<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number: 0-26642
-------
MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0494517
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
320 Wakara Way, Salt Lake City, UT 84108
---------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 584-3600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of November 10, 1999, the registrant had 10,116,269
shares of common stock outstanding.
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MYRIAD GENETICS, INC.
INDEX TO FORM 10-Q
Page
----
PART I - Financial Information
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets as of
September 30, 1999 and June 30, 1999 3
Condensed Consolidated Statements of Operations
for the three months ended September 30, 1999
and 1998 4
Condensed Consolidated Statements of Cash Flows
for the three months ended September 30, 1999
and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE(S) 16
2
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Sept. 30, 1999
(Unaudited) June 30, 1999
--------------- ---------------
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 15,677,896 $ 5,404,944
Marketable investment securities 8,692,710 4,477,138
Prepaid expenses 398,809 622,700
Trade accounts receivables, less allowance for doubtful accounts of $92,162
at September 30, 1999, $73,439 at June 30, 1999 1,581,621 1,322,950
Other receivables 5,273,627 1,855,696
--------------- ---------------
Total current assets 31,624,663 13,683,428
--------------- ---------------
Equipment and leasehold improvements:
Equipment 14,075,669 13,351,229
Leasehold improvements 3,739,171 3,520,253
--------------- ---------------
17,814,840 16,871,482
Less accumulated depreciation and amortization 7,595,036 6,871,981
--------------- ---------------
Net equipment and leasehold improvements 10,219,804 9,999,501
Long-term marketable investment securities 22,103,074 29,044,377
Other assets 1,186,616 823,634
--------------- ---------------
$ 65,134,157 $ 53,550,940
=============== ===============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 1,977,327 $ 2,917,810
Accrued liabilities 2,244,945 1,754,634
Deferred revenue 10,146,394 662,760
--------------- ---------------
Total current liabilities 14,368,666 5,335,204
--------------- ---------------
Stockholders' equity
Common stock, $0.01 par value. Authorized 15,000,000 shares; issued and
outstanding 9,807,213 on September 30, 1999 and 9,428,732 on
June 30, 1999 98,072 94,287
Additional paid-in capital 97,045,003 92,377,949
Accumulated other comprehensive loss (68,873) (68,846)
Deferred compensation (177,739) (247,774)
Accumulated deficit (46,130,972) (43,939,880)
--------------- ---------------
Net stockholders' equity 50,765,491 48,215,736
--------------- ---------------
$ 65,134,157 $ 53,550,940
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
Sept. 30, 1999 Sept. 30, 1998
(Unaudited) (Unaudited)
-------------- --------------
<S> <C> <C>
Research revenue $ 5,247,645 $ 4,646,516
Molecular diagnostic revenue 1,614,286 913,470
-------------- --------------
Total revenues 6,861,931 5,559,986
Costs and expenses:
Molecular diagnostic cost of revenue 802,931 602,872
Research and development expenses 5,786,801 5,817,490
Selling, general and administrative expenses 3,021,986 2,555,415
-------------- --------------
Total costs and expenses 9,611,718 8,975,777
-------------- --------------
Operating loss (2,749,787) (3,415,791)
Other income (expense):
Interest income 573,789 696,219
Interest expense -- (2,371)
Other (15,094) 19,441
-------------- --------------
558,695 713,289
-------------- --------------
Net loss ($2,191,092) ($2,702,502)
============== ==============
Basic and diluted loss per common share ($0.23) ($0.29)
============== ==============
Basic and diluted weighted average shares outstanding 9,432,737 9,342,942
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
Sept. 30, 1999 Sept. 30, 1998
(Unaudited) (Unaudited)
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,191,092) ($2,702,502)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 793,727 840,594
Loss on sale of assets 609 11,937
Bad debt expense 18,723 9,000
Increase in trade receivables (277,394) (207,617)
Decrease in other receivables 1,569,750 31,942
Decrease (increase) in prepaid expenses 223,891 (492,637)
Decrease (increase) in other assets (362,982) 42,188
Decrease in accounts payable and accrued expenses (949,015) (1,449,690)
Increase (decrease) in deferred revenue 9,483,634 (589,416)
-------------- --------------
Net cash provided by (used in) operating activities 8,309,851 (4,506,201)
============== ==============
Cash flows from investing activities:
Proceeds from sale of equipment -- 2,595
Capital expenditures (944,604) (984,921)
Net change in marketable investment securities 2,725,704 137,755
-------------- --------------
Net cash provided by (used in) investing activities 1,781,100 (844,571)
============== ==============
Cash flows from financing activities:
Net payments of notes payable -- (91,467)
Net proceeds from issuance of common stock 182,001 77,777
-------------- --------------
Net cash provided by financing activities 182,001 (13,690)
============== ==============
Net increase (decrease) in cash and cash equivalents 10,272,952 (5,364,462)
Cash and cash equivalents at beginning of period 5,404,944 14,595,034
-------------- --------------
Cash and cash equivalents at end of period $ 15,677,896 $ 9,230,572
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The accompanying condensed unaudited consolidated financial statements have
been prepared by Myriad Genetics, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information
and pursuant to the applicable rules and regulations of the Securities and
Exchange Commission. The condensed unaudited consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation. In the opinion of management, the accompanying
financial statements contain all adjustments (consisting of normal and
recurring accruals) necessary to present fairly all financial statements.
The financial statements herein should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for
the fiscal year ended June 30, 1999, included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1999. Operating results for
the three-month period ended September 30, 1999 may not necessarily be
indicative of the results to be expected for any other interim period or
for the full year.
(2) Collaborative Research Agreement
--------------------------------
In July 1999, the Company entered into a $33,500,000 collaboration and
license agreement related to genomic research. Under the agreement, the
Company received an upfront payment of $11,500,000 and will receive an
additional $22,000,000 of research funding over the two-year term. Upon
completion of the project, the Company will share any profits from the sale
of the discovered information equally with its collaborator.
(3) Common Stock
------------
In September 1999 the Company entered into a Subscription Agreement
pursuant to which the Company sold 355,000 shares of the Company's
unregistered Common Stock, $.01 par value per share (the "Shares") for a
purchase price of $4,987,750. The Company has no obligation to register the
Shares with the Securities and Exchange Commission. In conjunction with the
Subscription Agreement, the Company issued a 3-year warrant to purchase an
additional 17,750 Shares at a premium of 10%. Proceeds from the stock sale
were received October 5, 1999 and reflected as an "Other Receivable" on the
Condensed Consolidated Balance Sheet for the period ended September 30,
1999.
(4) Subsequent Events
-----------------
In October 1999, the Company announced the expansion of its collaboration
with Schering to include research into the field of cardiovascular disease.
The Company also entered into a Securities Purchase Agreement and a
Standstill Agreement with Schering Berlin Venture Corporation ("Schering
Berlin") to sell to Schering Berlin 303,030 Shares. Schering Berlin agreed
to acquire the Shares for an aggregate purchase price of $5,000,000 which
represents a premium to the 20 day trailing average share price.
(5) Segment and Related Information
-------------------------------
The Company's business units have been aggregated into two reportable
segments: (i) research and (ii) molecular diagnostics. The research segment
is focused on the discovery and sequencing of genes related to major common
diseases, marketing of subscriptions to proprietary database information,
and the development of therapeutic products for the treatment and
prevention of major diseases. The molecular diagnostics segment provides
testing to determine predisposition to common diseases.
The accounting policies of the segments are the same as those described in
the basis of presentation (note 1). The Company evaluates segment
performance based on loss from operations before interest income and
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expense and other income and expense. The Company's assets are not
identifiable by segment.
<TABLE>
<CAPTION>
Molecular
----------
Research diagnostics Total
---------- ----------- -----
<S> <C> <C> <C>
Three months ended September 30, 1999:
Revenues $ 5,247,645 $ 1,614,286 $ 6,861,931
Depreciation and amortization 608,603 185,124 793,727
Segment operating loss 1,586,948 1,162,839 2,749,787
Three months ended September 30, 1998:
Revenues 4,646,516 913,470 5,559,986
Depreciation and amortization 638,622 201,972 840,594
Segment operating loss 1,634,920 1,780,871 3,415,791
<CAPTION>
1999 1998
---- ----
Total operating loss for reportable segments ($2,749,787) (3,415,791)
Unallocated amounts:
Interest income 573,789 696,219
Interest expense -- (2,371)
Other (15,094) 19,441
----------- -----------
Net loss ($2,191,092) ($2,702,502)
=========== ===========
</TABLE>
(6) Comprehensive Loss
------------------
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income", effective July 1, 1998. SFAS
130 establishes standards for reporting and displaying comprehensive loss
and its components in financial statements. The components of the Company's
comprehensive loss are as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
(unaudited) (unaudited)
------------------ ------------------
<S> <C> <C>
Net loss ($2,191,092) ($2,702,502)
Unrealized gain (loss) on available-for-sale (27) 93,078
marketable investment securities
----------------- ------------------
Comprehensive loss ($2,191,119) ($2,609,424)
================= ==================
</TABLE>
7
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(7) Net Loss Per Common and Common Equivalent Share
-----------------------------------------------
Loss per common share is computed based on the weighted-average number of
common shares and, as appropriate, dilutive potential common shares
outstanding during the period. Stock options and warrants are considered to
be potential common shares.
Basic loss per common share is the amount of loss for the period available
to each share of common stock outstanding during the reporting period.
Diluted earnings per share is the amount of loss for the period available
to each share of common stock outstanding during the reporting period and
to each share that would have been outstanding assuming the issuance of
common shares for all dilutive potential common shares outstanding during
the period.
In calculating loss per common and common-equivalent share the net loss and
the weighted average common and common-equivalent shares outstanding were
the same for both the basic and diluted calculation.
For the three months ended September 30, 1999 and September 30, 1998, there
were antidilutive potential common shares of 2,017,645 and 2,155,178,
respectively. Accordingly, these potential common shares were not included
in the computation of diluted loss per share for the years presented, but
may be dilutive to future basic and diluted earnings per share.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since inception, the Company has devoted substantially all of its resources to
maintaining its research and development programs, establishing and operating a
molecular diagnostic laboratory, and supporting collaborative research
agreements, and more recently establishing a high throughput screening and drug
development facility. Revenues received by the Company primarily have been
payments pursuant to collaborative research agreements, upfront fees, milestone
payments, and sales of molecular diagnostics. The Company has been unprofitable
since its inception and, for the quarter ended September 30, 1999, the Company
had a net loss of $2,191,092 and as of September 30, 1999 had an accumulated
deficit of $46,130,972.
In April 1995, the Company commenced a five-year collaborative research and
development arrangement with Novartis Corporation ("Novartis"). This
collaboration may provide the Company with an equity investment, research
funding and potential milestone payments of up to $60,000,000. The Company is
entitled to receive royalties from sales of therapeutic products sold by
Novartis.
In September 1995, the Company commenced a five-year collaborative research and
development arrangement with Bayer Corporation ("Bayer"). This collaboration
provides the Company with an equity investment, research funding and potential
milestone payments of up to $71,000,000. In November 1997 and again in December
1998, the Company announced an expansions of its collaborative research and
development arrangement with Bayer. The expanded collaboration may provide the
Company with additional research funding and potential milestone payments of up
to $137,000,000. The Company is entitled to receive royalties from sales of
therapeutic products sold by Bayer.
In October 1996, the Company announced the introduction of BRACAnalysis, a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. In January 1998, the Company announced the
introduction of CardiaRisk which may assist physicians both in (i) identifying
which hypertensive patients are at a significantly increased risk of developing
cardiovascular disease and (ii) identifying which patients are likely to respond
to low salt diet therapy and antihypertensive drug therapy. The Company,
through its wholly owned subsidiary Myriad Genetic Laboratories, Inc.,
recognized molecular diagnostic revenues, primarily from BRACAnalysis, of
$1,614,286 for the quarter ended September 30, 1999.
In April 1997, the Company commenced a three-year collaborative research and
development arrangement with Schering Corporation ("Schering"). The three-year
term may be extended for two additional one-year periods. This collaboration
may provide the Company with an equity investment, license fees, research
funding and potential milestone payments totalling up to $60,000,000. The
Company is entitled to receive royalties from sales of therapeutic products sold
by Schering.
In October 1998, the Company entered into a five-year collaboration with
Schering AG, Germany ("Schering AG"), to utilize the Company's protein
interaction technology ("ProNet) for drug discovery and development. Under the
agreement, the Company will have an option to co-promote all new therapeutic
products in North America and receive 50 percent of the profits from North
American sales of all new drugs discovered with ProNet. This collaboration may
provide the Company with licensing fees, subscription fees, option payments and
milestone fees with a value of up to $51,000,000. If the Company chooses to co-
promote the drug as a 50 percent partner, the Company may be required to pay
funds to Schering AG to establish equal ownership.
In November 1998, the Company entered into a 15 month collaboration with
Monsanto Company ("Monsanto"), to utilize ProNet for drug discovery and
development. Under the agreement, Monsanto has the option to extend the
research term for an additional twelve months. If the anticipated milestones,
option payments, license fees and upfront payments are achieved, the value of
the agreement may reach up to $15,000,000. The Company will also receive
royalties on worldwide sales of drugs resulting from the discovery of novel
targets found through use of the ProNet technology.
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In July 1999, the Company entered into a two-year collaboration and license
agreement with the Novartis Agricultural Discovery Institute, Inc. ("NADII").
The genomic collaboration will focus on the discovery of the genetic structure
of cereal crops. The collaboration will provide the Company with an upfront
payment and research funding of up to $33,500,000. Upon completion, NADII and
the Company intend to jointly offer commercial access to the genomic databases
and share equally in any resulting proceeds.
In September 1999 the Company entered into a Subscription Agreement with Peter
Friedli to sell to Mr. Friedli 355,000 shares of unregistered Common Stock of
the Company, $.01 par value per share (the "Shares"). Mr. Friedli acquired the
Shares for a purchase price of $4,987,750. The Company has no obligation to
register the Shares with the Securities and Exchange Commission. In conjunction
with the Subscription Agreement, Mr. Friedli was issued a 3-year warrant to
purchase an additional 17,750 Shares at a premium of 10%.
The Company intends to enter into additional collaborative relationships to
locate and sequence genes and discover protein networks associated with other
common diseases as well as continuing to fund internal research projects. There
can be no assurance that the Company will be able to enter into additional
collaborative relationships on terms acceptable to the Company. The Company
expects to incur losses for at least the next several years, primarily due to
expansion of its research and development programs, increased staffing costs and
expansion of its facilities. Additionally, the Company expects to incur
substantial sales, marketing and other expenses in connection with building its
molecular diagnostic business. The Company expects that losses will fluctuate
from quarter to quarter and that such fluctuations may be substantial.
Subsequent Event
In October 1999, the Company announced the expansion of its collaboration with
Schering to include research into the field of cardiovascular disease. The
Company also entered into a Securities Purchase Agreement and a Standstill
Agreement with Schering Berlin Venture Corporation ("Schering Berlin") to sell
to Schering Berlin 303,030 Shares. Schering Berlin agreed to acquire the Shares
for an aggregate purchase price of $5,000,000 which represents a premium to the
20 day trailing average share price.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 and 1998
Research revenues for the quarter ended September 30, 1999 were $5,247,645 as
compared to $4,646,516 for the same quarter of 1998. The increase in research
revenue is primarily attributable to revenue recognized from the NADII
collaboration which began in July 1999. Research revenue from the research
collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase or decrease,
revenues increase or decrease proportionately.
Molecular diagnostic revenues of $1,614,286 were recognized in the quarter ended
September 30, 1999, an increase of 77% or $700,816 over the same quarter of the
prior year. Molecular diagnostic revenue is comprised of sales of diagnostic
tests resulting from the Company's discovery of disease genes. The test for
genetic predisposition to breast and ovarian cancer was launched by the Company
in October 1996 and the test for heart disease and hypertension risk was
launched by the Company in January 1998. Sales and marketing efforts since that
time have given rise to the increased revenues for the quarter ended September
1999. There can be no assurance, however that molecular diagnostic revenues
will continue to increase at the historical rate.
Research and development expenses for the quarter ended September 30, 1999 were
$5,786,801 as compared to $5,817,490 for the same quarter of 1998. As projects
mature and more information is collected in the laboratory, less expensive
automated analysis tools take on a more significant role. New projects such as
NADII can therefore utilize the available manpower from the more mature projects
made available by the shift toward automated analysis tools. The net result is
little change in research and development expense although future research and
development expenses may increase based on the nature of future projects.
10
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Selling, general and administrative expenses for the quarter ended September 30,
1999 were $3,021,986 as compared to $2,555,415 for the same quarter of 1998.
The increase was attributable to costs associated with the ongoing promotion of
BRACAnalysis as well as additional administrative, sales, marketing and
education personnel, market research activities, education material development,
and facilities-related costs. During the quarter ended September 30, 1999, the
company wrote off an asset resulting in a one-time expense of $344,531. The
Company expects its selling, general and administrative expenses will continue
to fluctuate as needed in support of its molecular diagnostic business and its
research and development efforts.
Interest income for the quarter ended September 30, 1999 was $573,789 as
compared to $696,219 for the same quarter of 1998. Cash, cash equivalents, and
marketable investment securities were $47,700,355 at September 30, 1998 as
compared to $46,473,680 at September 30, 1999. This decrease in cash and
investments, attributable to expenditures incurred in the ordinary course of
business, has resulted in reduced interest income. Interest expense for the
quarter ended September 30, 1998, amounting to $2,371, was due entirely to
borrowings under the Company's equipment financing facility.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $8,309,851 during the quarter
ended September 30, 1999 as compared to net cash used by operating activities of
$4,506,201 during the same quarter of 1998. Trade receivables for the three
months ended September 30, 1999 increased $277,394. This increase is primarily
attributable to the increase in molecular diagnostic revenue for the quarter
ended September 30, 1999 as compared to testing revenue for the quarter ended
June 30, 1999. Other receivables decreased $1,569,750 between June 30, 1999 and
September 30, 1999 primarily as a result of payments received by the Company for
the sale of leasehold improvements, and the receipt of collaborative partner
payments for research work performed in prior periods. Prepaid expenses
decreased $223,891 during the quarter ended September 30, 1999. The decrease is
primarily due to advance royalties and insurance premiums being expensed during
the quarter. Other assets decreased as a result of the Company writing down an
asset to its current value. Accounts payable and accrued expenses decreased
$949,015 between June 30, 1999 and September 30, 1999 primarily as a result of
payments for lab supplies and equipment which were accrued into the prior
quarter. Deferred revenue, representing the difference in collaborative
payments received and research revenue recognized, increased $9,483,634 during
the quarter ended September 30, 1999 as a result of an upfront payment from
NADII to the Company.
The Company's investing activities provided cash of $1,781,100 in the three
months ended September 30, 1999 and used cash of $844,571 in the three months
ended September 30, 1998. Investing activities were comprised primarily of
capital expenditures for research equipment, office furniture, and facility
improvements and marketable investment securities. During the quarter ended
September 30, 1999, the Company shifted a portion of its investment in
marketable investment securities to cash and cash equivalents from longer term
investments in order to provide for ongoing corporate expenditures.
Financing activities provided $182,001 during the quarter ended September 30,
1999 from the exercise of stock options during the period. During the quarter
ended September 30, 1998, the Company reduced the principal on its equipment
financing facility by $91,467. This decrease was offset by proceeds of $77,777
from the exercise of stock options.
The Company anticipates that its existing capital resources will be adequate to
maintain its current and planned operations for at least the next two years,
although no assurance can be given that changes will not occur that would
consume available capital resources before such time. The Company's future
capital requirements will be substantial and will depend on many factors,
including progress of the Company's research and development programs, the
results and cost of clinical correlation testing of the Company's genetic tests,
the costs of filing, prosecuting and enforcing patent claims, competing
technological and market developments, payments received under collaborative
agreements, changes in collaborative research relationships, the costs
associated with potential commercialization of its gene discoveries, if any,
including the development of manufacturing, marketing and sales capabilities,
the cost and availability of third-party financing for capital expenditures and
administrative and legal expenses. Because of the Company's significant long-
term capital requirements, the Company intends to raise funds when conditions
are
11
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favorable, even if it does not have an immediate need for additional capital at
such time.
Impact of the Year 2000 Issue
The Year 2000 Issue
The Year 2000 Issue is the result of computer programs using a two-digit format,
as opposed to four digits, to indicate the year. Any of the Company's computer
programs or other information systems that have time-sensitive software or
embedded microcontrollers may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations.
State of Readiness and Costs to Address the Year 2000 Issue
The Company has substantially completed its Year 2000 readiness testing.
Testing was performed on all of the Company's critical systems and any necessary
modifications have taken place. Where possible, third-party certification of
Year 2000 readiness was obtained on systems purchased by the Company. Third-
party systems which were not certified by the supplier were tested internally or
upgraded to compliant versions. The Company has received assurances from its
significant suppliers and customers that they are Year 2000 ready.
Risks of the Year 2000 Issue
If critical systems fail due to a lack of Year 2000 readiness, or if any of the
Company's suppliers or customers do not successfully deal with the Year 2000
Issue, the Year 2000 Issue could have a material impact on the operations of the
Company. The Company could experience delays in receiving or sending its
molecular diagnostic products that would increase its costs and that could cause
the Company to lose business and even customers and could subject the Company to
claims for damages. Problems with the Year 2000 Issue could also result in
delays in the Company invoicing its molecular diagnostic customers or in the
Company receiving payments from them. In addition, the Company's research and
development efforts which rely heavily on the storage and retrieval of
electronic information could be interrupted resulting in significant delays in
discovering genes, the loss of current collaborations, and the impairment of the
Company's ability to enter into new collaborations. The severity of these
possible problems would depend on the nature of the problem and how quickly it
could be corrected or an alternative implemented, which is unknown at this time.
In the extreme, such problems could bring the Company to a standstill.
The Company estimates direct and indirect costs associated with it Year 2000
readiness did not exceed $100,000. Direct costs include charges by third-party
software vendors for product enhancements, costs involved in testing software
products for Year 2000 compliance and resulting costs for enhancements to non-
compliant products. Indirect costs principally consist of the time devoted by
existing employees in monitoring software vendor progress, testing enhanced
software products and implementing any necessary contingency plans. Both direct
and indirect costs of addressing the Year 2000 Issue have been charged to
earnings as incurred.
Contingency Plan
The Company is considering contingency plans to address situations in which
various systems of the Company, or of third parties with which the Company does
business, are not Year 2000 compliant. Some risks of the Year 2000 Issue,
however, are beyond the control of the Company and its suppliers and customers.
For example, no preparations or contingency plan will protect the Company from a
downturn in economic activity caused by the possible ripple effect throughout
the entire economy caused by the Year 2000 Issue.
Certain Factors That May Affect Future Results of Operations
The Company believes that this report on Form 10-Q contains certain forward-
looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company cautions investors that there can
12
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be no assurance that actual results or business conditions will not differ
materially from those projected or suggested in such forward-looking statements
as a result of various factors, including, but not limited to, the following:
the timely implementation by the Company of its plan to prepare its computer
systems for the Year 2000, the costs to the Company of such preparation, and the
timely conversion by other parties on which the Company's business relies;
intense competition related to the discovery of disease-related genes and the
possibility that others may discover, and the Company may not be able to gain
rights with respect to, genes important to the establishment of a successful
molecular diagnostic business; difficulties inherent in developing genetic tests
once genes have been discovered; the Company's limited experience in operating a
molecular diagnostic laboratory; the Company's limited marketing and sales
experience and the risk that tests which the Company has or may develop may not
be able to be marketed at acceptable prices or receive commercial acceptance in
the markets that the Company is targeting or expects to target; uncertainty as
to whether there will exist adequate reimbursement for the Company's services
from government, private health care insurers and third-party payors; and
uncertainties as to the extent of future government regulation of the Company's
business; uncertainties as to whether the Company and its collaborators will be
successful in developing and obtaining regulatory approval for, and commercial
acceptance of, therapeutics based on the discovery of disease-related genes and
proteins; uncertainties as to the Company's ability to develop therapeutic lead
compounds, which is a new business area for the Company; and the risk that
markets will not exist for therapeutic lead compounds that the Company develops
or if such markets exist, that the Company will not be able to sell compounds
which it develops at acceptable prices. As a result, the Company's future
development efforts involve a high degree of risk. For further information,
refer to the more specific risks and uncertainties disclosed throughout this
Quarterly Report on Form 10-Q.
13
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings.
The Company is not a party to any legal proceedings.
Item 2. Changes in Securities.
On September 30, 1999, the Company entered into a Subscription Agreement
pursuant to which the Company sold 355,000 shares of the Company's unregistered
Common Stock, $.01 par value (the "Shares") for an aggregate purchase price of
$4,987,750. The sale of the Shares was made overseas to a foreign investor and
was exempt from registration under Regulation S of the Securities Act of 1933
(the "Securities Act"). In connection with this transaction, the Company also
granted the purchaser a warrant to purchase an additional 17,750 Shares at an
exercise price of $15.45 per share. These warrants are exercisable at any time
prior to 5:00 p.m. Salt Lake City time on October 4, 2002.
On October 15, 1999, the Company entered into a Securities Purchase Agreement
and a Standstill Agreement pursuant to which the Company sold 303,030 Shares for
an aggregate purchase price of $5,000,000. The sale was made to an accredited
investor in a private placement that was exempt from registration under Rule 506
of Regulation D of the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
The following is a list of exhibits filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Description
- ------ -----------
10.1 Collaboration and License Agreement between the Company and
Novartis Agricultural Discovery Institute, Inc. dated July 27,
1999. The Company has excluded from this Exhibit 10.1 portions of
the Collaboration and License Agreement for which the Company has
requested confidential treatment from the Securities and Exchange
Commission. The portions of the Collaboration and License Agreement
for which confidential treatment has been requested are marked
"[ ]" and such confidential portions have been filed separately
with the Securities and Exchange Commission.
10.2 Subscription Agreement between the Company and Peter Friedli
dated September 30, 1999.
10.3 Securities Purchase Agreement and Standstill Agreement between the
Company and Schering Berlin Venture Corporation dated October 15,
1999.
27.1 Financial Data Schedule
14
<PAGE>
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September 30, 1999.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYRIAD GENETICS, INC.
Date: November 15, 1999 By: /s/ Peter D. Meldrum
-----------------------------------
Peter D. Meldrum
President and Chief Executive Officer
Date: November 15, 1999 /s/ Jay M. Moyes
--------------------------------------
Jay M. Moyes
Vice President of Finance and Chief
Financial Officer
(principal financial and accounting
officer)
16
<PAGE>
MYRIAD GENETICS, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Collaboration and License Agreement between the Company and
Novartis Agricultural Discovery Institute, Inc. dated July 27,
1999. The Company has excluded from this Exhibit 10.1 portions of
the Collaboration and License Agreement for which the Company has
requested confidential treatment from the Securities and Exchange
Commission. The portions of the Collaboration and License
Agreement for which confidential treatment has been requested are
marked "[ ]" and such confidential portions have been filed
separately with the Securities and Exchange Commission.
10.2 Subscription Agreement between the Company and Peter Friedli dated
September 30, 1999.
10.3 Securities Purchase Agreement and Standstill Agreement between the
Company and Schering Berlin Venture Corporation dated October 15,
1999.
27.1 Financial Data Schedule
17
<PAGE>
Exhibit 10.1
COLLABORATION AND LICENSE AGREEMENT
This Collaboration and License Agreement (the "Agreement") is dated July
27, 1999 between Novartis Agricultural Discovery Institute, Inc., a Delaware
corporation ("NADII"), and Myriad Genetics, Inc., a Delaware corporation
("Myriad").
RECITALS
--------
A. WHEREAS, NADII has requested Myriad to join with it in a collaborative
research program whereby Myriad will, in consideration of payments received from
NADII, use its proprietary sequencing technology to sequence [____________] and
to develop additional related information (the "Project");
B. WHEREAS, Myriad will provide appropriate staff and facilities to
undertake the Project and is willing to do so on the terms contained in this
Agreement;
C. WHEREAS, at the conclusion of the project, Myriad will grant to NADII
a perpetual, world-wide, royalty-free, co-exclusive license for all commercial
and non-commercial applications of the information developed through the
Project;
D. WHEREAS, following the conclusion of the Project, the Parties expect
to resell or sublicense [___________] data to third parties and share the
proceeds equally;
E. WHEREAS, NADII expects to obtain preferred access to the information
generated under the Project;
<PAGE>
F. WHEREAS, NADII has expended and will continue to expend significant
resources and efforts to [___________] for cereal functional genomics; and
G. WHEREAS, NADII intends to allow access to [____________] information
generated under the Project to its collaborators and to other Novartis
organizations.
NOW THEREFORE, in consideration of the foregoing recitals and the mutual
covenants of the parties, they hereby agree as follows:
1. The Collaboration Project.
-------------------------
1.1 General. Each of NADII and Myriad shall use reasonably diligent
-------
efforts to satisfy the procedures, goals and objectives of the Project, which
are described on Exhibit A hereto (the "Project Description"). The Project
Description may be revised and updated from time to time by the Project
Committee (as defined below), provided that it continues to focus on the
development of new Data and Materials (as defined below) relating to cereal
genomes. The term of the Project begins on the date of this Agreement and
concludes on the attainment of the penultimate milestone as described in Exhibit
A (the "Project Term"). During the Project Term, Myriad will use reasonable
commercial efforts to conduct research with respect to and develop information
and data relating to cereal genomes as contemplated hereby, to meet and comply
with the schedules and projected milestones set forth in the Project Description
and to perform its duties as contemplated by this Agreement.
1.2 Staffing and Resources. The initial principal investigators for the
----------------------
Project shall be [___________] and [___________].employees of Myriad. Such
persons shall work under the guidance
2
<PAGE>
and supervision of the research steering committee (the "Project Committee")
which is further described in paragraph 1.5 below. Myriad shall make available
for use in the Project, at Myriad's expense, approximately [__________] full
time equivalent employees ("Project Employees") during the Project Term. Each
Project Employee shall have sufficient technical credentials, education and
experience as is appropriate to enable him or her to perform the duties required
with respect to the Project. Certain of the Project Employees may be consultants
to or independent contractors of Myriad, rather than actual employees, of
Myriad. If a vacancy in the Project Employees (including a principal
investigator) shall occur for any reason, Myriad shall promptly fill the vacancy
with one or more qualified replacement Project Employees and notify the Project
Committee of such replacement. In the event that either of the principal
investigators is for any reason unable to function on the Project and such event
materially affects Myriad's ability to conduct the Project and meet the
projected milestones set forth in the Project Description of Appendix A, NADII
shall have the right to terminate this Agreement in accordance with Section
6.4(a) of this Agreement.
1.3 Equipment. Myriad shall provide all equipment necessary for the
---------
conduct of the Project, all of which shall be owned or leased by Myriad. Myriad
shall maintain the equipment in accordance with prudent business practices.
1.4 [____________________] Milestones. Myriad shall use reasonable
----------------------------------
commercial efforts to achieve [_______________] within the Project Term in
accordance with the projected milestones set forth in the Project Description of
Appendix A.
3
<PAGE>
1.5 The Project Committee. Within ten days of the execution of this
---------------------
Agreement the parties shall establish the Project Committee to oversee all
aspects of the Project. The Project Committee shall consist of the following
six members, three of whom shall be appointed by each party in its sole
discretion and reasonably acceptable to the other party:
NADII Representatives: [__________________________________________________
_________________________________________________]
Myriad Representatives: [_________________________________________________
_________________________________________________]
Vacancies shall be filled by the party who appointed the terminated member by
written notice to the other party. The Project Committee shall plan, administer
and monitor the Project and shall attempt to keep the parties reasonably
informed as to the status of Project activities. Its oversight function shall
include matters such as (i) adopting material plans, resource allocations,
strategies and policies with respect to the Project; (ii) determining which
research activities to pursue, and when to change such allocations, strategies
and policies (including adjustments to the milestones); (iii) terminating
particular activities; (iv) making decisions concerning the protection of any
Intellectual Property, including filing for Patent Rights or other protection,
and similar matters; (v) setting research priorities; and (vi) demonstrating to
the satisfaction of the chief executive officer of NADII that the [____________]
milestones set forth in Exhibit A have been achieved. The Project Committee
shall meet at least quarterly, with each such meeting to be held, alternatively,
in Salt Lake City, Utah and in San Diego, California. The Project Committee
shall maintain accurate minutes of its deliberations which record all proposed
decisions and actions that are recommended or adopted. The party hosting a
meeting shall be responsible for the
4
<PAGE>
preparation and circulation of minutes, drafts of which shall be delivered to
all Project Committee members promptly after each meeting. Minutes shall be
issued in final form only with the approval and signature of Project Committee
members. The presence of two representatives of each party shall constitute a
quorum at a Project Committee meeting. Each party's Project Committee
representatives shall have the aggregate of one vote on all matters before the
Project Committee, regardless of the number of representatives present, and all
decisions of the Project Committee shall be made by unanimous vote. If the
Project Committee is unable to resolve any disputed matter after good faith
negotiations, the question shall be referred to the chief executive officers of
each of the parties for resolution. If such officers are unable to resolve the
dispute within the following twenty (20) days, the matter shall be resolved in
accordance with the best judgment of the chief executive officer of NADII, who
shall communicate his or her decision, and the reasons therefor, to all Project
Committee members. Each party shall bear the expenses of its Project Committee
members and other representatives.
1.6 Research Records and Reports. Each party shall maintain complete and
----------------------------
accurate records that reflect Project activities performed by it. Such records
shall be consistent with good scientific practices and include appropriate
detail for patent purposes that reflect all Project activities performed by it.
Myriad shall provide NADII with weekly updates to all new Data and Materials
developed under the Project. Myriad shall provide NADII with reports of other
Project events and developments promptly at NADII's request, but not more
frequently than weekly.
5
<PAGE>
1.7 Exclusive Activities. During the Exclusive Period, Myriad shall not
--------------------
collaborate with, undertake, fund any research or disclose to third parties any
information that is directly related to [_________________] without the prior
written consent of NADII.
1.8 Insurance. Each party shall maintain comprehensive general liability
---------
insurance with respect to claims for damages from bodily injury and property
damage, covering such risks as are customary in its industry.
1.9 Collaborative Efforts. The parties acknowledge that the successful
---------------------
execution of the Project will require the cooperation of both parties and the
use of their collective expertise (the "Collaboration"). Each party shall keep
the Project Committee and one another fully informed of the status of all
material activities and events concerning the Project.
2. Ownership of Technology; License; Transfer of Data and Materials and
--------------------------------------------------------------------
Commercialization
- -----------------
2.1 Previously Owned Technology. By virtue of entering into this
---------------------------
Agreement for the conduct of the Project, neither NADII nor Myriad shall acquire
any right, title or interest in or to technology or other intellectual property
of the other party, except as expressly set forth in this Agreement. This
Agreement does not grant to either party any license or other right to use in
any advertising or publicity any trademark, service mark, trade name or
equivalent of the other party.
2.2 Ownership of Project Technology.
-------------------------------
(a) Until the end of the Project Term, and for [____________]
thereafter (the "Exclusive Period"), NADII shall have an exclusive license from
Myriad, with the right to
6
<PAGE>
sublicense to third parties on a non-monetary quid pro quo basis, for all right,
title and interest in and to all Intellectual Property, including but not
limited to Data and Materials Inventions made during the Project Term shall be
owned according to inventorship, and inventorship shall be determined under U.S.
law.
(b) Upon the expiration of the Exclusive Period and thereafter, all
Data and Materials shall be the joint property of NADII and Myriad. As joint
owners, each party shall have the right to (1) freely practice and otherwise
exploit the Data and Materials for internal research purposes without any
obligation to the other party, and (2) freely practice and exploit Data and
Materials for commercial purposes, subject to the provisions of Section 2.3 of
this Agreement.
(c) Notwithstanding paragraph 2.2(b) above, and subject to good faith
negotiations between the parties, NADII shall have the right to maintain as its
sole property, a limited portion of the Data and Materials.
(d) Myriad shall, as the parties shall in good faith mutually agree
and upon NADII's request, grant to NADII a non-exclusive, non-transferable
world-wide license, without the right to sublicense, for use of certain of
Myriad's [____________] trade secrets solely by NADII or its Affiliates, without
additional compensation.
(e) Notwithstanding paragraphs 2.2(a) and 2.2(b), all discoveries,
inventions, and technology developed by Myriad prior to this Agreement, or
independently during the Project Term, which is not otherwise expressly licensed
to NADII under the terms of this Agreement, shall be the sole property of
Myriad.
7
<PAGE>
2.3 Commercial Rights.
-----------------
(a) During the Exclusive Period, NADII shall have exclusive access to
[______________] and all other Data and Materials, as well as exclusive rights
to all Intellectual Property, generated pursuant to the Project. At the
conclusion of the Exclusive Period, Myriad shall grant to NADII a perpetual,
royalty free, world-wide co-exclusive right for commercial use of the Data and
Materials and Myriad will retain a similar perpetual royalty free, world-wide
co-exclusive right to any commercial application also of the Data and Materials.
Rights, title and interest to Intellectual Property other than Data and
Materials shall remain with the owner; provided that each party grants a fully-
paid, worldwide license the other party to the extent necessary to practice and
exploit Data and Materials for their respective commercial purposes.
(b) After the Project Term and until the expiration of this Agreement
(the "Marketing Period"), the parties will cooperate with one another in a
collaborative effort to resell or sublicense the Data and Materials to
interested third parties, and will divide all monetary proceeds equally. NADII
shall have sole freedom to enter into licensing agreements with third parties on
a non-monetary quid pro quo basis without compensation to Myriad. The Data and
Materials to be resold or licensed to third parties (the "Database") shall
consist of [_________________________________________________________________].
The final content of the Database shall be determined by the Project Committee
and be subject to its procedures for resolving disputes. Upon the expiration of
the Exclusive Period, the Project Committee shall be disbanded, and each of the
parties will then promptly name two members of the marketing committee
("Marketing Committee"), which shall make all decisions with respect to the
marketing of the Data and Materials. The Marketing Committee will establish its
own
8
<PAGE>
operating procedures which will be comparable to those of the Project Committee
as set forth in paragraph 1.4 above. The Marketing Committee will agree on
resale terms, strategies and the need for supporting documentation for third-
party purchasers, including research institutions and government agencies. NADII
may restrict resales or licenses of the Data and Materials to a third party
competitor of NADII if NADII believes in good faith that such transfer would be
materially or economically detrimental to it, and Myriad will accept such good
faith decision by NADII. Each party's Marketing Committee representatives shall
have the aggregate of one vote on all matters before the Marketing Committee,
regardless of the number of representatives present, and all decisions of the
Marketing Committee shall be made by unanimous vote. If the Marketing Committee
is unable to resolve any disputed matter after good faith negotiations, the
question shall be referred to the chief executive officers of each of the
parties for resolution. If such officers are unable to resolve the dispute
within the following twenty (20) days, the matter shall be resolved in
accordance with the best judgment of the chief executive officer of NADII, who
shall communicate his or her decision, and the reasons therefor, to all
Marketing Committee members.
2.4 Licenses and Sub-Licenses. Except as provided in paragraphs 2.2(a),
-------------------------
2.2(c) and 2.3(b), neither party shall have the right to assign or sublicense
any of its rights to the Data and Materials except to its majority owned
subsidiary companies which must assume full responsibility for its obligations
hereunder, and notwithstanding the provisions in paragraph 8.3, with the further
exception that NADII may assign or sublicense to a NADII Affiliate, or to
Novartis Agribusiness Biotechnology Research, Inc. (NABRI) or an Affiliate of
NABRI. Any attempt at assignment by sale, transfer, sublicense or other
disposition, or by operation of law or
9
<PAGE>
otherwise, of this Agreement or of any rights or obligations hereunder in a
manner not permitted under this Agreement shall be a material breach of this
Agreement by the attempting party and shall be void and without force or effect,
except as provided in paragraph 6.4 below. Notwithstanding the above, the non-
exclusive license granted by Section 2.2(d) shall not be assignable or
sublicensable under this Section 2.4.
2.5 Patents and Patent Application. During the Project Term, each party
------------------------------
shall promptly disclose to the other party Intellectual Property which the
disclosing party believes has a reasonable likelihood of receiving patent
protection. The Project Committee shall determine whether to proceed with one
or more patent applications with respect to such matters, the jurisdictions in
which such applications shall be filed, and other issues with respect to such
filing. NADII shall have the final determination as to whether or not to file a
patent application and where appropriate applications shall be filed. NADII
shall bear all the expenses of filing and maintaining patent applications and
patents world-wide. NADII shall diligently prosecute and maintain Patent Rights
with respect to such Intellectual Property. NADII will promptly provide Myriad
with copies of all relevant documentation related to such prosecution and
maintenance, and Myriad will cooperate with NADII in all of such endeavors. All
patents and patent applications shall reflect the joint ownership rights of
NADII and Myriad in the Intellectual Property where such rights exist. In the
event that NADII shall elect to abandon prosecution or maintenance of any
patents or patent applications, NADII shall first provide Myriad with adequate
advance notice of such abandonment and provide Myriad with the opportunity to
assume responsibility of such prosecution or maintenance at Myriad's expense.
All patents and
10
<PAGE>
patent applications for which Myriad assumes responsibility for prosecution and
maintenance shall be owned solely by Myriad.
2.6 Infringements.
-------------
(a) Enforcement of Rights to Intellectual Property. If any party
----------------------------------------------
shall become aware of any infringement or threatened infringement by any third
party of any rights constituting Intellectual Property, then the party having
such knowledge shall immediately give notice to the other party. The parties
shall promptly meet to determine appropriate action with respect to such
infringements. The cost of all actions taken by NADII to enforce Intellectual
Property rights shall be borne by NADII. In the event that NADII fails to
prosecute such infringement, Myriad shall have the right, at its sole option, to
prosecute the infringement at its own expense. Any recovery obtained as a
result of enforcement actions taken by NADII or Myriad will first be used to
repay the prosecuting party's litigation and related costs, and any balance will
be divided equally between both parties.
(b) Defense of Third Party Claims. If either party shall become aware
-----------------------------
of any alleged infringement of the rights of others by either party through its
manufacture, use, importation, sale, offer or application of the Intellectual
Property, such party shall promptly notify the other party. With the
cooperation of Myriad, NADII shall be solely responsible for defending any such
claim at its own cost and expense, and may settle or otherwise dismiss this
matter, at its discretion, in accordance with its sound business judgment,
provided that Myriad is not obligated to pay any damages and does not suffer a
material diminution of its interest in Intellectual Property. Any and all
expenses, damages or payments, including any royalties, owed to a third party
with respect to a claim defended under this section shall be the responsibility
of
11
<PAGE>
NADII, with the exception that third party claims against Intellectual Property
owned solely by Myriad, as anticipated in Paragraph 2.5, shall be defended
solely by Myriad, at Myriad's sole expense and at Myriad's sole discretion.
3. Funding.
-------
3.1 Payments by NADII. In order to fund the Project, NADII will pay $33.5
-----------------
million to Myriad, as follows:
(i) Within 10 days following the execution of the agreement,
$11.5 million as an upfront payment;
(ii) on or before the first day of each of the eight calendar
quarters during the Project Term, beginning on the date
hereof, eight equal payments of [_________________________
_____________________]; and
(iii) within 10 days after completion of the Project and
approval by NADII to move to the Commercial Phase, the
final [____________________].
No milestone, royalty or other payments are required hereunder, and NADII shall
not obtain an equity ownership, asset ownership, or other rights in Myriad by
virtue of its payments hereunder.
3.2 Use of Proceeds. Myriad shall apply the payments identified in
---------------
paragraph 3.1 (less a profit of [_________________], and general overhead and
administrative costs [__________________], of such proceeds) exclusively to pay
Project and other related costs, including but not limited to equipment,
software development, leasehold improvements, labor, materials and supplies, but
12
<PAGE>
shall not be required to account to NADII for any payments or use of proceeds
other than to certify to NADII that the payments have been used according to the
Agreement. Myriad shall retain exclusive ownership of all equipment purchased
for use in the Project. NADII shall have no financial obligation to any third
party for any costs incurred in the performance of this Agreement. Myriad's sole
obligation will be to carry out the Project as provided in paragraph 1.1.
4. Representations and Warranties.
------------------------------
4.1 Representations and Warranties of Each Party. Each of Myriad and
--------------------------------------------
NADII hereby represents, warrants and covenants to the other party as follows:
(a) it is a corporation duly organized and validly existing under the
laws of the state or other jurisdiction of its incorporation or formation;
(b) the execution, delivery and performance of this Agreement by such
party has been duly authorized by all requisite corporate action;
(c) it has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, including the right, power
and authority to grant the licenses contemplated thereby;
(d) the execution, delivery and performance by such party of this
Agreement and its compliance with the terms and provisions hereof does not and
will not conflict with or result in a breach of any of the terms and provisions
of or constitute a default under (i) any material agreement or instrument
binding or affecting it or its property; (ii) the provisions of its
13
<PAGE>
charter documents or bylaws; or (iii) any order or decree of any court or
governmental authority entered against it or by which any of its property is
bound;
(e) the execution, delivery and performance of this Agreement by such
party does not require the consent, approval or authorization of, or notice,
filing or registration with, any governmental or regulatory authority;
(f) this Agreement constitutes such party's legal, valid and binding
obligation enforceable against it in accordance with its terms (subject, as to
enforcement, to bankruptcy, insolvency and other laws of general applicability
relating to creditors' rights and to the availability of particular remedies
under general equity principles);
(g) it shall comply with all applicable material laws and regulations
relating to its activities under this Agreement;
(h) to the best of its knowledge, Myriad and NADII own or have rights
to the technology identified in Recital A to this Agreement; and
(i) it has not previously assigned, transferred or encumbered its
right, title and interest in its technology referenced in Recital A.
4.2 Myriad's Representations. Myriad hereby represents, warrants and
------------------------
covenants to NADII as follows:
(a) it has the full right, power and authority to grant the license
contemplated hereby;
(b) to the best of Myriad's knowledge, the development, use and sale
of the Data and Materials will not interfere with or infringe any intellectual
property rights owned or possessed by any third party.
14
<PAGE>
4.3 Continuing Representations. The representations and warranties of
--------------------------
each Party contained in paragraphs 4.1 and 4.2 shall survive the execution of
this Agreement.
5. Indemnification.
---------------
5.1 Indemnification by NADII. NADII shall indemnify, defend and hold
------------------------
harmless Myriad and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "Myriad Indemnified Party")
from and against any and all liability, loss, damage, cost and expense
(including reasonable attorneys' fees) (collectively, a "Liability") which the
Myriad Indemnified Party may incur, suffer or be required to pay resulting from
or arising in connection with (i) the breach by NADII of any covenant,
representation or warranty contained in this Agreement, (ii) any negligent act
or omission or willful misconduct of NADII (or any Affiliate thereof) in
conducting the Project, or in (or any strict liability claim based on) the
promotion, marketing and sale of any product or any other activity conducted by
NADII or its successors under this Agreement which is the proximate cause of
injury, death or property damage to a third party, and (iii) the successful
enforcement by a Myriad Indemnified Party of its rights under this paragraph
5.1.
5.2 Indemnification by Myriad. Myriad shall indemnify, defend and hold
-------------------------
harmless NADII and its Affiliates, and each of its and their respective
employees, officers, directors and agents (each, a "NADII Indemnified Party")
from and against any and all Liability which the NADII Indemnified Party may
incur, suffer or be required to pay resulting from or arising in connection with
(i) the breach by Myriad of any covenant, representation or warranty contained
in this Agreement, and (ii) any negligent act or omission or willful misconduct
of Myriad (or any
15
<PAGE>
Affiliate thereof) in conducting the Project, or in (or any strict liability
claim based on) the promotion, marketing and sale of any product or any other
activity conducted by NADII or its successors under this Agreement which is the
proximate cause of injury, death or property damage to a third party, and (iii)
the successful enforcement by a NADII Indemnified Party of its rights under this
paragraph 5.2.
5.3 Conditions of Indemnification. The obligations of the indemnifying
-----------------------------
party under paragraphs 5.1 and 5.2 are conditioned upon the delivery of written
notice to the indemnifying party of any potential Liability promptly after the
indemnified party becomes aware of such potential Liability. The indemnifying
party shall have the right to assume the defense of any third party suit or
claim related to the Liability if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of the indemnified
party, such suit or claim involves an issue or matter which could have a
materially adverse effect on the business, operations or assets of the
indemnified party, the indemnified party may waive its rights to indemnity for
defense costs under this Agreement and control the defense or settlement
thereof, but in no event shall any such waiver be construed as a waiver of any
other indemnification rights such party may have at law or in equity. If the
indemnifying party defends the suit or claim, the indemnified party may
participate in (but not control) the defense thereof at its sole cost and
expense.
5.4 Settlements. Neither party may settle a claim or action related to a
-----------
third party Liability without the consent of the other party if such settlement
would impose any monetary obligation on such party or require it to submit to an
injunction or otherwise limit the other
16
<PAGE>
party's rights under this Agreement. Any payment made by a party to settle any
such claim or action shall be at its own cost and expense.
5.5 Limitation of Liability. With respect to any claim by one party
-----------------------
against the other arising out of the performance or failure of performance of a
party under this Agreement, the parties expressly agree that the liability of
such party to the other party for such breach shall be limited to direct damages
only and in no event shall a party be liable for lost profits, punitive,
exemplary or consequential damages.
5.6 Disclaimer of Warranties. Unless expressly provided in this
------------------------
Agreement, neither party makes any warranty, express or implied, with respect to
any technology, products, goods, services, rights or other subject matter of
this Agreement and hereby disclaims all warranties including warranties of
merchantability and fitness for a particular purpose.
6. Term and Termination
--------------------
6.1 Term and Expiration. This Agreement shall be effective as of the day
-------------------
set forth in the opening paragraph of this Agreement and, unless terminated
earlier pursuant to Paragraphs 6.2, 6.3,, or 6.4 below, shall continue in effect
for a period commensurate with the longer of (a) the life of the patents
covering Data and Materials or (b) 10 years after the Project Term, unless
terminated earlier in accordance with Paragraph 6.2, 6.3 or 6.4 below. Upon
termination of this Agreement due to its expiration, the licenses granted
pursuant to Section 2 shall become perpetual.
6.2 Unilateral Termination. This Agreement may be terminated by NADII
----------------------
upon 30 days written notice in the event of appearance in the public domain of
sufficient [__________] DNA
17
<PAGE>
sequence information such that the combination of publicly available data and
Data and Materials complete the goals of the Project.
6.3 Termination by Mutual Consent. This Agreement may be terminated by
-----------------------------
mutual consent of the parties.
6.4 Termination for Cause. This Agreement may be terminated by either
---------------------
party at any time:
(a) with respect to obligations other than payment obligations, if the
other party is in material breach of its obligations hereunder and has not cured
or taken significant and continuous steps to cure such breach within ninety (90)
days after notice of the breach, which notice includes a description in
reasonable detail of the particulars of the alleged breach;
(b) with respect to payment obligations, if NADII has not cured or
taken steps to substantially cure its breach (such as the mailing of the
delinquent check) within ten (10) days after notice of the particulars of the
alleged breach;
(c) upon the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings, or upon an assignment of a substantial
portion of the assets for the benefit of creditors by the other party, or in the
event a receiver or custodian is appointed for such party's business, or if a
substantial portion of such party's business is subject to attachment or similar
process; provided, however, in the case of any involuntary bankruptcy proceeding
-------- -------
such right to terminate shall only become effective if the party consents to the
involuntary bankruptcy or such proceeding is not dismissed within sixty (60)
days after its filing; or
18
<PAGE>
(d) NADII may terminate this Agreement with immediate effect if Myriad
suffers a change of control or sells to a third party the major part of the
assets relevant to this Agreement, or is taken over or merges with another
company or entity, and NADII reasonably believes such change of control or sale
to a third party would be materially or economically detrimental to it, such
right of termination to be exercised within three months after NADII becomes
aware of the relevant facts.
As used in this Section, the term "material breach" shall include, but
shall not be limited to, the failure of Myriad to reach two consecutive
projected milestones (without being subject to the right to cure) as set forth
in the Project Description of Appendix A.
6.5 Effect of Termination on License. In the event a party terminates
--------------------------------
this Agreement because of a material breach by the other party, all licenses for
commercial purposes granted to the breaching party under paragraph 2.3 shall
terminate.
6.6 Effect of Termination. In the event of termination, the rights and
---------------------
obligations of both parties, including any payment obligations not due and owing
as of the termination date, shall terminate. Expiration or termination of the
Agreement shall not relieve the parties of any right or obligation accruing
prior to such expiration or termination, and unless otherwise proveded under
this Agreement, the provisions of Sections 2, 3, 5, 7 and 8 as well as
Paragraphs 4.1 and 4.2 shall survive the expiration of the Agreement. Any
expiration or early termination of this Agreement shall be without prejudice to
the rights of a party against the other that accrued under this Agreement prior
to termination. In the event that this Agreement is terminated by NADII on
grounds that Myriad has failed to meet two consecutive projected milestones set
forth in the
19
<PAGE>
Project Description of Appendix A, as provided in Section 6.4 above, Myriad
shall relinquish its right to share in the monetary proceeds received for the
resell of Data and Materials to a third party. In the event that this Agreement
is terminated because of a material breach by Myriad within the first twelve
months of the Project Term, NADII shall have the right [_______________________
_____________________________________________________]. In the event that this
Agreement is terminated by NADII in accordance with Paragraph 6.4(d), the rights
granted to Myriad pursuant to Section 2 shall terminate, provided, however, that
all rights to receive monetary proceeds under Paragraph 2.3(b) shall not be
terminated.
7. Other Covenants and Agreements.
------------------------------
7.1 Confidentiality.
---------------
(a) "Confidential Information" of a party shall mean (i) all
information, whether written or oral, disclosed by such party hereunder bearing
a legend or otherwise indicating that such information is confidential, (ii) all
intellectual property of such party that is disclosed or furnished by such party
hereunder, (iii) improvements specific to the intellectual property of such
party made in the course of the Project, (iv) any results of the Project that
are specific to the intellectual property of such party, and (v) the terms and
existence of this Agreement.
(b) During the Project Term, and for a period of ten (10) years
thereafter, except as expressly authorized by the other party in writing, each
of the parties will use diligent efforts, and at least the same degree of care
that it uses to protect its own confidential
20
<PAGE>
information of like importance, to prevent unauthorized use, dissemination and
disclosure of the other party's Confidential Information. In furtherance, and
not in limitation of the foregoing, each party agrees that, except as otherwise
permitted hereunder, it shall (i) use such Confidential Information exclusively
for the purpose of exercising its rights and fulfilling its obligations under
this Agreement, (ii) restrict disclosure of such Confidential Information to
those of its employees, agents, contractors, and collaborative partners and
Affiliates who have a "need to know" such information, and refrain from
disclosing such Confidential Information to anyone other than such employees,
agents, contractors and collaborative partners and Affiliates, and (iii) cause
each of its supervising employees to instruct all other such employees, agents,
contractors and collaborative partners and Affiliates, to maintain the
confidentiality of such information and not to use such Confidential Information
except as expressly permitted herein.
(c) The provisions contained in subparagraph (b) above shall not apply
to any portion of the Confidential Information of any party which: (i) becomes
a matter of public knowledge through no fault of the party receiving the
Confidential Information, (ii) is rightfully received by the receiving party
from a third party, (iii) was known to the receiving party before its first
receipt from the disclosing party, as shown by files existing at the time of
initial disclosure, or (iv) is independently developed by the receiving party
without use of another party's Confidential Information.
(d) After any termination of this Agreement, upon written request,
each party shall promptly discontinue the use of, and return all originals and
copies of, any requested Confidential Information that has been fixed in any
tangible means of expression within thirty (30) days of such request; provided,
--------
however, that if a party's license rights pursuant to
- -------
21
<PAGE>
paragraph 2 shall remain in effect notwithstanding such termination, such party
shall be permitted to retain such information as is necessary, in its reasonable
judgment, in connection with the continued exercise of its license rights to the
extent specifically permitted hereby. If information concerning licensed
technology is retained after termination pursuant to the preceding sentence, the
retaining party shall provide the other party with a written description, in
reasonable detail, of the information concerning the other party's licensed
technology that has been retained.
(e) If a party is required pursuant to applicable law by any
governmental authority to disclose any Confidential Information of the other
party, such party shall provide the party whose Confidential Information is the
subject of the request or requirement with prompt written notice of such request
or requirement so that the other party may seek a protective order or other
appropriate remedy or waive compliance with the provisions of this Agreement.
If, in the absence of a protective order of other remedy or the receipt of a
waiver by the other party, the party being requested or required to disclose any
Confidential Information is nonetheless legally compelled to disclose such
Confidential Information, it may, without liability under this Agreement,
disclose that portion of the Confidential Information which it is legally
compelled to disclose.
7.2 Publication. Each party also recognizes the mutual interest in
-----------
obtaining valid patent protection and in protecting business interests and trade
secret information. Consequently, either party, its employees or consultants
wishing to make a publication covering Data and Materials or other information
arising from the Project shall deliver to the other party a copy of the proposed
written publication or an outline of an oral disclosure at least sixty (60)
22
<PAGE>
days prior to submission for publication or presentation. If the other party
reasonably determines that the proposed disclosure would reveal proprietary
information in a manner that would compromise such party's ability to protect
its proprietary information, then neither party may make the proposed
disclosure.
8. Miscellaneous.
-------------
8.1 Remedies. The provisions of this paragraph 8.1 shall be the sole and
--------
exclusive remedy for any default under or breach by any party of any term or
provision of this Agreement or for its enforcement, and no claim may be brought
under or with respect to this Agreement except in accordance with and pursuant
to these terms.
(a) If there is a dispute under this Agreement, the parties shall meet
with one another and diligently attempt to resolve their disagreements. If they
are unable to do so, then upon request of any party to the dispute, they will
mediate the dispute, utilizing an impartial mediator pursuant to the rules of
the American Arbitration Association ("AAA") or any other reputable organization
that sponsors mediation upon which the parties shall mutually agree. If, after
thirty (30) days, the mediation is not successful, then any party to the dispute
may bring arbitration to resolve the dispute but only if it makes a written
demand to do so within twenty-four (24) months of the date it has delivered a
written claim as to the same matter to the other party pursuant to the terms of
this Agreement.
(b) Assuming negotiations and mediation are unsuccessful and a party
makes a timely written demand for arbitration, the arbitration shall occur
before a single arbitrator in Salt Lake City, UT (if the arbitration demand is
made by NADII) or in San Diego, CA (if the
23
<PAGE>
demand is made by Myriad) in accordance with the commercial arbitration rules of
the AAA. To assure predictability, the arbitrator shall be an attorney at law
selected by the parties (with the assistance of the AAA if necessary) with
experience in intellectual property issues. The arbitrator shall base the
decision on applicable principles of law and equity and judicial precedent and,
on request of a party, will include in the award findings of fact and
conclusions of law upon which the award is based. The arbitrator may grant such
legal or equitable relief as he or she seems to be appropriate, including money
damages, specific performance and injunctive relief. Questions of whether the
dispute is subject to arbitration shall also be decided by the arbitrator.
(c) Within ten (10) days after the appointment of the arbitrator, each
party to the dispute shall present to the arbitrator a written statement of the
issues in dispute. Within five (5) days thereafter, the arbitrator shall give
notice to the parties of a preliminary hearing to discuss the issues, which
hearing will occur approximately twenty (20) days thereafter. The final
arbitration hearing will occur within one hundred twenty (120) days after the
arbitration is initiated. Prior thereto, there will be limited discovery as
approved by the arbitrator at the preliminary hearing, including no more than
three depositions per party.
(d) Any party may request and obtain from a court of competent
jurisdiction provisional or ancillary remedies for relief such as an injunction
or the appointment of a receiver, but the institution of a judicial proceeding
will not constitute a waiver of the right of a party to submit a dispute to
arbitration. Judgment upon an arbitration award may be entered in any court
having jurisdiction. Subject to the award of the arbitrator, each party shall
pay an equal share of the arbitrator's fees, except the arbitrator shall have
the power to award all
24
<PAGE>
expenses (including attorney's fees and costs) to the prevailing party, as
determined by the arbitrator.
(e) All matters relative to the arbitration, including the result
thereof, shall be maintained as confidential by the parties to this Agreement,
their employees and representatives.
8.2 Publicity. No party shall issue a press release or otherwise
---------
publicize, advertise, announce or publicly describe the terms of this Agreement
unless it is approved by the other party. Any press release or other public
announcement approved by the parties may be released again without the approval
of the other party, provided it does not disclose material information not
previously authorized to be released. If the party considering disclosure
believes, after consultation, that it is legally required to make a disclosure,
it may, without liability hereunder, disclose the information which it is
legally compelled to disclose.
8.3 Assignment. This Agreement shall inure to the benefit of, and shall
----------
be binding upon, the parties and their respective successors and permitted
assigns. Except as provided for in Paragraph 2.4, no party may assign or
transfer this Agreement or any of its rights or duties under this Agreement
without the prior written consent of the other party except (i) to a majority
owned subsidiary of such party which expressly assumes the obligations of the
assigning party hereunder (including, without limitation, by operation of law),
or (ii) to a successor by merger, consolidation, stock sale, asset sale or
comparable transaction. Notwithstanding the other provisions of this Paragraph
8.3, Myriad shall not have the right, under any circumstances, to transfer or
assign any rights to Data and Materials or other Intellectual Property if NADII
believes in good faith that such transfer or assign would be
25
<PAGE>
materially or economically detrimental to it, and Myriad will accept such good
faith decision by NADII.
8.4 Amendment. This Agreement may be amended, modified or supplemented
---------
only by a written instrument specifically referring to this Agreement that is
signed and delivered by duly authorized officers of each party.
8.5 Waiver. The failure of any party to enforce at any time any provision
------
of this Agreement shall not be construed to be a waiver of any such provision
and will not affect the validity of this Agreement or any part hereof or the
right of such party to enforce any such provision. No waiver of any breach
hereof will be construed to be a waiver of any other breach.
8.6 Notices. Each notice required or permitted to be given or sent under
-------
this Agreement shall be given by hand delivery, or by facsimile transmission
(with confirmation copy by registered first-class mail), or by registered or
overnight courier (return receipt requested), to the parties at the addresses
and facsimile numbers indicated below:
If to Myriad, to:
Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, UT 84108
Attention President
Facsimile No.: (801) 584-3640
(with a copy to Myriad's General Counsel)
If to NADII, to:
Novartis Agricultural Discovery Institute, Inc.
3115 Merryfield Row, Suite 100
San Diego, CA 92121
Attention: President
Facsimile No.: (858) 812-1106
(with a copy to NADII's General Counsel)
26
<PAGE>
Any such notice shall be deemed to have been received on the earlier of the date
actually received or the date five (5) days after the same was posted or sent.
Either party may change its address or its facsimile number by giving the other
party written notice, delivered in accordance with this paragraph.
8.7 Force Majeure. If the performance of this Agreement or any
-------------
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or due to strikes, riot, storms, explosions, acts of God,
war, or a similar occurrence or condition beyond the reasonable control of the
parties, the party so affected shall, upon giving prompt notice to the other
parties, be excused from such performance during such prevention, restriction or
interference, and any failure or delay resulting therefrom shall not be
considered a breach of this Agreement.
8.8 No Agency. This Agreement shall not be construed to constitute the
---------
parties as partners, joint venturers or agents. No party (or its agents and
employees) is the representative of the other party for any purpose and no party
has power or authority as agent, legal representative, employee or in any other
capacity to represent, act for, bind, or otherwise create or assume any
obligation on behalf of, any other party for any purpose whatsoever.
8.9 Further Assurances. The parties shall each perform such acts, execute
------------------
and deliver such instruments and documents, and do all such other things as may
be reasonably necessary to accomplish the transactions contemplated in this
Agreement.
8.10 Expenses. Each party shall each bear its own costs and expenses
--------
(including attorneys' fees) incurred in connection with the negotiation and
preparation of this Agreement
27
<PAGE>
and, except as otherwise provided herein, consummation of the transactions
contemplated hereby.
8.11 Governing Law. Because the performance of the obligations
-------------
established by this Agreement are anticipated to occur within the State of Utah,
this Agreement shall be governed by, and construed in accordance with, the laws
of Utah, without giving effect to its conflicts of laws provisions.
8.12 Entire Agreement. This Agreement, including any exhibits and
----------------
schedules hereto, each of which is incorporated herein by this reference,
contains the entire agreement and understanding of the parties, and supersedes
any prior understandings and agreements, with respect to its subject matter.
8.13 Severability. If any provision of this Agreement, or the application
------------
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction or by an arbitrator named pursuant to paragraph 8.1
hereof to be invalid, unenforceable or void, the remainder of this Agreement and
such provisions as applied to other persons, places and circumstances shall
remain in full force and effect only if, after excluding the portion deemed to
be unenforceable, the remaining terms shall provide for the consummation of the
transactions contemplated hereby in substantially the same manner as originally
set forth herein. In such event, the parties shall negotiate, in good faith, a
substitute, valid and enforceable provision or agreement which most nearly
effects the parties' intent in entering into this Agreement.
8.14 Broker's Fees: Each of the parties represents and warrants that it
-------------
has not dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement, and, to its knowledge, no broker or
other person is entitled to any commission or
28
<PAGE>
finder's fee in connection with such transactions. Each of the parties shall be
responsible for, and shall indemnify and hold the other party harmless against,
the fees of its investment bankers and other advisors, if any.
8.15 Paragraph Headings. The headings included in this Agreement are for
------------------
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
8.16 Counterparts. This Agreement may be executed in any number of
------------
counterparts each of which shall constitute an original instrument but all of
which, taken together, shall constitute one and the same instrument.
9. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the following meanings:
"Affiliate" shall mean any corporation or other business entity which,
---------
directly or indirectly controls, is controlled by, or is under common control
with NADII or MYRIAD, as the case may be. As used in this definition, "control"
means (a) direct or indirect beneficial ownership of at least forty percent
(40%) of the voting stock of a corporation; or (b) possession of the power to
direct or cause the direction of the management and policies of such corporation
or other business entity, whether through the ownership of the outstanding
voting securities or by contract or otherwise.
"Project Committee" shall have the meaning set forth in paragraphs 1.2 and
-----------------
1.5.
"Confidential Information" shall have the meaning set forth in paragraph
------------------------
7.1(a).
"Marketing Period" shall have the meaning set forth in paragraph 2.3(b).
-----------------
29
<PAGE>
"Coverage" shall mean a [__________________________________________________
----------
________________________________________________________________________________
______________________________________________________________________________].
"Data and Materials" shall mean those articles and information created or
------------------
developed during the course of the Exclusive Period and pursuant to this
Agreement, as described in Exhibit A. Data and Materials includes but is not
limited [_______________________________________________________________________
____________]. Articles and information independently created or developed by
NADII, whether or not based on sequence information supplied by Myriad under
this Agreement, shall be excluded from the definition of Data and Materials,
except where such article or information is expressly provided to the
Collaboration by NADII.
"Intellectual Property" shall include ideas, processes, principles,
-----------------------
designs, methods, techniques, software, inventions, improvements, know-how, Data
and Materials and/or discoveries which are made or developed during the Project
Term pursuant to the Project and as part of the Collaboration and which relate
solely to cereal genomes.
"Patent Rights" shall mean any US or foreign patent applications,
---------------
provisional applications or patents, and any divisionals, continuations,
continuations-in-part, reexaminations, reissues or supplemental protection
certificates thereof which are drawn to Intellectual Property.
"Liability" shall have the meaning set forth in Paragraph 5.1.
---------
"Marketing Committee" shall have the meaning set forth in Paragraph 2.3(b).
-------------------
"Myriad" shall mean Myriad Genetics, Inc., a Delaware corporation.
------
"Myriad Indemnified Party" shall have the meaning set forth in Paragraph
------------------------
5.1.
"NADII" shall mean Novartis Agricultural Discovery Institute, Inc.
-----
"NADII Indemnified Party" shall have the meaning set forth in Paragraph
-----------------------
5.2.
"Project" shall have the meaning set forth in Recital A.
-------
"Project Description" shall have the meaning set forth in Paragraph 1.1.
-------------------
"Project Employees" shall have the meaning set forth in Paragraph 1.2.
-----------------
"Project Term" shall have the meaning set forth in Paragraph 1.1.
------------
30
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
NOVARTIS AGRICULTURAL DISCOVERY INSTITUTE, INC.
By: /s/ Steven P. Briggs
--------------------------------------
Name: Steven P. Briggs
---------------------------------
Title: President and C.E.O.
--------------------------------
MYRIAD GENETICS, INC.
By: /s/ James S. Kuo, M.D.
--------------------------------------
Name: James S. Kuo, M.D.
---------------------------------
Title: Vice President
--------------------------------
31
<PAGE>
Exhibit A
PROJECT DESCRIPTION
(1) Purpose of the Project. [___________________________________________
----------------------
_______________________________________________________________________________]
(2) Development Phase. [________________________________________________
-----------------
_______________________________________________________________________________]
(3) Production Phase. [________________________________________________
----------------
_______________________________________________________________________________]
(4) Transfer of Data and Materials. [__________________________________
------------------------------
________________________________________________________________________________
_______________________________________________________________________________]
[_______________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________]
32
<PAGE>
<TABLE>
<CAPTION>
==================================================================================
MONTHS DATE PROJECTED MILESTONES QUARTERLY
PAYMENT
SCHEDULE
==================================================================================
<S> <C> <C> <C>
[
]
$33.5M TOTAL
============
=================================================================================
</TABLE>
33
<PAGE>
Exhibit 10.2
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made as of the 30th day of September, 1999, by
and between Myriad Genetics, Inc. (the "Company"), a Delaware corporation with
primary offices at 320 Wakara Way, Salt Lake City, Utah 84108, U.S.A., and the
purchaser whose name and address is set forth below (the "Purchaser").
1. The Purchaser hereby subscribes for 355,000 shares of Common Stock of the
Company, U.S. $.01 par value per share (the "Shares"), at a purchase price of
U.S. $14.05 per Share, for an aggregate purchase price of U.S. $4,987,750.
2. The Purchaser represents, acknowledges, warrants and covenants with the
Company, as of the date hereof and the closing of the Purchaser's purchase of
the Shares, that (i) the Purchaser is a resident of Switzerland and is not a
"U.S. Person" as defined in Regulation S under the United States Securities Act
of 1933, as amended (the "Act"), and is not acquiring the Shares for the account
or benefit of any U.S. Person; (ii) the Shares have not been registered, and
will not be registered, under the Act, and the Purchaser will reoffer and resell
the Shares only in accordance with the provisions of Regulation S under the Act,
pursuant to registration under the Act, or pursuant to an available exemption
from registration; (iii) the Purchaser will not engage in hedging transactions
with regard to the Shares unless in accordance with the provisions of Regulation
S under the Act or otherwise in compliance with the Act; and (iv) the Purchaser
will give each person to whom it transfers the Shares notice of any restrictions
on transfer of the Shares.
The certificate representing the Shares will bear a legend which reflects the
foregoing restrictions, substantially similar to the following:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE BENEFIT OF, U.S. PERSONS AS PART OF THEIR DISTRIBUTION AT ANY
TIME EXCEPT (1) IN ACCORDANCE WITH REGULATION S UNDER THE ACT, (2) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (3) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE
SHARES OF THE COMPANY MAY NOT BE CONDUCTED UNLESS CONDUCTED IN COMPLIANCE WITH
THE ACT. TERMS USED IN THIS PARAGRAPH SHALL HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S.
The Purchaser understands that a stop transfer instruction will be in effect
with respect to transfer of the Shares consistent with the requirements of
applicable federal and state securities laws.
<PAGE>
3. The Purchaser agrees to indemnify the Company (the "Indemnitee") and hold
it harmless from and against any losses, claims, damages, liabilities and costs,
including expenses reasonably incurred in investigating, preparing for or
defending against any legal action or claim, directly or indirectly caused by,
based upon or arising out of the Indemnitee's breach of its representations,
warranties, covenants and obligations herein. As used in this paragraph 3,
Indemnitee shall include the directors, officers, controlling persons and
advisors of the Indemnitee. In no case shall the Indemnitee be liable under
this Agreement with respect to any claim made against it unless notified in
writing of the nature of the claim within 45 days after receipt of written
notice thereof.
4. The Purchaser hereby acknowledges that Peter Friedli will receive
compensation totaling $498,775 in connection with its purchase of the Shares.
5. This Agreement shall be governed by the laws of the State of Delaware
without giving effect to principles of conflicts of law. This Agreement may be
executed in counterparts, each of which shall be an original, but all of which
together shall constitute but one and the same instrument.
PURCHASER
Peter Friedli
- --------------------------------------
Print name of Purchaser
/s/ Peter Friedli
- --------------------------------------
Signature of individual Purchaser or authorized officer
Address:
------------------------------------
- --------------------------------------------
- --------------------------------------------
Myriad Genetics, Inc. hereby accepts the Purchaser's Subscription.
MYRIAD GENETICS, INC.
By: /s/ Christopher L. Wight
----------------------------------
Christopher L. Wight
Vice President, General Counsel
-2-
<PAGE>
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE BENEFIT OF, U.S.
PERSONS AS PART OF THEIR DISTRIBUTION AT ANY TIME EXCEPT (1) IN ACCORDANCE WITH
REGULATION S UNDER THE ACT, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT.
HEDGING TRANSACTIONS INVOLVING THE SHARES OF THE COMPANY MAY NOT BE CONDUCTED
UNLESS CONDUCTED IN COMPLIANCE WITH THE ACT. TERMS USED IN THIS PARAGRAPH AND
NOT OTHERWISE DEFINED IN THIS WARRANT HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S.
MYRIAD GENETICS, INC.
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for value received, Peter Friedli, or such person's
registered assigns (the "Holder"), is entitled to purchase from MYRIAD GENETICS,
------
INC., a Delaware corporation (the "Company"), at an Exercise Price of $15.45 per
-------
share, 17,750 fully paid and nonassessable shares of Common Stock, subject to
the provisions and upon the terms and conditions hereinafter set forth. As used
herein, (i) the term "Common Stock" shall mean the Company's presently
------------
authorized Common Stock, $.01 par value per share, and any stock into or for
which such Common Stock may hereafter be converted or exchanged.
1. Term of Warrant. The purchase or conversion right represented by this
---------------
warrant (hereinafter the "Warrant") is exercisable, in whole or in part at any
-------
time during the period (the "Warrant Term") commencing on the date hereof and
------------
continuing until 5:00 p.m., Salt Lake City time, on the THIRD ANNIVERSARY OF THE
DATE HEREOF.
2. Method of Exercise and Payment. Subject to Section 1 hereof, the purchase
------------------------------
right represented by this Warrant may be exercised by the Holder hereof, in
whole or in part, during the Warrant Term by the surrender of this Warrant (with
the notice of exercise form attached hereto as Exhibit 1 duly executed) at the
---------
principal office of the Company and by the payment to the Company of an amount
equal to the then applicable Exercise Price per share multiplied by the number
of shares then being purchased in lawful money of the United States of America.
The Company agrees that the shares so purchased shall be deemed to be issued to
the Holder hereof as the record owner of such shares as of the close of business
on the date on which this Warrant shall have been surrendered and payment made
for such shares as aforesaid (such date being
1
<PAGE>
referred to as the "Exercise Date"). In the event of any exercise of this
-------------
Warrant, certificates for the shares of stock so purchased shall be delivered to
the Holder hereof within 15 days thereafter and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
shares, if any, with respect to which this Warrant shall not then have been
exercised, shall also be issued to the Holder hereof within such 15 day period.
3. Stock Fully Paid; Reservation of Shares. All Common Stock which may be
---------------------------------------
issued upon the exercise or conversion of this Warrant will, upon issuance, be
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for the purpose of the issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustment of Purchase Price and Number of Shares. The kind of securities
-------------------------------------------------
purchasable upon the exercise of this Warrant, the Exercise Price and the number
of shares purchasable upon exercise of this Warrant shall be subject to
adjustment from time to time upon the occurrence of certain events as follows:
(a) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), or in case of any consolidation or merger of the Company with
or into another corporation, other than a merger with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant, or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as the
case may be, shall execute a new Warrant, providing that the Holder of this
Warrant shall have the right to exercise such new Warrant and procure upon such
exercise, in lieu of each share of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation, or merger by a holder of one share of Common Stock. Such new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. No
consolidation or merger of the Company with or into another corporation referred
to in the first sentence of this paragraph (b) shall be consummated unless the
successor or purchasing corporation referred to above shall have agreed to issue
a new Warrant as provided in this Section 4. The provisions of this subsection
(b) shall similarly apply to successive reclassification, changes,
consolidations, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock,
2
<PAGE>
the Exercise Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination.
(c) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to Common Stock (except
any distribution specifically provided for in the foregoing subparagraphs (a) or
(b) of, Common Stock, then the Exercise Price shall be adjusted, from and after
the date of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (a) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Exercise Price pursuant to any of Sections 4 (a) through (c), the number of
shares of Common Stock purchasable hereunder shall be adjusted, to the nearest
whole share, to the product obtained by multiplying the number of shares
purchasable immediately prior to such adjustment in the Exercise Price by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment and the denominator of which shall be the Exercise Price
immediately thereafter.
5. Fractional Shares. No fractional shares of Common Stock will be issued in
-----------------
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. Compliance with the Act.
-----------------------
(a) The Holder represents, warrants, acknowledges and agrees that (1)
it is a resident of Switzerland and is not a "U.S. Person" as defined in
Regulation S under the Act, and is not acquiring this Warrant or the shares of
Common Stock to be issued upon exercise of this Warrant (the "Shares") for the
account or benefit of any U.S. Person; (2) this Warrant and the Shares have not
been registered, and will not be registered under the Act, and may not be
offered or sold within the United States or to, or for the account or benefit
of, US persons except in accordance with the provisions of Regulation S under
the Act, pursuant to registration under the Act, or pursuant to an available
exemption from registration; (3) the Holder will not engage in hedging
transactions with regard to the Warrant or the Shares unless in accordance with
the provisions of Regulation S under the Act or otherwise in compliance with the
Act; and (4) it will give each person to whom it transfers this Warrant or the
Shares notice of any restrictions on transfer of this Warrant or the Shares.
(b) Without limiting the generality of the foregoing, the Company shall be
under no obligation to issue the Shares unless and until the Holder shall have
executed an
3
<PAGE>
investment letter in form and substance satisfactory to the Company, including a
warranty at the time of such exercise that is acquiring such shares for its own
account, for investment and not with a view to, or for sale in connection with,
the distribution of any such shares, in which event the Holder shall be bound by
the provisions of the following legend or a legend in substantially similar form
which shall be endorsed upon the certificate(s) evidencing the shares issued
pursuant to such exercise:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE BENEFIT OF, U.S. PERSONS AS PART OF THEIR
DISTRIBUTION AT ANY TIME EXCEPT (1) IN ACCORDANCE WITH REGULATION S UNDER
THE ACT, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THE SHARES OF THE COMPANY MAY NOT BE CONDUCTED
UNLESS CONDUCTED IN COMPLIANCE WITH THE ACT. TERMS USED IN THIS PARAGRAPH
SHALL HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S.
(c) The Holder hereof understands that a stop transfer instruction
will be in effect with respect to transfer of Shares consistent with the
requirements of applicable federal and state securities laws.
7. Miscellaneous.
-------------
(a) No Rights as Shareholder. This Warrant shall not entitle its
------------------------
holder to any of the rights of a stockholder of the Company until the holder has
exercised this Warrant.
(b) Governing Law. This Warrant shall be governed by and construed
-------------
under the laws of the State of Delaware.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
4
<PAGE>
IN WITNESS WHEREOF, this Warrant is executed as of this 4th day of October,
1999.
MYRIAD GENETICS, INC.
By: /s/ Peter D. Meldrum
-----------------------------------------
Name: Peter D. Meldrum
Title: President and Chief Executive Officer
5
<PAGE>
EXHIBIT 10.3
SECURITIES PURCHASE AGREEMENT
between
MYRIAD GENETICS, INC.,
and
SCHERING BERLIN VENTURE CORPORATION
Dated as of October 15, 1999
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT, made as of October 15, 1999 (the "Effective Date"), is by
and between MYRIAD GENETICS, INC., a Delaware corporation with principal offices
at 320 Wakara Way, Salt Lake City, Utah (the "Company"), and SCHERING BERLIN
VENTURE CORPORATION, a Delaware corporation with offices at 340 Changebridge
Road, Pine Brook, New Jersey (the "Purchaser").
WHEREAS the Company and the Purchaser are discussing a potential business
collaboration in connection with which the parties hereto intend to enter into
this Securities Purchase Agreement and a Standstill Agreement substantially in
the form attached as Exhibit A hereto;
NOW, THEREFORE, in consideration of the mutual covenants contained in the
Standstill Agreement and this Securities Purchase Agreement, the parties agree
as follows:
SECTION 1. Authorization of Sale of the Common Shares. The Company has
------------------------------------------
authorized the issuance and sale to the Purchaser of that number of shares
(each, a "Common Share" and, collectively, the "Common Shares") of common stock,
$.01 par value per share ("Common Stock"), of the Company, as is equal to the
quotient obtained by dividing $5,000,000 by $16.50 (the "Common Stock Price"),
rounded to the next highest full Common Share.
SECTION 2. Agreement to Sell and Purchase the Shares. On the terms and
-----------------------------------------
subject to the conditions of this Securities Purchase Agreement, at the Closing
(as defined in Section 3 hereof), the Company will sell, transfer and deliver to
the Purchaser, and the Purchaser will buy from the Company the Common Shares, at
an aggregate purchase price of $5,000,000 (the "Common Purchase Price").
<PAGE>
SECTION 3. Delivery of the Shares at the Closing. The completion of the
-------------------------------------
purchase and sale of the Common Shares pursuant to this Stock Purchase Agreement
(the "Closing") shall occur on the Effective Date or such later time as shall be
agreed to by the Company and the Purchaser. At the Closing, the Company shall
issue and deliver to Purchaser a stock certificate representing the Common
Shares, such certificate to be registered in the name of the Purchaser. The
Company's obligation to close the transaction shall be subject to the following
conditions, any of which may be waived by the Company: (a) the receipt by the
Company of a certified or official bank check or wire transfer of funds in the
full amount of the Common Purchase Price for the Common Shares being purchased
hereunder; (b) the accuracy of the representations and warranties made by the
Purchaser herein as though such representations and warranties had been made on
and as of the Closing, and the fulfillment of those undertakings of the
Purchaser to be fulfilled prior to the Closing and the Company's receipt of a
Certificate of an authorized officer of the Purchaser certifying the same; (c)
the execution and delivery by the Purchaser of the Standstill Agreement; and (d)
no statute, law, ordinance, rule or regulation or injunction enacted, entered,
promulgated, enforced or issued by any Federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity"), or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby being in
effect. The Purchaser's obligation to close the transaction shall be subject to
the fulfillment of the following conditions, any of which may be waived by the
Purchaser: (a) the accuracy of the representations and warranties made by the
Company herein as of the Closing as though such representations and warranties
had been made on and as of the Closing, the accuracy of the statements of the
Company made in any certificates pursuant to the provisions hereof and the
fulfillment of those undertakings of the Company to be fulfilled prior to the
Closing, and the Purchaser's receipt of a certificate executed by the President
of the Company certifying the same; (b) no statute, law, ordinance, rule or
regulation or injunction enacted, entered, promulgated, enforced or issued by
any Governmental Entity or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby being in effect and (c)
there not being pending or threatened any suit, action or proceeding challenging
or seeking to restrain or prohibit the transactions contemplated by this
Securities Purchase Agreement or seeking to obtain from
-2-
<PAGE>
Purchaser in connection with the transactions contemplated by this Securities
Purchase Agreement any damages that are material in relation to Purchaser or
seeking to impose limitations on the ability of Purchaser to acquire or hold, or
exercise full rights of ownership of, the Common Shares, including the right to
vote the Common Shares on all matters properly presented to the stockholders of
the Company.
SECTION 4. Representations, Warranties and Covenants of the Company. The
--------------------------------------------------------
Company hereby represents and warrants to, and covenants with, the Purchaser as
follows:
4.1. Organization. Each of the Company and its wholly-owned
------------
subsidiaries, Myriad Pharmaceuticals, Inc., Myriad Genetic Laboratories, Inc.
and Myriad Financial, Inc. (the "Subsidiaries"), has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized. Each of the Company and the
Subsidiaries has full corporate power and authority and possesses all
governmental franchises, licenses, permits, authorizations and approvals
necessary to enable it to own, lease, operate and occupy its properties and to
conduct its business as presently conducted and is duly registered or qualified
to do business and in good standing in each jurisdiction in which it owns or
leases property or transacts business and where the failure to be so qualified
would have a material adverse effect upon the business, condition (financial or
other), properties, prospects or results of operations of the Company and the
Subsidiaries, taken together. The Company does not own, directly or indirectly,
any interest in any corporation, association, or other entity, other than the
Subsidiaries. The Company has delivered to Purchaser true and complete copies of
its certificate of incorporation and by-laws, in each case as amended through
the date of this Securities Purchase Agreement.
4.2. Due Authorization. The Company has all requisite corporate power
-----------------
and authority to execute, deliver and perform its obligations under this
Securities Purchase Agreement, and the execution and delivery of this Securities
Purchase Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action. The Company has
duly executed and delivered this Securities
-3-
<PAGE>
Purchase Agreement and this Securities Purchase Agreement constitutes a legal,
valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, except as (i) rights to indemnity and contribution
may be limited by state, federal or foreign laws or the public policy underlying
such laws, (ii) enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally, and (iii) enforceability may be subject
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.3. Non-Contravention. The execution and delivery of this Securities
-----------------
Purchase Agreement, the issuance and sale of the Common Shares to be sold by the
Company hereunder, the fulfillment of the terms of this Securities Purchase
Agreement and the consummation of the transactions contemplated hereby will not
conflict with, result in a breach or constitute a violation of, or default (with
the passage of time or otherwise) under or result in the creation or imposition
of any lien, charge, encumbrance, claim, security interest or restriction
whatsoever upon any of the material properties or assets of the Company or the
Subsidiaries or an acceleration of indebtedness pursuant to (i) the charter, by-
laws or other organizational documents of the Company or the Subsidiaries (ii)
the terms of any obligation, agreement, bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust or any other
agreement or instrument to which any of the Company or the Subsidiaries is a
party or by which any of them is bound or to which any of the property or assets
of the Company or the Subsidiaries is subject, or (iii) any statute, law, rule,
administrative regulation, ordinance, judgement, decree or order applicable to
the Company or the Subsidiaries of any court, or governmental body, regulatory
body, administrative agency, arbitrator or other authority having jurisdiction
over the Company or the Subsidiaries or any of its or their properties. No
consent, approval, authorization or other order of, or registration,
qualification or filing with, any court, regulatory body, administrative agency,
or other governmental body is required to be made or obtained by or on behalf of
the Company for the valid issuance and sale of the Common Shares to be sold
pursuant to this Securities Purchase Agreement or in connection with the
execution, delivery and performance of this Securities Purchase Agreement or the
consummation of the transaction contemplated hereby, other than such as have
been made or obtained.
-4-
<PAGE>
4.4. No Material Adverse Change. Subsequent to the date of the most
--------------------------
recent Quarterly Report on Form 10-Q filed by the Company with the Securities
and Exchange Commission, the Company and the Subsidiaries taken together have
not incurred any material liabilities or obligations, direct or contingent,
other than in the ordinary course of business, and there has not been any
material adverse change in their consolidated condition (financial or other),
earnings, results of operations, business, prospects, properties, key personnel
or capitalization.
4.5 Capitalization. As of June 30, 1999, the Company had a total
--------------
authorized capitalization consisting of (i) 15,000,000 shares of common stock,
$0.01 par value per share of which 9,428,732 shares were outstanding, and (ii)
5,000,000 shares of preferred stock, $.01 par value per share, of which no
shares were outstanding. As of such date, there were outstanding options to
acquire a total of 1,954,791 shares of Common Stock and outstanding warrants to
acquire a total of 26,243 shares of Common Stock. The outstanding shares of
capital stock of the Company have been duly and validly issued and are fully
paid and nonassessable. The Common Shares have been duly authorized and, when
issued and paid for pursuant to the terms of this Securities Purchase Agreement,
will be validly issued, fully paid and nonassessable.
4.6 Disclosure. No representation or warranty of the Company
----------
contained in this Securities Purchase Agreement, and no statement contained in
any document or certificate furnished by or on behalf of the Company to
Purchaser pursuant to this Securities Purchase Agreement contains, or will
contain any untrue statement of a material fact, or omits, or will omit to state
any material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they were made, not misleading or
necessary in order to fully and fairly provide the information required to be
provided in any such document or certificate.
4.7 Private Offering. None of the Company, its affiliates and its
----------------
representatives has issued, sold or offered any security of the Company to any
person under circumstances that would cause the sale of the Common Shares, as
contemplated by this Securities Purchase Agreement, to be subject to the
registration requirement of the Securities Act
-5-
<PAGE>
of 1933, as amended (the "Securities Act"), or applicable state securities laws.
None of the Company, its affiliates and its representatives will offer the
Common Shares or any part thereof or any similar securities for issuance or sale
to, or solicit any offer to acquire any of the same from, anyone so as to make
the issuance and sale of the Common Shares subject to the registration
requirements of Section 5 of the Securities Act or applicable state securities
laws. Assuming the representations of the Purchaser contained in Section 5.1 are
true and correct, the sale and delivery of the Common Shares hereunder are
exempt from the registration and prospectus delivery requirements of the
Securities Act or applicable state securities laws.
SECTION 5. Representations, Warranties and Covenants of the Purchaser.
----------------------------------------------------------
5.1. Securities Act Exemption. The Purchaser represents and warrants
------------------------
to, and covenants with, the Company, as of the date hereof and as of the Closing
Date, that (i) the Purchaser is an "accredited investor" as defined in
Regulation D under the Securities Act, and also is knowledgeable and experienced
in making investments in private placement transactions such as the purchase of
the Common Shares; (ii) the Purchaser is acquiring the Common Shares for its own
account for investment and with no present intention of distributing any of such
Common Shares, and no arrangement or understanding exists with any other person
regarding the distribution of any of such Common Shares (these representations
and warranties not limiting the Purchaser's right to sell pursuant to an
effective registration statement registering the Common Shares for resale or
pursuant to any other means of sale legally available), (iii) the Purchaser will
not, directly or indirectly, voluntarily offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Common Shares except in compliance with
the Securities Act, applicable state securities laws and the respective rules
and regulations promulgated thereunder; and (iv) the Purchaser has had an
opportunity to ask questions of and receive answers from the management of the
Company regarding the Company, its business and the offering of the Common
Shares.
5.2. Due Authorization. The Purchaser further represents and warrants
-----------------
to, and covenants with, the Company that (i) the Purchaser has all requisite
power and authority to
-6-
<PAGE>
execute, deliver and perform this Securities Purchase Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Securities
Purchase Agreement and (ii) upon the execution and the delivery hereof, this
Securities Purchase Agreement shall constitute a valid and binding obligation of
the Purchaser enforceable in accordance with its terms, except as rights to
indemnity and contribution may be limited by state, federal or foreign laws or
the public policy underlying such laws, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally, and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. Restrictions on Transfer. The Purchaser acknowledges and
------------------------
understands that the Common Shares have not been registered under the Securities
Act and applicable state securities laws and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available. The certificate representing the Common Shares issued
to the Purchaser will bear a legend in substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND APPLICABLE STATE LAW OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED. THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO THE PROVISIONS OF A SECURITIES PURCHASE AGREEMENT DATED AS
OF OCTOBER 15, 1999.
-7-
<PAGE>
The Purchaser agrees that any sale, transfer, pledge, hypothecation or
other disposition of the Common Shares shall be made in compliance with such
legends.
5.4. Lock-up. If (i) during the Registration Period (as hereafter
-------
defined), the Company shall file a registration statement with the SEC under the
Securities Act (other than in connection with the registration of securities
issuable pursuant to an employee stock option, stock purchase or similar plan or
pursuant to a merger, exchange offer or a transaction of the type specified in
Rule 145 under the Securities Act) with respect to the Common Stock or
securities convertible into, or exchangeable or exercisable for, Common Stock
and (ii) with reasonable prior notice, the Company (in the case of a non-
underwritten offering by the Company pursuant to such registration statement)
advises the Purchaser in writing that a public sale or distribution of Common
Shares would materially adversely affect such offering or the underwriter (in
the case of an underwritten offering by the Company pursuant to such
registration statement) advises the Company in writing (in which case the
Company shall notify the Purchaser) that a public sale or distribution of Common
Shares would adversely impact such offering, then the Purchaser agrees that it
shall, if so requested by the Company, enter into an agreement providing that it
shall not, to the extent not inconsistent with applicable law, effect any public
sale or distribution of Common Shares, including sales under Rule 144 of the
Securities Act, or any securities convertible into or exercisable for Common
Shares until the earliest of (A) 90 days from the effective date of such
registration statement, (B) the abandonment of such offering, and (C) if such
offering is an underwritten offering, the termination in whole or in part of any
"holdback" period obtained by the underwriter in such offering from the Company
in connection therewith.
SECTION 6. Survival of Representations, Warranties and Agreements;
-------------------------------------------------------
Indemnification.
- ---------------
6.1 Survival of Representations, Warranties and Agreements. Notwithstanding
------------------------------------------------------
any investigation made by any party to this Securities Purchase Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive the execution hereof, the delivery to the
Purchaser of the Common Shares being
-8-
<PAGE>
purchased, and the payment therefor. The provisions of Sections 6.2, 6.3, 7.6,
and 14 shall survive the termination or cancellation of this Securities Purchase
Agreement.
6.2 Indemnification by the Company. The Company hereby agrees to defend,
------------------------------
indemnify and hold the Purchaser, its Affiliates, and their respective officers,
directors, employees and agents (collectively, the "Purchaser Indemnitees")
harmless from and against any damages, liabilities, losses and expenses
(including reasonable attorneys' fees and expenses) suffered or incurred by the
Purchaser Indemnitees as a result of or based upon any material breach of any
representation, warranty or agreement of the Company in this Securities Purchase
Agreement, or by reason of any claim, action or proceeding asserted or arising
out of a breach of any such representation, warranty or agreement. Affiliate
means, with respect to any specified person, any other person that directly or
indirectly, through one or more intermediates, controls, is controlled by or is
under common control with, such specified person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by and "under common control with"), as used with respect to any
person, means the direct or indirect possession of the power to direct or cause
the direction of the management or policies of such person, whether through the
ownership of voting securities, by contract or otherwise.
6.3 Indemnification by the Purchaser. The Purchaser hereby agrees to
--------------------------------
defend, indemnify and hold the Company and its Affiliates and their respective
officers, directors, employees and agents (collectively, the "Company
Indemnitees") harmless from and against any damages, liabilities, losses and
expenses (including reasonable attorneys' fees and expenses) which are suffered
or incurred by the Company Indemnitees as a result of or based upon any material
breach of any representation, warranty or agreement of the Purchaser in this
Securities Purchase Agreement, or by reason of any claim, action or proceeding
asserted or arising out of a breach of any such representation, warranty or
agreement.
SECTION 7. Registration of the Shares; Compliance with the Securities Act.
--------------------------------------------------------------
7.1 "Piggyback" Registration. If at any time the Company shall
------------------------
initiate a
-9-
<PAGE>
registration under the Securities Act of any of its Common Stock or securities
convertible into or exercisable for shares of Common Stock for its own account,
other than securities to be issued solely (i) in connection with any acquisition
of any entity or business, (ii) upon the exercise of stock options, or (iii)
pursuant to employee benefit plans (including registrations on Form S-8 or Form
S-4 or their then equivalents), it shall send to the Purchaser prompt written
notice of such determination (which notice shall include the anticipated date of
the initial sale of securities in such offering (the "Sale Date") and the number
of shares of Common Stock proposed to be included in such registration) at least
30 days prior to the Sale Date and, if within fifteen (15) days after the giving
of such notice, the Purchaser shall so request in a writing received by the
Company, the Company shall include in such registration statement the number of
Common Shares that the Purchaser requests to be registered therein; except that,
if in connection with any underwritten public offering of Common Stock by the
Company, the underwriter shall advise the Company in writing that, in the
judgment of the underwriter, the number of shares of Common Stock requested to
be included in such offering would materially adversely affect its ability to
effect such offering, then the number of Common Shares to be included in such
registration statement shall be limited to the extent necessary to effect such
offering as determined by the underwriter (which may be the complete exclusion
of such Common Shares); provided, however, that such limitation shall be
proportionate to the limitation applied to any other holders of Common Stock
with "piggyback" registration rights who request the inclusion of shares in the
registration statement based on the number of shares of Common Stock requested
to be included. The Purchaser may elect to withdraw from participation in a
registration pursuant to this Section 7.1 by written notice to the Company no
later than the seventh day prior to the effective date of such registration
statement. The Company will use commercially reasonable efforts to maintain the
effectiveness of any registration statement under which any of the Common Shares
are being offered pursuant to this Section 7.1 until the earlier to occur of (a)
the completion of the distribution pursuant to such registration statement or
(b) thirty (30) days after the effectiveness of such registration statement.
7.2 Demand Registrations. (a) Subject to the provisions of this
--------------------
Section 7.2, the Purchaser shall have the right, upon written demand given to
the Company (the "Demand
-10-
<PAGE>
Notice") to request the Company to register its Common Shares (a "Demand
Registration") under and in accordance with the provisions of the Securities Act
by filing and having declared effective a registration statement (a "Demand
Registration Statement"), covering the Common Shares held by it.
(b) Within 45 days of receipt of a Demand Notice, the Company shall
file with the SEC a registration statement on the appropriate form for the
registration and sale (which shall be a short form registration if possible), in
accordance with the intended method or methods of distribution, of the total
number of Common Shares specified by the Purchaser in such Demand Notice.
(c) The Company shall use its reasonable best efforts to cause such
Demand Registration Statement to be declared effective by the SEC and to keep
such Demand Registration Statement continuously effective throughout the
Registration Period. As used herein, "Registration Period" shall mean with
respect to a Demand Registration Statement a period commencing on the effective
date of such Demand Registration Statement and ending on the earlier of the (i)
first day on which all Common Shares included in such Demand Registration
Statement have been sold as described therein and (ii) the 180th day after the
effective date.
(d) In connection with any Demand Registration in which other holders
of Common Stock elect to include shares of Common Stock in such Demand
Registration pursuant to registration rights granted by the Company to such
holders (such holders being collectively referred to with the Purchaser as the
"Selling Securityholders"), such election shall only be valid if such holders
agree to pay a pro rata share of all the costs and expenses incurred in
connection with such Demand Registration. In the event that such Demand
Registration involves an underwritten offering and the managing underwriter or
underwriters participating in such offering (collectively, the "Underwriter")
shall advise the Company and the Selling Securityholders in writing that, in the
judgment of the Underwriter, the number of shares of Common Stock requested to
be included in such offering would materially adversely affect its ability to
effect such offering, then the Company will include in such offering, to the
extent of the number of
-11-
<PAGE>
shares of Common Stock that can be sold in such offering: first, Common Shares
requested to be sold by the Purchaser and second, all other Common Stock
proposed to be registered by the Selling Securityholders other than the
Purchaser. No securities other than shares of Common Stock shall be included in
such Demand Registration Statement without the written consent of the Purchaser.
(e) Notwithstanding the foregoing, the Company shall be entitled to
postpone, for a period of not more than 90 days after receipt of a Demand
Notice, the filing of any Demand Registration Statement otherwise required to be
prepared and filed by it pursuant to Section 7.2(a) hereof if, at the time the
Company receives a Demand Notice, the Board of Directors of the Company
determines in its reasonable judgment that such registration and offering would
interfere with any material financing, acquisition, corporate reorganization or
other material transaction or development involving the Company and promptly
gives the Purchaser written notice of such determination; provided that (i) upon
such postponement by the Company, the Company shall be required to file such
Demand Registration Statement as soon as practicable after the Board of
Directors of the Company shall determine, in its reasonable business judgment,
that such registration and offering will not interfere with the aforesaid
material financing, acquisition, corporate reorganization or other material
transaction or development involving the Company and (ii) no more than one such
postponement shall occur in any 360 day period.
(f) The Purchaser may, at any time prior to the Effective Date of such
Demand Registration, revoke such demand by providing written notice to the
Company. In such event, the Purchaser shall reimburse the Company for its
out-of-pocket expenses incurred in the preparation, filing and processing of
the Demand Registration.
7.3 Notice During Effectiveness of Registration Statements. The
------------------------------------------------------
Company will promptly notify the Purchaser and each underwriter under any
registration statement under which any of the Common Shares are being offered
pursuant to Section 7.1 or 7.2 hereof, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event of which the Company has knowledge as a result of which the
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<PAGE>
prospectus contained in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. The Purchaser agrees
upon receipt of such notice forthwith to cease making offers and sales of Common
Shares pursuant to such registration statement or deliveries of the prospectus
contained therein for any purpose until the Company has prepared and furnished
such amendment or supplement to the prospectus as may be necessary so that, as
thereafter delivered to a purchaser of Common 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. The Purchaser
further agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in this Section 7.3, the Purchaser
will, if requested by the Company, deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in the Purchaser's
possession of the prospectus current at the time of receipt of such notice from
the Company.
7.4 Expenses of Registration. All costs and expenses incurred in
------------------------
connection with any registration pursuant to Section 7.1, including, without
limitation, all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel for the Company, and expenses of any special
audits of the Company's financial statements incidental to or required by such
registration shall be paid by the Company; provided, however, that the Company
shall have no obligation to pay any stock transfer taxes, underwriters' fees,
discounts or commissions with respect to the sale of the Common Shares, or the
fees and expenses of any counsel or advisor to the Purchaser. All costs and
expenses incurred in connection with any registration pursuant to Section 7.2,
including, without limitation, all registration, filing and qualification fees,
printing expenses, fees and disbursements of counsel for the Company, and
expenses of any special audits of the Company's financial statements incidental
to or required by such registration shall be paid by the Purchaser; provided,
however, that the Purchaser shall have no obligation to pay any stock transfer
taxes, underwriters' fees, discounts or commissions with respect to the sale of
Common Stock offered by persons other than the Purchaser.
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<PAGE>
7.5 Registration Procedures. Whenever the Purchaser has requested
-----------------------
that any Common Shares be included or registered in a Company registration
statement pursuant to this Section 7, the Company will use commercially
reasonable efforts to effect the registration and sale of such Common Shares
upon the terms and conditions hereof, and in connection with any such request,
the Company will:
(a) prepare and file with the SEC, and furnish to the Purchaser
and its counsel prior to the filing thereof, a copy of such
registration statement (including any preliminary prospectus contained
therein), and each amendment (including post-effective amendments)
thereto and each amendment or supplement, if any, to the prospectus
included therein and shall reflect in each such document, when so
filed with the SEC, such comments as the Purchaser reasonably may
propose;
(b) use its best efforts to ensure that (i) such registration
statement and any amendment thereto and such prospectus forming part
thereof and any amendment or supplement thereto complies as to form in
all material respects with the Securities Act, (ii) such registration
statement and any amendment thereto does not, when it becomes
effective, contain 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 contained therein not misleading and (iii) any
prospectus forming part of such registration statement, and any
amendment or supplement to such prospectus, does not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading;
provided, however, that the Company shall have no liability under
clauses (ii) or (iii) of this paragraph (b) with respect to any such
untrue statement or omission made therein in reliance upon and
conformity with information furnished to the Company by or on behalf
of the Purchaser for inclusion therein;
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<PAGE>
(c) use its best efforts to register or qualify or cooperate
with Purchaser and its counsel in connection with the registration or
qualification of such Common Shares under the securities or blue sky
laws of such jurisdictions as the Purchaser, may reasonably request
and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Purchaser to consummate the
disposition in such jurisdictions of the Common Shares; provided, that
the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required
to qualify but for this paragraph (b), or (ii) take any action that
would subject it to the service of process in suits other than
relating to the sale of the Common Shares or any violation of state
securities laws in any jurisdiction where it is not now so subject;
(d) use its best efforts to cause the Common Shares covered by
such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to
enable the Purchaser or the underwriter or underwriters, if any, to
consummate the disposition of such Common Shares subject to the
proviso contained in paragraph (c) above;
(e) promptly advise the Purchaser and, if requested by the
Purchaser, promptly confirm such advice in writing:
(i) when such registration statement or prospectus and any
amendment or supplement thereto has been filed with the SEC
and when such registration statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the SEC for amendments or supplements to
such registration statement or the prospectus included
therein or for additional information;
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<PAGE>
(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of such registration statement or the
initiation or threat of any actions or proceeding for that
purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption
from qualification of the Common Shares included in such
registration statement for sale in any jurisdiction or the
initiation or threatening of any action or proceeding for
such purpose; and
(v) of the happening of any event that requires the amendment or
supplementation of such registration statement or prospectus
(or documents incorporated or deemed to be incorporated
therein by reference) so that, as of such date, the
statements therein are not misleading and do not contain any
untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements contained therein (in the case of the
prospectus, in light of the circumstances under which they
were made) not misleading;
(f) use its reasonable best efforts to obtain the withdrawal of any
order suspending the effectiveness of such registration statement or
the lifting of any suspension of the qualification or exemption from
qualification of any common Shares for sale in any jurisdiction in the
United States, at the earliest possible time;
(g) furnish to the Purchaser and its counsel and the underwriter, if
any, and its counsel, without charge, a conformed copy of such
registration statement and any and all post-effective amendments
thereto, including financial statements and schedules, and all
exhibits thereto (including those incorporated therein by reference);
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<PAGE>
(h) deliver to the Purchaser, without charge, as many copies of the
prospectus included in such registration statement and any amendment
or supplement thereto as the Purchaser shall reasonably request; and
subject to Section 9.9 hereof, the Company consents to the use of the
prospectus or any amendment or supplement thereto by the Purchaser in
connection with the offering and sale of the Common Shares covered by
the prospectus or any amendment or supplement thereto;
(i) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions (including
obtaining customary opinions of counsel for the Company) as are
reasonably required in order to expedite or facilitate the disposition
of such Common Shares;
(j) to the extent customary for an offering of the type registered by
such registration statement, use its best efforts to obtain a comfort
letter from the Company's independent public accountants in customary
form and covering matters of the type customarily covered by comfort
letters with respect to such type of offering;
(k) otherwise comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as
soon as reasonably practicable, an earnings statement covering a
period of 12 months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act and Rule 158 thereunder.
(l) cause all such Common Shares to be listed on each securities
exchange or quotation system on which similar securities issued by the
Company are then listed;
(m) cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD") and in
the performance of
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<PAGE>
any due diligence investigation that is required in accordance with
the rules and regulations of the NASD;
(n) cooperate with the Purchaser to facilitate the timely preparation
and delivery of certificates representing Common Shares to be sold
pursuant to such registration statement in such denominations and
registered in such names as the Purchaser may reasonably request at
least two business days prior to such sales;
(o) at any time and from time to time upon the occurrence of any event
contemplated by paragraph 7.5 (e) (v) above, the Company shall use its
reasonable best efforts to prepare and file with the SEC as soon as
reasonably practicable a post-effective amendment to such registration
statement or an amendment or supplement to the related prospectus or
file any other required document so that, as thereafter delivered to
purchasers of the Common Shares offered thereby, the prospectus will
not include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements contained therein
(in the case of the prospectus, in the light of the circumstances
under which they were made) not misleading; and
(p) the Company shall make reasonably available for inspection during
normal business hours by the Purchaser and any attorney, accountant or
other agent retained by the Purchaser (collectively, the
"Inspectors"), all financial and other records and other information,
pertinent cooperate documents and properties of any of the Company and
its Subsidiaries and Affiliates (collectively, the "Records"), as
shall be reasonably necessary to enable the Inspectors to exercise
their due diligence responsibility; provided, however, that the
Records that the Company determines, in good faith, to be confidential
and which it notifies any Inspectors are confidential shall not be
disclosed to any Inspector unless such Inspector signs a
confidentiality agreement reasonably satisfactory to the Company.
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<PAGE>
The Company may require the Purchaser to furnish to the Company such
information regarding the distribution of the Common Shares as the Company may
from time to time reasonably request in writing that is required for inclusion
in any registration statement.
7.6 Indemnification.
---------------
(a) Indemnification by the Company. In connection with any
------------------------------
registration statement in which the Purchaser's Common Shares are included
pursuant hereto, the Company will indemnify and hold harmless the Purchaser,
together with each of the Purchaser's officers, directors, employees, agents and
partners, and each underwriter of the Common Shares, if any, and each person who
controls the Purchaser or any underwriter within the meaning of the Exchange Act
or the Securities Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement or prospectus or an amendment thereof or
supplement thereto, or arising out of or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such person for any legal and other expenses reasonably incurred in connection
with investigating, defending or settling 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 or liability arises out of
or is based on any untrue statement or omission (or alleged untrue statement or
omission) made therein in reliance upon and in conformity with written
information furnished to the Company by the Purchaser or underwriter
specifically for use therein. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
(b) Indemnification by the Purchaser. The Purchaser will, if any of
--------------------------------
its Common Shares are included in a registration pursuant hereto, indemnify the
Company, each of its directors, and each of its officers who signs the
registration statement, if any, of the Common Shares covered by such
registration statement, and each person who controls the Company and
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<PAGE>
any underwriter within the meaning of the Securities Act, against all claims,
losses, expenses, damages and liabilities (or actions in respect thereto)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any such registration statement or prospectus or
any amendment thereof or supplement thereto, or arising out of or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such person for any legal and other expenses reasonably
incurred in connection with investigating, defending or settling any such claim,
loss, damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement or omission (or alleged untrue statement or
omission) is made in such registration statement or prospectus or any amendment
thereof or supplement thereto in reliance upon and in conformity with written
information relating to the Purchaser furnished to the Company by the Purchaser
specifically for use therein.
(c) Contribution. In the event that the indemnity provided in
------------
Paragraph (a) o (b) of this Section 7.6 is unavailable to or insufficient to
hold harmless an indemnified party for any reason, the Company and the Purchaser
will contribute to the aggregate losses, claims, damages or liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) to which they may be subject (after
contribution from others) in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the Purchaser on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or by the Purchaser on the other, and
each party's relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission; provided, however,
that, in any such case, (a) the Purchaser will not be required to contribute any
amount in excess of the public offering price of all Common Shares offered by it
pursuant to such registration statement and (b) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was
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<PAGE>
not guilty of such fraudulent misrepresentation. The Company and the Purchaser
agree that it would not be just and equitable if contributions were determined
by pro rata allocation or any other method of allocation that does not take
account of the equitable considerations referenced above.
(d) Indemnification Procedures. Each party entitled to indemnification
--------------------------
under this Section 7.6 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party who shall conduct the defense of such claim or litigation
shall be approved by the Indemnified Party (which approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, 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 hereunder, unless and to the extent it did
not otherwise learn of such claim and such failure resulted in the forfeiture by
the Indemnifying Party of substantial rights and defenses. Notwithstanding the
Indemnifying Party's election to appoint counsel to represent the Indemnified
Party in an action, the Indemnified Party shall have the right to employ
separate counsel (including local counsel), and the Indemnifying Party shall
bear the reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the Indemnifying Party to represent the Indemnified
Party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
and/or other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party, (iii) the Indemnifying Party shall not have
employed counsel satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of the institution of
such action or (iv) the Indemnifying Party shall authorize the Indemnified Party
to employ separate counsel at the expense of the Indemnifying Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the prior written consent of each Indemnified Party,
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<PAGE>
compromise, consent to entry of any judgment or enter into any settlement which
does not include an unconditional release of each Indemnified Party from all
liability in respect of such claim or litigation.
7.7 Transferability of Registration Rights. The registration rights
--------------------------------------
granted hereunder may be transferred by the Purchaser (a) with the prior written
consent of the Company, (b) without the prior written consent of the company to
any Affiliate of the Purchaser, or (c) without the prior written consent of the
Company in connection with transfers of a material portion of the Common shares
or Preferred Shares to not more than two (2) transferees; provided, however,
that each transferee of registration rights hereunder shall be subject to the
same obligations as the Purchaser, and provided, further, that if any of such
transferees are Affiliates of the Purchaser, one entity (which may be the
Purchaser) shall be designated by the Purchaser to act on behalf of the
Purchaser and such Affiliates to give and receive all notices and other
communications pursuant to this Section 7.
SECTION 8. Rule 144 Reporting
------------------
With a view to making available the benefits of certain rules and
regulations of the Commission which may at any time permit the sale of the
Common Shares to the public without registration, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(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 Securities Act and the Exchange Act;
(c) furnish to any holder of Common Shares forthwith upon
request a written statement by the Company as to its compliance with
the reporting
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<PAGE>
requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company
as such holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing such holder to sell any
Common Shares without registration; and
(d) take such action as the Purchaser may reasonably request, to
the extent required from time to time to enable Purchaser to sell
Common Shares without registration under the Securities Act within the
limitations of the exemption provided by Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC.
SECTION 9. No Fee. The parties hereto hereby represent that there are no
------
brokers or finders entitled to compensation in connection with the transactions
contemplated hereby.
SECTION 10. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telecopy or facsimile transmission, (iii) sent by overnight
courier, or (iv) sent by registered or certified mail, return receipt requested,
postage prepaid:
if to the Company, to:
Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, Utah 84108
Fax: (801) 584-3640
Attention: President
and
Attention: General Counsel
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<PAGE>
with a copy to:
Jonathan L. Kravetz, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Fax: (617) 542-2241
if to the Purchaser, to:
Schering Berlin Venture Corporation
340 Changebridge Road
Montville, NJ 07045-1000
Attention: General Counsel
Fax: (973) 276-2000
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telecopy or facsimile transmission, at the time that receipt
thereof has been acknowledged by electronic confirmation or otherwise, (iii) if
sent by overnight courier, on the next business day following the day such
notice is delivered to the courier service, or (iv) if sent by registered or
certified mail, on the 5th business day following the day such mailing is made.
SECTION 11. Changes. Any term of this Securities Purchase Agreement may be
-------
amended or compliance therewith waived only with the written consent of the
parties hereto.
SECTION 12. Assignment. Subject to Section 7.8 hereof, the rights and
----------
obligations under this Securities Purchase Agreement may not be assigned by any
party hereto without the prior written consent of the other party; provided,
however, that the Purchaser may, without such prior written consent of the
Company, assign its rights and obligations hereunder to an Affiliate.
SECTION 13. Benefit. All statements, representations, warranties,
-------
covenants and agreements in this Securities Purchase Agreement shall be binding
on, and inure to the benefit of,
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<PAGE>
the respective parties hereto and their respective successors and permitted
assigns. Nothing herein shall be construed to create any rights or obligations
except among the parties hereto, and no person or entity shall be regarded as a
third-party beneficiary of this Securities Purchase Agreement, except as
expressly provided in Section 7.6.
SECTION 14. Expenses. Subject to Section 7.4 hereof, each of the parties
--------
hereto shall pay its own fees and expenses (including the fees of any attorneys,
accountants, appraisers or others engaged by such party) in connection with this
Securities Purchase Agreement, the Standstill Agreement and the transactions
contemplated hereby and thereby whether or not the transactions contemplated
hereby or thereby are consummated.
SECTION 15. Headings. The headings of the various sections of this
--------
Securities Purchase Agreement have been inserted for convenience of reference
only and shall not be deemed to be part hereof.
SECTION 16. Severability. In case any provision contained in this
------------
Securities Purchase Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 17. Governing Law. This Securities Purchase Agreement shall be
-------------
governed by and construed in accordance with (a) the internal laws of the State
of Delaware without giving effect to principles of conflicts of law, and (b)
with respect to Section 8 hereof, United States federal law.
SECTION 18. Counterparts. This Securities Purchase Agreement may be
------------
executed in counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Securities
Purchase Agreement as of this 15th day of October, 1999.
SCHERING BERLIN VENTURE CORPORATION
By: /s/ John Nicholson
-------------------------
Name: John Nicholson
Title: Treasurer
MYRIAD GENETICS, INC.
By: /s/ Peter D. Meldrum
-------------------------
Peter D. Meldrum
President and Chief Executive Officer
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<PAGE>
EXHIBIT A
---------
MYRIAD GENETICS, INC.
STANDSTILL AGREEMENT
THIS AGREEMENT, dated as of October 15, 1999, is between SCHERING BERLIN
VENTURE CORPORATION, a Delaware corporation having a place of business at 340
Changebridge Road, Pine Brook, New Jersey (the "Purchaser"), and MYRIAD
GENETICS, INC., a Delaware corporation having a place of business at 320 Wakara
Way, Salt Lake City, Utah (the "Company").
WITNESSETH:
WHEREAS on the date hereof, the Purchaser is acquiring 303,030 shares (the
"Shares") of common stock, $.01 par value per share ("Common Stock") of the
Company pursuant to the terms of a Securities Purchase Agreement dated as of the
date hereof (the "Securities Purchase Agreement"); and
WHEREAS the execution and delivery of this Agreement by the Purchaser is a
condition precedent to the Company's obligations under the Securities Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties,
intending to be legally bound hereby, agree as follows:
<PAGE>
ARTICLE I
Representations and Warranties
------------------------------
Section 1.01 The Purchaser hereby represents and warrants to the Company
as follows:
(a) The Purchaser has full legal right, power and authority to
enter into and perform this Agreement. The execution and delivery of this
Agreement by the Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on behalf of the Purchaser. This Agreement is a valid and binding obligation of
the Purchaser enforceable against it in accordance with its terms, except that
such enforcement may be subject to (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and contracting parties' rights generally
and (ii) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by the
Purchaser nor the consummation by it of the transactions contemplated hereby
conflicts with or constitutes a material violation of or default under the
charter, by-laws or other constituent document of the Purchaser, any statute,
law, regulation, order or decree applicable to the Purchaser, or any material
contract, commitment, agreement, arrangement or restriction of any kind to which
the Purchaser is a party or by which it is bound.
Section 1.02 The Company hereby represents and warrants to the Purchaser
as follows:
(a) The Company has full legal right, power and authority to enter
into and perform this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on behalf of the
Company. This Agreement is a valid and binding obligation of the Company
enforceable against it in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and
<PAGE>
contracting parties' rights generally and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
(b) Neither the execution and delivery of this Agreement by the
Company nor the consummation by it of the transactions contemplated hereby
conflicts with or constitutes a material violation of or default under the
charter, by-laws or other constituent document of the Company, any statute, law,
regulation, order or decree applicable to the Company, or any material contract,
commitment, agreement, arrangement or restriction of any kind to which the
Company is a party or by which it is bound.
ARTICLE II
Limitations and Restrictions
----------------------------
Section 2.01 Definitions. As used in this Agreement:
-----------
(a) "Affiliate" shall mean any entity controlling, controlled by or
under common control with the Purchaser, and "control" shall mean ownership of
more than 50% of the stock entitled to vote for directors, or the authority to
act as general partner of a partnership or managing member of an LLC, or such
other relationship which constitutes actual control to the extent necessary to
prevent any action prohibited hereunder;
(b) "group" shall have the meaning with which such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and
(c) "person" shall have the meaning with which such term is used in
Section 13(d)(3) under the Exchange Act and under Section 2(2) of the Securities
Act of 1933, as amended (the "Securities Act").
Section 2.02 Restrictions on Certain Actions by the Purchaser. Except (i)
------------------------------------------------
with the written consent of the Company (which shall not be unreasonably
withheld) or (ii) by way of stock dividends or other distributions or offerings
made available to the holders generally of securities of the Company held by the
Purchaser, the Purchaser agrees that during the term of this Agreement, it will
not, nor will any of its Affiliates:
<PAGE>
(a) acquire, announce an intention to acquire, offer or propose to
acquire, solicit an offer to sell or agree to acquire, by purchase, by gift or
otherwise, any shares of Common Stock or other securities of the Company with
general voting rights, or any other Company securities convertible into,
exchangeable for or exercisable for Common Stock or other voting securities of
the Company (all such securities, collectively, "Voting Securities"); provided
that this Section 2.02(a) shall not apply unless and until the Purchaser
(together with its Affiliates) has acquired beneficial ownership (as such term
is used under Section 13(d) of the Exchange Act) of at least two percent (2%) of
the Common Stock of the Company;
(b) participate in the formation of any person or group, or join
with any person or group, which owns or seeks to acquire beneficial ownership of
Voting Securities, for the purpose of acquiring Voting Securities;
(c) solicit or participate in any "solicitation" of "proxies" (as
such terms are defined or used in Regulation 14A under the Exchange Act, these
terms to have such meaning throughout this Agreement) with respect to the
Company;
(d) deposit any Voting Securities in a voting trust or subject them
to a voting agreement or other agreement or arrangement with respect to the
voting of such Voting Securities other than this Agreement;
(e) otherwise act, alone or in concert with others, to seek to
control the management, Board of Directors or policies of the Company or make
any public announcement or proposal with respect to any form of business
combination or other extraordinary transaction with the Company or any
restructuring, recapitalization, similar transaction or other transaction not in
the ordinary course of business with respect to the Company which could result
in a change of control or publicly disclose an intent, purpose, plan or proposal
with respect to the Company that would violate the provisions of this Section
2.02, or assist, participate in, facilitate or solicit any effort or attempt by
any person to do so or seek to do any of the foregoing;
Provided, however, that nothing in this Section 2.02 shall prohibit
the Purchaser or its Affiliates from proposing collaborative research agreements
or license agreements with the Company.
<PAGE>
Section 2.03 Employee Benefit Plans. For the avoidance of doubt, it is
----------------------
hereby agreed that the restrictions contained in Section 2.02 shall not apply to
any pension plan or other employee benefit plan of the Purchaser or its
Affiliates which is administered by an independent trustee or trustees.
Section 2.04 Freedom to Vote. Nothing contained herein shall prevent the
---------------
Purchaser or any of its Affiliates from voting any equity securities owned by
them in their sole discretion, and to that extent, seeking to influence the
policies or affairs of the Company, the membership of the Board of Directors of
the Company or any other matter.
ARTICLE III
Miscellaneous
-------------
Section 3.01 Interpretation. For all purposes of this Agreement, the term
--------------
Common Stock shall include any securities of the Company entitled to vote
generally for the election of directors of the Company which securities the
holders of the Common Stock shall have received or as a matter of right be
entitled to receive as a result of (i) any capital reorganization or
reclassification of the capital stock of the Company or, (ii) any consolidation,
merger or share exchange of the Company with another corporation in which the
Company survives after such transaction; provided, however, that nothing in this
Agreement shall preclude the Purchaser or its Affiliates from acquiring or being
entitled to acquire Common Stock in exchange for or in respect of their
securities of the Company in any such transaction.
Section 3.02 Enforcement. (a) The Purchaser acknowledges and agrees that
-----------
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise breached
and that monetary damages would be an inadequate remedy therefor. Accordingly,
the Company will be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically its provisions in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which the Company may be entitled at law or in
equity.
<PAGE>
(b) No failure or delay on the part of the Company in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
Section 3.03 Entire Agreement. This Agreement, together with the
----------------
applicable provisions of the Securities Purchase Agreement, constitute the
entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement may be amended only by an agreement in
writing executed by all the parties.
Section 3.04 Severability. If any provision of this Agreement is held by a
------------
court of competent jurisdiction to be unenforceable, the remaining provisions
shall remain in full force and effect. It is declared to be the intention of the
parties that they would have executed the remaining provisions without including
any that may be declared unenforceable.
Section 3.05 Headings. Descriptive headings are for convenience only and
--------
will not control or affect the meaning or construction of any provision of this
Agreement.
Section 3.06 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and each such executed counterpart will be an original instrument.
Section 3.07 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telex, telecopy or facsimile transmission, (iii) sent by overnight
courier, or (iv) sent by registered or certified mail, return receipt requested,
postage prepaid:
if to the Company: Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, Utah 84108
Attention: President
Fax: (801) 584-3640
and
Attention: General Counsel
<PAGE>
with a copy to: Jonathan L. Kravetz, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Fax: (617) 542-2241
if to the Purchaser: Schering Berlin Venture Corporation
340 Changebridge Road
Montville, NJ 07045-1000
Attention: General Counsel
Fax: (973) 276-2000
or to such other address or telecopy number as any party may, from time to time,
designate in a written notice given in a like manner. Notice by telecopy shall
be deemed delivered at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise.
Section 3.08 Successors and Assigns. This Agreement shall bind the
----------------------
successors and assigns of the parties, and inure to the benefit of any successor
or assign of any of the parties; provided, however, that no party may assign
this Agreement without the other party's prior written consent, and provided,
further, that this Agreement shall not be binding upon any purchaser of the
Shares from the Purchaser or an Affiliate of the Purchaser in a transaction
effected on a public trading market or pursuant to a public offering.
Section 3.09 Governing Law. This Agreement will be governed by and
-------------
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to the conflict of laws principles thereof.
Section 3.10 Termination. This Agreement shall terminate one (1) year
-----------
following the Effective Date hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first referred to above.
SCHERING BERLIN VENTURE CORPORATION.
By: /s/ John Nicholson
----------------------------------
Name: John Nicholson
Title: Treasurer
MYRIAD GENETICS, INC.
By: /s/ Peter D. Meldrum
----------------------------------
Peter D. Meldrum
President and CEO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND CONDENSED CONSOLIDATED BALANCE SHEETS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 15,677,896
<SECURITIES> 30,795,784
<RECEIVABLES> 6,947,410
<ALLOWANCES> 92,162
<INVENTORY> 0
<CURRENT-ASSETS> 31,624,663
<PP&E> 17,814,840
<DEPRECIATION> 7,595,036
<TOTAL-ASSETS> 65,134,157
<CURRENT-LIABILITIES> 14,368,666
<BONDS> 0
0
0
<COMMON> 98,072
<OTHER-SE> 50,667,419
<TOTAL-LIABILITY-AND-EQUITY> 65,134,157
<SALES> 1,614,286
<TOTAL-REVENUES> 6,861,931
<CGS> 802,931
<TOTAL-COSTS> 9,611,718
<OTHER-EXPENSES> 15,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,191,092)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,191,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,191,092)
<EPS-BASIC> (0.23)
<EPS-DILUTED> (0.23)
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