, attorneys' fees and expenses)
imposed upon or incurred by or asserted against Sublandlord by reason of (a) any
accident, injury to or death of persons or damage to or loss of property, by
theft or otherwise, occurring on or about the subleased premises or any part
thereof, arising out of the negligence or willful misconduct of Subtenant or
Subtenant's agents, employees or invitees, or (b) any failure on the part of
Subtenant to perform, fulfill or observe any of Subtenant's representations,
warranties or agreements set forth in this sublease. In case any action, suit or
proceeding is brought against Sublandlord by reason of any such occurrence,
Subtenant, upon Sublandlord's request, shall at Subtenant's expense, cause such
action, suit or proceeding to be resisted and defended by counsel designated by
Sublandlord.
4
<PAGE> 5
15. INCORPORATION OF PRIME LEASE: Except as otherwise expressly
provided herein, all of the terms, covenants and conditions of the Prime Lease
are incorporated herein by reference and made a part hereof with the same force
and effect as if set forth in their entirety, provided that the terms and
conditions hereof shall be controlling whenever the terms and conditions of the
Prime Lease is contradictory to or inconsistent with terms and conditions
hereof, and provided further that references in the Prime Lease to "Landlord"
and "Tenant" shall be deemed to refer to "Sublandlord" and "Subtenant",
respectively, that references therein to "this lease" shall be deemed to refer
to "this sublease" and that references therein to the "leased premises" or
"Premises" shall be deemed to refer to the subleased premises. Notwithstanding
the foregoing incorporation by reference of the terms, covenants and conditions
of the Prime Lease, (a) Section 7.4 of the Prime Lease shall not operate to give
Subtenant any interest in a taking award (but Subtenant shall have the right to
petition the taking authority for a separate award on account of its trade
fixtures and moving expenses, provided that such award does not diminish the
amount of Sublandlord's award); (b) except as set forth herein, Subtenant shall
not have the Option to Extend granted by Section 2.3 of the Prime Lease; (c)
Subtenant shall have no interest in the Right of First Refusal granted by
Section 2.4 of the Prime Lease; and (d) Subtenant shall not be required to
perform any restoration or repair pursuant to Article VII of the Prime Lease in
the event of a casualty or taking. Subtenant represents that it has read and is
familiar with the terms of the Prime Lease.
Subtenant and Sublandlord each covenants and agrees faithfully to
observe and perform all of the terms, covenants and conditions of the Prime
Lease on the part of Tenant and Prime Landlord, respectively, to be performed
with respect to the portion of the "Premises" thereunder comprising the
subleased premises, and neither to do nor cause to be done, nor suffer, nor
permit any act or thing to be done which would or might cause the Prime Lease or
the rights of Sublandlord thereunder to be canceled, terminated, forfeited or
surrendered, or which would or might make Sublandlord liable for any damages,
claims or penalties.
Sublandlord shall not be required to give any consent required or
permitted under the terms of this sublease with respect to any matter on which
the Prime Lease requires the consent of Prime Landlord until it has first
obtained the written consent of the Prime Landlord with respect to such matter.
Sublandlord agrees to use reasonable efforts (not involving the payment of
money) to obtain such consent of the Prime Landlord in a timely manner.
Except as otherwise specifically provided herein or in the Prime Lease,
Sublandlord shall not have any obligation to construct, maintain, alter, restore
or repair the subleased premises, the building, or any parking area or other
facility or improvement appurtenant thereto or to provide Subtenant with any
service of any kind or description whatsoever, nor shall Sublandlord be
responsible for the performance of Prime Landlord's obligations under the Prime
Lease or be liable in damages or otherwise for any negligence of Prime Landlord
or for any damage or injury suffered by Subtenant as a result of any act or
failure to act by
5
<PAGE> 6
Prime Landlord or any default by Prime Landlord in fulfilling its obligations
under the Prime Lease. Sublandlord agrees to act promptly and use reasonable
efforts (not involving the payment of money) to cause Prime Landlord to perform
its obligations under the Prime Lease in a timely manner.
If the Prime Lease is terminated pursuant to any provision of the Prime
Lease or otherwise, (i) this sublease shall terminate simultaneously therewith
and (ii) any unearned rent paid in advance shall be refunded to Subtenant unless
such termination was the result of a breach by Subtenant of any term, covenant
or condition of this sublease; provided, however, that if the Prime Lease
terminates during the sublease term by reason of the purchase by Sublandlord of
the Premises as described in the Prime Lease, this sublease shall remain in full
force and effect. Sublandlord agrees not to voluntarily default on or terminate
the Prime Lease; provided, however, that failure to extend the Prime Lease at
the end of its initial term shall not be deemed a voluntary termination under
this sentence.
16. SUBTENANT'S LIABILITY INSURANCE: The Subtenant shall maintain with
respect to the subleased premises and the property, of which the subleased
premises are a part, comprehensive public liability insurance in the amount of
$1,000,000 with property damage insurance in limits of $1,000,000 in responsible
companies qualified to do business in Massachusetts and in good standing therein
insuring the Sublandlord as well as Subtenant against injury to persons or
damage to property as provided. The Subtenant shall deposit with the Sublandlord
certificates for such insurance at or prior to the commencement of the term, and
thereafter within thirty (30) days prior to the expiration of any such policies.
All such insurance certificates shall provide that such policies shall not be
canceled without at least ten (10) days' prior written notice to each assured
named therein.
17. DEFAULT AND BANKRUPTCY: In the event that:
(a) the Subtenant shall default in the payment of any installment of
rent or other sum herein specified and such default shall continue for five (5)
days after written notice thereof; or
(b) the Subtenant shall default in the observance or performance of any
other of the Subtenant's covenants, agreements, or obligations hereunder and
such default shall not be corrected within thirty (30) days after written notice
thereof or, if such failure cannot be cured within such thirty (30) days, if
Subtenant shall fail to commence to cure such failure within such thirty (30)
days and promptly and diligently complete the curing of the same, and shall in
any event complete the cure within 180 days or, if such default is also a
default under the Prime Lease, shall fail to complete the curing of the same
prior to the expiration of the grace period allowed thereunder; or
(c) the Subtenant shall be declared bankrupt or insolvent according to
law, or, if any assignment shall be made of Subtenant's property for the benefit
of creditors;
6
<PAGE> 7
then the Sublandlord shall have the right thereafter, while such default
continues, to re-enter and take complete possession of the subleased premises,
to declare the term of this sublease ended, and remove the Subtenant's effects,
without prejudice to any remedies which might be otherwise used for arrears of
rent or other default. The Subtenant shall indemnify the Sublandlord against all
loss of rent and other payments which the Sublandlord may incur by reason of
such termination during the residue of the term. If the Subtenant shall default,
after reasonable notice thereof, in the observance or performance of any
conditions or covenants on Subtenant's part to be observed or performed under or
by virtue of any of the provisions in any article of this sublease, the
Sublandlord, without being under any obligation to do so and without thereby
waiving such default, may remedy such default for the account and at the expense
of the Subtenant. If the Sublandlord makes any expenditures or incurs any
obligations for the payment of money in connection therewith, including but not
limited to, reasonable attorney's fees in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations incurred shall be paid
to the Sublandlord by the Subtenant as additional rent.
If a default occurs, Sublandlord may at its option immediately or at
any time thereafter exercise any one or more of the remedies provided in the
Prime Lease with respect to a default thereunder by Tenant.
All sums not paid by Subtenant when due hereunder (regardless of
whether or not the applicable grace period has expired shall bear interest at a
rate equal to the lesser of (i) 1-1/2% per month or (ii) the highest rate
permitted by law, which interest shall be payable to Sublandlord as additional
rent hereunder immediately upon demand.
18. NOTICE: Any notice from the Sublandlord to the Subtenant relating
to the subleased premises or to the occupancy thereof, shall be deemed duly
served, if left at the subleased premises addressed to the Subtenant, or if
mailed to the address set forth in the preamble of this sublease, registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Subtenant. Any notice from the Subtenant to the Sublandlord relating to the
subleased premises or to the occupancy thereof, shall be deemed duly served, if
mailed to the Sublandlord by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Sublandlord at such address as the
Sublandlord may from time to time advise in writing. All rent and notices shall
be paid and sent to the Sublandlord at the address set forth in the preamble to
this sublease.
19. SURRENDER: The Subtenant shall at the expiration or other
termination of this sublease remove all Subtenant's goods and effects from the
subleased premises, (including, without hereby limiting the generality of the
foregoing, all signs and lettering affixed or painted by the Subtenant, either
inside or outside the subleased premises). Subtenant shall deliver to the
Sublandlord the subleased premises and all keys, locks thereto, and other
fixtures connected therewith and all alterations and additions made to or upon
the subleased premises, in the same condition as they were at the commencement
of the term, or as they were put in during the term thereof, reasonable wear and
tear and damage by fire or
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<PAGE> 8
other casualty only excepted. In the event of the Subtenant's failure to remove
any of Subtenant's property from the premises, Sublandlord is hereby authorized,
without liability to Subtenant for loss or damage thereto, and at the sole risk
of Subtenant, to remove and store any of the property at Subtenant's expense, or
to retain same under Sublandlord's control or to sell at public or private sale,
without notice any or all of the property not so removed and to apply the net
proceeds of such sale to the payment of any sum due hereunder, or to destroy
such property.
20. OPTIONS TO EXTEND: Subtenant shall have the following options to
extend this sublease by delivering a notice thereof to Sublandlord not later
than four months prior to the expiration of the term or extension thereof:
(a) from January 1, 1994 to February 28, 1997 on the same terms and
conditions as set forth above, except that base rent due under paragraph 3 shall
be $9725 per month, and Subtenant shall pay as additional rent (as well as the
additional rent required to be paid above) 15% of any amount expended by
Sublandlord for heat, electricity, water and sewer services to the building in
excess of $132,000 for each calendar year during the term. Additional rent under
this subparagraph shall be pro-rated for any partial year during the term.
Subtenant shall pay to Sublandlord on each day that payments of base rent are
due hereunder, an amount equal to one-twelfth of the amount which Sublandlord
reasonably estimates to be the total amount of Subtenant's obligation under this
subparagraph for that year (on the basis of the most current information
concerning operating expenses). If the total amount paid hereunder with respect
to any year exceeds the amount due under this subparagraph for such year, such
excess shall be credited by Sublandlord against the monthly installments on
account of operating next falling due, if any, or if no further payments on
account of operating will become due during the remainder of the term of this
sublease, Sublandlord shall promptly refund the amount of such excess to
Subtenant upon the expiration or termination of this sublease (unless such
termination is the result of a default by Subtenant, in which case such amount
shall be set off against amounts due Sublandlord from Subtenant). If the
aggregate amount of installments paid by Subtenant on account of operating
expenses with respect to any year is less than Subtenant's pro-rata share
thereof for such year, Sublandlord shall give written notice thereof to
Subtenant, and Subtenant shall pay to Sublandlord the amount of such deficiency,
as additional rent, within ten (10) days of receipt of such notice. Upon request
by Subtenant, Sublandlord shall promptly furnish to Subtenant reasonably
available information supporting the charge for operating expenses hereunder,
but Subtenant's obligation to make payments on account of operating expenses
shall not be conditioned upon receipt by Subtenant of this information; and
(b) provided that Sublandlord shall have exercised its right to extend
the Prime Lease under Section 2.3 thereof, from March 1, 1997 to February 28,
2002 on the same terms as set forth in subparagraph (a) above, except that
$5935.83 of the base rent due each month under paragraph 3 (as modified by
subparagraph (a)) shall be increased (but not deceased) by taking into account
one half of the increase in the CPI-U most recently determined in November, 1996
("CPI-96") over the CPI-U most recently determined in
8
<PAGE> 9
November, 1993 ("CPI-93") so that monthly base rent shall be determined by the
following formula:
$3789.17 + $5935.83 x [1 + 1/2 (CPI-96 - CPI-93)]
CPI-93
As used herein CPI-U means the Consumer Price Index for All Urban Consumers
(CPI-U), All Items, for the Boston metropolitan area, published by the United
States Department of Labor, Bureau of Labor Statistics or any revision thereof
or substitute therefor published by that Bureau, or, if there ceases to be any
such publication, any other comparable index selected by Landlord. If the CPI-U
is changed so that the base year differs from that in effect on the date hereof,
the CPI-U shall be converted in accordance with the conversion factor published
by the United States Department of labor, Bureau of Labor Statistics.
21. BROKERS: Subtenant represents and warrants that it has had no
dealings with any broker or agent in connection with this sublease and shall
indemnify and hold harmless sublandlord for any brokerage commission as a result
of the failure of this warranty; Sublandlord represents and warrants that it has
had no dealings with any broker or agent and shall indemnify and hold harmless
subtenant from any claims for any brokerage commission as a result of the
failure of this warranty.
22. NOTICE OF LEASE: Sublandlord agrees to execute and deliver to
Subtenant a notice of this sublease containing the information required by
Massachusetts General Laws chapter 183, section 4.
Executed as a sealed instrument as of the date first above written.
SUBLANDLORD:
Massachusetts Institute of Technology
By: /s/ Philip A. Trussell
---------------------------------------
Philip A. Trussell, Director of Real
Estate
SUBTENANT:
Transkaryotic Therapies, Inc.
By: /s/ K. Michael Forrest
----------------------------------------
K. Michael Forrest, President and CEO
9
<PAGE> 10
NOTICE OF SUBLEASE
In accordance with the provisions of Massachusetts General Laws,
Chapter 183, Section 4, as amended, NOTICE is hereby given of the following
described sublease:
PARTIES TO THE SUBLEASE:
Sublessor: Massachusetts Institute of Technology
Suite 200
238 Main Street
Cambridge, MA 02142
Sublessee: Transkaryotic Therapies, Inc.
195 Albany Street
Cambridge, MA 02139
DATE OF EXECUTION OF THE LEASE: 4/8, 1992
- ------------------------------
DESCRIPTION, IN THE FORM
CONTAINED IN SUCH SUBLEASE
OF THE PREMISES DEMISED: 7123 square feet of space on the
second floor of the building
at 185 Albany Street, Cambridge,
MA as shown on a drawing dated 16
January, 1992 by Rojas Vogt, being
part of the premises described on
Exhibit A.
COMMENCEMENT DATE AND
TERM OF LEASE: The Term commences May 1,
- ------------- 1992 and expires
February 28, 1997.
RIGHTS OF EXTENSION OR
RENEWAL: One five year extension term.
WITNESS the execution hereof, under seal by the parties to the
sublease.
SUBLESSOR:
Massachusetts Institute of Technology
(Seal) By: /s/ Philip A. Trussell
--------------------------------------------
Philip A. Trussell, its Director of Real
Estate
<PAGE> 11
SUBLESSEE:
Transkaryotic Therapies, Inc.
(Seal) By: /s/ K. Michael Forrest
---------------------------------------------
COMMONWEALTH OF MASSACHUSETTS
, ss 4/8, 1992
Then personally appeared the above named K. Michael Forrest and acknowledged the
foregoing to be the free act and deed of Transkaryotic Therapies, Inc., before
me,
/s/ Joan M. Ventola
---------------------------------------------
Notary Public
My commission expires:
COMMONWEALTH OF MASSACHUSETTS
, ss. 4/8, 1992
Then personally appeared the above named Philip A. Trussell, and acknowledged
the foregoing to be the free act and deed of Massachusetts Institute of
Technology, before me,
/s/ Joan M. Ventola
---------------------------------------------
Notary Public
My commission expires:
<PAGE> 12
Exhibit A
A parcel of land with the buildings thereon in Cambridge, Middlesex County,
Massachusetts:
That certain parcel of land known as and numbered 185-187 Albany
Street, being Lot C on "Plan of Land in Cambridge, Mass. surveyed for
Stimpson Investment Corp." dated October 22, 1947 by W.A. Mason & Son,
Co., Surveyors, recorded with Middlesex South District Registry of
Deeds as plan No. 1566 of 1947 at the end of Book 7206 and bounded:
SOUTHEASTERLY by said Albany Street by two courses
one hundred and five and 29/100
(105.29) feet; and five and 11/100
(5.11) feet, respectively;
SOUTHWESTERLY by Lot B as shown on said plan by a line
running through the middle of the common
area shown on said plan, one hundred and
five and 64/100 (105.64) feet;
NORTHWESTERLY by the same, seven and 02/100 (7.02) feet;
SOUTHWESTERLY by the same, by a line running through the
middle of a 12" brick wall, which shall be
and remain a common party wall, one hundred
fifteen and 70/100 (115.70) feet;
NORTHWESTERLY by Purrington Street, by the southeasterly
sideline thereof, one hundred ten and
24/100 (110.24) feet; and
NORTHEASTERLY by land now or formerly of Edward S.
Stimpson, et al Trustees two hundred
twenty one and 28/100 (221.28) feet.
Containing according to said Plan 22,903 square feet.
The above-described premises are subject to and have the benefit of the
following rights and easements (in common with the Landlord and others):
1. 25 foot wide right of way and platform rights on the
northeasterly side of Lot C, as set forth in deed from Harry
F. Stimpson to Stimpson Investment Corporation dated January
12, 1925 recorded with said Deeds in Book 4806, Page 506.
2. Lot A is subject to and with the benefit of the right to use,
in common with the owners and occupants of Lot B, the common
way forty-five (45) feet wide for all purposes for which
private ways may be used in said Cambridge, as set forth in a
deed from Stimpson Investment Corporation to Edward S.
Stimpson,
<PAGE> 13
et al dated October 4, 1948 recorded with said Deeds in Book
7370, Page 304.
3. The right of Lot B to use the common area shown on said plan
and the platform therein for the purpose of loading and
unloading vehicles and for ingress and egress to and from Lot
B and the right of Lot B to use for all purposes of ingress
and egress the stairway situated in the building upon Lot C
and adjacent to said common area leading from the second floor
to the basement; all as set forth in said deed recorded in
Book 7370, Page 304.
The subject premises are subject to the following:
1. Deed of spur track rights on Purrington Street as set forth in
a Deed from Harry F. Stimpson to Stimpson Terminal Company
dated May 12, 1919 recorded with said Deeds in Book 4262, Page
482.
2. Deed of spur track rights as set forth in a Deed from Stimpson
Terminal Company to Stimpson Investment Corporation dated
October 1, 1948 and recorded with said Deeds in Book 7344,
Page 581.
<PAGE> 14
LEASE BETWEEN TRUST UNDER THE WILL OF
HARRY F. STIMPSON AS LANDLORD
AND MASSACHUSETTS INSTITUTE OF TECHNOLOGY
AS TENANT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Reference Data........................................................... 1
1.1 Subjects Referred To..................................................... 1
1.2 Exhibits................................................................. 2
ARTICLE II Premises and Term........................................................ 3
2.1 Premises................................................................. 3
2.1.1 Parking............................................................ 3
2.1.2 Landlord's Reservations............................................ 3
2.2 Term..................................................................... 3
2.3 Option to Extend......................................................... 3
2.4 Right of First Refusal................................................... 4
ARTICLE III Rent..................................................................... 4
3.1 Annual Fixed Rent........................................................ 4
3.2 Adjustment and Annual Fixed Rent......................................... 5
3.3 Additional Rent.......................................................... 5
3.4 Real Estate Taxes........................................................ 6
3.4.1 Premises........................................................... 6
3.4.2 Parking Lot........................................................ 6
3.5 Betterment Assessments................................................... 6
3.5.1 Premises........................................................... 7
3.5.2 Parking Lot........................................................ 7
3.6 Tax Fund Payments........................................................ 7
3.7 Insurance................................................................ 8
3.8 Utilities and Services................................................... 8
3.9 Additional Expenses...................................................... 8
3.10 Late Charge.............................................................. 8
3.11 Net Lease................................................................ 8
3.12 No Offsets............................................................... 8
ARTICLE IV Maintenance and Repair, Alterations; Surrender; Holding Over............. 9
4.1 Tenant's Maintenance and Repair.......................................... 9
4.2 Landlord's Maintenance and Repair........................................ 9
4.3 Alterations.............................................................. 9
</TABLE>
i
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4.4 Alterations Requirements................................................. 10
4.5 Entry by Landlord........................................................ 10
4.6 Surrender................................................................ 10
4.7 Holding Over............................................................. 11
4.8 Tenant's Initial Repairs................................................. 11
ARTICLE V Additional Tenant Covenants.............................................. 11
5.1 Payment and Performance.................................................. 11
5.2 Use...................................................................... 12
5.3 Compliance with Law...................................................... 12
5.4 Personal Property Taxes.................................................. 12
5.5 Assignment and Subletting................................................ 12
ARTICLE VI Indemnity and Insurance.................................................. 14
6.1 Indemnity................................................................ 14
6.2 Tenant's Insurance....................................................... 14
6.3 Tenant's Risk............................................................ 16
6.4 Subrogation.............................................................. 16
ARTICLE VII Casualty and Eminent Domain.................................................... 16
7.1 Casualty During Term..................................................... 16
7.2 Condemnation............................................................. 18
7.3 Abatement of Rent........................................................ 18
7.4 Condemnation Award....................................................... 19
ARTICLE VIII Default....................................................................... 19
8.1 Tenant's Default......................................................... 19
8.2 Damages.................................................................. 20
8.3 Remedies Cumulative...................................................... 20
8.4 Landlord's Election...................................................... 21
8.5 Effect of Waivers of Default............................................. 21
8.6 No Waiver................................................................ 21
8.7 No Accord and Satisfaction............................................... 22
8.8 Delivery of Keys......................................................... 22
8.9 Attorneys' Fees.......................................................... 22
ARTICLE IX Mortgagees' and Ground Lessors' Rights.......................................... 22
9.1 Superiority of Lease..................................................... 22
9.2 Subordination............................................................ 22
9.3 Limitation on Tenant's Rights............................................ 23
9.4 Exercise of Mortgagee's Remedies......................................... 23
9.5 Further Assurances....................................................... 23
9.6 No Prepaid Rent.......................................................... 23
</TABLE>
ii
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE X Miscellaneous............................................................ 23
10.1 Estoppel Certificates.................................................... 23
10.2 No Recordation........................................................... 24
10.3 Notices.................................................................. 24
10.4 Successors and Assigns................................................... 24
10.5 Limitation of Liability.................................................. 24
10.6 Covenants and Conditions................................................. 24
10.7 Severability............................................................. 24
10.8 Quiet Enjoyment.......................................................... 25
10.9 Entire Agreement......................................................... 25
10.10 Brokers.................................................................. 25
10.11 Applicable Law and Construction.......................................... 25
10.12 Time of Essence.......................................................... 25
10.13 Authorization............................................................ 25
</TABLE>
iii
<PAGE> 17
THIS LEASE is made and entered into as of the 17th day of January, 1992
by and between HARRY F. STIMPSON, III, as Trustee under the will of Harry F.
Stimpson, late of Brookline, Norfolk Probate No. 99898 ("Landlord"), and
MASSACHUSETTS INSTITUTE OF TECHNOLOGY, a Massachusetts corporation ("Tenant").
In consideration of the mutual covenants herein set forth, Landlord and
Tenant do hereby agree to the terms and conditions set forth in this Lease.
ARTICLE I
Reference Data
1.1 Subjects Referred To. Each reference in this Lease to any of the following
shall be construed to incorporate the following data:
Annual Fixed Rent: $_________ as that amount may be
increased pursuant to the terms of
this Lease.
Building: The building known as and numbered
185 Albany Street, Cambridge,
Massachusetts
Lease Commencement Date: January 17, 1992
Extension Term: One (1) period of five (5) years
which shall become effective only
if Tenant exercises its option to
extend the Term as provided in
Section 2.3.
External Causes: See Section 7.1
Initial Public Liability Insurance Limits:
Bodily Injury: $1,000,000
Property Damage: $1,000,000
Umbrella Coverage: $5,000,000
Land: A parcel of land located at 185
Albany Street, Cambridge,
Massachusetts, as more particularly
described on Exhibit A attached
hereto
Landlord's Address: c/o Stimpson Properties Co., Inc.
P.O. Box 81386
Wellesley Hills, MA 02181
Landlord's Representative: Edward S. Stimpson, III
<PAGE> 18
Lease Year: Any period of one year during the
Term commencing on the Lease
Commencement Date or on any
anniversary thereof.
Original Term: A five (5) year, one month and 12
day period starting on the Lease.
Commencement Date and expiring on
February 28, 1997, unless extended
pursuant to Section 2.3.
Permitted Uses: See Section 5.2
Premises: The Land and the Building.
Rent Commencement Date: February 15, 1992
Tenant's Address: 238 Main Street
Suite 200
Cambridge, MA 02142
Attn: Philip A. Trussell, Director
of Real Estate,
Associate Treasurer
Tenant's Representative: Philip A. Trussell
Term: The Original Term and any Extension
Term as to which Tenant properly
exercises its option to extend as
set forth in Section 2.3.
1.2 Exhibits. The exhibits listed below are attached hereto and
incorporated in this Lease by reference and are to be construed as a part of
this Lease:
Exhibit A - Legal Description of Land
2
<PAGE> 19
ARTICLE II
Premises and Term
2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, to have and to hold for the Term provided for by Section 2.2
below, subject to and with the benefit of the terms, covenants, conditions and
provisions of this Lease, the Premises. Tenant is fully aware of the existing
conditions of the Premises and the Building and agrees to take the same on a
strictly "as is" basis without warranty or representation express or implied and
without any further obligation whatsoever on the part of Landlord with respect
thereto provided, however, Landlord acknowledges that Tenant has not had an
opportunity to test the air conditioning system.
2.1.1 Parking. Landlord shall provide twenty (20) parking spaces for
use by Tenant and Tenant's employees in the parking lot located on the corner of
Albany Street and Pacific Street, Cambridge, Massachusetts (the "Parking Lot")
at no additional cost to Tenant other than Annual Fixed Rent and additional
rent. Tenant acknowledges that the Parking Lot is presently managed by
Landlord's tenant at 195 Albany Street (the "Adjacent Building"), BASF
Corporation. Tenant agrees that it and all persons claiming by, through and
under it shall at times cooperate with said BASF Corporation and its successors,
from time to time, as manager of the Parking Lot, as to use of said Parking Lot
and shall abide by the rules and regulations imposed on the use of the Parking
Lot, from time to time. Landlord shall have the right to designate, from time to
time, and to change, from time to time, the designation of parking spaces within
the Parking Lot. Tenant shall use the designated parking spaces only for parking
of employee's private vehicles during business hours. Landlord shall be
responsible for assuring that the Parking Lot is properly maintained.
2.1.2 Landlord's Reservations. Landlord reserves the right, from time
to time, without unreasonable interference with Tenant's use to gain access to
the Premises for any purpose permitted under this Lease as provided in Section
4.5 below.
2.2 Term. The Term of this Lease shall begin on the Lease Commencement
Date and continue for the Original Term, unless sooner terminated as provided in
this Lease.
2.3 Option to Extend. Tenant shall have the option, to be exercised as
hereinafter provided, to extend the Original Term of this Lease for a period of
five (5) years following the expiration of the Original Term (the "Extension
Term"), upon the condition that there is at the time of exercise no then
existing default in the performance of any covenant or condition of this Lease
on the part of Tenant to be performed or observed as to which a notice Of
default has been given to Tenant and that this Lease otherwise remains in full
force and effect. The Extension Term shall be upon the same terms and conditions
as provided in this Lease, except for the Annual Fixed Rent, which shall be
determined in accordance with Section 3.2 below and except that Tenant shall
have no further option to extend the Term. Tenant shall exercise this option to
extend for an Extension Term by notifying Landlord in writing at least one year
prior to the expiration of the Original Term. Upon such exercise, this Lease
shall be deemed to be
3
<PAGE> 20
so extended for the Extension Term without the execution of any further lease or
other instrument.
2.4 Right of First Refusal. Provided that this Lease remains in full
force and effect and provided that Tenant is not in default hereunder, Tenant
shall have a right of first refusal with respect to the Property (the "Right of
First Refusal") during the Original Term and the Extension Term on the following
terms and conditions. If Landlord determines to sell all or any part of the
Premises at any time during the Original Term or the Extension Term, Landlord
shall notify Tenant of the terms on which Landlord will be willing to sell. If
Tenant, within fifteen (15) days after receipt of Landlord's notice, indicates
in writing its agreement to purchase the Premises or such part of the Premises
on the terms stated in Landlord's notice, Landlord shall sell and convey the
Premises or the part of the Premises to Tenant on the terms stated in the
notice. If Tenant so agrees to purchase the Premises or part of the Premises and
thereafter defaults in its obligation to purchase the Premises, the Right of
First Refusal shall expire and terminate for all purposes. If Tenant does not
indicate its agreement within said fifteen (15) days, Landlord thereafter shall
have the right to sell and convey the Premises or such part of the Premises to a
third party on the same terms or other terms no more favorable to the buyer than
those stated e fin the notice, and upon the closing of such sale, the Right of
First Refusal shall expire and terminate for all purposes. If Landlord does not
so sell and convey the Premises or such part of the Premises within one hundred
eighty (180) days, any further transaction shall be deemed a new determination
by Landlord to sell and convey the Premises or such part of the Premises and the
provisions of this Section 2.4 shall be applicable. If Tenant purchases all of
the Premises, this Lease shall terminate on the date title vests in Tenant, and
Landlord shall remit to Tenant all prepaid and unearned rent. If Tenant
purchases a part of the Premises, this Lease as to the part purchased shall
terminate on the date title vests in Tenant, and the Annual Fixed Rent and
additional rent shall be reduced so that Tenant continues to pay $_________ per
square foot, triple net, during the Original Term, or the corresponding rent per
square foot during the Extension Term based on the adjustment contained in
Section 3.2 below. The Right of First Refusal shall not apply to a transfer
(either outright or in trust) between any of those persons who constitute the
beneficial owners or principals of Landlord, the relatives by blood or marriage
of any of those persons, or to a legal entity (i.e., partnership, corporation,
trust, or like entity) when the majority interest is owned by all or some of
such persons, or any transfer by gift or for nominal consideration, so long as
the Premises continue to be subject to this Lease, including this Section 2.4.
An affidavit of an officer, trustee or principal of Landlord recorded with the
Middlesex South District Registry of Deeds stating that the provisions of this
Section 2.4 have been complied with or met as to any conveyance of all or any
portion of the Premises shall conclusively establish compliance therewith as to
any third party or parties.
ARTICLE III
Rent
3.1 Annual Fixed Rent. Tenant covenants and agrees to pay rent to
Landlord, at the
4
<PAGE> 21
Original Address of Landlord or such other place as Landlord may by notice in
writing to Tenant from time to time direct during the Term, in the amount of the
Annual Fixed Rent at the applicable rate, in equal monthly installments in
advance on the first day of each calendar month during the Term, commencing on
the Rent Commencement Date. Annual Fixed Rent for any portion of a calendar
month at the beginning or the end of such period shall be prorated accordingly.
3.2 Adjustment and Annual Fixed Rent. The Annual Fixed Rent provided
for in Section 1.1 shall be subject to adjustment at the commencement of the
first year of the Extension Term ("the Adjustment Date"), if Tenant exercises
its option to extend as set forth in Section 2.3, as follows:
The base for computing the adjustment is the Consumer Price Index for
All Urban Consumers - All Items for the Boston metropolitan area, published by
the United States Department of Labor, Bureau of Labor Statistics ("Index"),
which is in effect on the date of this Lease ("Beginning Index"). The Index
published most immediately preceding the Adjustment Date ("Extension Index") is
to be used in determining the amount of the adjustment. If the Extension Index
has increased over the Beginning Index, the Annual Fixed Rent for the Extension
Term shall be set as follows:
(a) the Annual Fixed Rent set forth in Section 1.1 shall be multiplied
by the figure obtained by dividing the Extension Index by the Beginning Index
(the total of which shall be the "CPI Rent"); and
(b) the difference between the CPI Rent and the Annual Fixed Rent set
forth in Section 1.1 shall be multiplied by fifty percent (50%), the product of
which shall be added to Annual Fixed Rent set forth in Section 1.1 to determine
Annual Fixed Rent for the Extension Term.
In no event whatsoever shall the Annual Fixed Rent for the Extension
Term be less than the Annual Fixed Rent set forth in Section 1.1. On adjustment
of the Annual Fixed Rent as provided in this Section 3.2, the Landlord shall
notify the Tenant of the Annual Fixed Rent for the Extension Term and the
parties hereto shall immediately execute an amendment to this Lease stating the
new Annual Fixed Rent. If the Index is changed so that the base year differs
from that in effect when the Term commences, the Index shall be converted in
accordance with the conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised
during the Term, such other government index or computation with which it is
replaced shall be used in order to obtain substantially the same result as would
be obtained if the Index had not been discontinued or revised.
3.3 Additional Rent. In order that the Annual Fixed Rent shall be
absolutely net to Landlord, Tenant covenants and agrees to pay, as additional
rent, all real estate taxes, betterment assessments, insurance costs, and
charges for utilities and other services with respect to the Premises as
hereinafter provided in this Lease. All amounts payable by Tenant to Landlord
5
<PAGE> 22
under this Lease shall be deemed to be additional rent and shall be paid within
ten (10) days of the date of invoices therefor.
3.4 Real Estate Taxes.
3.4.1 Premises. Tenant shall pay, directly to the authority charged
with collection thereof, all taxes levied or assessed by or becoming payable to
any municipality or any other governmental authority having jurisdiction of the
Premises, for or in respect of the ownership, leasing or operation of the
Premises or which may become a lien on the Premises, for each tax period wholly
included in the Term, all such payments to be made on or before the last date on
which the same may be paid without interest or penalty; provided that for any
fraction of a tax period included in the Term at the beginning (beginning on the
Rent Commencement Date) or end thereof, Tenant shall pay to Landlord, within ten
(10) days after receipt of Landlord's invoice therefor, the fraction of taxes so
levied or assessed or becoming payable which is allocable to such included
period. Tenant shall promptly after payment thereof furnish to Landlord
reasonable evidence of each such payment. If Tenant shall deem itself aggrieved
by any such tax or charge and shall elect to contest the payment thereof, Tenant
may make such payment under protest or, if postponement of such payment does not
jeopardize Landlord's title to the premises, Tenant may postpone the same,
provided that Tenant shall secure such payment and the interest and penalties
thereon by causing to be delivered to Landlord cash or other adequate security
in form and amount reasonably satisfactory to Landlord, which amount shall not
be greater than one hundred and twenty-five per cent (125%) of the contested tax
or charge, costs and penalties. Tenant agrees to save Landlord harmless from all
costs and expenses incurred on account of Tenant's participation in any such
contest. Any contest brought by Tenant shall be conducted jointly with any other
parties, including Landlord, subject to such taxes. Landlord shall cooperate
with Tenant with respect to such conduct so far as reasonably necessary at no
cost to Landlord. Either party paying any tax shall be entitled to recover,
receive and retain for its own benefit all abatements and refunds of such tax,
unless it has previously been reimbursed by the other party. Neither party shall
discontinue any abatement proceedings begun by it without first giving the other
party written notice of its intent so to do and reasonable opportunity to be
substituted in such proceedings. Nothing contained in this Lease shall, however,
require Tenant to pay any franchise, corporate, estate, inheritance, succession,
capital levy or transfer tax of Landlord, or any net income, profits or revenue
tax or charge upon the rent payable by Tenant under this Lease. Without limiting
the generality of the foregoing, Landlord agrees, upon execution hereof, and at
no out-of-pocket cost to Landlord, to assist Tenant in pursuing a tax abatement
from the City of Cambridge.
3.4.2 Parking Lot. Tenant shall pay to Landlord as additional rent,
Tenant's proportionate share of real estate taxes applicable to the Parking Lot.
For purposes of this section, Tenant's proportionate share of taxes for the
Parking Lot shall equal the number of parking spaces to which Tenant is entitled
over the total number of parking spaces in the Parking Lot attributable to the
Building.
3.5 Betterment Assessments.
6
<PAGE> 23
3.5.1 Premises. Tenant shall pay, directly to the authority charged
with the collection thereof, each installment of any public, special or
betterment assessment levied or assessed by or becoming payable to any
municipality or other governmental authority having jurisdiction of the
Premises, for or in respect of the ownership, leasing or operation of the
Premises or which may become a lien on the Premises, for each installment period
wholly included in the Term, all such payments to be made on or before the last
date on which the same may be made without interest or penalty; provided that
for any fraction of an installment period included in the Term at the beginning
(beginning on the Rent Commencement Date) or end thereof, Tenant shall pay to
Landlord, within ten (10) days after receipt of Landlord's invoice therefor, the
fraction of such installment which is allocable to such included period.
Landlord shall elect to pay any such assessment in installments over the longest
period permitted by law. Tenant shall promptly after payment thereof furnish to
Landlord reasonable evidence of each such payment. If Tenant shall deem itself
aggrieved by any such assessment and shall elect to contest the payment thereof,
Tenant may make such payment under protest. Tenant agrees to save Landlord
harmless from all costs and expenses incurred on account of Tenant's
participation in any such contest. Any contest brought by Tenant shall be
conducted jointly with any other parties, including Landlord, subject to such
assessments. Landlord shall cooperate with Tenant with respect to such conduct
so far as reasonably necessary at no cost to Landlord. Either party paying any
assessment shall be entitled to recover, receive and retain for its own benefit
all abatements and refunds of such assessment, unless it has previously been
reimbursed by the other party. Neither party shall discontinue any contest
proceedings begun by it without first giving the other party written notice of
its intent so to do and reasonable opportunity to be substituted in such
proceedings. Landlord shall promptly furnish to Tenant a copy of any notice of
any public, special or betterment assessment received by Landlord concerning the
Premises.
3.5.2 Parking Lot. Tenant shall pay to Landlord as additional rent,
Tenant's proportionate share of betterment assessments applicable to the Parking
Lot. For purposes of this Section, Tenant's proportionate share of betterment
assessments applicable to the Parking Lot shall equal the number of parking
spaces to which Tenant is entitled over the total number of parking spaces in
the Parking Lot attributable to the Building.
3.6 Tax Fund Payments. If any holder of a first mortgage on the
Premises requires Landlord to make tax fund payments to it, Tenant shall, as
additional rent, on the first day of each month of the Term, make Tax Fund
Payments to Landlord. "Tax Fund Payments" refer to such payments as the holder
of such first Mortgage shall reasonably determine to be sufficient to provide in
the aggregate a fund adequate to pay all taxes and assessments referred to in
Sections 3.4 and 3.5 when they become due and payable. If the aggregate of said
Tax Fund Payments is not adequate to pay all said taxes and assessments, Tenant
shall pay to Landlord the amount by which such aggregate is less than the amount
equal to all said taxes and assessments, such payment to be made on or before
the later of (a) ten (10) days after receipt by Tenant of written notice from
Landlord of such amount, or (b) the 30th day prior to the last day on which such
taxes and assessments may be paid without interest or penalty If Tenant shall
have made the aforesaid payments, Landlord shall on or before the last day on
which the same may be paid without interest or penalty, pay or cause to be paid
to the proper authority charged with the
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collection thereof all taxes and assessments referred to in said Sections 3.4
and 3.5 and furnish Tenant, upon request, with reasonable evidence of such
payment. Any balance remaining after such payment by Landlord shall be accounted
for to Tenant annually. All payments made by Tenant pursuant to this Section 3.6
shall to the extent thereof relieve Tenant of its obligations under said
Sections 3.4 and 3.5.
3.7 Insurance. Tenant shall obtain insurance for the Premises as
provided for by Section 6.2.
3.8 Utilities and Services. Tenant shall pay directly to the proper
authorities charged with the collection thereof all charges for water, sewer,
gas, electricity, telephone and other utilities or services used or consumed on
the Premises during the Term.
3.9 Additional Expenses. Tenant shall pay to Landlord as additional
rent:
(a) One half of all maintenance expenses attributable to the
courtyard which the Premises shares with the Adjacent Building including,
without limitation, landscape, snowplowing and any and all other costs and
expenses attributable to the maintenance of said courtyard provided, however,
that if Tenant so elects, Tenant may so notify Landlord in writing and undertake
said maintenance at its sole cost and expense.
(b) Tenant's proportionate share of maintenance expenses
attributable to the Parking Lot. For purposes of this Section, Tenant's
proportionate share of maintenance expenses applicable to the Parking Lot shall
equal the number of parking spaces to which Tenant is entitled over the total
number of parking spaces in the Parking Lot.
3.10 Late Charge. In the event that any payment of Annual Fixed Rent or
additional rent shall remain unpaid for a period of five (5) business days after
due, there shall become due to Landlord from Tenant, as additional rent and as
compensation for Landlord's extra administrative costs in investigating the
circumstances of late rent, a late charge of three percent (3%) of the amount
overdue. Payment of any late charge shall not constitute a cure of any default
with respect to the amount as to which such late charge is paid.
3.11 Net Lease. It is understood and agreed that this Lease is a net
lease and that the Annual Fixed Rent is absolutely net to Landlord, excepting
only capital improvements and repairs for which Tenant is not required to pay
under this Lease.
3.12 No Offsets. All payments to be made by Tenant to Landlord in
accordance with the terms of this Lease, including, but not limited to, Annual
Fixed Rent and additional rent, shall be paid by Tenant without offset,
abatement or deduction.
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ARTICLE IV
Maintenance and Repair, Alterations;
Surrender; Holding Over
4.1 Tenant's Maintenance and Repair. Except as otherwise provided in
Section 4.2 or Article VII below, Tenant, at Tenant's expense, shall keep neat
and clean and maintain and repair in good order, condition and repair the
Premises and every part thereof (including, without limitation, ordinary
maintenance of the electrical, plumbing and HVAC systems and equipment serving
the Premises and the other fixtures and equipment therein and the cleaning of
and trash removal from the Premises), reasonable wear and tear excepted. Without
limiting the generality of the foregoing, Tenant, at Tenant's expense, shall
provide or cause to be provided landscape care to and maintenance of the Land,
and maintenance (including snow plowing) of the walkways, driveways and parking
areas on the Premises. Tenant hereby covenants and agrees to remove all trash
from the Premises in compliance with all federal, state, and local laws, rules,
ordinances and regulations. If maintenance or repairs are required to be done or
made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant do
or make the same forthwith, and, if Tenant refuses or neglects to commence such
repairs and complete the same with reasonable dispatch after such demand,
Landlord may (but shall not be required to do so) make or cause such repairs to
be made and shall not be responsible to Tenant for any loss or damage that may
accrue to Tenant's property or business by reason thereof, so long as Landlord
makes or causes such repairs to be made in a reasonable manner. If Landlord
makes or causes such repairs to be made, Tenant agrees that Tenant will
forthwith on demand pay to Landlord the cost thereof as additional rent pursuant
to Section 8.4. Tenant shall receive the benefit of all warranties and
guaranties with respect to those portions of the Premises that Tenant is
obligated to maintain, as well as, at Tenant's election and Tenant's expense,
any options to extend or similar rights with respect to the warranties and
guaranties.
4.2 Landlord's Maintenance and Repair. Except as otherwise provided in
Article VII below, Landlord, at Landlord's expense, shall keep, maintain and
repair in good order, condition and repair the structural parts of the Building,
which structural parts include only the foundations, bearing and exterior walls
(excluding glass and doors), subflooring, support columns, support beams and
roof (excluding skylights), except for any damage caused to any of the foregoing
by the negligence or neglect of Tenant, its agents, contractors, employees or
invitees. Landlord shall be responsible for the cost of replacing major
mechanical systems in the event that they are no longer serviceable or damaged
beyond repair, except for any damage caused by the negligence or neglect of
Tenant, its agents, contractors, employees or invitees. Landlord shall be
responsible for compliance with laws and regulations regarding the transformer
located in the basement of the Building in the event said transformer contains
PCB's. Except as set forth in this Section 4.2 and in Article VII below, Tenant
shall be responsible for the cost of all replacements and repairs to the
Premises.
4.3 Alterations. Tenant shall not make alterations and additions to the
Premises except in accordance with plans and specifications therefor first
approved by Landlord, which approval shall be requested in writing and shall not
be unreasonably withheld or delayed.
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Landlord shall not be deemed unreasonable for withholding approval of any
alterations or additions that (a) involve or might affect any structural or
exterior element of the Building, or any area or element outside of the
Premises, or (b) will require unusual expense to readapt the Premises to normal
office or laboratory use on expiration or earlier termination of the Term,
unless Tenant first provides assurances acceptable to Landlord that such
readaptation will be made prior to such expiration or termination without
expense to Landlord. All alterations and additions shall become part of the
Building and shall become the property of Landlord upon expiration or earlier
termination of the Term unless Landlord shall notify Tenant in writing that the
same must be removed. Such notice by Landlord shall be given no later than in
response to Tenant's written request for Landlord's approval of the alterations
or additions prior to their installation, and in such event Tenant shall remove
such alterations or additions and any damage caused by removal shall be repaired
by Tenant at Tenant's expense upon expiration or earlier termination of this
Lease.
4.4 Alterations Requirements. Landlord may (but shall not be obligated
to) inspect any construction work of Tenant under this Lease at reasonable
times. Tenant, before its work is started, shall secure all licenses and permits
necessary therefor; deliver to Landlord a statement of the names of all its
contractors and subcontractors; and shall cause each contractor to carry such
workmen's compensation insurance and comprehensive general public liability
insurance as Landlord may reasonably require insuring Landlord and Tenant as
well as the contractors, and to deliver to Landlord certificates of all such
insurance. Tenant agrees to pay promptly when due the entire cost of any work
done on or about the Premises by or on behalf of Tenant, its agents, employees
or independent contractors, not to cause or permit any liens for labor or
materials performed or furnished in connection therewith to attach to the
Premises and promptly to discharge any such liens which may so attach. Tenant
shall hold Landlord harmless and indemnify Landlord from and against all injury,
loss, claims or damage to any person or property occasioned by or growing out of
any such work.
4.5 Entry by Landlord. Tenant shall permit Landlord and its agents,
after reasonable notice (except in the case of emergencies), to enter the
Premises at all reasonable hours for the purpose of inspecting, testing, or of
making repairs to the same, or otherwise carrying out Landlord's rights or
obligations under this Lease, and to show the Premises to prospective tenants
during the year preceding expiration of the Term and to prospective purchasers
and mortgagees at all reasonable times. Landlord shall not be liable to Tenant
for any compensation or reduction of rent by reason of inconvenience or
annoyance or for loss of business arising from Landlord or its agents entering
the Premises for any purposes authorized in this Lease.
4.6 Surrender. Tenant shall surrender the Premises, and all alterations
and additions thereto as hereinabove provided, at the expiration or earlier
termination of the Term, in the condition described in Section 4.1, first
removing all personal property and trade fixtures of Tenant and, to the extent
specified by Landlord by notice to Tenant as hereinabove provided or as
otherwise agreed by Landlord and Tenant, alterations and additions made by
Tenant, and repairing any damage caused by such removal and restoring the
Premises and leaving them clean and neat. Tenant waives all claims against
Landlord for any damage to Tenant resulting from
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Landlord's retention or disposition of any of Tenant's personal property or
trade fixtures remaining on the Premises on expiration or earlier termination of
the Term. Tenant shall be liable to Landlord for Landlord's costs for storing,
removing, and disposing of any alterations or additions that Tenant is obligated
to remove but fails to remove or Tenant's personal property or trade fixtures.
If Tenant fails to surrender the Premises to Landlord on expiration or earlier
termination of the Term in the condition and otherwise as required by this
Section, Tenant shall hold Landlord harmless from all damages resulting from
Tenant's failure to surrender the Premises, including, without limitation,
claims made by succeeding tenants resulting from Tenant's failure to surrender
the Premises.
4.7 Holding Over. If Tenant with Landlord's consent remains in
possession of the Premises after expiration or earlier termination of Term, such
possession by Tenant shall be deemed to be a month-to-month tenancy terminable
on thirty days' notice given at any time by either party. During any such
month-to-month tenancy, Tenant shall pay all rent and other sums required by
this Lease, and all provisions of this Lease, except those pertaining to Term,
option(s) to extend and right(s) of first refusal, shall apply to the
month-to-month tenancy, and the monthly base rent (excluding additional rent)
shall be one-twelfth of two times the Annual Fixed Rent upon expiration or
termination of the Term. This provision shall not be construed as a consent by
Landlord to any such holding over.
4.8 Tenant's Initial Repairs. To induce Tenant to accept the Premises
in "as is" condition, Landlord hereby agrees to pay Tenant $___________ on or
before April 1, 1992 on account of punch-list repairs which Tenant requested by
letter from Tenant's Representative to Landlord's Representative dated January
2, 1992 (the "Letter"). Tenant shall make such repairs in accordance with
Section 4.4 above and in accordance with applicable federal, state and local
laws, rules and ordinances and notwithstanding any provision of this Lease to
the contrary, Landlord shall not be responsible for the repairs listed in the
Letter. In addition, Tenant hereby agrees to upgrade electrical switch gear
located on the Premises, and Landlord hereby agrees to reimburse Tenant for the
actual cost of said upgrade up to $_________, which cost will be paid by
Landlord within ten (10) days after Tenant provides Landlord with copies of
waivers of liens executed by applicable contractor(s) and/or utility companies
and paid invoices for the cost of said work. In no event shall Landlord be
obligated to pay more than $__________ for the upgrade of the electrical switch
gear.
ARTICLE V
Additional Tenant Covenants
5.1 Payment and Performance. Tenant agrees to pay when due all Annual
Fixed Rent and additional rent, all charges for utility and other services
rendered to the Premises, and all other monies required to be paid by Tenant
pursuant to this Lease and to promptly perform all obligations of Tenant
pursuant to this Lease. Annual Fixed Rent and additional rent payments required
under this Lease shall be deemed sufficiently paid if made by check collected on
first presentation.
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5.2 Use. Tenant agrees, from the Commencement Date to the end of the
Term, to use and occupy the Premises for general office, research, manufacturing
or other purposes permitted by federal, state and local laws and ordinances.
Tenant agrees not to injure, overload or deface the Premises, nor to permit on
the Premises any auction sale. Tenant shall comply with all requirements of
public authorities and of the Board of Fire Underwriters in connection with
methods of storage, use and disposal. Tenant shall not permit in the Premises
any nuisance, or the emission from the Premises of any objectionable noise, odor
or vibration, nor use or devote the Premises or any part thereof for any purpose
which is contrary to law or ordinance or liable to invalidate or increase
premiums for any insurance on the Building or its contents or liable to render
necessary any unpermitted alteration or addition to the Building, nor commit or
permit any waste in or with respect to the Premises, nor generate, store or
dispose of any oil, toxic substances, hazardous wastes, or hazardous materials
(each a, "Hazardous Material"), or permit the same in or on the Premises
provided for under this Lease, except incompliance with applicable law. Tenant
shall not dump, flush or in any way introduce any Hazardous Material into
septic, sewage or other waste disposal systems serving the Premises provided for
under this Lease. Tenant shall permit Landlord to enter the Premises for the
purpose of testing and to determine Tenant's compliance with the covenants
herein contained, each such entry shall be made in accordance with Section 4.5
above. Tenant will indemnify the Landlord and its successors and assigns against
all claims, loss, cost, and expenses, including, without limitation, attorneys'
fees, incurred as a result of any contamination of the Building or any portion
of the Land with Hazardous Materials by the Tenant or Tenant's contractors,
licensees, invitees, agents, servants or employees, and this indemnity shall
survive the expiration of the Term or any other termination of this Lease.
5.3 Compliance with Law. Tenant agrees to comply with all federal,
state and local laws, regulations, ordinances, executive orders and similar
requirements applicable to the Premises or the Parking Lot or Tenant's use
thereof in effect from time to time during the Term, including, without
limitation, City of Cambridge ordinances with respect to smoking, animal
experiments and hazardous waste and any such requirements pertaining to
employment opportunity, anti-discrimination and affirmative action. Tenant
agrees, at its sole cost, to comply with the aforesaid laws regulations and
ordinances, and to keep the Premises equipped with all safety appliances
required by law or ordinance or any other regulations of any public authority,
and to procure all licenses and permits required for the Premises or Tenant's
use thereof, it being understood that the foregoing provisions shall not be
construed to broaden in any way the Permitted Uses.
5.4 Personal Property Taxes. Tenant agrees to pay promptly when due all
taxes which may be imposed upon personal property (including, without
limitation, fixtures and equipment) on the Premises.
5.5 Assignment and Subletting. Any assignment, mortgage, pledge,
hypothecation or transfer of all or any portion of Tenant's interest under this
Lease or any subletting of all or any portion of the Premises shall be subject
to the provisions of this Section.
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(a) Tenant agrees not to assign, mortgage, pledge, hypothecate
or otherwise transfer this Lease, or sublet (which term, without limitation,
shall include granting of concessions, licenses and the like) the whole or any
part of the Premises without, in each instance, having first received the
consent of Landlord, which shall not be unreasonably withheld. Any assignment or
sublease made without such consent shall be void, and in any case where Landlord
consents to such assignment or subletting or such assignment is permitted by
this Lease, Tenant shall remain fully and primarily liable for the obligations
of the tenant hereunder, including, without limitation, the obligation to pay
Annual Fixed Rent and additional rent as provided under this Lease. Any transfer
of control of Tenant by means of one or more transfers of stock or partnership
interests shall be deemed an assignment for purposes of this Section.
(b) In the event that any sublease or assignment is permitted
under this Lease (other than the sublease described in subsection (d) below),
Tenant shall pay to Landlord as additional rent one half of the amount Tenant
receives from any subtenant or assignee as rent, additional rent or other form
of compensation or reimbursement in excess of (i) the Annual Fixed Rent,
additional rent and other monies otherwise due to Landlord pursuant to this
Lease (allocable in the case of a sublease to that portion of the Premises being
subleased), and (ii) any reasonable expenses incurred and paid by Tenant in
connection with such sublease or assignment such as brokerage commissions, fees
for legal services and expenses of preparing the Premises for occupancy by such
subtenant or assignee.
(c) If this Lease is assigned, or if the Premises or any part
thereof is sublet or occupied by anyone other than Tenant, Landlord may, at any
time and from time to time, collect rent and other charges from the assignee,
sublessee or occupant and apply the net amount collected to the rent and other
charges herein reserved, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of the prohibitions contained in this
Section 5.5, or the acceptance of the assignee, sublessee or occupant as a
tenant, or a release of Tenant from the further performance by Tenant of the
covenants herein contained to be performed by Tenant. The consent by Landlord to
one assignment or subletting shall not be construed to relieve Tenant from
obtaining the express consent in writing of Landlord to any further assignment
or subletting.
(d) Landlord hereby consents to Tenant entering into, a
sublease with Transkaryotic Therapies, Inc. ("TKT"), a Delaware corporation, for
up to 8,000 square feet of space within the Premises for a term not to exceed
the expiration of the Original Term, which such term may be extended for the
Extension Term if Tenant exercises its option to extend under Section 2.3 above.
Tenant and/or TKT shall be responsible for the cost of subdividing space
according to applicable code requirements. The sublease shall be in form and
substance satisfactory to Tenant. Landlord hereby grants Tenant a limited right
of entry, after reasonable written notice, to the Adjacent Building to create an
entry way to the Subleased Premises.
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ARTICLE VI
Indemnity and Insurance
6.1 Indemnity. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to defend with counsel, save harmless,
and indemnify Landlord and any manager or cotenant of the Parking Lot, from time
to time, from any liability or injury, loss, accident or damage to any person or
property, and from any claims, actions, proceedings and expenses and costs in
connection therewith (including without limitation attorneys' fees and costs),
(i) caused by Tenant, its contractors, agents, employees or invitees, or arising
or claimed to arise from any use made or thing done or occurring on the Premises
or the Parking Lot during the Term, or the Extension Term, or during Tenant's
possession of any part of the Premises not due to the willful act, active
negligence or other misconduct of Landlord or any manager or cotenant of the
Parking Lot and their respective contractors, agents and employees or (ii)
resulting from the failure of Tenant to perform and discharge its covenants and
obligations under this Lease, including, without limitation, the violation of
any environmental law or other governmental requirement by Tenant. This
indemnity and hold harmless agreement shall include indemnity against all costs,
expenses and liabilities incurred in connection with any such claim or
proceeding brought thereon, and the defense thereof, and shall survive
expiration or termination of the Term.
6.2 Tenant's Insurance. Tenant shall, as additional rent, take out and
maintain in full force from the date upon which Tenant or its contractors or
agents first enter the Premises for any reason and continuing throughout the
Term and the Extension Term, if so exercised, unless earlier terminated, and
thereafter so long as Tenant is in occupancy of any part of the Premises, the
following insurance protecting Landlord:
(a) Fire and extended coverage insurance in an amount at least
equal to the full insurable value of the Building on the Premises, expressly
including rental interrupting coverage in amounts sufficient to prevent Landlord
or Tenant from becoming a co-insurer of any loss, but in any event, in amounts
not less than the actual replacement value determined from time to time of the
improvements on the Premises exclusive of foundations, site preparation and
other non-recurring construction costs.
(b) A policy of comprehensive public liability and property
damage insurance with broad form comprehensive general liability endorsement
attached under which Landlord and Tenant (and, at Landlord's request, any
mortgagee of the Premises or any manager or co-tenant of the Parking Lot) are
named as insureds, and under which the insurer provides a contractual liability
endorsement insuring against all cost, expense and liability arising out of or
based upon any and all claims, accidents, injuries and damages described in
Section 6.1, in the broadest form of such coverage from time to time available.
Each such policy shall be noncancellable and non-amendable (to the extent that
any proposed amendment reduces the limits or the scope of the insurance required
in this Lease) with respect to Landlord without thirty (30) days' prior notice
to Landlord, and a duplicate certificate thereof shall be delivered to Landlord.
As of the Commencement Date hereof, the minimum limits of liability of such
insurance for each year
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shall be as set forth in Section 1.1, and from time to time during the Term for
such higher limits as may be designated by Landlord, if any, as are carried
customarily in the Boston area with respect to similar properties. Tenant shall
deliver a certificate evidencing such coverage to Landlord, and at Landlord's
request any mortgagee of the premises or any manager or co-tenant of the Parking
Lot, which certificate shall state that the coverage may not be amended or
cancelled without at least a thirty (30) days' prior written notice to Landlord,
any mortgagee, or any manager or co-tenant of the Parking Lot, as the case may
be.
(c) At any time when Tenant is performing construction work in
or on the Premises, Tenant shall carry builder's risk insurance reasonably
satisfactory to Landlord. Tenant shall provide Landlord with a certificate
evidencing such coverage, which shall state that the coverage cannot be canceled
or amended without thirty (30) days' prior notice to Landlord.
(d) Tenant shall maintain on all its personal property, tenant
improvements, and alterations, in, on, or about the Premises, a policy of
physical hazard insurance on an "all risks" basis covering the perils of fire
and extended coverage, with vandalism and malicious mischief endorsements, to
the extent of their full replacement cost. In the event of casualty causing
damage to the Premises, the proceeds from any such policy shall be used by
Tenant for the replacement of personal property or the restoration of tenant
improvements or alterations, unless this Lease is terminated as a result of the
casualty as hereinafter provided. Tenant shall deliver a certificate evidencing
such coverage to Landlord, which shall state that the coverage may not be
amended or canceled without at least thirty (30) days' prior written notice to
Landlord.
(e) All insurance required to be maintained by Tenant shall be
effected by valid and enforceable policies insured by insurers of recognized
responsibility qualified to do business in The Commonwealth of Massachusetts,
and satisfactory to Landlord, except that Tenant may provide satisfactory
evidence of coverage through its wholly owned, captive insurance company, Barton
Insurance Co. Upon the Lease Commencement Date and thereafter, not less than
fifteen (15) days prior to the expiration dates of the existing policies
theretofore furnished pursuant to this paragraph, certificates of insurance
shall be delivered by Tenant to Landlord. All such policies shall provide at
least thirty (30) days written notice to Landlord prior to any termination
thereof.
(f) All policies of insurance required to be maintained by
Tenant shall name Tenant and Landlord as the insured as their respective
interests may appear. If Landlord so requires, the proceeds of insurance shall
be payable to the holder of any mortgage as the interests of such holder may
appear pursuant to the standard mortgagee clause. All such policies shall
provide that any loss shall be payable to landlord or to the holder of any
mortgage notwithstanding any act or negligence of Tenant which might otherwise
result in forfeiture of such insurance. All such policies shall contain an
agreement by the insurers that such policies shall not be cancelled without at
least ten (10) days' prior written notice to the Landlord and to the holder of
any mortgage to whom loss hereunder may be payable.
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(g) In the event Tenant breaches any covenant or condition set
forth in this Section 6.2, then without limiting any other right or remedy and
not withstanding any other provision herein concerning notice or cure of
defaults, Landlord may, after ten (10) days' written notice to Tenant, obtain
such insurance as Tenant is required to obtain and maintain, and Tenant shall
pay the cost thereof and Landlord's reasonable expenses thereto to Landlord as
additional rent.
6.3 Tenant's Risk. Tenant agrees that all of the furnishings, fixtures,
equipment, effects and property of every kind, nature and description of Tenant
and of all persons claiming by, through or under Tenant which, during the
continuance of this Lease or any occupancy of the Premises by Tenant or anyone
claiming under Tenant, may be on the Premises or the Parking Lot, shall be at
the sole risk and hazard of Tenant, and if the whole or any part thereof shall
be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of pipes or by theft or from any other cause, no part of said loss or
damage is to be charged to or be borne by Landlord, except that Landlord shall
in no event be exonerated from any liability to Tenant or to any person, for any
injury, loss, damage or liability to the extent such exoneration is prohibited
by law.
6.4 Subrogation. Any insurance carried by either party with respect to
the Premises, or any property therein or occurrences thereon, shall, without
further request by either party, if it can be so written without additional
premium, or with an additional premium which the other party elects to pay,
include a clause or endorsement denying to the insurer rights of subrogation
against the other party to the extent rights have been waived by the insured
prior to occurrence of injury or loss. Each party, notwithstanding any
provisions of this Lease to the contrary, hereby waives any rights of recovery
against the other for injury or loss, including, without limitation, injury or
loss caused by negligence of such other party, due to hazards covered by
insurance containing such clause or endorsement to the extent of the
indemnification received thereunder.
ARTICLE VII
Casualty and Eminent Domain
7.1 Casualty During Term. If, during the Term, the Building shall be
damaged as a result of casualty, the following provisions shall apply.
(a) The term "Substantially Damaged", as used in this Article
VII, shall refer to damage of such a character that the same cannot, in ordinary
course, reasonably be expected to be repaired within ninety (90) days from the
time that repair work would commence.
(b) If the Building shall be partially damaged (as
distinguished from "Substantially Damaged"), Landlord shall proceed promptly to
restore the Building (consistent, however, with governmental laws and codes then
in existence) to substantially the condition thereof at the time of such damage,
but Landlord shall not be responsible for delay in such
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restoration which may result from External Causes, as hereinafter defined. For
purposes of this Lease, External Causes shall mean (i) Acts of God, war, civil
commotion, fire, flood or other casualty, strikes or other extraordinary and
unforeseeable labor difficulties, extraordinary and unforeseeable shortages of
labor or materials or equipment, government order or regulations or other cause
not reasonably within Landlord's control and not due to the fault or neglect of
Landlord, and (ii) any act, failure to act or neglect of Tenant or Tenant's
servants, agents, employees, licensees or any person claiming by, through or
under Tenant, which actually delays Landlord in the performance of any act
required to be performed by Landlord under this Lease. For purposes of this
Lease, partially damaged shall mean damage to the Premises by casualty, the cost
of repair of which shall not exceed Seven Thousand Five Hundred dollars
($7,500).
(c) If the Building shall be damaged as a result of a
casualty, the cost of repair of which is reasonably expected to exceed Seven
Thousand Five Hundred dollars ($7,500), but which in the ordinary course can
reasonably be expected to be repaired within ninety (90) days from the time the
repair work would commence, which casualty is covered by insurance attributable
to the Premises, and the holder of any mortgage on the Premises allows the
insurance proceeds to be applied to the restoration of the Building, Landlord
shall, promptly after such casualty and after the determination of the net
amount of insurance proceeds available to Landlord, expend so much as may be
necessary of such net amount to restore (consistent, however, with governmental
laws and codes then in existence) the Building to substantially the condition
thereof at the time of such Casualty, except as provided in paragraph (e) below.
If the Building shall be so damaged by a casualty (i) not covered by insurance
attributable to the Premises, or (ii) the holder of any mortgage on the Premises
does not allow the insurance proceeds to be applied to the restoration of the
Building, or (iii) the net amount of insurance proceeds available to Landlord
are insufficient to cover the cost of restoring the Building in the reasonable
estimate of Landlord, then in any such case, Landlord may, but shall have no
obligation to, restore the Building. If Landlord elects not to restore the
Building, Landlord shall terminate this Lease by giving notice to Tenant within
a reasonable time after Landlord has determined the net amount of insurance
proceeds available to Landlord and the estimated cost of such restoration. If
Landlord shall notify Tenant that Landlord does not intend to restore the
Building and intends to terminate this Lease by reason of the unavailability or
insufficiency of insurance proceeds, Tenant shall have the right to contribute
to Landlord the amount of such insufficiency, and if Tenant shall promptly
notify Landlord of Tenant's desire to contribute such insufficiency and provide
Landlord with security for Tenant undertaking in this respect reasonably
satisfactory to Landlord, this Lease shall not terminate, and Landlord shall
restore the Building unless otherwise excused and permitted to terminate by some
other provision of this Article VIII.
(d) If the Building shall be Substantially Damaged by a
casualty covered by insurance attributable to the Premises, and the holder of
any mortgage on the Premises allows the insurance proceeds to be applied to the
restoration of the Building, Landlord shall, promptly after such casualty and
the determination of the net amount of insurance proceeds available to Landlord,
expend so much as may be necessary of such net amount to restore (consistent,
however, with governmental laws and codes then in existence) the Building to
substantially the
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<PAGE> 34
condition thereof at the time of such casualty, except as provided in paragraph
(e) below. If the Building shall be Substantially Damaged by a casualty (i) not
covered by insurance attributable to the Premises, or (ii) the holder of any
mortgage on the Premises does not allow the insurance proceeds to be applied to
the restoration of the Building, or (iii) the net amount of insurance proceeds
available to Landlord are insufficient to cover the cost of restoring the
Building in the reasonable estimate of Landlord, then, in any such case,
Landlord may, but shall have no obligation to, restore the Building. If Landlord
elects not to restore the Building, Landlord shall terminate this Lease by
giving notice to Tenant within a reasonable time after Landlord has determined
the net amount of insurance proceeds available to Landlord and the estimated
cost of such restoration. If Landlord shall notify Tenant that Landlord does not
intend to restore the Building and intends to terminate this Lease by reason of
the unavailability or insufficiency of insurance proceeds, Tenant shall have the
right to contribute to Landlord the amount of such insufficiency, and if Tenant
shall promptly notify Landlord of Tenant's desire to contribute such
insufficiency and provide Landlord with security for Tenant's undertaking in
this respect reasonably satisfactory to Landlord, this Lease shall not
terminate, and Landlord shall restore the Building unless otherwise excused and
permitted to terminate by some other provision of this Article VIII. Unless
Landlord, within ninety (90) days after the casualty, advises Tenant of the
status of Landlord's obligations with respect to reconstruction, Tenant shall
have the right to terminate this Lease, such termination to take effect as of
the date of such Tenant's notice.
(e) If the Building shall be Substantially Damaged or damaged
by casualty, the repair of which would cost more than Seven Thousand Five
Hundred dollars ($7,500) but which reasonably be expected to be repaired within
ninety (90) days from the time that repair work commences, within the last
twelve (12) months of the Term (as the same may have been extended hereunder),
either party shall have the right, by giving notice to the other not later than
sixty (60) days after such damage, to terminate this Lease, whereupon this Lease
shall terminate as of the date of such notice.
7.2 Condemnation. Except as hereinafter provided, if the Premises, or
such portion thereof as to render the balance (if reconstructed to the maximum
extent practicable in the circumstances) unsuitable for Tenant's purposes, shall
be taken by eminent domain, Landlord and Tenant each shall have the right to
terminate this Lease by notice to the other of its desire to do so, provided
that such notice is given not later than thirty (30) days after the effective
date of such taking. Should any part of the Premises be so taken, and should
this Lease be not terminated in accordance with the foregoing provisions,
Landlord agrees to use due diligence to put what may remain of the Premises
(consistent, however, with governmental laws and codes then in existence) into
proper condition for use and occupation as nearly like the condition of the
Premises prior to such taking as shall be practicable, but Landlord shall not be
required to expend funds in excess of the damages recovered by Landlord as a
result of such taking.
7.3 Abatement of Rent. If the Premises shall be damaged by casualty,
the Annual Fixed Rent and additional rent shall be justly and equitably abated
and reduced according to the nature and extent of the loss of use thereof
suffered by Tenant; and in case of a taking which permanently reduces the area
of the Premises, a just proportion of the Annual Fixed Rent and
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<PAGE> 35
additional rent shall be so abated and reduced for the remainder of the Term.
7.4 Condemnation Award. Landlord shall have and hereby reserves and
excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover
for damages to the Premises, and the leasehold interest hereby created, and all
rights to compensation accrued or hereafter to accrue by reason of such taking,
damage or destruction, as aforesaid, and by way of confirming the foregoing,
Tenant hereby grants and assigns to Landlord all rights to such damages or
compensation. Nothing contained herein shall be construed to prevent Tenant from
prosecuting in any condemnation proceedings a claim for relocation expenses,
provided that such action shall not affect the amount of compensation otherwise
recoverable by Landlord from the taking authority pursuant to the preceding
sentence.
ARTICLE VIII
Default
8.1 Tenant's Default. In the event that:
(a) Tenant shall fail to pay the Annual Fixed Rent, additional
rent or any other charges for which provision is made herein on or
before the date on which the same become due and payable, and such
condition continues for five (5) days after notice from Landlord to
Tenant that the same are due, unless the failure to pay the foregoing
items when due occurs in any year during which Landlord has previously
given Tenant notice of default twice, in which event the failure to pay
when due shall constitute an event of default without notice; or
(b) Tenant shall fail to perform or observe any other term or
condition contained in this Lease and Tenant shall not cure such
failure within thirty (30) days after notice from Landlord to Tenant
thereof or, if such failure cannot be cured within such thirty (30)
days, if Tenant shall fail to commence to cure such failure within such
thirty (30) days and promptly and diligently complete the curing of the
same, and shall in any event complete the cure within 180 days; or
(c) The estate hereby created shall be taken on execution or
by other process of law, or if Tenant shall be judicially declared
bankrupt or insolvent according to law, or if any assignment or trust
mortgage arrangement, so-called, shall be made of the property of
Tenant for the benefit of creditors, or if a receiver, guardian,
conservator, trustee in bankruptcy or other similar officer shall be
appointed to take~ charge of all or any substantial part of Tenant's
property by a court of competent jurisdiction, or if a petition shall
be filed by Tenant under any provisions of the federal Bankruptcy Code
or any similar federal or state law now or hereafter enacted or if a
petition shall be filed against Tenant thereunder and the same is not
dismissed within ninety (90) days, or if Tenant shall file such a
petition,
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then, in any such case, Landlord and the agents and servants of Landlord
lawfully may, in addition to and not in derogation of any remedies for any
preceding breach of covenant, immediately or at any time thereafter and without
demand or notice and with or without due process of law, (forcibly if necessary)
enter into and upon the Premises or any part thereof or mail a notice of
termination addressed to Tenant at the Premises, and repossess the same as of
Landlord's former estate, and expel Tenant and those claiming by, through or
under Tenant and remove its and their effects (forcibly if necessary) without
being deemed guilty of any manner of trespass and without prejudice to any
remedies that might otherwise be used for arrears of rent (or prior breach of
covenant), and upon such entry or mailing as aforesaid this Lease shall
terminate, as fully and completely as if such date were the date herein
originally fixed for the expiration of the Term (Tenant hereby waiving any
rights of redemption), and Tenant will then quit and surrender the Premises to
Landlord, but Tenant shall remain liable as hereinafter provided.
8.2 Damages. In the event that this Lease is terminated under any of
the provisions contained in Section 8.1 or shall be otherwise terminated for
breach of any obligation of Tenant, Tenant covenants to pay to Landlord
forthwith on Landlord's demand, as compensation, in addition to any other
amounts to which Landlord may be entitled, an amount equal to the excess, if
any, of the discounted present value of the total rent reserved for the residue
of the Term or the Extension Term if so exercised, over the then discounted
present fair rental value of the Premises for the residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
Annual Fixed Rent and all additional rent, the value of all other considerations
agreed to be paid or performed by Tenant for said residue. Tenant further
covenants as an additional and cumulative obligation after any such termination
to pay punctually to Landlord all the sums and perform all the obligations which
Tenant covenants in this Lease to pay and to perform in the same manner and to
the same extent and at the same time as if this Lease had not been terminated.
In calculating the amounts to be paid by Tenant under the next foregoing
covenant, Tenant shall be credited with (a) any amount received from Tenant
under the first sentence of this Section 8.2; and (b) the net proceeds of any
rent obtained by reletting the Premises, after deducting all Landlord's expenses
in connection with such reletting, including, without limitation, all
repossession costs, brokerage commissions, fees for legal services and expenses
of preparing the Premises for such reletting, it being agreed that Landlord may
(i) relet the Premises, or any part or parts thereof, for a term or terms which
may, at Landlord's option, be equal to or less than or exceed the period which
would otherwise have constituted the balance of the Term, and may grant such
concessions and free rent as Landlord in its reasonable commercial judgment
considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its
reasonable commercial judgment considers advisable or necessary to relet the
same, and no action of Landlord in accordance with the foregoing or failure to
relet or to collect rent under reletting shall operate or be construed to
release or reduce Tenant's liability as aforesaid. Landlord agrees to use
reasonable efforts to attempt to relet the Premises, but shall be entitled to
seek to rent other properties of Landlord prior to reletting the Premises.
8.3 Remedies Cumulative. The specific remedies to which Landlord may
resort under
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the terms of this Lease are cumulative and are not intended to be exclusive of
each other or of any other remedies or means of redress to which Landlord may be
lawfully entitled in case of any breach or threatened breach by Tenant of any
provisions of this Lease. In addition to the other remedies provided in this
Lease, Landlord shall be entitled to the restraint by injunction of the
violation or attempted or threatened violation of any of the covenants,
conditions or provisions of this Lease or to a decree compelling specific
performance of any such covenants, conditions or provisions in the event a legal
remedy will be insufficient. Nothing contained in this Lease shall limit or
prejudice the right of Landlord to prove for and obtain in proceedings for
bankruptcy, insolvency or like proceedings, by reason of the termination of this
Lease, an amount equal to the maximum allowed by any statute or rule of law in
effect at the time when, and governing the proceedings in which, the damages are
to be proved, whether or not the amount be greater, equal to, or less than the
amount of the loss or damages referred to above.
8.4 Landlord's Election. If Tenant shall at any time default in the
performance of any obligation under this Lease, Landlord shall have the right,
but not the obligation, upon fifteen (15) days' notice to Tenant (except in case
of emergency in which case no notice need be given), to perform such obligation,
notwithstanding the fact that no specific provision for such substituted
performance is made in this Lease with respect to such default. In performing
such obligation, Landlord may (but shall not be required to) make any payment of
money or perform any other act, and all sums so paid by Landlord and all
necessary incidental costs and expenses thereof, including, without limitation,
reasonable legal fees in connection with enforcement of its rights under this
Section incurred by Landlord, together with interest on all such amounts at two
percent (2%) above the First National Bank of Boston's large business prime rate
from time to time in effect, shall be deemed to be additional rent under this
Lease and shall be payable to Landlord immediately on demand. Landlord may
exercise its rights under this Section without waiving any other of its rights
or releasing Tenant from any of its obligations under this Lease.
8.5 Effect of Waivers of Default. Any consent or permission by Landlord
to any act or omission which otherwise would be a breach of any covenant or
condition herein, or any waiver by Landlord of the breach of any covenant or
condition herein, shall not in any way be held or construed (unless expressly so
declared) to operate so as to impair the continuing obligation of any covenant
or condition herein, or otherwise, except as to the specific instance, or to
operate to permit similar acts of omission.
8.6 No Waiver. No waiver by Landlord shall be valid unless in writing
and signed by Landlord, and the failure of Landlord to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease shall not be deemed a waiver of such violation nor
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed to have been waiver of such breach by Landlord unless such
waiver be in writing signed by the party to be charged. No consent or waiver,
express or implied, by Landlord to or of any breach of any agreement or duty
shall be construed as a waiver or consent to or of any other breach of the same
or any other agreement or duty.
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8.7 No Accord and Satisfaction. No acceptance by Landlord of a lesser
sum than the Annual Rent, additional rent or any other charge then due shall be
deemed to be other than on account of the earliest installment of such rent or
charge due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent or other charge be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
8.8 Delivery of Keys. The delivery of keys to any employee of Landlord
or to Landlord's agent or any employee thereof shall not operate as a
termination of this Lease or a surrender of the Premises.
8.9 Attorneys' Fees. Tenant agrees, as additional rent, to pay all
reasonable costs, counsel and other fees incurred by Landlord in connection with
the successful enforcement by Landlord of any obligations of Tenant under this
Lease.
ARTICLE IX
Mortgagees' and Ground Lessors' Rights
9.1 Superiority of Lease. Except as provided in Section 9.2 below, this
Lease shall be superior to and shall not be subordinated to any future mortgage,
lien or other encumbrance on the Premises. Upon entry and taking possession of
the Premises for the purpose of foreclosure the holder thereof shall have all
the rights of Landlord. No such holder shall be liable, either as mortgagee or
as assignee, to perform, or be liable in damages for failure to perform, any of
the obligations of Landlord unless and until such holder shall enter and take
possession of the Premises for the purpose of foreclosure. Upon entry for the
purpose of foreclosure, such holder shall be liable to perform all of the
obligations of Landlord accruing from and after such entry, but not before,
provided that a discontinuance of any foreclosure proceeding shall operate as a
transfer of all such liability to the owner of the equity of the Premises.
9.2 Subordination. Tenant shall, at the request of Landlord,
subordinate this Lease to any mortgage, lien or other encumbrance now or
hereafter on the Premises, so that the lien thereof shall be superior to all
rights hereby or hereafter vested in Tenant, provided that the holder thereof
enters into an agreement with Tenant by the terms of which the holder will agree
to recognize the rights of Tenant under this Lease and to accept Tenant as
tenant of the Premises under the terms and conditions of this Lease in the event
of acquisition of title by such holder through foreclosure proceedings or
otherwise and Tenant will agree to recognize such holder as Landlord in such
event, which agreement shall be made to expressly bind and inure to the benefit
of the Successors and assigns of Tenant and of the holder and upon anyone
purchasing said Premises at any foreclosure sale.
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9.3 Limitation on Tenant's Rights. Notwithstanding Sections 9.1 or 9.2
above, unless the holder of such a mortgage, lien or other encumbrance of the
Premises otherwise agrees in writing, no such holder shall be obligated to
recognize or accept any of Tenant's rights under Section 2.4 of this Lease.
Further, any such holder whose mortgage, or other encumbrance is superior to
this Lease pursuant to the terms of Section 9.1 may elect to subordinate only
those rights of Tenant under this Lease to purchase all or any portion of the
Premises, including, without limitation, the rights of Tenant under Sections 2.4
of this Lease, to such mortgage, or other encumbrance.
9.4 Exercise of Mortgagee's Remedies. Notwithstanding any other
provision of this Lease, in no event shall Tenant's rights under Section 2.4
apply to any exercise of remedies by any mortgagee, or holder of a similar
interest in the Premises, including, without limitation, any foreclosure sale or
any conveyance by deed in lieu of foreclosure.
9.5 Further Assurances. Tenant agrees, upon Landlord's request,
promptly (but in any event within fifteen (15) days after Landlord's request) to
execute and deliver such documents and instruments as Landlord may reasonably
request to carry out the agreements contained in this Article IX.
9.6 No Prepaid Rent. No Annual Fixed Rent, additional rent, or any
other charge payable to Landlord shall be paid more than thirty (30) days prior
to the due date thereof under the terms of this Lease, and payments made in
violation of this provision shall (except to the extent that such payments are
actually received by a mortgagee) be a nullity as against such mortgagee, and
Tenant shall be liable for the amount of such payments to such mortgagee.
ARTICLE X
Miscellaneous
10.1 Estoppel Certificates. Tenant shall, from time to time, with
fifteen (15) days after a written request by Landlord, execute, acknowledge and
deliver to Landlord a statement in writing certifying to Landlord or an
independent third party designated by Landlord: that this Lease is unmodified
and in full force and effect (or, if there have been any modifications, that the
same is in full force and effect as modified and stating the modifications);
that Tenant has no knowledge of any defenses, offsets or counterclaims against
its obligations to pay the Annual Fixed Rent and additional rent and to perform
its other covenants under this Lease (or if there are any defenses, offsets, or
counterclaims, setting them forth in reasonable detail); that there are no known
uncured defaults of Landlord or Tenant under this Lease (or if there are known
uncured defaults, setting them forth in reasonable detail); the dates to which
the Annual Fixed Rent, additional rent and other charges payable hereunder have
been paid; and such other matters as Landlord may reasonably request. On the
Commencement Date, Tenant shall, at the request of Landlord, promptly execute,
acknowledge and deliver to Landlord a statement in writing that the Commencement
Date has occurred, stating the date that the Annual Fixed Rent will begin to
accrue, and that Tenant has taken occupancy of the Premises. Any such statement
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<PAGE> 40
delivered pursuant to this Section may be relied upon by any mortgagee or
purchaser of the Premises and shall be binding on Tenant.
10.2 No Recordation. Tenant agrees not to record this Lease, but if the
Term hereof (as the same may be extended hereunder) is for seven years or more,
then upon request of either party, both parties shall execute and deliver a
memorandum of this Lease in form appropriate for recording or registration, an
instrument in such form acknowledging the Commencement Date of the Term, and if
this Lease is terminated before the Term expires, an instrument in such form
acknowledging the date of termination.
10.3 Notices. Whenever any notice, approval, consent, request,
election, offer or acceptance is given or made pursuant to this Lease, it shall
be in writing. Communications and payments shall be addressed, if to Landlord,
at Landlord's Original Address or at such other address as may have been
specified by prior notice to Tenant; and if to Tenant, at Tenant's Original
Address or at such other address as may have been specified by prior notice to
Landlord. Any communication so addressed shall be deemed duly served on the
earlier of (i) the date received, or (ii) the date of delivery, refusal or
non-delivery indicated on the return receipt, if deposited in a United States
Postal Service Depository, postage prepaid, sent by registered or certified
mail, return receipt requested or if sent by a recognized overnight delivery
service providing for a receipt. If Landlord by notice to Tenant at any time
designates some other person to receive payments or notices, all payments or
notices thereafter by Tenant shall be paid or given to the agent designated
until notice to the contrary is received by Tenant from Landlord.
10.4 Successors and Assigns. Subject to Section 6.5 regarding Tenant's
right to assign and sublet, this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that the original Landlord named herein and each successive landlord
shall be liable only for obligations accruing during the period of its
ownership.
10.5 Limitation of Liability. The obligations of Landlord shall be
binding upon the assets of Landlord consisting of an equity ownership interest
in the Premises, but not upon any other assets of Landlord, and neither Tenant,
nor anyone claiming by, under or through Tenant, shall be entitled to obtain any
judgment creating personal liability on the part of Landlord or enforcing any
obligations of Landlord against any assets of Landlord other than an equity
ownership in the Premises. Landlord has executed this Lease in a fiduciary
capacity, therefore, only the assets of the trust under the will of Harry F.
Stimpson shall be bound hereby, and no beneficiary thereof shall be personally
liable for any obligation under this Lease.
10.6 Covenants and Conditions. All provisions, whether covenants or
conditions, on the part of Tenant to be performed under this Lease shall be
deemed to be both covenants and conditions.
10.7 Severability. If any term of this Lease, or the application
thereof to any person
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or circumstances, shall to any extent be invalid or unenforceable, the remainder
of this Lease, or the application of such term to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
10.8 Quiet Enjoyment. So long as Tenant pays the Annual Fixed Rent and
additional rent and other charges provided for under this Lease, performs all
other covenants of this Lease to be performed by Tenant and observes all
conditions of this Lease to be observed by Tenant, Tenant shall peaceably and
quietly have, hold and enjoy the Premises for the Term in accordance with the
terms of this Lease against all those claiming by, under or through Landlord.
10.9 Entire Agreement. This Lease contains all of the agreements of the
parties with respect to the subject matter hereof and supersedes all prior
dealings between them with respect to such subject matter, including, without
limitation, any letters of intent.
10.10 Brokers. Tenant represents and warrants that it has had no
dealings with any broker or agent in connection with this Lease other than
Whittier Partners and shall indemnify and hold harmless Landlord from any claims
for any brokerage commission as a result of the failure of this warranty.
Landlord represents and warrants that it has had no dealings with any broker or
agent other than Whittier Partners in connection with this Lease and shall
indemnify and hold harmless Tenant from any claims for any brokerage commission
as a result of the failure of this warranty. Landlord acknowledges that the fees
of Whittier Partners are its exclusive obligation.
10.11 Applicable Law and Construction. This Lease shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
This Lease may be amended, and the provisions hereof may be waived or modified,
only by instruments in writing executed by Landlord and Tenant. The titles of
the several Articles and Sections contained herein are for convenience only and
shall not be considered in construing this Lease.
10.12 Time of Essence. Time is of the essence of each provision of this
Lease.
10.13 Authorization. If either party is a corporation, that party shall
deliver to the other party on execution of this Lease a certified copy of a
resolution of its Board of Directors authorizing the execution of this Lease and
naming the officers that are authorized to execute this Lease on behalf of the
corporation.
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EXECUTED as a sealed instrument on the day and year first above
written.
TENANT:
Massachusetts Institute of Technology
By: /s/ Philip A. Trussell
---------------------------------------
Name: Philip A. Trussell
Title: Director of Real Estate
Associate Treasurer
/s/ Harry F. Stimpson, as Trustee
---------------------------------------
Harry F. Stimpson, III, as Trustee u/w/o/
Harry F. Stimpson, and not individually
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Exhibit A
A parcel of land with the buildings thereon in Cambridge, Middlesex County,
Massachusetts:
That certain parcel of land known as and numbered 185-187 Albany
Street, being Lot C on "Plan of Land in Cambridge, Mass. surveyed for
Stimpson Investment Corp." dated October 22, 1947 by W.A. Mason & Son,
Co., Surveyors, recorded with Middlesex South District Registry of
Deeds as plan No. 1566 of 1947 at the end of Book 7206 and bounded:
SOUTHEASTERLY by said Albany Street by two courses
one hundred and five and 29/100
(105.29) feet; and five and 11/100
(5.11) feet, respectively;
SOUTHWESTERLY by Lot B as shown on said plan by a line
running through the middle of the common
area shown on said plan, one hundred and
five and 64/100 (105.64) feet;
NORTHWESTERLY by the same, seven and 02/100 (7.02) feet;
SOUTHWESTERLY by the same, by a line running through the
middle of a 12" brick wall, which shall be
and remain a common party wall, one hundred
fifteen and 70/100 (115.70) feet;
NORTHWESTERLY by Purrington Street, by the southeasterly
sideline thereof, one hundred ten and 24/100
(110.24) feet; and
NORTHEASTERLY by land now or formerly of Edward S.
Stimpson, et al Trustees two hundred
twenty one and 28/100 (221.28) feet.
Containing according to said Plan 22,903 square feet.
The above-described premises are subject to and have the benefit of the
following rights and easements (in common with the Landlord and others):
1. 25 foot wide right of way and platform rights on the
northeasterly side of Lot C, as set forth in deed from Harry
F. Stimpson to Stimpson Investment Corporation dated January
12, 1925 recorded with said Deeds in Book 4806, Page 506.
2. Lot A is subject to and with the benefit of the right to use,
in common with the owners and occupants of Lot B, the common
way forty-five (45) feet wide for all purposes for which
private ways may be used in said Cambridge, as set forth in a
deed from Stimpson Investment Corporation to Edward S.
Stimpson, et al dated
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October 4, 1948 recorded with said Deeds in Book 7370, Page
304.
3. The right of Lot B to use the common area shown on said plan
and the platform therein for the purpose of loading and
unloading vehicles and for ingress and egress to and from Lot
B and the right of Lot B to use for all purposes of ingress
and egress the stairway situated in the building upon Lot C
and adjacent to said common area leading from the second floor
to the basement; all as set forth in said deed recorded in
Book 7370, Page 304.
The subject premises are subject to the following:
1. Deed of spur track rights on Purrington Street as set forth in
a Deed from Harry F. Stimpson to Stimpson Terminal Company
dated May 12, 1919 recorded with said Deeds in Book 4262, Page
482.
2. Deed of spur track rights as set forth in a Deed from Stimpson
Terminal Company to Stimpson Investment Corporation dated
October 1, 1948 and recorded with said Deeds in Book 7344,
Page 581.
28
<PAGE> 1
EXHIBIT 10.14
TRANSKARYOTIC THERAPIES, INC.
1993 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
<PAGE> 2
TRANSKARYOTIC THERAPIES, INC.
1993 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
1. PURPOSE.................................................................. 3
2. DEFINITIONS.............................................................. 3
3. TERM OF THE PLAN......................................................... 4
4. STOCK SUBJECT TO THE PLAN................................................ 4
5. ADMINISTRATION........................................................... 4
6. ELIGIBILITY.............................................................. 5
7. TERMS OF OPTION GRANTS................................................... 5
8. RESTRICTIONS ON ISSUANCE OF SHARES....................................... 5
9. EFFECT OF CERTAIN TRANSACTIONS........................................... 6
10. TERMINATION AND AMENDMENT OF THE PLAN AND OPTIONS....................... 6
11. MISCELLANEOUS PROVISIONS................................................ 6
<PAGE> 3
TRANSKARYOTIC THERAPIES, INC.
1993 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
1. PURPOSE
The purpose of this Plan is to promote the interests of the Company and
its shareholders by (i) attracting, retaining and motivating top caliber
Directors; (ii) strengthening the mutuality of interest between Directors and
the Company's shareholders; and (iii) enabling Directors to participate in the
long-term success of the business.
2. DEFINITIONS
For the purposes of the Plan, the following terms shall have the
meanings set forth below
2.1. Affiliate means a parent or subsidiary corporation of the Company,
as defined in Sections 424(e) and (f), respectively, of the Code.
2.2. Board means the Board of Directors of the Company.
2.3. Code means the federal Internal Revenue Code of 1986, as amended
from time to time, or any statute successor thereto, and any regulations issued
from time to time thereunder.
2.4. Committee means a committee appointed by the Board, responsible
for the administration of the Plan, as provided in Section 5 of the Plan.
Members of the Committee shall be eligible to receive Options under the Plan if
otherwise eligible. For any period during which no such committee is in
existence all authority and responsibility assigned the Committee under the Plan
shall be exercised, if at all, by the Board
2.5. Company means Transkaryotic Therapies, Inc., a corporation
organized under the laws of the State of Delaware.
2.6. Disability means long-term disability as determined under rules
and procedures identical to those that apply in the Company's long-term
disability plan for employees then in effect.
2.7. Eligible Director means a member of the Board who is eligible for
grants under the Plan pursuant to the provisions of Section 6. 2.8. Fair Market
Value means, as of any given
<PAGE> 4
date, the last reported sales price of the Stock as reported in The Wall Street
Journal for such date or, if either no such sale is reported or the Stock is not
publicly traded on or as of such date, the fair market value of the Stock as
determined by the Committee in good faith based on the available facts and
circumstances at the time.
2.8. Fair Market Value means, as of any given date, the last reported
sales price of the Stock as reported in The Wall Street Journal for such date
or, if either no such sale is reported or the Stock is not publicly traded on or
as of such date, the fair market value of the Stock as determined by the
Committee in good faith based on the available facts and circumstances at the
time.
2.9. Option means an option to purchase shares of Stock granted under
the Plan.
2.10. Option Agreement means an agreement evidencing the grant of an
Option under the Plan, in such form as the Committee may prescribe.
2.11. Participant means an Eligible Director to whom an Option shall
have been granted under the Plan.
2.12. Plan means this 1993 Non-Employee Directors Stock Option Plan of
the Company, as amended from time to time.
2.13. Retirement means cessation of active service as a member of the
Board at or after the normal retirement date specified in the Company's pension
or other deferred compensation plan applicable generally to employees of the
Company.
2.14. Stock means Common Stock, par value S.01 per share, of the
Company.
2.15. Vesting Period means the three-year period commencing on the date
of an Option grant, over which period shares subject to such Option shall become
fully vested and available for purchase by exercise of the Option, as follows:
(a) one-third on the first anniversary of grant;
(b) one-third on the second anniversary of the grant; and
(c) one-third on the third anniversary of the grant.
2.16. Vested Shares, as of any date, means those shares of Stock
available at that date for purchase by exercise of the Option, as determined by
application of the Vesting Period for such Option.
3. TERM OF THE PLAN
Unless the Plan shall have been earlier terminated by the Board,
Options may be granted hereunder at any time in the period commencing on the
approval of the Plan by the Board and
<PAGE> 5
ending on the tenth anniversary of the earlier of the adoption of the Plan by
the Board or approval of the Plan by the Company's shareholders. Options granted
pursuant to the Plan within such period shall not expire solely by reason of the
termination of the Plan.
4. STOCK SUBJECT TO THE PLAN
4.1. Aggregate Limit on Options. At no time shall the number of shares
of Stock issued pursuant to or subject to Options granted under the Plan exceed
180,000 shares, subject, however, to the provisions of Section 4.2 below. Such
shares may be either authorized but unissued shares or shares held by the
Company in its treasury. The Company shall at all times reserve and make
available in sufficient number of shares to meet the requirements of the Plan,
provided that following termination of the Plan the number of shares reserved
need not exceed the number of shares issuable under Options outstanding from
time to time thereafter.
4.2. Adjustment for Corporate Transactions. In the event of any merger,
reorganization, consolidation, recapitalization, stock dividend, or other change
in corporate structure affecting the Stock, such substitution or adjustment
shall be made in the character and aggregate number of shares reserved for
issuance under the Plan, and in the number and option price of shares subject to
outstanding Options, as may be determined to be appropriate by the Committee,
provided that the number of shares subject to any Option shall always be a whole
number.
5. ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have complete authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to resolve all disputes arising under the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan;
provided, however, that the Committee shall have no discretionary authority over
the persons entitled to receive the Options, or the terms and conditions thereof
The Committee's determinations shall be conclusive, final and binding upon all
persons having or claiming any interest in the Plan or in any Option pursuant to
the Plan.
6. ELIGIBILITY
Only members of the Board who (a) are not employees of the Company, or
of any subsidiary, affiliate or five or more percent shareholder of the Company
and (b) do not own or hold any Stock which was purchased prior to the Board's
approval of the Plan and remains at the time the Director is being considered
for eligibility hereunder for any specific grant subject to substantial risk of
forfeiture under an agreement entered into with the Company are eligible to
receive grants of Options under the Plan. Any member of the Board to whom
Options have been granted and who thereafter becomes an employee of the Company
or of any subsidiary or affiliate of the Company shall cease to be eligible for
any further Option grants under this Plan while an employee, but shall not, by
reason of becoming an employee, cease to be eligible to retain Options
previously granted under the Plan.
<PAGE> 6
7. TERMS OF OPTION GRANTS
Options under the Plan shall be granted on the following terms:
7.1. Timing of Awards. During the term of the Plan, each Eligible
Director shall receive an Option grant on the first business day immediately
following the annual meeting of stockholders of the Company (or special meeting
or written consent in lieu thereof).
7.2. Option Grant. Each Option grant shall consist of an Option to
acquire in aggregate 5,250 shares of Stock and shall be exercisable at a price
equal to the Fair Market Value of the Stock at the time of the grant No Option
granted hereunder is intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code.
7.3. Exercise of Option. An Option may be exercised to the extent of
the Vested Shares thereunder at any time and from time to time during their
respective terms by giving written notice of exercise to the Company, in the
manner set out in Section 11.4, specifying the number of Vested Shares to be
purchased. Such notice shall be accompanied by payment in full of the purchase
price, either by certified or bank check, or such other instrument as the
Committee may accept. Payment in full or in part for such exercise may also be
made with unrestricted Stock already owned by the Participant Such unrestricted
Stock shall be priced at their Fair Market Value on the date of exercise.
If payment of the Option exercise price of a Stock Option is made in
whole or in part in the form of unrestricted Stock already owned by the
Participant, such Stock must have been owned by the Participant for a period of
not less than six (6) months prior to the date of exercise.
No Stock will be issued under the Plan until full payment for such
shares has been received by the Company. No Eligible Director exercising an
Option shall be considered a shareholder with respect to the Vested Shares so
acquired until a certificate for the same shall have been delivered to the
Director.
7.4. Option Term. The term of each Stock Option shall be than ten
years, subject to Section 7.7 below. No Stock Option may be exercised by any
person after expiration of the term of the Option.
7.5. Transferability. No Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and distribution, and all
Stock Options shall be exercisable, during the optionee's lifetime, only by the
optionee.
7.6. Option Agreement. The prospective recipient of an Option Grant
shall not have any rights with respect to such Options to be granted unless,
within 30 days of the date of the Option Grant, such recipient delivers an
executed copy of the Option Agreement to the Company, and complies with the
applicable terms and conditions of the Option Agreement.
<PAGE> 7
7.7. Accelerated Vesting and Forfeiture. Notwithstanding anything to
the contrary in this Plan:
(a) Death, Retirement, etc. In the event a Participant ceases to
be a member of the Board on account of death, Disability, or Retirement, all
shares available under any Option theretofore granted to that Participant under
this Plan shall automatically become Vested Shares and such Option shall remain
exercisable for the lesser of three years or the remaining term of the Option.
(b) Other Termination. In the event a Participant ceases to be a
member of the Board for reasons other than as described (a) above, any Option
granted to the Participant under this Plan shall remain exercisable for the
lesser of ninety (90) days from the date of such event or the remaining term of
the Option but only to the extent of the number of Vested Shares under such
Option as of the date of such cessation of service for which such Option had not
previously been exercised. All shares of Stock subject to the Option which are
not then Vested Shares shall thereafter cease to be available under the Option
and shall be forfeited by Participant.
8. RESTRICTIONS ON ISSUANCE OF SHARES
8.1. Securities Laws. Notwithstanding any other provision of the Plan,
if, at any time, in ) the reasonable opinion of the Company the issuance of
shares of Stock covered by any option granted under the Plan may constitute a
violation of law, then the Company may delay such issuance and the delivery of a
certificate for such shares until (i) approval shall have been obtained from
such governmental agencies, other than the Securities and Exchange Commission,
as may be required under any applicable law, rule, or regulation; and (ii) in
the case where such issuance would constitute a violation of a law administered
by or a regulation of the Securities and Exchange Commission, one of the
following conditions shall have been satisfied:
(a) the shares with respect to which such Option has been exercised are
at the time of the issue of such shares effectively registered under the
Securities Act of 1933, as amended (the "Securities Act"); or
(b) a no-action letter in form and substance reasonably satisfactory to
the Company with respect to the issuance of such shares shall have been obtained
by the Company from the Securities and Exchange Commission.
The Company shall make all reasonable efforts to bring about the
occurrence of said events.
8.2. Investment Representation. Unless the shares to be issued in
connection with any Option granted under the Plan have been effectively
registered under the Securities Act, the Company shall be under no obligation to
issue any shares covered by such Option unless the person to acquire such shares
shall give a written representation to the Company which is satisfactory in form
and substance to its counsel and upon which the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
Option as an investment and not with a view to, or for sale in connection with,
the distribution of any such
<PAGE> 8
shares.
8.3. Placement of Legends; Stop Orders, etc. Each share of Stock issued
pursuant to an Option granted under this Plan may bear a reference to the
investment representation made in accordance with Section 8.2 in addition to any
other applicable restriction under the Plan, and the terms of the Option and, if
applicable, to the fact that no registration statement has been filed with the
Securities and Exchange Commission in respect to said Stock. All certificates
for shares of Stock or other securities delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of any
stock exchange upon which the Stock is then listed, and any applicable Federal
or state securities law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.
8.4. Registration. If the Company shall deem it necessary or desirable
to register under the Securities Act or other applicable statutes any shares
with respect to which an Option shall have been granted, or to qualify any such
shares for exemption from the Securities Act or other applicable statutes, then
the Company shall take such action at its own expense. The Company may require
from each Participant, and each holder of shares of Stock acquired pursuant an
Option granted under the Plan, such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damage and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements herein not misleading in the light of the
circumstances under which they were made.
8.5. Applicability of Shareholders Agreement. Whenever shares are to be
issued pursuant to an Option granted hereunder, the Company shall have the right
to require the Participant to execute and deliver and otherwise become a party
to the Shareholders Agreement in respect of such shares.
9. EFFECT OF CERTAIN TRANSACTIONS
9.1. Liquidation or Dissolution of the Company. In the event of a
proposed dissolution or liquidation of the Company, each outstanding Option
granted hereunder shall terminate on consummation of such action but for the
twenty (20) day period preceding such action each Optionee shall have the right
to exercise his Option as to all or any part of the shares of Stock covered by
an Option, including shares of Stock as to which the Option would not otherwise
be exercisable (but not any shares of Stock previously forfeited).
9.2. Sale of Assets, Merger or Consolidation. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger or consolidation of the Company with or into another corporation in a
transaction in which the Company does not survive, but for the twenty (20) day
period preceding such action each Optionee shall have the right to exercise his
Option as to all or any part of the shares of Stock covered by an Option,
including
<PAGE> 9
shares of Stock as to which the Option would not otherwise be exercisable (but
not any shares of Stock previously forfeited).
10. TERMINATION AND AMENDMENT OF THE PLAN AND OPTIONS
The Board may at any time terminate the Plan or make such modifications
of the Plan as it shall deem advisable; provided, however, that the Board may
not, without approval of the shareholders of the Company, increase the maximum
number of shares of Stock purchasable under the Plan, change the description of
the individuals eligible to receive Options or materially increase the benefits
accruing to Participants hereunder; and provided, further, however, that no
amendment of any provision of the Plan governing the amount of Stock and price
under, and timing of, grants of Options pursuant to the Plan (or of any other
provision of the Plan to the extent a limitation on amendments is required to
preserve the status of Eligible Directors as "disinterested" persons under Rule
16b-3 as promulgated by the Securities Exchange Commission under the Securities
Exchange Act of 1934) shall be made more frequently than once in any six month
period, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder. No
termination or amendment of the Plan may, without the consent of the Participant
to whom any Option shall theretofore have been granted, adversely affect the
rights of such Participant under such Option.
11. MISCELLANEOUS PROVISIONS
11.1. Adoption of Other Plans. Nothing contained in this Plan shall
prevent the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or Ma . applicable only in
specific cases.
11.2. Tax Withholding. No later than the date as of which an amount
first becomes includable in the gross income of the Participant for federal
income tax purposes with respect to any Option, the Participant shall pay to the
Company, or make arrangements satisfactory to the Company regarding the payment
of, any federal, state, or local taxes of any kind required by law to be
withheld (whether so required to secure an otherwise available tax deduction or
otherwise) with respect to such amount. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company shalL
to the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Participant.
11.3. No Special Employment or Other Rights. Nothing contained in the
Plan or in any Option shall confer upon any Participant any right with respect
to the continuation of his or her association with the Company.
11.4. Notices and Other Communications. All notices and other
communications required or permitted under the Plan shall be effective if in
writing and if delivered or sent by certified or registered mail, return receipt
requested (a) if to the Participant, at his or her residence address last filed
with the Company, and (b) if to the Company, at 195 Albany Street, Cambridge, MA
02139 Attention: Treasurer or to such other persons or addresses as the
<PAGE> 10
Participant or the Company may specify by a written notice to the other from
time to time.
11.5. Governing Law. The Plan and all Options and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof
Date of Board Approval: June 16, 1993
Date of Shareholder Approval: June 24, 1993
<PAGE> 11
EXHIBIT A
ACCELERATED VESTING
This Exhibit A provides for accelerated vesting of shares under the
Option prior to the 10th anniversary of the grant of this Option (which is the
date all shares covered by this Option will vest absent acceleration as provided
herein or as provided by the Company's Board of Directors (or a committee
thereof) pursuant to this option). As specifically set forth below. in the event
the Company realizes a valuation in a public offering or acquisition context,
which realized valuation exceeds a base target Company valuation applicable at
that time, these accelerated vesting provisions are intended to provide the
optionee with the immediate ability to exercise the Option for some portion or
all of the underlying option shares.
1. DEFINED TERMS.
For the purposes of this Exhibit A, the following terms shad have the
following meanings:
(a) "Acceleration Event": an Acquisition or an IPO.
(b) "Acquisition": the closing of a merger or consolidation of the
Company with or into any other entity in which the Company or the stockholders
of the Company (prior to the merger or consolidation) will not own immediately
after the merger or consolidation securities having more than fifty percent
(50%) of the outstanding voting power of the surviving corporation's capital
stock, or the sale of all or substantially all of the assets of the Company. In
the event that material assets, but less than an or substantially an of the
assets, of the Company are sold, the Company's Board of Directors (or a
committee thereof) shad in good faith consider the appropriateness of providing
accelerated vesting of some or an of the shares covered by this Option.
(c) "Initial Public Offering" ("IPO"): the closing of an initial public
offering and sale by the Company of shares of its capital stock pursuant to an
effective registration statement filed with the Securities and Exchange
Commission. For purposes of making fair market valuation determinations
hereunder, the value shad be that set as of the close of trading on the last
business day Preceding the closing of the IPO (said closing date typically
occurring 5 business days after the commencement of public trading in the
issuer's securities).
(d) "Acceleration Event Per Share Price" ("Per Share Price"): (i) In
connection with an IPO or any annual anniversary thereof and at the time any
determination is taking place, Per Share Price shad be equal to the fair market
value per share of Common Stock of the Company, determined as follows:
(i) The average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or
<PAGE> 12
(ii) the last reported sale price (on that date) of the Common Stock
on the NASDAQ National Market List, if the Common Stock is not
then traded on a national securities exchange; or
(iii) the closing bid price (or average of bid prices) last quoted (on
that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported
on the NASDAQ National Market List.
(iv) In connection with an Acquisition and at the time any
determination is taking place, Per Share Price shall be equal to
the sum of the cash consideration and the fair market value of
any other consideration (as determined by the Company's Board of
Directors (or a committee thereof)) payable by the purchaser in
respect of a single share of Common Stock or common 'stock
equivalent of the Company upon the closing of such Acquisition.
The value of any consideration to be received following the
closing of the Acquisition shall be accounted for as provided in
Paragraph 5 below.
2. SHARES SUBJECT TO ACCELERATED VESTING.
(A) At the time any determination of accelerated vesting is taking
place under Paragraph 3 or 4 below, this Option will become immediately
exercisable for % of the number of shares (rounded to the nearest whole share,
with .5 being rounded up) as set forth on the Accelerated Vesting Schedule
attached as Schedule A-1 hereto (i) under the column dated the first day of the
calendar quarter in which the date of the event causing the determination of
accelerated vesting hereunder occurs, and (in) opposite the applicable per share
price, subject to the remainder of this Paragraph 2(a). In the event that the
actual Per Share Price for an Acquisition, an LPO or the anniversary of an IPO
falls between t vie prices listed on Schedule A-I, then the following averaging
mechanism shad apply. In the event the Per Share Price is a price fazing between
two stated prices on the table contained on Schedule A-1, a rounding shad be
computed such that this Option win then be immediately exercisable for _______%
of a number of shares equal to the sum of: (A)the number of shares set forth on
Schedule A-1 under the applicable column and opposite the next lowest per share
price, and
(B) the result obtained by subtracting (1) the number of shares set
forth on Schedule A-1 under the applicable column and opposite the next lowest
per share price from (2) the number of shares set forth on Schedule A-1 under
the applicable column and opposite the next highest per share price, and then
multiplying the result of such subtraction by (3) a fraction, the numerator of
which is the Per Share Price minus the next lowest per share price set forth on
Schedule A-1 under the applicable column, and the denominator of which is the
next highest per share price minus the next lowest per share price as set forth
in each case on Schedule A-1 under the applicable column (such number of shares
rounded to the nearest whole share, with .5 being rounded up).
(b) The per share prices and numbers of shares set forth on the Accelerated
Vesting Schedule shall be equitably adjusted by the Company's Board of Directors
(or a committee thereof) for stock splits, stock dividends and the like
affecting the number of shares of outstanding Common
<PAGE> 13
Stock issued and outstanding and reserved for issuance.
3. OPTION VESTING ON INITIAL ACCELERATION EVENT.
If the Optionee has continued to maintain a Business Relationship with
the Company at the time of an Acceleration Event, then the Optionee may, upon
the occurrence of the Acceleration Event, exercise this option for a number of
shares determined in accordance with Paragraph 2.
4. ACCELERATION ON ANNIVERSARY OF IPO.
If the Acceleration Event is an IPO and the optional has continued to
maintain a Business Relationship with the Company at the time of any
twelve-month anniversary of the Acceleration Event, this option shad become
exercisable on each such anniversary for an additional number of shares
determined by subtracting (A) the number of shares previously vested under this
Exhibit A from (B) a number of shares determined in accordance with Paragraph 2
at the time such anniversary occurs, determining Per Share Price for the
purposes of this clause (B) as of such anniversary date.
5. SUBSTITUTE BENEFIT ON ACQUISITION EARN-OUT.
In the event of an Acquisition, no further vesting of shares shall
occur hereunder after the initial vesting of shares on the date of the
Acquisition. In lieu of such additional vesting, and whether or not the optionee
continues to be involved in a Business Relationship with the Company or any
successor entity, the holder of this Option shall be entitled to participate in
any consideration payable after the closing of the Acquisition as follows. In
the event the holders of Common Stock receive additional consideration
("Earn-Out Payments") paid after the closing of the Acquisition as a result of
earn-outs or other future or contingent payments in connection therewith (other
than the consideration included in Per Share Price at the time of the
Acquisition), the Company's Board of Directors (or a committee thereof) shall
provide for payments of a portion of such Earn-Out Payments to the holder of
this option equal to the fair market value of the additional shares which would
have vested under this option as of the closing of the Acquisition, net of the
applicable exercise price, had such Earn-Out Payments been made as of the
closing of the Acquisition and included in Per Share Price. Such payments shall
be made at the times when holders of Common Stock of the Company (as of the
closing of the Acquisition) receive payments subsequent to the closing date. The
Company's Board of Directors (or a committee thereof) shall determine the amount
and timing of such substituted payment in a manner it deems equitable in order
to provide the holder of this Option with the benefits intended hereunder.
6. MAXIMUM NUMBER OF SHARES. In no event shall the total number of shares which
become exercisable under this Exhibit A exceed the total number of shares for
which this Option has been granted (subject to adjustment as provided in
paragraph 2(d)).
<PAGE> 1
EXHIBIT 10.15
TRANSKARYOTIC THERAPIES, INC.
1993 LONG-TERM INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
1. PURPOSE........................................................... 1
2. DEFINITIONS....................................................... 1
2.1. Affiliate................................................ 1
2.2. Award.................................................... 1
2.3. Board.................................................... 1
2.4. Code..................................................... 1
2.5. Committee................................................ 1
2.6. Company.................................................. 1
2.7. Employment Agreement..................................... 1
2.8. Fair Market Value........................................ 2
2.9. Incentive Option......................................... 2
2.10. Long-Term Performance Award or Long-Term Award........... 2
2.11. Nonstatutory Option...................................... 2
2.12. Participant.............................................. 2
2.13. Plan..................................................... 2
2.14. Restricted Stock......................................... 2
2.15. Stock.................................................... 2
2.16. Shareholders Agreement................................... 2
2.17. Stock Appreciation Right................................. 2
2.18. Stock Grant.............................................. 2
2.19. Stock Option or Option................................... 2
2.20. Ten Percent Owner........................................ 3
3. TERM OF THE PLAN.................................................. 3
4. STOCK SUBJECT TO THE PLAN......................................... 3
5. ADMINISTRATION.................................................... 4
6. ELIGIBILITY....................................................... 5
7. STOCK OPTIONS..................................................... 5
7.1. Provision for Grant...................................... 5
7.2. Terms and Conditions..................................... 5
8. STOCK APPRECIATION RIGHTS......................................... 8
8.1. Provision for Grant...................................... 8
8.2. Termination.............................................. 8
8.3. Manner and Effect of Exercise............................ 8
i
<PAGE> 3
8.4. Other Terms and Conditions............................... 8
9. RESTRICTED STOCK.................................................. 9
9.1. Provision for Grant...................................... 9
9.2. Awards and Certificates.................................. 9
9.3. Additional Terms and Conditions.......................... 9
10. LONG-TERM PERFORMANCE AWARDS...................................... 11
10.1. Provision for Grant...................................... 11
10.2. Periodic Determination of Performance.................... 11
10.3. Adjustment of Awards..................................... 11
10.4. Effect of Termination of Employment or Association....... 11
10.5. Form of Payment.......................................... 12
11. STOCK GRANTS...................................................... 12
12. RESTRICTIONS ON ISSUANCE OF SHARES................................ 12
12.1. Securities Laws.......................................... 12
12.2. Investment Representation................................ 13
12.3. Placement of Legends; Stop Orders; etc................... 13
12.4. Registration............................................. 13
12.5. Applicability of Shareholders Agreement.................. 13
13. EFFECT OF CERTAIN TRANSACTIONS.................................... 14
13.1. Liquidation or Dissolution of the Company................ 14
13.2. Sale of Assets, Merger or Consolidation.................. 14
14. TERMINATION AND AMENDMENT OF THE PLAN AND AWARDS.................. 14
15. MISCELLANEOUS PROVISIONS.......................................... 14
15.1. Unfunded Status of Plan.................................. 14
15.2. Adoption of Other Plans.................................. 15
15.3. Payments on Death........................................ 15
15.4. Tax Withholding.......................................... 15
15.5. Limitation of Rights in Stock............................ 16
15.6. No Special Employment or Other Rights.................... 16
15.7. Notices and Other Communications......................... 16
15.8. Governing Law............................................ 16
ii
<PAGE> 4
TRANSKARYOTIC THERAPIES, INC.
1993 LONG-TERM INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to enable key employees of and consultants
to Transkaryotic Therapies, Inc. (the "Company") to (i) own shares of stock in
the Company, (ii) participate in the shareholder value which has been created,
(iii) have a mutuality of interest with other shareholders and (iv) enable the
Company to attract, retain and motivate key employees and consultants of
particular merit.
2. DEFINITIONS
For the purposes of the Plan, the following terms shall have the
meanings set forth below:
2.1. Affiliate means a parent or subsidiary corporation of the Company,
as defined in Sections 424(e) and (f), respectively, of the Code.
2.2. Award means the grant or sale pursuant to the Plan of any of Stock
Options, Restricted Stock, Stock Appreciation Rights, Stock Grants, and Long
Term Awards.
2.3. Board means the Board of Directors of the Company.
2.4. Code means the federal Internal Revenue Code of 1986, as amended
from time to time, or any statute successor thereto, and any regulations issued
from time to time thereunder.
2.5. Committee means a committee appointed by the Board, responsible
for the administration of the Plan, as provided in Section 5 of the Plan. No
member of the Committee shall be eligible to receive an Award under the Plan,
and no individual shall be eligible for membership on the Committee within one
year of having received an Award under the Plan. For any period during which no
such committee is in existence all authority and responsibility assigned the
Committee under the Plan shall be exercised, if at all, by the Board.
2.6. Company means Transkaryotic Therapies, Inc., a corporation
organized under the laws of the State of Delaware.
2.7. Employment Agreement means an agreement, if any, between the
Company and a Participant, setting forth, inter alia, conditions and
restrictions upon the transfer of shares of Stock.
<PAGE> 5
2.8. Fair Market Value means, as of any given date, the last reported
sales price of the Stock as reported in The Wall Street Journal for such date
or, if either no such sale is reported or the Stock is not publicly traded on or
as of such date, the fair market value of the Stock as determined by the
Committee in good faith based on the available facts and circumstances at the
time.
2.9. Incentive Option means an Option which by its terms is to be
treated as an "incentive stock option" within the meaning of Section 422 of the
Code.
2.10. Long-Term Performance Award or Long-Term Award means an award
made pursuant to Section 10 below that is payable in cash and/or Stock
(including Restricted Stock) in accordance with the terms of the grant, based on
Company, business unit and/or individual performance.
2.11. Nonstatutory Option means any Option that is not an Incentive
Option.
2.12. Participant means an employee or consultant to whom an Award, as
provided in Section 6, shall have been granted under the Plan.
2.13. Plan means this 1993 Long-Term Incentive Plan of the Company, as
amended from time to time.
2.14. Restricted Stock means an Award pursuant to Section 9 below of
shares of Stock subject to restrictions or other forfeiture conditions.
2.15. Stock means Common Stock, par value $.01 per share of the
Company.
2.16. Shareholders Agreement means the agreement, if any, between the
Company and certain shareholders, setting forth, inter alia, certain
restrictions upon the transfer of shares of Stock.
2.17. Stock Appreciation Right means the right, pursuant to an Award
granted under Section 8 below, to surrender to the Company all (or a portion) of
a Stock Option in exchange for an amount equal to the difference between (i) the
Fair Market Value, as of the date such Stock Option (or such portion thereof) is
surrendered, or the shares of Stock covered by such Stock Option (or such
portion thereof), and (ii) the aggregate exercise price of such Stock Option (or
such portion thereof).
2.18. Stock Grant means an Award pursuant to Section 11 below of shares
of Stock not subject to restrictions or other forfeiture conditions.
2.19. Stock Option or Option means any option to purchase shares of
Stock (including Restricted Stock) granted pursuant to Section 7 below.
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2.20. Ten Percent Owner means a person who owns, or is deemed within
the meaning of Section 422(b)(6) of the Code to own, stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
(or any Affiliate). Whether a person is a Ten Percent Owner shall be determined
with respect to an Incentive Option based on the facts existing immediately
prior to the grant date of such Option.
3. TERM OF THE PLAN
Unless the Plan shall have been earlier terminated by the Board, Awards
may be granted hereunder at any time in the period commencing on the approval of
the Plan by the Board and ending on the tenth anniversary of the earlier of the
adoption of the Plan by the Board or approval of the Plan by the Company's
shareholders. Awards granted pursuant to the Plan within such period shall not
expire solely by reason of the termination of the Plan.
4. STOCK SUBJECT TO THE PLAN
(a) Aggregate Limit On Awards. At no time shall the number of
shares of Stock issued pursuant to Awards granted under the Plan exceed
1,250,000 shares, subject, however, to the provisions of subsection (c) below.
Such shares may be either authorized but unissued shares or shares held by the
Company in its treasury. The Company shall at all times reserve and make
available in sufficient number of shares to meet the requirements of the Plan,
provided that following termination of the Plan the number of shares reserved
need not exceed the number of Shares issuable under Awards outstanding from time
to time thereafter.
(b) Computation of Available Shares. For the purpose of
computing the total number of shares of Stock available for Plan purposes at any
time during which the Plan is in effect, there shall be debited against the
total number of shares determined to be available pursuant to paragraphs (a) and
(c) of this Section 4(i) any outstanding Restricted Stock and Stock Grants, (ii)
the maximum number of shares of Stock subject to issuance upon exercise of
Options or upon settlement of other Awards theretofore made under the Plan,
(iii) the shares related to the unexercised or undistributed portion of any
terminated, expired or forfeited Award for which a material benefit was received
by a Participant (e.g. dividends, but not including voting rights), and the
equivalent number of shares (determined as of the date of settlement) of any
portion of any Award settled in cash.
(c) Other Adjustment. In the event of any merger,
reorganization, consolidation, recapitalization, Stock dividend, or other change
in corporate structure affecting the Stock, such substitution or adjustment
shall be made in the character and aggregate number of shares reserved for
issuance under the Plan, and in the number and option price of shares subject to
outstanding Options and other stock based Awards granted under the Plan, as may
be determined to be appropriate by the Committee, provided that the number of
shares subject to any Award shall always be a whole number. Any such adjusted
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option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right associated with any Stock
Option.
5. ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its sole
discretion, to make or to select the manner of making any and all determinations
required for the operation of the Plan, and without limiting the generality of
the foregoing, shall have the authority to
(a) grant to eligible individuals, pursuant to the terms of
the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, (iv) Long-Term Performance Awards, and (v) Stock Grants;
(b) select from time to time the officers, other employees and
consultants of the Company and its Affiliates to whom Awards shall be granted
hereunder;
(c) determine whether and to what extent Incentive Options,
Nonstatutory Options, Stock Appreciation rights, Restricted Stock, Long-Term
Performance Awards and Stock Grants or any combination thereof, are to be
granted hereunder;
(d) determine the number of shares of Stock to be covered by
each Award granted hereunder;
(e) determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Award (which need not be identical in every case),
including, but not limited to, the share price and any restriction or
limitation, or any vesting acceleration or forfeiture waiver regarding any Stock
Option or other Award and the shares of Stock relating thereto, based on such
factors as the Committee shall determine;
(f) determine whether and under what circumstances a Stock
Option may be settled in cash or Stock, including Restricted Stock, as provided
in Section 7.2;
(g) determine whether and under what circumstances a Stock
Option may be exercised without a payment of cash as provided in Section 7.2;
and
(h) determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an Award under
this Plan shall be deferred either automatically or at the election of the
Participant.
In making such determinations, the Committee may take into account the
nature of the services rendered by the respective employees and consultants,
their present and potential contributions to the success of the Company and its
Affiliates, and such other factors as the Committee in its discretion shall deem
relevant. Subject to the provisions of the Plan, the
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Committee shall also have complete authority, in its sole discretion, to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of any Award issued under
the Plan (and any agreements relating thereto), to resolve all disputes arising
under the Plan, and to make all other determinations necessary or advisable for
the administration of the Plan. The Committee's determinations shall be
conclusive, final and binding upon all persons having or claiming any interest
in the Plan or in any Award pursuant to the Plan.
6. ELIGIBILITY
Awards shall be granted under the Plan only to employees of or
consultants to one or more of the Company or an Affiliate (but excluding members
of the Committee) who are responsible for or contribute to, as determined by the
Committee, the management, growth and profitability of the business of the
Company and its Affiliates. A director of one or more of the Company or any
Affiliate who is not also an employee or consultant of one or more of the
Company or an Affiliate shall not be eligible to receive an Award under the
Plan.
7. STOCK OPTIONS
7.1. Provision for Grant. Stock Options may be granted alone, in
addition to or in tandem with other Awards under the Plan. Any Stock Option
granted under the Plan shall be in such form as the Committee may from time to
time approve. The Committee shall have the authority to grant any optionee who
is an employee of the Company, or an Affiliate, Incentive Options, Nonstatutory
Options, or both types of Stock Options (in each case with or without Stock
Appreciation Rights). To the extent that any Stock Option does not qualify as an
Incentive Option, it shall constitute a separate Nonstatutory Option. In the
case of any other person eligible for an Award under the Plan, any Stock Option
granted under the Plan shall be a Nonstatutory Option (with or without Stock
Appreciation Rights).
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Options shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be so exercised, so as
to disqualify the Plan under Section 422 of the code, or, without the consent of
the optionee(s) affected, to disqualify any Incentive Option under such Section
422.
7.2. Terms and Conditions. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem appropriate:
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant
but in the case of any Incentive Option shall be not less than 100% of the Fair
Market Value of the Stock at
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<PAGE> 9
the time of grant (110% of Fair Market Value, in the case of any grant of an
Incentive Option to a Ten Percent Owner).
(b) Option Term. The term of each Stock Option shall be fixed by
the Committee, but not Incentive Option shall be exercisable more than ten years
after the date the Option is granted (or, more than five years after the date
the Option is granted, in the case of any grant of an Incentive Option to a Ten
Percent Owner). No Stock Option may be exercised by any person after expiration
of the term of the Option.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at or after grant, provided, however, that, except as provided in
this Section 7 and Section 13, at or after grant no Stock Option shall be
exercisable during the six months following the date of the granting of the
Option. If the Committee provides, in its discretion, that any Stock Option is
exercisable only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall determine.
(d) Method of Exercise. Subject to whatever installment exercise
provisions may apply, Stock Options may be exercised in whole or in part at any
time and from time to time during the option period, by giving written notice of
exercise to the Company, in the manner set out in Section 15.7, specifying the
number of shares to be purchased. Such notice shall be accompanied by payment in
full of the purchase price, either by certified or bank check, or such other
instrument as the Committee may accept. As determined by the Committee, at or
after grant, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a Nonstatutory Option, Restricted Stock subject to an Award hereunder (based,
in each case, on the Fair Market Value of the Stock on the date the option is
exercised, as determined by the Committee); provided, however, that, in the case
of an Incentive Option, the right to make a payment in the form of already owned
shares may be authorized only at the time the option is granted.
If payment of the option exercise price of a Nonstatutory Option
is made in whole or in part in the form of Restricted Stock, such Restricted
Stock (and any replacement shares relating thereto) shall remain (or be)
restricted in accordance with the original terms of the Restricted Stock Award
in question, and any additional Stock received upon the exercise shall be
subject to the same forfeiture restrictions, unless otherwise determined by the
Committee, at or after grant.
If payment of the Option exercise price of a Stock Option is
made in whole or in part in the form of unrestricted Stock already owned by the
Participant, the Company may require that the Stock has been owned by the
Participant for a specified minimum period of time, for the purpose of avoiding
any charge to the Company's earnings, limiting the
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pyramiding of Stock Option exercises, or such other purposes as the Company
deems appropriate.
(e) Replacement Options. If a Nonstatutory Option granted pursuant
to the Plan may be exercised by an optionee by means of the delivery of
previously acquired Stock, then the Committee may, at the time of the original
option grant, authorize the Participant to automatically receive a replacement
Nonstatutory Option to the extent shares are available under Section 4 at the
time such replacement Option would be issued. Any such replacement Option shall
cover such number of shares as may be determined by the Committee, but in no
event more than the number of shares equal to the difference, if any, between
the number of shares for which the original Option is exercised and the net
shares received by the Participant from such exercise. Any such replacement
Option shall have an exercise price equal to the then Fair Market Value of
Stock, and a term extending to the expiration date of the original Option. The
Committee shall have the right at any time to discontinue the automatic grant of
replacement Options.
(f) Transferability. No Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and distribution, and all
Stock Options shall be exercisable, during the optionee's lifetime, only by the
optionee.
(g) Effect of Termination of Employment Or Association. If an
optionee's employment by or association with the Company and its Affiliates
terminates for any reason whatsoever, unless the Committee shall have provided
otherwise, any Stock Option held by such optionee shall thereupon terminate;
provided, however, that military or sick leave shall not be deemed a termination
of employment or other association, if it does not exceed the longer of 90 days
or the period during which the absent optionee's reemployment rights, if any,
are guaranteed by statute or by contract.
(h) Incentive Option Limitations. To the extent required for
"Incentive Option" status under Section 422 of the Code, the aggregate Fair
Market Value (determined as of the date of grant) of the Stock with respect to
which Incentive Options become exercisable for the first time by the optionee
during any calendar year under the Plan and any other stock option plan of the
Company and any Affiliate shall not exceed $100,000. In the event shares of
Stock in excess of the preceding limitation become exercisable for the first
time in a calendar year under any such Options or options, such shares shall be
considered to have become exercisable under separate Nonstatutory Options (with
the Options or options granted earliest in time considered to constitute to the
maximum extent possible the Incentive Options).
(i) Cash-out of Option; Settlement of Spread Value in Restricted
Stock. On receipt of written notice to exercise, the Committee may elect to cash
out all or part of the portion of the Option(s) to be exercised by paying the
optionee an amount, in cash or Stock, equal to the excess of the Fair Market
Value of the Stock over the option price (the "Spread Value") on the effective
date of such exercise. In addition, if the Option agreement
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so provides at grant or is amended after grant and prior to exercise to so
provide (with the optionee's consent), the Committee may require that all or
part of the shares to be issued with respect to the Spread Value of an exercised
Option take the form of Restricted Stock, which shall be valued on the date of
exercise on the basis of the Fair Market Value of such Restricted Stock
determined without regard to the forfeiture restrictions involved.
(j) Cashless Exercise. To the extent permitted under the
applicable laws and regulations and the terms of a Participant's Option
agreement, at the request of the Participant and with the consent of the
Committee, the Company agrees to cooperate in a "cashless exercise" of an
Option. The cashless exercise shall be effected by the Participant delivering to
a registered securities broker acceptable to the Company instructions to sell a
sufficient number of shares of Stock from which such Option is then exercisable
to cover the costs and expenses associated with such exercise and sale.
(k) Grant Date. The granting of an Option shall take place at the
time specified in the agreement set forth the terms of such Option. Only if
expressly so provided in the Option agreement, shall the grant date be the date
on which an Option agreement shall have been duly executed and delivered by the
Company and the Participant.
8. STOCK APPRECIATION RIGHTS
8.1. Provision for Grant. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Nonstatutory Option, such rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive Option, such
rights may be granted only at the time of the grant of such Stock Option.
8.2. Termination. A Stock Appreciation Right or applicable portion
thereof granted with respect to a given Stock Option shall terminate and no
longer be exercisable upon the termination or exercise of the related Stock
Option, except that, unless otherwise determined by the Committee at the time of
grant, a Stock Appreciation Right granted with respect to less than the full
number of shares covered by a related Stock Option shall not be reduced until
the number of shares covered by an exercise or termination of the related Stock
Option exceeds the number of shares not covered by the Stock Appreciation Right.
8.3. Manner and Effect of Exercise. A Stock Appreciation Right may be
exercised by an optionee, in accordance with Section 8.4, by surrendering the
applicable portion of the related Stock Option. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount determined in the
manner prescribed in Section 8.4. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Right has been exercised.
8.4. Other Terms and Conditions. Stock Appreciation Rights granted
under the Plan shall be subject to the following terms and conditions, and shall
contain such additional
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terms and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall deem appropriate:
(a) Exercisability. Stock Appreciation Rights shall be exercisable
only at such time or times and to the extent that the Stock Options to which
they relate, if any, shall be exercisable in accordance with the provisions of
Section 7 and this Section 8.4 of the Plan; provided, however, that any Stock
Appreciation Right granted subsequent to the grant of the related Stock Option
shall not be exercisable during the first six months of its term; and provided,
further, however, that a Stock Appreciation Right granted in connection with an
Incentive Option may be exercised only if and when the market price of the Stock
subject to the Incentive Option exceeds the exercise price of such Stock Option.
(b) Amount Payable. Upon the exercise of a Stock Appreciation
Right, an optionee shall be entitled to receive up to, but not more than, an
amount in cash or shares of Stock equal in value to the excess of the Fair
Market Value of one share of Stock over the option price per share specified in
the related Stock Option, multiplied by the number of shares in respect of which
the Stock Appreciation Right shall have been exercised. The Committee shall
determine the form of payment.
(c) Transferability. Stock Appreciation Rights shall be
transferable only when and to the extent that the underlying Stock Option would
be transferable under Section 7.2 of the Plan.
9. RESTRICTED STOCK
9.1. Provision for Grant. Shares of Stock may be issued either alone or
in addition to other Awards granted under the Plan at such price, if any, as the
Committee may determine. The Committee may condition the grant of Restricted
Stock upon the completion of additional service, attainment of specified
performance goals or such other factors as the Committee may determine.
9.2. Awards and Certificates. The prospective recipient of a Restricted
Stock Award shall not have any rights with respect to such Award, unless and
until such recipient has executed an agreement evidencing the Award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such Award.
9.3. Additional Terms and Conditions. Grants of Restricted Stock may be
made under the following additional terms and conditions:
(a) Purchase Price. The purchase price for shares of Restricted
Stock shall be equal to or less than their Fair Market Value and may be zero, as
determined by the Committee.
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(b) Acceptance of Awards. Awards of Restricted Stock must be
accepted within a period of 60 days (or such shorter period as the Committee may
specify at grant) after the Award date, by executing a Restricted Stock Award
agreement and paying whatever price (if any) is required pursuant to the terms
of the Award.
(c) Issuance of Certificates. Each Participant receiving a
Restricted Stock Award shall be issued a stock certificate in respect of such
shares of Restricted Stock. Such certificate shall be registered in the name of
such Participant and, if applicable, shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Award, in addition
to legends authorized pursuant to Section 12, substantially in the following
form:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the Transkaryotic
Therapies, Inc. 1993 Long-Term Incentive Plan and an Agreement
entered into between the registered owner and Transkaryotic
Therapies, Inc. Copies of such Plan and Agreement are on file
in the offices of Transkaryotic Therapies, Inc. at 195 Albany
Street, Cambridge, MA 02139."
(d) Escrow of Shares. The Committee may require that the stock
certificates evidencing shares of Restricted Stock be held in custody by the
Company until the restrictions thereon shall have lapsed, and that the
Participant deliver a stock power, endorsed in blank, relating to the Stock
covered by such Award.
(e) Transferability. Subject to the provisions of this Plan
and the Award agreement, during the period set by the Committee commencing with
the date of such Award (the "Restriction Period"), the Participant shall not be
permitted to sell, transfer, pledge, assign or otherwise encumber shares of
Restricted Stock awarded under the Plan. Within these limits, the Committee may
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions in whole or in part, based on service, performance
and/or such other factors or criteria as the Committee may determine.
(f) Rights Pending Lapse of Restrictions or Forfeiture of
Award. Except as provided in this subsection (f) and subsection (e) above, the
Participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Company, including the right to vote the
shares, and the right to receive any cash dividends. The Committee, as
determined at the time of Award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested in
additional Restricted Stock to the extent shares are available under Section 4.
(g) Effect of Termination of Employment or Association. Unless
otherwise determined by the Committee and subject to the applicable provisions
of the Award
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agreement and this Section 9, upon termination of a Participant's employment or
other association with the Company and its Affiliates for any reason during the
Restriction Period, all shares still subject to restriction shall be forfeited
by the Participant; provided, however, that military or sick leave shall not be
deemed a termination of employment or other association, if it does not exceed
the longer of 90 days or the period during which the absent optionee's
reemployment rights, if any, are guaranteed by statute or by contract.
(h) Lapse of Restrictions. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the certificates for such shares shall be delivered to the
Participant promptly if not theretofore so delivered.
10. LONG-TERM PERFORMANCE AWARDS
10.1. Provision for Grant. Long-Term Performance Awards may be awarded
either alone or in addition to other Awards granted under the Plan. The
Committee shall determine the nature, length and starting date of the
performance period (the "Performance Period") for each Long-Term Performance
Award, which subject to Section 13 below shall be a period of at least two
years, and shall determine the performance objectives to be used in valuing
Long-Term Performance Awards and determining the extent to which such Long-Term
Performance Awards have been earned. Performance objectives may vary from
Participant to Participant and between groups of Participants and shall be based
upon such Company, business unit and/or individual performance factors and
criteria as the Committee may deem appropriate, including, but not limited to,
earnings per share or return on equity. Performance Periods may overlap and
Participants may participate simultaneously with respect to Long-Term
Performance Awards that are subject to different Performance Periods and/or
different performance factors and criteria.
10.2. Periodic Determination of Performance. At the beginning of each
Performance Period, the Committee shall determine for each Long-Term Performance
Award subject to such Performance period the range of dollar values or number of
shares of Stock to be awarded to the Participant at the end of the Performance
period if and to the extent that the relevant measure(s) of performance for such
Long Term Performance is (are) met. Such dollar values or number of shares of
Stock may be fixed or may vary in accordance with such performance or other
criteria as may be specified by the Committee.
10.3. Adjustment of Awards. In the event of special or unusual events
or circumstances affecting the application of one or more performance objectives
to a Long- Term Performance Award, the Committee may revise the performance
objectives or underlying factors and criteria applicable to the Long-Term
Performance Awards affected, to the extent deemed appropriate by the Committee,
to avoid unintended windfalls or hardship.
10.4. Effect of Termination of Employment or Association. Unless
otherwise determined by the Committee, upon termination of a Participant's
employment or other
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association with the Company and its Affiliates for any reason during a
Performance period, the Participant shall not be entitled to any payment with
respect to the Long-Term Performance Awards subject to such Performance period;
provided, however, that military or sick leave shall not be deemed a termination
of employment or other association, if it does not exceed the longer of 90 days
or the period during which the absent Participant's reemployment rights, if any,
are guaranteed by statute or by contract.
10.5. Form of Payment. The earned portion of a Long-Term Performance
Award may be paid currently or on a deferred basis with such interest or
earnings equivalent as may be determined by the Committee. Payment shall be made
in the form of cash or whole shares of Stock, including Restricted Stock, either
in a lump sum payment or in annual installments commencing as soon as
practicable after the end of the relevant Performance Period, all as the
Committee shall determine at or after grant.
11. STOCK GRANTS
In recognition of significant contributions to the success of the
Company or its Affiliates, and in such other circumstances as the Committee
deems appropriate shares of Stock may be issued either alone or in addition to
other stock or cash-based Awards granted under the Plan at such price, if any,
as the Committee may determine. Subject to adjustment pursuant to Section 4(c)
above, the number of shares awarded as Stock Grants shall not exceed 125,000 of
the 1,250,000 shares of Stock subject to this Plan. Stock Grant Awards shall be
made without forfeiture conditions of any kind and otherwise pursuant to such
terms and conditions as the Committee may determine.
12. RESTRICTIONS ON ISSUANCE OF SHARES
12.1. Securities Laws. Notwithstanding any other provision of the Plan,
if, at any time, in the reasonable opinion of the Company the issuance of shares
of Stock covered by any Award granted under the Plan may constitute a violation
of law, then the Company may delay such issuance and the delivery of a
certificate for such shares until (i) approval shall have been obtained from
such governmental agencies, other than the Securities and Exchange Commission,
as may be required under any applicable law, rule, or regulation; and (ii) in
the case where such issuance would constitute a violation of a law administered
by or a regulation of the Securities and Exchange Commission, one of the
following conditions shall have been satisfied:
(a) the shares with respect to which such Option has been
exercised are at the time of the issue of such shares effectively registered
under the Securities Act of 1933, as amended (the "Securities Act"); or
(b) a no-action letter in form and substance reasonably
satisfactory to the Company with respect to the issuance of such shares shall
have been obtained by the Company from the Securities and Exchange Commission.
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The Company shall make all reasonable efforts to bring about the occurrence of
said events.
12.2. Investment Representation. Unless the shares to be issued in
connection with any Award granted under the Plan have been effectively
registered under the Securities Act, the Company shall be under no obligation to
issue any shares covered by such Award unless the person to acquire such shares
shall give a written representation to the Company which is satisfactory in form
and substance to its counsel and upon which the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such Award as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares.
12.3. Placement of Legends; Stop Orders; etc. Each share of Stock
issued pursuant to an Award granted under this Plan may bear a reference to the
investment representation made in accordance with Section 12.2 in addition to
any other applicable restriction under the Plan, the terms of the Award, and any
applicable Shareholders Agreement and Employment Agreement, and to the fact that
no registration statement has been filed with the Securities and Exchange
Commission in respect to said Stock. All certificates for shares of Stock or
other securities delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
12.4. Registration. If the Company shall deem it necessary or desirable
to register under the Securities Act or other applicable statutes any shares
with respect to which an Option shall have been granted or to qualify any such
shares for exemption from the Securities Act or other applicable statutes, then
the Company shall take such action at its own expense. The Company may require
from each Participant, and each holder of shares of Stock acquired pursuant to
an Award granted under the Plan such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damage and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
12.5. Applicability of Shareholders Agreement. Whenever shares are to
be issued pursuant to an Award granted hereunder, the Company shall have the
right to require the Participant to execute and deliver and otherwise become a
party to the Shareholders Agreement in respect of such shares.
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13. EFFECT OF CERTAIN TRANSACTIONS
13.1. Liquidation or Dissolution of the Company. In the event of a
proposed dissolution or liquidation of the Company, each outstanding Award
granted hereunder shall terminate (i.e., Options and Stock Appreciation Rights
shall lapse, Restricted Stock shall be forfeited and any Performance Awards
cancelled) immediately prior to the consummation of such action, without any
payment therefore, unless otherwise provided by the Committee. As to outstanding
Options, the Committee may, in the exercise of its sole discretion in such
instances, declare that any such Option shall terminate as of a date fixed by
the Committee and give each Optionee the right to exercise his option as to all
or any part of the shares of Stock covered by an Option for a period of twenty
(20) days following such date, including shares of Stock as to which the Option
would not otherwise be exercisable.
13.2. Sale of Assets, Merger or Consolidation. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger or consolidation of the Company with or into another corporation in a
transaction in which the Company does not survive, the Committee may, in the
exercise of its sole discretion in such instances, give each Participant the
right to exercise his Option as to all or any part of the shares of Stock
covered by an Option, including shares of Stock as to which the Option would not
otherwise be exercisable, waive any remaining restrictions applicable to
Restricted Stock and provide for the pro rata payment of Performance Awards
based on performance through the date of such transaction. In the event the
Committee elects to authorize the exercise of outstanding and otherwise
unexercisable Options, the Committee shall notify the Participant that the
Option shall be fully exercisable for a period of not less than twenty (20) nor
more than sixty (60) days from the date of such notice, and if such Option shall
not be exercised, the Committee may, in the exercise of its sole discretion in
such instances, determine that the Option shall terminate upon the expiration of
such period and be of no further force or effect.
14. TERMINATION AND AMENDMENT OF THE PLAN AND AWARDS
The Board may at any time terminate the Plan or make such modifications
of the Plan as it shall deem advisable. No termination or amendment of the Plan
may, without the consent of the Participant to whom any Award shall theretofore
have been granted, adversely affect the rights of such Participant under such
Award.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without the Participant's consent.
15. MISCELLANEOUS PROVISIONS
15.1. Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to
14
<PAGE> 18
a Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of any other general creditor
of the Company. The Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Stock or
payments in lieu of or with respect to Awards hereunder, provided, however,
unless the Committee otherwise determines with the consent of the affected
participant, the existence of such trusts or other arrangements is consistent
with the "unfunded" status of the Plan.
15.2. Adoption of Other Plans. Nothing contained in this Plan shall
prevent the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
15.3. Payments on Death. The Committee shall establish such procedures
as it deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid.
15.4. Tax Withholding.
(a) In General. No later than the date as of which an amount
first becomes includable in the gross income of the Participant for federal
income tax purposes with respect to any Award, the Participant shall pay to the
Company, or make arrangements satisfactory to the Company regarding the payment
of, any federal, state, or local taxes of any kind required by law to be
withheld (whether so required to secure an otherwise available tax deduction or
otherwise) with respect to such amount. If authorized by the Committee at the
grant of an Award (or, other than in the case of Incentive Option, at any time
thereafter) and so elected by the Participant, the minimum required withholding
obligations may be settled with Stock, including Stock that is part of the Award
that gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements and the
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the Participant.
(b) Disqualifying Dispositions. The Company may require as a
condition to the issuance of shares covered by any Incentive Option that the
party exercising such Option give a written representation to the Company which
is satisfactory in form and substance to its counsel and upon which the Company
may reasonably rely, that he or she will report to the Company any disposition
of such shares prior to the expiration of the holding periods specified by
Section 422(a)(1) of the Code. If and to the extent that the realization of
income in such a disposition imposes upon the Company federal, state, local or
other withholding tax requirements, or any such withholding is required to
secure for the Company an otherwise available tax deduction, the Company shall
have the right to require that the recipient remit to the Company an amount
sufficient to satisfy those requirements.
15
<PAGE> 19
15.5. Limitation of Rights in Stock. No Participant shall not be deemed
for any purpose to be a stockholder of the Company with respect to any of the
shares of Stock covered by an Award, except to the extent any payment required
therefor shall have been received by the Company and a certificate shall have
been issued therefor and delivered to the Participant or his or her agent (or,
in the case of Restricted Stock, the Company as escrow agent). Any Stock issued
pursuant to an Award shall be subject to all restrictions upon the transfer
thereof which may be now or hereafter imposed by the Certificate of
Incorporation, the By-laws of the Company, the Shareholders Agreement and the
Employment Agreement.
15.6. No Special Employment or Other Rights. Nothing contained in the
Plan or in any Award shall confer upon any Participant any right with respect to
the continuation of his or her employment or other association with the Company
(or any Affiliate), or interfere in any way with the right of the Company (or
any Affiliate), subject to the terms of any separate employment or consulting
agreement or provision of law or corporate articles or by-laws to the contrary,
at any time to terminate such employment or consulting agreement or to increase
or decrease the compensation of the Participant from the rate in existence at
the time of the grant of an Award under the Plan.
15.7. Notices and Other Communications. All notices and other
communications required or permitted under the Plan shall be effective if in
writing and if delivered or sent by certified or registered mail, return receipt
requested (a) if to the Participant, at his or her residence address last filed
with the Company, and (b) if to the Company, at 195 Albany Street, Cambridge, MA
02139 Attention: Treasurer or to such other persons or addresses as the
Participant or the Company may specify by a written notice to the other from
time to time.
15.8. Governing Law. The Plan and all Awards and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
Date of Board Approval: June 16, 1993
Date of Shareholder Approval: June 24, 1993
16
<PAGE> 1
EXHIBIT 10.16
TKT LETTERHEAD
______________, 1996
<<name>>
<<address>>
Re: Confidentiality. Inventions and Noncompetition
----------------------------------------------
Dear <<salutation>>:
This letter is being written for the purpose of setting forth certain of the
terms of the understandings between Transkaryotic Therapies, Inc. (the
"Company") and you in connection with your employment by the Company. If you are
in agreement with these terms, please sign and date the last page of one copy of
this letter and return it to the Company, whereupon this letter shall represent
a legally binding agreement between the Company and you. Please keep the other
copy of this letter for your files.
A. Consideration.
- -----------------
As consideration for your employment by the Company and as a condition of your
employment by the Company, you hereby agree to the following:
1) CONFIDENTIALITY. You recognize and acknowledge that the Company's trade
secrets, know-how and proprietary processes as they may exist from time to time
(including, but not limited to, information regarding methods, cultures,
subcultures, mutants, plasmids, synthesis techniques, gene mapping data,
experimental animals and assay procedures) as well as the Company's,
confidential business plans and financial data are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of your duties as an employee of the Company. In addition,
you acknowledge that as an employee of the Company, you may be given access to
confidential information regarding the research of certain consultants or
advisors to the Company and other scientists who may enter into discussions with
the Company ("Third Party Research"). You shall not, during or after the term of
your employment by the Company, in whole or in part, disclose such secrets,
know-how, processes, business plans, financial data or Third Party Research to
any person, firm, corporation, association or other entity (except the Company)
for any reason or purposes whatsoever, nor shall you make use of any property
owned by the Company or of any Third Party Research for your own purposes or for
the benefit of any third party (except the Company) under any circumstances
during or after the term of your employment. These restrictions shall not apply
to such secrets, know-how and processes which you can establish by competent
proof:
i. were known to you, other than under binder of secrecy, prior
to your employment by the Company; or
<PAGE> 2
ii. have passed into the public domain prior to or after their
development by or for the Company, or their disclosure to the Company, other
than through acts or omissions attributable to you; or
iii. were subsequently obtained, other than under binder of
secrecy, from a third party not acquiring the information under an obligation of
confidentiality from the disclosing party.
Upon termination of your employment with the Company, you shall promptly
turnover to the Company all originals and copies which you may have of any of
the Company's confidential information described in this Agreement or any Third
Party Research. You will not disclose to the Company any confidential
information, proprietary material, or trade secrets belonging to any former
employer or other third party.
2) INTELLECTUAL PROPERTY. You hereby sell, transfer and assign to the
Company, or to any person or entity designated by the Company, your entire
right, title and interest in and to all inventions, ideas, discoveries, and
improvements (including, but not limited to, cultures, subcultures, mutants,
plasmids, synthesis techniques, gene mapping data, experimental animals and
assay procedures), whether patented or unpatented, and materials subject to
copyright, made or conceived by you, solely or jointly, during the term of your
employment by the Company and for six (6) months thereafter which arise out of
or in connection with research or other activities conducted by, for, or under
the direction of the Company, whether or not conducted at the Company's
facilities, or which relate to methods, apparatus, designs, products, processes
or devices, sold, leased, used or under consideration or development by the
Company. You acknowledge that all copyrightable materials developed or produced
by you within the scope of your employment constitute works made for hire. you
shall communicate promptly and disclose to the Company, in such form as the
Company may reasonably request, all information, details and data pertaining to
any such inventions, ideas, discoveries and improvements; and you shall execute
and deliver to the Company such formal transfers and assignments and such other
papers and documents and shall give such testimony as may be necessary or
required of you to permit the Company or any person or entity designated by the
Company to file and prosecute patent applications and, as to material subject to
copyright, to obtain copyrights thereof.
3) NONCOMPETITION. So long as you are employed by the Company, (and, if
your employment is terminated for cause or terminated by you, for a period of
one year thereafter), you shall not engage in any business (whether as an
officer, director, owner, employee, partner, consultant, advisor or other direct
or indirect participant) engaged in the commercial exploitation of research in
gene therapy, gene mapping, or any other business which competes with the
business of the Company, provided that during any period on which this covenant
may be in effect, you may be employed as a faculty member of any educational
institution or an employee of any non profit entity after termination of your
employment by the Company. So long as you are employed by the Company and for a
period of one year thereafter you shall not interfere with, disrupt or attempt
to disrupt, the relationship (contractual or otherwise) between the Company and
any of its customers, suppliers, lessors, lessees, employees, consultants
research partners, creditors or investors. It is the intent of the Company and
you that the provisions of this Paragraph 3 be enforced to the fullest extent
permissible under the laws and public policies of each jurisdiction in which
enforcement is sought. Accordingly, if any portion of this
<PAGE> 3
Paragraph 3 shall be adjudicated to be invalid or unenforceable, this Paragraph
3 shall be deemed amended to delete therefrom the portion so adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of this Paragraph 3 in the particular jurisdiction in which such
adjudication is made.
4) INJUNCTIVE RELIEF. If there is a breach or threatened breach of the
provisions of Paragraphs 1, 2, or 3 of this Agreement, the Company shall be
entitled to an injunction, without bond, restraining you from such breach.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedies for such breach or threatened breach.
B. Rights Conferred.
- -- -----------------
Nothing contained in this Agreement shall be construed as giving you any legal
or equitable rights against the Company or any subsidiary corporation or any
director, officer, employee, or agent thereof except for such rights as are
expressly provided herein. Under no circumstances shall this Agreement be
construed as a contract of continuing employment of you, nor shall this
Agreement obligate the Company to continue your employment.
C. Governing Law.
- -- --------------
This Agreement will be construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts.
D. Severability.
- -- -------------
If any portion of this Agreement shall, in whole or in part, provide to be
invalid for any reason, such invalidity shall affect only the portion of such
provision which shall be invalid, and no other portion or provisions of this
Agreement shall be invalidated or affected thereby.
Please indicate your acceptance and approval of the foregoing in the space
provided below.
TRANSKARYOTIC THERAPIES, INC.
BY:
Richard F. Selden
Founder and Chief Executive Officer
ACCEPTED AND APPROVED:
<<signature>>
DATED:
<PAGE> 1
EXHIBIT 10.17
TKT LETTERHEAD
Re: Restricted Stock Agreement
--------------------------
Dear Dr. :
This letter is being written for the purpose of setting forth the basic terms of
the understandings between Transkaryotic Therapies, Inc. (the "Company') and you
in connection with the purchase by you and sale by the Company of shares of
Common Stock, par value one cent ($0.01) per share of the Company (the
"Restricted Stock"). Promptly after the execution of this Agreements the Company
will issue and sell to you, and you will purchase from the Company, at a
purchase price of per share, the Restricted Stock. If you are in agreement with
these terms, please sign and date the last page of one copy of this letter and
return it to the Company, whereupon this letter shall represent a legally
binding agreement between the Company and you. Please keep the other copy of
this letter for your files.
A. Restrictions on Stock.
---------------------
All shares of Restricted Stock sold hereunder (including any Shares received by
you in respect of the Restricted Stock as a result of stock dividends, stock
splits or any other forms of recapitalization) shall be subject to the following
restrictions:
1) No shares of Restricted Stock shall be disposed of by you either
voluntarily or involuntarily, directly or indirectly, during the period
commencing on the date hereof and ending on (the "Restricted Stock
Period") unless such shares of Restricted Stock shall have then been
released from such restrictions pursuant to Paragraph 2 hereof, and any
attempted disposition of shares of Restricted Stock while they are
restricted shall be null and void and of no effect.
2) The restrictions imposed under Paragraph 1 above upon shares of
Restricted Stock shall terminate with respect to one fourth of the
shares on and on each successive thereafter.
3) If you cease to be an employee of the Company at any time during the
Restricted Stock Period for any reason, then within the period
following the termination of your employment with the Company, the
Company will buy and you (or your personal representative if you should
die) will sell to the Company all of the shares of Restricted Stock
which are then restricted under this agreement for a cash purchase
price of (such price per share to be adjusted ratably in the event of
any stocksplit, stock dividend, combination, reclassification,
recapitalization, or other similar event).
4) You hereby confirm that you are acquiring the shares of Restricted
Stock solely for your own account for investment and not with a view to
any distribution or public offering thereof. You agree that you will
not, at any time (before or after the Restricted Stock
<PAGE> 2
Period) sell, offer for sale, pledge or otherwise dispose of any of the
shares acquired hereunder, or any interest therein in the absence of
either an effective current registration statement relating thereto
under the Securities Act of 1933 (the "Act") or an opinion of counsel.
in form and substance satisfactory to the Company to the effect that
registration is not required. You hereby acknowledge having been
advised that (i) you must hold the shares acquired hereunder
indefinitely unless they are registered under the Act, or an exemption
from registration becomes available, (ii) there is not likely to be a
market for such shares in the foreseeable future and therefore no sales
of such shares under Rule 144 under the Act will be possible, and (iii)
sales of shares in reliance upon Rule 144 may be made only after the
expiration of two years from the date of purchase and then only in
limited amounts in accordance with the conditions of that rule, all of
which must be met.
5) You hereby agree to execute, prior to your receipt of the Restricted
Stock, an Instrument of Adherence to that certain Stockholders'
Agreement, dated as of September 16, 1988, among the company and
certain of its stockholders, which agreement provides that the shares
acquired hereunder are subject to certain rights of first refusal in
favor of the Company and certain of its stockholders.
6) The certificates evidencing the Restricted Stock shall bear the
following legends:
Transfer of this certificate and the shares represented hereby
is restricted pursuant to the terms of an agreement, dated as
of between Transkaryotic Therapies, Inc. and the holder
hereof. A copy of such agreement is on file at the principal
offices of Transkaryotic Therapies, Ink.
The shares of stock represented by this certificate are
subject to all the terms of that certain Stockholders'
Agreement, dated as of September 16, 1988, among Transkaryotic
Therapies, Inc., and certain of its Stockholders, a copy of
which agreement is on file at the offices of Transkaryotic
Therapies, Inc. Such agreement provides that shares
represented hereby are subject to rights of first refusal in
favor of certain Stockholders and Transkaryotic Therapies,
Inc.
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended. No
transfer, sale or other disposition of these shares may be
made unless a Registration Statement with respect to these
shares has become effective under said Act, or Transkaryotic
Therapies, Inc., has been furnished with an opinion of counsel
satisfactory to it that such registration is not required.
The issuer has multiple classes of stocks. The full text of
the preferences, powers, qualifications and special and
relative rights
<PAGE> 3
of the shares of each such class as set forth in the
Certificate of Incorporation will be furnished to the holder
of this Certificate upon written request to the issuer and
without charge.
and stop transfer instructions shall be delivered by the Company to any
transfer agent for the Restricted Stock. At the time or times when the
restrictions in Paragraph I of this Section A are terminated with
respect to the Restricted Stock or the Restricted Stock is registered
under the Act, the relevant legends on the certificates evidencing such
shares shall be appropriately amended and the stop transfer
instructions shall be appropriately modified. If shares of Restricted
Stock are repurchased by the company pursuant to Paragraph 3 of this
Section A, then any property of any description distributed with
respect to the shares repurchased, including but not limited to stock
dividends, but excluding cash dividends, shall be transferred to the
Company at the same time the shares so repurchased are transferred to
the Company.
7) During the Restricted Stock Period, the Company will retain possession
of all stock certificates evidencing Restricted Stock. Promptly after
the release of any portion of the Restricted Stock from the
restrictions provided for in this Agreement, the Company will deliver
to you a certificate evidencing such portion of the Restricted Stock.
B. Rights Conferred.
----------------
Nothing contained in this Agreement, nor the purchase of the Restricted Stock,
hereunder, shall be construed as giving you any legal or equitable rights
against the Company or any subsidiary corporation or any director, officer,
employee, or agent thereof except for such rights as are expressly provided
herein. Under no circumstances shall this Agreement: be construed as a contract
of continuing employment of you, nor shall this Agreement or the Restricted
Stock purchased hereunder Obligate the Company to continue your employment.
C. Governing Law.
-------------
This Agreement will be construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts.
D. Severability.
------------
If any portion of this Agreement shall, in whole or in pan, provide to be
invalid for any reason, such invalidity shall affect only the portion of such
provision which shall be invalid, and no other portion or provisions of this
Agreement shall be invalidated or affected thereby.
<PAGE> 4
Please indicate your acceptance and approval of the foregoing in the space
provided below.
TRANSKARYOTIC THERAPIES INC.
BY:
-------------------------------------
TITLE: President
ACCEPTED AND APPROVED
- ----------------------------------
DATED:
----------------------------
<PAGE> 1
Exhibit 10.18
[FORM OF SCIENTIFIC ADVISORY BOARD MEMBER AGREEMENT]
Dear Dr.
This letter is being written for the purpose of setting forth the basic terms of
the understandings between Transkaryotic Therapies, Inc., ("the Company") and
you (the "Scientific Advisor"). If you are in agreement with these terms, please
sign and date the last page of one copy of this letter and return it to us,
whereupon this letter shall represent a legally binding agreement between us.
Please keep the other copy of this letter for your files.
1. Academic Responsibilities. You, as a member of the Professional Staff of
the _____________ and as a full-time employee of___________ are responsible
for teaching and conducting, supervising and administering a variety of
research programs in molecular biology and biochemistry, and you are
subject to all requirements imposed by the consulting, conflict of interest
and patent policies of ___________ and_______________.
2. Duties. As a Scientific Advisor to the extent not prohibited by your
obligations to __________ and _____________including your obligations to
any sponsor of research at ______________ or _____________ your duties will
consist of using your best efforts during each year of the term of this
agreement to attend meetings of the Scientific Advisors of the Company (two
to three per year as scheduled by the Company), and at such meetings to
discuss research conducted by the Company and new developments in research
areas of interest to the Company, including work done in your own
laboratories which has been made public by presentation at an open
scientific meeting or by written publications, and potentials for
commercial application of developments in gene therapy, molecular biology
as it relates to gene therapy, and gene mapping. In addition, as the
Company's business develops, the Company will be able to look to you to
help evaluate or screen specific research proposals which are presented to
the Company and, if such proposals are pursued, to help the Company in
monitoring their progress.
As a Scientific Advisor to the Company, you will also be expected to attend
regular scientific meetings (at an internal and location to be mutually
agreed to by the Company and the Scientific Advisor), for the purpose of
reviewing data and planning experiments related to the Company's hematology
gene therapy research programs.
From time to time, the Company may also ask certain of its Scientific
Advisors who have interests or specialties in a particular field to attend
additional meetings or to undertake one or more special consulting projects
for the Company. Attendance at such additional meetings or acceptance of
such special engagements will be at the option of each Scientific Advisor
and all arrangements with respect thereto will be mutually agreed to in
advance by the Scientific Advisor and the Company.
<PAGE> 2
The Company recognizes that in accepting a position as the Scientific
Advisor our role must be viewed as one which clearly allows you to continue
to function in your academic environment without alteration of your
research, publication or professional goals and practices.
Nothing herein shall be construed to permit or require you to disclose, and
you shall not disclose, to the Company any information including without
limitation any advice or suggestions regarding any product, product
development, formula, or technological or manufacturing process, whether or
not related to your services hereunder, which you shall be under any duty,
express or implied, to ______________ or _____________ or any other person
or persons, including any sponsor of research at ______________ or at
___________________, to keep secret, develop or otherwise to deal with.
3. Funding of Your Research. Nothing contained in this Agreement shall be
construed to require the Company to fund research in the laboratory with
which you are affiliated or to require you to seek funding for such
laboratory or projects being conducted in such laboratory from the Company,
or to prevent the ____________ from obtaining from any source funding for
research to be conducted in whole or in part by you or any other member of
_______________. Should you and the Company wish to pursue such a funding
or research arrangement, then such arrangement shall be the subject of a
separate agreement between the institutions with which you are affiliated
and the Company, which agreement shall set forth among other terms the
level of funding, the rights of the Company in intellectual property
resulting from such research, confidentiality provisions and other matters
specifically negotiated with respect to the particular research project.
4. Existing and Future Commitments. You represent and warrant to the Company
that:
(a) You are permitted under the terms of your employment by
__________ and the terms of your affiliation with __________
to enter into this agreement; and you have furnished such
institutions with such notice, and obtained such approvals,
regarding your accepting a position as a Scientific Advisor
of the Company as are required under the term of your
employment and affiliation;
(b) You are not presently a party to any agreement under which
you conduct research for or render services to any
commercial enterprise, other than as set forth in Schedule A
to this agreement, nor except as disclosed on such Schedule
A do you have any equity participation in any enterprise
engaged in the commercialization of developments in gene
therapy, molecular biology as it relates to gene therapy, or
gene mapping, (other than investments in securities in any
corporation whose securities are regularly traded and in
which your beneficial ownership does not exceed one percent
(1%) of the equity securities of such corporation); and
-2-
<PAGE> 3
(c) If during the term of this agreement you enter into any
additional agreements under which you conduct research or
provide services in molecular biology of blood clotting
factors, hematopoietic factors, or oncology, to any
commercial enterprise so engaged you will (i) obtain from
such enterprise the right to disclose the fact of such
agreement to the company, (ii) provide to the company
written notice of the fact that such agreement is fully
executed, and (iii) prior to the execution of such agreement
inform such enterprise of your position as a Scientific
Advisor for the Company.
5. Confidentiality. In the performance of your duties under this agreement,
you may be given access to confidential information regarding the research
of other Scientific Advisors as well as other scientists, confidential
research proposals, proprietary processes and trade secrets, confidential
business plans of the company and third parties with whom it may have
business dealings, confidential financial data and other information of a
confidential or proprietary nature (collectively "Confidential
Information"). You will not, during or for a period of ten (10) years after
the term of this agreement, disclose such Confidential Information to any
person, firm, corporation, association, or other entity for any reason or
purpose whatsoever, nor shall you make use of such confidential Information
for your own purposes or for the benefit of any person, firm, corporation,
association or other entity under any circumstances during or for a period
of ten (10) years after the term of this agreement, provided that these
restrictions will not apply to such Confidential Information which, as can
be established by you by competent proof: (i) was known to you, other than
under binder of secrecy, prior to ____________, at which time you entered
into discussions with company personnel, or prior to its disclosure to you
in the course of performing your duties under this agreement, (ii) has
passed into the public domain other than through acts or omissions
attributable to you, (iii) was subsequently obtained by you other than
under binder of secrecy from a third party not acquiring the information
under an obligation of confidentiality from the disclosing party, or (iv)
can be shown by appropriate documentation to have been developed by you or
on your behalf independent of any disclosure hereunder.
The Company shall not require you to and you shall not disclose to the
Company any information (except information made public by presentation at
an open scientific meeting or by written publication) as to which you are
under any duty express or implied not to disclose.
Nothing contained in this agreement, however, shall be construed to
preclude a publication by you, by journals, conferences, symposia or other
means, of any of the results of your own research.
6. Covenants Not to Compete. During the term of this Agreement, you agree
that, except for the commitments that you now have as set forth in Schedule
A to this Agreement, you will not without prior written consent of the
Company serve as an
-3-
<PAGE> 4
officer, director, owner, employee, partner, consultant or advisor for any
commercial enterprise engaged in the commercial exploitation of research in
gene therapy, molecular biology as it relates to gene therapy, or gene
mapping. The foregoing restriction shall not be deemed to preclude you from
(i) investing your personal assets in businesses which are so engaged and
whose securities are regularly traded in recognized securities markets,
provided that such investments shall not result in your owning beneficially
at any time 1% or more of the equity securities of any corporation so
engaged or (ii) participating in any research at __________ or at
______________, including research sponsored by a commercial enterprise.
During the period in which this covenant not to compete is in effect, you
agree that you will also not materially interfere with, disrupt or attempt
to disrupt the relationship, contractual or otherwise, between the Company
and any of the Company's research partners, customers, suppliers, employees
or consultants; provided, that carrying out your responsibilities to
___________ and ____________ including but not limited to participation in
research sponsored by any commercial enterprise shall not be construed to
be material interference with or disruption of relationships between the
Company and others. You acknowledge that the Company shall have the right
to enforce this covenant on your part to the fullest extent permissible
under Massachusetts law, and that the Company shall be entitled to an
injunction, without bond, restraining you from the breach of this covenant.
7. Compensation. As compensation for your services as the Scientific Advisors,
the Company will pay you an honorarium of $1,000 per day for each of the
regular meetings which you attend. Such amount will be paid to you promptly
after each of such meetings. As compensation for your involvement in
research activities with the Company which require you to perform regular
services on-site at TKT in Cambridge, Massachusetts, the Company will pay
you $ per year, payable in quarterly installments on the last days of the
months June, September and December, and March, and at three months
intervals thereafter. In addition, the company will reimburse you for
reasonable out-of-pocket expenses incurred by you in connection with the
rendering of services to the company, which reimbursement shall be made
upon presentation to the Company of an itemized and documented accounting
of such expenses.
8. Sale of Stock; Annual Vesting. Simultaneously with the execution of this
agreement, the Company will issue and sell to you, and you will purchase
from the Company, at a purchase price of _________ per share, ____________
shares of Common Stock of the Company, equivalent to approximately ___% of
all of the Company's issued shares as of_____________. Of the shares of
Common Stock sold to you, ____________ shares shall initially constitute
restricted stock subject to the restrictions described below (the
"Restricted Stock"). All shares of Restricted Stock sold hereunder
(including any shares received by you as a result of stock dividends, stock
splits or any other forms of recapitalization) shall be subject to the
following restrictions:
-4-
<PAGE> 5
(a) No shares of Restricted Stock shall be disposed of by you
either voluntarily or involuntarily, directly or indirectly,
during the period commencing on the date hereof and ending
on the third anniversary of the date hereof (the "Restricted
Stock Period") unless such shares of Restricted Stock shall
have then been released from such restriction pursuant to
subparagraph 8(b), and any attempted disposition of shares
of Restricted Stock while they are restricted shall be null
and void and of no effect.
(b) The restrictions imposed under subparagraph 8(a) above upon
shares of Restricted Stock shall terminate with respect to
__________ of the shares on ____________ and each successive
____________thereafter.
(c) If you cease to be the Scientific Advisors of the Company at
any time during the Restricted Stock Period for any reason,
then within the thirty day period following the termination
of your affiliation with the Company as a Scientific
Advisor, the Company will buy and you (or your personal
representative if you should die) will sell to the company
all of the shares of Restricted Stock which are then
restricted under this Agreement for a cash purchase price of
per share.
(d) You hereby confirm that you are acquiring the shares of
Restricted Stock solely for your own account for investment
and not with a view to any distribution or public offering
thereof. You agree that you will not, at any time (before or
after the Restricted Stock Period) sell, offer for sale,
pledge or otherwise dispose of any of the shares acquired
hereunder, or any interest therein in the absence of either
an effective current registration statement relating thereto
under the Securities Act of 1933 (the "Act") or an opinion
of counsel, in form and substance satisfactory to the
Company, to the effect that registration is not required.
You hereby acknowledge having been advised that (i) you must
hold the shares acquired hereunder indefinitely unless they
are registered under the Act, or an exemption from
registration becomes available, (ii) there is not likely to
be a market for such shares in the foreseeable future and
therefore no sales of such shares under rule 144 under the
Act will be possible, and (iii) sales of shares in reliance
upon Rule 144 may be made only after the expiration of two
years from the date of purchase and then only in limited
amounts in accordance with the conditions of that rule, all
of which must be met.
(e) The certificates evidencing the Restricted Stock shall bear
the following legend;
"Transfer of this certificate and the shares
represented hereby is restricted pursuant to the terms
of a Scientific Advisor's Agreement, dated as
of________________, between Transkaryotic Therapies,
Inc.
-5-
<PAGE> 6
and the holder hereof. A copy of such agreement is on
file at the principal offices of Transkaryotic
Therapies, Inc.
The securities represented by this certificate have not
been registered under the Securities Act of 1933 and
may be offered and sold only if registered pursuant to
the provisions of such Act or if any exemption from
registration is available."
and stop transfer instructions shall be delivered by the
Company to any transfer agent for the Restricted Stock. At
the time or times when the restrictions in subparagraph 8(a)
hereof are terminated with respect to the Restricted Stock
or the Restricted Stock is registered under the Act, such
legend on the certificates evidencing such shares shall be
appropriately modified. If shares of Restricted Stock are
repurchased by the Company pursuant to subparagraph 8(c)
hereof, then any property of any description distributed
with respect to the shares repurchased, including but not
limited to stock dividends, but excluding cash dividends,
shall be transferred to the Company at the same time the
shares so repurchased are transferred to the Company.
(f) During the Restricted Stock Period, the Company will retain
possession of all stock certificates evidencing Restricted
Stock. Promptly after the release of any portion of the
Restricted Stock from the restrictions provided for in this
Agreement, the Company will deliver to you a certificate
evidencing such portion.
9. Nothing herein shall be construed to grant the Company any right to any
invention which you are required to assign to ______________ or
_______________ pursuant to any agreement with ______________
or______________.
10. Term. This agreement shall be for an initial term of three years commencing
on the date hereof. Thereafter, unless terminated by either party on
not less than 30 days notice, this agreement will continue for successive
one (1) year periods. Notwithstanding the foregoing, you may terminate this
agreement at any time by giving ninety (90) days prior written notice to
the Company, and, the Company may terminate this agreement upon written
notice to you in the event that 1) you violate the provisions of Paragraph
5 or 6 hereof or, 2) upon the decision of the Chief Scientific Officer of
the Company in the event you are unable to fulfill your responsibilities as
outlined in Paragraph 2 above.
11. Independent Contractor. Nothing contained in this agreement shall be deemed
to constitute you an employee of the Company, it being the desire and
intent of both you and the Company to establish an independent contractor
relationship.
-6-
<PAGE> 7
12. Governing Law. This agreement will be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts. Any litigation with
respect to this contract shall occur only in the courts of the Commonwealth
of Massachusetts.
Please indicate your acceptance and approval of the foregoing in the space
provided below.
TRANSKARYOTIC THERAPIES, INC.
_____________________________
ACCEPTED AND APPROVED
AS OF THE____________
DAY OF ____________, 199
-7-
<PAGE> 1
Exhibit 10.19
AMENDED AND RESTATED
PROMISSORY NOTE
$125,000 June 16, 1993
FOR VALUE RECEIVED, the undersigned Richard F. Selden, a resident
of the Commonwealth of Massachusetts (the "Debtor") hereby promises to pay to
the order of Transkaryotic Therapies, Inc. (the "Creditor"), at its principal
business address, the principal sum of One Hundred Twenty-Five Thousand Dollars
($125,000) payable (subject to the other provisions of this Note) in six (6)
installments of Seventeen Thousand Eight Hundred Fifty-Seven Dollars ($17,857)
each on January 31 1992, 1994, 1995, 1996, 1997 and 1998, and a final
installment of Seventeen Thousand Eight Hundred Fifty-Eight Dollars ($17,858) on
January 31, 1999.
This Note shall bear interest on the unpaid balance of such
principal amount from May 14, 1991 until paid. The interest rate applicable
during each calendar year or portion thereof shall be the rate equal to one
percent (1%) per annum above the average yield in percent per annum prevailing
in the secondary market for one-year United States Treasury Bills as of the last
day in such calendar year on which such market is open, as reported in Federal
Reserve Statistical Release H-15. Accrued interest hereunder shall be due and
payable in arrears on each principal installment payment date, commencing
January 31, 1992. Overdue principal, and, to the extent permitted by applicable
law, overdue interest thereon and all other annual rate two percent (2%) above
the annual interest rate applicable to principal not overdue, payable on demand
and compounded monthly. Whenever any payment under this Note becomes due on a
date which is not a regular business day, the maturity thereof shall be extended
to the next succeeding business day and interest shall accrue at the applicable
rate during such extension.
This Note may be prepaid, in whole or in part, at any time
without penalty.
This Note amends and restates in its entirety a certain
Promissory Note dated May 14, 1991 made by the Debtor and payable to the order
of the Creditor (the "Original Note"), which Original Note has been delivered to
the Debtor for cancellation in exchange for this Note. The Debtor and the
Creditor, by its acceptance of this Note, agree that (i) the indebtedness
evidenced by this Note shall be secured by, and the holder of this Note shall be
entitled to the benefits of, a certain Pledge Agreement dated as of May 14,
1991, between the Creditor and the Debtor, in all respects as though this Note
were the "Note" referred to in Section 2(c) of such Pledge Agreement, and (ii)
notwithstanding any other provision hereof, in the event that the aggregate
amount of payments heretofore made by the Debtor under the Original Note is more
or less than the aggregate amount that would have been payable heretofore under
this Note as hereby amended and restated, then such excess or shortfall shall be
deducted from or added to, as the case may be, the amount otherwise due
hereunder on the date of the next scheduled payment hereunder.
In the event that (i) the Debtor defaults in the payment of any
principal or interest
<PAGE> 2
hereunder for more than five (5) days after the date due, or (ii) the Debtor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due, or (iii) any order,
judgment or decree is entered adjudicating the Debtor bankrupt of insolvent, or
(iv) the Debtor petitions (or consents to any petition to) any tribunal for the
appointment of a trustee or receiver of the Debtor or of any substantial part of
his assets under any bankruptcy, debt readjustment, insolvency, dissolution, or
liquidation law of any jurisdiction, or (v) the Debtor's employment by the
Creditor is terminated either by the Creditor for cause (which term shall mean
(a) the Debtor's breach of his obligations under the Employment Agreement
between the Debtor and the Creditor dated as of February 1, 1991 or (b) the
Debtor's having been convicted of a felony) or by the Debtor, then, and in every
such event (each, an "Event of Default"), the Creditor may declare all amounts
owing with respect this Note, and such amounts shall thereupon become, due and
payable without presentment, demand, protest, or notice of any kind, all of
which are hereby expressly waived.
To the extent permitted by applicable law, any sums credited by
or due from the Creditor to the Debtor, including, but not limited to, annual
employment bonuses and amounts payable to the Debtor by the Creditor upon or
after the termination of the Debtor's employment by the Creditor, may at any
time be applied to the Debtor's obligations hereunder.
Should the indebtedness evidenced by this Note or any part
thereof be collected by action at law, or in bankruptcy, receivership or other
court proceedings, or should this note be placed in the hands of attorneys for
collection after default, the Debtor agrees to pay, upon demand by the holder
hereof, in addition to principal and other sums, if any, due and payable hereon,
court costs and reasonable attorneys' fees and other collection charges and
expenses, unless prohibited by law.
The Debtor and all indorsers and/or guarantors hereof (i) consent
and agree to be bound by the provisions of this Note, absolutely and
unconditionally, to pay the principal of this note as herein provided, (ii)
waive trial by jury in any action on this Note, (iii) waive presentment, notice
of nonpayment, notice of protest, suit and all other conditions precedent in
connection with the collection and enforcement of this Note, (iv) waive any
right to the benefit of, or to direct the application of, any security for this
Note until all indebtedness hereunder shall have been paid in full, and (v)
waive the right to require the holder hereof to proceed against any other person
or to pursue any other remedy before proceeding against him, and, except as
otherwise required by law, waives the right to require the holder hereof to
proceed against any security before proceeding against him.
No delay or omission on the part of the Creditor in exercising
any right hereunder shall operate as a waiver of such right or of any right
under this Note. No waiver shall be deemed binding on the Creditor unless in
writing signed by the Creditor, and then only to the extent specifically set
forth therein.
This Note shall be deemed to take effect as a sealed instrument
under, and be construed in accordance with, the laws of the Commonwealth of
Massachusetts.
<PAGE> 3
/s/ Donald P. Richards /s/ Richard F. Selden
- ----------------------------- -------------------------
Witness Richard F. Selden
<PAGE> 1
Exhibit 10.20
PROMISSORY NOTE
$60,000 June 16, 1993
FOR VALUE RECEIVED, the undersigned Douglas A. Treco, a resident
of the Commonwealth of Massachusetts (the "Debtor") hereby promises to pay to
the order of Transkaryotic Therapies, Inc. (the "Creditor"), at its principal
business address, the principal sum of Sixty Thousand Dollars ($60,000) payable
(subject to the other provisions of this Note) in six annual installments of
Eight Thousand Five Hundred Seventy-One Dollars ($8,571) each on September 1,
1992, 1993, 1994, 1995, 1996, and 1997, and a seventh installment of Eight
Thousand Five Hundred Seventy-Four Dollars ($2,574) on September 1, 1998.
This Note shall bear interest: on the unpaid balance of such
principal amount from August 15, 1991 until paid. The interest rate applicable
during each calendar year or portion thereof shall be the rate equal to one
percent (1%) per annum above the average yield in percent per annum prevailing
in the secondary market for one-year United States Treasury Bills as of the last
day in such calendar year on which such market is open, as reported in Federal
Reserve Statistical Release H-15. Accrued interest hereunder shall be due and
payable in arrears on each principal installment payment date, commencing
September 1, 1992. Overdue principal, and, to the extent permitted by applicable
law, overdue interest thereon and all other overdue amounts payable hereunder
shall bear interest at an annual rate two percent (2%) above the annual interest
rate applicable to principal not overdue, payable on demand and compounded
monthly. Whenever any payment under this Note becomes due on a date which is not
a regular business day, the maturity thereof shall be extended to the next
succeeding business day and interest shall accrue at the applicable rate during
such extension.
This Note may be prepaid, in whole or in part, at any time
without penalty.
This Note amends and restates in its entirety a certain
Promissory Note dated August 15, 1991 made by the Debtor and payable to the
order of the Creditor (the "Original Note"), which Original Note has been
delivered to the Debtor for cancellation in exchange for this Note. The Debtor
and the Creditor, by its acceptance of this Note, agree that (i) the
indebtedness evidenced by this Note shall be secured by, and the holder of this
Note shall be entitled to the benefits of, a certain Pledge Agreement dated as
of August 15, 1991, between the Creditor and the Debtor, in all respects as
though this Note were the "Note" referred to in Section 2(c) of such Pledge
Agreement, and (ii) notwithstanding any other provision hereof, in the event
that the aggregate amount of payments heretofore made by the Debtor under the
Original Note is more or less than the aggregate amount that would have been
payable heretofore under this Note as hereby amended and restated, then such
excess or shortfall shall be deducted from or added to, as the case may be, the
amount otherwise due hereunder on the date of the next scheduled payment
hereunder.
In the event What (i) the Debtor defaults in the Payment of any
principal or interest hereunder for more than five (5) days after the date due,
or (ii) the Debtor makes an assignment for the benefit of creditors or admits in
writing his inability to pay his debts generally as they become due, or (iii)
any order, judgment or decree is entered adjudicating the Debtor bankrupt
<PAGE> 2
of insolvent, or (iv) the Debtor petitions (or consents to any petition to) any
tribunal for the appointment of a trustee or receiver of the Debtor or of any
substantial part of his assets under any bankruptcy, debt readjustments
insolvency, dissolution, or liquidation law of any jurisdiction, or (v) the
Debtor's employment by the Creditor is terminated either by the Creditor for
cause (which term shall mean (a) the Debtor's breach of his obligations under
the Employment Agreement between the Debtor and the Creditor dated as of July
26, 1991 or (b) the Debtor's having been Convicted of a felony) or by the
Debtor, then, and in every such event (each, an "Event of Defaults'), the
Creditor may declare all amounts owing with respect this Note, and such amounts
shall thereupon become, due and payable without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived.
To the extent permitted by applicable law, any sums credited by
or due from the Creditor to the Debtor, including, but not limited to, annual
employment bonuses and amounts payable to the Debtor by the Creditor upon or
after the termination of the Debtor's employment by the Creditor, may at any
time be applied to the Debtor's obligations hereunder. Should the indebtedness
evidenced by this Note or any part thereof be collected by action at law, or in
bankruptcy, receivership or other court proceedings, or should this note be
placed in the hands of attorneys for collection after default, the Debtor agrees
to pay, upon demand by the holder hereof, in addition to principal and other
sums, if any, due and payable hereon, court costs and reasonable attorneys' fees
and other collection charges and expenses, unless prohibited by law.
The Debtor and all indorsers and/or guarantors hereof (i) consent
and agree to be bound by the provisions of this Note, absolutely and
unconditionally, to pay the Principal of this note as herein provided, (ii)
waive trial by jury in any action on this Note, (iii) waive presentment, notice
of nonpayment, notice of protest, suit and all other conditions precedent in
Connection with the collection and enforcement of this Note, (iv) waive any
right to the benefit of, or to direct the application of, any security for this
Note until all indebtedness hereunder shall have been paid in full, and (v)
waive the right to require the holder hereof to Proceed against any other person
or to pursue any other remedy before proceeding against him, and, except as
otherwise required by law, waives the right to require the holder hereof to
proceed against any security before proceeding against him.
No delay or omission on the part of the Creditor in exercising any right
hereunder shall operate as a waiver of such right or of any right under this
Note. No waiver shall be deemed binding on the Creditor unless in writing signed
by the Creditor, and then only to the extent specifically set forth therein.
This Note shall be deemed to take effect as a sealed instrument under, and be
construed in accordance with, the laws of the Commonwealth of Massachusetts.
WITNESS:
/s/ Nancy A. Cornillard /s/ Douglas A. Treco
- --------------------------- ----------------------
Douglas A. Treco
<PAGE> 1
Exhibit 10.21
PROMISSORY NOTE
$15,000 April 21, 1995
FOR VALUE RECEIVED, the undersigned Christoph M. Adams, a
resident of the Commonwealth of Massachusetts (the "Debtor") hereby promises to
pay to the order of Transkaryotic Therapies, Inc. (the "Creditor"), at its
principal business address, the principal sum of Fifteen Thousand Dollars
($15,000), payable (subject to the other provisions of this Note) in four annual
installments of Three Thousand Seven Hundred Fifty Dollars ($3,750) each on May
1 in 1996, 1997, 1998, and 1999, respectively, in each case with all accrued
interest hereon as set forth below.
This Note shall bear interest on the unpaid balance of such
principal amount from the date of this Note until paid. The interest rate
applicable during each calendar year or portion thereof shall be the rate equal
to one per cent (1%) per annum above the average yield in per cent per annum
prevailing in the secondary market for one-year United States Treasury Bills as
of the last day in such calendar year on which such market is open, as reported
in Federal Reserve Statistical Release H-15. Accrued interest hereunder shall be
due and payable upon each installment payment of principal of this Note. Overdue
principal, and, to the extent permitted by applicable law, overdue interest
thereon and all other overdue amounts payable hereunder shall bear interest at
an annual rate two per cent (2%) above the annual interest rate applicable to
principal not overdue, payable on demand and compounded monthly. Whenever any
payment under this Note becomes due on a date which is not a regular business
day, the maturity thereof shall be extended to the next succeeding business day
and interest shall accrue at the applicable rate during such extension.
This Note may be prepaid, in whole or in part, at any time
without penalty.
The indebtedness represented by this Note is secured by a certain
Pledge Agreement dated as of the date hereof between the Creditor and the
Debtor.
In the event that (i) the Debtor defaults in the payment of any
principal or interest hereunder or under any other promissory note payable to
the Creditor for more than five (5) days after the date due, or (ii) the Debtor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due, or (iii) any order,
judgment or decree is entered adjudicating the Debtor bankrupt of insolvent, or
(iv) the Debtor petitions (or consents to any petition to) any tribunal for the
appointment of a trustee or receiver of the Debtor or of any substantial part of
his assets under any bankruptcy, debt readjustment, insolvency, dissolution, or
liquidation law of any jurisdiction, or (v) the Debtor's employment by the
Creditor is terminated either by the Creditor for cause (which term shall mean
(a) the Debtor's breach of his obligations under the Employment Agreement
between the Debtor and the Creditor dated as of November 20, 1993 (or any
successor agreement thereto), or (b) the Debtor's having been convicted of a
felony) or by the Debtor, then, and in every such event (each, an "Event of
Default"), the Creditor may declare all amounts owing with respect this Note,
and such amounts shall thereupon become, due and payable without presentment,
demand,
<PAGE> 2
protest, or notice of any kind, all of which are hereby expressly waived.
To the extent permitted by applicable law, any sums credited by
or due from the Creditor to the Debtor, including, but not limited to, annual
employment bonuses and amounts payable to the Debtor by the Creditor upon or
after the termination of the Debtor's employment by the Creditor, may at any
time be applied to the Debtor's obligations hereunder.
Should the indebtedness evidenced by this Note or any part
thereof be collected by action at law, or in bankruptcy, receivership or other
court proceedings, or should this note be placed in the hands of attorneys for
collection after default, the Debtor agrees to pay, upon demand by the holder
hereof, in addition to principal and other sums, if any, due and payable hereon,
court costs and reasonable attorneys' fees and other collection charges and
expenses, unless prohibited by law.
The Debtor and all indorsers and/or guarantors hereof (i) consent
and agree to be bound by the provisions of this Note, absolutely and
unconditionally, to pay the principal and interest of this note and all other
charges for which the Debtor may be or become liable hereunder as herein
provided, (ii) waive trial by jury in any action on this Note, (iii) waive
presentment, notice of nonpayment, notice of protest, suit and all other
conditions precedent in connection with the collection and enforcement of this
Note, (iv) waive any right to the benefit of, or to direct the application of,
any security for this Note until all indebtedness hereunder shall have been paid
in full, and (v) waive the right to require the holder hereof to proceed against
any other person or to pursue any other remedy before proceeding against him,
and, except as otherwise required by law, waives the right to require the holder
hereof to proceed against any security before proceeding against him.
No delay or omission on the part of the Creditor in exercising
any right hereunder shall operate as a waiver of such right or of any right
under this Note. No waiver shall be deemed binding on the Creditor unless in
writing signed by the Creditor, and then only to the extent specifically set
forth therein.
This Note shall be deemed to take effect as a sealed instrument
under, and be construed in accordance with, the laws of the Commonwealth of
Massachusetts.
/s/ Paul Hassie /s/ Christoph M .Adams
- ------------------------- -----------------------
Witness Christoph M. Adams
<PAGE> 1
Exhibit 10.22
PROMISSORY NOTE
$20,000 May 5, 1995
FOR VALUE RECEIVED, the undersigned Christoph M. Adams, a
resident of the Commonwealth of Massachusetts (the "Debtor") hereby promises to
pay to the order of Transkaryotic Therapies, Inc. (the "Creditor"), at its
principal business address, the principal sum of Twenty Thousand Dollars
($20,000), payable (subject to the other provisions of this Note) in four annual
installments of Five Thousand Fifty Dollars ($5,000) each on May 1 in 1996,
1997, 1998, and 1999, respectively, in each case with all accrued interest
hereon as set forth below.
This Note shall bear interest on the unpaid balance of such
principal amount from the date of this Note until paid. The interest rate
applicable during each calendar year or portion thereof shall be the rate equal
to one per cent (1%) per annum above the average yield in per cent per annum
prevailing in the secondary market for one-year United States Treasury Bills as
of the last day in such calendar year on which such market is open, as reported
in Federal Reserve Statistical Release H-16. Accrued interest hereunder shall be
due and payable upon each installment payment of principal of this Note. Overdue
principal, and, to the extent permitted by applicable law, overdue interest
thereon and all other overdue amounts payable hereunder shall bear interest at
an annual rate two per cent (2%) above the annual interest rate applicable to
principal not overdue, payable on demand and compounded monthly. Whenever any
payment under this Note becomes due on a date which is not a regular business
day, the maturity thereof shall be extended to the next succeeding business day
and interest shall accrue at the applicable rate during such extension.
This Note may be prepaid, in whole or in part, at any time
without penalty.
The indebtedness represented by this Note is secured by a certain
Pledge Agreement dated as of the date hereof between the Creditor and the
Debtor.
In the event that (i) the Debtor defaults in the payment of any
principal or interest hereunder or under any other promissory note payable to
the Creditor for more than five (5) days after the date due, or (ii) the Debtor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due, or (iii) any order,
judgment or decree is entered adjudicating the Debtor bankrupt of insolvent, or
(iv) the Debtor petitions (or consents to any petition to) any tribunal for the
appointment of a trustee or receiver of the Debtor or of any substantial part of
his assets under any bankruptcy, debt readjustment, insolvency, dissolution, or
liquidation law of any jurisdiction, or (v) the Debtor's employment by the
Creditor is terminated either by the Creditor for cause (which term shall mean
(a) the Debtor's breach of his obligations under the Employment Agreement
between the Debtor and the Creditor dated as of November 20, 1993 (or any
successor agreement thereto), or (b) the Debtor's having been convicted of a
felony) or by the Debtor, then, and in every such event (each, an "Event of
Default"), the Creditor may declare all amounts owing with respect this Note,
and such amounts shall thereupon become, due and payable without presentment,
demand,
<PAGE> 2
protest, or notice of any kind, all of which are hereby expressly waived.
To the extent permitted by applicable law, any sums credited by
or due from the Creditor to the Debtor, including, but not limited to, annual
employment bonuses and amounts payable to the Debtor by the Creditor upon or
after the termination of the Debtor's employment by the Creditor, may at any
time be applied to the Debtor's obligations hereunder.
Should the indebtedness evidenced by this Note or any part
thereof be collected by action at law, or in bankruptcy, receivership or other
court proceedings, or should this note be placed in the hands of attorneys for
collection after default, the Debtor agrees to pay, upon demand by the holder
hereof, in addition to principal and other sums, if any, due and payable hereon,
court costs and reasonable attorneys' fees and other collection charges and
expenses, unless prohibited by law.
The Debtor and all indorsers and/or guarantors hereof (i) consent
and agree to be bound by the provisions of this Note, absolutely and
unconditionally, to pay the principal and interest of this note and all other
charges for which the Debtor may be or become liable hereunder as herein
provided, (ii) waive trial by jury in any action on this Note, (iii) waive
presentment, notice of nonpayment, notice of protest, suit and all other
conditions precedent in connection with the collection and enforcement of this
Note, (iv) waive any right to the benefit of, or to direct the application of,
any security for this Note until all indebtedness hereunder shall have been paid
in full, and (v) waive the right to require the holder hereof to proceed against
any other person or to pursue any other remedy before proceeding against him,
and, except as otherwise required by law, waives the right to require the holder
hereof to proceed against any security before proceeding against him.
No delay or omission on the part of the Creditor in exercising
any right hereunder shall operate as a waiver of such right or of any right
under this Note. No waiver shall be deemed binding on the Creditor unless in
writing signed by the Creditor, and then only to the extent specifically set
forth therein.
This Note shall be deemed to take effect as a sealed instrument
under, and be construed in accordance with, the laws of the Commonwealth of
Massachusetts.
/s/ Paul Hassie /s/ Christoph M. Adams
- ------------------------ ----------------------------
Witness Christoph M. Adams
<PAGE> 1
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 19, 1991 between Transkaryotic Therapies,
Inc., a Delaware corporation (the "Company"), and Dr. Richard F. Selden (the
"Executive").
1. Employment. The Company hereby employs the Executive and the
Executive hereby accepts employment with the Company upon the terms and
conditions herein set forth.
2. Duties. The Executive shall be engaged as a full-time employee to
act as Chief Scientific Officer and Chairman of the Company's Scientific
Advisory Board, and shall be subject to the instruction and control of the
Company's Board of Directors (the "Board") of which he shall be a member. The
Executive shall devote his entire professional time, attention and energies to
the business of the Company and shall not engage in any other business activity
or activities, whether or not such business activity is pursued for gain, profit
or other pecuniary advantage, that, in the judgment of the Board, may conflict
with the proper performance of the Executive's duties under this Agreement.
Notwithstanding the foregoing, (i) with respect to businesses which do not
compete with the Company the Executive may invest his personal or family assets
in such form or manner as will not require any services on the part of the
Executive in the operation of the affairs of the companies in which such
investments are made and in which his participation is solely that of an
investor, (ii) the Executive may purchase securities in any corporation whose
securities are regularly traded in recognized securities markets, provided that
such investments shall not result in his collectively owning beneficially at any
time one percent or more of the equity securities of any corporation engaged in
a business competitive to that of the Company and (iii) the Executive may
continue to pursue professional activities in academic pediatrics to the extent
such activities do not conflict with the proper performance of the Executive's
duties under this Agreement.
3. Compensation.
(a) Base Salary. For services rendered under this Agreement, the
Company shall pay the Executive an annual salary of One Hundred Thirty-Five
Thousand Dollars ($135,000) (the "Base Salary"), payable (after deduction of
applicable withholding for Federal and State income and payroll taxes) in equal
monthly installments. The Board (or a Compensation Committee of the Board) may
review the Executive's compensation from time to time and award such bonuses or
make such increases to the Base Salary as the Board (or Compensation Committee)
determines are merited, based upon the Executive's performance and consistent
with the Company's compensation policies.
(b) Performance Bonus. As soon as practicable, but in any event on
or before July 15, 1991, the Board (or a compensation committee thereof) in
consultation with the Executive shall establish objective performance goals for
the Executive for the remainder of the first Calendar Year (i.e., 1991). In
addition to his Base Salary, upon the attainment of such performance goals, the
Executive shall be entitled to a cash bonus of up to a maximum of Fifty-Four
Thousand Dollars ($54,000) for the first Calendar Year, payable in a tiered
manner
<PAGE> 2
in three (3) increments of Eighteen Thousand Dollars ($18,000) each as set forth
in such goals. At least thirty (30) days prior to each subsequent Calendar Year,
the Board (or a compensation committee thereof) in consultation with the
Executive shall establish objective performance goals for the Executive for such
Calendar Year and the amount of the performance bonus payable upon the
attainment of such goals (which maximum potential amount shall not be less than
forty percent (40%) of the Executive's Base Salary for the Calendar Year in
question). Within twenty (20) days after the close of Calendar Year, the Board
(or a compensation committee thereof) shall evaluate the attainment of the
performance goals for such Calendar Year and determine the amount of any
performance bonus payable hereunder. Any such performance bonus shall be payable
within thirty (30) days after the Calendar Year to which it relates.
(c) Fringe Benefits. In addition to salary and bonus payments under
Sections 3(a) and (b) above, the Executive shall be entitled to (i) term life
and accidental death and dismemberment insurance, each in an amount equal to
three hundred percent (300%) of his Base Salary plus target performance bonus
and (ii) long term disability insurance to age 65 in an amount equal to
seventy-five percent (75%) of his Base Salary. The Executive also shall be
reimbursed by the Company for all reasonable out-of-pocket expenses incurred by
the Executive in connection with the preparation of his personal income tax
returns and with personal financial planning services furnished by the Company's
auditors, and shall be eligible for and participate in such fringe benefits as
shall be generally provided to executives of the Company, including incentive
compensation, health insurance and retirement programs which may be adopted from
time to time during the term hereof by the Board. Nothing herein contained shall
be deemed to preclude the Board from granting such additional compensation or
benefits to the Executive as it shall in its sole discretion determine.
4. Sick Leave and Vacation. During the term of this Agreement, the
Executive shall be entitled to sick leave and annual vacation consistent with
the Company's customary sick leave and vacation policies.
5. Expenses. During the term of this Agreement, the Company shall
reimburse the Executive for all reasonable out-of-pocket expenses incurred by
the Executive in connection with the business of the Company and in performance
of his duties under this Agreement upon the Executive's presentation to the
Company of an itemized accounting of such expenses with reasonable supporting
data.
6. Term.
(a) The Executive's employment under this Agreement shall commence
on the date first set forth above and shall continue until terminated by the
Company as provided in this Section 6(a) or by the Executive as provided in
Section 6(c) below. The Company may at its election, as determined by the
affirmative vote of not less than a majority of the Board, terminate the
obligations of the Company under this Agreement as follows:
(i) Upon at least sixty (60) days prior written notice, if the
Executive
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becomes physically or mentally incapacitated or is injured so that
he is unable to perform the services required of him hereunder
and such inability to perform continues for a period in excess of
six (6) months and is continuing at the time of
such notice; or
(ii) For "Cause" upon prior written notice of such termination
to the Executive. For purposes of this Agreement, the Company shall
have "Cause" to terminate its obligations hereunder upon (A) the
Board's determination that the Executive has ceased or failed to
substantially perform his duties hereunder (other than as a result
of his incapacity due to physical or mental illness or injury), and
at least In: sixty (60) days prior written notice to the Executive,
(B) the Executive's death, (C) the Board's determination that the
Executive has engaged or is about to engage in conduct materially
injurious to the Company, (D) the Executive's having been convicted
of a felony, or (E) the Executive's participation in activities
proscribed by the provisions of Sections 2, 8 or 10 hereof or
material breach of any of the other covenants herein; or
(iii) Without Cause upon written notice of such termination to
the Executive.
(b) If this Agreement is terminated pursuant to Section 6(a)(i)
above, subject to Section 10(d) below, the Executive shall receive severance pay
until the fourth anniversary of the date hereof at the rate of one hundred
percent (100%) of the Base Salary, reduced by applicable payroll taxes and
further reduced by the amount received by the Executive during such period under
any Company-maintained disability insurance policy or plan or under Social
Security or similar laws. Such severance payments shall be paid periodically to
the Executive as provided in Section 3(a) for the payment of Base Salary. If
this Agreement is terminated pursuant to Section 6(a)(ii) above, the Executive
shall receive no severance pay. If this Agreement is terminated pursuant to
Section 6(a)(iii) above, the Executive shall receive severance pay, for a period
of eighteen (18) months from and after such termination, equal to the Base
Salary less the amount, if any, earned by the Executive from any other employer
or from self-employment during such eighteen (18) month period whether as
salary, consulting fees, deferred payments or other direct or indirect
compensation. During such period the Executive shall inform the Company from
time to time, but no less often than every three (3) months, of the Executive's
employment and the amount of the Executive's compensation and earnings during
such period. Such severance payments (less applicable payroll taxes) shall be
paid periodically to the Executive as provided in Section 3(a) for the payment
of Base Salary.
(c) The Executive may terminate this Agreement for any reason upon
at least sixty (60) days prior written notice. In the event of any such
termination, the Executive shall not be entitled to any severance payments.
7. Representations. The Executive hereby represents to the Company that
(a) he is legally entitled to enter into this Agreement and to perform the
services and other obligations
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<PAGE> 4
contemplated herein; (b) he has, and throughout the term of this Agreement will
continue to have, the full right, power and authority, subject to no rights of
third parties, to grant to the Company the rights contemplated by Section 9
hereof, and (c) he is not subject to any agreement, rule, regulation or policy
of any university, research institution or other third party inconsistent with
the foregoing representations.
8. Disclosure of Information.
(a) The Executive recognizes and acknowledges that the Company's
trade secrets, know-how and proprietary processes as they may exist from time to
time (including, without limitation, information regarding methods, cultures,
vectors, plasmids, synthesis techniques, nucleic acid sequences, purification
techniques and assay procedures) as well as the Company's confidential business
plans and financial data are valuable, special and unique assets of the
Company's business, access to and knowledge of which are essential to the
performance of the Executive's duties hereunder. Except as provided in Section
8(b) below, the Executive shall not, during or after the term of his employment
by the Company, in whole or in part, disclose such secrets, know-how, processes,
business plans or financial data to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever, nor shall the Executive
make use of any such property for his own purposes or for the benefit of any
person, firm, corporation or other entity (except the Company) under any
circumstances during or after the term of his employment, provided that after
the term of his employment, these restrictions shall not apply to such secrets,
know-how and processes which the Executive can establish by competent proof:
(i) were known, other than under binder of secrecy, to the
Executive prior to his employment by or consultancy to the Company;
(ii) have passed into the public domain prior to or after their
development by or for the Company, other than through acts or
omissions attributable to the Executive; or
(iii) were subsequently obtained, other than under binder of
secrecy, from a third party not acquiring the information under an
obligation of confidentiality from the disclosing party.
(b) Recognizing the desire of the Executive to disclose certain work
done at the direction of the Company either in its laboratory or funded by the
Company at a third party institution, either through publication in reputable
scientific journals, participation in lectures, seminars or symposia, or by
correspondence with other members of the scientific community (herein referred
to as a "Disclosure"), the Executive and the Board shall confer and consult, one
with the other, where any anticipated scientific Disclosure ought, for the sake
of completeness, to contain some of the trade secrets, know-how or processes of
the Company described in Section 8(a), with a view toward resolving the
competing interests of confidentiality and desired scientific credit through
disclosure in a manner fairly and reasonably consistent with the interests
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<PAGE> 5
of the Company on one hand, and those of the Executive on the other. No such
Disclosure shall be made, nor any manuscript submitted for publication, unless
and until (i) the Board has had at least 90 days to review the same, (ii) the
Company, if desired, has had ample time to effect associated patent filings so
as to preserve patent rights, (iii) with respect to such of the work done in the
Company's laboratories, such Disclosure has been expressly authorized by the
affirmative vote of at least a majority of the members of the Company's Board
and (iv) such Disclosure is not prohibited under any agreement between the
Company and any third party.
(c) Upon termination of his employment hereunder, the Executive
shall promptly turn over to the Company all originals and copies which he may
have of any of the Company's confidential information described in this Section
then in his possession or under his control.
9. Intellectual Property. The Executive hereby sells, transfers and
assigns to the Company, or to any person or entity designated by the Company,
the entire right, title and interest of the Executive in and to all inventions,
ideas, discoveries and improvements (including, without limitation, all
microorganisms, strains or cultures) whether patented or unpatented, and
copyrightable material made or conceived by the Executive, solely or jointly,
during the term hereof, which arise out of research or other activities
conducted by, for or under the direction of the Company, whether or not
conducted at the Company's facilities, or which relate to methods, apparatus,
designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company. The Executive acknowledges that all
copyrightable materials developed or produced by the Executive within the scope
of his employment by or consultancy to the Company constitute works made for
hire. The Executive shall communicate promptly and disclose to the Company, in
such form as the Company may reasonably request, all information, details and
data pertaining to any such inventions, ideas, discoveries and improvements; and
the Executive shall execute and deliver to the Company such formal transfers and
assignments and such other papers and documents and shall give such testimony as
may be necessary or required of the Executive to permit the Company or any
person or entity designated by the Company to file and prosecute patent
applications and, as to copyrightable material, to obtain copyrights thereof.
Any such invention, idea, discovery or improvement disclosed by the Executive
within one year following the termination of this Agreement shall be deemed to
fall within the provisions of this Section 9 unless proved to have been first
conceived and made following such termination.
10. Covenants Not to Compete or Interfere.
(a) Subject to Section 10(b) below, during the term of this
Agreement and the period ending twenty-four (24) months from and after the
termination of the Executive's employment hereunder (including a termination at
the expiration of the term hereof), the Executive shall not engage in any
business (whether as an officer, director, owner, employee, partner, consultant,
advisor or other direct or indirect participant) engaged in the development of
gene therapy and/or gene isolation methods and/or the sale of products or
rendering of services related to gene therapy or gene isolation and/or to any
other activities which directly
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compete with the Company's business activities. This Agreement shall not be
construed to restrict the Executive's right to be employed as a faculty member
of any university or employee of any nonprofit agency or foundation after any
termination of this Agreement where this covenant not to compete shall continue
to be in effect. During the period in which this covenant not to compete is in
effect the Executive also shall not interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the Company and any
customer, supplier, lessor, lessee, employee, consultant, research partner or
investor of the Company.
(b) If this Agreement is terminated by the Company pursuant to
Section 6(a)(iii) above, the provisions of the first sentence of Section 10(a)
shall apply until twelve (12) months from and after such termination.
(c) It is the desire and intent of the parties that the provisions
of this Section 10 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular Subsection or portion of this Section 10
shall be adjudicated to be invalid or unenforceable, this Section 10 shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section in the particular jurisdiction in which such adjudication is made.
(d) In the event of any breach of the provisions of this Section 10
by the Executive, any and all rights of the Executive to receive severance
payments under Section 6(b) above shall automatically terminate.
11. Injunctive Relief. If there is a breach or threatened breach of the
provisions of Sections 8, 9 or 10 of this Agreement, the Company shall be
entitled to an injunction, without bond, restraining the Executive from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies for such breach or threatened breach.
12. Sale of Stock; Annual Vesting. Pursuant to a Consulting Agreement,
dated July 29, 1988, between the Company and the Executive (the "Consulting
Agreement"), the Company issued and sold to the Executive, and the Executive
purchased from the Company, at a purchase price of one cent ($0.01) per share,
10,000 shares of Common Stock of the Company (the "Common Stock") of the shares
of Common Stock sold to the Executive, 2,500 shares current constitute
restricted stock (the "Restricted Stock") subject to the restrictions and other
provisions set forth below. All shares of Restricted Stock (including any shares
received by Executive as a result of stock dividends, stock splits or any other
forms of recapitalization) shall be subject to the restrictions set forth in
Sections 12(a) to 12(e) hereof, and all shares of Common Stock owned by the
Executive shall be subject to the restrictions set forth in Section 12(d)
hereof.
(a) No shares of Restricted Stock shall be disposed of by Executive
either voluntarily or involuntarily, directly or indirectly, during the period
commencing on the date hereof and ending on July 1, 1991 (the "Restricted Stock
Period"), and any attempted disposition
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of shares of Restricted Stock while they are restricted shall be null and void
and of no effect.
(b) If Executive's employment with the Company is terminated at any
time during the Restricted Stock Period for any reason, then within the thirty
(30) day period following such termination of employment, the Company shall buy
and Executive (or Executive's personal representative if Executive is deceased
or incompetent) shall sell to the Company all of the shares of Restricted Stock
which are then restricted under this Agreement for a cash purchase price of
$0.01 per share.
(c) Executive hereby confirms that he acquired the shares of Common
Stock solely for his own account for investment and not with a view to any
distribution or public offering thereof. Executive will not, at any time (before
or after the Restricted Stock Period) sell, offer for sale, pledge or otherwise
dispose of any of the shares of Common Stock or any interest therein in the
absence of either an effective current registration statement relating thereto
under the Securities Act of 1933 (the "Act") or an opinion of counsel, in form
and substance satisfactory to the Company, to the effect that registration is
not required. Executive hereby acknowledges having been advised that (i) he must
hold the shares of Common Stock indefinitely unless they are registered under
the Act, or an exemption from registration becomes available, (ii) there is not
likely to be a market for such shares in the foreseeable future and therefore no
sales of such shares under Rule 144 under the Act will be possible, and (iii)
sales of shares in reliance upon Rule 144 may be made only after the expiration
of two years from the date of purchase and then only in limited amounts in
accordance with the conditions of that rule, all of which must be met.
(d) The certificates evidencing the Restricted Stock shall bear the
following legend:
"Transfer of this certificate and the shares represented hereby is
restricted pursuant to the terms of an Employment Agreement, dated
as of February 1, 1991 between Transkaryotic Therapies, Inc. and Dr.
Richard F Selden. A copy of such agreement is on file at the
principal offices of the Company.
The securities represented by this certificate have not been
registered under the Securities Act of 1933 and may be offered and
sold only if registered pursuant to the provisions of such Act or if
an exemption from registration is available."
and stop transfer instructions shall be delivered by the Company to any transfer
agent for the Restricted Stock. At the time or times when the restrictions in
Subsection 12(a) hereof are terminated with respect to the Restricted Stock or
the Restricted Stock is registered under the Act, such legend on the
certificates evidencing such shares shall be appropriately amended and the stop
transfer instructions shall be appropriately modified. If shares of Restricted
Stock are repurchased by the Company pursuant to Subsection 12(c) hereof, then
any property of any
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description distributed with respect to the shares repurchased, including but
not limited to stock dividends, but excluding cash dividends, shall be
transferred to the Company at the same time the shares so repurchased are
transferred to the Company.
(e) During the Restricted Stock Period, the Company shall retain
possession of all stock certificates evidencing Restricted Stock. Promptly after
the release of any portion of the Restricted Stock from the restrictions
provided for in this Agreement, the Company shall deliver to the Executive a
certificate evidencing such portion of Restricted Stock.
13. Insurance. The Company may, at its election and for its benefit,
insure the Executive against accidental loss or death, and the Executive shall
submit to such physical examinations and supply such information as may be
required in connection therewith.
14. Notices. Any notice required or permitted to be given under this
Agreement to the Executive shall be sufficient if in writing and if sent by
certified or registered mail to his residence, or in the case of the Company, to
the Board, c/o Transkaryotic Therapies, Inc., 195 Albany Street, Cambridge, MA
02139, or to such other officers or addresses as the Company shall designate
from time to time in writing too the Executive. Any such notice shall be
effective on the earlier of (a) the date on which it is personally delivered or
(b) three days after it is deposited in the United States mails, postage
prepaid.
15. Waiver of Breach. A waiver by the Company or the Executive of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by the other party.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the Commonwealth of
Massachusetts.
16. Assignment. This Agreement may be assigned, without the consent of
the Executive, by the Company to any person, partnership, corporation or other
entity which succeeds to the business of the Company or which has purchased
substantially all the assets of the Company, provided such assignee assumes all
the liabilities of the Company hereunder.
17. Entire Agreement. This Agreement contains the entire agreement of
the parties and supersedes any prior understandings or agreements between the
Executive and the Company relating to the subject matter hereof (including, but
not limited to, the Consulting Agreement, which is hereby terminated as of the
date hereof). This Agreement may be changed only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRANSRARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
----------------------
Name: K. Michael Forrest
---------------------
Title: President and CEO
--------------------
/s/ Richard F. Selden
--------------------------
Dr. Richard F. Selden
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EXHIBIT 10.24
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement"), dated as of May 14 , 1991, by and
between Richard Selden, a resident of the Commonwealth of Massachusetts (the
"Pledger") and Transkaryotic Therapies, Inc., a Delaware corporation (the
"Pledgee").
1. Pledge of Stock. The Pledgor hereby pledges, assigns, grants a
security interest in, and delivers to the Pledgee, two thousand five hundred
(2,500) shares of the common stock of the Pledgee (the "Stock"), to be held by
the Pledgee subject to the terms and conditions hereinafter set forth. The
certificates for such shares, accompanied by stock powers or other appropriate
instruments of assignment thereof duly executed in blank by the Pledger, have
been delivered to the Pledgee.
2. Definitions. As used herein, the following terms shall have the
following meanings:
(a) The term "Collateral" as used herein means the property at any
time, whether now or hereafter, pledged to the Pledgee hereunder
(whether described herein or not) and all income therefrom, increases
therein and proceeds thereof, other than income, increases or proceeds
received by the Pledger pursuant to 56 hereof.
(b) The term "Stock" as used herein includes the shares of stock
described in Section 1 hereof and any additional shares of stock at the
time pledged with the Pledgee hereunder.
(c) The term "Obligations" as used herein means all indebtedness,
obligations and liabilities of the Pledger under the promissory note
dated as of the date hereof, issued by the Pledger to the Pledgee in
the original principal amount of $125,000 (the "Note"), now existing or
hereafter arising, direct or indirect, absolute or contingent, matured
or unmatured, arising by operation of law or otherwise.
3. Security for Obligations. This Agreement and the pledge of the
Collateral hereunder is made with the Pledgee as security for the payment and
performance of the Obligations.
4. Liquidation, Recapitalization, Etc. Any sums paid upon or with
respect to any of the Stock upon the liquidation or dissolution of the issuer
thereof shall be paid over to the Pledgee to be held by it as security for the
Obligations; and in case any distribution of capital shall be made on or in
respect of any of the Stock or any property shall be distributed upon or with
respect to any of the Stock pursuant to the recapitalization or reclassification
of the capital of the issuer thereof or pursuant to the reorganization thereof,
the property so distributed shall be delivered to the Pledgee to be held by it
as security for the Obligations. All sums of money and
<PAGE> 2
property paid or distributed in respect of the Stock upon such a liquidation,
dissolution, recapitalization or reclassification which are received by the
Pledgor shall, until paid or delivered to the Pledgee, be held in trust for the
Pledgee as security for the Obligations.
5. Warrantor of Title. The Pledger warrants that he has good and
marketable title to the Stock described in Section 1 hereof, subject to no
pledges, liens, security interests, charges, options, restrictions or other
encumbrances except the security interest created by this Agreement, and that he
has power, authority and legal right to pledge all of such Stock pursuant to
this Agreement. The Pledger covenants that he will defend the Pledgee's rights
and security interest in such Stock against the claims and demands of all
persons whomsoever; and the Pledger covenants that he will have the like title
to and right to pledge the Collateral and will likewise defend the Pledgee's
rights and security interest therein.
6. Dividends, Voting, Etc., Prior to Maturity. So long as no Event of
Default (as such term is defined in the Note) shall have occurred and be
continuing, the Pledger shall be entitled to receive all cash dividends paid in
respect of the Stock, and payments on account of taxes and allocated corporate
expenses in accordance with past practice, to vote the Stock and to give
consents, waivers and ratifications in respect of the Stock. The Pledgor
acknowledges and agrees that the Pledgee may cause the Stock to be transferred
into its own name as collateral security. All such rights of the Pledger to
receive cash dividends shall cease in case an Event of Default shall have
occurred and be continuing. All such rights of the Pledger to vote and give
consents, waivers and ratifications with respect to the Stock shall, at the
Pledgee's option, as evidenced by the Pledgee's notifying the Pledger of such
election, cease in case an Event of Default shall have occurred and be
continuing.
7. Remedies. If an Event of Default shall have occurred and be
continuing, the pledgee shall thereafter have the following rights and remedies
(to the extent permitted by applicable law) in addition to the rights and
remedies of a secured party under the Uniform Commercial Code of Massachusetts,
all such rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently, at such time or times as the
Pledgee deems expedient:
(a) if the Pledgee so elects and gives notice of such election to
the Pledger, the Pledgee may vote any or all shares of the Stock
(whether or not the same shall have been transferred into its name or
the name of its nominee or nominees) for any lawful purpose, including,
without limitation, for the liquidation of the assets of the issuer
thereof, and give all consents, waivers and ratifications in respect of
the Stock and otherwise act with respect thereto as though it were the
outright owner thereof (the Pledger hereby irrevocably constituting and
appointing the Agent the proxy and attorney-in-fact of the Pledger,
with full power of substitution, to do so);
(b) the Pledgee may demand, sue for, collect or make any compromise
or settlement the Pledgee deems suitable in respect of any Collateral
held by it hereunder;
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(c) the Pledgee may sell, resell, assign and deliver, or otherwise
dispose of any or all of the Collateral, for cash and/or credit and
upon such terms at such place or places and at such time or times and
to such persons, firms, companies or corporations as the Pledgee thinks
expedient, all without demand for performance by the Pledgor or any
notice or advertisement whatsoever except as expressly provided herein
or as may otherwise be required by law; and
(d) the Pledgee may cause all or any part of the Stock held by it to
be transferred into its name or the name of its nominee or nominees, if
it has not already done so.
In the event of any disposition of the Collateral a provided in
paragraph (c) of this Section 7, the Pledgee shall give to the Pledgor at least
five (5) Business Days' prior written notice of the time and place of any public
sale of the Collateral or of the time after which any private sale or any other
intended disposition is to be made. The pledgor hereby acknowledges that five
(5) Business Days' prior written notice of such sale or sales shall be
reasonable notice. The Pledgee may enforce its rights hereunder without any
other notice and without compliance with any other Condition precedent now or
hereunder imposed by statute, rule or law or otherwise (all of which are hereby
expressly waived by the Pledgor, to the fullest extent permitted by law). The
Pledgee may buy any part or all of the Collateral at any public sale and if any
part or all of the Collateral is of a type customarily sold in a recognized
market or is of the type which is the subject of widely-distributed Standard
price quotations, the Pledgee may buy at private sale and may make payments
thereof by any means. The Pledgee may apply the cash proceeds actually received
from any sale or other disposition to the reasonable expenses of retaking,
holding, preparing for sale, selling and the like, to reasonable attorneys'
fees, travel and all other expenses which may be incurred by the Pledgee in
attempting to collect the Obligations or to enforce this Agreement or in the
prosecution or defense of any action or proceeding related to the subject matter
of this Agreement; and then to the Obligations. Any surplus after the
Obligations have been paid in full shall be paid to the Pledgor or to such other
persons which are entitled thereto.
The Pledger recognizes that the Pledgee may be unable to effect a
public Sale of the Stock by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the "Securities Act") and other applicable
laws, but may be compelled to resort to one or more private sales thereof to a
restricted group of purchasers. The Pledgor agrees that any such private sales
may be at prices and other terms less favorable to the seller than if sold at
public sales and that such private sales shall not by reason thereof be deemed
not to have been made in a Commercially reasonable manner. The Pledgee shall be
under no obligation to delay a sale of any of the Stock for the period of time
necessary to permit the issuer of such securities to register such securities
for public sale under the Securities Act, or such other applicable laws, even if
the issuer would agree to do so. Subject to the foregoing, the Pledgee agrees
that any sale of the Stock shall be made in a commercially reasonable manner.
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The Pledgor agrees to do or cause to be done all such acts and things
as may be necessary to make any sales of any portion or all of the Stock
pursuant to this Section 7 valid and binding and in compliance with any and all
applicable laws (including, without limitation, the Securities Act, the
Securities Exchange Act of 1934, as amended, the rules and regulations of the
Securities and Exchange Commission applicable thereto and all applicable state
securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales, all at the
Pledgor's expense. The Pledger further agrees that a breach of any of the
covenants contained in this Section 7 will cause irreparable injury to the
Pledgee, that the Pledgee has no adequate remedy at law in respect of such
breach and, as a consequence, agrees that each and every covenant contained in
this Section 7 shall be specifically enforceable against the Pledger and the
Pledger hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants.
8. Marshaling. The Pledgee shall not be required to marshal any present
or future security for (including but not limited to this Agreement and the
Collateral pledged hereunder), or other assurances of payment of the Obligations
or any of them, or to resort to such security or other assurances of payment in
any particular order, and all of its rights hereunder and in respect of such
security and other assurances of payment shall be cumulative and in addition to
all other fights, however existing or arising. To the extent that he lawfully
may, the Pledger hereby agrees that he will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Pledgee's rights under this Agreement or under any other instrument
evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or payment thereof is
otherwise assured, and to the extent that he lawfully may, the Pledger hereby
irrevocably waives the benefits of all such laws.
9. Pledgor's Obligations Not Affected. The obligations of the Pledger
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Pledger; (b) any
exercise or nonexercise, or any waivers by the Pledgee of any right, remedy,
power or privilege under or in respect of any of the Obligations or any security
therefor (including this Agreement); (c) any extensions or renewals of any
Obligation; (d) any amendment to or modification of the Note or any instrument
(other than this Agreement) securing any of the Obligations, or (e) the taking
of additional security for, or any other assurances of payment of, any of the
Obligations or the release or discharge or termination of any security or other
assurances of payment for any of the Obligations, whether or not the Pledger
shall have notice or knowledge of any of the foregoing.
10. Transfer, Etc., by Pledgor. Without the prior written consent of
the Pledgee, the Pledger will not sell, assign, transfer or otherwise dispose
of, grant any option with respect to, or pledge or grant any security interest
in or otherwise encumber any of the Collateral or any interest therein, except
the pledge thereof provided for in this Agreement.
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<PAGE> 5
11. Further Assurances. The Pledger will do all such acts, and will
furnish to the Pledgee all such financing statements, certificates, legal
opinions and other documents and will obtain all such governmental consents and
corporate approvals and will do or cause to be done all such other things as the
Pledgee may reasonably request from time to time in order to give full effect to
this Agreement and to secure the rights of the Pledgee hereunder, all without
any cost or expense to the Pledgee.
12. Pledgee's Exoneration. The powers conferred on the Pledgee
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon the Pledgee to exercise any such powers. The Pledgee shall
be accountable only for the amounts it actually receives as a result of such
powers and neither it nor any of its officers, directors, employees or agents
shall be responsible to the Pledgor for any failure to act, except for its own
gross negligence or any intentional misconduct. Under no circumstances shall the
Pledgee be deemed to assume any responsibility for or obligation or duty with
respect to any part or all of the Collateral of any nature or kind, other than
the physical custody thereof, or any matter or proceedings arising out of or
relating thereto, other than to exercise reasonable care in the physical custody
of the Collateral. The Pledgee shall not be required to take any action of any
kind to collect, preserve or protect its or the Pledgor's rights in the
Collateral or against other parties thereto, other than to exercise reasonable
care in the physical custody of the Collateral. The Pledgee's sole duty with
respect to the custody, safe keeping and physical preservation of the Collateral
in i's possession, under Section 9-207 of the Uniform Commercial Code of the
Commonwealth of Massachusetts or otherwise, shall be to deal with such
Collateral in the same manner as the Pledgee deals with similar property for its
own account. The Pledgees prior recourse to any part or all of the Collateral
shall not constitute a condition of any demand, suit or proceeding for payment
or collection of the Obligations.
13. No Waiver, Etc. No act, failure or delay by the Pledgee shall
constitute a waiver of its rights and remedies hereunder or otherwise. No single
or partial waiver by the Pledgee of any default or right or remedy which it may
have shall operate as a waiver of any other default, right or remedy or of the
same default, right or remedy on a future occasion. The Pledgor hereby waives
presentment, notice of dishonor and protest of all instruments, included in or
evidencing any of the Obligations or the Collateral, and any and all other
notices and demands whatsoever.
14. Notice, Etc. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise specifically provided
herein, shall be deemed to have been duly made or given when delivered by hand
or mailed first class, postage prepaid, or, in the case of telegraphic, telecopy
or telexed notice, when transmitted, answer back received, addressed as follows:
if to the Pledgor, at 106 Bristol Road, Wellesley, MA 02181, and if to the
Pledgee, at l95 Albany street, Cambridge, MA, or at such address as either party
may designate in writing to the other.
15. Termination. Upon payment and performance in full of the
Obligations in accordance with their terms and the performance by the Pledger of
all of his covenants and
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<PAGE> 6
agreements hereunder or, if earlier, upon the Pledgee's termination of the
Pledgor's employment by the Pledgee without cause (as such firm is defined in
the Employment Agreement dated as of July 19, 1991 between the Pledgor and the
Pledgee), this Agreement shall terminate and the Pledger shall be entitled the
return of such Collateral as may then be held by the Pledgee hereunder.
16. Miscellaneous Provisions. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated except by a written
document expressly referring to this Agreement and to the provisions so modified
or limited, and executed by the party .o be charged. The execution and delivery
of this Agreement and pledging of the Stock described in Section 1 hereof are
within the Pledger's power and such execution and delivery and she pledging of
such Stock do not contravene any law or any rule or regulation thereunder or of
any judgment, decree or order of any tribunal or of any agreement or instrument
to which the Pledger is a party or by which he or any of his property is bound
or constitute a default thereunder. This Agreement and all Obligations of the
Pledger shall be binding upon the successors and assigns of the Pledger, and
shall, together with the rights and remedies of the Pledgee hereunder, inure to
the benefit of the Pledgee, its successors in title and assigns.
This Agreement is intended to take effect as an instrument under seal
and this Agreement and the obligations of the Pledger hereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
The descriptive section headings have been inserted for convenience of
reference only and do not define or limit the provisions hereof. If any term of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall be in no way affected thereby, and this
Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The pledger acknowledges
receipt of a copy of this Agreement.
Terms used herein without definition which are defined in the Uniform
Commercial Code of Massachusetts have such defined meanings herein, unless the
context otherwise indicates or requires.
17. Waiver of Jury Trial. The Pledger waives his right to a jury trial
with respect to any action or claim arising out of any dispute in connection
with this Agreement, any rights or obligations hereunder or the Performance of
any such rights or obligations. Except as prohibited by law, the pledger waives
any right which he may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. The Pledgor (a)
certifies that neither the Pledgee nor any representative, agent or attorney of
the Pledgee has represented, expressly or otherwise, that the Pledgee would not,
in the event of litigation, seek to enforce the foregoing waivers and (b)
acknowledges that, in entering into this Agreement, the Pledgee is relying upon,
among other things, the waivers and certifications contained in this Section 17.
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<PAGE> 7
IN WITNESS WHEREOF, intending to be legally bound, the Pledger and the
Agent have caused this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
PLEDGOR:
/s/ Richard F. Selden
-------------------------------------------
Richard Selden
PLEDGEE:
Transkaryotic Therapies, Inc.
By: /s/ K. Michael Forrest
-------------------------------------------
Title: President and CEO
7
<PAGE> 1
EXHIBIT 10.25
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of July 26, 1991 between Transkaryotic Therapies,
Inc., a Delaware corporation (the "Company"), and Dr. Douglas A. Treco (the
"Executive").
1. Employment. The Company hereby employs the Executive and the
Executive hereby accepts employment with the Company upon the terms and
conditions herein set forth.
2. Duties. The Executive shall be engaged as a full-time employee to
act as the Company's Director of Research and shall be subject to the
instruction and control of the Company's Chief Scientific Officer. The Executive
shall devote his entire time, attention and energies to the business of the
Company and shall not engage in any other business activity or activities,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage, that, in the judgment of the Company, may conflict with the
proper performance of the Executive's duties under this Agreement.
Notwithstanding the foregoing, (a) with respect to businesses which do not
compete with the Company, the Executive may invest his personal or family assets
in such form or manner as will not require any services on the part of the
Executive in the operation of the affairs of the companies in which such
investments are made and in which his participation is solely that of an
investor, and (b) the Executive may purchase securities in any corporation whose
securities are regularly traded in recognized securities markets, provided that
such investments shall not result in his collectively owning beneficially at any
time one percent or more of the equity securities of any corporation engaged in
a business competitive to that of the Company.
3. Compensation.
(a) For services rendered under this Agreement, the Company shall pay
the Executive an annual salary of $72,000 (the "Base Salary"), payable (after
deduction of applicable withholding for federal and state income and payroll
taxes) in equal monthly installments. The Company may review the Executive's
compensation from time to time and award such bonuses or make such increases to
the Base Salary as the Company determines are merited, based upon the
Executive's performance and consistent with the Company's compensation policies.
(b) In addition to salary payments under Section 3 (a) above, the
Executive shall be eligible for and participate in such fringe benefits as shall
be generally provided to executives of the Company, including incentive
compensation, health insurance and retirement programs which may be adopted from
time to time during the term hereof by the Company. Nothing herein contained
shall be deemed to preclude the Company from granting such additional
compensation or benefits to the Executive as it shall in its sole discretion
determine.
4. Sick Leave and Vacation. During the term of this Agreement, the
Executive shall be entitled to sick leave and annual vacation consistent with
the Company's customary sick leave and vacation policies.
<PAGE> 2
5. Expenses. During the term of this Agreement, the Company shall
reimburse the Executive for all reasonable out-of-pocket expenses incurred by
the Executive in connection with the business of the Company and in performance
of his duties under this Agreement upon the Executive's presentation to the
Company of an itemized accounting of such expenses with reasonable supporting
data.
6. Term.
(a) The Executive's employment under this Agreement shall commence
on the date first set forth above and shall continue until terminated by the
Company as provided in this Section 6(a) or by the Executive as provided in
Section 6(c) below. The Company may at its election, terminate the obligations
of the Company under this Agreement as follows:
(i) Upon at least sixty (60) days prior written notice if the
Executive becomes physically or mentally incapacitated or is injured so that he
is unable to perform the services required of him hereunder and such inability
to perform continues for a period in excess of six (6) months and is continuing
at the time of such notice; or
(ii) For "Cause" upon prior written notice of such termination
to the Executive. For purposes of this Agreement, the Company shall have "Cause"
to terminate its obligations hereunder upon (a) the Company's determination that
the Executive has ceased or failed to substantially perform his duties hereunder
(other than as a result of his incapacity due to physical or mental illness or
injury), and at least sixty (60) days prior written notice to the Executive, (b)
the Executive's death, (c) the Company's determination that the Executive has
engaged or is about to engage in conduct materially injurious to the Company,
(d) the Executive's having been convicted of a felony, or (e) the Executive's
participation in activities proscribed by the provisions of Sections 2, 8 or 10
hereof or material breach of any of the other covenants herein; or
(iii) Without Cause upon at least thirty (30) days prior
written notice of such termination to the Executive.
(b) If this Agreement is terminated pursuant to Section 6(a)(i)
above, subject to Section 10(d) below, the Executive shall receive severance pay
until the fourth anniversary of the date hereof at the rate of one hundred
percent (100%) of Base Salary, reduced by applicable payroll taxes and further
reduced by the amount received by the Executive during such period under any
Company maintained disability insurance policy or plan or under Social Security
or similar laws. Such severance payments shall be paid periodically to the
Executive as provided in Section 3(a) for the payment of Base Salary. If this
Agreement is terminated pursuant to Section 6(a)(ii) above, the Executive shall
receive no severance pay. If this Agreement is terminated pursuant to Section
6(a)(iii) above, the Executive shall receive severance pay, for a period of
twelve (12) months from and after such termination, equal to the Base Salary
less the amount, if any, earned by the Executive from other employer or from
selfemployment during such twelve (12) month period whether as salary,
consulting fees,
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<PAGE> 3
deferred payments or other direct or indirect compensation. During such period
the Executive shall inform the Company from time to time, but no less often than
every three (3) months, of the Executive's employment and the amount of the
Executive's compensation and earnings during such period. Such severance
payments (less applicable payroll taxes) shall be paid periodically to the
Executive as provided in Section 3(a) for the payment of Base Salary.
(c) The Executive may terminate this Agreement for any reason upon at
least sixty (60) days prior written notice. In the event of any such
termination, the Executive shall not be entitled to any severance payments.
7. Representations. The Executive hereby represents- to the Company
that (a) he is legally entitled to enter into this Agreement and to perform the
services and other obligations contemplated herein, (b) he has, and throughout
the term of this Agreement will continue to have, the full right, power and
authority, subject to no rights of third parties, to grant to the Company the
rights contemplated by Section 9 hereof, and (c) he is not subject to any
agreement, rule, regulation or policy of any university, research institution or
other third party inconsistent with the foregoing representations.
8. Disclosure of Information.
(a) The Executive recognizes and acknowledges that the Company's
trade secrets, know-how and proprietary processes as they may exist from time to
time (including, without limitation, information regarding methods, cultures,
vectors, plasmids, synthesis techniques, nucleic acid sequences, purification
techniques and assay procedures) as well as the Company's confidential business
plans and financial data are valuable, special and unique assets of the
Company's business, access to and knowledge of which are essential to the
performance of the Executive's duties hereunder. Except as provided in Section
8(b) below, the Executive shall not, during or after the term of his employment
by the Company, in whole or in part, disclose such secrets, know-how, processes,
business plans or financial data to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever, nor shall the Executive
make use of any such property for his own purposes or for the benefit of any
person, firm, corporation or other entity (except the Company) under any
circumstances during or after the term of his employment provided that after the
term of his employment, these restrictions shall not apply to such secrets,
know-how and processes which the Executive can establish by competent proof:
(i) were known, other than under binder of secrecy, to the
Executive prior to his employment by the Company;
(ii) have passed into the public domain prior to or after
their development by or for the Company, other than through acts or omissions
attributable to the Executive; or
(iii) were subsequently obtained, other than- under binder of
secrecy,
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<PAGE> 4
from a third party not acquiring the information under an obligation of
confidentiality from the disclosing party.
(b) Recognizing the desire of the Executive to disclose certain work
done at the direction of the Company either in its laboratory or funded by the
Company at a third party institution, either through publication in reputable
scientific journals, participation in lectures, seminars or symposia, or by
correspondence with other members of the scientific community (herein referred
to as a "Disclosure"), the Executive and the Company shall confer and consult,
one with the other, where any anticipated scientific Disclosure ought, for the
sake of completeness, to contain some of the trade secrets, know-how or
processes of the Company described in Section 8(a), with a view toward resolving
the competing interests of confidentiality and desired scientific credit through
disclosure in a manner fairly and reasonably consistent with the interests of
the Company on one hand, and those of the Executive on the other. No such
Disclosure shall be made, nor any manuscript submitted for publication, unless
and until (i) the Company has had at least ninety (90) days to review the same,
(ii) the Company, if desired, has had ample time to effect associated patent
filings so as to preserve patent rights, (iii) with respect y to such of the
work done in the Company's laboratories, such Disclosure has been expressly
authorized by the affirmative vote of at least a majority of the members of the
Company's Board of Directors and (iv) such Disclosure is not prohibited under
any agreement between the Company and any third party.
(c) Upon termination of his employment hereunder, the Executive shall
promptly turn over to the Company all originals and copies which he may have of
any of the Company's confidential information described in this Section 8.
9. Intellectual Property. The Executive hereby sells, transfers and
assigns to the Company, or to any person or entity designated by the Company,
the entire right, title and interest of the Executive in and to all inventions,
ideas, discoveries and improvements (including, without limitation, all
microorganisms, strains or cultures), whether patented or unpatented, and
copyrightable material made or conceived by the Executive, solely or jointly,
during the term hereof, which arise out of research or other activities
conducted by, for or under the direction of the Company, whether or not
conducted at the Company's facilities, or which relate to methods, apparatus,
designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company. The Executive acknowledges that
all-copyrightable materials developed or produced by the Executive within the
scope of his employment constitute works made for hire. The Executive shall
communicate promptly and disclose to the Company, in such form as the Company
may reasonably request, all information, details and data pertaining to any such
inventions, ideas, discoveries and improvements; and the Executive shall execute
and deliver to the Company such formal transfers and assignments and such other
papers and documents and shall give such testimony as may be necessary or
required of the Executive to permit the Company or any person or entity
designated by the Company to file and prosecute patent applications and, as to
copyrightable material, to obtain copyrights thereof. Any such invention, idea,
discovery or improvement disclosed by the Executive within one year following
the termination of this Agreement shall be deemed to fall within the
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<PAGE> 5
provisions of this Section 9 unless proved to have been first conceived and made
following such termination.
10. Covenants Not to Compete or Interfere.
(a) Subject to Section 10(b) below, during the term of this
Agreement and the period ending twenty-four (24) months from and after the
termination of the Executive's employment hereunder, the Executive shall not
engage in any business (whether as an officer, director, owner, employee,
partner, consultant, advisor or other direct or indirect participant) engaged in
the development of gene therapy and/of gene-isolation methods and/or the sale of
products or rendering of services related to gene therapy or gene isolation
and/or to any other activities which directly compete with the Company's
business activities. This Agreement shall not be construed to restrict the
Executive's right to be employed as a faculty member of any university or
employee of any nonprofit agency or foundation after any termination of this
Agreement where this covenant not to compete shall continue to be in effect.
During the period in which this covenant not to compete is in effect the
Executive also shall not interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee, employee, consultant, research partner or investor of
the Company.
(b) If this Agreement is terminated by the Company pursuant to
Section 6(a)(iii) above, the provisions of the first sentence of Section 10(a)
shall apply until twelve (12) months from and after such termination.
(c) It is the desire and intent of the parties that the provisions
of this Section 10 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular Subsection or portion of this Section 10
shall be adjudicated to be invalid or unenforceable, this Section 10 shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section in the particular jurisdiction in which such adjudication is made.
(d) in the event of any breach of the provisions of this Section 10
by the Executive, any and all rights of the Executive to receive severance
payments under Section 6(b) above shall automatically terminate.
11. Injunctive Relief. If there is a breach or threatened breach of the
provisions of Sections 8, 9 or 10 of this Agreement, the Company shall be
entitled to an injunction, without bond, restraining the Executive from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies for such breach or threatened breach.
12. Insurance. The Company may, at its election and for its benefit,
insure the Executive against accidental loss or death, and the Executive shall
submit to such physical
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examinations and supply such information as may be required in connection
therewith.
13. Notices. Any notice required or permitted to be given under this
Agreement to the Executive shall be sufficient if in writing and if sent by
certified or registered mail to his residence, or in the case of the Company, to
Transkaryotic Therapies, Inc., 195 Albany Street, Cambridge, MA 02139, or to
such other offices or addresses as the Company shall designate from time to time
in writing to the Executive. Any such notice shall be effective on the earlier
of (a) the date on which it is personally delivered or (b) three (3) days after
it is deposited in the United States mails, postage prepaid.
14. Waiver of Breach. A waiver by the Company or the Executive of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by the other party.
15. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the Commonwealth of
Massachusetts.
16. Assignment. This Agreement may be assigned, without the consent of
the Executive, by the Company to any person, partnership, corporation or other
entity which succeeds to the business of the Company or which has purchased
substantially all the assets of the Company, provided such assignee assumes all
the liabilities of the Company hereunder.
17. Entire Agreement. This Agreement contains the entire agreement of
the parties and supersedes any prior letters of understanding or employment
agreements between the Executive and the Company, except Section 12 of the
Employment Agreement between them dated as of July 26, 1988, which Section shall
remain in full force and effect. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
----------------------------------
Title: President & CEO
-------------------------------
/s/ Douglas A. Treco
-------------------------------------
Douglas A. Treco
6
<PAGE> 1
EXHIBIT 10.26
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement"), dated as of August 15, 1991, by
and between Douglas A. Treco, a resident of the Commonwealth of Massachusetts
(the "Pledgor") and Transkaryotic Therapies, Inc., a Delaware corporation (the
"Pledgee").
Section 1. Pledge of Stock. The Pledgor hereby pledges, assigns, grants
a security interest in, and delivers to the Pledgee, One Thousand Two Hundred
Fifty (1,250) shares of the common stock of the Pledgee (the "Stock"), to be
held by the Pledgee subject to the terms and conditions hereinafter set forth.
The certificates for such shares, accompanied by stock powers or other
appropriate instruments of assignment thereof duly executed in blank by the
Pledgor, have been delivered to the Pledgee.
Section 2. Definitions. As used herein, the following terms shall have
the following meanings:
(a) The term "Collateral" as used herein means the property at
any time, whether now or hereafter, pledged to the Pledgee hereunder
(whether described herein or not) and all income therefrom, increases
therein and proceeds thereof, other than income, increases or proceeds
received by the Pledgor pursuant to Section 6 hereof.
(b) The term "Stock" as used herein includes the shares of
stock described in Section 1 hereof and any additional shares of stock
at the time pledged with the Pledgee hereunder.
(c) The term "Obligations" as used herein means all
indebtedness, obligations and liabilities of the Pledgor under the
promissory note dated as of the date hereof, issued by the Pledgor to
the Pledgee in the original principal amount of $60,000 (the "Note"),
now existing or hereafter arising, direct or indirect, absolute or
contingent, matured or unmatured, arising by operation of law or
otherwise.
Section 3. Security for Obligations. This Agreement and the pledge of
the Collateral hereunder is made with the Pledgee; as security for the payment
and performance of the Obligations.
Section 4. Liquidation, Recapitalization, Etc. Any sums paid upon or
with respect to any of the Stock upon the liquidation or dissolution of the
issuer thereof shall be paid over to the Pledgee to be held by it as security
for the Obligations; and in case any distribution of capital shall be made on or
in respect of any of the Stock or any property shall be distributed upon or with
respect to any of the Stock pursuant to the recapitalization or reclassification
of the capital of the issuer thereof or pursuant to the reorganization thereof,
the property so distributed shall be delivered to the Pledgee to be held by it
as security for the Obligations. All sums of money
<PAGE> 2
and property paid or distributed in respect of the Stock upon such a
liquidation, dissolution, recapitalization or reclassification which are
received by the Pledgor shall, until paid or delivered to the Pledgee, be held
in trust for the Pledgee as security for the Obligations.
Section 5. Warranty of Title. The Pledgor warrants that he has good and
marketable title to the Stock described in Section 1 hereof, subject to no
pledges, liens, security interests, charges, options, restrictions or other
encumbrances except the security interest created by this Agreement, and that he
has power, authority and legal right to pledge all of such Stock pursuant to
this Agreement. The Pledgor covenants that he will defend the Pledgee's rights
and security interest in such Stock against the claims and demands of all
persons whomsoever, and the Pledgor covenants that he will have the like title
to and right to pledge the Collateral and will likewise defend the Pledgee's
rights and security interest therein.
Section 6. Dividends, Voting, Etc., Prior to Maturity. So long as no
Event of Default (as such term is defined in the Note) shall have occurred and
be continuing, the Pledgor shall be entitled to receive all cash dividends paid
in respect of the Stock, and payments on account of taxes and allocated
corporate expenses in accordance with past practice, to vote the Stock and to
give consents, waivers and ratifications in respect of the Stock. The Pledgor
acknowledges and agrees that the Pledgee may cause the Stock to be transferred
into its own name as collateral security. All such rights of the Pledgor to
receive cash dividends shall cease in case an Event of Default shall have
occurred and be continuing. All such rights of the Pledgor to vote and give
consents, waivers and ratifications with respect to the Stock shall, at the
Pledgee's option, as evidenced by the Pledgee's notifying the Pledgor of such
election, cease in case an Event of Default shall have occurred and be
continuing.
Section 7. Remedies. If an Event of Default shall have occurred and be
continuing, the pledgee shall thereafter have the following rights and remedies
(to the extent permitted by applicable law) in addition to the rights and
remedies of a secured party under the Uniform Commercial Code of Massachusetts,
all such rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively or concurrently, at such time or times as the
Pledgee deems expedient:
(a) if the Pledgee so elects and gives notice of such
election to the Pledgor, the Pledgee may vote any or all shares of the
Stock (whether or not the same shall have been transferred into its
name or the name of its nominee or nominees) for any lawful purpose,
including, without limitation, for the liquidation of the assets of the
issuer thereof, and give all consents, waivers and ratifications in
respect of the Stock and otherwise act with respect thereto as though
it were the outright owner thereof (the Pledgor hereby irrevocably
constituting and appointing the Agent the proxy and attorney-in-fact of
the Pledgor, with full power of substitution, to do so);
(b) the Pledgee may demand, sue for, collect or make any
compromise or settlement the Pledgee deems suitable in respect of any
Collateral held by it hereunder;
(c) the Pledgee may sell, resell, assign and deliver, or
otherwise dispose of any or all of the Collateral, for cash and/or
credit and upon such terms at such place or places and at such time or
times and to such persons, firms, companies or corporations
- 2 -
<PAGE> 3
as the Pledgee thinks expedient, all without demand for performance by
the Pledgor or any notice or advertisement whatsoever except as
expressly provided herein or as may otherwise be required by law; and
(d) the Pledgee may cause all or any part of the Stock held
by it to be transferred into its name or the name of its nominee or
nominees, if it has not already done so.
In the event of any disposition of the Collateral as provided in
paragraph (c) of this Section 7, the Pledgee shall give to the Pledgor at least
five (5) Business Days' prior written notice of the time and place of any public
sale of the Collateral or of the time after which any private sale or any other
intended disposition is to be made. The Pledgor hereby acknowledges that five
(5) Business Days' prior written notice of such sale or sales shall be
reasonable notice. The Pledgee may enforce its rights hereunder without any
other notice and without compliance with any other condition precedent now or
hereunder imposed by statute, rule of law or otherwise (all of which are hereby
expressly waived by the Pledgor, to the fullest extent permitted by law). The
Pledgee may buy any part or all of the Collateral at any public sale and if any
part or all of the Collateral is of a type customarily sold in a recognized
market or is of the type which is the subject of widely-distributed standard
price quotations, the Pledgee may buy at private sale and may make payments
thereof by any means. The Pledgee may apply the cash proceeds actually received
from any sale or other disposition to the reasonable expenses of retaking,
holding, preparing for sale, selling and the like, to reasonable attorneys'
fees, travel and all other expenses which may be incurred by the Pledgee in
attempting to collect the Obligations or to enforce this Agreement or in the
prosecution or defense of any action or proceeding related to the subject matter
of this Agreement; and then to the Obligations. Any surplus after the
Obligations have been paid in full shall be paid to the pledger or to such other
persons which are entitled thereto.
The Pledgor recognizes that the Pledgee may be unable to effect a
public sale of the Stock by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the "Securities Act") and other applicable
laws, but may be compelled to resort to one or more private sales thereof to a
restricted group of purchasers. The Pledgor agrees that any such private sales
may be at prices and other terms less favorable to the seller than if sold at
public sales and that such private sales shall not by reason thereof be deemed
not to have been made in a commercially reasonable manner. The Pledgee shall be
under no obligation to delay a sale of any of the Stock for the period of time
necessary to permit the issuer of such securities to register such securities
for public sale under the Securities Act, or such other applicable laws, even if
the issuer would agree to do so. Subject to the foregoing, the Pledgee agrees
that any sale of the Stock shall be made in a commercially reasonable manner.
The Pledgor agrees to do or cause to be done all such acts and things
as may be necessary to make any sales of any portion or all of the Stock
pursuant to this Section 7 valid and binding and in compliance with any and all
applicable laws (including, without limitation, the Securities Act, the
Securities Exchange Act of 1934, as amended. The rules and regulations of the
Securities and Exchange Commission applicable thereto and all applicable state
securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees
or awards of any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction
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<PAGE> 4
over any such sale or sales. All at the Pledgor's expense. The Pledgor further
agrees that a breach of any of the covenants contained in this Section 7 will
cause irreparable injury to the Pledgee, that the Pledgee has no adequate remedy
at law in respect of such breach and, as a consequence, agrees that each and
every covenant contained in this Section 7 shall be specifically enforceable
against the Pledgor and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants.
Section 8. Marshaling. The Pledgee shall not be required to marshal any
present or future security for (including but not limited to this Agreement and
the Collateral pledged hereunder), or other assurances of payment of, the
Obligations or any of them, or to resort to such security or other assurances of
payment in any particular order, and all of its rights hereunder and in respect
of such security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that he
lawfully may, the Pledgor hereby agrees that he will not invoke any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of the Pledgee's rights under this Agreement or under any other
instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and to the extent that he lawfully may,
the Pledgor hereby irrevocably waives the benefits of all such laws.
Section 9. Pledgor's Obligations Not Affected. The obligations of the
Pledgor hereunder shall remain in full force and effect without regard to, and
shall not be impaired by (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Pledgor;
(b) any exercise or nonexercise, or any waiver, by the Pledgee of any right,
remedy, power or privilege under or in respect of any of the Obligations or any
security therefor (including this Agreement); (c) any extensions or renewals of
any Obligation; (d) any amendment to or modification of the Note or any
instrument (other than this Agreement) securing any of the Obligations, or (e)
the taking of additional security for, or any other assurances of payment of,
any of the Obligations or the release or discharge or termination of any
security or other assurances of payment for any of the Obligations, whether or
not the Pledgor shall have notice or knowledge of any of the foregoing.
Section 10. Transfer, Etc., by Pledgor. Without the prior written
consent or the Pledgee, the Pledgor will not sell, assign, transfer or otherwise
dispose of, grant any option with respect to, or pledge or grant any security
interest in or otherwise encumber any of the Collateral or any interest therein,
except for the pledge thereof provided for in this Agreement.
Section 11. Further Assurances. The Pledgor will do all such acts, and
will furnish to the Pledgee all such financing statements, certificates, legal
opinions and other documents and will obtain all such governmental consents and
corporate approvals and will do or cause to be done all such other things as the
Pledgee may reasonably request from time to time in order to give full effect to
this Agreement and to secure the rights of the Pledgee hereunder, all without
any cost or expense to the Pledgee.
Section 12. Pledgee's Exoneration. The powers conferred on the Pledgee
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon the Pledgee to exercise any such powers. The Pledgee shall
be accountable only for the amounts it actually
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<PAGE> 5
receives as a result of such powers and neither it nor any of its officers,
directors, employees or agents shall be responsible to the Pledgor for any
failure to act, except for its own gross negligence or any intentional
misconduct. Under no circumstances shall the Pledgee be deemed to assume any
responsibility for or obligation or duty with respect to any part or all of the
Collateral of any nature or kind, other than the physical custody thereof, or
any matter or proceedings arising out of or relating thereto, other than to
exercise reasonable care in the physical custody of the Collateral. The Pledgee
shall not be required to take any action of any kind to collect, preserve or
protect its or the Pledgor's rights in the Collateral or against other parties
thereto, other than to exercise reasonable care in the physical custody of the
Collateral. The Pledgee's sole duty with respect to the custody, safe keeping
and physical preservation of the Collateral in its possession, under Sections
9-207 of the Uniform Commercial Code of the Commonwealth of Massachusetts or
otherwise, shall be to deal with such Collateral in the same manner as the
Pledgee deals with similar property for its own account. The Pledgee's prior
recourse to any part or all of the Collateral shall not constitute a condition
of any demand, suit or proceeding for payment or collection of the Obligations.
Section 13. No Waiver, Etc. No act, failure or delay by the Pledgee
shall constitute a waiver of its rights and remedies hereunder or otherwise. No
single or partial waiver by the Pledgee of any default or right or remedy which
it may have shall operate as a waiver of any other default, right or remedy or
of the same default, right or remedy on a future occasion. The Pledgor hereby
waives presentment, notice of dishonor and protest of all instruments, included
in or evidencing any of the Obligations or the Collateral, and any and all other
notices and demands whatsoever.
Section 14. Notice, Etc. All notices and other communications called
for hereunder shall be made in writing and, unless otherwise specifically
provided herein, shall be deemed to have been duly made or given when delivered
by hand or mailed first class, postage prepaid, or, in the case of telegraphic,
telecopy or telexed notice, when transmitted, answer back received, addressed as
follows: if to the Pledgor, at his principal residence, and if to the Pledgee,
at 195 Albany Street, Cambridge, MA, or at such address as either party may
designate in writing to the other.
Section 15. Termination. Upon payment and performance in full of the
Obligations in accordance with their terms and the performance by the Pledgor of
all of his covenants and agreements hereunder or, if earlier, upon the Pledgee'
termination of the Pledgor's employment by the Pledgee without cause (as such
term is defined in the Employment Agreement dated as of July 26, 1991 between
the Pledgor and the Pledgee), this Agreement shall terminate and the Pledgor
shall be entitled the return of such Collateral as may then be held by the
Pledgee hereunder.
Section 16. Miscellaneous Provisions. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated except by a written
document expressly referring to this Agreement and to the provisions so modified
or limited, and executed by the party to be charged. The execution and delivery
of this Agreement and pledging of the Stock described in Section 1 hereof are
within the Pledgor's power and such execution and delivery and the pledging of
such Stock do not contravene any law or any rule or regulation thereunder or of
any judgment, decree or order of any tribunal or of any agreement or instrument
to which the Pledgor is a
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<PAGE> 6
party or by which he or any of his property is bound or constitute a default
thereunder. This Agreement and all obligations of the Pledgor shall be binding
upon the successors and assigns of the Pledgor, and shall, together with the
rights and remedies of the Pledgee hereunder, inure to the benefit of the
Pledgee, its successors in title and assigns.
This Agreement is intended to take effect as an instrument under seal
and this Agreement and the Obligations of the Pledgor hereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
The descriptive section headings have been inserted for convenience of
reference only and do not define or limit the provisions hereof. If any term of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall be in no way affected thereby, and this
Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Pledgor acknowledges
receipt of a copy of this Agreement.
Terms used herein without definition which are defined in the Uniform
Commercial Code of Massachusetts have such defined meanings herein, unless the
context otherwise indicates or requires.
Section 17. Waiver of Jury Trial. The Pledgor waives his right to a
jury trial with respect to any action or claim arising out of any dispute in
connection with this Agreement, any rights or obligations hereunder or the
Performance of any such rights or obligations. Except as prohibited by law, the
Pledgor waives any right which he may have to claim or recover in any litigation
referred to in the preceding sentence any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. The Pledgor (a) certifies that neither the Pledgee nor any
representative, agent or attorney of the Pledgee has represented, expressly or
otherwise, that the Pledgee would not, in the event of litigation, seek to
enforce the foregoing waivers and (b) acknowledges that, in entering into this
Agreement, the Pledgee is relying upon, among other things, the waivers and
certifications contained in this Section 17.
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<PAGE> 7
IN WITNESS WHEREOF, intending to be legally bound, the Pledgor and the
Agent have caused this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
PLEDGOR:
/s/ Douglas A. Treco
------------------------------------------
Douglas A. Treco
PLEDGEE:
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
------------------------------------------
Title: President and CEO
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<PAGE> 1
EXHIBIT 10.27
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 20, 1993, between Transkaryotic
Therapies, Inc., a Delaware corporation (the "Company"), and Christoph Michael
Adams, Ph.D. (the "Executive").
1. EMPLOYMENT. The Company hereby employs the Executive and the
Executive hereby accepts employment with the Company upon the terms and
conditions herein set forth.
2. DUTIES. The Executive shall be engaged as a full-time employee to
act as the Company's Vice President, Business Development, and shall report to
the Company's President and Chief Executive Officer. The Executive shall perform
the duties consistent with such position as the President and Chief Executive
Officer shall from time to time designate. The Executive shall devote his entire
time, attention and energies to the business of the Company and shall not engage
in any other business activity or activities, whether or not such business
activity is pursued for gain, profit or other pecuniary advantage, that, in the
judgment of the Company, may conflict with the proper performance of the
Executive's duties under this Agreement. Notwithstanding the foregoing, (a) with
respect to businesses which do not compete with the Company, the Executive may
invest his personal or family assets in such form or manner as will not require
any services on the part of the Executive in the operation of the affairs of the
companies in which such investments are made and in which his participation is
solely that of an investor, and (b) the Executive may purchase securities in any
corporation whose securities are regularly traded in recognized securities
markets, provided that such investments shall not result in his collectively
owning beneficially at any time one percent (1%) or more of the equity
securities of any corporation engaged in a business competitive to that of the
Company.
3. COMPENSATION.
(a) Base Salary. For services rendered under this Agreement, the
Company shall pay the Executive an annual salary of $135,000 (the "Base
Salary"), payable (after deduction of applicable withholding for federal and
state income and payroll taxes) in equal monthly installments. The Company may
review the Executive's compensation from time to time and make such increases to
the Base Salary as the Company determines are merited, based upon the
Executive's performance and consistent with the Company's compensation policies.
(b) Bonus. Within sixty (60) days after the Commencement Date (as
defined in Section 6), the Company shall establish objective performance goals
for the Executive for the remainder of calendar year 1994. At least thirty (30)
days prior to each subsequent calendar year under this Agreement, the Company
shall establish objective performance goals for the Executive for such calendar
year. Upon the attainment of such performance goals, but subject to the overall
performance of the Company during such year, the Executive shall be entitled to
a bonus, up to a maximum of 25% of the Executive's Base Salary for the calendar
year in question. Within thirty (30) days after the close of each such calendar
year, the Company shall evaluate the attainment of the performance goals for
such calendar year and determine the
<PAGE> 2
amount of any performance bonus payable hereunder. Any such performance bonus
shall be payable within ninety (90) days after the calendar year to which it
relates.
(c) Fringe Benefits. In addition to Base Salary and Bonus payments
under Sections 3(a) and 3(b) above, the Executive shall be eligible for and
participate in such fringe benefits as shall be generally provided to executives
of the Company, including incentive compensation, the Company's 401(k) Plan,
health and dental insurance, and any retirement programs, stock option plans or
employee stock purchase plans which may be adopted from time to time during the
term hereof by the Company. Nothing herein contained shall be deemed to preclude
the Company from granting such additional compensation or benefits to the
Executive as it shall in its sole discretion determine.
(d) Stock Options. Upon authorization by the Company's Board of
Directors or Compensation Committee, the Company will promptly grant the
Executive under the Company's 1993 Long-Term Incentive Plan (the "Plan") a
nonstatutory stock option to purchase an aggregate of forty thousand (40,000)
shares of the Common Stock of the Company, par value $.01 per share, at a
purchase price of one cent ($0.01) per share. Such option will vest annually for
a period of six years in installments of 6,666 shares each, with any remaining
shares vesting on the sixth anniversary hereof. Such option shall be exercisable
during the ten (10) year period following its date of vesting and shall be
subject to all the terms and conditions of the Plan and the Company's standard
form of Stock Option Agreement, copies of which have been delivered to the
Executive separately.
4. SICK LEAVE AND VACATION. During the term of this Agreement, the
Executive shall be entitled to sick leave and annual vacation consistent with
the Company's customary sick leave and vacation policies provided that such
annual vacation shall in no event be less than three (3) weeks.
5. EXPENSES.
(a) General. During the term of this Agreement, the Company shall
reimburse the Executive in accordance with the Company's customary policies for
all reasonable out-of-pocket expenses incurred by the Executive in connection
with the business of the Company and in performance of his duties under this
Agreement upon the Executive's presentation to the Company of an itemized
accounting of such expenses with reasonable supporting data.
(b) Relocation Expenses. The Company shall pay a $20,000 lump sum
amount to the Executive which may be applied to the costs of purchasing a home
in the greater Boston area. In addition, the Company will reimburse the
Executive (x) for the Executive's reasonable, out-of-pocket moving expenses
relating to his relocation from Switzerland to the greater Boston area, (y) for
the reasonable, out-of-pocket expense of staying two weeks at a hotel in the
greater Boston area, together with reasonable, out-of-pocket living expenses
during such two-week period, and (z) for the reasonable out-of-pocket rental
(but no other expenses) of an apartment for a four-week period. Reimbursement of
expenses by the Company hereunder will be made upon the Executive's presentation
of an itemized accounting of such expenses with reasonable supporting data.
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<PAGE> 3
6. TERM.
(a) The Executive's employment under this Agreement shall commence
on or before February 21, 1994 or such other date as the parties may mutually
agree upon (the "Commencement Date") and shall continue until terminated by the
Company as provided in this Section 6(a) or by the Executive as provided in
Section 6(c) below. The Company may, at its election, terminate the obligations
of the Company under this Agreement as follows:
(i) Upon at least sixty (60) days prior written notice if the
Executive becomes physically or mentally incapacitated or is injured so
that he is unable to perform the services required of him hereunder and
such inability to perform continues for a period in excess of six (6)
months and is continuing at the time of such notice; or
(ii) For "Cause" upon prior written notice of such termination
to the Executive. For purposes of this Agreement, the Company shall
have "Cause" to terminate its obligations hereunder upon (a) the
Company's determination that the Executive has ceased or failed to
substantially perform his duties hereunder (other than as a result of
his incapacity due to physical or mental illness or injury), and at
least thirty (30) days prior written notice to the Executive, (b) the
Executive's death, (c) the Company's determination that the Executive
has engaged or is about to engage in conduct materially injurious to
the Company, (d) the Executive's having been convicted of a felony, or
(e) the Executive's participation in activities proscribed by the
provisions of Sections 2, 8 or 10 hereof or material breach of any of
the other covenants herein; or
(iii) Without Cause upon at least sixty (60) days prior
written notice of such termination to the Executive.
(b) If, within six (6) months of the date the Executive's employment
hereunder commences, this Agreement is terminated for any reason (including,
without limitation, termination by the Company without Cause or voluntary
termination by the Executive, the Executive shall receive no severance pay. If,
subsequent to such six (6) month period, this Agreement is terminated pursuant
to Section 6(a)(i) above, subject to Section 10(d) below, the Executive shall
receive severance pay until the fourth anniversary of the date hereof at the
rate of one hundred percent (100%) of Base Salary, reduced by applicable payroll
taxes and further reduced by the amount received by the Executive during such
period under any Company maintained disability insurance policy or plan or under
Social Security or similar laws. Such severance payments shall be paid
periodically to the Executive as provided in Section 3(a) for the payment of
Base Salary. If this Agreement is terminated at any time pursuant to Section
6(a)(ii) above, the Executive shall receive no severance pay. If this Agreement
is terminated pursuant to Section 6(a)(iii) above more than six (6) months but
within one (1) year after the date the Executive's employment hereunder
commences, the Executive shall receive severance pay, for a period of six (6)
months from and after such termination, equal to the Base Salary less the
amount, if any, earned by the Executive during such six (6) month period,
whether as salary, consulting fees, deferred payments or other direct or
indirect compensation. If this Agreement is terminated pursuant to Section
6(a)(iii) above more than one (1) year after the date the Executive's employment
hereunder commences, the Executive shall receive severance pay, for a period of
twelve (12) months from and after such termination, equal to the Base Salary
less
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<PAGE> 4
the amount, if any, earned by the Executive during such twelve (12) month
period, whether as salary, consulting fees, deferred payments or other direct or
indirect compensation. During any such six (6) month or twelve (12) month period
the Executive shall inform the Company from time to time, but no less often than
every three (3) months, of the Executive's employment and the amount of the
Executive's compensation and earnings during such period. Such severance
payments (less applicable payroll taxes) shall be paid periodically to the
Executive as provided in Section 3(a) for the payment of Base Salary.
(c) The Executive may terminate this Agreement for any reason upon
at least sixty (60) days prior written notice. In the event of any such
termination, the Executive shall not be entitled to any severance payments.
7. REPRESENTATIONS. The Executive hereby represents to the Company that
(a) he is legally entitled to enter into this Agreement and to perform the
services and other obligations contemplated herein, (b) he has, and throughout
the term of this Agreement will continue to have, the full right, power and
authority, subject to no rights of third parties, to grant to the Company the
rights contemplated by Section 9 hereof, and (c) he is not subject to any
agreement, rule, regulation or policy of any university, research institution or
other third party inconsistent with the foregoing representations.
8. DISCLOSURE OF INFORMATION.
(a) The Executive recognizes and acknowledges that the Company's
trade secrets, know-how and proprietary processes as they may exist from time to
time (including, without limitation, information regarding methods, cultures,
vectors, plasmids, synthesis techniques, nucleic acid sequences, purification
techniques and assay procedures) as well as the Company's confidential business
plans and financial data are valuable, special and unique assets of the
Company's business, access to and knowledge of which are essential to the
performance of the Executive's duties hereunder. The Executive shall not, during
or after the term of his employment by the Company, in whole or in part,
disclose such secrets, know-how, processes, business plans or financial data to
any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, nor shall the Executive make use of any such property for
his own purposes or for the benefit of any person, firm, Corporation or other
entity (except the Company) under any circumstances during or after the term of
his employment, provided that after the term of his employment, these
restrictions shall not apply to such secrets, know-how and processes which the
Executive can establish by competent proof:
(i) were known, other than under binder of secrecy, to the
Executive prior to his employment by the Company;
(ii) have passed into the public domain prior to or after
their development by or for the Company, other than through acts or
omissions attributable to the Executive; or
(iii) were subsequently obtained, other than under binder of
secrecy, from a third party not acquiring the information under an
obligation of confidentiality from the disclosing party.
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<PAGE> 5
(b) Upon termination of his employment hereunder, the Executive
shall promptly turn over to the Company all originals and copies which he may
have of any of the Company's confidential information described in this Section
8.
9. INTELLECTUAL PROPERTY. The Executive hereby sells, transfers and
assigns to the Company, or to any person or entity designated by the Company,
the entire right, title and interest of the Executive in and to all inventions,
ideas, discoveries and improvements (including, without limitation, all
microorganisms, strains or cultures), whether patented or unpatented, and
copyrightable material made or conceived by the Executive, solely or jointly,
during the term hereof, which arise out of research or other activities
conducted by, for or under the direction of the Company, whether or not
conducted at the Company's facilities, or which relate to methods, apparatus,
designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company. The Executive acknowledges that all
copyrightable materials developed or produced by the Executive within the scope
of his employment constitute works made for hire. The Executive shall
communicate promptly and disclose to the Company, in such form as the Company
may reasonably request, all information, details and data pertaining to any such
inventions, ideas, discoveries and improvements; and the Executive shall execute
and deliver to the Company such formal transfers and assignments and such other
papers and documents and shall give such testimony as may be necessary or
required of the Executive to permit the Company or any person or entity
designated by the Company to file and prosecute patent applications and, as to
copyrightable material, to obtain copyrights thereof. Any such invention, idea,
discovery or improvement disclosed by the Executive within one (1) year
following the termination of this Agreement shall be deemed to fall within the
provisions of this Section 9 unless proved to have been first conceived and made
following such termination.
10. COVENANTS NOT TO COMPETE OR INTERFERE.
(a) Subject to Section 10(b) below, during the term of this
Agreement and the period ending twenty-four (24) months from and after the
termination of the Executive's employment hereunder, the Executive shall not
engage in any business (whether as an officer, director, owner, employee,
partner, consultant, advisor or other direct or indirect participant) engaged in
the development of gene therapy and/or gene targeting and/or gene isolation
methods and/or the sale of products or rendering of services related to gene
therapy and/or gene targeting and/or gene isolation and/or to any other
activities which directly compete with the Company's business activities. This
Agreement shall not be construed to restrict the Executive's right to be
employed as a faculty member of any university or employee of any nonprofit
agency or foundation after any termination of this Agreement where this covenant
not to compete shall continue to be in effect. During the period in which this
covenant not to compete is in effect the Executive also shall not interfere
with, disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any customer, supplier, lessor, lessee, employee,
consultant, research partner or investor of the Company.
(b) If this Agreement is terminated by the Company pursuant to
Section 6(a)(iii) above, the provisions of the first sentence of Section 10(a)
shall apply until twelve (12) months from and after such termination.
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<PAGE> 6
(c) It is the desire and intent of the parties that the provisions
of this Section 10 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular Subsection or portion of this Section 10
shall be adjudicated to be invalid or unenforceable, this Section 10 shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section in the particular jurisdiction in which such adjudication is made.
(d) In the event of any breach of the provisions of this Section 10
by the Executive, any and all rights of the Executive to receive severance
payments under Section 6(b) above shall automatically terminate.
11. INJUNCTIVE RELIEF. If there is a breach or threatened breach of the
provisions of Sections 8, 9 or 10 of this Agreement, the Company shall be
entitled to an injunction, without bond, restraining the Executive from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies for such breach or threatened breach.
12. INSURANCE. The Company may, at its election and for its benefit,
insure the Executive against accidental loss or death, and the Executive shall
submit to such physical examinations and supply such information as may be
required in connection therewith.
13. NOTICES. Any notice required or permitted to be given under this
Agreement to the Executive shall be sufficient if in writing and if sent by
certified or registered mail to his residence, or in the case of the Company, to
Transkaryotic Therapies, Inc., 195 Albany Street, Cambridge, MA 02139,
Attention: President, or to such other offices or addresses as the Company shall
designate from time to time in writing to the Executive.
Any such notice shall be effective on the earlier of (a) the date on which it is
personally delivered or (b) three (3) days after it is deposited in the United
States mails, postage prepaid.
14. WAIVER OF BREACH. A waiver by the Company or the Executive of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by the other party.
15. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the Commonwealth of
Massachusetts.
16. ASSIGNMENT. This Agreement may be assigned, without the consent of
the Executive, by the Company to any person, partnership, corporation or other
entity which succeeds to the business of the Company or which has purchased
substantially all the assets of the Company, provided such assignee assumes all
the liabilities of the Company hereunder.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties and supersedes any prior understandings or agreements between the
Executive and the Company. This Agreement may be changed only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is
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<PAGE> 7
sought.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date first above written.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ K. Michael Forrest
----------------------------------------
K. Michael Forrest,
President and
Chief Executive Officer
/s/ Christoph Adams
----------------------------------------
Christoph Michael Adams, Ph.D.
To be completed upon commencement
of employment of the Executive:
The definition of the Commencement Date, previously set forth in
Section 6 hereof, is superseded and declared to be ___________________ , 199___.
By: _______________________________
Christoph Michael Adams, Ph.D.
TRANSKARYOTIC THERAPIES, INC.
By: _________________________________
By:
Title:
- 7 -
<PAGE> 1
EXHIBIT 10.28
PLEDGE AGREEMENT
PLEDGE AGREEMENT (this "Agreement"), dated as of April 21, 1995, by and
between Christoph M. Adams, a resident of the Commonwealth of Massachusetts (the
"Pledgor") and Transkaryotic Therapies, Inc., a Delaware corporation (the
"Pledgee").
Section 1. Pledge. The Pledgor hereby pledges, assigns, grants a
security interest in, and delivers to the Pledgee, the Collateral (as defined
below), to be held by the Pledgee subject to the terms and conditions
hereinafter set forth.
Section 2. Definitions. As used herein, the following terms shall have
the following meanings:
(a) The term "Collateral" as used herein means all the estate,
right, title, and interest of the Pledgor, now owned or hereafter acquired, in,
to, and under (i) the Option Agreement dated as November 16, 1994, between the
Pledgee and the Pledgor, evidencing the Pledgor's option to purchase up to
40,000 shares of the Pledgee's Common Stock, $0.01 par value, at an exercise
price of $0.01 per share, a copy of which Option Agreement is attached hereto as
Exhibit A, to the extent (but only to the extent) applicable to 10,000 shares of
the Pledgee's Common Stock (the "Stock") issuable thereunder (the security
interest hereby granted being applicable to the first 10,000 shares of the
Pledgee's Common Stock in respect of which the Pledgor's options vest in
accordance with the terms of such Option Agreement) and (ii) any shares of the
Pledgee's capital stock or other cash, securities, and/or other property that
may be issued or issuable upon exercise of the Pledgor's rights under such
Option Agreement in respect of the Stock.
(b) The term "Obligations" as used herein means all indebtedness,
obligations and liabilities of the Pledgor in respect of (i) a certain
promissory note of the Pledgor to the Pledgee, dated as of the date hereof, in
the original principal amount of $15,000; and (ii) a certain promissory note of
the Pledgor to the Pledgee, to be dated as of May 5, 1995, in the original
principal amount of $20,000, but only from and after the making of such
promissory note (each of the foregoing promissory notes, a "Note," and
collectively, the "Notes").
Section 3. Security for Obligations. This Agreement and the pledge of
the Collateral hereunder is made with the Pledgee as security for the payment
and performance of the Obligations.
Section 4. Liquidation, Recapitalization, Etc. Any sums paid upon or
with respect to any of the Stock upon the liquidation or dissolution of the
issuer thereof shall be paid over to the Pledgee to be held by it as security
for the Obligations; and in case any distribution of capital shall be made on or
in respect of any of the Stock or any property shall be distributed upon or with
respect to any of the Stock pursuant to the recapitalization or reclassification
of the capital of the issuer thereof or pursuant to the reorganization thereof,
the property so distributed shall be delivered to the Pledgee to be held by it
as security for the Obligations. All sums of money
<PAGE> 2
and property paid or distributed in respect of the Stock upon such a
liquidation, dissolution, recapitalization, or reclassification that are
received by the Pledgor shall, until paid or delivered to the Pledgee, be held
in trust for the Pledgee as security for the Obligations.
Section 5. Warranty of Title. The Pledgor warrants that he has good and
marketable title to the Stock described in Section 1 hereof, subject to no
pledges, liens, security interests, charges, options, restrictions, or other
encumbrances except the security interest created by this Agreement, and that he
has power, authority, and legal right to pledge all of such Stock pursuant to
this Agreement. The Pledgor covenants that he will defend the Pledgee's rights
and security interest in such Stock against the claims and demands of all
persons whomsoever; and the Pledgor covenants that he will have the like title
to and right to pledge the Collateral and will likewise defend the Pledgee's
rights and security interest therein.
Section 6. Exercise of Options; Dividends, Voting, Etc., Prior to
Maturity. The Pledgor shall not exercise his stock option rights comprised
within the Collateral, unless the Pledgor first agrees to deliver the stock
certificate(s) representing the shares for which such stock option rights are
exercised, duly indorsed in blank for transfer or accompanied by appropriate
stock powers duly executed in blank for transfer, which shares, certificates,
and stock powers will constitute Collateral and will be held by the Pledgee
until payment and performance in full of the obligations. So long as no Event of
Default (as such term is defined in the Note) shall have occurred and be
continuing, the Pledgor shall be entitled to receive all cash dividends paid in
respect of the Stock, to vote the Stock, and to give consents, waivers, and
ratifications in respect of the Stock. The Pledgor acknowledges and agrees that
the Pledgee may cause the Stock to be transferred into its own name as
collateral security. All such rights of the Pledgor to receive cash dividends
shall cease in case an Event of Default shall have occurred and be continuing.
All such rights of the Pledgor to vote and give consents, waivers, and
ratifications with respect to the Stock shall, at the Pledgee's option, as
evidenced by the Pledgee's notifying the Pledgor of such election, cease in case
an Event of Default shall have occurred and be continuing.
Section 7. Remedies. If an Event of Default shall have occurred and be
continuing, the Pledgee shall thereafter have the following rights and remedies
(to the extent permitted by applicable law) in addition to the rights and
remedies of a secured party under the Uniform Commercial Code of Massachusetts,
all such rights and remedies being cumulative, not exclusive, and enforceable
alternatively, successively, or concurrently, at such time or times as the
Pledgee deems expedient:
(a) if the Pledgee so elects and gives notice of such election to
the Pledgor, the Pledgee may vote any or all shares of the Stock (whether or not
the same shall have been transferred into its name or the name of its nominee or
nominees) for any lawful purpose, including without limitation for the
liquidation of the assets of the issuer thereof, and give all consents, waivers
and ratifications in respect of the Stock and otherwise act with respect thereto
as though it were the outright owner thereof (the Pledgor hereby irrevocably
constituting and appointing the Agent the proxy and attorney-in-fact of the
Pledgor, with full power of substitution, to do so);
2
<PAGE> 3
(b) the Pledgee may demand, sue for, collect, or make any compromise
or settlement the Pledgee deems suitable in respect of any Collateral held by it
hereunder;
(c) the Pledgee may sell, resell, assign, and deliver, or otherwise
dispose of, any or all of the Collateral, for cash and/or credit and upon such
terms at such place or places and at such time or times and to such persons,
firms, companies, or corporations as the Pledgee thinks expedient, all without
demand for performance by the Pledgor or any notice or advertisement whatsoever
except as expressly provided herein or as may otherwise be required by law;
(d) the Pledgee may cancel all or any portion of the options
representing the Collateral (the dollar amount applied to reduce the Obligations
secured by the Collateral to be equal to the difference between (A) the fair
market value of a share of the Pledgee's Common Stock on the day prior to such
option cancellation, as determined in good faith by the Pledgee's Board of
Directors, minus (B.) the per share option exercise price of $0.01, multiplied
by the number of options canceled, with any portion of such difference in excess
of the Obligations to be remitted to the Pledgor upon satisfaction in full of
all Obligations), and
(e) the Pledgee may cause all or any part of the Stock held by it to
be transferred into its name or the name of its nominee or nominees, if it has
not already done so.
In the event of any disposition of the Collateral as provided in
paragraph (c) of this Section 7, the Pledgee shall give to the Pledgor at least
five (5) business days' prior written notice of the time and place of any public
sale of the Collateral or of the time after which any private sale or any other
intended disposition is to be made. The Pledgor hereby acknowledges that five
(5) business days' prior written notice of such sale or sales shall be
reasonable notice. The Pledgee may enforce its rights hereunder without any
other notice and without compliance with any other condition precedent now or
hereunder imposed by statute, rule of law or otherwise (all of which are hereby
expressly waived by the Pledgor, to the fullest extent permitted by law). The
Pledgee may buy any part or all of the Collateral at any public sale and if any
part or all of the Collateral is of a type customarily sold in a recognized
market or is of the type that is the subject of widely distributed standard
price quotations, the Pledgee may buy at private sale and may make payments
thereof by any means. The Pledgee may apply the cash proceeds actually received
from any sale or other disposition to the reasonable expenses of retaking,
holding, preparing for sale, selling and the like, to reasonable attorneys'
fees, travel and all other expenses that may be incurred by the Pledgee in
attempting to collect the Obligations or to enforce this Agreement or in the
prosecution or defense of any action or proceeding related to the subject matter
of this Agreement; and then to the Obligations. Any surplus after the
Obligations have been paid in full shall be paid to the Pledgor or to such other
persons that are entitled thereto.
The Pledgor recognizes that the Pledgee may be unable to effect a
public sale of the Stock by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the "Securities Act") and other applicable
laws, but may be compelled to resort to one or more
3
<PAGE> 4
private sales thereof to a restricted group of purchasers. The Pledgor agrees
that any such private sales may be at prices and other terms less favorable to
the seller than if sold at public sales and that such private sales shall not by
reason thereof be deemed not to have been made in a commercially reasonable
manner. The Pledgee shall be under no obligation to delay a sale of any of the
Stock for the period of time necessary to permit the issuer of such securities
to register such securities for public sale under the Securities Act, or such
other applicable laws, even if the issuer would agree to do so. Subject to the
foregoing, the Pledgee agrees that any sale of the Stock shall be made in a
commercially reasonable manner.
The Pledgor agrees to do or cause to be done all such acts and things
as may be necessary to make any sales of any portion or all of the Stock
pursuant to this Section 7 valid and binding and in compliance with any and all
applicable laws (including, without limitation, the Securities Act, the
Securities Exchange Act of 1934, as amended, the rules and regulations of the
Securities and Exchange Commission applicable thereto and all applicable state
securities or "Blue Sky" laws), regulations, orders, writs, injunctions,
decrees, or awards of any and all courts, arbitrators, or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such sale
or sales, all at the Pledgor's expense. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 7 will cause irreparable
injury to the Pledgee, that the Pledgee has no adequate remedy at law in respect
of such breach, and as a consequence, agrees that each and every covenant
contained in this Section 7 shall be specifically enforceable against the
Pledgor and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants.
Section 8. Marshaling. The Pledgee shall not be required to marshal any
present or future security for (including but not limited to this Agreement and
the Collateral pledged hereunder), or other assurances of payment of, the
Obligations or any of them, or to resort to such security or other assurances of
payment in any particular order, and all of its rights hereunder and in respect
of such security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that he
lawfully may, the Pledgor hereby agrees that he will not invoke any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of the Pledgee's rights under this Agreement or under any other
instrument evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and to the extent that he lawfully may,
the Pledgor hereby irrevocably waives the benefits of all such laws.
Section 9. Pledgor's Obligations Not Affected. The obligations of the
Pledgor hereunder shall remain in full force and effect without regard to, and
shall not be impaired by (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Pledgor;
(b) any exercise or nonexercise, or any waiver, by the Pledgee of any right,
remedy, power or privilege under or in respect of any of the Obligations or any
security therefor (including this Agreement); (c) any extensions or renewals of
any of the Obligations; (d) any amendment to or modification of the Notes or any
instrument (other than this Agreement) securing any of the Obligations, or (e)
the taking of additional security for, or any
4
<PAGE> 5
other assurances of payment of, any of the Obligations or the release or
discharge or termination of any security or other assurances of payment for any
of the Obligations, whether or not the Pledgor shall have notice or knowledge of
any of the foregoing.
Section 10. Transfer, Etc., by Pledgor. Without the prior written
consent of the Pledgee, the Pledgor will not sell, assign, transfer, or
otherwise dispose of, grant any option with respect to, or pledge or grant any
security interest in or otherwise encumber any of the Collateral or any interest
therein, except for the pledge thereof provided for in this Agreement.
Section 11. Further Assurances. The Pledgor will do all such acts, and
will furnish to the Pledgee all such financing statements, certificates, legal
opinions, and other documents, and will obtain all such governmental consents
and corporate approvals, and will do or cause to be done all such other things,
as the Pledgee may reasonably request from time to time in order to give full
effect to this Agreement and to secure the rights of the Pledgee hereunder, all
without any cost or expense to the Pledgee.
Section 12. Pledgee's Exoneration. The powers conferred on the Pledgee
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon the Pledgee to exercise any such powers. The Pledgee shall
be accountable only for the amounts it actually receives as a result of such
powers and neither it nor any of its officers, directors, employees, or agents
shall be responsible to the Pledgor for any failure to act, except for its own
gross negligence or any intentional misconduct. Under no circumstances shall the
Pledgee be deemed to assume any responsibility for or obligation or duty with
respect to any part or all of the Collateral of any nature or kind, other than
the physical custody thereof, or any matter or proceedings arising out of or
relating thereto, other than to exercise reasonable care in the physical custody
of the Collateral. The Pledgee shall not be required to take any action of any
kind to collect, preserve, or protect its or the Pledgor's rights in the
Collateral or against other parties thereto, other than to exercise reasonable
care in the physical custody of the Collateral. The Pledgee's sole duty with
respect to the custody, safekeeping, and physical preservation of the Collateral
in its possession, under Sections 9-207 of the Uniform Commercial Code of the
Commonwealth of Massachusetts or otherwise, shall be to deal with such
Collateral in the same manner as the Pledgee deals with similar property for its
own account. The Pledgee's prior recourse to any part or all of the Collateral
shall not constitute a condition of any demand, suit, or proceeding for payment
or collection of the Obligations.
Section 13. No Waiver, Etc. No act, failure, or delay by the Pledgee
shall constitute a waiver of its rights and remedies hereunder or otherwise. No
single or partial waiver by the Pledgee of any default, right, or remedy that it
may have shall operate as a waiver of any other default, right, or remedy or of
the same default, right or remedy on a future occasion. The Pledgor hereby
waives presentment, notice of dishonor, and protest of all instruments included
in or evidencing any of the Obligations or the Collateral, and any and all other
notices and demands whatsoever.
Section 14. Notice, Etc. All notices and other communications called
for hereunder shall be
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<PAGE> 6
made in writing and, unless otherwise specifically provided herein, shall be
deemed to have been duly made or given when delivered by hand or mailed
first-class, postage prepaid,~ or, in the case of telegraphic, telecopy or
telexed notice, when transmitted, answer back received, addressed as follows: if
to the Pledger, at his principal residence, and if to the Pledgee, at 195 Albany
Street, Cambridge, MA, or at such address as either party may designate in
writing to the other.
Section 15. Termination. Upon payment and performance in full of the
Obligations in accordance with their terms and the performance by the Pledgor of
all of his covenants and agreements hereunder or, if earlier, upon the Pledgee's
termination of the Pledgor's employment by the Pledgee without cause (as such
term is defined in the Employment Agreement dated as of November 20, 1993, by
and between the Pledgor and the Pledgee, or any successor agreement thereto),
this Agreement shall terminate and the Pledgor shall be entitled the return of
such Collateral as may then be held by the Pledgee hereunder.
Section 16. Miscellaneous Provisions. Neither this Agreement nor any
term hereof may be changed, waived, discharged, or terminated except by a
written document expressly referring to this Agreement and to the provisions so
modified or limited, and executed by the party to be charged. The execution and
delivery of this Agreement and pledging of the Stock described in Section 1
hereof are within the Pledgor's power and such execution and delivery and the
pledging of such Stock do not contravene any law or any rule or regulation
thereunder or of any judgment, decree, or order of any tribunal or of any
agreement or instrument to which the Pledgor is a party or by which he or any of
his property is bound or constitute a default thereunder. This Agreement and all
obligations of the Pledgor shall be binding upon the successors and assigns of
the Pledgor, and shall, together with the rights and remedies of the Pledgee
hereunder, inure to the benefit of the Pledgee and its successors in title and
assigns.
This Agreement is intended to take effect as an agreement under seal
and this Agreement and the obligations of the Pledgor hereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
The descriptive section headings have been inserted for convenience of
reference only and do not define or limit the provisions hereof. If any term of
this Agreement shall be held to be invalid, illegal, or unenforceable, the
validity of all other terms hereof shall be in no way affected thereby, and this
Agreement shall be construed and be enforceable as if such invalid, illegal, or
unenforceable term had not been included herein. The Pledgor acknowledges
receipt of a copy of this Agreement.
Terms used herein without definition that are defined in the Uniform
Commercial Code of Massachusetts have such defined meanings herein, unless the
context otherwise indicates or requires.
Section 17. Waiver of Jury Trial. The Pledgor waives his right to a
jury trial with respect to any action or claim arising out of any dispute in
connection with this Agreement, any rights
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<PAGE> 7
or obligations hereunder or the Performance of any such rights or obligations.
Except as prohibited by law, the Pledgor waives any right which he may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive, or consequential damages or any damages other
than, or in addition to, actual damages. The Pledgor (a) certifies that neither
the Pledgee nor any representative, agent or attorney of the Pledgee has
represented, expressly or otherwise, that the Pledgee would not, in the event of
litigation, seek to enforce the foregoing waivers, and (b) acknowledges that, in
entering into this Agreement, the Pledgee is relying upon, among other things,
the waivers and certifications contained in this Section 17.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement under seal as of the date first above written.
PLEDGOR: PLEDGEE:
TRANSKARYOTIC THERAPIES, INC.
/s/ Christoph Adams By: /s/ Richard F. Selden
- --------------------------------- --------------------------------
Christoph M. Adams Name: Richard F. Selden
Title: President & CEO
7
<PAGE> 8
TRANSKARYOTIC THERAPIES, INC.
STOCK OPTION AGREEMENT
AGREEMENT dated this 16th day of November, 1994, between Transkaryotic
Therapies, Inc., a corporation organized under the laws of the State of Delaware
(the "Company"), and the individual identified below, residing at the address
there set out (the "Optionee").
1. GRANT OF OPTION. Pursuant to the Company's 1993 Long-Term Incentive
Plan as attached hereto as EXHIBIT A (the "Plan"), the Company grants to the
Optionee an option (the "Option") to purchase from the Company all or any part
of a total of forty thousand (40,000) shares (the "Optioned Shares") of the
Company's Common Stock, par value $0.01 per share (the "Stock"), at a price of
$0.01 per share. This Option is granted as of March 1, 1994 (the "Grant Date").
2. CHARACTER OF OPTION. This Option is not to be treated as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
3. DURATION OF OPTION. This Option shall expire (the "Option Expiration
Date") on the earlier of (a) the tenth anniversary of the Grant Date and (b) the
Optionee's termination of employment on account of death, disability or for
another reason or other association with the Company and its Affiliates for any
reason. For this purpose, military or sick leave shall not be deemed a
termination of employment or other association, if it does not exceed the longer
of 90 days or the period during which the Optionee's reemployment rights are
guaranteed by statute or contract.
4. EXERCISE OF OPTION. Until its expiration, this Option may be
exercised, in the manner specified in Section 7.2(d) of the Plan and subject to
Section 7 hereof, in those installments of Optioned Shares identified in the
table below, in full or in part, within the exercise period set opposite each
such installment; provided, however, that if this Option does not otherwise
terminate immediately upon the termination of the Optionee's employment or other
association with the Company, after such termination this Option shall, until
its expiration, be exercisable only to the extent exercisable immediately prior
to such termination:
NUMBER OF SHARES IN
EACH INSTALLMENT EXERCISE PERIOD FOR SHARES IN INSTALLMENT
<TABLE>
<CAPTION>
Not Earlier Than No Later Than
---------------- -------------
<S> <C> <C>
6,666 First Anniversary Grant Date Option Expiration Date
6,667 Second Anniversary Grant Date Option Expiration Date
6,667 Third Anniversary Grant Date Option Expiration Date
6,666 Fourth Anniversary Grant Date Option Expiration Date
</TABLE>
<PAGE> 9
NUMBER OF SHARES IN
EACH INSTALLMENT EXERCISE PERIOD FOR SHARES IN INSTALLMENT
<TABLE>
<CAPTION>
Not Earlier Than No Later Than
---------------- -------------
<S> <C> <C>
6,667 Fifth Anniversary Date Option Expiration Date
6,667 Sixth Anniversary Grant Date Option Expiration Date
</TABLE>
5. TRANSFER OF OPTIONS. This Option is not transferable, and may be
exercised only by the Optionee.
6. INCORPORATION OF PLAN TERMS. This Option is granted subject to all
of the applicable terms and provisions of the Plan, including but not limited to
the limitations on the Company's obligation to deliver Optioned Shares upon
exercise set forth in Section 12 (Restrictions on Issuance of Shares), Section
15.4 (Tax Withholding) and Section 15.5 (Limitations of Rights in Stock).
7. STOCKHOLDERS' AGREEMENT. This Option may not be exercised unless the
Optionee, on or prior to such date, has executed and delivered to the Company an
Instrument of Adherence to the Stockholders' Agreement, dated as of September
16,1988 (the "Stockholders' Agreement), among the Company and certain of its
stockholders, copies of which are attached hereto as Exhibit B. All Optioned
Shares issued to the Optionee during the term of the Stockholders' Agreement
shall be subject to the restrictions contained therein, and all stock
certificates issued to the Optionee evidencing such shares shall contain a
legend stating that the shares evidenced thereby are subject to certain
restrictions under the Stockholders' Agreement.
8. MISCELLANEOUS. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts and shall be
binding upon and inure to the benefit of any successor or assign of the Company
and any executor, administrator, trustee, guardian, or other legal
representative of the Optionee.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date first above written.
TRANSKARYOTIC THERAPIES, INC.
/s/ Richard F. Selden /s/ C. Adams
- ------------------------------------- -----------------------------------
Richard F. Selden Christoph M. Adams
President and Chief Executive Officer Ten Baskin Road
Lexington, MA 02173
<PAGE> 1
EXHIBIT 10.29
TRANSKARYOTIC THERAPIES, INC.
195 Albany Street
Cambridge, Massachusetts 02139
September 1, 1991
Mr. William R. Miller
150 East 52nd Street
New York, New York 10022
Dear Mr. Miller:
We are pleased to offer you a position on TKT's Board of Directors
effective as of September 1, 1991, upon the following terms and conditions:
1. TERM. Unless you earlier resign or are removed, you will
serve until the nest annual meeting of the Companies stockholders and until your
successor is elected and qualified.
2. DIRECTORS' FEES. As compensation for your services, you will
receive a Director's fee of $1,000 per Board meeting attended, payable promptly
after each meeting. The Company will also reimburse you for reasonable
out-of-pocket expenses incurred by you in rendering services to the Company upon
presentation to the Company of an itemized and appropriately documented invoice
for such expenses.
3. STOCK. The Company will sell to you upon joining the Board 500
shares of its Common Stock for $0.01 per share (an aggregate purchase price of
$5.00), representing approximately 0.5% of the Companies currently outstanding
Common Stock. Such stock will vest over a four-year period in accordance with
the enclosed letter agreement.
4. CONFIDENTIALITY. (a) You recognize and acknowledge that the
Company's trade secrets, know-how and proprietary processes as they may exist
from time to time (including, without limitation, information regarding methods,
cultures, vectors, plasmids, synthesis techniques, nucleic acid sequences,
purification techniques and assay procedures) as well as the Company's
confidential business plans and financial data are valuable, special and unique
assets of the Company's business, access to and knowledge of which are essential
to the performance of your duties as a Director of the Company. You agree that
you will not, while you are serving as a Director of the Company or thereafter,
in whole or in part, disclose such secrets, know-how, processes, business plans
or financial data to any person, firm, corporation, association or other entity
for any reason or purpose whatsoever, nor shall you make use of any such
property for your own purposes or for the benefit of any person, firm,
corporation or other entity (except the Company) under any circumstances while
you are Serving as a Director of the Company or thereafter, PROVIDED that these
restrictions shall not apply to such secrets, know-how and processes which you
can establish by competent proof:
<PAGE> 2
(i) were known to you, other than under binder of secrecy,
prior to your serving as a Director of the Company;
(ii) have passed into the public domain prior to or after
their development by or for the Company, other than through acts or
omissions attributable to you; or
(iii) were subsequently obtained by you, other than under
binder of secrecy, from a third party not acquiring the information
under an obligation of confidentiality from the disclosing party.
(b) Upon your resignation, removal or completion of your term as a
Director of the Company, you shall promptly turn over to the Company all
originals and copies of the Company's confidential information described in this
Section 4 then in your possession or under your control.
5. COVENANTS NOT TO COMPETE. (a) While you serve as a Director of
the Company, you shall not engage in any business (whether as an officer,
director, owner, employee, partner, consultant, advisor or other direct or
indirect participant) engaged in the development of gene therapy methods, and/or
the sale of products or rendering of services related to gene therapy, and/or to
any other activities which directly compete with the Company's business
activities. During the period in which this covenant not to compete is in effect
you also shall not interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between the Company and any customer,
supplier, lessor, lessee, employee, consultant, research partner or investor of
the Company.
(b) It is the desire and intent of the parties that the provisions
of this Section 5 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular subsection or portion of this Section 5
shall be adjudicated to be invalid or unenforceable, this Section 5 shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of this
Section in the particular jurisdiction in which such adjudication is made.
- 2 -
<PAGE> 3
If you would like to accept our offer, please so indicate by
countersigning the enclosed duplicate of this letter and returning it to the
undersigned.
Very truly yours,
TRANSKARYOTIC THERAPIES, INC.
By: /S/ K. Michael Forrest
------------------------------------
K. Michael Forrest
President
Accepted and agreed to:
/S/ William R. Miller
- ----------------------------------
William R. Miller
Date: 9-27-91
- 3 -
<PAGE> 1
EXHIBIT 10.30
AGREEMENT TO NOMINATE
This Agreement to Nominate (the "Agreement"), made as of July 30, 1993,
is by and between Transkaryotic Therapies, Inc., a Delaware corporation the
Company), and Warburg, Pincus Capital Company, L.P., a Delaware corporation (the
"Investor").
W I T N E S S E T H:
WHEREAS, the Company and Warburg are parties to a Stock Purchase
Agreement, dated as of July, 1988 (the "Class A Agreement"), which requires that
the Company use its best efforts to cause certain nominees of Warburg to be
elected an directors of the Company is certain circumstances; and
WHEREAS, the Company, Warburg and certain other stockholders are party
to a voting Rights Agreement, dated as of February 14, 1992 (the "Class B
Agreement"), which provides for the election of certain designees of Warburg to
the Board of Directors of the Company; and
WHEREAS, the Company is contemplating a public offering of its
securities which would cause the voting provisions of the Class A Agreement and
the Class B Agreement to be terminated; and
WHEREAS, Warburg has agreed to assist the Company in the contemplated
public offering on the condition that the Company enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenant; hereinafter contained, the parties agree with each other ax follows:
1. Definitions.
-----------
(a) "Common Stock" shall mean the Common Stock, par value $.01
per share, of the Company.
(b) "IPO" shall mean the initial public offering of Common
Stock to be underwritten on a firm commitment basis by Lehman Brothers and
Morgan Stanley & Co., Incorporated, as Representatives of the underwriters,, as
contemplated by the Company 8 Registration statement on Form S-1, Registration
Number 33-65328.
The Company hereby agrees, that from and after the closing of the IPO,
(i) so long as Warburg owns at least twenty-five percent (25%) of the issued and
outstanding Common Stock, the Company shall, at each annual meeting of
stockholders of the Company, cause the nomination for election as directors of
the Company (each, a "Nominee") at least two persons designated by Warburg, and
(ii) so long as Warburg owns at least ten percent (log) of the issued and
outstanding Common Stock, the Company shall, at each annual meeting of
stockholders of the Company, cause the nomination for election as directors of
the Company at least one person
<PAGE> 2
designated by Warburg.
In the absence of any designation by Warburg, the Company shall cause
to nominated, as Nominee(s), the director(s) previously designated by Warburg
and then serving if still eligible to serve.
In the event of any vacancy on the Board of Directors created by the
resignation, removal, incapacity or death of any person elected as a Nominee of
Warburg, the Company shall cause a person designated by Warburg to be elected to
fill such vacancy.
2. EFFECTIVENESS. This Agreement shall only take effect and be
binding on the parties hereto if the IPO shall occur.
3. TERMINATION. This Agreement shall terminate on the earlier to
occur of (i) the date on which Warburg holds less than ten percent (10%) of the
Common Stock, or (ii) the tenth anniversary of the closing of the IPO.
4. REMEDIES. Each party to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement, and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that Warburg may in its sole discretion apply
to any court of law or equity of competent jurisdiction in order to enforce or
prevent any violations of the provisions of this Agreement.
5. NOTICES. All notices or other communications required or
permitted to be delivered hereunder shall be in writing signed by the party
giving the notice (i) to the Company, at Transkaryotic Therapies, Inc., 195
Albany Street, Cambridge, Massachusetts 02139, Attention: President, with a copy
to Leslie Shapiro, Esq., Bingham, Dana & Gould, 150 Federal Street, Boston,
Massachusetts 02110; (ii) to Warburg, c/o E.M. Warburg, Pincus & Co., 466
Lexington Avenue, New York, New York 10017, Attention: James E. Thomas with a
copy to Rodman W. Moorhead, III, at the same address; or (iii) to such other
address as may be furnished in writing by either party to the other party.
Notices shall be deemed effectively given when personally delivered or sent by
telex, or a facsimile transmission, when delivered to a receipted courier,
properly addressed, or three days after having been deposited into the United
States mail, postage prepaid, and addressed to the recipient at the address set
forth above whichever is earlier.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the matters contemplated herein. This
Agreement supersedes any and all prior understandings as to the subject matter
of this Agreement, including without limitation the voting agreements contained
in the Class A Agreement and the Class B Agreement.
2
<PAGE> 3
7. AMENDMENTS WAIVERS AND CONSENTS. Any amendments to this
Agreement, and any waivers of the provisions hereof, shall be in writing and
shall be executed by both parties hereto.
8. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon the personal representatives, successors, transferees and assignees of the
respective parties hereto. No party to this Agreement may assign any right
granted or implied by this Agreement without the written consent of the other
party.
9. GENERAL. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural, the singular, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the laws of the State of Delaware.
10. SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
11. COUNTERPARTS. This Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
TRANSKARYOTIC THERAPIES, INC.
By: /S/ K. Michael Forrest
------------------------------------
Title: President and CEo
WARBURG, PINCUS CAPITAL COMPANY, L.P.
By: Warburg, Pincus & Co.
------------------------------------
Its General Partner
By: /S/ Peter Stalker, III
------------------------------------
Title: Partner
3
<PAGE> 1
EXHIBIT 10.31
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
ANY EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
TRANSKARYOTIC THERAPIES, INC.
Common Stock Purchase Warrant
TRANSKARYOTIC THERAPIES, INC., a Delaware corporation (the "Company"),
hereby certifies that, for value received, Warburg Pincus Capital Company, L.P.,
or assigns, is entitled, subject to the terms set forth below, to purchase from
the Company on or before 5:00 P.M., Boston time, on April 22, 1996, 1,334 fully
paid and nonassessable shares of Common Stock, $0.01 par value, of the Company
at a purchase price per share of $400.00 (such purchase price, as adjusted from
time to time as provided herein, the "Purchase Price"). The number and character
of such shares of Common Stock and the Purchase Price thereof are subject to
adjustment as provided in this Warrant.
This Warrant is issued pursuant to and arising out of a certain
Promissory Note (the "Note"), dated April 22, 1991 between the Company and the
original holder of this Warrant, a copy of which Note is on file at the
principal office of the Company.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Transkaryotic
Therapies, Inc. and any corporation that shall succeed to or assume the
obligations of Transkaryotic Therapies, Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's
Common Stock, $0.01 par value, as authorized on the date hereof, (b)
any other capital stock of any class or classes (however designated) of
the Company, authorized on or after such date, the holders of which
shall have the right, without limitation as to amount, either to all or
to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any
shares entitled to preference and (c) any other securities into which
or for which any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Expiration Date" shall mean April 22, 1996.
<PAGE> 2
(d) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the Company or any
other person (corporate or otherwise) which the holders of the Warrants
at any time shall be entitled to receive, or shall have received, on
the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or Other Securities
pursuant to Sections 4 and 5 or otherwise.
(e) The term "Venture Capital Financing" shall mean any
venture capital or institutional financing of the Company in which the
aggregate gross proceeds received by the Company is at least $1,000,000
and in which the Company issues Common Stock or equity securities
directly or indirectly convertible into Common Stock.
(f) The term "Venture Capital Security" shall mean the
Common Stock or equity security directly or indirectly convertible into
Common Stock issued by the Company in a Venture Capital Financing.
1. Exercise of Warrant.
-------------------
1.1. FULL EXERCISE. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of
subscription at the end hereof duly executed by such holder, to the
Company at its principal office, accompanied by payment to the Company,
in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price
then in effect.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part
by the holder hereof by surrender of this Warrant in the manner and
place described in Section 1.1 above PROVIDED that the amount payable
by the holder shall be the amount obtained by multiplying (a) the
number of shares of Common Stock designated by the holder in the
accompanying subscription form by (b) the Purchase Price then in effect
and provided further that the total number of exercises under this
Warrant and any replacement Warrant(s) shall not exceed four. On any
such partial exercise, the Company, at its expense, will forthwith
issue and deliver to or upon the order of the holder a new Warrant or
Warrants of like tenor, in the name of the holder hereof, calling in
the aggregate on the face or faces thereof for the number of shares of
Common Stock called for on the face of this Warrant minus the number of
such shares with respect to which the partial exercise shall have
occurred.
1.3. COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of the Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such
holder any rights to which such holder shall continue to be entitled
after such exercise in accordance with the provisions of this Warrant,
PROVIDED that if the holder of this Warrant shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.4. TRUSTEE FOR WARRANT HOLDER. In the event that a bank or
trust
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<PAGE> 3
company shall have been appointed as trustee for the holder of this
Warrant pursuant to Section 5.2, such bank or trust company shall have
all the powers and duties of a warrant agent appointed pursuant to
Section 13 and shall accept, in its own name for the account of the
Company or such successor person as may be entitled thereto, all
amounts otherwise payable to the Company or such successor, as the case
may be, on exercise of this Warrant pursuant to this Section 1.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and in any event within thirty
(30) days thereafter, the Company at its expense including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder hereof, or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of fully said and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
3. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock
receivable on the exercise of this Warrant above the amount payable therefor on
such exercise, and (b) will take all action that may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this Warrant.
4. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, OR
RECLASSIFICATION. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out
of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate rearrangement,
OTHER THAN additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 6), then and in
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<PAGE> 4
each such case the holder of this Warrant, on the exercise hereof as provided in
Section 1, shall be entitled to receive the amount of stock and other Securities
and property (including cash in the cases referred to in subdivisions (b) and
(c) of this Section 4) which such holder would hold on the date of such exercise
if on the date hereof he had been the holder of record of the number of shares
of Common Stock provided for herein and had thereafter, during the period from
the date hereof to find including the date of such exercise, retained such
shares and all such other or additional stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and (c) of this
Section 4) receivable by him as aforesaid during such period, giving effect to
all adjustments called for during such period by Sections 5 and 6.
5. Adjustment for Reorganization, Consolidation or Merger.
------------------------------------------------------
5.1. REORGANIZATION, CONSOLIDATION OR MERGER. In case at any
time or from time to time the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person, or
(c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, the holder of this
Warrant, on the exercise hereof as provided in Section 1 at any time
after the consummation of such reorganization, consolidation or merger
or the effective date or such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on
such exercise immediately prior to such consummation or such effective
date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder
had so exercised this Warrant, immediately prior thereto, all subject
to further adjustments thereafter as provided in Sections 4 and 6.
5.2. DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its
properties or assets, the Company, prior to such dissolution, shall at
its expense deliver or cause to be delivered the stock and other
securities and property (including cash, where applicable) (the
"Property") receivable by tale holder of this Warrant after the
effective date of such dissolution pursuant to this Subsection 5.2 to a
bank or trust company having its principal office in Boston,
Massachusetts, as trustee for the holder of this Warrant, pending the
exercise of this Warrant. Such Property shall be delivered to the
holder hereof upon payment of the Purchase Price for all of the shares
of Common Stock subject to this Warrant. If this Warrant expires
unexercised, then such Property shall be distributed pro rata to the
stockholders of the Company.
5.3. CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolutions following any
transfer) referred to in this Section 5, this Warrant shall continue in
full force and effect and the terms hereof shall be applicable to the
shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following
any such transfer, as the case maybe, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of
any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of
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<PAGE> 5
this Warrant as provided in Section 3.
6. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that
the Company shall (i) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
the Common Stock into a smaller number of shares of the Common Stock, then, in
each such event, the Purchase Price shall, simultaneously with the happening of
such event, (X) be adjusted by multiplying the then current Purchase Price by a
fraction, (a) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event, and (b) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such event, and the product so obtained shall thereafter be the Purchase
Price then in effect and (Y) the number of shares of Common Stock for which this
Warrant is then exercisable shall be increased or decreased, as the case may be,
by the percentage increase or decrease in the total number of shares of Common
Stock outstanding immediately after such event over the total number of shares
of Common Stock outstanding immediately prior to such event and the result so
obtained shall be the number of shares of Common Stock for which this Warrant is
exercisable then in effect. The Purchase Price and the number of shares of
Common Stock for which this Warrant is then exercisable, as so adjusted, shall
be readjusted in the same manner upon the happening of any successive event or
events described in this Section 6.
7. CHIEF FINANCIAL OFFICER'S CERTIFICATE AS TO ADJUSTMENTS. In
each case of any adjustment or readjustment in the shares of Common Stock
issuable on the exercise of this Warrant, the Company at its expense will
promptly cause its chief financial officer to compute such adjustment or
readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common stock issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price and the number of shares of Common Stock
to be received upon exercise of this Warrant in effect immediately prior to such
issue or sale and as adjusted and readjusted as provided in this Warrant. The
Company will forthwith mail a copy of each such certificate to the holder of
this Warrant, and will, on the written request at any time of the holder of this
Warrant, furnish to such holder a like certificate setting forth the Purchase
Price at the time in effect and showing how it was calculated.
8. Notices of Record Date. In the event of
----------------------
(a) any taking by the Company of a record of the holders
of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of the
Company to or consolidation or merger of the Company with or into
- 5 -
<PAGE> 6
any other person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up, and (iii) the amount and character of
any stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or grant and
the persons or class of persons to whom such proposed issue or grant is to be
offered or made. Such notice shall be mailed at least twenty (20) days prior to
the date specified in such notice on which any such action is to be taken.
9. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock from time
to time issuable on the exercise of this Warrant.
10. EXCHANGE OF WARRANT. Subject to Section 14, on surrender for
exchange of this Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or on the order of the holder thereof a new
Warrant of like tenor, in the name of such holder or as such holder (on payment
by such holder or any applicable transfer taxes) may direct, calling in the
aggregate on the face thereof for the number of shares of Common Stock called
for on the face of the Warrant so surrendered.
11. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of a
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. WARRANT AGENT. The Company may, by written notice to the
holder of this warrant, appoint an agent having an office in either Boston,
Massachusetts or New York, New York for the purpose of issuing Common Stock on
the exercise of the Warrant pursuant to Section 1, exchanging Warrants pursuant
to Section 10, and replacing Warrants pursuant to Section 11, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
13. REMEDIES. The Company stipulates that the remedies at law of
the holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that
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<PAGE> 7
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
14. NEGOTIABILITY. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) Notwithstanding anything to the contrary contained in
this Warrant, the holder of this Warrant shall not transfer, endorse,
pledge, mortgage or otherwise convey this Warrant (or the shares of
Common Stock issuable upon its exercise) without the Company's prior
written consent.
(b) Subject to Subsection (a), title to this Warrant may
be transferred by endorsement (by the holder hereof executing the form
of assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and
delivery; PROVIDED that this Warrant may not be divided and/or
transferred to more than one holder at any given time.
(c) Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.
(d) No holder of this Warrant shall, as such, be entitled
to vote or to receive dividends or to be deemed the holder of Common
Stock that may at any time be issuable upon exercise of the Warrant for
any purpose whatsoever, nor shall anything contained herein be
construed to confer upon such holder, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue or reclassification of stock,
change of par value or change of stock to no par value, consolidation,
merger or conveyance or otherwise), or to receive notice of meetings,
or to receive dividends or subscription rights, until such holder shall
have exercised the Warrant and been issued shares of Common Stock in
accordance with the provisions hereof.
(e) Neither this Warrant nor any shares of Common Stock
purchased pursuant to this Warrant shall be registered under the
Securities Act of 1933 and applicable state securities laws. Therefore,
the Company may require, as a condition of allowing the transfer or
exchange of this Warrant or such shares, that the holder or transferee
of this Warrant or such shares, as the case may be, furnish to the
Company an opinion of counsel reasonably acceptable to the Company to
the effect that such transfer or exchange may be made without
registration under the Securities Act of 1933 and applicable state
securities laws. The certificates evidencing the shares of Common Stock
issued on the exercise of the Warrant shall bear a legend to the effect
that the shares evidenced by such certificates have not been registered
under the Securities Act of 1933 and applicable state securities laws.
15. NOTICES. All notices and other communications from the
Company to the holder
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<PAGE> 8
of this Warrant shall be mailed by first Class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any terms hereof may be
changed, waived, discharges or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination on is sought. This warrant shall be construed and enforced in
accordance with and covered by the laws of the Commonwealth of Massachusetts.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the arms hereof. This Warrant is being executed
as an instrument under seal. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
Dated: September 12, 1991 TRANSKARYOTIC THERAPIES, INC.
By: /S/ K. Michael Forrest
--------------------------
Title: President and CEO
[Corporate Seal]
Attest:
By: /S/ Leslie H. Shapiro
----------------------------
Title: Secretary
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<PAGE> 9
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO: TRANSKARYOTIC THERAPIES, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ____________
shares of Common Stock of TRANSKARYOTIC THERAPIES, INC., and herewith makes
payment of $_________ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to _____________, whose address
__________________ is ____________________________.
Dated: _________________________________
(Signature must conform to
name of holder as Specified on
the face of the Warrant)
----------------------------------
(Address)
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ___________________ the right represented by the within Warrant
to purchase shares of Common Stock of TRANSKARYOTIC THERAPIES, INC. to which the
within Warrant relates, and appoints __________________ Attorney to transfer
such right on the books of TRANSKARYOTIC THERAPIES, INC. with full power of
substitution in the premises.
Dated: ____________________________________
(Signature must conform to name of holder as
specified on the face of the Warrant)
-------------------------------------
(Address)
Signed in the presence of:
- ----------------------------
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<PAGE> 10
AMENDMENT TO AMENDED AND RESTATED
COMMON STOCK PURCHASE WARRANT
This Amendment is dated as of October 26, 1995 and amends the Amended
and Restated Common Stock Purchase Warrant, dated September 12, 1991, issued by
Transkaryotic Therapies, Inc. (the "Company") to Warburg Pincus Capital Company,
L.P. relating to 1.334 shares of Common Stock, $0.01 par value of the Company
(the "Warrant").
The Company desires to amend the terms of the Warrant as follows:
The date "April 22, 1996" appearing in the first paragraph of
the Warrant is hereby changed to April 22, 1998. Similarly, the
Expiration Date of the Warrant, as defined in the Warrant, is hereby
amended to be April 22, 1998.
Except as modified hereby, the Warrant shall remaining full force and
effect in accordance with its terms.
EXECUTED as of the date first appearing above.
TRANSKARYOTIC THERAPIES, INC.
By: /S/ Richard F. Selden
-----------------------------------------
Richard F. Selden
President and Chief Executive Officer
- 10 -
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS (LOSS) PER SHARE -- PRO FORMA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED -------------------------------
DECEMBER 31, 1995 JUNE 30, 1995 JUNE 30, 1996
----------------- ------------- -------------
<S> <C> <C> <C>
Weighted average common shares outstanding....... 5,195,472 5,195,587 5,197,007
Effect of Preferred Stock -- assumed converted at
date of issuance............................... 5,666,165 5,666,163 5,776,819
Weighted average common equivalent shares
resulting from stock options and warrants...... 489,723 496,488 --
Effect of Common and Common equivalent shares
issued by the Company during the twelve month
period immediately preceding the Company's
filing of the registration statement for its
initial public offering (using the treasury
stock method).................................. 3,281,510 3,281,510 3,281,510
---------- ---------- -----------
Shares used in computing pro forma net income
(loss) per share............................... 14,632,870 14,639,748 14,255,336
========== ========== ===========
Net income (loss)................................ $ 2,074,471 $ 5,105,020 $ (5,987,344)
Pro forma net income (loss) per share............ $ 0.14 $ 0.35 $ (0.42)
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INTELLECTUAL PROPERTY COUNSEL
HAMILTON, BROOK, SMITH & REYNOLDS, P.C.
TWO MILITIA DRIVE
LEXINGTON, MA 02173
August 23, 1996
We hereby consent to the reference to our firm under the captions "Legal
Matters" and "Experts" in the Prospectus that is a part of the Registration
Statement on Form S-1 of Transkaryotic Therapies, Inc.
Hamilton, Brook, Smith & Reynolds, P.C.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts," and to the use of our report dated February 23,
1996, in the Registration Statement (Form S-1) and related Prospectus of
Transkaryotic Therapies, Inc. for the registration of 2,875,000 shares of its
common stock.
ERNST & YOUNG LLP
Boston, Massachusetts
August 21, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 DEC-31-1995
<CASH> 17,798,459 11,539,531
<SECURITIES> 10,975,201 22,945,311
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 29,016,799 34,581,852
<PP&E> 8,836,511 8,329,439
<DEPRECIATION> 5,082,066 4,330,786
<TOTAL-ASSETS> 33,625,562 39,217,519
<CURRENT-LIABILITIES> 1,058,760 1,056,687
<BONDS> 0 0
4,545,273 4,440,273
2,943,669 2,943,669
<COMMON> 51,977 51,977
<OTHER-SE> (24,891,483) (30,545,713)
<TOTAL-LIABILITY-AND-EQUITY> 33,625,562 39,217,519
<SALES> 0 0
<TOTAL-REVENUES> 1,975,000 15,400,000
<CGS> 0 0
<TOTAL-COSTS> 8,750,469 14,356,610
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 13,220
<INCOME-PRETAX> (5,987,344) 2,159,471
<INCOME-TAX> 0 85,000
<INCOME-CONTINUING> (5,987,344) 2,074,471
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,987,344) 2,074,471
<EPS-PRIMARY> (.42) .14
<EPS-DILUTED> (.42) .14
</TABLE>
