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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 28, 1997 Commission File No. 0-21794
GENZYME TRANSGENICS CORPORATION
(Exact name of Registrant as specified in its charter)
MASSACHUSETTS 04-3186494
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
FIVE MOUNTAIN ROAD 01701
FRAMINGHAM, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
(508) 872-8400
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01
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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 twelve months and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 16, 1998: $122,872,600
Number of shares of the Registrant's Common Stock outstanding as of March
16, 1998: 17,406,912
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held May 27, 1998 are incorporated by reference into Part III
of this Form 10-K.
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ITEM 1.
BUSINESS
General
Genzyme Transgenics Corporation ("GTC" or the "Company") has established a
leadership position in the application of transgenic technology to the
development and production of genetically engineered proteins for therapeutic,
diagnostic and other biomedical uses, both in collaboration with pharmaceutical
and biotechnology companies and independently. To date, GTC has produced more
than 27 such proteins. For its lead compound, Antithrombin III ("AT-III"), the
Company has completed a Phase I and Phase II human clinical trial, and has
initiated a Phase III clinical study. GTC is also a leading Contract Research
Organization ("CRO"), providing services such as preclinical efficacy and safety
testing, in vitro testing and formulation development to pharmaceutical,
biotechnology, medical device and other companies. In February 1998, GTC
reorganized its CRO business to form Primedica Corporation ("Primedica").
Revenues for the Company's testing and production services were $43.4 million in
1997, an increase of 13% from 1996. Revenues from research and development
totaled $19.5 million, an increase of 134% from 1996.
GTC produces recombinant proteins transgenically by inserting, into the genetic
material of an animal embryo, a gene that directs the production of a desired
protein in the milk of female offspring. The Company believes that transgenic
production offers significant economic and technological advantages relative to
traditional protein production systems, including reduced capital expenditures
and lower direct production cost per unit for complex proteins. For proteins
currently derived from pooled human plasma, transgenic production provides an
alternative source, free from the risks of transmission of human viruses and
other adventitious agents. In the case of certain complex proteins, transgenic
production may represent the only technologically and economically feasible
method of commercial production. To date, GTC has expressed 14 proteins at
levels of one gram per liter or higher, more than 10 times the level typically
achieved for comparable proteins in conventional cell culture systems.
GTC's most advanced product candidate is transgenic AT-III, an anticoagulant
normally present in human serum. Plasma-derived AT-III is an approved therapy
for inherited AT-III deficiency and for certain acquired deficiencies. Worldwide
sales of plasma-derived AT-III were approximately $200 million in 1994. The
Company believes transgenic AT-III may represent a more attractive product in
light of safety considerations, the limited volume of AT-III available from
plasma and the impracticality of producing sufficient quantities of recombinant
AT-III by cell culture methods. GTC has expressed transgenic AT-III in goats,
demonstrating stable expression across multiple generations and successive
lactations. Further, GTC has purified transgenic AT-III to clinical grade with
attractive yields. Preclinical safety and efficacy studies, Phase I and Phase II
human safety studies, have been successfully completed. GTC filed an
Investigational New Drug application (an "IND") with the U.S. Food and Drug
Administration ("FDA") to initiate a Phase III clinical trial for this product,
which began in the first quarter of 1998.
Other significant plasma proteins under development by GTC include Alpha-1
Proteinase Inhibitor ("API") and Human Serum Albumin ("HSA"), which is now being
developed in conjunction with Fresenius AG. Additionally, GTC is working with
other corporate partners such as Bristol-Meyers Squibb and BASF on a number of
monoclonal antibodies and other recombinant proteins. The Company is also
developing transgenic production processes for other proteins, including
prolactin, insulin and the msp-1 protein for use in a malaria vaccine, and is in
commercial discussions with prospective partners for other products.
The Company's Primedica CRO operations are focused on enabling its clients to
meet regulatory testing and other product development needs quickly and
effectively by offering a fully integrated line of services. Primedica's
laboratories focus on providing high value, scientifically differentiated
services to clients, including preclinical efficacy testing, experimental
surgery, photobiology and reproductive toxicology testing as well as formulation
development. Primedica uses its technological capabilities to introduce new
services that improve the ability of its customers to develop their products
successfully. The Company's comprehensive programs link its preclinical and
manufacturing support services in order to reduce the time and expense of
bringing new therapeutics or other products to market.
As an outgrowth of production services performed for the National Cancer
Institute (the "NCI"), the Company has developed technology for the production
of idiotypic vaccines, in which a cancer patient's own tumor cells are used to
enhance the immune system's ability to prevent the regrowth of tumors. Idiotypic
vaccines produced by GTC have shown
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promising results, including the absence of disease for over six years in four
of nine lymphoma patients treated. Results from this program have been reported
in the October 1992 issue of The New England Journal of Medicine and the May
1995 issue of The Lancet. During 1997, 4 of 5 multiple myeloma patients and 7 of
8 lymphoma patients were shown to mount T-cell immune responses specific to
their tumors in response to vaccination with the idiotype vaccine. These results
were reported at the IVth International Workshop on Multiple Myeloma in Boston
in June 1997 and at the American Society of Hematology Meeting in San Diego in
December 1997. GTC and the NCI signed a Collaborative Research and Development
Agreement ("CRADA") in 1996. The Company has expanded its clinical trials in
myeloma in 1997 under an agreement with the University of Arkansas for Medical
Sciences.
Transgenic Production
Overview and Strategy
A growing number of recombinant proteins are being developed by pharmaceutical,
biotechnology and other companies for therapeutic, diagnostic and nutriceutical
applications. Many of these proteins have proven difficult or expensive to
produce in the quantities required using conventional methods, such as bacteria,
yeast or mammalian cell sources. Moreover, bacteria or yeast systems cannot
produce many complex proteins. While mammalian cells can produce certain complex
proteins, they are generally more difficult and expensive to grow and often
produce lower volumes of protein. Proteins produced by the Company
transgenically have been expressed at concentrations significantly greater than
those typically achieved using conventional methods.
Transgenic technology uses in vitro microinjection or other techniques to
introduce a genetically engineered segment of exogenous DNA (an "expression
vector") into the genetic material of a fertilized egg or early stage animal
embryo. Two types of genetic instructions are incorporated into the expression
vector: the coding sequence and the promoter sequence. Coding sequences instruct
the cells of the animal to express a specified protein. Promoter sequences
direct the expression of proteins at appropriate times and by specific tissues
or cell types. The modified embryo is then transferred to a recipient female.
Transgenes are successfully integrated into the genetic makeup of only a small
percentage of the embryos that are microinjected; therefore multiple
microinjection candidates are required. If successful, the resulting animal,
when mature and lactating, will express the desired protein. Once established in
the first generation of transgenic animals, the transgene is transmitted like
other genetic traits to future generations through traditional breeding with
either non-transgenic or other transgenic animals.
The Company believes transgenic production offers significant economic and
technological advantages over traditional methods of protein production,
including reduction in the total amount of required capital expenditures, lower
direct production cost per unit and reduced risk of transmission of human
viruses and other adventitious agents. For certain complex proteins, transgenic
production may represent the only technologically and economically feasible
method of commercial production. To date, the Company has produced such proteins
principally using goats, which offer an attractive combination of large milk
volumes, relatively short generational time periods and ease of handling and
milking.
GTC also believes that for certain proteins required in extremely large amounts,
the cloning of large dairy animals such as cows expressing the desired transgene
in their milk will speed transgenic biopharmaceutical development. In September
1997, GTC signed an exclusive, worldwide licensing agreement with Advanced Cell
Technologies, Inc. ("ACT") of Worcester, MA allowing GTC to utilize ACT
technology for the development of biopharmaceuticals and nutraceuticals in the
milk of cloned, transgenic dairy cows. In January 1998, two transgenic calves
expressing a marker gene were born using this technology. ACT has developed
proprietary technology, which, when coupled with GTC's transgenic technology,
will provide patentable approaches to efficiently create cloned transgenic cows.
GTC's strategy is to commercially produce proteins by use of transgenic
technology both by (i) entering into contracts with biotechnology and
pharmaceutical companies to utilize the Company's transgenic services in
exchange for revenue, royalties and, possibly, marketing rights to the resulting
product and (ii) independently identifying proteins in the public domain,
proteins covered by lapsing patents and proprietary proteins available for
license which represent attractive candidates for transgenic production and
funding development of such proteins itself or seeking corporate partner
funding.
GTC has entered into funding contracts for the development of AT-III, other
plasma proteins, certain monoclonal antibodies and other products.
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Achievements to Date:
Over the past few years, GTC has shown the feasibility of transgenic protein
production by the achievement of the following specific milestones:
o To date, GTC has produced 27 different transgenic proteins in animals,
14 at concentrations of one gram per liter or greater and one protein
in excess of 35 grams per liter, levels often many times higher than
those achievable in other production systems.
o The Company has produced a significant number of transgenic goats. GTC
maintains a herd of over 500 goats at its facility in Massachusetts as
well as an additional 150 goats at Tufts University School of
Veterinary Medicine ("Tufts"). Over 40 of these goats are transgenic,
each expressing one of five different proteins.
o Stability of expression has been demonstrated across lactations, and,
for two proteins, across two generations expressing the same
transgene.
o Together with Genzyme Corporation ("Genzyme"), GTC has been able to
achieve clinical grade purity for a transgenically produced protein at
high recovery levels. This transgenic protein has been extensively
characterized and its pharmacodynamic properties in animal models have
been shown to be comparable to those of the same protein from other
sources.
o GTC completed a Phase I human safety clinical trial, filed an IND with
the FDA, and completed a Phase II clinical trial in patients
undergoing coronary artery bypass grafting ("CABG"). GTC began a Phase
III clinical trial in patients on cardiopulmonary bypass during
surgery in March 1998.
Transgenic Products Under Development
Antithrombin III. AT-III is an anticoagulant normally present in human serum.
Decreased levels of AT-III are found in individuals who have either a hereditary
or an acquired deficiency of AT-III. The hereditary deficiency has an incidence
rate of 1 in 2,000 to 1 in 20,000. Individuals with hereditary AT-III deficiency
have an increased tendency towards blood clots (thromboses) and are treated with
AT-III protein replacement therapy during periods when they are at high risk for
clots, such as during surgery. Acquired AT-III deficiency occurs in many disease
states as a result of several possible causes, including a decrease in the
amount of AT-III produced, an increase in the rate of AT-III consumption or an
abnormal loss of AT-III from the circulation. Examples of such conditions
include acute liver failure, disseminated intravascular coagulation, sepsis and
septic shock, burns, multiple organ failure, bone marrow and other organ
transplantation and hemodialysis.
Plasma-derived AT-III is approved for use in Europe and Japan for treatment of
both acquired and hereditary AT-III deficiency. In the United States,
plasma-derived AT-III is currently approved for use only for hereditary AT-III
deficiency. The worldwide market for plasma-derived AT-III was approximately
$200 million in 1994.
GTC believes transgenic AT-III may represent a more attractive product in light
of the risks of viral transmission from pooled plasma products in general, the
limited volume of AT-III currently available from plasma and the impracticality
of producing sufficient quantities of recombinant AT-III in cell culture
systems. The Company also believes that a lower cost, higher volume alternative
to plasma-derived AT-III will further expand the use of AT-III in clinical
settings.
GTC has produced multiple transgenic goats carrying the AT-III gene and has
selected a founder goat from which a production herd is being generated. This
genetic line expresses AT-III at levels of approximately two grams per liter.
The processes for production and purification have been implemented and result
in a product that is purified to clinical grade at attractive yields.
Preclinical safety and efficacy studies for AT-III have been successfully
completed. The Company filed an IND with the FDA for the use of transgenic
AT-III as a potential treatment for AT-III deficiency that occurs during certain
vascular surgeries, including cardiopulmonary artery bypass grafting, and a
Phase II clinical study for this indication was completed. The study confirmed
the safety of AT-III at all doses administered and supported its ability to
enhance anticoagulation in CABG patients. A Phase III clinical trial was begun
in March 1998 to test the efficacy of AT-III in restoring heparin sensitivity
among patients on cardiopulmonary bypass. A concurrent trial is comparing the
physiological activity of transgenic AT-III with that of plasma-derived AT-III.
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GTC is developing recombinant human AT-III under a license from Behringwerke AG,
subject to a royalty obligation. In March 1996, the Company entered into a
Convertible Debt and Development Funding Agreement (the "Agreement") with
Genzyme under which Genzyme agreed to provide a revolving line of credit
("Genzyme Credit Line") in the amount of $10 million and agreed to fund
development costs of the AT-III program. During 1996, Genzyme converted
$1,673,000 of debt to equity under this agreement, leaving the availability
under the Genzyme Credit Line at $8.3 million.
In March 1997, the Company amended the Agreement with Genzyme to provide for
continued funding by Genzyme of the development costs of the AT-III program
through June 30, 1997. In June 1997, the Company agreed to extend the AT-III
Agreement until December 31, 1997. Under the agreements in effect in 1997,
Genzyme provided $7 million in development funding. In July 1997, the Company
and Genzyme announced an agreement to establish a joint venture (the "ATIII
LLC") for the development, marketing and distribution of AT-III, subject to the
execution of a definitive agreement. A definitive collaboration agreement for
ATIII LLC ("Genzyme Joint Venture") was executed on January 1, 1998. Under the
terms of the agreement, Genzyme will provide 70% of the next $33 million of
development costs and the Company will fund the remaining 30%. Development costs
in excess of $33 million will be funded equally by the partners. In addition to
the funding, both partners will contribute manufacturing, marketing and other
resources to the joint venture at cost and will share profits from product sales
equally. The agreement covers all territories other than Asia and may include
milestone payments from Genzyme to the Company after the product has been
approved by the FDA.
Alpha-1 Proteinase Inhibitor ("API"). API is a serine protease inhibitor which
is normally present in human plasma. In certain pulmonary diseases, including
congenital alpha1-antitrypsin ("AAT") deficiency and cystic fibrosis, patients
develop chronic emphysema. Although the precise mechanism is uncertain,
researchers believe that the development of emphysema results from a chronic
imbalance between elastase and API, which is deficient in patients with
hereditary AAT deficiency. Plasma-derived API is approved in the United States
for parenteral use in the treatment of patients with congenital AAT deficiency.
Treatment of AAT deficiency focuses on chronic augmentation therapy with API to
restore the elastase/elastase inhibitor balance. Dosing requirements are high,
averaging four grams per week for a 150-pound patient.
An imbalance between elastase and elastase inhibitors also occurs in cystic
fibrosis, which is the most common fatal genetic disease among Caucasians,
occurring in one in every 2,500 infants born in the United States. Based on
preliminary data, the Company believes that aerosol administration of API to
cystic fibrosis patients may be effective in reducing the level of neutrophil
elastase in the lung, thereby reducing elastase-induced pulmonary tissue
degradation and fibrosis.
GTC believes that transgenic API may represent a more attractive product than
plasma-derived API in light of potential risks of viral transmission from donor
plasma products, and that it will be more economical to produce and more widely
available than the plasma-derived products. The ability to produce large
quantities of transgenic API may enable the Company to pursue other indications
for this product, such as atopic dermatitis, in which an imbalance of proteases
is also implicated.
GTC has expressed API at levels equivalent to 35 grams per liter in a mouse
model. Several transgenic founder goats have been generated, including at least
one line which expresses API in excess of 20 grams per liter. To date, GTC has
funded the development of API internally.
Human Serum Albumin ("HSA"). HSA is the protein principally responsible for
maintaining oncotic pressure, plasma volume and the balance of fluids in blood.
It is critical to the transport of amino acids, fatty acids, enzymes and
hormones in the blood stream. The therapeutic use of HSA is indicated in
situations of blood loss and decreased blood albumin levels which can occur
during shock, serious burns, pre- and post-operative conditions and gastric and
intestinal malfunctions. HSA is currently produced by human plasma
fractionation, with 1994 worldwide sales in excess of $1.3 billion.
For HSA and all human blood sourced products, the theoretical risk of virus
transmission, including HIV and hepatitis, remains a concern despite efforts to
improve screening and purification techniques.
Prices for HSA are expected to rise due to a number of factors, including
increasing costs of testing and purifying protein fractions sourced from human
plasma, the replacement of high margin plasma fractions with safer recombinant
versions,
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and decreasing blood donations in the face of increasing demand. Transgenic
production of HSA would eliminate the risk of human viral transmission and help
ensure the delivery of safe therapeutics at competitive prices.
GTC has expressed transgenic HSA in mice at levels equivalent to or greater than
35 grams per liter. Because the Company has demonstrated that the mouse system
is highly predictive to that of dairy animals, the Company believes it will be
able to produce transgenic HSA in cows at commercial scale. An individual dairy
cow will produce approximately 8,000 liters of milk per year, or an estimated 80
kilograms of albumin per year. This level of productivity will provide GTC with
the ability to produce HSA at costs competitive with albumin sourced from human
blood. The Company believes that HSA is not the subject of any composition of
matter patent, and has entered into an agreement with Fresenius AG of Bad
Homburg, Germany, to further develop and commercialize transgenic HSA. During
1997, GTC made substantial progress toward meeting key milestones for the
commercialization of HSA. By the end of 1997, GTC has demonstrated, at the
technical laboratory scale and through its sophisticated analysis, that the
production of HSA at the scale, purity and cost requirements is feasible. In
February 1998, GTC's partner, Fresenius, agreed that this milestone had been
achieved. By this achievement GTC now believes it has demonstrated that it has
the ability to produce recombinant proteins at the lowest-to-date cost ever
achieved in the biotechnology industry.
The founding of transgenic cows for HSA also progressed well. GTC and its
collaborators were on target for the year in activities toward the founding of
transgenic cows. Both traditional microinjection and cloning techniques are
being utilized, and the first cows are expected to be born by Spring 1998. The
other elements of the project, such as planning for production facilities, are
on track or ahead of planned schedules. GTC has entered into an agreement with
Advanced Cell Technologies of Worcester, MA to develop cloned, transgenic cows
for the production of HSA.
Monoclonal Antibodies. Monoclonal antibodies are immune system proteins that can
find and attach to specific biological targets in the body. Recent advances in
developing humanized and human antibodies, single chain antibodies and
conjugated antibodies have added to the potential value of these therapeutic
agents. More than 50 monoclonal antibodies are now in clinical trials sponsored
by pharmaceutical and biotechnology companies with many more in development as
therapeutics for cancer, cardiovascular disease, immune system disorders and for
use against a wide variety of infectious agents, such as viruses and bacterial
infections. GTC is now collaborating with pharmaceutical and biotechnology
companies for the transgenic production of a number of therapeutic monoclonal
antibodies.
Bristol-Myers Squibb ("BMS"), a leading pharmaceutical company specializing in
cancer treatment, has entered into an agreement with GTC for transgenic
production in goats of its BR-96 monoclonal antibody, a potential therapy for
breast and lung cancer. In February 1997, GTC announced that it had successfully
demonstrated an expression level of 14 grams per liter in the milk of transgenic
goats, and that the antigen binding levels were equivalent to material produced
using conventional cell culture technology. During 1997, BMS decided to
terminate its antibody targeting program, of which BR-96 was a part. GTC did
receive its milestone payment of achievement of expression levels prior to this
termination. BMS is currently spinning off this technology to a group of former
BMS employees, and GTC expects that any further BR-96 development would be done
in conjunction with this new entity.
Discussions are underway to determine next steps.
GTC executed a second agreement with BMS for the development of transgenic goats
expressing a humanized monoclonal antibody in their milk. This antibody,
CTLA4Ig, is currently in clinical trials for the treatment of psoriasis, and may
have applications in other disorders including rheumatoid arthritis and organ
transplant rejection.
GTC currently has nine other funded development programs underway. One, an
anti-colon cancer antibody, produced on behalf of a Japanese pharmaceutical
company, has been expressed in the milk of goats at four grams per liter. Other
programs are being conducted in collaboration with B. Braun Melsungen,
Progenics, BASF AG, Zeneca, HMR, Monsanto/Searle, Novopharm and NeoRx. The
Company is in active discussions with a number of other pharmaceutical and
biotechnology companies for the transgenic development of therapeutic
antibodies.
Progenics. In 1997, GTC and Progenics Pharmaceuticals, Inc. signed a
collaborative agreement for the development of a transgenic manufacturing
process for PRO 542, Progenics' fusion protein for the treatment of HIV. The
initial samples of product have been produced by Progenics in cell culture and
have entered Phase I human clinical trials. This exclusive arrangement between
GTC and Progenics is targeted to the large scale, low cost manufacture of this
product which is hoped to be beneficial for HIV/AIDS patients.
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Insulin. Current worldwide sales of insulin products are more than $3 billion
annually. Recombinant DNA insulin now accounts for approximately 50% of the
market.
GTC has expressed insulin precursors at the equivalent of more than eight grams
per liter in the milk of mice, which provides for the potential to manufacture
insulin on a highly cost effective basis. GTC has taken initial steps to develop
appropriate insulin processing and purification procedures, and the Company
believes that there are several approaches to the manufacture of a transgenic
insulin that may offer cost benefits compared to current products. Insulin is
not the subject of any known patents that could foreclose the Company's
development program.
Prolactin. In collaboration with Genzyme, GTC has developed multiple transgenic
mouse lines which express prolactin at levels in excess of the equivalent of one
gram per liter. Prolactin is a human hormone which has numerous biological
activities, including stimulation of the immune system. Genzyme has licensed
patents covering recombinant prolactin and the parties are jointly exploring the
development of transgenic prolactin for multiple clinical indications, and for
the infant and specialty nutritional product markets. GTC announced in November
1997 that it had achieved expression levels of 3 milligrams per milliliter of
human prolactin in the milk of transgenic mice, a level 30-50 times greater than
that achieved in conventional cell culture production systems.
Malaria Vaccine. GTC's transgenic expression system has the potential to express
the correct, immunogenic protein for use as a malaria vaccine both economically
and on a large scale. Malaria is a disease that has an annual incidence of more
than 300 million people worldwide and results in several million deaths
annually. GTC is working with the U.S. National Institutes of Health (the "NIH")
and the Federal Malaria Vaccine Coordinating Committee to transgenically express
a malaria vaccine and to examine the options for commercializing the vaccine.
The Company has signed a letter of intent to enter into a CRADA with the NIH and
has achieved high level expression on a malaria-based peptide, MSP-1, in the
milk of transgenic mice.
TransGenerics. GTC has a program to identify and develop transgenic production
systems for the first generation of approved recombinant drugs as they come off
patent. These drugs, many of which have established significant markets, may
become vulnerable to competition from second-generation transgeneric versions
which are more cost effective. GTC is in discussions with both generic and
proprietary pharmaceutical and biotechnology companies with strategic and
product-specific interests in the TransGenerics program.
GTC completed its first commercial agreement for an undisclosed
second-generation transgeneric with B. Braun of Melsungen, Germany. GTC will
develop the product, a currently-approved biological, through product launch. B.
Braun will make up to $11 million in development and milestone payments to GTC
in exchange for bringing the product to Phase II human clinical trials. Both
companies will share pivotal clinical trial costs, and GTC will retain
co-marketing rights in the US.
Other Products. GTC is actively developing, at various technical stages, a
number of proprietary products on its own or in conjunction with partners. These
products include decorin, for the treatment of scar formation in a wide variety
of surgical indications and other conditions such as renal disease, and
gluatamic acid decarboxylase (GAD) for the putative treatment of Type 1 juvenile
diabetes. GTC is also involved in several collaborations on products where
identity is confidential.
Primedica Corporation (CRO Services)
Overview
Contract research organizations provide testing and development services to
pharmaceutical, biotechnology, medical device and other companies, as well as to
certain government agencies. The industry is divided generally into companies
which conduct human clinical trials and those providing non-clinical services,
including preclinical testing, clinical trial support and other development
services. The worldwide revenues for non-clinical CRO services were in excess of
$1 billion in 1997.
The growth of the CRO market has been influenced by several factors. First, cost
control pressures on large pharmaceutical firms are leading them to focus on
core competencies, often resulting in a reduction in the size and capacity of
in-house, non-clinical testing departments. Second, emerging biotechnology and
medical device companies often have and can afford little infrastructure
dedicated to such functions. Third, new scientific developments continue
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to lead to new fields of safety testing. Fourth, regulatory changes have
mandated additional testing requirements. Fifth, the need for services, such as
efficacy models and formulation development, increases as pharmaceutical
companies venture further from their traditional bases in search of breakthrough
products.
GTC believes that it has built one of the premier non-clinical CROs in the
industry. The Company believes that it has a broader set of value-added services
than any of its competitors and is differentiated by its ability to offer
comprehensive development programs. The Company has the ability to perform
virtually all of the safety, efficacy and quality control testing, as well as to
provide the regulatory affairs expertise necessary to bring a client's early
research-stage product to the start of Phase I clinical trials.
Operations and Technical Capabilities
GTC acquired its CRO capabilities through the acquisitions of TSI Corporation
("TSI") in October 1994 and BioDevelopment Laboratories, Inc. ("BDL") in June
1995. GTC conducts its CRO services through five laboratories: Mason
Laboratories (Worcester, Massachusetts); Argus Research Laboratories (Horsham,
Pennsylvania); Redfield Laboratories (Redfield, Arkansas); Washington
Laboratories (Rockville, Maryland) and BDL (Cambridge, Massachusetts). In
February 1998, GTC reorganized its CRO businesses under its wholly owned
subsidiary, Primedica Corporation ("Primedica"), to provide a unified identity
and a dedicated structure for further growth of its CRO business. GTC expects to
use Primedica as a vehicle to pursue acquisitions and facilitate other
transactions driving growth and profitability. This business currently employs
over 400 people.
Primedica's laboratories focus on providing high value, scientifically
differentiated services to its clients. Fields in which Primedica provides
contract services include:
o Preclinical Efficacy Testing measures the effectiveness of a drug
candidate prior to human clinical trials. Primedica believes that its
Mason Laboratories facility has the only comprehensive preclinical
efficacy services in the CRO marketplace utilizing a wide variety of
disease models and expertise intended to assist clients in designing
optimal clinical trials.
o ExperimentalSurgery to support toxicology programs enables Primedica
scientists to test novel routes of administration for biotechnology
products which cannot be delivered through standard routes. Primedica
believes that its Mason Laboratories facility has the leading surgical
capabilities in the preclinical CRO marketplace and has the ability to
perform studies which are unavailable from other CROs.
o PhotobiologyTesting measures a drug candidate's potential interactions
with sunlight. Primedica believes that the FDA will require an
increasing number of products to be tested for these effects.
Primedica has the only CRO facilities capable of performing a full
range of phototoxicology and photocarcinogenesis testing.
o Developmental and Reproductive Toxicology Testing measures a drug
candidate's potential impact on a fetus. Primedica believes that its
Argus Research Laboratories facility has performed more teratology
studies than any other laboratory in the industry and is widely
recognized as the leader in the field.
Primedica has also made significant investments in bioanalytical chemistry
services to support clinical trials, drug formulation development and lot
release testing for biopharmaceuticals. The Company believes that its experience
in related areas, its client base and its sales force enables it to compete
effectively in these fields. Clients have recently contracted with Primedica for
testing services for major programs in each of these areas, and Primedica is
pursuing opportunities which may, if successfully concluded, lead to growth in
each field. Primedica believes that its ability to provide high value,
scientifically differentiated services, combined with its traditional strengths
in toxicology, pharmacokinetics, cell line testing and production and regulatory
affairs, offers clients one of the broadest sets of preclinical services
available in the CRO industry.
Primedica believes the key to sustaining superior performance in this field will
be in providing services in a close, collaborative relationship in which
customers are able to receive scientific services from Primedica at levels equal
to or greater than that which they could receive from an in-house department.
Toward this end, GTC has also made significant investment in people, technology
and programs since its acquisition of TSI, increasing the numbers of doctoral
level employees by 42% since the acquisition. GTC believes that its testing
services strategy has been validated by the growth in its business since the
acquisition of TSI in October 1994. Revenues for the Company's testing and
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production services in 1997 were $43.4 million representing a 13% increase
compared to 1996.
Idiotypic Cancer Vaccines
GTC's Washington Laboratories (now part of Primedica) has been producing
experimental cancer vaccines for the NCI under contract since 1993. These
vaccines have shown preliminary efficacy in early clinical trials. In 1996, the
Company signed a letter of intent to enter into a CRADA with the NCI to expand
these clinical trials and to gain development rights to the program.
Idiotypic cancer vaccines are autologous therapeutics, requiring that
immunoglobulin harvested from individual patients be expanded in separate cell
cultures. Vaccines are produced at the NCI and Primedica and are given to
patients upon the completion of chemotherapy. The vaccine activates the
patient's immune system to destroy cancer cells which remain after traditional
chemotherapy regimens.
The principal clinical focus of the work today is on B-cell lymphoma, with
secondary efforts on multiple myeloma and other related malignancies. There
are over 40,000 newly diagnosed cases of B-cell lymphoma in the United States
each year. Most patients initially respond favorably to chemotherapy, but the
cancer has a 70% to 90% mortality rate, with patients typically relapsing
within two to three and one half years.
Idiotypic vaccines produced by Primedica have shown promising results, including
the absence of disease for over six years in four of nine lymphoma patients. The
first myeloma patient treated experienced a remission of three and one half
years. GTC signed a CRADA with the NCI in May 1997 to expand clinical trials for
lymphoma and myeloma. The production costs for these vaccines will be shared by
the NCI and GTC. In June 1997, GTC's NCI collaborator, Dr. Larry Kwak, reported
that 4 of 5 multiple myeloma patients who had received the idiotypic vaccine
have mounted a cellular immune response against their own tumors. He further
reported at the American Society of Hematology meeting in December 1997, that 7
of 8 lymphoma patients had responded similarly to the vaccine. In 1997, GTC
entered into a collaboration with the University of Arkansas to expand myeloma
Phase I/II clinical trials at that institution, and expects to be manufacturing
6 vaccines per month by March 1998 for these trials, as well as two vaccines
monthly for the lymphoma clinical trial.
Relationship With Genzyme
Equity Position. Genzyme is the largest single stockholder of the Company,
currently holding 7,428,365 shares of Common Stock, representing approximately
43% of the outstanding GTC Common Stock. Genzyme also holds a Common Stock
Purchase Warrant (the "Genzyme Warrant") exercisable for 145,000 shares of
Common Stock at a price of approximately $2.84 per share, the market price of
the Common Stock at the time the warrant was issued.
Four million of Genzyme's shares in GTC were acquired in 1993 at the time of the
Company's organization in exchange for the transfer of certain assets to the
Company. In February 1995, 500,000 shares were sold to Genzyme at $8.00 per
share, upon exercise by GTC of a put agreement entered into at the time of the
Company's initial public offering. Genzyme received 1,333,333 shares in 1995 and
219,565 shares in 1996 in exchange for conversion of debt at the then current
market prices. In July 1995, 475,467 shares were issued to Genzyme in exchange
for shares of Genzyme common stock delivered as a portion of the consideration
for the acquisition of BDL. The remaining 900,000 shares were purchased by
Genzyme as part of the August 1996 Public Offering. The Genzyme Warrant, which
expires on July 3, 2005, was issued to Genzyme in consideration of Genzyme's
guaranty of the Company's indebtedness to a commercial bank discussed below. All
of the shares held by Genzyme are entitled to certain registration rights.
Arrangements Regarding Technology and Product Development. GTC and Genzyme have
entered into a number of agreements regarding technology and product development
discussed below:
Technology Transfer Agreement. Under the Technology Transfer Agreement
dated May 1, 1993, Genzyme transferred substantially all of its transgenic
assets and liabilities to GTC, including its ownership interest in SMI
Genzyme Ltd., a joint venture between Genzyme and Sumitomo Metal Industries
Ltd. (the "Joint Venture"), assigned its relevant contracts, and licensed
to the Company technology owned or controlled by it and relating to the
production of recombinant proteins in the milk of transgenic animals (the
"Field") and the purification of proteins produced in that matter. The
license is worldwide and royalty free as to Genzyme, although GTC is
obligated to Genzyme's licensors for any royalties due them. As long as
Genzyme owns less than 50% of GTC,
<PAGE>
Genzyme may use the transferred technology, or any other technology it
subsequently acquires relating to the Field, without any royalty obligation
to the Company, provided Genzyme may not offer transgenic production
services to third parties.
R&D Agreement. Pursuant to the R&D Agreement, Genzyme and GTC agreed, until
May 1, 1998, to provide research and development services to the other
relating, in the case of GTC, to transgenic production of recombinant
proteins and, in the case of Genzyme, to the purification of such proteins.
Each company receives payments from the other equal to the performing
party's fully allocated cost of such services, which can be no less than
80% of the annual budgets established by the parties under the R&D
Agreement, plus, in most cases, a fee equal to 10% of such costs.
AT-III Development Funding. In March 1996, the Company entered into a
Convertible Debt and Development Funding Agreement (the "Agreement") with
Genzyme under which Genzyme agreed to provide a revolving line of credit
("Genzyme Credit Line") in the amount of $10 million and agreed to fund
development costs of the AT-III program. During 1996, Genzyme converted
$1,673,000 of debt to equity under this agreement, leaving the availability
under the Genzyme Credit Line at $8.3 million.
In March 1997, the Company amended the Agreement with Genzyme to provide
for continued funding by Genzyme of the development costs of the AT-III
program through June 30, 1997. In June 1997, the Company agreed to extend
the Agreement until December 31, 1997. Under the agreements in effect in
1997, Genzyme provided $7 million in development funding. In July 1997, the
Company and Genzyme announced an agreement to establish a joint venture for
the development, marketing and distribution of AT-III, subject to the
execution of a definitive agreement. A definitive collaboration agreement
for ATIII LLC was executed on January 1, 1998. Under the terms of the
agreement, Genzyme will provide 70% of the next $33 million of development
costs and the Company will fund the remaining 30%. Development costs in
excess of $33 million will be funded equally by the partners. In addition
to the funding, both partners will contribute manufacturing, marketing and
other resources to the joint venture at cost and will share profits from
product sales equally. The agreement covers all territories other than Asia
and may include milestone payments from Genzyme to the Company after the
product has been approved by the United States Food and Drug
Administration.
Other Arrangements. GTC and Genzyme have also entered into the following other
arrangements:
Services Agreement. Under a services agreement between GTC and Genzyme (the
"Services Agreement"), GTC pays Genzyme a fixed monthly fee for basic
laboratory and administrative support services provided by Genzyme. The
monthly fee is adjusted annually, based on the services to be provided and
changes in Genzyme's cost of providing the services. The Services Agreement
is self-renewing annually and may be terminated upon 90 days notice by
either party to the other party.
Lease. GTC leases a portion of Genzyme's facilities in Framingham,
Massachusetts (the "Lease"). GTC paid Genzyme $178,000 under the Lease in
1997.
Credit Line Guaranty, Term Loan Guaranty and Lien. The Company obtained a
credit line in July 1995 and a term loan in December 1995 with a commercial
bank, each secured by Genzyme's guaranty of the Company's obligations
thereunder (up to $9.8 million at December 28, 1997). The Company has
agreed to reimburse Genzyme for any liability Genzyme may incur under such
guaranty and has granted Genzyme a first lien on all of the Company's
assets to secure such obligation.
Genzyme Credit Line. In March 1996, the Company entered into the Genzyme
Credit Line Agreement with Genzyme under which Genzyme agreed to provide a
revolving line of credit in the amount of $10 million. During 1996,
$1,673,000 of debt was converted into 219,565 shares of common stock,
leaving $8,327,000 available on the revolving line of credit.
In September 1997, the Company and Genzyme amended the terms of the $8.3
million Genzyme Credit Line. The expiration date of the revolving credit
line was extended to March 31, 2000, with an option, at that date, for the
Company to convert the outstanding balance to a three-year term loan. The
interest rate remains at 7% through April 1, 1998, increasing annually
through the end of the term loan; starting at the lower of 8% or prime in
the first year increasing to the lower of 10% or prime lending rate +2% in
the final year of the term loan. Financial
<PAGE>
covenants require positive quarterly earnings before interest, taxes,
depreciation, amortization and unfunded research and development expense
starting April 1, 1998. As of December 28, 1997, there was $6,000,000
outstanding on the Genzyme Credit Line.
Other Strategic Collaborations
Tufts University School of Veterinary Medicine. Pursuant to a cooperation and
licensing agreement, Tufts has agreed to work exclusively with GTC until
September 1998 in developing commercial applications of transgenic protein
production in milk. Tufts has also granted GTC a perpetual, non-exclusive
license to use certain proprietary microinjection technology and animal
husbandry techniques. Sales of products derived from transgenic goats produced
by Tufts, or from their offspring, are subject to royalties payable to Tufts.
The Company maintains a herd of approximately 150 goats at Tufts' facility in
Grafton, Massachusetts.
The Joint Venture. GTC holds an interest in the Joint Venture which, in March
1994, increased to 22% after an additional $1.2 million cash investment by the
Company. In October 1995, GTC contributed approximately $807,000 to maintain its
22% interest. The Joint Venture and GTC are parties to a research and
development agreement under which the Joint Venture funded GTC's research into
transgenic production of AT-III through October 1995 and certain research on
other proteins (the "Funded Proteins") through October 1996. GTC has granted to
the Joint Venture an exclusive license in Asia to use GTC's transgenic
technology to market and sell transgenic animals and to sell Funded Proteins
until the later of 2008 or the expiration of any applicable Japanese patent,
subject to various reciprocal royalty obligations. In February 1997, the Company
reached agreement with the Joint Venture under which GTC received milestone
payments of $4.4 million (see Note 12 to the consolidated financial statements
appearing in this report).
Patents and Proprietary Rights
GTC has filed a number of patent applications which cover relevant portions of
its transgenic technology, several of which are covered by cross-licensing
agreements. GTC holds an exclusive license from Genzyme to rights under a number
of patent applications on file in the United States and corresponding foreign
patent applications relating to certain aspects of its technology. GTC has a
broad patent issued by the European Patent Office which grants the full range of
claims presented in GTC's application covering the basic method of protein
production in milk, as well as any promoter used to do so. Other GTC
applications as to specific proteins, classes of proteins, techniques to enhance
expression and purification technologies remain pending.
GTC has exclusive and nonexclusive licenses to technologies owned by other
parties, including DNX, Inc. as to microinjection, Stanford University as to
gene transfer, and Behringwerke AG as to AT-III, as well as promoter
cross-licenses in place with PPL Therapeutics PLC and Pharming B.V. Certain of
the licenses require GTC to pay royalties on sales of products which may be
derived from or produced using the licensed technology. The licenses generally
extend for the life of any applicable patent. In April 1997, GTC entered into a
Settlement Agreement that ended the arbitration proceeding with Pharming B.V.
with respect to one such cross-license agreement. See "Item 3--Legal
Proceedings."
The Company also relies upon trade secrets, know how and continuing
technological advances to develop and maintain its competitive position. In an
effort to maintain the confidentiality and ownership of trade secrets and
proprietary information, the Company requires employees, consultants and certain
collaborators to execute confidentiality and invention assignment agreements
upon commencement of a relationship with the Company.
Competition
Transgenics
Many companies, including biotechnology and pharmaceutical companies, are
actively engaged in seeking efficient methods of producing proteins for
therapeutic or diagnostic applications. Two other companies known to GTC are
extensively engaged in the application of transgenic technology for the
production of proteins: Pharming B.V. and PPL Therapeutics PLC. Pharming B.V.,
based in the Netherlands, is primarily engaged in the development of recombinant
proteins in the milk of transgenic cows, which are most suitable for extremely
high volume protein production. See "Item 3--Legal Proceedings." PPL
Therapeutics PLC, which is based in Scotland, utilizes primarily sheep for
transgenic protein production.
<PAGE>
Primedica
The worldwide markets for testing services, manufacturing support services and
related development services are highly fragmented, involving several hundred
companies, as well as universities and governmental bodies. Competition in these
markets is based primarily on technological capabilities and reputation for
quality of products and services offered and perceived financial stability. In
certain market segments, price is also a significant competitive factor.
Government Regulation
Transgenics
The manufacturing and marketing of GTC's potential products, and certain areas
of research related to them, are subject to regulation by governmental
authorities in the United States, including the FDA, the U.S. Department of
Agriculture (the "USDA") and the Environmental Protection Agency (the "EPA").
Comparable authorities are involved in other countries.
To GTC's knowledge, no protein produced in the milk of a transgenic animal has
been submitted for final regulatory approval. However, the FDA issued its Points
to Consider in August 1995. Earlier in 1995, comparable guidelines were issued
by European regulatory authorities. GTC believes that its programs
satisfactorily address the issues raised by these documents and generally views
them as a very positive milestone in the acceptance of the transgenic form of
production. Based on discussions with the FDA and others, GTC expects that the
basic U.S. regulatory framework for the transgenic production of recombinant
proteins in animals will be similar to that described in the Points to Consider.
The anticipated approval process will be a two-part process, governing, first,
the approval of an individual pharmaceutical product as safe and effective and,
second, the approval of the manufacturing process as complying with applicable
FDA current Good Manufacturing Processes ("GMPs"). There can be no assurance,
however, that there will not be any delays in product development or FDA
approval due to issues arising from the breeding of transgenic animals and the
use of proteins derived from such animals.
With respect to therapeutic products, generally the standard FDA approval
process includes preclinical laboratory and animal testing, submission of an IND
to the FDA, appropriate human clinical trails to establish safety and
effectiveness and submission of a New Drug Application prior to market
introduction. The Company generally expects the same process to apply to
transgenically produced products and has already submitted a U.S. IND for AT-III
and has initiated clinical trials in the U.S. GTC expects the approval process
for various proteins to be undertaken either by the Company, by a collaborator
for which the Company is producing proteins, or jointly, depending upon the
nature of the relationship involved.
Approval for the production facilities to be used in producing a therapeutic
product will be subject to both the requirements for Biologics License
Applications and the Points to Consider.
Primedica
GTC and its customers are subject to a variety of regulatory requirements
intended to ensure the quality and integrity of their products and services. The
industry standard for conducting non-clinical testing is embodied in regulations
called Good Laboratory Practices ("GLPs"). GLPs have been adopted by the EPA and
the FDA and a number of foreign regulatory bodies. To help ensure compliance,
the Company maintains a strict quality assurance program at each site to audit
test data and conduct regular inspections of testing procedures and facilities.
GTC also complies with FDA-established current GMPs at its Washington
Laboratories and at BDL.
GTC also maintains certain licenses and permits issued by federal, state and
local authorities relating to the operation of its current laboratory and
testing facilities, including those required for hazardous waste disposal, the
purchase, use and disposal of radioactive isotopes and the use of animals in
testing and research. These licenses and permits include licenses from the U.S.
Nuclear Regulatory Commission for the purchase, use and disposal of small
amounts of short-lived radioactive isotopes for research purposes. GTC also has
registered with the Massachusetts Department of Environmental Protection and the
EPA as a Very Small Quantity Hazardous Waste Generator in connection with its
disposal of certain organic hazardous wastes used in connection with its
molecular biology and biomedical research. These wastes are disposed of through
a licensed hazardous waste transporter. The use and disposal of chemicals is
<PAGE>
regulated under the Toxic Substances Control Act and other state and federal
legislation.
Each of GTC's laboratories is licensed by the USDA and state and local
authorities to house and use laboratory animals for biomedical research
purposes. The ability to continue using animals in testing and research is
dependent on continued compliance with the requirements of such licenses. GTC's
Argus, Mason and Washington Laboratories are also registered with the U.S.
Public Health Service to conduct biomedical research on laboratory animals
funded by the NIH and other federal agencies. GTC's Argus, Mason and Redfield
laboratories are also licensed by federal and state drug enforcement agencies to
procure and use controlled substances in research programs involving laboratory
animals.
The Company's operations are also subject to federal, state and local laws,
rules, regulations and policies governing the use, generation, manufacture,
storage, air emission, effluent discharge, handling and disposal of certain
materials and waste, including, but not limited to, animal waste and waste
water.
RESEARCH AND DEVELOPMENT COSTS
During its fiscal years ended December 28, 1997, December 29, 1996, and December
31, 1995, GTC spent $17,840,000, $8,684,000, and $6,394,000, respectively, on
research and development (both sponsored and proprietary). These costs include
labor, materials and supplies, and overhead, including the cost of operating the
transgenics production facility as well as certain subcontracted research
projects.
EMPLOYEES
As of December 28, 1997, GTC employed 582 people. Of these, 368 were engaged in
operations, 54 were engaged in research and development, and 160 were engaged in
marketing and general administration. Of GTC's employees, approximately 43 have
Ph.D. degrees, 1 has a M.D. degree and 14 have D.V.M. degrees. None of GTC's
employees are covered by collective bargaining agreements. GTC believes its
employee relations are satisfactory.
<PAGE>
ITEM 1A.
EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
James A. Geraghty.............. 43 Chairman of the Board, President and Chief Executive
Officer
John B. Green.................. 44 Vice President, Chief Financial Officer and Treasurer
Harry M. Meade................. 51 Vice President, Transgenics Research
Peter H. Glick................. 34 President, Primedica Corporation
</TABLE>
Executive officers of the Company are elected by the Board of Directors on an
annual basis and serve at the discretion of the Board of Directors.
Mr. Geraghty has been the President, Chief Executive Officer and a director of
GTC since its incorporation in February 1993 and Chairman of the Board since
January 1998. Mr. Geraghty announced in November 1997 that upon the engagement
of his successor as Chief Executive Officer of the Company, he would resign from
such position. A search is currently underway for such position. Mr. Geraghty
joined Genzyme in September 1992, where he was a Vice President for Corporate
Development and the General Manager of the transgenics business unit until the
incorporation of the Company.
Mr. Green has been the Vice President and Chief Financial Officer of GTC since
December 1994 and Treasurer since August 1997. He has also served as Vice
President and Treasurer of TSI since March 1993 and as its Chief Financial
Officer since December 1994. Prior to that, he was Vice President and Assistant
Treasurer of TSI from December 1989.
Dr. Meade has been Vice President, Transgenics Research for GTC since August
1994 and has served as Research Director of GTC since May 1993. Prior to joining
GTC, Dr. Meade was a Scientific Fellow at Genzyme, where he was responsible for
directing the transgenic molecular biology program. From 1981 to March 1990,
when he joined Genzyme, Dr. Meade was a Senior Scientist at Biogen, Inc., a
biotechnology company, where he worked on the technology relating to the
production of proteins in milk and was an inventor on the first issued patent
covering this process.
Mr. Glick has been President, Primedica Corporation, a wholly-owned subsidiary
of GTC, since February 1998 and has served as Vice President, Marketing and
Corporate Development of GTC since June 1995. Prior to that he was Vice
President, Corporate Development of GTC from October 1994, and of TSI from June
1993. From January 1994 to January 1996, he also served as President of
Primedica's Washington Laboratories subsidiary. From November 1991 to May 1993,
he was Director, Corporate Development of TSI. Prior to joining TSI, he was a
strategy consultant at Bain & Company.
ITEM 2. PROPERTIES
GTC's headquarters and research facilities are located in approximately 9,100
square feet of laboratory and office space leased from Genzyme in Framingham,
Massachusetts. This lease extends through May 1998, at which time the lease
automatically renews on a year-to-year basis unless terminated by either party
on 90 days' notice. See "Item 1 - Business--Relationship with Genzyme."
GTC owns a 168-acre commercial production facility in central Massachusetts.
This facility contains 63,180
<PAGE>
square feet of production, laboratory and administrative space. The facility
also currently houses more than 500 goats. GTC believes its and Genzyme's
current facilities are adequate for significant further development of
commercial transgenic products. GTC also currently utilizes animal housing, care
and treatment facilities operated by Tufts in Massachusetts.
GTC also owns or leases sites for each of its testing laboratories. The
Company's Mason Laboratories occupy two facilities in Worcester, Massachusetts,
the largest of which is an approximately 107,600 square foot preclinical testing
facility, leased through March 2005. In addition, GTC owns an adjacent building
that consists of 46,800 square feet, of which 28,100 square feet of space has
been renovated for preclinical testing. The remaining 18,700 square feet, of
which 16,000 square feet is unrenovated shell space, is available for future
expansion.
In addition, GTC owns and occupies a 68,000 square-foot preclinical testing
facility in Redfield, Arkansas; leases a 55,000 square-foot facility in Horsham,
Pennsylvania consisting of a 38,000 square foot preclinical testing facility and
16,000 square feet of unrenovated expansion space, under a lease which expires
in June 2002; operates its formulation business in a 10,500 square-foot
laboratory facility in Cambridge, Massachusetts under a lease that expires in
October 2002; and occupies a 27,000 square-foot laboratory and office facility
in Rockville, Maryland, under a lease expiring in December 2000 and leases 5,000
square feet of office space located in Milford, Massachusetts under a lease
expiring in October 1998.
The operations of the Company's now inactive subsidiary, Health and Sciences
Research Incorporated ("HSRI") were located in a 20,700 square foot facility in
Englewood, New Jersey under a lease expiring in August 1998. The Company has
sublet approximately 6,000 square feet of this space.
ITEM 3. LEGAL PROCEEDINGS
On April 23, 1997, the Company and Pharming, B.V., a Netherlands corporation,
("Pharming"), entered into a Settlement Agreement, thereby ending arbitration
proceedings which were initiated by Pharming on December 21, 1995. The
arbitration was filed under a license agreement between the companies dated
September 21, 1994 (the "License Agreement"), under which the Company and
Pharming cross-licenses various intellectual property rights under certain
patents relating to the transgenic production of proteins. Pharming claimed
breach of the License Agreement by the Company on various grounds, and the
Company denied Pharming's allegations and filed a counterclaim alleging that
Pharming's request for arbitration was filed for improper purposes.
Under the Settlement Agreement, a stipulation dismissing all claims was
submitted to the tribunal and the Company paid Pharming $200,000, which payment
was made in May 1997. Also, in connection with the settlement, the companies
amended the License Agreement to clarify the terms under which (i) the Company
and its affiliates may work in transgenic cattle under the existing license to
Pharming's promoter patent and (ii) Pharming and its affiliates may work in
transgenic goats under the existing license to the Company's promoter patent.
The amended License Agreement further specifies that the Company and Pharming
each have a right of first refusal to perform the work in goats and cattle,
respectively, which the other party would seek to contract to a third party.
Finally, the amended License Agreement clarifies that the agreement's conditions
and restrictions apply only to the cross-licensed patents, and that no rights
other than the cross-licensed patents are conferred on the parties. All other
material terms of the original License Agreement remain in force.
On June 17, 1994, a lawsuit was filed in the Court of Chancery of the State of
Delaware for New Castle County, Civil Action No 13569, on behalf of the
stockholders of TSI naming the Company, TSI and each of the directors of TSI as
defendants. The complaint alleged, among other things, that (i) the terms of the
merger between TSI and a subsidiary of GTC pursuant to the Agreement and Plan of
Merger dated June 14, 1994 among TSI, GTC and such subsidiary of GTC (the
"Merger Agreement") are unfair to the TSI stockholders, (ii) TSI's directors
breached their fiduciary duties to the TSI stockholders in authorizing TSI to
enter into the Merger Agreement and failing to conduct an auction for TSI, and
(iii) GTC aided and abetted the TSI directors in the breach of their fiduciary
duty. The lawsuit sought an unspecified amount of damages and a court order to
unwind the Merger. In September 1994, GTC filed a motion to dismiss all claims
asserted against it in the litigation. On April 14, 1996, the case was dismissed
by stipulation of the parties and under an approving order of the court.
Except as described above, GTC is not a party to any material legal proceedings.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1997, no matter was submitted to a vote
of the security holders of the Company.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of GTC commenced trading on July 9, 1993 in the Nasdaq National
Market System under the symbol GZTC. Quarterly high and low sales prices for the
stock as reported by the Nasdaq National Market System are shown below.
HIGH LOW
---- ---
1995:
1st Quarter 3 1/8 1 1/2
2nd Quarter 3 5/8 1 7/8
3rd Quarter 6 1/8 2 7/16
4th Quarter 5 7/8 4
1996:
1st Quarter 7 1/8 4 3/8
2nd Quarter 10 5/8 5
3rd Quarter 8 1/8 3 3/4
4th Quarter 7 1/4 5 1/8
1997:
1st Quarter 10 1/4 6
2nd Quarter 9 1/4 6 3/8
3rd Quarter 12 3/16 8
4th Quarter 14 8 1/4
On March 16, 1998, there were approximately 734 shareholders of GTC of record.
The Company has never paid a cash dividend on its Common Stock and currently
expects that future earnings will be retained for use in its business.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below as of December 28, 1997 and December
29, 1996 and for each of the three fiscal years in the period ended December 28,
1997 are derived from the Company's consolidated financial statements included
elsewhere in this Report, which have been audited by Coopers & Lybrand L.L.P.,
independent public accountants. The selected financial data set forth below as
of December 31, 1995, 1994 and 1993, and for the years ended December 31, 1994
and 1993 are derived from audited consolidated financial statements not included
in this Report. This data should be read in conjunction with the Company's
consolidated financial statements and related notes thereto under Item 8 of this
Report and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" under Item 7 of this Report.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
-----------------------------------------------------------------------
December 28, December 29, December 31, December 31, December 31,
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Services $ 43,417 $ 38,496 $ 26,399 $ 4,465 $ -
Sponsored research and development 19,521 8,338 6,022 4,097 3,222
Products - - - 909 -
---------- ----------- ---------- ---------- ----------
62,938 46,834 32,421 9,471 3,222
Costs and expenses:
Services 36,989 33,356 24,250 5,157 -
Research and development 17,840 8,684 6,394 4,671 3,143
Products - - - 841 -
Selling, general and administrative 15,650 11,691 8,919 3,596 1,088
Equity in loss of Joint Venture 811 356 713 582 -
Impairment of investment in
Joint Venture - - - 58 318
---------- ----------- ---------- ---------- ----------
71,290 54,087 40,276 14,905 4,549
---------- ----------- ---------- ---------- ----------
Loss from continuing operations (8,352) (7,253) (7,855) (5,434) (1,327)
Other income and (expenses):
Interest income 136 85 32 238 156
Interest expense (1,129) (1,138) (1,007) (263) -
Other income 50 587 780 - -
---------- ----------- ---------- ---------- ----------
Loss from continuing operations before
income taxes (9,295) (7,719) (8,050) (5,459) (1,171)
Provision (benefit) for income taxes 48 27 (2,346) 7 -
---------- ----------- ---------- ---------- ----------
Loss from continuing operations $ (9,343) $ (7,746) $ (5,704) $ (5,466) $ (1,171)
Discontinued operations
Income from discontinued clinical
operations
(less applicable taxes of $239
and $21) - - 412 182 -
Gain on disposal of clinical
operations
(less applicable income taxes
of $3,401) - - 1,159 - -
---------- ----------- ---------- ---------- ----------
Net loss $ (9,343) $ (7,746) $ (4,133) $ (5,284) $ (1,171)
========== ============ =========== =========== ==========
Results per weighted average number
of common shares (basic and diluted)
From continuing operations $ (0.54) $ (0.52) $ (0.48) $ (0.83) $ (0.44)
========== ============ =========== =========== ==========
Net loss $ (0.54) $ (0.52) $ (0.35) $ (0.80) $ (0.44)
========== ============ =========== =========== ==========
Weighted average number of
shares outstanding (basic and
diluted) 17,253,292 14,801,725 11,788,542 6,598,545 2,632,070
<CAPTION>
December 28, December 29, December 31, December 31, December 31,
1997 1996 1995 1994 1993
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $ 6,383 $ 8,894 $ 5,825 $ 816 $ 8,417
Short-term investments - - - 2,231 1,944
Working capital (deficit) (8,423) (116) (7,011) (7,858) 9,882
Total assets 70,980 66,704 58,042 47,993 10,527
Long-term liabilities 10,779 6,742 7,179 9,082 -
Stockholders' equity 27,378 35,204 27,288 19,424 10,014
</TABLE>
There were no cash dividends paid for any period presented.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Year Ended December 28, 1997 as Compared to Year Ended December 29, 1996
Total revenues for 1997 were $62.9 million, compared with $46.8 million in 1996,
an increase of $16.1 million or 34%. Service revenues increased to $43.4 million
in 1997 from $38.5 million in 1996, an increase of $4.9 million or 13%.
Sponsored research and development revenues increased to $19.5 million in 1997
from $8.3 million in 1996, an increase of $11.2 million or 135%, due primarily
to an increase in activity and revenues related to the funding received from
Genzyme Corporation ("Genzyme") in the development of the lead compound,
transgenic Antithrombin III ("AT-III"), the achievement of $4.4 million in
milestones from the joint venture formed by the Company and Sumitomo Metals
Industries, LTD. (the "Joint Venture"), the achievement of a $1.5 million
milestone, from Bristol-Meyers Squibb related to the BR96 collaboration and
increased commercial activity.
Cost of services in 1997 was $37 million compared to $33.4 million in 1996, an
increase of $3.6 million or 11%, due, primarily, to the increased service
volumes. Sponsored research and development expenses increased to $12.6 million
in 1997 from $7.9 million in 1996, an increase of $4.7 million or 59%. The
increase is due to the operating costs of a manufacturing facility coming
on-line for the production of AT-III clinical trial material and increased
activity in commercial programs. Proprietary research and development increased
to $5.3 million in 1997 from $828,000 in 1996, an increase of 540%. The increase
is due to the cancer vaccine program being initiated in 1997 and increased
internal research.
Gross profit in 1997 amounted to $8.1 million versus $4.8 million in 1996. Gross
profit on services in 1997 was $6.4 million, a gross margin of 15%, versus $5.1
million, a gross margin of 13%, in 1996. The improvement in the services margins
was primarily due to increased services revenues.
Selling, general and administrative ("SG&A") expenses increased to $15.7 million
in 1997 from $11.7 million in 1996, an increase of $4 million or 34%. The
increase is due to an increase in the sales and marketing effort and to the
addition of administrative personnel required to support the growth in
transgenic research and development programs, $434,000 of transaction costs on
uncompleted merger and acquisition activities as well as $326,000 in one-time
personnel-related charges.
Interest income increased to $136,000 in 1997, from $85,000 in 1996, due to the
investment of funds from the Company's secondary public offering and receipt of
interest on funds that were held in escrow last year. Interest expense was
essentially unchanged year to year at $1.1 million. Of the 1997 total, $962,000
represents interest incurred by the testing service operations, $161,000
represents interest for the financing of the transgenic production facility and
$6,000 represents interest incurred under the Convertible Debt and Development
Funding Agreement with Genzyme (the "Genzyme Credit Line") (see Item 8 and Note
5 to the consolidated financial statements appearing in this report).
The Company recognized $50,000 of non-operating income in 1997 compared to
$587,000 in 1996, a decrease of $537,000 or 91%. Of the 1996 total, $538,000
represents the collection of the final payments of the promissory note received
in connection with the 1995 sale of the TSI Center for Diagnostic Products Inc.
("CDP").
The Company recognized $811,000 of Joint Venture losses in 1997 compared to
$356,000 in 1996. The increase was due to additional research by the Joint
Venture including increased research funding to the Company (see Note 12 to the
consolidated financial statements appearing in this report).
Year Ended December 29, 1996 as Compared to Year Ended December 31, 1995
Total revenues for 1996 were $46.8 million compared with $32.4 million in 1995,
an increase of $14.4 million or 44%. Service revenues for 1996 were $38.5
million compared with $26.4 million in 1995, an increase of $12.1 million or
46%. Sponsored research and development revenues increased to $8.3 million in
1996 compared with $6 million in 1995, an increase of $2.3 million or 38%, due
primarily to an increase in activity and revenues related to the development of
AT-III.
<PAGE>
Cost of services for 1996 were $33.4 million compared with $24.3 million in
1995, an increase of $9.1 million or 37%, due to increased service volumes.
Sponsored research and development expenses increased to $7.9 million in 1996
compared with $5.7 million in 1995, an increase of $2.2 million or 39%. The
increase was due to increased activity relating to the development of AT-III,
which, in the second half of 1996, had an Investigational New Drug Filing
("IND") approved by the Food and Drug Administration ("FDA") and entered into
Phase I/II clinical trials. Proprietary research and development increased to
$828,000 in 1997 from $727,000 in 1996, an increase of 14%.
Gross profit amounted to $4.8 million in 1996 compared with $1.8 million in
1995. Gross profit on services in 1996 was $5.1 million, a gross margin of 13%,
versus $2.1 million, a gross margin of 8% in 1995. The majority of the
improvement in service margins was due to increased service revenues as a result
of continued marketing efforts with an emphasis on developing significant client
relationships and a shift to higher margin services.
SG&A expenses increased to $11.7 million in 1996 from $8.9 million in 1995, an
increase of $2.8 million or 31%. The increase was due primarily to increased
investment in sales and marketing and to the growth in the testing services
operations.
Interest income increased to $85,000 in 1996 from $32,000 in 1995, an increase
of $53,000 or 166%, primarily due to the investment of funds received from the
Company's 1996 public offering. Interest expense was $1.1 million in 1996
compared with $1 million in 1995, an increase of $131,000 or 13%. Of the 1996
total, $902,000 represents interest incurred by the testing service operations,
$167,000 represents interest for the financing of the transgenic production
facility and $61,000 represents interest incurred under the Genzyme Credit Line.
The Company recognized $356,000 of Joint Venture losses in 1996 compared to
$713,000 in 1995, a decrease of $357,000 or 50%. The decrease is due to reduced
funding received from the Joint Venture during 1996.
The Company recognized $587,000 of non-operating income in 1996 compared to
$780,000 in 1995, a decrease of $193,000 or 25%. Of the 1996 total, $538,000
represents the collection of the final payments of the promissory note received
in connection with the 1995 sale of CDP.
The Company had income from its discontinued clinical operations of $412,000 in
1995. The 1995 income represents the results of operations (net of tax) for the
first three quarters of 1995 for GDRU Limited ("GDRU") and Health and Sciences
Research Incorporated ("HSRI"). These operations were acquired by the Company as
part of the TSI Corporation ("TSI") acquisition in October 1994. GDRU was sold
effective as of September 1, 1995 and the HSRI operation was shutdown in August
1995.
The Company realized a $1,159,000 gain on the disposal of clinical operations in
1995 from the sale of GDRU.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting
Comprehensive Income requires that all components of comprehensive income and
total comprehensive income be reported on one of the following: (1) the
statement of operations, or (2) a separate statement of comprehensive income.
Comprehensive income is comprised of net income and all changes to stockholders'
equity, except those due to investments by owners (changes in paid-in capital)
and distribution to owners (dividends). This statement is effective for fiscal
years beginning after December 15, 1997. The implementation of SFAS 130 is not
expected to have a significant impact on the Company's financial statements.
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosure
About Segments of an Enterprise and Related Information requires public
companies to report certain information about their operating segments in their
annual financial statements and quarterly reports issued to stockholders. It
also requires public companies to report certain information about their
products and services, the geographic areas in which they operate, and their
major customers. This statement is effective for fiscal years beginning after
December 15, 1997. Implementation of SFAS 131 will have no effect on the
Company's financial position or results of operations. The Company is assessing
the financial statement disclosure impact of SFAS 131.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $6.4 million at December 28, 1997.
During 1997 the Company had
<PAGE>
a $2.5 million net decrease in cash; $6.2 million was invested in equipment,
further expansion of the transgenic production facility and the expansion of
laboratory facilities, $3.6 million was used to pay down long-term debt and $4.4
million was used in operations. Sources of funds during 1997 included $5.3
million of proceeds from issuance of long-term debt, $1.1 million of proceeds
from the issuance of common stock, and $6 million in borrowings under the
Genzyme Credit Line.
In June 1997, the Company completed a $3 million expansion of its Mason
Laboratories facility. The Company obtained $5 million in long-term financing
for this project from a consortium consisting of state and local government
agencies in conjunction with a commercial bank. In June 1997, the Company
received approximately $3.8 million in funds under this facility, of which
approximately $800,000 was used to pay down existing debt. In connection with
the financing, the Company issued 20,000 warrants at the closing market value on
June 26, 1997 of $8.75. The remaining $1.2 million of financing is available
through December 31, 1998 to fund future renovations of this facility, if any
(see Note 5 to the consolidated financial statements appearing in this report).
In September 1997, the Company and Genzyme amended the terms of the $8.3 million
Genzyme Credit Line dated March 29, 1996. Under the terms of the amended Genzyme
Credit Line, the expiration date of the revolving credit line was extended to
March 31, 2000 with an option, at that date, for the Company to convert the
outstanding balance to a three-year term loan. As of December 28, 1997, $6
million was outstanding under the Genzyme Credit Line (see Note 5 to the
consolidated financial statements appearing in this report).
In September 1997, the Company entered into an agreement with Advanced Cell
Technology ("ACT") to utilize ACT's cloning technology to produce transgenic
proteins. In return for exclusive access to this technology and subject to
successful achievement of technical milestones, the Company agreed to place a
minimum of $2 million in contract services with ACT annually from 1998 through
2002.
In March 1998, the Company completed a $20 million private placement of Series A
Convertible Preferred Stock (the "Preferred Stock") to three institutional
investors. The Preferred Stock matures in three years and is convertible into
common stock at various conversion prices (see Note 13 to the consolidated
financial statements appearing in this report). As a result of this financing,
the amount of the Genzyme Credit Line was reduced to approximately $6.4 million.
The Company had a working capital deficit of $8.4 million at December 28, 1997
compared to a deficit of $116,000 at December 29, 1996. As of December 28, 1997,
the Company had approximately $2.3 million available under the Genzyme Credit
Line (subsequently reduced to approximately $400,000 as a result of the
Preferred Stock offering), $1.2 million available under the Mason facility
financing and commitments for an additional $3 million of capital lease
financing. The Company expects that the funds available from these sources as
well as the Preferred Stock offering completed in March 1998 will be sufficient
to fund operations and capital investment for the next year.
Management's current expectations regarding the sufficiency of the Company's
cash resources are forward-looking statements, and the Company's cash
requirements may vary materially from such expectations. Such forward-looking
statements are dependent on several factors, including the results of the
Company's testing services business, the ability of the Company to enter into
any transgenic research and development collaborations in the future and the
terms of such collaborations, the results of research and development and
preclinical and clinical testing, competitive and technological advances and
regulatory requirements. If the Company experiences increased losses, the
Company may have to seek additional financing through collaborative
arrangements or from public or private sales of its securities, including
equity securities. There can be no assurance that additional funding will be
available on terms acceptable to the Company, if at all. If additional
financing cannot be obtained on acceptable terms, to continue its operations
the Company could be forced to delay, scale back or eliminate certain of its
research and development programs or to enter into license agreements with
third parties for the commercialization of technologies or products that the
Company would otherwise undertake itself.
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and is
implementing its plan to resolve the issue. The Year 2000 problem is a result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations. The
Company presently believes that, with upgrades to existing financial software,
the Year 2000 problem will not pose significant operational
problems or additional cost for the Company's computer systems as so modified
and converted.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Financial Statements
Response to this item is submitted as a separate section of this report
immediately following Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is set forth in part under the captions "ELECTION OF DIRECTORS"
and "SECTION 16 (a) BENEFICIAL REPORTING COMPLIANCE" in the Company's Proxy
Statement for the 1998 Annual Meeting of Stockholders to be held on May 27, 1998
(the "Proxy Statement") which are incorporated herein by reference, and the
remainder of such information is set forth under the caption "EXECUTIVE OFFICERS
OF THE REGISTRANT" in Part I, Item 1A hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "EXECUTIVE COMPENSATION" in the
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information set forth under the caption "SHARE OWNERSHIP" in the Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "EXECUTIVE EMPLOYMENT AGREEMENTS"
and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in the Proxy
Statement is incorporated herein by reference. See also, Notes 2, 6 and 10 to
the Consolidated Financial Statements included herewith.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) The Company's Financial Statements appear as a separate section of this
report immediately following Item 14.
All schedules have been omitted because the required information is not
applicable or not present in amounts sufficient to required submission of the
schedule, or because the information required is in the consolidated financial
statements or the notes thereto.
The Exhibits to this report are listed below under Part IV, Item 14(c) hereof.
(b) Reports on Form 8-K
<PAGE>
No reports on Form 8-K were filed by the Company during the quarter ended
December 28, 1997.
(c) Exhibits
The exhibits filed as part of this Form 10-K are listed on the Exhibit Index
immediately preceding such Exhibits, which Exhibit Index is incorporated herein
by reference.
<PAGE>
FORM 10-K-ITEM 8, 14 (a) (1) and (2), and (d)
GENZYME TRANSGENICS CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Genzyme Transgenics
Corporation and subsidiaries are included in Item 8:
Report of Coopers & Lybrand L.L.P. - Independent Accountants
Consolidated Balance Sheets--December 28, 1997 and December 29, 1996
Consolidated Statements of Operations--For the fiscal years ended December
28, 1997, December 29, 1996 and December 31, 1995
Consolidated Statements of Stockholders Equity--For the fiscal years ended
December 28, 1997, December 29, 1996 and December 31, 1995
Consolidated Statements of Cash Flows--For the fiscal years ended December
28, 1997, December 29, 1996 and December 31, 1995
Notes to Consolidated Financial Statements
All schedules for which provision is made in the applicable regulation of the
Securities and Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been omitted.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Genzyme Transgenics Corporation:
We have audited the consolidated balance sheets of Genzyme Transgenics
Corporation as of December 28, 1997 and December 29, 1996 and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three fiscal years in the period ended December 28, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Genzyme
Transgenics Corporation as of December 28, 1997 and December 29, 1996, and the
consolidated results of its operations and its cash flows for each of the three
fiscal years in the period ended December 28, 1997 in conformity with generally
accepted accounting principles.
Boston, Massachusetts /s/ Coopers & Lybrand L.L.P.
February 25, 1998, except as to
the information presented in Note 13,
for which the date is March 20, 1998
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share amounts)
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,383 $ 8,894
Accounts receivable, net of allowance of $390
and $422 at December 28, 1997 and
December 29, 1996, respectively 10,517 7,499
Unbilled contract revenue (including
$891 and $664 from Genzyme Corporation at
December 28, 1997 and December 29, 1996,
respectively) 6,069 6,740
Other current assets 1,431 1,509
------------- -------------
Total current assets 24,400 24,642
Net property, plant, and equipment 26,297 20,566
Costs in excess of net assets acquired, net 19,532 20,695
Investment in Joint Venture - 283
Other assets 751 518
============= =============
$ 70,980 $ 66,704
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,091 $ 2,992
Accounts payable - Genzyme Corporation 3,364 1,339
Revolving line of credit 6,000 6,000
Revolving line of credit - Genzyme 6,000 -
Corporation
Accrued expenses 7,900 5,911
Advance payments 5,568 6,649
Current portion of long-term debt and
capital leases 1,900 1,867
------------- -------------
Total current liabilities 32,823 24,758
Long-term debt and capital leases, net of current portion 9,862 5,708
Deferred lease obligation 613 508
Other liabilities 304 526
------------- -------------
Total liabilities 43,602 31,500
Commitments and Contingencies (Note 4)
Stockholders' equity:
Preferred stock, $.01 par value; authorized
5,000,000 shares, none outstanding - -
Common stock, $.01 par value; 40,000,000
shares authorized; 17,403,406 and 17,130,901 shares
issued and outstanding at December 28, 1997
and December 29, 1996, respectively 174 171
Capital in excess of par value 54,478 52,974
Accumulated deficit (27,274) (17,931)
Accumulated translation adjustment - (10)
------------- -------------
Total stockholders' equity 27,378 35,204
============= =============
$ 70,980 $ 66,704
============= =============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except share and per share amounts)
<TABLE>
<CAPTION>
For the Fiscal Years Ended
----------------------------------
December 28, December 29, December 31,
1997 1996 1995
---------------- ------------- ---------------
<S> <C> <C> <C>
Revenues:
Services $ 43,417 $ 38,496 $ 26,399
Sponsored research and development 19,521 8,338 6,022
---------------- ------------- ---------------
62,938 46,834 32,421
Costs and operating expenses:
Services 36,989 33,356 24,250
Research and development:
Sponsored 12,558 7,856 5,667
Proprietary 5,282 828 727
Selling, general and administrative 15,650 11,691 8,919
Equity in loss of Joint Venture 811 356 713
---------------- ------------- ---------------
71,290 54,087 40,276
---------------- ------------- ---------------
Loss from continuing operations (8,352) (7,253) (7,855)
Other income (expense):
Interest income 136 85 32
Interest expense (1,129) (1,138) (1,007)
Other income 50 587 780
---------------- ------------- ---------------
Loss from continuing operations before income taxes (9,295) (7,719) (8,050)
Provision (benefit) for income taxes 48 27 (2,346)
---------------- ------------- ---------------
Loss from continuing operations $ (9,343) $ (7,746) $ (5,704)
Discontinued operations
Income from discontinued clinical operations
(less applicable income taxes of $240) - - 412
Gain on disposal of clinical operations
(less applicable income taxes of $3,401) - - 1,159
---------------- ------------- ---------------
Net loss $ (9,343) $ (7,746) $ (4,133)
=============== ============= ===============
Net loss per common share (basic and diluted):
From continuing operations $ (0.54) $ (0.52) $ (0.48)
=============== ============= ===============
Net loss per share $ (0.54) $ (0.52) $ (0.35)
=============== ============= ===============
Weighted average number of common
shares outstanding (basic and diluted) 17,253,292 14,801,725 11,788,542
=============== ============= ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
waiting for consolidated statements of stockholders' equity
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Series A Convertible Capital in Parent Unrealized Accumulated Total
Preferred Stock Common Stock Excess of Company Loss on Accumulated Translation Stockholders'
Shares Amount Shares Amount Par Value Investment Investments Deficit Adjustment Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994...... -- -- 9,890 $99 $25,476 -- $(94) $ (6,052) $(5) $19,424
Net loss (4,133) (4,133)
Common stock issuance under the
Genzyme Common Stock Put
Agreement..................... 500 5 3,995 4,000
Issuance of common stock in
connection with the Common
Stock Purchase
Agreement with Genzyme........ 1,334 13 3,987 4,000
Issuance of common stock in
connection with the purchase
of a subsidiary............... 866 10 2,469 2,479
Issuance of common stock for
payment of consulting and non-
competition agreement......... 341 3 973 976
Common stock issuance under
Employee Stock Purchase Plan.. 87 1 170 171
Common stock issuance in
connection with the TSI
Savings and Retirement Plan... 130 1 273 274
Proceeds from the exercise of
stock options................. 3 8 8
Realized loss on investments.... 94 94
Translation adjustment.......... (5) (5)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995...... -- -- 13,151 132 37,351 -- -- (10,185) (10) 27,288
Net loss........................ (7,746) (7,746)
Sale of common stock to public,
net of expenses............... 3,450 34 12,666 12,700
Issuance of common stock in
connection with the
Convertible Debt and
Development Funding Agreement. 220 2 1,671 1,673
Common stock issuance under
Employee Stock Purchase Plan.. 165 1 511 512
Common stock issuance in
connection with the GTC
Savings and Retirement Plan... 58 1 265 266
Issuance of warrants in
settlement of liability....... 128 128
Proceeds from the exercise of
stock options................. 87 1 382 383
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 29, 1996...... -- -- 17,131 171 52,974 -- -- (17,931) (10) 35,204
Net loss........................ (9,343) (9,343)
Common stock issuance under
Employee Stock Purchase Plan.. 115 1 572 573
Common stock issuance in
connection with the GTC
Savings and Retirement Plan... 37 1 257 258
Issuance of warrants in
connection with a debt
financing..................... 130 130
Translation adjustment.......... 10 10
Proceeds from the exercise of
stock options................. 120 1 545 546
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 28, 1997...... -- -- 17,403 $174 $54,478 -- -- $(27,274) $ -- $27,378
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
GENZYME TRANSGENICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED
--------------------------------------
December 28, December 29, December 31,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows for operating activities:
Net loss $ (9,343) $ (7,746) $ (4,133)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 4,149 3,821 3,712
Provision (recovery) of accounts receivable
allowances 124 (237) 3
Loss on sale of investments -- -- 108
Write-off of goodwill -- -- 972
Shares to be issued for 401-K employer match 464 368 266
Deferred tax provision -- -- 175
Gain on disposal of discontinued operations -- -- (2,350)
Gain from utilization of operating loss carry forward -- -- (1,159)
Loss on disposal of fixed assets 7 165 88
Equity in loss of Joint Venture 811 356 713
Issuance of warrants in settlement of liability -- 128 --
Changes in assets and liabilities, net of effects from purchase of
subsidiaries:
Accounts receivable and unbilled contract revenue (2,471) (4,072) (2,806)
Inventory and other current assets 78 (700) (29)
Decrease in net assets held for sale/disposition -- -- 781
Accounts payable 1,124 (38) 270
Accrued income taxes -- -- (407)
Other accrued expenses 1,783 (1,153) (2,228)
Advance payments (1,081) 1,959 (1,825)
-------- -------- --------
Net cash used by operating activities (4,355) (7,149) (7,849)
Cash flows for investing activities:
Purchase of property, plant and equipment (6,175) (3,549) (2,326)
Proceeds from sales and maturities of
short-term investments -- -- 2,217
Investment in Joint Venture (528) -- (807)
Cash paid for acquisitions -- -- (679)
Proceeds from sale of discontinued operations -- -- 6,443
Restricted cash -- 1,425 (1,425)
Other assets -- 632 495
-------- -------- --------
Net cash provided by (used in) investing activities (6,703) (1,492) 3,918
Cash flows from financing activities:
Net proceeds from the issuance of common stock -- 12,700 4,275
Net proceeds from employee stock purchase plan 573 512 171
Net proceeds from the exercise of stock options 546 383 8
Proceeds from long-term debt 5,302 -- 2,423
Repayment of long-term debt (3,597) (1,713) (3,515)
Net borrowings under revolving line of credit -- -- 4,670
Investment and advances by Genzyme Corporation 6,000 1,673 428
Deposits on capital leases -- -- (197)
Deferred financing costs (170) -- --
Other long-term liabilities (117) (420) (743)
-------- -------- --------
Net cash provided by financing activities 8,537 13,135 7,520
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (2,521) 4,494 3,589
Effect of exchange rates on cash 10 -- (5)
Cash and cash equivalents at beginning of the year 8,894 4,400 816
-------- -------- --------
Cash and cash equivalents at end of year $ 6,383 $ 8,894 $ 4,400
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years ended December 28, 1997, December 29, 1996 and December 31, 1995
(all tabular $ in thousands, except per share data)
NOTE 1. NATURE OF BUSINESS
Genzyme Transgenics Corporation (together with its subsidiaries, the "Company")
is engaged in the application of transgenic technology to the development and
production of recombinant proteins for therapeutic and diagnostic uses and,
through its wholly-owned subsidiaries, TSI Corporation ("TSI") and
BioDevelopment Laboratories, Inc. ("BDL"), is a leading provider of preclinical
and toxicology testing services to pharmaceutical, biotechnology, medical device
and chemical companies.
The accompanying financial statements have been presented on the assumption that
the Company is a going concern. The Company has incurred losses and negative
operating cash flow in each of the fiscal years ended December 28, 1997,
December 29, 1996 and December 31, 1995. The Company had a working capital
deficit of $8.4 million at December 28, 1997. As of December 28, 1997, the
Company had $2.3 million available under a credit line with Genzyme Corporation
("Genzyme"). In addition, in February 1998, the Company entered into a lease
agreement with a commercial leasing company for $3 million of additional lease
availability and in March 1998, the Company completed a $20 million private
placement of convertible preferred stock (see Notes 5 and 13). In conjunction
with this private placement, the credit line availability with Genzyme was
subsequently reduced by approximately $1.9 million.
The Company is subject to risks common to companies in the biotechnology
industry, including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and compliance with government regulations.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company was incorporated in February 1993. On October 1, 1994, the Company
acquired TSI and its respective subsidiaries, Argus Research Laboratories, Inc.
("Argus"), The TSI Center for Diagnostic Products, Inc. ("CDP"), Health and
Sciences Research Incorporated ("HSRI"), TSI Mason Laboratories, Inc. ("Mason"),
TSI Redfield Laboratories, Inc. ("Redfield"), TSI Washington Laboratories, Inc.
("Washington") and G.D.R.U. Limited ("GDRU"). In July 1995, the Company acquired
BDL.
In August 1995, the Company closed its HSRI laboratory. The results of
operations for HSRI are shown net of tax and included in discontinued clinical
operations for all periods presented. Effective September 1, 1995, the Company
completed the sale of GDRU. The 1995 results of operations for GDRU are shown
net of tax and included in discontinued clinical operations. HSRI and GDRU were
the only laboratories performing human clinical trials within the Company s
operations.
Genzyme is the Company's largest single stockholder. As a result of various
equity transactions, Genzyme owned 43% of the Company at both December 28, 1997
and December 29, 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. The Company has accounted for its 22% investment
in the joint venture between SMI Genzyme Ltd. and Sumitomo Metals Industries
Ltd. (" Joint Venture") using the equity method since 1994. All significant
intercompany transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The significant estimates and assumptions in these financial
statements include contract revenue recognition, net realizable value of costs
in excess of net assets acquired, account receivable reserves, tax valuation
reserves and the assumptions regarding the presentation of the Company as a
going concern. Actual results could differ from those estimates.
<PAGE>
Cash and Cash Equivalents
Cash equivalents, consisting principally of money market funds and municipal
notes purchased with initial maturities of three months or less, are valued at
market.
Restricted Cash
Restricted cash represents cash from the sale of GDRU that was held in escrow
and became unrestricted during 1996.
Short-Term Investments
All short-term investments are classified as available for sale and are stated
at the lower of cost or market plus accrued interest with premiums and discounts
amortized over the life of the investment. Gains and losses on sales of
securities are calculated using the specific identification method.
At December 31, 1994, there was an unrealized loss on investment of $94,000 that
was included in equity. During 1995, the Company sold securities with a cost
basis of $2,231,000 and realized losses of $108,000 on those sales. At December
28, 1997 and December 29, 1996, there were no short-term investments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents and trade accounts
receivable. At December 28, 1997 and December 29, 1996, approximately 87% and
78%, respectively of cash and cash equivalents were held by one financial
institution.
The Company provides most of its testing services to diverse pharmaceutical
companies worldwide. The Company also provides services to the U.S. government.
See Note 9 for additional revenue information. Concentrations of credit risk
with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. The Company performs ongoing
credit evaluations of its customers' financial conditions and maintains reserves
for potential credit losses. Activity for fiscal 1996 included a provision of
$334,000, a recovery of $571,000 and write-offs of $144,000. Activity for fiscal
1997 included a provision of $256,000, a recovery of $132,000 and write-offs of
$156,000.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the
straight-line method over estimated useful lives of three to thirty years.
Leasehold improvements are amortized using the straight-line method over the
life of the improvement or the remaining term of the lease, whichever is
shorter. The direct costs of the New Zealand goats ("Livestock") and related
costs to bring them to the United States are capitalized and amortized using the
straight-line method over three years.
<PAGE>
The following is the summary of property, plant and equipment and related
accumulated amortization and depreciation as of December 28, 1997 and December
29, 1996.
Years December 28, December 29,
of Life 1997 1996
-------- ---------- ------------
Land -- $ 534 $ 530
Buildings 20 - 30 13,225 7,893
Livestock 3 1,291 740
Leasehold improvements lease life 3,751 2,854
Laboratory, manufacturing and
office equipment 3 - 10 5,829 5,177
Laboratory, manufacturing and
office equipment - capital lease 3 - 10 8,199 5,724
Construction in process -- 77 1,364
------- -------
$32,906 $24,282
Less accumulated amortization and
depreciation 6,609 3,716
------- -------
Net property, plant and
equipment $26,297 $20,566
======= =======
Depreciation and amortization expense was $2,919,000, $2,603,000 and $2,330,000
for the fiscal years ended December 28, 1997, December 29, 1996 and December 31,
1995, respectively. Accumulated amortization for equipment under capital lease
was $2,154,000 and $1,311,000 at December 28, 1997 and December 29, 1996,
respectively.
Non Cash Transactions
During fiscal 1995, the Company purchased BDL for 830,996 shares of stock valued
at $2,386,000 and issued approximately 35,077 shares of stock with a value of
$93,000 in return for settlement of a liability. In connection with the
acquisition, the Company exchanged approximately 341,160 shares of stock with a
value of $976,000 in return for a Consulting and a Non-Competition Agreement
with the principal stockholder of BDL (see Note 3). The Company also purchased
$1,312,000 of fixed assets and financed these additions with capital lease
obligations.
During fiscal 1996, the Company converted $1,673,000 of debt into 219,565 shares
of common stock under the Convertible Debt and Development Funding Agreement
with Genzyme. The Company also purchased $2,009,000 of fixed assets and financed
these additions with capital lease obligations.
During fiscal 1997, the Company purchased $2,482,000 of fixed assets and
financed these additions with capital lease obligations. The Company issued
warrants valued at $130,000 in connection with the financing for the expansion
of Mason Laboratories (see Note 5).
Long-Lived Assets
The Company reviews long-lived assets for impairment by comparing the cumulative
undiscounted cash flows from the assets with their carrying amount. Any
write-downs are to be treated as permanent reductions in the carrying amount of
the assets. Management's policy regarding long-lived assets is to evaluate the
recoverability of its assets when the facts and circumstances suggest that these
assets may be impaired. This analysis relies on a number of factors, including
operating results, business plans, budgets, economic projections and changes in
management's strategic direction or market emphasis. The test of such
recoverability is a comparison of the asset value to its expected cumulative net
operating cash flow over the remaining life of the asset.
Costs in Excess of Net Assets Acquired
The $19,397,000 of excess consideration paid and costs incurred over the net
value of assets acquired (goodwill) by GTC of TSI (see Note 3) is being
amortized using the straight-line method over a twenty-year period. The carrying
value of goodwill is included in management's evaluation of the recoverability
of its long-lived assets. In connection with the sale of GDRU in 1995, goodwill
was written down by $2 million, representing GDRU s percentage of the total
long-term assets acquired in the TSI acquisition, with the charge offsetting a
portion of the gain on disposal of clinical operations. In addition, final
purchase adjustments to goodwill in relation to the purchase of TSI were
recorded which amounted to a net decrease in
<PAGE>
goodwill of $1,537,000. The resulting goodwill in connection with the purchase
of TSI was $15,860,000. Accumulated amortization at December 28, 1997 was
$2,710,000.
The $7,329,000 of excess consideration paid and costs incurred over the net fair
value of assets of BDL acquired by GTC (see Note 3) is being amortized using the
straight-line method over twenty years. Accumulated amortization at December 28,
1997 was $947,000.
At December 28, 1997, goodwill totaled $23,189,000 with $3,657,000 accumulated
amortization.
Accrued Expenses
Accrued expenses at December 28, 1997 and December 29, 1996 included the
following:
1997 1996
--------- ---------
Accrued payroll and benefits $2,877 $1,869
Accrued severance 523 219
Loss reserves on contracts 807 618
Other 3,693 3,205
------- -------
Total accrued expenses $7,900 $5,911
======= =======
As a result of the 1995 acquisition of BDL, the Company established severance
reserves of $542,000 for the elimination of 19 positions of which nine were
laboratory positions, three were accounting/finance positions and seven were
general and administrative positions. As of December 28, 1997, $478,000 has been
paid. During 1997, an additional $144,000 was recorded which is expected to be
paid in 1998, leaving a balance of $208,000.
As a result of the merger with TSI, the Company established severance reserves
for the elimination of 35 positions of which 20 were laboratory positions, eight
were accounting/finance positions and seven were general and administrative
positions. The total severance reserve established was $1,417,000 of which
$578,000 was classified as a long-term liability to be paid through 1999. As of
December 28, 1997, $1,044,000 has been paid. Of the remaining $373,000 balance,
$210,000 was classified as a long-term liability.
An additional $152,000 of severance was recorded in December 1997, which is
expected to be paid in 1998.
Investment in Joint Venture
In 1990, the Company entered into a Joint Venture with Sumitomo Metal Industries
as a minority owner (see Note 12). The investment has been accounted for under
the equity method since March 1994, with the Company recognizing its 22% share
of the Joint Venture losses in its Statement of Operations. In October 1995 and
March 1997, the Company made additional investments of $807,000 and $528,000,
respectively, in the Joint Venture, which maintained the Company's interest at
22%. In December 1997, the equity investment in the Joint Venture was reduced to
zero as a result of recognizing the Company's share of the Joint Venture's
losses. The Company has neither obligation nor intention to provide additional
funding to the Joint Venture, and has therefore discontinued recognizing its
share of the Joint Venture's losses.
Revenue Recognition and Contract Accounting
For both services and research and development revenues, the Company accounts
for cost reimbursement contracts and fixed price contracts using the percentage
of completion method. Unbilled contract revenue represents recoverable costs and
accrued profit which had not been billed at the balance sheet date. Advance
payments represent cash received from customers in advance of the work being
performed. Research and development revenues in fiscal 1997 consisted of
$4,413,000 from the Joint Venture (see Note 12), $7,011,000 from related parties
(see Note 10) and $8,097,000 from commercial clients.
Profits expected to be realized on contracts are based on the total contract
sales value and the Company's estimates of costs at completion. These estimates
are reviewed and revised periodically, throughout the lives of the contracts,
with adjustments to profits resulting from such revisions being recorded on a
cumulative basis in the period in which the revisions are made. When management
believes the cost of completing a contract will exceed its sales value, the full
amount of the anticipated contract loss is immediately recognized.
<PAGE>
Net Loss per Common Share
The Company adopted Statement of Financial Accounting Standards No. 128, ("SFAS
128") Earnings Per Share in 1997. SFAS 128 simplifies the computation of
earnings per share ("EPS") previously required in Accounting Principles Board
("APB") Opinion No. 15, "Earnings Per Share," by replacing primary and fully
diluted EPS with basic and diluted EPS. Under SFAS 128, basic EPS is calculated
by dividing net earnings (loss) by the weighted-average common shares
outstanding during the period. Diluted EPS reflects the potential dilution to
basic EPS that could occur upon conversion or exercise of securities, options,
or other such items, to common shares using the treasury stock method based upon
the weighted-average fair value of the Company's common shares during the
period. SFAS 128 was required to be adopted by the Company in its year-end 1997
Annual Report. Common stock equivalents of the Company consist of warrants (see
Note 6), stock options (see Note 7), stock to be issued under the 401-K savings
plan (see Note 7) and convertible debt (see Note 5). The Company was in a net
loss position in 1997, 1996 and 1995, therefore 2.8 million, 1.8 million and 1.6
million common share equivalents, respectively, were not used to compute diluted
loss per share, as the effect was antidilutive.
In 1995, basic and diluted EPS from discontinued operations was $.13 per share.
In March 1998, the Company completed a private placement of 20,000 shares of
Series A Convertible Preferred Stock. In connection with the financing,
warrants to purchase 450,000 shares of the Company's common stock were issued
(see Note 13).
Income Taxes
The Company accounts for income taxes under the asset and liability method,
which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the financial
statement and tax bases of assets and liabilities using the expected enacted tax
rates for the year in which the differences are expected to reverse.
Reclassifications
Certain amounts in the prior years' financial statements have been reclassified
to conform to the current year presentation.
NOTE 3. ACQUISITIONS/DISPOSITIONS
Effective October 1, 1994, the Company acquired all of the common stock of TSI,
a leading provider of preclinical, toxicology and human clinical testing
services to pharmaceutical, biotechnology, medical device and chemical
companies, for 4,367,601 shares of the Company's common stock with a market
value of approximately $14,741,000 at the date of the acquisition. In exchange
for these shares, the Company received total assets of $20,306,000, assumed
$22,563,000 of liabilities and incurred costs of $2,399,000 with a resulting
goodwill of $19,397,000. The Company has accounted for the acquisition using the
purchase method.
In July 1995, the Company acquired all of the outstanding common stock of BDL, a
leading provider of testing and development services to the biopharmaceutical,
medical device and chemical industries, in exchange for 830,996 of the Company s
common shares with an approximate market value of $2,378,000 at the date of the
acquisition. In exchange for these shares, the Company received total assets
with a fair value of $2,595,000, assumed $6,628,000 of liabilities and incurred
costs of $918,000. The transaction was accounted for under the purchase method
and the resulting goodwill of $7,329,000 is being amortized using the
straight-line method over twenty years. The Company also entered into a
Consulting and Non-Competition Agreement with the principal stockholder of BDL
in exchange for approximately 341,160 shares of the Company s common stock with
an approximate market value of $976,000. Approximately $488,000 of the value of
the Agreement was assigned to the consulting portion and was recorded as an
expense in 1995. The remaining value, representing the non-competition portion,
was recorded as a long-term asset included in Other Assets and is being
amortized over the ten year non-competition period. As a part of the
transaction, Genzyme exchanged 33,945 shares of its General Division common
stock with a market value of $1,360,000 for 475,467 of the Company s common
shares issued in the transaction.
In August 1995, the Company completed the closure of HSRI, a small clinical
trials monitoring unit based in San Diego, California. The related closure
expenses of approximately $166,000 were recorded in 1995.
Effective September 1, 1995, the Company completed the sale of its GDRU unit for
$9.5 million in cash. In exchange for the cash, the Company sold assets with a
net book value of $2,960,000. The Company recognized a gain on the sale of
$1,159,000 which includes a tax charge of $3,401,000 and a $2,000,000 writedown
of goodwill identifiable with GDRU. In conjunction with this transaction, the
Company received $1,425,000 of restricted cash which became unrestricted in
three
<PAGE>
increments on January 31, April 30, and September 30, 1996. This transaction
completed the disposition of the former TSI units that were outside the
Company's core preclinical and nonclinical testing operations.
The following summary represents unaudited pro forma results of operations as if
the HSRI and GDRU dispositions and the BDL acquisition had occurred at the
beginning of 1995. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which would have actually resulted had the combination been in effect on the
date indicated and are not intended to be indicative of future results.
Unaudited
Pro forma
Year Ended
----------
1995
----
Revenues . . . . . . . . . . . . . . . . . . . . $ 29,709
Net loss . . . . . . . . . . . . . . . . . . . . $ (5,102)
Net loss per share (basic and diluted). . . . . $ (0.39)
NOTE 4. COMMITMENTS & CONTINGENCIES
The Company leases equipment and facilities under various operating and capital
leases (see Notes 5 and 13). The deferred lease obligation represents the
cumulative difference between actual facility lease payments and lease expense
recognized ratably over the lease period. Rent expense for the fiscal years
ended December 28, 1997, December 29, 1996 and December 31, 1995 was
approximately $2,566,000, $2,291,000 and $2,553,000, respectively.
At December 28, 1997, the Company's future minimum payments required under these
leases are as follows:
Operating Capital Total
1998 $ 2,579 $ 1,615 $ 4,194
1999 1,799 1,291 3,090
2000 1,718 1,214 2,932
2001 1,447 920 2,367
2002 1,303 308 1,611
Thereafter 2,244 - 2,244
----- ----- -----
Total $ 11,090 5,348 $ 16,438
======= =======
Less amount representing
interest 1,022
-----
Present value of minimum
lease payments $ 4,326
=======
On June 17, 1994, a law suit was filed in the State of Delaware, on behalf of
the stockholders of TSI, naming the Company, TSI and each of the directors of
TSI as defendants. The complaint alleged, among other things, that (i) the terms
of the merger between TSI and a subsidiary of GTC pursuant to the Agreement and
Plan of Merger dated June 14, 1994 among TSI, GTC and such subsidiary of GTC
(the "Merger Agreement") are unfair to the TSI stockholders, (ii) TSI s
directors breached their fiduciary duties to the TSI stockholders in authorizing
TSI to enter into the Merger Agreement and failing to conduct an auction for
TSI, and (iii) GTC aided and abetted the TSI directors in the breach of their
fiduciary duty. The lawsuit sought an unspecified amount of damages and a court
order to unwind the Merger. In September 1994, GTC filed a motion to dismiss all
claims asserted against it in the litigation. On April 14, 1996, the case was
dismissed by stipulation of the parties and under an approving order of the
court.
In September 1997, the Company entered into an agreement with Advanced Cell
Technologies, Inc. ("ACT") of Worcester, MA allowing GTC to utilize ACT
technology. This agreement requires that the Company shall make minimum annual
payments of not less than $2 million per year to ACT for the calendar years 1998
through 2002.
NOTE 5. BORROWINGS
At the date of the TSI acquisition, TSI had certain arrangements with a
commercial bank ("Credit Agreement"). Under the Credit Agreement, TSI could
borrow up to $3 million based on 75% of eligible accounts receivable. In
December 1994, the bank agreed to maintain the maximum borrowing under the
credit line at $3 million. The advances accrued interest at the base rate plus
.5% per annum, payable on the first of the following month. The Company
refinanced the Credit Agreement
<PAGE>
in July 1995. Under the new facility, which totaled $7.5 million and expired on
March 31, 1997, the Company could borrow up to $6 million and $1.5 million for
an existing standby letter of credit in support of a major facility lease. At
the Company s option, interest on loans under the credit facility (other than
the standby letter of credit) accrued either at the Eurodollar rate plus 3/4% or
at the bank s base lending rate. In March 1997, the Company received an
extension of the Credit Agreement through March 31, 1999. The weighted average
interest rate on the line of credit was 5.68% for the fiscal year ended December
28, 1997 and 7.15% for the fiscal year ended December 29, 1996. As of December
28, 1997, $6,000,000 was outstanding under the line of credit and none was
available. The Company was in compliance with all covenants and no amounts were
due under the standby letter of credit as of December 28, 1997.
In connection with the refinancing of the Credit Agreement, Genzyme provided a
guaranty to the bank under which Genzyme will become primarily liable under the
Credit Agreement in the event of a default by the Company. In consideration of
Genzyme s agreement to provide such a guaranty, the Company granted a first lien
on all assets of the Company and issued warrants to purchase 145,000 shares of
the Company s common stock for a period of ten years at $2.84375 per share
(market price at the date of the Agreement). Under the terms of the Credit
Agreement, the Company has agreed not to pay any dividends until the loans have
been repaid.
In December 1995, the Company received a $2.3 million term loan from a
commercial bank which matures on December 15, 2000. At the Company s option,
interest on the loan will accrue either at the Eurodollar rate plus 1% or at the
bank s base lending rate. The loan is being repaid in quarterly installments
which commenced March 31, 1997, escalating from $50,000 per quarter for the
first year to $68,750 per quarter in the second year, $91,250 per quarter for
the next year, $133,333 for the final three quarters, and a balloon payment for
the remaining balance due December 15, 2000. The loan is guaranteed by Genzyme
and includes a covenant requiring the Company to maintain stockholders equity of
at least $20 million. Based on the borrowing rates currently available to the
Company for an unguaranteed loan with similar maturity, the fair value of the
$2.1 million remaining balance on the term loan is $2 million at December 28,
1997.
In June 1995, TSI received a $1 million increase in its lease line with a
commercial leasing company. Leases require monthly payments over 36 months at an
annual interest rate of 11% with a fair market value buyout not to exceed 15% of
original cost at the end of the lease term. The Lease Agreement required a 25%
cash deposit at inception which was reduced to 10% or fully refunded under
certain conditions. In December 1995, the lease line was increased by $1 million
and, during 1996, the lease line was increased by an additional $2 million.
Leases under the increased line require monthly payments over 48-60 months with
a fair market value buyout and no cash deposit. In February of 1997, the Company
received a commitment for an additional $2 million in lease line availability
from a second leasing company to fund 1997 capital additions. Leases under this
line will have a term of 48 months at 11% per annum with a fair market value
buyout at expiration. At December 28, 1997, there was no availability under any
of the lease lines (see Note 13).
On March 29, 1996 the Company entered into a Convertible Debt and Development
Funding Agreement (the"Agreement") with Genzyme under which Genzyme agreed to
provide a revolving line of credit ("Genzyme Credit Line") in the amount of $10
million and agreed to fund development costs of the Antithrombin III ("AT-III")
program through March 31, 1997. Under the Agreement, GTC granted to Genzyme
co-marketing rights to AT-III in all territories other than Asia subject to
negotiation and execution of a development and supply agreement between the
parties prior to March 31, 1997. The line of credit carries a rate of 7% and is
convertible into the Company's common stock (at the average market price for the
20-day period ending two days before any conversion), at GTC's option, to
maintain GTC's tangible net worth at the end of each quarter at a level between
$4.0 million and $4.2 million or by Genzyme at any time for up to the full
amount outstanding. Any amount so converted reduces by an equivalent amount the
availability on the line. During 1996, approximately $1.7 million of debt was
converted into 219,565 shares of common stock, resulting in availability of $8.3
million on the line of credit.
In March 1997, the Company amended the Agreement with Genzyme to provide for
continued funding by Genzyme of the development costs of the AT-III program
through June 30, 1997. In June 1997, the Company agreed to extend the Agreement
until December 31, 1997. Under the agreements in effect in 1997, Genzyme
provided $7 million in development funding.
In July 1997, the Company and Genzyme announced an agreement to establish a
joint venture for the development, marketing and distribution of AT-III, subject
to the execution of a definitive agreement. A definitive collaboration agreement
for ATIII LLC ("Genzyme Joint Venture") was executed on January 1, 1998. Under
the terms of the agreement, Genzyme will provide 70% of the next $33 million of
development costs and the Company will fund the remaining 30%. Development costs
in excess of $33 million will be funded equally by the partners. In addition to
the funding, both partners will contribute manufacturing, marketing and other
resources to the Genzyme Joint Venture at cost and will share profits from
product sales equally. The agreement covers all territories other than Asia and
may include milestone payments from Genzyme to the Company after the product has
been approved by the United States Food and Drug Administration.
<PAGE>
In September 1997, the Company and Genzyme amended the terms of the $8.3 million
Genzyme Credit Line. The expiration date of the revolving credit line was
extended to March 31, 2000, with an option, at that date, for the Company to
convert the outstanding balance to a three-year term loan. The interest rate
remains at 7% through April 1, 1998, increasing annually through the end of the
term loan; starting at the lower of 8% or prime in the first year increasing to
the lower of 10% or prime lending rate +2% in the final year of the term loan.
Financial covenants require positive quarterly earnings before interest, taxes,
depreciation, amortization and unfunded research and development expense
starting April 1, 1998. As of December 28, 1997, there was $6,000,000
outstanding on the Genzyme Credit Line. Interest expense of $6,000 was incurred
during 1997 on the line of credit (see Notes 10 and 13).
In June 1997, the Company completed financing for the expansion of its Mason
Laboratory. The financing package provides $5 million in available funds from a
consortium of federal, state and local government agencies in conjunction with a
commercial bank. The loan carries a ten year amortization schedule with a
variable interest rate adjusted annually. The current rate is 9.25%. The Company
utilized $3.8 million of the line in June to fund the initial phase of
renovations and to refinance approximately $800,000 of existing mortgage debt on
the facility. The remaining $1.2 million is available through December 31, 1998
for additional renovations of the facility, if any. In connection with the
financing, the Company issued the warrants to purchase 20,000 shares of the
Company's common stock for a period of ten years at the then current market
price of $8.75 per share. Warrants valued at $130,000 are being amortized over
the life of the mortgage.
In June 1997, the Company's Redfield Laboratories subsidiary obtained $1,050,000
in financing from a commercial bank in conjunction with a state government
agency for the refinancing of approximately $750,000 in existing mortgage debt
and to fund expansion of its facility. The financing consists of two notes, both
at 10% annual interest. The first note, in the amount of $350,000, has a ten
year term. The second note, in the amount of $750,000, has a ten year
amortization with a balloon payment due in May 1999. The annual balloon
requirement is intended to be refinanced each year.
In July 1997, Redfield Laboratories obtained an additional $350,000 in financing
for the expansion of its facility from a combination of federal, state and
county government agencies. The loan is amortized over a fifteen year term and
carries an interest rate of 5.5%.
The Company's long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 28,
1997
-----------------
<S> <C>
Note payable with monthly payments of $48,750 through June 2007,
interest at 9.25%, collateralized by real estate. $ 3,689
Note payable, with escalating quarterly payments of $50,000
beginning March 1997, interest is variable, collateralized by real estate. 2,100
Mortgage note payable, with monthly payments of $9,251 through
May 1999, interest at 10%, collateralized by real estate. 675
Note payable, with quarterly payments of $8,605 through
July 2012, interest at 5.5%, collateralized by real estate. 342
Mortgage note payable with monthly payments of $4,625 through
June 2007, interest at 10%, collateralized by real estate. 338
Note payable with monthly payments of $6,066 through December
2000, interest at 8%, collateralized by real estate. 188
Capital lease obligations, with monthly payments of $142,288 through
February 1998 and December 2002, interest varies, collateralized
by property. 4,326
Other 104
-------
$11,762
Less current portion 1,900
-------
$ 9,862
=======
</TABLE>
Based on the borrowing rates currently available to the Company for loans with
similar terms and average maturities, the value of the notes payable
approximates fair value.
<PAGE>
Maturities of long-term debt over the next five years are as follows:
1998................................................ $1,900
1999................................................ 2,368
2000................................................ 2,009
2001................................................ 2,180
2002................................................ 701
Thereafter.......................................... 2,604
-------
$11,762
=======
Cash paid for interest for the fiscal years ended December 28, 1997, December
29, 1996, and December 31, 1995 was $1,098,000, $1,138,000 and $615,000,
respectively.
NOTE 6. STOCKHOLDERS' EQUITY
The Company's authorized capital stock consists of 40,000,000 shares of common
stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par
value $0.01 per share. Prior to the Company's IPO, the Board of Directors
designated 4,000,000 shares of Preferred Stock as Series A Convertible Preferred
Stock ("Series A Stock"), none of which is outstanding.
In October 1994, the Company acquired TSI for 4,367,601 shares of the Company's
common stock (see Note 3). In addition, all warrants to purchase TSI common
stock then outstanding were converted into warrants to purchase the Company's
common stock at the acquisition exchange ratio.
In July 1995, Genzyme provided a guarantee of the Company's line of credit (see
Note 5). In consideration for the guarantee, the Company issued warrants to
purchase 145,000 shares of common stock at the then current market price of
$2.84375 per share.
In connection with the commercial lease line, the Company has assumed warrants
to purchase 4,000 shares of common stock at a price of $0.10 per share which
were originally issued to the commercial leasing company by TSI in September
1994. In June 1995, the Company issued additional warrants to purchase 2,000
shares of common stock at the then current market price of $2.75 per share.
During fiscal 1996, warrants to purchase an additional 2,000 shares at the then
current market price of $6.50 per share were issued in connection with an
increase in the lease line which was made available in December 1995 (see Note
5).
In connection with the financing for the expansion of the Mason Laboratories,
the Company issued warrants to purchase 20,000 shares of the Company's common
stock at the then current market price of $8.75 per share (see Notes 5 and 13).
A summary of the outstanding GTC warrants as of December 28, 1997, all of which
are currently exercisable, is as follows:
Common Shares Exercise Warrant Expiration
Issuable for Price Per Share Date
--------------- --------------- -------------------
37,600 $0.05000 October 28, 1998
4,000 $0.10000 January 1, 2000
145,000 $2.84375 July 3, 2005
2,000 $2.75000 December 31, 2001
2,000 $6.50000 December 31, 2001
20,000 $8.75000 June 26, 2007
------
210,600
=======
In February 1995, Genzyme purchased an additional 500,000 shares of the
Company's common stock at $8.00 per share pursuant to the Common Stock Put
Agreement and, in June 1995, Genzyme entered into a Common Stock Purchase
Agreement under which it obtained 1,333,333 shares of the Company s common stock
in exchange for a $4 million reduction in the amount due to Genzyme. In July
1995, the Company purchased BDL and entered into a Consulting and
Non-Competition Agreement with the principal stockholder of BDL in exchange for
1,207,233 shares of the Company s common stock (see Note 3).
<PAGE>
In March 1996, Genzyme entered into the Convertible Debt and Development Funding
Agreement (see Note 10) under which it converted $1,673,000 of debt into 219,565
shares of the Company's common stock. In July 1996, the Company completed a
secondary public offering of 3,450,000 shares of its common stock priced at
$4.00 per share. The proceeds to the Company, after deducting commissions and
offering expenses, were $12.7 million.
As of December 28, 1997, the Company has reserved 3,125,984 shares of common
stock, subject to adjustment, for future issuance under the various classes of
warrants, Stock Option and Employee Stock Purchase Plans (see Note 7).
NOTE 7. EMPLOYEE BENEFIT PLANS
Stock Options and Purchase Plan
In May 1993, the Board of Directors adopted and the stockholders approved the
1993 Equity Incentive Plan (the "Equity Plan"), the 1993 Director Stock Option
Plan (the "Director Plan") and the 1993 Employee Stock Purchase Plan (the
"Purchase Plan").
Under the Equity Plan, 2,015,000 shares of common stock were issued or reserved
for issuance pursuant to incentive stock options, non-statutory stock options,
restricted stock awards, stock appreciation rights or stock units in accordance
with specific provisions to be established by a committee of the Board of
Directors at the time of grant. To date, all options have been issued at 85% or
greater of the fair value at the grant date. The Equity Plan also permits the
Company to assume outstanding options in an acquisition without using shares
reserved under the Plan. Of the foregoing total, 224,350 shares are subject to
options assumed by the Company in the acquisition of TSI. In May 1997, the Board
of Directors increased the number of shares reserved for issuance under this
plan to 2,515,000 shares.
Under the Director Plan, 50,000 shares of common stock were reserved for
issuance as non-statutory stock options at the rate of 2,000 shares for each
year of service to members of the Board of Directors who are not employees of
the Company. Such options are automatically granted at fair market value upon
the election or reelection of each director. In May 1997, the Board of Directors
increased the number of shares reserved for issuance under this plan to 100,000
shares.
Under these plans, an option's maximum term is ten years and vest ratably 20% on
the date of issuance and 20% thereafter on the anniversary of the grant.
Under the Purchase Plan, 300,000 shares of common stock were reserved for the
grant of purchase rights to employees in one or more offerings in accordance
with provisions to be established by a committee of the Board of Directors prior
to commencement of any offering period. In May 1997, the Board of Directors
increased the number of shares reserved for issuance under this plan to 900,000
shares. Participants may purchase shares of common stock at not less than 85% of
the lower of the market value at the beginning of each offering or on the
purchase date. Purchase dates occur every three months for a period of two years
from the offering date. Participants may not carry over balances from one
purchase date to the next. Offering dates occur every six months. A total of
510,937 and 26,321 shares of common stock remained available for issuance under
the plan at December 28, 1997 and December 29, 1996, respectively. The purchases
of common stock under the plan during fiscal 1997 and fiscal 1996 were 115,384
shares at an aggregate purchase price of approximately $572,000 and 164,879
shares at an aggregate purchase price of approximately $511,000, respectively.
No compensation expense has been recorded related to the employee stock purchase
plan.
In 1996, the Company adopted, Statement of Financial Accounting Standards No.
123 ("SFAS 123"), Accounting For Stock-Based Compensation. SFAS 123 requires
that companies either recognize compensation expense for grants of stock, stock
options and other equity instruments based on fair value, or provide pro forma
disclosure of net income and earnings per share in the notes to the financial
statements. The Company adopted the disclosure provisions of SFAS 123 in 1996
and has applied APB Opinion 25 and related Interpretations in accounting for its
plans. Accordingly, no compensation cost has been recognized for its stock
option plans. Had compensation cost for the Company's stock-based compensation
plans been determined based on the fair value at the grant dates as calculated
in accordance with SFAS 123, the Company's net loss and loss per share for the
years ended December 28, 1997, December 29, 1996 and December 31, 1995 would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
December 28, 1997 December 29, 1996 December 31, 1995
----------------- ----------------- -----------------
Earnings Per Share Earnings Per Share Earnings Per Share
Net Loss (basic and diluted) Net Loss (basic and diluted) Net Loss (basic and diluted)
-------- ------------------ -------- ------------------ -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
As Reported $(9,343) $(0.54) $(7,746) $(0.52) $(4,133) $(0.35)
Pro Forma (11,458) (0.66) (8,988) (0.61) (4,755) (0.40)
</TABLE>
<PAGE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to 1995, and
additional awards in future years are anticipated.
A summary of the status of the Company's stock option plans as of December 28,
1997, December 29, 1996 and December 31, 1995 and changes during the years
ending on those dates is presented below:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1994 664,308 $6.9485
- ----------------------------------------------------------------------------------------------------------
Granted
Price = Fair value 653,225 $3.0902
Price > Fair value 6,750 $3.3750
Exercised (2,800) $2.9900
Cancelled (85,818) $8.3865
- ----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1,235,665 $4.7751
- ----------------------------------------------------------------------------------------------------------
Granted
Price = Fair value 389,910 $8.0901
Price > Fair value 130,519 $6.5974
Exercised (87,131) $4.3939
Cancelled (72,449) $5.0537
- ----------------------------------------------------------------------------------------------------------
Balance at December 29, 1996 1,596,514 $5.7432
- ----------------------------------------------------------------------------------------------------------
Granted
Price = Fair value 647,814 $7.7843
Price > Fair value 10,400 $7.8462
Exercised (120,377) $4.5246
Cancelled (132,362) $5.9003
- ----------------------------------------------------------------------------------------------------------
Balance at December 28, 1997 2,001,989 $6.4611
==========================================================================================================
</TABLE>
At December 28, 1997, December 29, 1996 and December 31, 1995, there were
991,367, 718,644 and 432,681 shares exercisable at a weighted average exercise
price of $6.1142, $5.6903 and $5.9830, respectively. The weighted average fair
value of options granted during fiscal 1997, 1996 and 1995 was $7.79, $5.15 and
$2.03, respectively.
The following table summarizes information about stock options outstanding at
December 28, 1997:
<TABLE>
<CAPTION>
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.7500 - $5.7500 610,885 7.46 $3.4066 374,705 $3.3136
$5.7625 - $7.3750 670,468 8.94 $7.0740 166,143 $6.9552
$7.5000 - $8.7500 373,120 5.82 $7.6330 321,472 $7.5779
$8.8750 - $13.6250 342,256 8.60 $9.2260 123,801 $9.1825
$15.9500 - $55.0000 5,260 2.95 $17.4228 5,246 $17.4143
------- ---- -------- ----- --------
$2.7500 - $55.0000 2,001,989 7.83 $6.4611 991,367 $6.1142
========= =======
</TABLE>
At December 28, 1997, 397,783 shares were available for grant.
<PAGE>
The fair value of each stock option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumption: an expected life of five years, expected volatility of 78%, a
dividend yield of 0% and a risk-free interest rate of 6.36% for fiscal 1997,
6.49% for fiscal 1996 and 5.92% for fiscal 1995.
The fair value of the employees' purchase rights was estimated using the
Black-Scholes model with a dividend yield of 0%, expected volatility of 78%, a
weighted average risk free interest rate of 5.40% and a weighted average
expected life of one year for fiscal 1997; and a dividend yield of 0%, expected
volatility of 78%, a weighted average risk free interest rate of 5.16% and a
weighted average expected life of six months for fiscal 1996; and a dividend
yield of 0%, expected volatility of 78%, a weighted average risk free interest
rate of 6.34% and a weighted average expected life of one year for fiscal 1995.
The average fair value of those purchase rights granted during fiscal 1997,
fiscal 1996 and fiscal 1995 was $2.71, $2.08 and $1.09, respectively.
Other
All GTC employees, subject to certain eligibility requirements, can participate
in the Company's defined contribution plan. Currently, the Company may match up
to 50% of each participating employee's contributions to the plan to a maximum
of 3% of salary. The Company may also contribute an additional 2% of each
employee's salary as a retirement contribution. All contributions are at the
discretion of the Board of Directors. Expense recognized under this plan was
approximately $464,000, $368,000 and $266,000 for the fiscal years ended
December 28, 1997, December 29, 1996 and December 31, 1995, respectively.
NOTE 8. INCOME TAXES
Deferred tax assets and deferred tax liabilities are recognized based on
temporary differences between the financial reporting and tax basis of assets
and liabilities using future expected enacted rates. A valuation allowance is
recorded against deferred tax assets if it is more likely than not that some or
all of the deferred tax assets will not be realized.
The income tax (benefit) provision consisted of the following:
1997 1996 1995
---- ---- ----
Current:
Federal 0 0 747
State 48 27 308
Foreign 0 0 238
------- ------- ------
Total Current 48 27 1,293
======= ======= =======
Deferred:
Federal (3,158) (3,882) 828
State 1,241 0 0
Foreign 0 0 0
Change in Valuation Allowance 1,917 3,882 (828)
------- ------- ------
Total Deferred 0 0 0
======= ======= =======
The 1995 tax provision was reflected in operations as a benefit of $2,346,000
offset by a charge of $240,000 to income from discontinued operations and a
charge of $3,401,000 on the gain from the disposal of clinical operations.
<PAGE>
The provision for income taxes was at rates different from the U.S. Federal
statutory income tax rate for the following reasons:
<TABLE>
<CAPTION>
Fiscal Years Ended
--------------------------------------------------------------------
December 28, 1997 December 29, 1996 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Federal tax - expense (benefit) (34.0)% (34.0)% (34.0)%
Goodwill 3.2 5.2 6.0
State taxes - net 9.1 0.2 3.3
Gain on sale of GDRU -- -- 40.1
Joint Venture loss 3.0 0.9 3.9
Other (1.3) 0.4 1.4
Change in valuation allowance 20.5 27.6 --
---- ---- ----
Effective tax rate 0.5% 0.3% 20.7%
==== ==== ====
</TABLE>
The components of the deferred tax assets and liabilities at December 28, 1997
and December 29, 1996, respectively, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
December 28, 1997 December 29, 1996
----------------- -----------------
Deferred Tax Assets/(Liabilities):
<S> <C> <C>
Accrued compensation reserves $ 1,091 $ 868
Other reserves 1,020 1,120
Tax credits 584 408
Net operating loss carryforwards 22,100 20,780
Depreciation 289 -
Other 9 -
--------- ---------
$ 25,093 $ 23,176
Total deferred tax asset $ 25,093 $ 23,176
Valuation allowance (25,093) (23,176)
--------- ---------
$ - $ -
========== =========
</TABLE>
Due to the uncertainty surrounding the realization of these favorable tax
attributes in future income tax returns, the Company has placed a valuation
allowance against its otherwise recognizable deferred tax assets.
At December 28, 1997, the Company had U.S. net operating loss ("NOL")
carryforwards of approximately $58.5 million for federal income tax purposes.
These carryforwards expire through 2010. Utilization of these net operating loss
carryforwards reflected above are limited pursuant to provisions Section 382 of
the Internal Revenue Code of 1986, and to the extent that the Separate Return
Limitation Year ("SRLY") rules apply.
Approximately $40.6 million of these NOL's were acquired in connection with its
acquisition of TSI. Consequently, any realization of the benefit of these
purchased NOL's will be recorded as a reduction of goodwill. In 1995, goodwill
was reduced by approximately $1 million as a result of the utilization of
purchased NOL's to offset taxable gain principally resulting from the sale of
GDRU.
The Company paid taxes of $48,000, $27,000 and $238,000 in fiscal 1997, 1996 and
1995, respectively.
NOTE 9. REVENUE INFORMATION
Revenues from the U.S. government accounted for 4% of total revenues in fiscal
1997, 6% in fiscal 1996 and 7% in fiscal 1995. Revenues from the Joint Venture
accounted for 7% of total revenues in fiscal 1997, 2% in fiscal 1996 and 12% in
fiscal 1995. Revenues from Genzyme accounted for 11% of total revenues in fiscal
1997, 13% in fiscal 1996 and 0% in fiscal 1995.
A summary of export sales by fiscal year follows:
Asia Europe Total
1997 .............. $9,178 $ 4,640 $13,818
1996 .............. 3,291 780 4,071
1995 .............. 5,311 1,311 6,622
<PAGE>
NOTE 10. ARRANGEMENTS WITH GENZYME CORPORATION
From the Company's inception, certain facilities and support services, including
both research and administrative support, have been provided by Genzyme. For
these services, the Company was charged $8,073,000, $3,824,000 and $3,156,000
for the fiscal years ended December 28, 1997, December 29, 1996 and December 31,
1995, respectively. These charges represent an allocation of the Company's
proportionate share of Genzyme's overhead costs using formulae which management
believes are reasonable based upon the Company's use of the facilities and
services. All other costs for all periods presented, including payroll costs,
are directly attributable to the Company and have been paid by Genzyme and
charged to the Company.
In April 1993, the Company entered into several agreements under which Genzyme
has agreed to provide various services, facilities and funding to the Company as
described below:
Services Agreement
Under the Services Agreement, the Company receives certain basic support
services in exchange for a fixed monthly payment ($42,415 per month during 1997)
adjusted annually. These basic services include laboratory support, as well as
assistance with certain administrative functions including purchasing, data
processing, risk management, corporate communications and treasury activities.
If the Company requests additional services from Genzyme, the Company has agreed
to pay Genzyme fully allocated costs of those services. The Services Agreement
is automatically renewed each year thereafter unless terminated by either party
not less than 90 days prior to the end of any annual period. Under the Services
Agreement, the Company made payments of $509,000, $582,000 and $390,000 for the
fiscal years ended December 28, 1997, December 29, 1996 and December 31, 1995,
respectively.
Sublease Agreement
Under the Sublease Agreement, the Company has leased certain laboratory,
research and office space from Genzyme through May 1998 in exchange for fixed
monthly rent payments which approximate the estimated current rental value for
such space. In addition, the Company reimburses Genzyme for its pro rata share
of appropriate facilities operating costs such as maintenance, cleaning,
utilities and real estate taxes. The sublease is automatically renewed each year
and renewals are subject to earlier termination of the sublease by either party
after the initial five-year term. Under the Sublease Agreement, the Company made
payments for the fiscal years ended December 28, 1997, December 29, 1996 and
December 31, 1995, of $280,000, $178,000 and $169,000, respectively, and is
committed to make annual minimum rental payments of: $53,900 in 1998.
Technology Transfer Agreement
Under the Technology Transfer Agreement, Genzyme has transferred substantially
all of its transgenic assets and liabilities to the Company including its
ownership in the Joint Venture, assigned its relevant contracts and licensed to
the Company technology owned or controlled by it and relating to the production
of recombinant proteins in the milk of transgenic animals (the "Field") and the
purification of proteins produced in that manner. The license is worldwide and
royalty free as to Genzyme although the Company is obligated to Genzyme's
licensors for any royalties due them.
As long as Genzyme's ownership of the Company remains below 50%, Genzyme may use
the transferred technology and the new technology only on its own behalf and
without any royalty obligation to the Company.
Research and Development Agreement
The Research and Development Agreement defines the relationship among the
parties whereby each entity may perform research for the other. This agreement
is in effect through May 1998 and may be renewed by mutual consent. Genzyme has
agreed to use the Company to perform all research in the field of production of
recombinant proteins in transgenic animals. The Company has a similar obligation
to use Genzyme to purify proteins produced transgenically. Each party must
request such services from the other company before seeking them from a third
party although the Company may perform purification services on its own behalf.
These obligations are qualified by the ability of each party to perform the
requested services in accordance with the performance, scheduling, cost and
other specifications reasonably established by the requesting party. Each
company will receive payments from the other equal to the performing party's
fully allocated cost of performing such services, which shall not be less than
80% of the annual budgets established by the parties under the agreement, plus,
in most cases, a fee equal to 10% of such costs. The Company currently provides
development services to Genzyme for which it recognized revenues of $11,000,
$75,000 and $485,000 for the fiscal years ended December 28, 1997, December 29,
1996 and December 31, 1995, respectively. The Company also receives research and
development services from Genzyme, for which it incurred costs of $7.3 million,
$3.1 million and $2.6 million in 1997, 1996 and 1995, respectively (see Note 5).
<PAGE>
In March 1996, the Company entered into a Convertible Debt and Development
Funding Agreement (the "Agreement") (see Note 5) with Genzyme under which
Genzyme agreed to provide a revolving line of credit ("Genzyme Credit Line") in
the amount of $10 million and agreed to fund development costs of the AT-III
program. During 1996, Genzyme converted $1,673,000 of debt to equity under this
agreement, leaving the availability under the Genzyme Credit Line at $8.3
million.
In March 1997, the Company amended the Agreement with Genzyme to provide for
continued funding by Genzyme of the development costs of the AT-III program
through June 30, 1997. In June 1997, the Company agreed to extend the Agreement
until December 31, 1997. Under the agreements in effect in 1997, Genzyme
provided $7 million in development funding. Genzyme provided $5.9 million and $0
in development funding in 1996 and 1995, respectively.
In July 1997, the Company and Genzyme announced an agreement to establish a
joint venture for the development, marketing and distribution of AT-III, subject
to the execution of a definitive agreement. A definitive collaboration agreement
for ATIII LLC ("Genzyme Joint Venture") was executed on January 1, 1998. Under
the terms of the agreement, Genzyme will provide 70% of the next $33 million of
development costs and the Company will fund the remaining 30%. Development costs
in excess of $33 million will be funded equally by the partners. In addition to
the funding, both partners will contribute manufacturing, marketing and other
resources to the Genzyme Joint Venture at cost and will share profits from
product sales equally. The agreement covers all territories other than Asia and
may include milestone payments from Genzyme to the Company after the product has
been approved by the United States Food and Drug Administration.
In September 1997, the Company and Genzyme amended the terms of the $8.3 million
Genzyme Credit Line. The expiration date of the revolving credit line was
extended to March 31, 2000, with an option, at that date, for the Company to
convert the outstanding balance to a three-year term loan. The interest rate
remains at 7% through April 1, 1998, increasing annually through the end of the
term loan; starting at the lower of 8% or prime in the first year increasing to
the lower of 10% or prime lending rate +2% in the final year of the term loan.
Financial covenants require positive quarterly earnings before interest, taxes,
depreciation, amortization and unfunded research and development expense
starting April 1, 1998 (see Notes 5 and 13).
Any amounts outstanding under the credit line may be converted into the
Company's common stock at Genzyme's option at any time for up to the full amount
outstanding or at the Company's option on a quarterly basis limited to an amount
sufficient to maintain a minimum tangible net worth. All such conversions are to
be based on the average closing stock price over 20 trading days prior to
conversion.
As of December 28, 1997, there was $6 million outstanding under the Genzyme
Credit Line.
NOTE 11. OTHER AGREEMENTS
Tufts University School of Veterinary Medicine ("Tufts")
Since 1988, pursuant to a cooperation agreement, the Company has funded an
ongoing program to develop transgenic animals at Tufts. During the term of the
agreement, which extends through September 1998, Tufts has agreed to work
exclusively with the Company for commercial applications within the field of
transgenic protein production in milk. The Company paid Tufts $284,000, $517,000
and $665,000 for the fiscal years ended December 28, 1997, December 29, 1996 and
December 31, 1995, respectively. Sales of products derived from transgenic goats
produced by Tufts, or from their offspring, are subject to royalties payable to
Tufts.
NOTE 12. JOINT VENTURE
In 1990, Genzyme entered into a joint venture with Sumitomo Metal Industries to
develop proteins produced transgenically (the "Joint Venture"). The Joint
Venture has engaged the Company, as the successor to Genzyme s transgenics
business, to perform research and development for which the Company is
reimbursed a portion of its costs and receives additional payments based on
achievement of specified milestones. However, GTC does not have any intercompany
profits or losses as a result of its transactions with the Joint Venture. This
three-year program ended during 1993 and the parties decided to extend the
contract for an additional three years.
The Joint Venture has a license, exclusive as to Asia and non-exclusive as to
Europe, to use the Company's transgenic technology and to market and sell
products and transgenic animals produced by the Joint Venture based on that
technology. The Company retained the exclusive right to market and sell such
products within the Americas. Each party is obligated to make royalty payments
based on its sales of products developed by the Joint Venture and, additionally,
the Company is obligated to pay royalties on sales of other transgenically
produced proteins in Asia.
<PAGE>
The Company's initial $1,077,000 investment in the Joint Venture represented a
25% ownership interest. In 1992, the Company invested an additional $381,000,
less than 25% of the aggregate new investment resulting in a decline of its
ownership to 19.7%. In March 1994, the Company and its partner agreed to extend
the Joint Venture contract and contribute an additional $1.2 million and $4.6
million, respectively, increasing the Company's ownership percentage to 22%. In
October 1995, the Company contributed an additional $807,000 to maintain the
Company's ownership percentage at 22%. In February 1997, the Company reached an
agreement with the Joint Venture entitling the Company to receive up to $4.4
million in future milestone payments for the development of AT-III. In March
1997, the Joint Venture partners agreed to raise $2.4 million in additional
equity, of which the Company contributed $528,000 in April 1997 to maintain its
22% ownership. For the fiscal years ended December 28, 1997, December 29, 1996
and December 31, 1995, the Company recognized revenue of $4,413,000, $857,000
and $3,874,000, respectively, under the Joint Venture agreement.
Summarized financial information (unaudited) for the Joint Venture is as
follows:
At December 31,
-----------------------------------
1997 1996
---- ----
Balance Sheet Data:
Current assets $ 603 $1,301
Noncurrent asset 5 2
Current Liabilities 1,334 19
Partners capital (726) 1,284
For the Fiscal Years Ended
--------------------------
1997 1996 1995
---- ---- ----
Statement of Operations Data:
Research and development expenses $4,613 $1,381 $3,183
Administrative expense 203 11 1,083
Revenue (316) - (961)
------ ------ ------
Net loss $4,500 $1,392 $3,305
====== ====== ======
NOTE 13. SUBSEQUENT EVENTS
In February 1998, the Company received an additional $3 million commitment from
a commercial leasing company. Leases under this line will have a term of 48
months and an interest rate of 11% per annum, subject to adjustment proportional
to the change in the weekly average of interest rates of like term United States
Treasury Securities.
In February 1998, the Company announced that it had established a new
subsidiary, Primedica Corporation, to provide a unified identity and a dedicated
structure for further growth of its CRO operations. Initially 100% owned by GTC,
Primedica is expected to serve as a vehicle to pursue acquisitions.
In March 1998, the Company completed a private placement of $20 million of
Series A Convertible Preferred Stock (the "Preferred Stock") to three
institutional investors. The Preferred Stock carries a $1,000 face value per
share, and is subject to mandatory redemption, if not previously converted, in
three years. Such redemption may be in the form of cash or stock, at the
Company's option. The Preferred Stock may be converted into the Company's common
stock at a price of $14.55 per share through December 20, 1998. Thereafter, it
may be converted into common stock at a per share price equal to the lower of
$14.55 or the average of any five closing bid prices over the twenty trading
days prior to conversion. Dividends will only accrue if the holders are unable
to convert their Preferred Stock into common stock in certain circumstances. In
connection with the financing, warrants to purchase 450,000 shares of the
Company's common stock were issued. Each warrant has a four year term at an
exercise price of $15.1563 per share. As a result of this financing, the amount
of the Genzyme Credit Line was reduced to approximately $6.4 million.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENZYME TRANSGENICS CORPORATION
By: /s/ James A. Geraghty
----------------------------- ,
James A. Geraghty, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
/s/ James A. Geraghty Chairman of the Board, President 3/27/98
- ------------------------- ------------
James A. Geraghty and Chief Executive Officer
/s/ John B. Green Chief Financial Officer 3/27/98
- ------------------------- ------------
John B. Green
/s/ Robert W. Baldridge Vice Chairman of the Board 3/27/98
- ------------------------- ------------
Robert W. Baldridge
/s/ Henri A. Termeer Director 3/27/98
- ------------------------- ------------
Henri A. Termeer
/s/ Alan E. Smith Director 3/27/98
- ------------------------- ------------
Alan E. Smith
/s/ Henry E. Blair Director 3/27/98
- ------------------------- ------------
Henry E. Blair
/s/ Alan W. Tuck Director 3/27/98
- ------------------------- ------------
Alan W. Tuck
/s/ Francis J. Bullock Director 3/27/98
- ------------------------- ------------
Francis J. Bullock
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated as of June 14, 1994, among
TSI Corporation ("TSI"), Genzyme Transgenics Corporation ("GTC")
and New Acorn Corporation. Filed as Appendix A to the Joint Proxy
Statement--Prospectus included in Part I of the Company's
Registration Statement on Form S-4 (File No. 33-80924) (the "GTC
S-4") and incorporated herein by reference.
2.2 Asset Purchase and Sale Agreement, dated as of January 3, 1995,
between The TSI Center for Diagnostic Products, Inc. and BioVest,
Inc. Filed as Exhibit 2.2 to the original filing of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994
(Commission File No. 0-21794) (the "GTC 1994 10-K") and
incorporated herein by reference. Pursuant to Item 601(b)(2) of
Regulation S-K, the schedules to this Agreement are omitted. A
list of such schedules appears in the table of contents to the
Agreement. The Company hereby undertakes to furnish
supplementally upon request a copy of any such schedule to the
Commission.
2.3 Agreement and Plan of Merger, dated May 23, 1995, among GTC,
Biodevelopment Laboratories, Inc. and BDL Acquisition Corp. Filed
as Exhibit 2 to the Company's Current Report on Form 8-K dated as
of July 3, 1995 (File No. 0-21794) and incorporated herein by
reference.
2.4 Share Purchase Agreement, dated as of September 1, 1995, among
GTC, TSI and Quintiles Holdings Limited. Filed as Exhibit 2 to
the Company's Current Report on Form 8-K dated as of September
19, 1995 (File No. 0-21794) and incorporated herein by reference.
3.1.1 Restated Articles of Organization of GTC, filed with the
Secretary of the Commonwealth of Massachusetts on December 27,
1993. Filed as Exhibit 3.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 (File No. 0-21794) (the
"GTC 1993 10-K") and incorporated herein by reference.
3.1.2 Articles of Amendment to the Restated Articles of Organization
filed with the Secretary of the Commonwealth of Massachusetts on
October 3, 1994. Filed herewith.
3.1.3 Articles of Amendment to the Restated Articles of Organization
filed with the Secretary of Commonwealth of Massachusetts on June
26, 1997. Filed as Exhibit 3 to GTC's Quarterly Report on Form
10-Q for the quarter ended June 29, 1997 (File No. 0-21794) (the
"GTC June 1997 10-Q") and incorporated herein by reference.
3.1.4 Certificate of Vote of Directors Establishing a Series of a Class
of Stock (Series A Convertible Preferred Stock). Filed with the
Secretary of the Commonwealth of Massachusetts on March 20, 1998.
Filed herewith.
3.2 By-Laws of GTC, as amended to date. Filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (File No. 33-62782)
(the "GTC S-1") and incorporated herein by reference.
4.1 Specimen Common Stock Certificate. Filed as Exhibit 4.1 to the
GTC S-1 and incorporated herein by reference.
4.2 Specimen Series A Convertible Preferred Stock Certificate. Filed
herewith.
4.3.1 TSI Specimen Warrant Certificate. Filed as Exhibit 4.8 to TSI's
Registration Statement on Form S-3 (File No. 33-48107) and
incorporated herein by reference.
<PAGE>
4.3.2 Form of Notice of Assumption by GTC of the TSI warrants to which
Exhibit 4.2.1 of this Report relates. Filed as Exhibit 4.2.2 to
the original filing of the GTC 1994 10-K and incorporated herein
by reference.
4.4.1 TSI Common Stock Purchase Warrant No. F-1 issued, on October 28,
1993, to The First National Bank of Boston ("FNBB"). Filed as
Exhibit 4.6 to the GTC S-4 and incorporated herein by reference.
4.4.2 TSI Common Stock Purchase Warrant No. G-1, dated September 27,
1994, issued to Financing for Science International, Inc.
("FSI"). Filed as Exhibit 4.4 to the original filing of the GTC
1994 10-K and incorporated herein by reference.
4.4.3 Form of Notice of Assumption by GTC of the TSI Common Stock
Purchase Warrants Nos. F-1 and G-1. Filed as Exhibit 4.5 to the
original filing of the GTC 1994 10-K and incorporated herein by
reference.
4.5 Common Stock Purchase Warrant, dated June 30, 1995, issued to
FSI. Filed as Exhibit 10.9 to the Company's Quarterly Report on
Form 10-Q for the period ended July 2, 1995 (Commission File No.
0-21794) (the "GTC July 1995 10-Q") and incorporated herein by
reference.
4.6 Common Stock Purchase Warrant, dated July 3, 1995, issued to
Genzyme. Filed as Exhibit 10.5 to the GTC July 1995 10-Q and
incorporated herein by reference.
4.7 Common Stock Purchase Warrant, dated March 13, 1996, issued to
FSI. Filed as Exhibit 4.8 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (File No. 0-21794) (the
"GTC 1995 10-K") and incorporated herein by reference.
4.8 Common Stock Purchase Warrant, dated as of June 26, 1997, issued
to Government Land Bank d/b/a The MassDevelopment
("MassDevelopment"). Filed as Exhibit 4 to the GTC June 1997 10-Q
and incorporated herein by reference.
4.9 Form of Common Stock Purchase Warrant issued to the purchasers of
Series A Convertible Preferred Stock, dated March 20, 1998,
together with schedule of holders. Filed herewith.
4.10 Form of Common Stock Purchase Warrant issued to Shoreline Pacific
Institutional Finance and affiliates, dated as of March 20, 1998.
Filed herewith.
10.1 Technology Transfer Agreement between GTC and Genzyme Corporation
("Genzyme"), dated as of May 1, 1993. Filed as Exhibit 2.1 to the
GTC S-1 and incorporated herein by reference.**
10.2 Research and Development Agreement between GTC and Genzyme, dated
as of May 1, 1993. Filed as Exhibit 10.1 to the GTC S-1 and
incorporated herein by reference.
10.3 Services Agreement between GTC and Genzyme, dated as of May 1,
1993. Filed as Exhibit 10.2 to the GTC S-1 and incorporated
herein by reference.
10.4 Sublease Agreement between GTC and Genzyme, dated as of May 1,
1993. Filed as Exhibit 10.3 to the GTC S-1 and incorporated
herein by reference.
10.5 License Agreement between GTC and Genzyme, as successor to IG
Laboratories, Inc., dated as of May 1, 1993. Filed as Exhibit
10.4 to the GTC S-1 and incorporated herein by reference.
10.6 Series A Convertible Preferred Stock Purchase Agreement between
GTC and Genzyme, dated as of May 1, 1993. Filed as Exhibit 10.5
to the GTC S-1 and incorporated herein by reference.
10.7.1 Mortgage and Security Agreement, dated as of June 30, 1995,
between GTC and Genzyme. Filed as Exhibit 10.6 to the GTC July
1995 10-Q and incorporated herein by reference.
<PAGE>
10.7.2 First Amendment to Mortgage and Security Agreement, dated as of
December 15, 1995, between GTC and Genzyme. Filed as Exhibit
10.7.2 to the GTC 1996 10-K and incorporated herein by reference.
10.8* GTC 1993 Equity Incentive Plan, as amended through May 28, 1997.
Filed as Exhibit 10.3 to the GTC June 1997 10-Q and incorporated
herein by reference.
10.9* GTC 1993 Employee Stock Purchase Plan, as amended through May 28,
1997. Filed as Exhibit 10.4 to the GTC June 1997 10-Q and
incorporated herein by reference.
10.10* GTC 1993 Director Stock Option Plan, as amended through May 28,
1997. Filed as Exhibit 10.5 to the GTC June 1997 10-Q and
incorporated herein by reference.
10.11 GTC Form of Confidential and Proprietary Information Agreement
signed by GTC employees. Filed as Exhibit 10.9 to the GTC S-1 and
incorporated herein by reference.
10.12 GTC Form of Agreement Not to Compete. Filed as Exhibit 10.10 to
the GTC S-1 and incorporated herein by reference.
10.13 Form of Indemnification Agreement between GTC and its directors.
Filed as Exhibit 10.12 to the original filing of the GTC 1994
10-K and incorporated herein by reference. Such agreements are
materially different only as to the signing directors and the
dates of execution.
10.14 License Agreement between GTC and Biogen, Inc., dated December
26, 1990. Filed as Exhibit 10.12 to the GTC S-1 and incorporated
herein by reference.**
10.15 Agreement between GTC, SMI Genzyme Limited ("SMIG") and a
European pharmaceutical company, dated as of September 29, 1990.
Filed as Exhibit 10.13 to the GTC S-1 and incorporated herein by
reference.**
10.16 Research and Development Agreement between Genzyme and SMIG,
dated as of September 11, 1990, filed as Exhibit 10.14 to the GTC
S-1, as amended by an Agreement between GTC and SMIG, dated as of
March 15, 1994, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994, and, in
each case, incorporated herein by reference.**
10.17 Joint Venture and Shareholders Agreement between GTC, Sumitomo
Metal Industries, Ltd. ("SMI") and SMIG, dated as of September 7,
1990. Filed as Exhibit 10.15 to the GTC S-1 and incorporated
herein by reference.
10.18 Shareholders' Subscription Agreement among GTC, SMI and SMIG,
dated as of March 15, 1994. Filed as Exhibit 10.17 to the GTC
1993 10-K and incorporated herein by reference.**
10.19.1 Cooperation and Licensing Agreement between GTC and Tufts
University, dated September 6, 1988, as amended through May 13,
1993 (the "Cooperation and Licensing Agreement"). Filed as
Exhibit 10.18 to the GTC 1994 10-K and incorporated herein by
reference.**
10.19.2 Amendment No. 7, dated April 1, 1993, to Cooperation and
Licensing Agreement. Filed as Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the period ended October 1,
1995 (File No. 0-294) (the "GTC October 1995 10-Q") and
incorporated herein by reference.
10.19.3 Amendment No. 8, dated October 21, 1993, to Cooperation and
Licensing Agreement. Filed as Exhibit 10.7 to the GTC October
1995 10-Q and incorporated herein by reference.
10.19.4 Amendment No. 9, dated December 1, 1993, to Cooperation and
Licensing Agreement. Filed as Exhibit 10.8 to the GTC October
1995 10-Q and incorporated herein by reference.**
<PAGE>
10.19.5 Amendment No. 10, dated November 1, 1993, to Cooperation and
Licensing Agreement. Filed as Exhibit 10.9 to the GTC October
1995 10-Q and incorporated herein by reference.
10.19.6 Amendment No. 11, dated May 25, 1995, to Cooperation and
Licensing Agreement. Filed as Exhibit 10.10 to the GTC October
1995 10-Q and incorporated herein by reference.
10.20 United States Patent No. 4,873,191 Sublicense Agreement between
DNX, Inc. and Genzyme Regarding Transgenic Experimental Animals
and Transgenic Mammary Production Systems, dated February 1,
1990; and letter of amendment, dated April 19, 1991. Filed
together as Exhibit 10.17 to the GTC S-1 and incorporated herein
by reference.**
10.21.1 Indenture of Lease, dated March 17, 1986, between TSI Mason
Laboratories, Inc. ("Mason") and Stephen W. Wolfe and William C.
Greene as Trustees of the Fifty-Seven Union Street Trust (the
"Mason Lease"). Filed as Exhibit 10.15 to TSI's Registration
Statement on Form S-1 (File No. 33-33708) and incorporated herein
by reference.
10.21.2 Amendment to the Mason Lease, dated September 30, 1993. Filed as
Exhibit 10.4 to Amendment No. 1 to TSI's Annual Report on Form
10-K for the fiscal year ended June 27, 1993 (the "TSI 1993
10-K") and incorporated herein by reference.
10.21.3 Guaranty by TSI of the obligations of Mason under the TSI Mason
Lease. Filed as Exhibit 10.41 to the TSI 1993 10-K and
incorporated herein by reference.
10.22 Lease Agreement, dated September 25, 1989, between TSI and
Laboratory Animal Services, Inc. and Greg E. Beatty and Betty L.
Beatty. Filed as Exhibit 10.15 to TSI's Annual Report on Form
10-K for the fiscal year ended July 1, 1990 and incorporated
herein by reference.
10.23.1 Lease Agreement, dated November 14, 1990, between TSI and
Hechinger Enterprises ("the Hechinger Lease"). Filed as Exhibit
10.21 to Amendment No. 2 to TSI's Registration Statement on Form
S-1 (File No. 33-39008) and incorporated herein by reference.
10.23.2 First Amendment to the Hechinger Lease, dated January 20, 1991.
Filed as Exhibit 10.22 to Amendment No. 1 to TSI's Registration
Statement on Form S-1 (File No. 33-39008) and incorporated herein
by reference.
10.24 Non-Competition and Confidentiality Agreement, dated as of August
7, 1991, between TSI and Mildred S. Christian. Filed as Exhibit
10.27 to Amendment No. 2 to TSI's Registration Statement on Form
S-1 (File No. 33-44724) and incorporated herein by reference.
10.25 Agreement to Terminate Existing Leases and Contemporaneously to
Enter Into a New Lease, dated as of July 1, 1992, between
Heffernan and Partners and Argus Research Laboratories, Inc.
Filed as Exhibit 10.31 to the TSI 1993 10-K and incorporated
herein by reference.
10.26.1 Lease Agreement, dated as of October 8, 1992, between W.M.
Rickman Construction Company and TSI Washington Laboratories,
Inc. (the "Washington Lease"). Filed as Exhibit 10.32 to the TSI
1993 10-K and incorporated herein by reference.
10.26.2 Amendment to the Washington Lease, dated as of January 17, 1995.
Filed herewith.
10.26.3 Second Amendment and accompanying Side Agreement to the
Washington Lease, dated as of July 7, 1997. Filed herewith.
10.27.1 Revolving Credit Agreement, dated July 3, 1995, among GTC,
certain of its subsidiaries and FNBB (the "Revolving Credit
Agreement"). Filed as Exhibit 10.2 to the GTC July 1995 10-Q and
incorporated herein by reference.
<PAGE>
10.27.2 First Amendment to Revolving Credit Agreement, dated as of
September 15, 1995 among GTC, certain of its subsidiaries and
FNBB. Filed as Exhibit 10.28.2 to the GTC 1996 10-K and
incorporated herein by reference.
10.27.3 Second Amendment to Revolving Credit Agreement, dated as of
December 22, 1995 among GTC, certain of its subsidiaries and
FNBB. Filed as Exhibit 10.28.3 to the GTC 1996 10-K and
incorporated herein by reference.
10.27.4 Third Amendment to Revolving Credit Agreement, dated as of March
29, 1996 among GTC, certain of its subsidiaries and FNBB. Filed
as Exhibit 10.28.4 to the GTC 1996 10-K and incorporated herein
by reference.
10.27.5 Fourth Amendment to Revolving Credit Agreement, dated as of
October 1, 1996 among GTC, certain of its subsidiaries and FNBB.
Filed herewith.
10.27.6 Fifth Amendment to Revolving Credit Agreement, dated as of
February 21, 1997 among GTC, certain of its subsidiaries and
FNBB. Filed herewith.
10.27.7 Sixth Amendment to Revolving Credit Agreement, dated as of March
17, 1997 among GTC, certain of its subsidiaries and FNBB. Filed
herewith.
10.27.8 Seventh Amendment to Revolving Credit Agreement, dated as of June
17, 1997, among GTC, certain of its subsidiaries and FNBB. Filed
as Exhibit 10.7 to the GTC June 1997 10-Q and incorporated herein
by reference.
10.27.9 Eighth Amendment to Revolving Credit Agreement, dated as of March
20, 1998, among GTC, certain of its subsidiaries and FNBB. Filed
herewith.
10.28.1 Security Agreement, dated as of July 3, 1995, by GTC and certain
of its subsidiaries in favor of Genzyme (the "Security
Agreement"). Filed as Exhibit 10.3 to the GTC July 1995 10-Q and
incorporated herein by reference.
10.28.2 First Amendment to Security Agreement, dated as of December 15,
1997. Filed herewith.
10.29.1 Reimbursement Agreement, dated as of July 3, 1995, among GTC,
certain of its subsidiaries and Genzyme. Filed as Exhibit 10.4 to
the GTC July 1995 10-Q and incorporated herein by reference.
10.29.2 First Amendment to Reimbursement Agreement, dated as of December
15, 1995, among GTC, certain of its subsidiaries and Genzyme.
Filed as Exhibit 10.30.2 to the GTC 1996 10-K and incorporated
herein by reference.
10.30 Amended and Restated Convertible Debt Agreement, dated as of
September 4, 1997, between the Company and Genzyme. Filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 28, 1997 (the "GTC September 1997
10-Q") and incorporated herein by reference.
10.31 Subordination Agreement, dated as of March 29, 1996, among GTC,
Genzyme and FNBB. Filed as Exhibit 10.32 to the GTC September
1997 10-Q and incorporated herein by reference.
10.32.1 Term Loan Agreement, dated as of December 15, 1995, among GTC,
FNBB and Genzyme. Filed as Exhibit 10.33.1 to the GTC September
1997 10-Q and incorporated herein by reference.
10.32.2 First Amendment to Term Loan Agreement, dated as of March 29,
1996, among GTC, FNBB and Genzyme. Filed as Exhibit 10.33.1 to
the GTC September 1997 10-Q and incorporated herein by reference.
<PAGE>
10.32.3 Second Amendment to Term Loan Agreement, dated as of October 1,
1996, among GTC, FNBB and Genzyme. Filed herewith.
10.32.4 Third Amendment to Term Loan Agreement, dated as of February 21,
1997, among GTC, FNBB and Genzyme. Filed herewith.
10.32.5 Fourth Amendment to Term Loan Agreement, dated as of June 17,
1997, among GTC, FNBB and Genzyme. Filed as Exhibit 10.6 to the
GTC June 1997 10-Q and incorporated herein by reference.
10.32.6 Fifth Amendment to Term Loan Agreement, dated as of March 20,
1998, among GTC, FNBB and Genzyme. Filed herewith.
10.33 Amendment to Standby Letter of Credit, dated as of June 29, 1994,
issued by FNBB in favor of Stephen W. Wolfe and William C.
Greene, as Trustees of the Fifty-Seven Union Street Trust. Filed
as Exhibit 10.43 to the GTC S-4 and incorporated herein by
reference.
10.34 Master Equipment Lease Agreement, dated as of September 27, 1994,
between TSI and FSI. Filed as Exhibit 10.33 to the original
filing of the GTC 1994 10-K and incorporated herein by reference.
10.35.1 Reserve Pledge and Security Agreement, dated as of September 27,
1994, between TSI and FSI. Filed as Exhibit 10.34 to the original
filing of the GTC 1994 10-K and incorporated herein by reference.
10.35.2 Modification to Reserve Pledge and Security Agreement, dated as
of June 30, 1995, between TSI and FSI. Filed herewith.
10.36 Security Agreement, dated as of September 27, 1994, between TSI
and FSI. Filed as Exhibit 10.35 to the original filing of the GTC
1994 10-K and incorporated herein by reference.
10.37 Intercreditor Agreement, dated as of July 3, 1995, among GTC,
TSI, certain other subsidiaries of GTC, FNBB and FSI. Filed as
Exhibit 10.7 to the GTC July 1995 10-Q and incorporated herein by
reference.
10.38 Guaranty of Lease, dated as of December 26, 1996, by GTC in favor
of FSI. Filed herewith.
10.39 Conversion and Registration Rights Agreement, dated as of June
29, 1994, between GTC and TSI. Filed as Exhibit 10.47 to the GTC
S-4 and incorporated herein by reference.
10.40 Common Stock Purchase Agreement, dated as of June 8, 1995,
between GTC and Genzyme. Filed as Exhibit 10.1 to the GTC July
1995 10-Q and incorporated herein by reference.
10.41* Amended and Restated Employment Agreement, dated as of August 28,
1997, between the Company and James A. Geraghty. Filed as Exhibit
10.1 to the GTC September 1997 10-Q and incorporated herein by
reference.
10.42* Amended and Restated Employment Agreement, dated as of August 28,
1997, between the Company and John B. Green. Filed as Exhibit
10.2 to the GTC September 1997 10-Q and incorporated herein by
reference.
10.43* Amended and Restated Employment Agreement, dated as of September
16, 1997, between the Company and Peter Glick. Filed as Exhibit
10.3 to the GTC September 1997 10-Q and incorporated herein by
reference.
<PAGE>
10.44* Employment Agreement, dated as of March 27, 1996, between GTC and
Harry Meade. Filed as Exhibit 10.44 to the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1996 and
incorporated herein by reference.
10.45* Form of Employment and Consulting Agreement among GTC, TSI and
Robert W. Baldridge. Filed as Exhibit 10.56 to the GTC S-4 and
incorporated herein by reference.
10.46.1 Agreement, dated as of September 21, 1994, between GTC and Gene
Pharming Europe B.V. ("Pharming B.V."). Filed as Exhibit 10.49 to
the Company's Registration Statement on Form S-1 (File No.
333-05843) and incorporated herein by reference.**
10.46.2 Amendment Agreement, dated as of April 23, 1997, between GTC and
Pharming B.V. Filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1997 (File
No. 0-21794) (the "GTC March 1997 10-Q") and incorporated herein
by reference.
10.47 Development and Commercialization Agreement, dated as of
September 25, 1997, between the Company and Advanced Cell
Technology, Inc. Filed as Exhibit 10.5 to the GTC September 1997
10-Q and incorporated herein by reference.**
10.48 Development and Commercialization Agreement, dated as of
September 25, 1997, between the Company and B. Braun Melsungen
AG. Filed as Exhibit 10.6 to the GTC September 1997 10-Q and
incorporated herein by reference.**
10.49.1 Loan Agreement, dated as of May 22, 1997, between Redfield and
Simmons First National Bank ("SFNB"). Filed herewith in order to
correct a typographical error regarding the date of the agreement
as contained in the version previously filed as Exhibit 10.9.1 to
the GTC June 1997 10-Q.
10.49.2 Promissory Note in the amount of $700,000.00, dated as of May 22,
1997, executed by Redfield and issued to SFNB. Filed herewith in
order to correct a typographical error regarding the date of the
agreement as contained in the version previously filed as Exhibit
10.9.2 to the GTC June 1997 10-Q.
10.49.3 Promissory Note in the amount of $350,000.00, dated as of May 22,
1997, executed by Redfield and issued to SFNB. Filed herewith in
order to correct a typographical error regarding the date of the
agreement as contained in the version previously filed as Exhibit
10.9.3 to the GTC June 1997 10-Q.
10.49.4 Mortgage, dated as of May 22, 1997, entered into by and between
Redfield and SFNB. Filed herewith in order to correct a
typographical error regarding the date of the agreement as
contained in the version previously filed as Exhibit 10.9.4 to
the GTC June 1997 10-Q.
10.49.5 Security Agreement, dated as of May 22, 1997, entered into by and
between Redfield and SFNB. Filed herewith in order to correct a
typographical error regarding the date of the agreement as
contained in the version previously filed as Exhibit 10.9.5 to
the GTC June 1997 10-Q.
10.49.6 Unconditional Guaranty, dated as of May 22, 1997, executed by TSI
Corporation, Inc. in connection with the Loan Agreement, dated as
of May 22, 1997, between Redfield and SFNB. Filed herewith in
order to correct a typographical error regarding the date of the
agreement as contained in the version previously filed as Exhibit
10.9.6 to the GTC June 1997 10-Q.
10.49.7 Unconditional Guaranty, dated as of May 22, 1997, executed by the
Company in connection with the Loan Agreement, dated as of May
22, 1997, between Redfield and SFNB. Filed herewith in order to
correct a typographical error regarding the date of the agreement
as contained in the version previously filed as Exhibit to 10.9.7
the GTC June 1997 10-Q.
<PAGE>
10.50.1 Loan Agreement, dated as of May 22, 1997, between TSI Redfield
Laboratories, Inc. ("Redfield") and Jefferson County, Arkansas
("Jefferson County"). Filed as Exhibit 10.2.1 to the GTC June
1997 10-Q and incorporated herein by reference.
10.50.2 Promissory Note in the amount of $350,000.00, dated as of May 22,
1997, executed by Redfield and issued to Jefferson County. Filed
as Exhibit 10.2.2 to the GTC June 1997 10-Q and incorporated
herein by reference.
10.50.3 Mortgage, dated as of May 22, 1997, entered into by and between
Redfield and Jefferson County, Arkansas. Filed as Exhibit 10.2.3
to the GTC June 1997 10-Q and incorporated herein by reference.
10.50.4 Guaranty Agreement, dated as of May 22, 1997, executed by the
Company in connection with the Loan Agreement, dated as of May
22, 1997, between Redfield and Jefferson County. Filed as Exhibit
10.2.4 to the GTC June 1997 10-Q and incorporated herein by
reference.
10.51.1 Loan Agreement, dated as of June 26, 1997, between GTC Mason
Laboratories ("Mason") and MassDevelopment. Filed as Exhibit
10.8.1 to the GTC June 1997 10-Q and incorporated herein by
reference.
10.51.2 Promissory Note in the amount of $5,000,000.00, dated as of June
26, 1997, executed by Mason and issued to MassDevelopment. Filed
as Exhibit 10.8.2 to the GTC June 1997 10-Q and incorporated
herein by reference.
10.51.3 Mortgage and Security Agreement, dated as of June 26, 1997,
entered into by and between Mason and MassDevelopment. Filed as
Exhibit 10.8.3 to the GTC June 1997 10-Q and incorporated herein
by reference.
10.51.4 Guaranty, dated as of June 26, 1997, executed by the Company in
connection with the Loan Agreement, dated as of June 26, 1997,
between Mason and MassDevelopment. Filed 10.8.4 as Exhibit to the
GTC June 1997 10-Q and incorporated herein by reference.
10.51.5 Hazardous Materials Indemnification Agreement, dated as of June
26, 1997, entered into by and between Mason and MassDevelopment.
Filed as Exhibit 10.8.5 to the GTC June 1997 10-Q and
incorporated herein by reference.
10.52.1 Amended and Restated Operating Agreement of ATIII LLC dated as of
January 1, 1998. Filed herewith.**
10.52.2 Purchase Agreement between GTC and Genzyme dated as of January 1,
1998, transferring an interest in ATIII LLC from Genzyme to GTC.
Filed herewith.**
10.52.3 Collaboration Agreement among Genzyme, GTC and ATIII LLC, dated
as of January 1, 1998. Filed herewith.**
10.53 Registration Rights Agreement, dated March 20, 1998, between GTC
and certain stockholders named therein. Filed herewith.
<PAGE>
10.54 Securities Purchase Agreement, dated as of March 20, 1998,
between GTC and certain purchasers named therein. Filed herewith.
23.1 Consent of Coopers & Lybrand L.L.P. Filed herewith.
27 Financial Data Schedule. Filed herewith.
99 Important Factors Regarding Forward-Looking Statements. Filed
herewith.
- ----------------------------
* Indicates a management contract or compensatory plan.
** Certain confidential information contained in the document has been omitted
and filed separately with the Securities and Exchange Commission pursuant
to Rule 406 of the Securities Act of 1933, as amended, or Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT 3.1.2
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT FEDERAL IDENTIFICATION
General Laws, Chapter 156B, Section 72 NO. 04-3186494
We, James A. Geraghty, President and Mark A. Hofer, Assistant Clerk of:
Genzyme Transgenics Corporation
- ------------------------------------------------------------------------------
(EXACT Name of Corporation)
located at: One Mountain Road, Framingham, MA 01701
- -----------------------------------------------------------------------------
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles NUMBERED:
Three (3)
- ------------------------------------------------------------------------------
(Number those articles 1,2,3,4,5 and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on September
28, 1994, by vote of:
5,366,244 shares of Common out of 5,507,034 shares outstanding,
- --------- -------- ----------
type, class & series, (if any)
being at least a majority of each type, class or series outstanding and entitled
to vote thereon.(1)
- ----------------
(1) For amendments adopted pursuant to Chapter 156B, Section 70.
<PAGE>
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS
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TYPE NUMBER OF SHARES
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<S> <C>
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COMMON: None
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PREFERRED None
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</TABLE>
<TABLE>
<CAPTION>
WITH PAR VALUE STOCKS
- ------------------------------------------
TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------------
<S> <C> <C>
- ------------------------------------------
COMMON: 12,000,000 $0.01
- ------------------------------------------
PREFERRED 5,000,000 $0.01
- ------------------------------------------
</TABLE>
CHANGE the total authorized to:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS
- ------------------------------------
TYPE NUMBER OF SHARES
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<S> <C>
COMMON: None
- ------------------------------------
PREFERRED None
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</TABLE>
<TABLE>
<CAPTION>
WITH PAR VALUE STOCKS
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TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------------
<S> <C> <C>
- ------------------------------------------
COMMON: 24,000,000 $0.01
- ------------------------------------------
PREFERRED 5,000,000 $0.01
- ------------------------------------------
</TABLE>
<PAGE>
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of the General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date.
LATER EFFECTIVE DATE:
---------------------------
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 30th day of September in the year 1994.
/s/ James A. Geraghty President
- --------------------------------------------------------------------
/s/ Mark A. Hofer Assistant Clerk
- ----------------------------------------------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
-----------------------------------------------------
I hereby approve the within articles of amendment
and, the filing fee in the amount of $12,000 having
been paid, said articles are deemed to have been
filed with me this third day of October 1994.
MICHAEL J. CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE
SENT
TO: Joseph L. Johnson III, Esquire
Goodwin, Procter & Hoar
Exchange Place, Boston, MA 02109
Telephone: (617) 570-1000
<PAGE>
Exhibit 3.1.4
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
Certificate of Vote of Directors Establishing
A Series of A Class of Stock
FEDERAL IDENTIFICATION
NO. ___________________
General Laws, Chapter 156B, Section 72
We, John B. Green, Vice President and Lynnette C. Fallon, Clerk of:
Genzyme Transgenics Corporation
- --------------------------------------------------------------------------------
(Name of Corporation)
located at: One Mountain Road, Framingham, MA 01701
do hereby certify that at a meeting of the directors of the corporation held on
March 4, 1998, the following vote establishing and designating a series of a
class of stock and determining the relative rights and preferences thereof was
duly adopted: VOTED: To adopt the Certificate of Vote of Directors Establishing
a Series of a Class of Stock attached as Exhibit A hereto (the "Certificate of
Designation"), pursuant to the authority granted to the Board of Directors in
the Company's Restated Articles of Organization to fix by resolution or
resolutions the designations and the powers, preferences, and rights and the
qualifications, limitations, or restrictions of one or more series of Series A
Convertible Preferred Stock, par value $0.01 per share, to the extent permitted
by Section 26 of Chapter 156B of the General Laws of Massachusetts; the officers
of the Company at the time in office be and each of them acting singly is hereby
authorized and empowered, in the name and on behalf of the Company, to execute
the Certificate of Designation and that the proper officers of the Company be
and each of them acting singly is hereby authorized to file such Certificate of
Designation with the Secretary of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 20th day of March in the year 1998.
/s/ John B. Green Vice President
- -----------------------
/s/ Lynnette C. Fallon Assistant Clerk
- --------------------------
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing A
Series of a Class of Stock
(GENERAL LAWS, CHAPTER 156B, SECTION 26)
I hereby approve the within articles of amendment and, the filing
fee in the amount of $________ having been paid, said articles
are deemed to have been filed with me this ____ day of
__________, 19__.
MICHAEL J. CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF CERTIFICATE TO BE SENT
TO: Lynnette C. Fallon, Esquire
Palmer & Dodge LLP
One Beacon Street
Boston, Boston, MA 02108
Telephone: (617) 573-0220
<PAGE>
STATEMENT OF TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The designation (this "Certificate of Designation") of this series, which
consists of 20,000 shares of Preferred Stock of Genzyme Transgenics Corporation,
a Massachusetts corporation (the "Company"), is the Series A Convertible
Preferred Stock (the "Preferred Stock" or "Preferred Shares") and the face
amount per share shall equal $1,000 (the "Face Amount").
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms shall have
the following meanings:
"Anniversary Date" means the date that is 9 months following the Closing
Date.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks in New York, New York are permitted or required by law
to be closed.
"Closing Bid Price" means, for any security as of any date, the closing
bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported
by Bloomberg Financial Markets or a comparable reporting service of
national reputation selected by the Company and reasonably
acceptable to the Holders
<PAGE>
then holding a majority of the outstanding shares of Preferred Stock
("Majority Holders") if Bloomberg Financial Markets is not then
reporting closing bid prices of such security (collectively,
"Bloomberg"), or if the foregoing does not apply, the last reported
sale price of such security in the over-the-counter market on the
electronic bulletin board of such security as reported by Bloomberg,
or, if no sale price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc.
If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as
mutually determined by the Company and the Majority Holders, or, if
they are unable to agree on such value, it shall be determined by an
investment banking firm selected by the Company and reasonably
acceptable to the Majority Holders.
"Closing Date" means the date on which the Preferred Shares are initially
issued.
"Common Stock" means the common stock, $0.01 par value, of the Company.
"Conversion Price" means (1) on and prior to the Anniversary Date, $14.55
and (2) beginning on the day following the Anniversary Date, the
lesser of (i) $14.55 and (ii) the Market Price.
"Effective Date" means the date the Registration Statement registering the
resale of the shares of Common Stock into which the Preferred Shares
are convertible is declared effective by the Securities and Exchange
Commission.
"Holders" means the initial Holders of the Preferred Stock and their
permitted transferees.
"majority of the outstanding shares of Preferred Stock" means greater than
66.6% of the outstanding shares of Preferred Stock.
"Market Price" means the average of the Closing Bid Prices of the Common
Stock over any 5 trading days, selected by the Holder, in the 20
trading days immediately preceding the Conversion Date.
<PAGE>
"Registration Deadline" means the 90th day following the Closing Date.
"Registration Statement" means a registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933,
as amended.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of March 20, 1998, among the Company and the purchasers
named therein, as amended from time to time in accordance with the
terms thereof.
"Warrants" means certain stock purchase warrants to acquire shares of
Common Stock issued by the Company to the initial Holders in
connection with the transactions contemplated by the Securities
Purchase Agreement.
III. DIVIDENDS
A. General. Each Holder of the Preferred Stock shall be entitled to
receive cumulative dividends at the rate of ten percent (10%) of the Face Amount
per annum (the "Dividend") of the Preferred Stock held by such Holder commencing
on and continuing through any period that shares of Common Stock equal to such
Holder=s Maximum Share Amount (as defined below) have been issued in conversion
of Preferred Stock with respect to such Holder of the Preferred Stock. Such
cumulative Dividends shall be payable at the end of each fiscal quarter of the
Company in arrears in cash or additional Preferred Shares, at the Company's
option; provided however, that the Company's option to pay such Dividends in
additional Preferred Shares shall be subject to and contingent upon the
effectiveness of a Registration Statement for the Common Shares underlying the
Preferred Shares and Warrants. Dividends on the Preferred Stock shall accrue and
be cumulative on a daily basis from the date payable (with appropriate proration
for any partial dividend period), whether or not earned and whether or not in
any dividend period there shall be surplus or net profits of the Company legally
available for the payment of such dividends. In no event, so long as any
Preferred Stock shall remain outstanding, shall any dividend whatsoever be
declared or paid upon, nor shall any distribution be made upon, any Junior
Securities (as defined below), nor shall any shares of Junior Securities be
purchased or redeemed by the Company nor shall any moneys be paid to or made
available for a sinking fund for the purchase or redemption of any Junior
Securities, without, in each such case, the written consent of the Holders of a
majority of the outstanding shares of Preferred Stock, voting together as a
class.
<PAGE>
B. Payment of Dividend in Preferred Shares. Should the Company elect to
pay accrued but unpaid Dividends in additional shares of Preferred Stock, the
number of Preferred Shares to which the Holder shall be entitled will be equal
to the aggregate cash value of such unpaid Dividends, divided by the Face
Amount.
IV. CONVERSION
A. Conversion at the Option of Holder. Subject to Article V(B), beginning
on the earlier to occur of the Effective Date and the Registration Deadline,
each Holder may, at any time and from time to time convert each of its shares of
Preferred Stock into a number of fully paid and nonassessable shares of Common
Stock determined by dividing the aggregate Face Amount of the Preferred Shares
being converted by the then applicable Conversion Price, subject to adjustment
as provided in Article X; provided, however, that, unless the Holder delivers a
waiver in accordance with the immediately following sentence, in no event shall
a Holder of shares of Preferred Stock be entitled to convert any such shares to
the extent that (x) the number of shares of Common Stock beneficially owned by
the Holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the shares of Preferred Stock or unexercised portion of warrants or any other
securities containing analogous limitations) plus (y) the number of shares of
Common Stock issuable upon the conversion of the shares of Preferred Stock with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by a Holder and such Holder's affiliates of more than
4.99% of the outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, (i) beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Rules 13(d) through (g) thereunder, except as otherwise provided in
clause (x) of such proviso, and (ii) a Holder may waive the limitations set
forth therein by written notice to the Company upon not less than sixty-one (61)
days prior written notice (with such waiver taking effect only upon the
expiration of such sixty-one (61) day notice period).
B. Mechanics of Conversion. To convert the Preferred Shares, a Holder
shall: (i) fax , confirming receipt (or otherwise deliver by other means
resulting in notice), a copy of the fully executed Notice of Conversion in the
form of Exhibit A hereto to the Company and (ii) surrender or cause to be
surrendered to the Company (or satisfy the provisions of Article XIII(A), if
applicable) the certificates representing the Preferred Stock being converted
(the "Preferred Stock Certificates") accompanied by duly executed stock powers
and the original executed version of the Notice of Conversion as soon as
practicable thereafter. The date the Holder faxes to the Company a the Notice of
Conversion described in clause (i) or such later date specified in the Notice of
Conversion shall be the "Conversion Date".
<PAGE>
C. Timing of Conversion. No later than the third Business Day following
the Conversion Date (the ADelivery Date@), provided that the Company has
received prior to such date the Preferred Stock Certificates (or the Holder has
satisfied the provisions of Article XIII(A), if applicable), the Company shall
issue and deliver to the Holder (or at its direction) that number of shares of
Common Stock issuable upon conversion of the number of Preferred Shares being
converted. The person or persons entitled to receive shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares at the close of business on the Conversion
Date, unless the Notice of Conversion is revoked as provided in Section IV(D).
The Delivery Date shall be extended until the Business Day following the date of
surrender to the Company of Preferred Stock Certificates to be converted or
satisfaction of the provisions of Article XIII(A), if applicable.
D. Continuing Rights. In addition to any other remedies which may be
available to the Holder, in the event the Company fails for any reason to effect
delivery to the Holder of certificates representing the shares of Common Stock
receivable upon conversion of the Preferred Shares by the Business Day following
the Delivery Date (which certificates shall be unlegended as and when required
pursuant to the Securities Purchase Agreement, Registration Rights Agreement
dated as of March 20, 1998, by and among the Company and the other signatories
thereto (the "Registration Rights Agreement") and this Certificate of
Designation), the Holder shall, unless the Holder otherwise elects to retain its
status as a holder of Common Stock by so notifying the Corporation, regain the
rights of a Holder with respect to such unconverted shares of Preferred Stock.
and the Company shall immediately return the subject Preferred Stock
certificates and other conversion documents, if any, delivered by Holder, to the
Holder, or, if shares of Preferred Stock have not been surrendered, adjust its
records to reflect that such shares of Preferred Stock have not been converted;
provided however, that the Company shall remain liable for payment of the
amounts determined pursuant to Article VI(A) hereof for each day falling between
the trading day following the Delivery Date and the date of the revocation
notice is received by the Company, and shall also remain liable for any damages
suffered by Holder.
E. Stamp, Documentary and Other Similar Taxes. The Company shall pay all
stamp, documentary, issuance and other similar taxes which may be imposed with
respect to the issuance and delivery of the shares of Common Stock pursuant to
conversion of the Preferred Stock; provided that the Company will not be
obligated to pay stamp, transfer or other taxes resulting from the issuance of
Common Stock to any person other than the registered holder of the Preferred
Stock.
<PAGE>
F. No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the conversion of Preferred Stock, but the Company shall make a cash
payment equal to such fraction multiplied by the per share face value in respect
of any fractional share which would otherwise be issuable; provided that in the
event that sufficient funds are not legally available for the payment of such
cash adjustment any fractional shares of Common Stock shall be rounded up to the
next whole number.
G. Electronic Transmission. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of a Holder who shall have
previously instructed such Holder's prime broker to confirm such request to the
Company's transfer agent and upon the Holder=s compliance with Section IV(B),
the Company shall use its commercially reasonable efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of Holder's prime broker with DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system. The Company shall
within three (3) Business Days issue a new certificate representing the
Preferred Stock not converted pursuant to any Notice of Conversion.
V. RESERVATION OF AUTHORIZED SHARES OF COMMON STOCK;
LIMITATION ON NUMBER OF CONVERSION SHARES
A. Reservation of Common Stock. Subject to the provisions of this Article
V, the Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock a sufficient number of shares of
Common Stock to provide for the conversion of all outstanding Preferred Shares
upon issuance of shares of Common Stock and the exercise of all Warrants (the
"Reserved Amount"). The Reserved Amount shall be increased from time to time in
accordance with the Company=s obligations pursuant to Section 4(g) of the
Securities Purchase Agreement. In addition, if the Company shall issue any
securities or make any change in its capital structure which would change the
number of shares of Common Stock into which each share of the Preferred Stock
shall be convertible at the then current Conversion Price, the Company shall at
the same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Preferred Stock.
B. Limitation on Number of Common Shares to be Issued. Notwithstanding
anything to the contrary contained herein, if, at any time, the aggregate number
of shares of Common Stock then issued upon conversion of the Preferred Stock
equals
<PAGE>
3,479,641 shares, subject to adjustments for stock dividends, stock splits,
combinations or similar events, the Preferred Stock shall, from that time
forward, cease to be convertible into Common Stock in accordance with the terms
of Article IV, unless the Company (i) has obtained approval of the issuance of
the Preferred Stock by a majority of the total votes eligible to be cast on such
proposal, in person or by proxy, by the holders of the then-outstanding Common
Stock, (ii) shall have otherwise obtained permission to allow such issuances
from Nasdaq or such other principal exchange upon which the Common Stock is then
trading; or (iii) is no longer governed by a rule promulgated by a stock
exchange, Nasdaq or other applicable body prohibiting the issuance of Common
Stock upon conversion of the Preferred Stock in excess of 3,479,641 shares
without shareholder approval. The maximum number of shares of Common Stock
issuable as a result of the limitation set forth in the first sentence of this
Section V(B) is hereinafter referred to as the "Maximum Share Amount." The
Company shall as promptly as possible, at any time that the Maximum Share Amount
has been reached with respect any Holder, exercise best efforts to obtain the
required stockholder or Nasdaq approval to issue shares of Common Stock upon
conversion of additional shares of Preferred Stock pursuant to Notices of
Conversion delivered by the Holders. With respect to each Holder of Preferred
Stock, the Maximum Share Amount shall refer to such Holder's pro rata share
thereof determined in accordance with Article X below. In the event that the
Company obtains stockholder approval, the approval of Nasdaq or otherwise
concludes that it is able to increase the number of shares to be issued above
the Maximum Share Amount (such increased number being the "New Maximum Share
Amount"), the references to Maximum Share Amount, above, shall be deemed to be
instead, references to the greater New Maximum Share Amount. In the event that
stockholder approval is not obtained, there are insufficient reserved or
authorized shares or a registration statement covering the additional shares of
Common Stock which constitute the New Maximum Share Amount is not effective
prior to the Maximum Share Amount being issued (if such registration statement
is necessary to allow for the public resale of such securities), the Maximum
Share Amount shall remain unchanged; provided, however, that the Holder may
grant an extension to obtain a sufficient reserved or authorized amount of
shares or of the period for obtaining effectiveness of such registration
statement
C. Allocation of Reserved Amount, Maximum Share Amount. The Reserved
Amount and the Maximum Share Amount shall be allocated among the initial Holders
according to the number of Preferred Shares issued to each such Holder on the
Closing Date. Any Common Shares which were initially allocated to any Holder
remaining after such Holder no longer owns any Preferred Shares shall be
allocated among the remaining Holders pro rata, based on the number of Preferred
Shares then held by such Holders.
VI. FAILURE TO CONVERT
A. If, at any time, (x) the Conversion Date has occurred and the Company
fails for any reason to deliver, on or prior to the third Business Day following
the expiration of the Delivery Date for such conversion (said period of time
being the
<PAGE>
"Extended Delivery Period"), such number of shares of Common Stock to which such
Holder is entitled (taking into account the limitations on conversions imposed
by such Holder=s allocated portion of the Reserved Amount and the Maximum Share
Amount) upon such conversion, or (y) the Company provides notice (including by
way of public announcement) to any Holder at any time of its intention not to
issue shares of Common Stock upon exercise by any Holder of its conversion
rights in accordance with the terms of this Certificate of Designation (other
than because such issuance would exceed such Holder's allocated portion of the
Reserved Amount) (each of (x) and (y) being a "Conversion Default"), then the
Company shall pay to the affected Holder, in the case of a Conversion Default
described in clause (x) above, and to all Holders, in the case of a Conversion
Default described in clause (y) above, an amount equal to 1% of the Face Amount
of the Preferred Stock with respect to which the Conversion Default exists
(which amount shall be deemed to be the aggregate Face Amount of all outstanding
Preferred Stock in the case of a Conversion Default described in clause (y)
above) for each day thereafter until the Cure Date. "Cure Date" means (i) with
respect to a Conversion Default described in clause (x) of its definition, the
date the Company effects the conversion of the portion of the Preferred Stock
submitted for conversion and (ii) with respect to a Conversion Default described
in clause (y) of its definition, the date the Company undertakes in writing to
issue Common Stock in satisfaction of all conversions of Preferred Stock in
accordance with the terms of this Certificate of Designation. The Company shall
promptly provide each Holder with notice of the occurrence of a Conversion
Default with respect to any of the other Holders.
The payments to which a Holder shall be entitled pursuant to this
Article VI(A) are referred to herein as "Conversion Default Payments."
Conversion Default Payments shall be paid in cash. Such payment shall be made in
accordance with and be subject to the provisions of Article XIII(B).
VII. REDEMPTION DUE TO CERTAIN EVENTS
A. Redemption Events. A "Redemption Event" means any one of the following
(after expiration of any applicable cure period):
(i) the Company fails, and any such failure continues uncured for
seven (7) Business Days after the Company has been notified thereof in writing
by the Holder, to (x) remove any restrictive legend on any certificate for any
shares of Common Stock issued after the Effective Date to the Holders upon
conversion of the Preferred Stock or upon exercise of the Warrants, or (y) to
cause its transfer agent to transfer any certificate for shares of Common Stock
issued to a Holder upon conversion of the Preferred Stock, in each case as and
when required by this Certificate of Designation, the Warrants, the Securities
Purchase Agreement or the Registration Rights Agreement; or
<PAGE>
(ii) The Company fails to issue shares of Common Stock to any
Holder of Preferred Stock upon exercise by such Holder of its conversion rights
in accordance with the terms of this Certificate of Designation for a period of
10 Business Days following the expiration of the Extended Delivery Period ; or
(iii) The Company fails to fulfill any of its obligations pursuant
to the Registration Rights Agreement (or makes any statement that it does not
intend to honor such obligations) and any such failure shall continue uncured
(or any statement not to honor its obligations shall not be rescinded) for ten
(10) business days.
B. Redemption By Holder. During the continuation of a Redemption Event,
each Holder shall have the right to elect at any time and from time to time by
delivery of a Redemption Notice (as defined herein) to the Company while such
Redemption Event continues, to require the Company to purchase for cash for an
amount per share equal to the Redemption Amount (as defined herein) any or all
of the then outstanding shares of Preferred Stock held by such Holder.
Notwithstanding the foregoing, any Holder of Preferred Stock who does not sign a
Redemption Notice shall retain such Holder's shares of Preferred Stock, the
rights of which shall continue to be governed by the terms of this Certificate
of Designation
C. Optional Redemption by the Company. The Company may, at its option,
upon five (5) Business Days= notice, redeem the Preferred Stock, as follows:
(i) If, notwithstanding the exercise by the Company in good faith of
best efforts, the registration statement required by the Registration Rights
Agreement is not effective within 90 days following the Closing Date, the
Company may, on or prior to the date that is 120 days following the Closing
Date, at its option, redeem for cash out of funds legally available therefor,
all (but not less than all) of the outstanding Preferred Shares at a price per
share equal to the 110% of the Face Amount of the Preferred Shares plus accrued
and unpaid dividends, if any, and any other amounts payable thereon.
(ii) Beginning upon the earlier to occur of (a) the date that the
Company completes an underwritten public offering of its Common Stock in an
amount of at least $10,000,000, or (b) the date that is eighteen months
following the Closing Date, the Company may, at its option, redeem for cash out
of funds legally available therefor, all (but not less than all) of the
outstanding Preferred Shares at a price per share (the "Redemption Amount")
equal to accrued and unpaid dividends on the outstanding Preferred Stock and any
other amounts payable hereunder plus the greater of (x) 115% of the Face Amount
of the Preferred Shares or (y) the product of (1) the Market Price of the Common
Stock as determined on the trading day preceding
<PAGE>
the Company's redemption notice to the Preferred Shareholders, multiplied by (2)
the number of shares of Common Stock issuable upon conversion of the outstanding
Preferred Shares at the then applicable Conversion Price.
(iii) Beginning on the date any Holder reaches such Holder=s Maximum
Share Amount, the Company may, at its option, redeem for cash out of funds
legally available therefor, all (but not less than all) of the outstanding
shares of Preferred Stock held by the Holder who has reached its Maximum Share
Amount at a price per share equal to 100% of the Face Amount such shares of
Preferred Stock plus accrued and unpaid dividends, if any, and any other amounts
payable thereon.
Nothing in this Section VIII(C) shall prohibit conversions of Preferred
Stock otherwise permitted pursuant to the terms of this Certificate of
Designation during the pendency of any notice of optional redemption by the
Company hereunder.
D. Maturity; Required Redemption. Subject to the limitations contained in
Section VII(F) hereof each share of Preferred Stock outstanding on the third
anniversary of the Closing Date (the "Maturity Date") will be redeemed at the
Company=s sole option, (a) in cash equal to the aggregate face value thereof
plus accrued and unpaid dividends, if any, and any other amounts payable thereon
or, (b) by delivery of a number of shares of Common Stock issuable upon
conversion of all of the Preferred Stock at the then-applicable Conversion
Price, provided that (i) any necessary approval for the issuance of additional
shares has been obtained, and (ii) all shares of Common Stock issuable upon
conversion of all outstanding shares of Preferred Stock are then (x) authorized
and reserved for issuance, (y) registered under the Securities Act for resale by
all Holders of such Preferred Shares and (z) eligible to be traded on either the
Nasdaq, Nasdaq Small Cap Market, the New York Stock Exchange or the American
Stock Exchange.
E. Redemption Defaults. If the Company fails to pay any Holder the
Redemption Amount with respect to any share of Preferred Stock, as provided in
this Article VII, within five (5) Business Days of its receipt or delivery, as
applicable, of a notice requiring such redemption, then each Holder (i) shall be
entitled to interest on the Redemption Amount at a per annum rate equal to the
lower of (x) the sum of prime rate published from time to time by the Wall
Street Journal plus three percent (3%) and (y) the highest interest rate
permitted by applicable law from the date of the Redemption Notice until the
date of redemption hereunder. In the event the Company is not able to redeem all
of the shares of Preferred Stock subject to Redemption Notices, the Company
shall redeem shares of Preferred Stock from each Holder, pro rata, based on the
total number of shares of Preferred Stock included in the Redemption Notice
relative to the total number of shares of Preferred Stock in all of the
Redemption Notices. In the case of a Redemption Event, if the Company fails to
pay the Redemption Amount for each share for any reason (including, without
limitation, the circumstances specified in paragraph VII(F)), within five (5)
Business
<PAGE>
Days of the applicable Redemption Notice then (assuming there are sufficient
authorized shares) in addition to all other available remedies, each Holder of
Preferred Stock shall have the right at any time, so long as the Redemption
Event continues, to convert, upon written notice, in lieu of the Redemption
Amount, each outstanding share of Preferred Stock held by such Holder, into the
number of shares of Common Stock of the Company equal to the Redemption Amount,
divided by the Conversion Price then in effect, subject in all cases to each
such Holder=s Maximum Share Amount.
F. Capital Impairment. In the event that any section of the Massachusetts
Corporation Law ("MCL"), would be violated by the redemption of any shares of
Preferred Stock that are otherwise subject to redemption pursuant to this
Article VII, the Company: (i) will redeem the greatest number of shares of
Preferred Stock possible without violation of said Section; (ii) the Company
thereafter shall use its best efforts to take all necessary steps permitted
pursuant to this Certificate of Designation and the agreements entered into in
connection with the issuance of Preferred Stock pursuant hereto in order to
remedy its capital structure in order to allow further redemptions without
violation of said Section; and (iii) from time to time thereafter as promptly as
possible the Company shall redeem shares of Preferred Stock at the request of
the Holders to the greatest extent possible without causing a violation of the
MCL.
VIII. RANK; PARTICIPATION
A. Rank. All shares of the Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the Company
hereafter created (unless, with the consent of the Holders of a majority of the
outstanding shares of Preferred Stock obtained in accordance with Article XII
hereof, such class or series of capital stock specifically, by its terms, ranks
senior to or pari passu with the Preferred Stock) (collectively, with the Common
Stock, "Junior Securities"); (iii) pari passu with any class or series of
capital stock of the Company hereafter created (with the consent of the Holders
of a majority of the outstanding shares of Preferred Stock obtained in
accordance with Article XII hereof) specifically ranking, by its terms, on
parity with the Preferred Stock (the "Pari Passu Securities"); and (iv) junior
to any class or series of capital stock of the Company hereafter created (with
the consent of the Holders of a majority of the outstanding shares of Preferred
Stock obtained in accordance with Article XII hereof) specifically ranking, by
its terms, senior to the Preferred Stock (the "Senior Securities"), in each case
as to distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
B. Participation. Subject to the rights of the Holders (if any) of Pari
Passu Securities and Senior Securities, the Holders shall, as such Holders, be
entitled to such dividends paid and distributions made to the Holders of Common
<PAGE>
Stock to the same extent as if such Holders had converted their shares of
Preferred Stock into Common Stock (without regard to any limitations on
conversion herein or elsewhere contained) and had been issued such Common Stock
on the day before the record date for said dividend or distribution. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the Holders of Common Stock.
IX. LIQUIDATION PREFERENCE
A. Liquidation of the Company. If the Company shall commence a voluntary
case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or make an assignment for
the benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Company shall be entered by a court having jurisdiction in the premises in
an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of sixty (60) consecutive
days and, on account of any such event, the Company shall liquidate, dissolve or
wind up, or if the Company shall otherwise liquidate, dissolve or wind up (a
"Liquidation Event"), no distribution shall be made to the Holders of any shares
of capital stock of the Company (other than Senior Securities and, together with
the Holders of Preferred Stock the Pari Passu Securities) upon liquidation,
dissolution or winding up unless prior thereto the Holders shall have received
the Liquidation Preference (as herein defined) with respect to each share. If,
upon the occurrence of a Liquidation Event, the assets and funds available for
distribution among the Holders and holders of Pari Passu Securities shall be
insufficient to permit the payment to such Holders of the preferential amounts
payable thereon, then the entire assets and funds of the Company legally
available for distribution to the Preferred Stock and the Pari Passu Securities
shall be distributed ratably among such shares in proportion to the ratio that
the Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
B. Certain Acts Not a Liquidation. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other entity nor the sale or transfer by the Company of less than substantially
all of its assets shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company.
<PAGE>
C. Definition of Liquidation Preference. The "Liquidation Preference" with
respect to a share of Preferred Stock means an amount equal to the Face Amount
thereof plus any other amounts that may be due from the Company with respect
thereto, including any accrued and unpaid dividends, pursuant to this
Certificate of Designation through the date of final distribution. The
Liquidation Preference with respect to any Pari Passu Securities shall be as set
forth in the Certificate of Designation filed in respect thereof.
X. ADJUSTMENTS TO THE CONVERSION PRICE; CERTAIN PROTECTIONS
The Conversion Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, reclassification or other similar event, the number
of shares of Common Stock issuable upon conversion of the Preferred Shares shall
be proportionately increased, or if the number of outstanding shares of Common
Stock is decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the number of shares of Common Stock issuable
upon conversion of the Preferred Shares shall be proportionately reduced. In
such event, the Company shall notify the Company's transfer agent of such change
on or before the effective date thereof.
B. Major Transactions. If the Company shall consolidate with or merge into
any corporation, sell all or substantially all of its assets, effectuate a
transaction or series of transactions in which 50% or more of the voting power
of the Company is disposed of or reclassify its outstanding shares of Common
Stock (other than by way of subdivision or reduction of such shares) (each a
"Major Transaction"), then each Holder shall thereafter be entitled to receive
consideration, in exchange for each share of Preferred Stock held by it, equal
to the greater of, as determined in the sole discretion of the Holders of at
least 50.1% of the outstanding shares of Preferred Stock: (i) the number of
shares of stock or securities or property of the Company, or of the entity
resulting from such consolidation or merger (the "Major Transaction
Consideration"), to which a Holder of the number of shares of Common Stock
delivered upon conversion of such shares of Preferred Stock would have been
entitled upon such Major Transaction (without regard to any limitations on
conversion herein contained) and had such Common Stock been issued and
outstanding and had such Holder been the holder of record of such Common Stock
at the time of such Major Transaction, and the Company shall make lawful
provision therefore as a part of such consolidation, merger or reclassification;
and (ii) 125% of the Face Amount of such shares of Preferred Stock plus accrued
and unpaid dividends, if any, in cash. No sooner than ten (10) days nor later
than five (5) days prior to the consummation of the Major Transaction, but not
prior to the public announcement of such Major Transaction, the Company shall
deliver written notice ("Notice of Major Transaction")
<PAGE>
to each Holder, which Notice of Major Transaction shall be deemed to have been
delivered one (1) Business Day after the Company's sending such notice by
telecopy (provided that the Company sends a confirming copy of such notice on
the same day by overnight courier). Such Notice of Major Transaction shall
indicate the amount and type of the Major Transaction Consideration which such
Holder would receive under clause (i) of this Article X(B). If the Major
Transaction Consideration does not consist entirely of United States dollars,
the value of such other property shall be determined by a reputable accounting
firm selected by the Company that is reasonably acceptable the Holders of a
majority of the outstanding shares of Preferred Stock.
C. Adjustment Due to Distribution. If at any time after the Closing Date,
the Company shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a partial liquidating
dividend, by way of return of capital or otherwise (including any dividend or
distribution to the Company's stockholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"), then the minimum Conversion Price per share shall be reduced by
the value of such Distribution per share. If the Distribution does not consist
entirely of U.S. Dollars, the value of such other property shall be determined
by a reputable accounting firms selected by the Company that is reasonably
acceptable to the Holders of a majority of the outstanding shares of Preferred
Stock.
D. Purchase Rights. If at any time after the Closing Date, the Company
issues any Convertible Securities or rights to purchase stock, warrants,
securities or other property (the "Purchase Rights") pro rata to the record
holders of any class of Common Stock, then the Holders will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held
the number of shares of Common Stock acquirable upon complete conversion of the
Preferred Stock (without regard to any limitations on conversion or exercise
herein or elsewhere contained) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
E. Adjustment to Conversion Price. If at any time when Preferred Stock is
issued and outstanding, the number of outstanding shares of Common Stock is
increased or decreased by a stock split, stock dividend, combination,
reclassification, below-market price rights offering to all holders of Common
Stock or other similar event, which event shall have taken place during the
reference period for determination of the Conversion Price for the Preferred
Stock, then the Conversion Price shall be calculated giving appropriate effect
to the stock split, stock dividend, combination, reclassification or other
similar event during the calculation period preceding the Conversion Date. In
such event, the Company shall notify the Transfer Agent of such change on or
before the effective date thereof.
<PAGE>
F. Adjustment for Restricted Periods. If (i) the Company fails to obtain
effectiveness of the Registration Statement prior to ninety (90) days following
the Closing Date, or (ii) the Registration Statement, once effective, lapses in
effect, or sales cannot otherwise be made thereunder, whether by reason of the
Corporation=s failure or inability to amend or supplement the prospectus
included therein (AProspectus@) in accordance with the Registration Rights
Agreement or otherwise, then the 20 trading days period (ALookback Period@) used
for determining the AMarket Price@ shall be extended to include (x) in the case
of an event described in clause (i), the 20 trading days immediately preceding
the 90th day following the Closing Date plus all Trading Days through and
including the date of effectiveness of the Registration Statement, and (y) in
the case of an event described in clause (ii), the number of trading days
preceding the date on which the Holder is first notified that sales may not be
made under the Prospectus, which would otherwise then be included in the
Lookback Period plus all trading days through and including the date on which
the Holder is notified that sales may again be made under the Prospectus. If a
Holder of the Preferred Stock reasonably determines that sales may not be made
pursuant to the Prospectus, it shall notify the Company in writing and, unless
the Company provides Holder with an opinion of Company=s counsel to the
contrary, such determination shall be binding for purposes of this paragraph.
G. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article X, the Company, at
its expense, shall promptly compute such adjustment or readjustment and prepare
and furnish to each Holder a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request at any time
of any Holder, furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Preferred Stock.
XI. VOTING RIGHTS
No Holder of the Preferred Stock shall be entitled to vote on any matter
submitted to the shareholders of the Company for their vote, waiver, release or
other action, except as may be otherwise expressly required by law.
XII. PROTECTION PROVISIONS
So long as any Preferred Shares are outstanding, the Company shall not,
without first obtaining the approval of the Holders of majority of the
outstanding shares of Preferred Stock: (a) alter or change the rights,
preferences or privileges of the
<PAGE>
Preferred Stock; (b) alter or change the rights, preferences or privileges of
any capital stock of the Company so as to affect adversely the Preferred Stock;
(c) create any Senior Securities; (d) create any Pari Passu Securities; (e)
increase the authorized number of shares of Preferred Stock; or (e) do any act
or thing not authorized or contemplated by this Certificate of Designation which
would result in any taxation with respect to the Preferred Stock under Section
305 of the Internal Revenue Code of 1986, as amended, or any comparable
provision of the Internal Revenue Code as hereafter from time to time amended,
(or otherwise suffer to exist any such taxation as a result thereof).
XIII. MISCELLANEOUS
A. Lost or Stolen Certificates. Upon receipt by the Company of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost, stolen, destroyed or mutilated Preferred Stock
Certificate(s) if the Holder contemporaneously requests the Company to convert
such Preferred Stock.
B. Payment of Cash; Defaults. Whenever the Company is required to make any
cash payment to a Holder under this Certificate of Designation (as a Conversion
Default Payment, Redemption Amount or otherwise), such cash payment shall be
made to the Holder by the method (by certified or cashier's check or wire
transfer of immediately available funds) elected by such Holder. If such payment
is not delivered when due such Holder shall thereafter be entitled to interest
on the unpaid amount until such amount is paid in full to the Holder at a per
annum rate equal to the lower of (x) the sum of prime rate published from time
to time by the Wall Street Journal plus three percent (3%) and (y) the highest
interest rate permitted by applicable law.
C. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. Company covenants to each Holder that there shall be no
characterization concerning this instrument other than as expressly provided
<PAGE>
herein; provided, however, that the Company shall be entitled to prepare
summaries of this Certificate of Designation for purposes of complying with its
disclosure obligations and in connection with bona fide disputes as to the
operations of the provisions of this Certificate of Designation.
D. Failure or Indulgency Not Waiver. No failure or delay on the part of a
Holder 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.
E. Notices. Any notice from a Holder to the Company hereunder shall be
given to the Company in accordance with Section 8(f) of the Securities Purchase
Agreement. Any notices from the Company to a Holder shall be given to such
Holder at such Holder=s address as shown in the stock register of the Company
and otherwise in accordance with Section 8(f) of the Securities Purchase
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be duly executed this 20th day of March, 1998.
Genzyme Transgenics Corporation
By: /s/ John B. Green
---------------------------
Name: John B. Green
Title: Vice President, Finance
<PAGE>
EXHIBIT A
GENZYME TRANSGENICS CORPORATION
CONVERSION NOTICE - SERIES A CONVERTIBLE PREFERRED STOCK
Reference is made to the Statement of Terms (the "Certificate of Designation")
of the Series A Convertible Preferred Stock, face amount $1,000 per share (the
"Preferred Shares"), of Genzyme Transgenics Corporation, a Massachusetts
corporation (the "Company"). In accordance with and pursuant to the Certificate
of Designation, the undersigned hereby elects to convert the number of Preferred
Shares indicated below into shares of Common Stock, par value $0.01 per share
(the "Common Stock"), of the Company, by tendering the stock certificate(s)
representing the share(s) of Preferred Stock specified below as of the date
specified below.
Date of Conversion:
---------
Number of Preferred Shares to be converted:
---------
Stock certificate no(s). of Preferred Shares to be converted:
---------
Please confirm the following information:
Conversion Price:
---------
Number of shares of Common Stock
to be issued:
---------
<PAGE>
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Company into which the Preferred Shares are being converted in the
following name and to the following address:
Issue to:
-----------------------
-----------------------
-----------------------
Facsimile Number:
-----------------------
Authorization: -----------------------
By:
-----------------------
Title:
-----------------------
Dated: -----------------------
<PAGE>
The undersigned hereby represents and covenants that it has complied, or will
comply, with any and all prospectus delivery requirements with respect to its
sale of the Common Stock of the Company being issued herewith.
[ADD INFORMATION RE: DTC / DWAC PROCEDURES]
[ACKNOWLEDGED AND AGREED:
GENZYME TRANSGENICS CORPORATION
By:
-----------------------
Name:
Title:
Date:
-----------------------]
<PAGE>
Exhibit 4.2
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTION ON
TRANSFER AS SET FORTH ON THE REVERSE SIDE
INCORPORATED UNDER THE LAWS OF MASSACHUSETTS
NUMBER SHARES
- SPECIMEN - - SPECIMEN -
GENZYME TRANSGENICS CORPORATION
Series A Convertible Preferred Stock $.01 Par Value
This Certifies that ---- Specimen ---- is the
registered holder of _________________________________________________________
Shares
of Series A Convertible Preferred Stock of
GENZYME TRANSGENICS CORPORATION
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed
this _________________ day of _________________ A.D. 1998
________________________________ _________________________________
Vice President Treasurer
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE, AND SCOPE CUSTOMARY FOR OPINIONS OF
COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE ACT.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES, AND RELATIVE, PARTICIPATING,
OPTIONAL, OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS, OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.
For Value Received, _____ hereby sell, assign and transfer unto
________________________________________________________________
___________________________________________________________ Shares represented
by the within Certificate, and do hereby irrevocably constitute and appoint
_________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________, 19____
In presence of
________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
Exhibit 4.9
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: March 20, 1998
to Purchase ___________ Shares of Common Stock of
GENZYME TRANSGENICS CORPORATION
Genzyme Transgenics Corporation, a Massachusetts corporation (the
"Company"), hereby certifies that ______________________, its permissible
transferees, designees, successors and assigns (collectively, the "Holder"), for
value received, is entitled to purchase from the Company at any time commencing
on March 20, 1998 ("Issuance Date") and terminating on the fourth anniversary of
the Issuance Date (or such earlier date as is specified in a duly delivered Call
Notice (as defined below)) up to _______________________ shares (each a "Share"
and collectively the "Shares") of the Company's common stock (the "Common
Stock"), at an exercise price of $15.1563 per Share (the "Exercise Price"). The
number of Shares purchasable hereunder and the Exercise Price are subject to
adjustment as provided in Section 4 hereof.
1. Exercise of Warrants.
(a) Upon presentation and surrender of this Common Stock Purchase
Warrant Certificate ("Warrant Certificate" or "Certificate"), or Lost
Certificate Affidavit (as defined below), accompanied by a completed Election to
Purchase in the form attached hereto as Exhibit A (the "Election to Purchase")
duly executed, at the principal office of the Company at Five Mountain Road,
Framingham, MA 01701, Attn: Secretary, together with a check payable to the
Company in the amount of the Exercise Price multiplied by the number of Shares
being purchased, the Company or the Company's Transfer Agent as the case may be,
shall, within two (2) trading days of receipt of the foregoing, deliver to the
Holder hereof, certificates of fully paid and non-assessable Common Stock which
in the aggregate represent the number of Shares being purchased; provided,
however, that the Holder may elect, with the prior written consent of the
Company, which may be granted or withheld in the Company's sole discretion on a
case by case basis, to utilize the cashless exercise provisions
<PAGE>
set forth below in lieu of tendering the Exercise Price in cash. The
certificates so delivered shall be in such denominations as may be reasonably
requested by the Holder and shall be registered in the name of the Holder or
such other name as shall be designated by the Holder. All or less than all of
the Warrants represented by this Certificate may be exercised and, in case of
the exercise of less than all, the Company, upon surrender hereof, will at the
Company's expense deliver to the Holder a new Warrant Certificate or
Certificates (in such denominations as may be requested by the Holder) of like
tenor and dated the date hereof entitling said holder to purchase the number of
Shares represented by this Certificate which have not been exercised and to
receive Registration Rights with respect to such Shares, and all other rights
with respect to the shares which the Holder has on the date hereof.
(b) Cashless Exercise. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, the Holder may elect, with the
prior written consent of the Company, which may be granted or withheld in the
Company's sole discretion on a case by case basis, to receive a reduced number
of Shares in lieu of tendering the Exercise Price in cash ("Cashless Exercise");
provided that the Holder shall be entitled, without the consent of the Company,
to elect Cashless Exercise at any time that the resale of the Warrant Shares by
the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
at any time when registration is so required pursuant to the Registration Rights
Agreement (as defined below). In such case, the number of Shares to be issued to
the Holder shall be computed using the following formula;:
X = Y(A-B)/A
where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common
Stock; and
B = the Exercise Price.
As used herein, " Market Value" refers to the closing bid price of the Common
Stock (as reported by Bloomberg, L.P.) on the day before the Election to
Purchase and this Warrant Certificate are duly surrendered to the Company for a
full or partial exercise hereof. Notwithstanding the foregoing definition, if
the Common Stock is not listed on a national securities exchange or quoted in
the Nasdaq System at the time said Election to Purchase is submitted to the
Company in the foregoing manner, the Market Value of the Common Stock shall be
(a) determined in good faith by the Board of Directors of the Company and
certified in a board resolution, based on the most recently completed
arm's-length transaction between the Company and a Person other than an
affiliate of the Company or between any two such Persons and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred within
the six-month period, the value of the security as determined by an independent
financial expert, unless the Company shall become subject to a merger,
acquisition, or other consolidation pursuant to which the Company is not the
surviving entity, in which case the Market Value
<PAGE>
of the Common Stock shall be deemed to be the value received per share by the
Company's common stockholders pursuant to such merger, acquisition or other
consolidation.
2. Exchange, Transfer and Replacement. (a) At any time prior to the
exercise hereof, this Warrant Certificate may be exchanged upon presentation and
surrender to the Company, alone or with other Warrant Certificates of like tenor
of different denominations registered in the name of the same Holder, together
with a duly executed Assignment in substantially the form and substance of the
Form of Assignment which accompanies this Warrant Certificate. The Warrant
Certificate or Certificates shall be exchanged for another Warrant Certificate
or Certificates of like tenor in the name of such Holder and/or the transferees
named in such Assignment, exercisable for the aggregate number of Shares as the
Certificate or Certificates surrendered, provided that the Company shall not be
obligated to issue exchange or transfer Certificates for an exchange or transfer
of less than 10,000 shares. The Company shall issue any Warrant Certificates
reflecting such transfer or assignment (including such portion of this Warrant
Certificate, if any, as shall not have been transferred or assigned) within
three (3) business days after receipt of the requisite Warrant Certificate(s)
and duly completed Assignment.
(b) Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant Certificate and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company (collectively, a "Lost Certificate
Affidavit"), or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver in lieu thereof, a new Warrant Certificate of like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant Certificate in connection with any transfer, exchange or replacement as
provided in this Section 2, this Warrant Certificate shall be promptly canceled
by the Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the Holder or transferees) and charges payable in connection with the
preparation, execution and delivery of Warrant Certificates pursuant to this
Section 2.
(d) Warrant Register. The Company shall maintain, at its principal
executive offices (or at the offices of the transfer agent for the Warrant
Certificate or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant Certificate (the
"Warrant Register"), in which the Company shall record the name and address of
the person in whose name this Warrant Certificate has been issued, as well as
the name and address of each permitted transferee and each prior owner of this
Warrant Certificate.
(e) Company Call Right. Beginning on the business day following the
first anniversary of the Issuance Date, provided that the twenty consecutive
trading day average closing bid price of the Common Stock the Company for the
period ending on the date prior to delivery of such notice (as reported by
Bloomberg, L.P.) is equal to or greater than 140%
<PAGE>
of the Exercise Price, as adjusted pursuant to Section 4 hereof, the Company
shall have the ability to deliver a written notice to the Holder hereof (a "Call
Notice"). The Call Notice shall specify a date no less than 30 days following
the date of delivery of such Call Notice, and, unless exercised prior to such
date, this Certificate (or any unexercised portion hereof) shall expire, and
Holder shall have no further rights hereunder, on and following such specified
date. The Holder shall have the right to exercise its rights hereunder during
such 30 day notice period.
3. Rights and Obligations of Holders of this Certificate. The Holder of
this Certificate shall not, by virtue hereof, be entitled to any rights of a
stockholder in the Company, either at law or in equity; provided, however, that
in the event any certificate representing shares of Common Stock or other
securities is issued to the holder hereof upon exercise of some or all of the
Warrants, such holder shall, for all purposes, be deemed to have become the
holder of record of such Common Stock on the date on which this Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
aggregate Exercise Price was made, irrespective of the date of delivery of such
share certificate.
4. Adjustments.
(a) Stock Dividends, Reclassifications, Recapitalizations, Etc. In
the event the Company: (i) pays a dividend in Common Stock or makes a
distribution in Common Stock, (ii) subdivides its outstanding Common Stock into
a greater number of shares, (iii) combines its outstanding Common Stock into a
smaller number of shares or (iv) increases or decreases the number of shares of
Common Stock outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (1) the Exercise Price on the
record date of such division or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (2) the
number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(b) Cash Dividends and Other Distributions. In the event that at any
time or from time to time the Company shall distribute to all holders of Common
Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (ii) any options, warrants or other rights to subscribe for or purchase any
of the foregoing (other than in each case, (w) the issuance of any rights under
a shareholder rights plan, (x) any dividend or distribution described in Section
4(a), (y) any rights, options, warrants or securities described in Section 4(c)
and (z) any cash dividends or other cash distributions from current earnings),
then the number of shares of Common Stock issuable upon the exercise of each
Warrant Certificate shall be increased to a number determined by multiplying the
number of shares of Common Stock issuable upon the exercise
<PAGE>
of such Warrant Certificate immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be such
Current Market Value (as hereinafter defined) per share of Common Stock on the
record date for such dividend or distribution, and the denominator of which
shall be such Current Market Value per share of Common Stock on the record date
for such dividend or distribution less the sum of (x) the amount of cash, if
any, distributed per share of Common Stock and (y) the fair value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be evidenced by a board resolution, a copy of which will be sent to the
Holders upon request) of the portion, if any, of the distribution applicable to
one share of Common Stock consisting of evidences of indebtedness, shares of
stock, securities, other property, warrants, options or subscription or purchase
rights; and the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such record date by the above
fraction. Such adjustments shall be made whenever any distribution is made and
shall become effective as of the date of distribution, retroactive to the record
date for any such distribution. No adjustment shall be made pursuant to this
Section 4(b) which shall have the effect of decreasing the number of shares of
Common Stock issuable upon exercise of each Warrant Certificate or increasing
the Exercise Price.
(c) Rights Issue. In the event that at any time or from time to time
the Company shall issue rights, options or warrants entitling the holders
thereof to subscribe for shares of Common Stock, or securities convertible into
or exchangeable or exercisable for Common Stock to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the then Current Market Value per share of Common Stock,
the number of shares of Common Stock issuable upon the exercise of each Warrant
Certificate shall be increased to a number determined by multiplying the number
of shares of Common Stock theretofore issuable upon exercise of each Warrant
Certificate by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights, options,
warrant or securities plus the number of additional shares of Common Stock
offered for subscription or purchase or into or for which such securities that
are issued are convertible, exchangeable or exercisable, and the denominator of
which shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, option, warrants or securities plus the total number of
shares of Common Stock which the aggregate consideration expected to be received
by the Company (assuming the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then Current Market Value per
share of Common Stock. In the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants are
issued and shall become effective, retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities. No adjustment shall be made pursuant to this Section 4(c) which
shall have the effect of decreasing the number of shares of Common Stock
purchasable upon exercise or each Warrant Certificate or of increasing the
Exercise Price.
<PAGE>
(d) Combination: Liquidation. (i) Except as provided in Section
4(d)(ii) below, in the event of a Combination (as defined below), each Holder
shall have the right to receive upon exercise of the Warrant Certificates the
kind and amount of shares of capital stock or other securities or property which
such Holder would have been entitled to receive upon or as a result of such
Combination had such Warrant Certificate been exercised immediately prior to
such event (subject to further adjustment in accordance with the terms hereof).
Unless paragraph (ii) is applicable to a Combination, the Company shall provide
that the surviving or acquiring Person (the "Successor Company") in such
Combination will assume by written instrument the obligations under this Section
4 and the obligations to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be
entitled to acquire. The provisions of this Section 4(d)(i) shall similarly
apply to successive Combinations involving any Successor Company. "Combination"
means an event in which the Company consolidates with, mergers with or into, or
sells all or substantially all of its assets to another Person, where "Person"
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
(ii) In the event of (x) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable solely in cash
or (y) the dissolution, liquidation or winding-up of the Company, the Holders
shall be entitled to receive, upon surrender of their Warrant Certificates,
distributions on an equal basis with the holders of Common Stock or other
securities issuable upon exercise of the Warrant Certificates, as if the Warrant
Certificates had been exercised immediately prior to such event, less the
Exercise Price. In case of any Combination described in this Section 4(d)(ii),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
following the consummation of such combination or at the time of such
dissolution, liquidation or winding-up with an agent or trustee for the benefit
of the Holders of the funds, if any, necessary to pay to the Holders the amounts
to which they are entitled as described above. After such funds and the
surrendered Warrant Certificates are received, the Company is required to
deliver a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrant Certificates.
(e) Notice of Adjustment. Whenever the Exercise Price or the number
of shares of Common Stock and other property, if any, issuable upon exercise of
the Warrant Certificates is adjusted, as herein provided, the Company shall
deliver to the holders of the Warrant Certificates in accordance with Section 10
a certificate of the Company's Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
(i) the Board of Directors determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the common
Stock was determined, if either of such determinations were required), and
specifying the Exercise Price and number of shares of
<PAGE>
Common Stock issuable upon exercise of Warrant Certificates after giving effect
to such adjustment.
(f) Purchase Price Adjustment. In the event that the Company issues
or sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any warrants
or other rights to subscribe for or to purchase or any options for the purchase
of its Common Stock or any such convertible securities (other than shares or
options issued or which may be issued pursuant to the Company's employee or
director option plans or shares issued upon exercise of options, warrants or
rights outstanding on the date of the Agreement and listed in the Company's most
recent periodic report filed under the Exchange Act) at a purchase price per
share on the date of original issuance of such security which is less than 95%
of the Current Market Value of the Common Stock on the trading day next
preceding such issue or sale, then in each such case, the Exercise Price in
effect immediately prior to such issue or sale shall be reduced effective
concurrently with such issue or sale to an amount determined by multiplying the
Exercise Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (2) the number of shares of Common Stock which
the aggregate consideration received by the Company for such additional shares
would purchase at such Current Market Value ; and (y) the denominator of which
shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the issuance of any
convertible securities, warrants, options or other rights to subscribe for or to
purchase or exchange for, shares of Common Stock ("Convertible Securities"), the
maximum number of shares of Common Stock that would be issuable upon exercise,
exchange or conversion of such Convertible Securities (assuming that shares of
Common Stock were trading at the Current Market Value at the time of conversion)
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.
(g) Notice of Certain Transactions. In the event that the Company
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) to offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) to effect any capital reorganization,
reclassification, consolidation or merger affecting the class of Common Stock,
as a whole, or (d) to effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, the Company shall, within the time
limits specified below, send to each Holder a notice of such proposed action or
offer. Such notice shall be mailed to the Holders at their addresses as they
appear in the Warrant Register (as defined in Section 2(d)), which shall specify
the record date for the purposes of such dividend, distribution or rights, or
the date such issuance or event is to take place and the date of participation
therein by the holders of Common Stock, if any such date is to be fixed, and
shall briefly indicate the effect of such action on the number of shares of
Common Stock and on the number and kind of any other
<PAGE>
shares of stock and on other property, if any, and the number of shares of
Common Stock and other property, if any, issuable upon exercise of each Warrant
Certificate and the Exercise Price after giving effect to any adjustment
pursuant to Section 4 which will be required as a result of such action. Such
notice shall be given as promptly as possible and (x) in the case of any action
covered by clause (a) or (b) above, at least 10 days prior to the record date
for determining holders of the Common Stock for purposes of such action or (y)
in the case of any other such action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
(h) Current Market Value. "Current Market Value" per share of Common
Stock or any other security at any date means (i) if the security is not
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (a) the value of the security, determined in good faith by the Board of
Directors of the Company and certified in a board resolution, based on the most
recently completed arm's-length transaction between the Company and a Person
other than an affiliate of the Company or between any two such Persons and the
closing of which occurs on such date or shall have occurred within the six-month
period preceding such date, or (b) if no such transaction shall have occurred
within the six-month period, the value of the security as determined by an
independent financial expert or (ii) if the security is registered under the
Exchange Act, the average of the daily closing bid prices (or the equivalent in
an over-the-counter market) for each day on which the Common Stock is traded for
any period on the principal securities exchange or other securities market on
which the common Stock is being traded (each, a "Trading Day") during the period
commencing ten (10) Trading Days before such date and ending on the date one day
prior to such date, or if the security has been registered under the Exchange
Act for less than ten (10) consecutive Trading Days before such date, the
average of the daily closing bid prices (or such equivalent) for all of the
Trading Days before such date for which daily closing bid prices are available;
provided, however, that if the closing bid price is not determinable for at
least five (5) Trading Days in such period, the "Current Market Value" of the
security shall be determined as if the security were not registered under the
Exchange Act.
(i) Other Adjustments. In the event of any other transaction of the
type contemplated by this Section 4, but not expressly provided for by the
provisions hereof, the Board of Directors of the Company will make appropriate
adjustment in the Exercise Price so as to equitably protect the rights of the
Holder.
(j) No Impairment of Holder's Rights. The Company will not, by
amendment of its articles of organization or bylaws or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, except as contemplated hereby,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant Certificate, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all action as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment.
<PAGE>
5. Company's Representations.
(a) The Company covenants and agrees that all shares of Common Stock
issuable upon exercise of this Warrant Certificate will, upon delivery, be duly
and validly authorized and issued, fully-paid and non-assessable and free from
all taxes, liens, claims and encumbrances.
(b) The Company covenants and agrees that it will at all times
reserve and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise in full of all
outstanding options, warrants and rights, including this Warrant Certificate.
(c) The Company shall promptly secure the listing of the Shares upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant Certificate) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant Certificate; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant Certificate if and so long as
any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(d) The Company has taken all necessary action and proceedings as
required and permitted by applicable law, rule and regulation, including,
without limitation, the notification of the principal market on which the Common
Stock is traded, for the legal and valid issuance of this Warrant Certificate to
the Holder under this Warrant Certificate.
(e) With a view to making available to Holder the benefits of Rule
144 promulgated under the Act and any other rule or regulation of the Securities
and Exchange Commission ("SEC") that may at any time permit Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and
(iii) furnish to any Holder forthwith upon request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 and of the 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 may be
<PAGE>
reasonably requested to permit any such Holder to take advantage of any rule or
regulation of the SEC permitting the selling of any such securities without
registration.
6. Registration Rights. The initial Holder is entitled to the benefit of
such registration rights in respect of the Shares as are set forth in the
Registration Rights Agreement dated as of March 20, 1998 by and between the
Company, the Holder and the other investors parties thereto ("Registration
Rights Agreement"), including the right to assign such rights to certain
assignees as set forth therein.
7. Issuance of Certificates. Within two (2) trading days of receipt of a
duly completed Election to Purchase form, together with this Certificate and
payment of the Exercise Price, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this Warrant, a certificate
or certificates for the number of fully paid and non-assessable shares of Common
Stock to which that holder shall be entitled on such exercise. In the event the
shares of Common Stock are not timely delivered to the Holder, the Company
agrees to (a) indemnify Holder for all damages, including consequential and
special damages, lost profits and expenses, including legal fees, and (b)
beginning on the fifth (5th) day following the Company's receipt of a duly
completed Election to Purchase form, pay a default premium of 2% per day of the
value of underlying shares (based on the highest closing price during the two
(2) day period preceding the date of surrender of the Warrant Certificate). In
lieu of issuance of a fractional share upon any exercise hereunder, the Company
will pay the cash value of that fractional share, calculated on the basis of the
Exercise Price. Prior to registration of the resale of the shares of Common
Stock underlying this Warrant Certificate, and delivery of an Election to
Purchase to the Company, all such certificates shall bear a restrictive legend
to the effect that the Shares represented by such certificate have not been
registered under the 1933 Act, and that the Shares may not be sold or
transferred in the absence of such registration or an exemption therefrom, such
legend to be substantially in the form of the bold-face language appearing at
the top of Page 1 of this Warrant Certificate.
8. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any Shares,
by his or its acceptance thereof, agrees that no public distribution of Warrants
or Shares will be made in violation of the provisions of the 1933 Act.
Furthermore, it shall be a condition to the transfer of the Warrants that any
transferee thereof deliver to the Company his or its written agreement to accept
and be bound by all of the relevant terms and conditions contained in this
Warrant Certificate.
9. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered U.S. mail with return receipt requested and postage prepaid; by
private overnight delivery service (e.g. Federal Express); by facsimile
transmission (if no original documents or instruments must accompany the
notice); or by personal delivery. Any such notice shall be deemed to have been
given (a) on the business day immediately following the mailing thereof, if
mailed by certified or registered U.S. mail as specified above; (b) on the
business day immediately following deposit with a
<PAGE>
private overnight delivery service if sent by said service; (c) upon receipt of
confirmation of transmission if sent by facsimile transmission; or (d) upon
personal delivery of the notice. All such notices shall be sent to the following
addresses (or to such other address or addresses as a party may have advised the
other in the manner provided in this Section 10):
If to the Company:
Genzyme Transgenics Corporation
One Mountain Road
Framingham, MA 01701
Attn: Chief Financial Officer
Phone: (508) 270-2579
Fax: (508) 270-2303
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108-3190
Attn: Lynnette C. Fallon, Esq.
Phone: (617) 573-0220
Fax: (617) 227-4420
If to ________________________:
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
and with a copy to:
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
<PAGE>
in each case with a copy to:
Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
Notwithstanding the time of effectiveness of notices set forth in this Section,
an Election to Purchase shall not be deemed effectively given until it has been
duly completed and submitted to the Company together with the original Warrant
Certificate to be exercised and payment of the Exercise Price in a manner set
forth in this Section.
10. Notwithstanding anything in this Warrant Certificate to the contrary,
in no event shall the holder of this Warrant Certificate be entitled to exercise
with respect to a number of shares of Common Stock to the extent that following
such exercise the sum of (i) the number of shares of Common Stock beneficially
owned by the holder and its affiliates (other than shares of Common Stock which
may be deemed beneficially owned through the ownership of the unexercised
Warrant Certificates and unconverted shares of Preferred Stock (as defined in
the Securities Purchase Agreement)) or other securities containing restrictions
on conversion or exercise analogous to the provisions in this paragraph, and
(ii) the number of shares of Common Stock issuable upon exercise of the Warrant
Certificates (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock. For purposes of the immediately preceding sentence, (x) beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Rules 13(d) -(g) thereunder, except as
otherwise provided in clause (i) hereof, and (y) a holder may waive the
limitations set forth herein upon not less than sixty-one (61) days prior
written notice to the Company (with such waiver taking effect only upon the
expiration of such sixty-one (61) day notice period).
11. Governing Law. This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and governed by the laws of the State
of New York without giving effect to the conflicts of laws provisions. The
Holder hereby irrevocably consents to the venue and jurisdiction of the State
and Federal Courts located in the State of New York, County of New York.
12. Successors and Assigns. This Warrant Certificate shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
13. Headings. The headings of various sections of this Warrant Certificate
have been inserted for reference only and shall not affect the meaning or
construction of any of the provisions hereof.
<PAGE>
14. Severability. If any provision of this Warrant Certificate is held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant Certificate, and the balance hereof shall be interpreted as if such
provision were so excluded.
15. Modification and Waiver. This Warrant Certificate and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
16. Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant Certificate were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Warrant Certificate and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which
either of them may be entitled by law or equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Genzyme Transgenics Corporation: Common Stock Purchase Warrant Certificate
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or by facsimile, by one of its officers thereunto duly
authorized.
GENZYME TRANSGENICS CORPORATION
Date: March 20, 1998 By:/s/ John B. Green
----------------------------------
Name: John B. Green
Title: Vice President, Treasurer
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby elects to exercise _______ of the Warrants
represented by the attached Common Stock Purchase Warrant Certificate, and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants,
and requests that certificates for securities be issued in the name of:
__________________________________________________________
(Please type or print name and address)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Social Security or Tax Identification Number)
and delivered to:______________________________________________________________
_______________________________________________________________________________.
(Please type or print name and address if different from above)
If such number of Warrants being exercised hereby shall not be all the Warrants
evidenced by the attached Common Stock Purchase Warrant Certificate, a new
Common Stock Purchase Warrant Certificate for the balance of such Warrants shall
be registered in the name of, and delivered to, the Holder at the address set
forth below.
[In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________ by check, money order or wire transfer payable in United States
currency to the order of Genzyme Transgenics Corporation.] or [The undersigned
elects cashless exercise in accordance with Section 1(b) of the Common Stock
Purchase Warrant Certificate.]
<PAGE>
Holder hereby represents and convenants that it has complied with, or will
comply with, any and all prospectus delivery requirements with respect to its
sale of the Common Stock of the Company being purchased herewith.
HOLDER:
Dated:_________________________ By:_________________________________
Name:
Title:
Address: _______________________
_______________________
_______________________
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase ______
shares of Common Stock of Genzyme Transgenics Corporation, a Massachusetts
corporation, to which the within Warrant relates, and appoints
____________________ Attorney to transfer such right on the books of Genzyme
Transgenics Corporation, a Massachusetts corporation, with full power of
substitution of premises.
Dated:_________________ By: __________________________
Name:
Title:
(signature must conform to name
of holder as specified on the fact
of the Warrant)
Address: _____________________
______________________________
______________________________
Signed in the presence of :
____________________________
<PAGE>
Schedule of Holders
Warrant Holder No. of Shares Issuable Under Warrant
- -------------- ------------------------------------
Shepherd Investments International, Ltd. 100,000
c/o Staro Asset Management
1500 West Market Street, Suite 200
Mequon, WI 53092
Stark International 100,000
c/o Staro Asset Management
1500 West Market Street, Suite 200
Mequon, WI 53092
RGC International Investors, LDC 200,000
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
<PAGE>
Exhibit 4.10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: March 20, 1998
to Purchase ___________ Shares of Common Stock of
GENZYME TRANSGENICS CORPORATION
Genzyme Transgenics Corporation, a Massachusetts corporation (the
"Company"), hereby certifies that _____________________________, its permissible
transferees, designees, successors and assigns (collectively, the "Holder"), for
value received, is entitled to purchase from the Company at any time commencing
on March 20, 1998 ("Issuance Date") and terminating on the fourth anniversary of
the Issuance Date (or such earlier date as is specified in a duly delivered Call
Notice (as defined below)) up to _______________________ shares (each a "Share"
and collectively the "Shares") of the Company's common stock (the "Common
Stock"), at an exercise price of $15.1563 per Share (the "Exercise Price"). The
number of Shares purchasable hereunder and the Exercise Price are subject to
adjustment as provided in Section 4 hereof.
1. Exercise of Warrants.
(a) Upon presentation and surrender of this Common Stock Purchase
Warrant Certificate ("Warrant Certificate" or "Certificate"), or Lost
Certificate Affidavit (as defined below), accompanied by a completed Election to
Purchase in the form attached hereto as Exhibit A (the "Election to Purchase")
duly executed, at the principal office of the Company at Five Mountain Road,
Framingham, MA 01701, Attn: Secretary, together with a check payable to the
Company in the amount of the Exercise Price multiplied by the number of Shares
being purchased, the Company or the Company's Transfer Agent as the case may be,
shall, within two (2) trading days of receipt of the foregoing, deliver to the
Holder hereof, certificates of fully paid and non-assessable Common Stock which
in the aggregate represent the number of Shares being purchased; provided,
however, that the Holder may elect, with the prior written consent of the
Company, which may be granted or withheld in
<PAGE>
the Company's sole discretion on a case by case basis, to utilize the cashless
exercise provisions set forth below in lieu of tendering the Exercise Price in
cash. The certificates so delivered shall be in such denominations as may be
reasonably requested by the Holder and shall be registered in the name of the
Holder or such other name as shall be designated by the Holder. All or less than
all of the Warrants represented by this Certificate may be exercised and, in
case of the exercise of less than all, the Company, upon surrender hereof, will
at the Company's expense deliver to the Holder a new Warrant Certificate or
Certificates (in such denominations as may be requested by the Holder) of like
tenor and dated the date hereof entitling said holder to purchase the number of
Shares represented by this Certificate which have not been exercised and to
receive Registration Rights with respect to such Shares, and all other rights
with respect to the shares which the Holder has on the date hereof.
(b) Cashless Exercise. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, the Holder may elect, with the
prior written consent of the Company, which may be granted or withheld in the
Company's sole discretion on a case by case basis, to receive a reduced number
of Shares in lieu of tendering the Exercise Price in cash ("Cashless Exercise");
provided that the Holder shall be entitled, without the consent of the Company,
to elect Cashless Exercise at any time that the resale of the Warrant Shares by
the holder is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
at any time when registration is so required pursuant to the Registration Rights
Agreement (as defined below). In such case, the number of Shares to be issued to
the Holder shall be computed using the following formula;:
X = Y(A-B)/A
where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares to be exercised under this Warrant
Certificate;
A = the Market Value (defined below) of one share of Common
Stock; and
B = the Exercise Price.
As used herein, " Market Value" refers to the closing bid price of the Common
Stock (as reported by Bloomberg, L.P.) on the day before the Election to
Purchase and this Warrant Certificate are duly surrendered to the Company for a
full or partial exercise hereof. Notwithstanding the foregoing definition, if
the Common Stock is not listed on a national securities exchange or quoted in
the Nasdaq System at the time said Election to Purchase is submitted to the
Company in the foregoing manner, the Market Value of the Common Stock shall be
(a) determined in good faith by the Board of Directors of the Company and
certified in a board resolution, based on the most recently completed
arm's-length transaction between the Company and a Person other than an
affiliate of the Company or between any two such Persons and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred within
the six-month period, the value of the security as determined by an independent
financial expert, unless the Company shall become subject to a merger,
acquisition, or other consolidation
<PAGE>
pursuant to which the Company is not the surviving entity, in which case the
Market Value of the Common Stock shall be deemed to be the value received per
share by the Company's common stockholders pursuant to such merger, acquisition
or other consolidation.
2. Exchange, Transfer and Replacement. (a) At any time prior to the
exercise hereof, this Warrant Certificate may be exchanged upon presentation and
surrender to the Company, alone or with other Warrant Certificates of like tenor
of different denominations registered in the name of the same Holder, together
with a duly executed Assignment in substantially the form and substance of the
Form of Assignment which accompanies this Warrant Certificate. The Warrant
Certificate or Certificates shall be exchanged for another Warrant Certificate
or Certificates of like tenor in the name of such Holder and/or the transferees
named in such Assignment, exercisable for the aggregate number of Shares as the
Certificate or Certificates surrendered, provided that the Company shall not be
obligated to issue exchange or transfer Certificates for an exchange or transfer
of less than 10,000 shares. The Company shall issue any Warrant Certificates
reflecting such transfer or assignment (including such portion of this Warrant
Certificate, if any, as shall not have been transferred or assigned) within
three (3) business days after receipt of the requisite Warrant Certificate(s)
and duly completed Assignment.
(b) Replacement of Warrant Certificate. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant Certificate and, in the case of any such loss, theft,
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company (collectively, a "Lost Certificate
Affidavit"), or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver in lieu thereof, a new Warrant Certificate of like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant Certificate in connection with any transfer, exchange or replacement as
provided in this Section 2, this Warrant Certificate shall be promptly canceled
by the Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the Holder or transferees) and charges payable in connection with the
preparation, execution and delivery of Warrant Certificates pursuant to this
Section 2.
(d) Warrant Register. The Company shall maintain, at its principal
executive offices (or at the offices of the transfer agent for the Warrant
Certificate or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant Certificate (the
"Warrant Register"), in which the Company shall record the name and address of
the person in whose name this Warrant Certificate has been issued, as well as
the name and address of each permitted transferee and each prior owner of this
Warrant Certificate.
(e) Company Call Right. Beginning on the business day following the
first anniversary of the Issuance Date, provided that the twenty consecutive
trading day average closing bid price of the Common Stock the Company for the
period ending on the date prior
<PAGE>
to delivery of such notice (as reported by Bloomberg, L.P.) is equal to or
greater than 140% of the Exercise Price, as adjusted pursuant to Section 4
hereof, the Company shall have the ability to deliver a written notice to the
Holder hereof (a "Call Notice"). The Call Notice shall specify a date no less
than 30 days following the date of delivery of such Call Notice, and, unless
exercised prior to such date, this Certificate (or any unexercised portion
hereof) shall expire, and Holder shall have no further rights hereunder, on and
following such specified date. The Holder shall have the right to exercise its
rights hereunder during such 30 day notice period.
3. Rights and Obligations of Holders of this Certificate. The Holder of
this Certificate shall not, by virtue hereof, be entitled to any rights of a
stockholder in the Company, either at law or in equity; provided, however, that
in the event any certificate representing shares of Common Stock or other
securities is issued to the holder hereof upon exercise of some or all of the
Warrants, such holder shall, for all purposes, be deemed to have become the
holder of record of such Common Stock on the date on which this Certificate,
together with a duly executed Purchase Form, was surrendered and payment of the
aggregate Exercise Price was made, irrespective of the date of delivery of such
share certificate.
4. Adjustments.
(a) Stock Dividends, Reclassifications, Recapitalizations, Etc. In
the event the Company: (i) pays a dividend in Common Stock or makes a
distribution in Common Stock, (ii) subdivides its outstanding Common Stock into
a greater number of shares, (iii) combines its outstanding Common Stock into a
smaller number of shares or (iv) increases or decreases the number of shares of
Common Stock outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (1) the Exercise Price on the
record date of such division or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (2) the
number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(b) Cash Dividends and Other Distributions. In the event that at any
time or from time to time the Company shall distribute to all holders of Common
Stock (i) any dividend or other distribution of cash, evidences of its
indebtedness, shares of its capital stock or any other properties or securities
or (ii) any options, warrants or other rights to subscribe for or purchase any
of the foregoing (other than in each case, (w) the issuance of any rights under
a shareholder rights plan, (x) any dividend or distribution described in Section
4(a), (y) any rights, options, warrants or securities described in Section 4(c)
and (z) any cash dividends or other cash distributions from current earnings),
then the number of shares of Common Stock issuable upon the exercise of each
Warrant Certificate shall be increased to a number determined by multiplying the
number of shares of Common Stock issuable upon the exercise
<PAGE>
of such Warrant Certificate immediately prior to the record date for any such
dividend or distribution by a fraction, the numerator of which shall be such
Current Market Value (as hereinafter defined) per share of Common Stock on the
record date for such dividend or distribution, and the denominator of which
shall be such Current Market Value per share of Common Stock on the record date
for such dividend or distribution less the sum of (x) the amount of cash, if
any, distributed per share of Common Stock and (y) the fair value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be evidenced by a board resolution, a copy of which will be sent to the
Holders upon request) of the portion, if any, of the distribution applicable to
one share of Common Stock consisting of evidences of indebtedness, shares of
stock, securities, other property, warrants, options or subscription or purchase
rights; and the Exercise Price shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such record date by the above
fraction. Such adjustments shall be made whenever any distribution is made and
shall become effective as of the date of distribution, retroactive to the record
date for any such distribution. No adjustment shall be made pursuant to this
Section 4(b) which shall have the effect of decreasing the number of shares of
Common Stock issuable upon exercise of each Warrant Certificate or increasing
the Exercise Price.
(c) Rights Issue. In the event that at any time or from time to time
the Company shall issue rights, options or warrants entitling the holders
thereof to subscribe for shares of Common Stock, or securities convertible into
or exchangeable or exercisable for Common Stock to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the then Current Market Value per share of Common Stock,
the number of shares of Common Stock issuable upon the exercise of each Warrant
Certificate shall be increased to a number determined by multiplying the number
of shares of Common Stock theretofore issuable upon exercise of each Warrant
Certificate by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights, options,
warrant or securities plus the number of additional shares of Common Stock
offered for subscription or purchase or into or for which such securities that
are issued are convertible, exchangeable or exercisable, and the denominator of
which shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, option, warrants or securities plus the total number of
shares of Common Stock which the aggregate consideration expected to be received
by the Company (assuming the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then Current Market Value per
share of Common Stock. In the event of any such adjustment, the Exercise Price
shall be adjusted to a number determined by dividing the Exercise price
immediately prior to such date of issuance by the aforementioned fraction. Such
adjustment shall be made immediately after such rights, options or warrants are
issued and shall become effective, retroactive to the record date for the
determination of stockholders entitled to receive such rights, options, warrants
or securities. No adjustment shall be made pursuant to this Section 4(c) which
shall have the effect of decreasing the number of shares of Common Stock
purchasable upon exercise or each Warrant Certificate or of increasing the
Exercise Price.
<PAGE>
(d) Combination: Liquidation. (i) Except as provided in Section
4(d)(ii) below, in the event of a Combination (as defined below), each Holder
shall have the right to receive upon exercise of the Warrant Certificates the
kind and amount of shares of capital stock or other securities or property which
such Holder would have been entitled to receive upon or as a result of such
Combination had such Warrant Certificate been exercised immediately prior to
such event (subject to further adjustment in accordance with the terms hereof).
Unless paragraph (ii) is applicable to a Combination, the Company shall provide
that the surviving or acquiring Person (the "Successor Company") in such
Combination will assume by written instrument the obligations under this Section
4 and the obligations to deliver to the Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be
entitled to acquire. The provisions of this Section 4(d)(i) shall similarly
apply to successive Combinations involving any Successor Company. "Combination"
means an event in which the Company consolidates with, mergers with or into, or
sells all or substantially all of its assets to another Person, where "Person"
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
(ii) In the event of (x) a Combination where consideration to the
holders of Common Stock in exchange for their shares is payable solely in cash
or (y) the dissolution, liquidation or winding-up of the Company, the Holders
shall be entitled to receive, upon surrender of their Warrant Certificates,
distributions on an equal basis with the holders of Common Stock or other
securities issuable upon exercise of the Warrant Certificates, as if the Warrant
Certificates had been exercised immediately prior to such event, less the
Exercise Price. In case of any Combination described in this Section 4(d)(ii),
the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
following the consummation of such combination or at the time of such
dissolution, liquidation or winding-up with an agent or trustee for the benefit
of the Holders of the funds, if any, necessary to pay to the Holders the amounts
to which they are entitled as described above. After such funds and the
surrendered Warrant Certificates are received, the Company is required to
deliver a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrant Certificates.
(e) Notice of Adjustment. Whenever the Exercise Price or the number
of shares of Common Stock and other property, if any, issuable upon exercise of
the Warrant Certificates is adjusted, as herein provided, the Company shall
deliver to the holders of the Warrant Certificates in accordance with Section 10
a certificate of the Company's Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
(i) the Board of Directors determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the common
Stock was determined, if either of such determinations were required), and
specifying the Exercise Price and number of shares of
<PAGE>
Common Stock issuable upon exercise of Warrant Certificates after giving effect
to such adjustment.
(f) Purchase Price Adjustment. In the event that the Company issues
or sells any Common Stock or securities which are convertible into or
exchangeable for its Common Stock or any convertible securities, or any warrants
or other rights to subscribe for or to purchase or any options for the purchase
of its Common Stock or any such convertible securities (other than shares or
options issued or which may be issued pursuant to the Company's employee or
director option plans or shares issued upon exercise of options, warrants or
rights outstanding on the date of the Agreement and listed in the Company's most
recent periodic report filed under the Exchange Act) at a purchase price per
share on the date of original issuance of such security which is less than 95%
of the Current Market Value of the Common Stock on the trading day next
preceding such issue or sale, then in each such case, the Exercise Price in
effect immediately prior to such issue or sale shall be reduced effective
concurrently with such issue or sale to an amount determined by multiplying the
Exercise Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale, plus (2) the number of shares of Common Stock which
the aggregate consideration received by the Company for such additional shares
would purchase at such Current Market Value ; and (y) the denominator of which
shall be the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
For the purposes of the foregoing adjustment, in the case of the issuance of any
convertible securities, warrants, options or other rights to subscribe for or to
purchase or exchange for, shares of Common Stock ("Convertible Securities"), the
maximum number of shares of Common Stock that would be issuable upon exercise,
exchange or conversion of such Convertible Securities (assuming that shares of
Common Stock were trading at the Current Market Value at the time of conversion)
shall be deemed to be outstanding, provided that no further adjustment shall be
made upon the actual issuance of Common Stock upon exercise, exchange or
conversion of such Convertible Securities.
(g) Notice of Certain Transactions. In the event that the Company
shall propose (a) to pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) to offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) to effect any capital reorganization,
reclassification, consolidation or merger affecting the class of Common Stock,
as a whole, or (d) to effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, the Company shall, within the time
limits specified below, send to each Holder a notice of such proposed action or
offer. Such notice shall be mailed to the Holders at their addresses as they
appear in the Warrant Register (as defined in Section 2(d)), which shall specify
the record date for the purposes of such dividend, distribution or rights, or
the date such issuance or event is to take place and the date of participation
therein by the holders of Common Stock, if any such date is to be fixed, and
shall briefly indicate the effect of such action on the number of shares of
Common Stock and on the number and kind of any other
<PAGE>
shares of stock and on other property, if any, and the number of shares of
Common Stock and other property, if any, issuable upon exercise of each Warrant
Certificate and the Exercise Price after giving effect to any adjustment
pursuant to Section 4 which will be required as a result of such action. Such
notice shall be given as promptly as possible and (x) in the case of any action
covered by clause (a) or (b) above, at least 10 days prior to the record date
for determining holders of the Common Stock for purposes of such action or (y)
in the case of any other such action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of Common Stock, whichever shall be the earlier.
(h) Current Market Value. "Current Market Value" per share of Common
Stock or any other security at any date means (i) if the security is not
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (a) the value of the security, determined in good faith by the Board of
Directors of the Company and certified in a board resolution, based on the most
recently completed arm's-length transaction between the Company and a Person
other than an affiliate of the Company or between any two such Persons and the
closing of which occurs on such date or shall have occurred within the six-month
period preceding such date, or (b) if no such transaction shall have occurred
within the six-month period, the value of the security as determined by an
independent financial expert or (ii) if the security is registered under the
Exchange Act, the average of the daily closing bid prices (or the equivalent in
an over-the-counter market) for each day on which the Common Stock is traded for
any period on the principal securities exchange or other securities market on
which the common Stock is being traded (each, a "Trading Day") during the period
commencing ten (10) Trading Days before such date and ending on the date one day
prior to such date, or if the security has been registered under the Exchange
Act for less than ten (10) consecutive Trading Days before such date, the
average of the daily closing bid prices (or such equivalent) for all of the
Trading Days before such date for which daily closing bid prices are available;
provided, however, that if the closing bid price is not determinable for at
least five (5) Trading Days in such period, the "Current Market Value" of the
security shall be determined as if the security were not registered under the
Exchange Act.
(i) Other Adjustments. In the event of any other transaction of the
type contemplated by this Section 4, but not expressly provided for by the
provisions hereof, the Board of Directors of the Company will make appropriate
adjustment in the Exercise Price so as to equitably protect the rights of the
Holder.
(j) No Impairment of Holder's Rights. The Company will not, by
amendment of its articles of organization or bylaws or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, except as contemplated hereby,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant Certificate, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all action as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment.
<PAGE>
5. Company's Representations.
(a) The Company covenants and agrees that all shares of Common Stock
issuable upon exercise of this Warrant Certificate will, upon delivery, be duly
and validly authorized and issued, fully-paid and non-assessable and free from
all taxes, liens, claims and encumbrances.
(b) The Company covenants and agrees that it will at all times
reserve and keep available an authorized number of shares of its Common Stock
and other applicable securities sufficient to permit the exercise in full of all
outstanding options, warrants and rights, including this Warrant Certificate.
(c) The Company shall promptly secure the listing of the Shares upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant Certificate) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant Certificate; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant Certificate if and so long as
any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(d) The Company has taken all necessary action and proceedings as
required and permitted by applicable law, rule and regulation, including,
without limitation, the notification of the principal market on which the Common
Stock is traded, for the legal and valid issuance of this Warrant Certificate to
the Holder under this Warrant Certificate.
(e) With a view to making available to Holder the benefits of Rule
144 promulgated under the Act and any other rule or regulation of the Securities
and Exchange Commission ("SEC") that may at any time permit Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and
(iii) furnish to any Holder forthwith upon request a written
statement by the Company that it has complied with the reporting requirements of
Rule 144 and of the 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 may be reasonably requested to permit any such Holder to
take advantage of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
<PAGE>
6. Registration Rights. The initial Holder is entitled to the benefit of
such registration rights in respect of the Shares as are set forth in the
Registration Rights Agreement dated as of March 20, 1998 by and between the
Company, the Holder and the other investors parties thereto ("Registration
Rights Agreement"), including the right to assign such rights to certain
assignees as set forth therein.
7. Issuance of Certificates. Within two (2) trading days of receipt of a
duly completed Election to Purchase form, together with this Certificate and
payment of the Exercise Price, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this Warrant, a certificate
or certificates for the number of fully paid and non-assessable shares of Common
Stock to which that holder shall be entitled on such exercise. In the event the
shares of Common Stock are not timely delivered to the Holder, the Company
agrees to (a) indemnify Holder for all damages, including consequential and
special damages, lost profits and expenses, including legal fees, and (b)
beginning on the fifth (5th) day following the Company's receipt of a duly
completed Election to Purchase form, pay a default premium of 2% per day of the
value of underlying shares (based on the highest closing price during the two
(2) day period preceding the date of surrender of the Warrant Certificate). In
lieu of issuance of a fractional share upon any exercise hereunder, the Company
will pay the cash value of that fractional share, calculated on the basis of the
Exercise Price. Prior to registration of the resale of the shares of Common
Stock underlying this Warrant Certificate, and delivery of an Election to
Purchase to the Company, all such certificates shall bear a restrictive legend
to the effect that the Shares represented by such certificate have not been
registered under the 1933 Act, and that the Shares may not be sold or
transferred in the absence of such registration or an exemption therefrom, such
legend to be substantially in the form of the bold-face language appearing at
the top of Page 1 of this Warrant Certificate.
8. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, each transferee hereof and any holder and transferee of any Shares,
by his or its acceptance thereof, agrees that no public distribution of Warrants
or Shares will be made in violation of the provisions of the 1933 Act.
Furthermore, it shall be a condition to the transfer of the Warrants that any
transferee thereof deliver to the Company his or its written agreement to accept
and be bound by all of the relevant terms and conditions contained in this
Warrant Certificate.
9. Notices. Except as otherwise specified herein to the contrary, all
notices, requests, demands and other communications required or desired to be
given hereunder shall only be effective if given in writing by certified or
registered U.S. mail with return receipt requested and postage prepaid; by
private overnight delivery service (e.g. Federal Express); by facsimile
transmission (if no original documents or instruments must accompany the
notice); or by personal delivery. Any such notice shall be deemed to have been
given (a) on the business day immediately following the mailing thereof, if
mailed by certified or registered U.S. mail as specified above; (b) on the
business day immediately following deposit with a private overnight delivery
service if sent by said service; (c) upon receipt of confirmation of
transmission if sent by facsimile transmission; or (d) upon personal delivery of
the notice. All
<PAGE>
such notices shall be sent to the following addresses (or to such other address
or addresses as a party may have advised the other in the manner provided in
this Section 10):
If to the Company:
Genzyme Transgenics Corporation
One Mountain Road
Framingham, MA 01701
Attn: Chi ef Financial Officer
Phone: (508) 270-2579
Fax: (508) 270-2303
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108-3190
Attn: Lynnette C. Fallon, Esq.
Phone: (617) 573-0220
Fax: (617) 227-4420
If to ________________________:
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
______________________________
c/o Shoreline Pacific Institutional Finance
3 Harbor Drive, Suite 211
Sausalito, CA 94965
Telephone: (415) 332-7800
Telecopy: (415) 332-7808
Attention: General Counsel
Notwithstanding the time of effectiveness of notices set forth in this Section,
an Election to Purchase shall not be deemed effectively given until it has been
duly completed and submitted to the Company together with the original Warrant
Certificate to be exercised and payment of the Exercise Price in a manner set
forth in this Section.
<PAGE>
10. Governing Law. This Warrant Certificate and all rights and obligations
hereunder shall be deemed to be made under and governed by the laws of the State
of New York without giving effect to the conflicts of laws provisions. The
Holder hereby irrevocably consents to the venue and jurisdiction of the State
and Federal Courts located in the State of New York, County of New York.
11. Successors and Assigns. This Warrant Certificate shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
12. Headings. The headings of various sections of this Warrant Certificate
have been inserted for reference only and shall not affect the meaning or
construction of any of the provisions hereof.
13. Severability. If any provision of this Warrant Certificate is held to
be unenforceable under applicable law, such provision shall be excluded from
this Warrant Certificate, and the balance hereof shall be interpreted as if such
provision were so excluded.
14. Modification and Waiver. This Warrant Certificate and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
15. Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Warrant Certificate were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the provisions of this Warrant Certificate and to enforce specifically the terms
and provisions hereof, this being in addition to any other remedy to which
either of them may be entitled by law or equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Genzyme Transgenics Corporation: Common Stock Purchase Warrant Certificate
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or by facsimile, by one of its officers thereunto duly
authorized.
GENZYME TRANSGENICS CORPORATION
Date: March 20, 1998 By:/s/ John B. Green
----------------------------------
Name: John B. Green
Title: Vice President, Finance
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder
in Order to Exercise the Common Stock
Purchase Warrant Certificate
The undersigned Holder hereby elects to exercise _______ of the Warrants
represented by the attached Common Stock Purchase Warrant Certificate, and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants,
and requests that certificates for securities be issued in the name of:
__________________________________________________________
(Please type or print name and address)
__________________________________________________________
__________________________________________________________
__________________________________________________________
(Social Security or Tax Identification Number)
and delivered to:______________________________________________________________
_______________________________________________________________________________.
(Please type or print name and address if different from above)
If such number of Warrants being exercised hereby shall not be all the Warrants
evidenced by the attached Common Stock Purchase Warrant Certificate, a new
Common Stock Purchase Warrant Certificate for the balance of such Warrants shall
be registered in the name of, and delivered to, the Holder at the address set
forth below.
[In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$__________ by check, money order or wire transfer payable in United States
currency to the order of Genzyme Transgenics Corporation.] or [The undersigned
elects cashless exercise in accordance with Section 1(b) of the Common Stock
Purchase Warrant Certificate.]
<PAGE>
Holder hereby represents and convenants that it has complied with, or will
comply with, any and all prospectus delivery requirements with respect to its
sale of the Common Stock of the Company being purchased herewith.
HOLDER:
Dated:_________________________ By:_________________________________
Name:
Title:
Address: _______________________
_______________________
_______________________
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
_____________ the right represented by the within Warrant to purchase ______
shares of Common Stock of Genzyme Transgenics Corporation, a Massachusetts
corporation, to which the within Warrant relates, and appoints
____________________ Attorney to transfer such right on the books of Genzyme
Transgenics Corporation, a Massachusetts corporation, with full power of
substitution of premises.
Dated:_________________ By: __________________________
Name:
Title:
(signature must conform to name
of holder as specified on the fact
of the Warrant)
Address: _____________________
______________________________
______________________________
Signed in the presence of :
____________________________
<PAGE>
Exhibit 10.26.2
Amendment to Lease Agreement
This first amendment to lease agreement ("AGREEMENT") made and entered into this
17th day of January 1995 by and between W.M. Rickman Construction Company
("LANDLORD") and T.S.I. Washington Laboratories, Inc. ("TENANT").
WITNESSETH:
Whereas, the LANDLORD and TENANT entered into a certain lease ("LEASE") dated
October 8, 1992 covering 14,564 square feet of laboratory & office space located
in 2 Taft Court, Rockville, Maryland ("BUILDING"); and
Whereas, the LEASE commenced on December 1, 1993 and terminates on December 31,
2000; and
Whereas, the TENANT desires to lease an additional 6,072 square feet of space
("Additional Space") in the BUILDING as shown in Exhibit A; and
Whereas, the Landlord agrees to renovate the Additional Space as shown in
Exhibit A. All above standard items will be billed to the TENANT upon
completion, and
Whereas, the LANDLORD has agreed to abate one-half (1/2) of each of the first
twelve (12) months of rent for the Additional Space, and
Whereas, the LANDLORD and TENANT desire to enter into an agreement amending the
LEASE as follows on February 1, 1995:
1. The leased premises as outlined in Paragraph 1 shall increase from
14,564 square feet to 20,637 square feet.
2. The TENANT's option to terminate the Lease as outlined in Paragraph 2
has been revoked.
3. The current minimum rent as outlined in Paragraph 3 shall increase from
$19,375.68 per month to $22,791.18 on February 1, 1995 and then increase
according as shown in Exhibit B, and
4. The TENANT's proportionate share of real estate taxes as outlined in
paragraph 5 shall increase from 43% to 60.85%.
5. The TENANT shall maintain additional insurance to cover the personal
property contained in the Additional space.
<PAGE>
Ratification of LEASE. Except as expressly modified or amended by this
AGREEMENT, all terms, covenants and conditions of the LEASE shall remain the
same.
In witness whereof, LANDLORD and TENANT have caused this AGREEMENT to be
executed as of this 17th day of January, 1995, and do hereby declare this
AGREEMENT to be binding on them, their respective successors and assigns.
WITNESS: LANDLORD:
W.M. Rickman Construction Co.
/s/ Lynn M. Green /s/ William M. Rickman
- ----------------- -----------------------
William M. Rickman
ATTEST: TENANT:
T.S.I. Washington Laboratories, Inc.
/s/ Peter H. Glick /s/ John B. Green
- ------------------- -------------------
Peter H. Glick John Green
Vice President, TSI Treasurer
<PAGE>
December 30, 1994
Exhibit 'A' - TSI Washington Laboratories
2 Taft Court, Rockville, Maryland 20850
Second Floor
All work described will be provided by W.M. Rickman Corporation Company unless
noted.
1. Walls
As shown on plan. Building standard construction i.e. 1/2" gypsum wall
board on 20 gauge 2.5" steel studs 24" on center.
Paint - latex in office area, oil base in labs.
2. Ceilings
Office and support areas: 2' x 4' lay in acoustical panels.
General labs and lab corridors: 2' x 4' in vinyl clad gypsum board.
Two specialty labs - drywall.
3. Floors
'Base' Carpet or 12" x 12" vinyl tile, both with rubber base.
Toilets, ceramic tile floor and base.
Concrete in large freezer area.
4. Plumbing
Rough in as per drawing, water and vacuum.
*Tenant to pay for (1) emergency shower.
*Tenant to pay for all fixtures and final connections.
5. Electrical
All electrical including 110V circuits and 220V circuits. Outlets over
30 amps at cost.
*Tenant to pay for additional panel to feed emergency generator and any
wiring to transfer switch and generator (materials and labor).
*Tenant to pay for plug molds.
Lights:
Building standard 2' x 4' 4 tube lay in florescent fixtures with
acrylic lenses.
6. Doors
Building standard, i.e., stained solid core paint grade doors in office
areas. Labs - metal with optional 12 x 12 view window, oil base paint
finish.
<PAGE>
7. HVAC
(2) 7 Ton Zones
(1) 5 Ton Zone in autoclave area and small freezer room
*Tenant to pay for (1) additional 5 Tons Zone in large freezer area
including all materials and labor, and modifications to the existing 5
Ton unit.
8. Hepa
*Tenant to pay for Hepa exhaust in (1) lab and Hepa supply on (1) 7 ton
zone including all materials and labor.
9. Telephone
By others.
10. Window Coverings.
Exterior windows - building standard venetian blinds.
Interior windows - vertical flat blinds.
11. Bathrooms
As per drawing.
12. Architectural and Mechanical Drawings
Sufficient to obtain building permit. No casework or detailed layout
drawings.
<PAGE>
Exhibit 10.26.3
Second Amendment to Lease Agreement
This second amendment to Lease Agreement ("AGREEMENT") made and entered into
this 7th day of July, 1997 by and between W. M. Rickman Construction Company
("LANDLORD") and Genzyme Transgenics Washington Laboratories, Inc., formerly
known as T.S.I. Washington Laboratories, Inc., ("TENANT").
WITNESSETH:
Whereas, the LANDLORD and TENANT entered into a certain lease ("LEASE") dated
October 8, 1992 coverning 14,564 square feet of laboratory and office space
located in 2 Taft Court, Rockville, Maryland ("BUILDING"); and
Whereas, the LEASE commenced on December 1, 1993, and terminates on December
31, 2000, and
Whereas, the TENANT added 6,072 square feet of space under the First Lease
Amendment, and
Whereas, the TENANT desires to lease an additional 6,424 square feet of space
("Additional Space") in the BUILDING as shown in Exhibit A increasing the
total square footage from 20,636 square feet to 27,060 square feet, and
Whereas, the current minimum rent shall increase from $27,802.68 per month to
$35,249.17 per month on JULY 1, 1997 and then increase in addordance with the
terms of the LEASE, and
Whereas, the TENANT'S proportionate share of real estate taxes shall increase
from 60.85% to 70.37%, and
Whereas, the TENANT shall maintain additional insurance to cover the personal
property contained in the Additional Space, and
Whereas, the LANDLORD has agreed to:
1. Paint the Additional Space.
2. Replace carpet in reception area and conference room.
3. Repaint common atrium area.
4. Improve lighting in common atrium area by adding spotlights in planter.
5. Clean carpet throughout additional space.
Ratification of LEASE: Except as expressly modified or amended by this
AGREEMENT, all terms, covenants and conditions of the LEASE shall remain the
same.
<PAGE>
In witness whereof, LANDLORD and TENANT have caused this AGREEMENT to be
executed as of this 7th day of July 1997 and do hereby declare this AGREEMENT
to be binding on them, their respective successors and assigns.
WITNESS: LANDLORD
W.M. Rickman Construction Co.
/s/ Ross L. Englehart /s/ William M. Rickman
- ------------------------------ ----------------------------------
ATTEST: TENANT
Genzyme Transgenics Washington
Laboratories Inc.
/s/ William Alan Moore
- ----------------------------- ----------------------------------
W. Alan Moore, President
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
GENZYME TRANSGENICS WASHINGTON LABORATORIES INC.
- ------------------------------------------------------------------------------
RENT SUMMARY
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
3% ANNUAL INCREASE
- ------------------------------------------------------------------------------
SQUARE FEET MONTHLY RENT EFFECTIVE DATE
- ------------------------------------------------------------------------------
ORIGINAL LEASE 14,564 $20,555.65 1-Dec-97
- ------------------------------------------------------------------------------
1ST AMENDMENT 6,072 $7,247.02 1-Feb-98
- ------------------------------------------------------------------------------
2ND AMENDMENT 6,424 $7,446.49 1-Jul-98
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
July 7, 1997
Mr. Ross L. Englehart
W.M. Rickman Construction Company
15215 Shady Grove Road
Suite 201
Rockville, MD 20850
Dear Mr. Englehart:
Pursuant to your conversation with Mr. Mark Turk, this letter shall serve as
a side agreement to the Second Amendment to Lease Agreement ("Agreement")
under which Genzyme Transgenics Washington Laboratories ("Tenant") is leasing
an additional 6,424 square feet ("Additional Space") from W.M. Rickman
Construction Company, at 2 Taft Court. Notwithstanding anything to the
contrary contained in the Agreement, the minimum rent, and Tenant's
proportionate share of real estate taxes for the Additional Space shall not
commence until July 14, 1997.
Please sign below to acknowledge the above.
Sincerely,
W. Alan Moore
President, Washington Laboratories
W.M. RICKMAN CONSTRUCTION COMPANY
BY: /s/ William M. Rickman
ITS: _____________________________
DATE: 7/8/97
<PAGE>
EXHIBIT 10.27.5
FOURTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Fourth
Amendment") is made and entered into as of the 1st day of October, 1996, by and
among GENZYME TRANSGENICS CORPORATION, a Massachusetts corporation having its
principal place of business at One Mountain Road, Framingham, Massachusetts
01701 (the "Parent") and its Subsidiaries listed on the signature pages hereto
(the Parent and each such Subsidiary is individually referred to herein as a
"Borrower," and collectively as the "Borrowers"), and THE FIRST NATIONAL BANK OF
BOSTON (the "Bank"), a national banking association with its head office at 100
Federal Street, Boston, Massachusetts 02110.
WHEREAS, the Borrowers and the Bank entered into a Revolving Credit
Agreement dated as of July 3, 1995 as amended by the First Amendment to
Revolving Credit Agreement dated as of September 15, 1995, the Second Amendment
to Revolving Credit Agreement dated as of December 22, 1995, and the Third
Amendment to Revolving Credit Agreement dated as of March 29, 1996 (as further
amended and in effect from time to time, the "Credit Agreement") pursuant to
which the Bank extended credit to the Borrowers on the terms set forth therein;
WHEREAS, the Bank and the Borrowers have agreed to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition
have the meanings ascribed to them in the Credit Agreement.
2. Amendment to Credit Agreement.
The following new subsection (ix) is added to Section 8.2(a) of the
Credit Agreement:
"and (ix) Indebtedness of TSI Corporation to Financing for Science
International, Inc. pursuant to the terms of the Master Equipment
Lease Agreement dated as of September 27, 1994 by and between TSI
Corporation and Financing for Science International, Inc.; provided
that the aggregate outstanding amount of all such Indebtedness
shall not exceed $5,200,000."
3. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the other
Loan Documents and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. This Fourth Amendment and the Credit Agreement shall hereafter be
read and construed together as a
<PAGE>
single document, and all references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended by this Fourth Amendment. By executing this Fourth
Amendment where indicated below, the Guarantor hereby ratifies and confirms its
guaranty of the Obligations pursuant to the terms of the Guaranty, as amended,
and acknowledges and consents to the terms of this Fourth Amendment.
4. GOVERNING LAW.
THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE
EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
5. Counterparts. This Fourth Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which counterparts taken together shall be deemed to constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Bank.
6. Effectiveness. This Fourth Amendment shall become effective
upon its execution and delivery by the respective parties hereto.
7. Entire Agreement. THE CREDIT AGREEMENT AS AMENDED REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement under seal as of October 1, 1996.
THE BORROWERS:
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
----------------------------
Name: John B. Green
Title: Vice President
Address of the Borrower:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
TSI CORPORATION
By: /s/ John B. Green
----------------------------
Title: Vice President
TSI MASON LABORATORIES INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
TSI WASHINGTON LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
- 3 -
<PAGE>
TSI REDFIELD LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
ARGUS RESEARCH LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
TRANSGENIC INVESTMENTS, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
HEALTH AND SCIENCES RESEARCH
INCORPORATED
By: /s/ John B. Green
----------------------------
Title: Vice President
THE TSI CENTER FOR DIAGNOSTIC
PRODUCTS, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
- 4 -
<PAGE>
BIODEVELOPMENT LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
THE BANK:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Elizabeth C. Everett
----------------------------
Name: Elizabeth C. Everett
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2318
Fax: 617-434-0819
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
------------------
Title: Vice President and Treasurer
- 5 -
<PAGE>
EXHIBIT 10.27.6
FIFTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Fifth
Amendment") is made and entered into as of the 21st day of February, 1997, by
and among GENZYME TRANSGENICS CORPORATION, a Massachusetts corporation having
its principal place of business at One Mountain Road, Framingham,
Massachusetts 01701 (the "Parent") and its Subsidiaries listed on the
signature pages hereto (the Parent and each such Subsidiary is individually
referred to herein as a "Borrower," and collectively as the "Borrowers"), and
THE FIRST NATIONAL BANK OF BOSTON (the "Bank"), a national banking
association with its head office at 100 Federal Street, Boston, Massachusetts
02110.
WHEREAS, the Borrowers and the Bank entered into a Revolving
Credit Agreement dated as of July 3, 1995 as amended by the First Amendment
to Revolving Credit Agreement dated as of September 15, 1995, the Second
Amendment to Revolving Credit Agreement dated as of December 22, 1995, the
Third Amendment to Revolving Credit Agreement dated as of March 29, 1996 and
the Fourth Amendment to Revolving Credit Agreement dated as of October 1,
1996 (as further amended and in effect from time to time, the "Credit
Agreement") pursuant to which the Bank extended credit to the Borrowers on
the terms set forth therein;
WHEREAS, the Bank and the Borrowers have agreed to amend the
Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without
definition have the meanings ascribed to them in the Credit Agreement.
2. Amendment to Credit Agreement.
Effective as of December 30, 1996, Section 8.2(a)(xi) of the
Credit Agreement is hereby deleted in its entirety and the following
substituted in place thereof:
"and (ix) Indebtedness of (a) TSI Corporation to Finova
Technology Finance, Inc. (formerly Financing for Science
International, Inc. ("Finova")) pursuant to the terms of the
Master Equipment Lease Agreement dated as of September 27, 1994
by and between TSI Corporation and Financing for Science
International, Inc., and of the Parent, Argus Research
Laboratories, Inc., TSI Mason Laboratories, Inc., TSI Redfield
Laboratories, Inc., and TSI Washington Laboratories, Inc. to
Finova pursuant to guaranties of such lease; and (b) the Parent
to Transamerica Business Credit Corporation ("TBCC") pursuant to
the terms of the Master Lease Agreement dated as of December 30,
1996 by and between TBCC and the Parent, and of TSI
<PAGE>
Corporation, BioDevelopment Laboratories, Inc., TSI Mason
Laboratories, Inc., TSI Washington Laboratories, Inc., TSI
Redfield Laboratories, Inc., and Argus Research Laboratories,
Inc. to TBCC pursuant to guaranties of such lease provided that
the aggregate outstanding amount of all such Indebtedness shall
not exceed $5,300,000."
3. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the
other Loan Documents and all documents, instruments and agreements related
thereto are hereby ratified and confirmed in all respects and shall continue
in full force and effect. This Fifth Amendment and the Credit Agreement
shall hereafter be read and construed together as a single document, and all
references in the Credit Agreement or any related agreement or instrument to
the Credit Agreement shall hereafter refer to the Credit Agreement as amended
by this Fifth Amendment. By executing this Fifth Amendment where indicated
below, the Guarantor hereby ratifies and confirms its guaranty of the
Obligations pursuant to the terms of the Guaranty, as amended, and
acknowledges and consents to the terms of this Fifth Amendment.
4. GOVERNING LAW.
THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE
EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
5. Counterparts. This Fifth Amendment may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which counterparts taken together shall be deemed to
constitute one and the same instrument. A complete set of counterparts shall
be lodged with the Bank.
6. Effectiveness. This Fifth Amendment shall become effective
upon its execution and delivery by the respective parties hereto.
7. Entire Agreement. THE CREDIT AGREEMENT AS AMENDED
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement under seal as of the date first set forth above.
THE BORROWERS:
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
------------------------------
Name: John B. Green
Title: Vice President
Address of the Parent:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
TSI CORPORATION
By: /s/ John B. Green
------------------------------
Title: Vice President
TSI MASON LABORATORIES INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
TSI WASHINGTON LABORATORIES, INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
3
<PAGE>
TSI REDFIELD LABORATORIES, INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
ARGUS RESEARCH LABORATORIES, INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
TRANSGENIC INVESTMENTS, INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
HEALTH AND SCIENCES RESEARCH
INCORPORATED
By: /s/ John B. Green
------------------------------
Title: Vice President
THE TSI CENTER FOR DIAGNOSTIC
PRODUCTS, INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
4
<PAGE>
BIODEVELOPMENT LABORATORIES, INC.
By: /s/ John B. Green
------------------------------
Title: Vice President
THE BANK:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Elizabeth C. Everett
------------------------------
Name: Elizabeth C. Everett
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2318
Fax: 617-434-0819
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
-----------------------
Title: Vice President and Treasurer
5
<PAGE>
EXHIBIT 10.27.7
SIXTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Sixth
Amendment") is made and entered into as of the seventeenth day of March,
1997, by and among GENZYME TRANSGENICS CORPORATION, a Massachusetts
corporation having its principal place of business at One Mountain Road,
Framingham, Massachusetts 01701 (the "Parent") and its Subsidiaries listed on
the signature pages hereto (the Parent and each such Subsidiary is
individually referred to herein as a "Borrower," and collectively as the
"Borrowers"), and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"), a national
banking association with its head office at 100 Federal Street, Boston,
Massachusetts 02110.
WHEREAS, the Borrowers and the Bank entered into a Revolving
Credit Agreement dated as of July 3, 1995 as amended by the First Amendment
to Revolving Credit Agreement dated as of September 15, 1995, the Second
Amendment to Revolving Credit Agreement dated as of December 22, 1995, the
Third Amendment to Revolving Credit Agreement dated as of March 29, 1996, the
Fourth Amendment to Revolving Credit Agreement dated as of October 1, 1996
and the Fifth Amendment to Revolving Credit Agreement dated as of February
21, 1997 (as further amended and in effect from time to time, the "Credit
Agreement") pursuant to which the Bank extended credit to the Borrowers on
the terms set forth therein;
WHEREAS, the Bank and the Borrowers have agreed to amend the
Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without
definition have the meanings ascribed to them in the Credit Agreement.
2. Amendment to Section 1.1. The definition of "Maturity Date"
appearing in Section 1.1 of the Credit Agreement is hereby deleted in its
entirety and the following substituted in place thereof:
"Maturity Date. March 31, 1999, or any later date to which
such date may be extended pursuant to Section 2.5 hereof."
3. Amendment to Section 2.2. The first sentence of Section 2.2
of the Credit Agreement is hereby amended by deleting the phrase "the
Eurodollar Rate plus three quarters of one percent (3/4%)," appearing therein
and substituting the phrase "the Eurodollar Rate plus one half of one percent
(1/2%)," in place thereof.
<PAGE>
4. Amendment to Section 2.5. Section 2.5 of the Credit
Agreement is hereby deleted in its entirety and the following substituted in
place thereof:
"Extension of Maturity Date. At least sixty (60) days but not
more than ninety (90) days prior to (i) March 31, 1998 and
(ii) March 31 of any year thereafter, the Borrowers may request in
writing that the Maturity Date be extended for an additional one
year period beyond the then-applicable Maturity Date. Not later
than thirty (30) days after the date of the Borrowers' request, the
Bank will notify the Borrowers whether, in its sole discretion, it
is willing to consent to such one-year extension. If the Bank
shall agree to extend the Maturity Date, then this Agreement shall
be deemed to be amended to reflect such extension and all the terms
and conditions hereof shall continue in full force and effect
during such extended period."
5. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the
other Loan Documents and all documents, instruments and agreements related
thereto are hereby ratified and confirmed in all respects and shall continue
in full force and effect. This Sixth Amendment and the Credit Agreement
shall hereafter be read and construed together as a single document, and all
references in the Credit Agreement or any related agreement or instrument to
the Credit Agreement shall hereafter refer to the Credit Agreement as amended
by this Sixth Amendment. By executing this Sixth Amendment where indicated
below, the Guarantor hereby ratifies and confirms its guaranty of the
Obligations pursuant to the terms of the Guaranty, as amended, and
acknowledges and consents to the terms of this Sixth Amendment.
6. GOVERNING LAW.
THIS SIXTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE
EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Sixth Amendment may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which counterparts taken together shall be deemed to
constitute one and the same instrument. A complete set of counterparts shall
be lodged with the Bank.
8. Effectiveness. This Sixth Amendment shall become effective
upon its execution and delivery by the respective parties hereto.
9. Entire Agreement. THE CREDIT AGREEMENT AS AMENDED
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement under seal as of the date first set forth above.
THE BORROWERS:
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
---------------------------
Name: John B. Green
Title: Vice President
Address of the Parent:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
TSI CORPORATION
By: /s/ John B. Green
----------------------------
Title: Vice President
TSI MASON LABORATORIES INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
TSI WASHINGTON LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
3
<PAGE>
TSI REDFIELD LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
ARGUS RESEARCH LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
TRANSGENIC INVESTMENTS, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
HEALTH AND SCIENCES RESEARCH
INCORPORATED
By: /s/ John B. Green
----------------------------
Title: Vice President
THE TSI CENTER FOR DIAGNOSTIC
PRODUCTS, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
4
<PAGE>
BIODEVELOPMENT LABORATORIES, INC.
By: /s/ John B. Green
----------------------------
Title: Vice President
THE BANK:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Elizabeth C. Everett
----------------------------
Name: Elizabeth C. Everett
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2318
Fax: 617-434-0819
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
--------------------------------
Title: Vice President and Treasurer
5
<PAGE>
Exhibit 10.27.9
EIGHTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS EIGHTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this
"Eighth Amendment") is made and entered into as of March 20, 1998, by and among
GENZYME TRANSGENICS CORPORATION, a Massachusetts corporation having its
principal place of business at One Mountain Road, Framingham, Massachusetts
01701 (the "Parent") and its Subsidiaries listed on the signature pages hereto
(the Parent and each such Subsidiary is individually referred to herein as a
"Borrower," and collectively as the "Borrowers"), and BANKBOSTON, N.A. (formerly
known as The First National Bank of Boston) (the "Bank"), a national banking
association with its head office at 100 Federal Street, Boston, Massachusetts
02110.
WHEREAS, the Borrowers and the Bank entered into a Revolving Credit
Agreement dated as of July 3, 1995 as amended by the First Amendment to
Revolving Credit Agreement dated as of September 15, 1995, the Second Amendment
to Revolving Credit Agreement dated as of December 22, 1995, the Third Amendment
to Revolving Credit Agreement dated as of March 29, 1996, the Fourth Amendment
to Revolving Credit Agreement dated as of October 1, 1996, the Fifth Amendment
to Revolving Credit Agreement dated as of February 21, 1997, the Sixth Amendment
to Revolving Credit Agreement dated as of March 17, 1997, and the Seventh
Amendment to Revolving Credit Agreement dated as of June 17, 1997 (as further
amended and in effect from time to time, the "Credit Agreement") pursuant to
which the Bank extended credit to the Borrowers on the terms set forth therein;
WHEREAS, the Bank and the Borrowers have agreed to
amend the Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein
without definition have the meanings ascribed to them in the
Credit Agreement.
<PAGE>
2
2. Amendment to Section 8.2(a) of the Credit Agreement. Section
8.2(a) of the Credit Agreement is hereby amended by deleting the amount
"$5,300,000" which appears in clause (ix) of Section 8.2(a) and substituting
in place thereof the new amount "$7,250,000".
3. Amendment to Section 8.2(d) of the Credit Agreement. Section
8.2(d) of the Credit Agreement is hereby deleted in its entirety and
substituting in place thereof the following:
"(d) no Borrower will make any distributions on or in
respect of its capital of any nature whatsoever, other than
(i) dividends payable solely in the shares of common stock or
distributions by any Borrower other than the Parent to such
Borrower's shareholders and (ii) in the case of the Parent,
any penalty or redemption payments due to the purchasers of
the Parent's Series A Convertible Preferrred Stock, in an
aggregate amount not to exceed $2,000,000 during the term of
this Agreement; provided, however, that no Default or Event of
Default will exist or be continuing at the time of such
payments or after making such payments and the Parent shall
have delivered to the Bank a compliance certificate evidencing
pro forma calculations with respect thereto;"
4. Amendment to Section 8.2(e) of the Credit Agreement. Section
8.2(e) of the Credit Agreement is hereby amended by inserting immediately
after the phrase "sale-leaseback transaction" the following:
", except for those sale-leaseback transactions
associated with certain Indebtedness described in clause (ix)
of Section 8.2(a) herein;"
5. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the other
Loan Documents and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. This Eighth Amendment and the Credit Agreement shall hereafter be
read and construed together as a single document, and all references in the
Credit Agreement or any related agreement or instrument to the Credit Agreement
shall hereafter refer to the Credit Agreement as amended by this Eighth
Amendment. By executing this Eighth Amendment where indicated below, the
Guarantor hereby ratifies and confirms its guaranty of the Obligations pursuant
to the terms of the Guaranty, as amended, and acknowledges and consents to the
terms of this Seventh Amendment.
6. GOVERNING LAW.
THIS EIGHTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE
<PAGE>
3
COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT IN
ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Eighth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Bank.
8. Effectiveness. This Eighth Amendment shall become effective
upon its execution and delivery by each of the Borrowers, the Guarantor and
the Bank; provided, however, the amendment set forth in Section 4 hereof
shall be deemed to have been effective as of December 30, 1996.
9. Entire Agreement. THE CREDIT AGREEMENT AS AMENDED REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINING PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Eighth
Amendment under seal as of the date first set forth above.
THE BORROWERS:
GENZYME TRANSGENICS
CORPORATION
By: /s/ John B. Green
-----------------------
Name: John B. Green
Title: Vice President
Address of the Parent:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
TSI CORPORATION
By: /s/ John B. Green
----------------------
Title: Vice President
MASON LABORATORIES, INC.
(formerly known as TSI Mason
Laboratories, Inc.)
By: /s/ John B. Green
-----------------------
Title: Vice President
WASHINGTON LABORATORIES, INC.
(formerly known as TSI
Washington Laboratories, Inc.)
By: /s/ John B. Green
----------------------
Title: Vice President
<PAGE>
REDFIELD LABORATORIES,
INC. (formerly known as TSI
Redfield Laboratories, Inc.)
By: /s/ John B. Green
----------------------
Title: Vice President
ARGUS RESEARCH
LABORATORIES, INC.
By: /s/ John B. Green
----------------------
Title: Vice President
TRANSGENIC INVESTMENTS,
INC.
By: /s/ John B. Green
----------------------
Title: Vice President
HEALTH AND SCIENCES
RESEARCH INCORPORATED
By: /s/ John B. Green
----------------------
Title: Vice President
BIODEVELOPMENT
LABORATORIES, INC.
By: /s/ John B. Green
----------------------
Title: Treasurer
<PAGE>
THE BANK:
BANKBOSTON, N.A. (formerly
known as The First National
Bank of Boston)
By: /s/ Walter J. Marullo
---------------------------
Name: Walter J. Marullo
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2308
Fax: 617-434-0819
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
- -----------------------
Name:
Title: Vice President, Treasurer
<PAGE>
EXHIBIT 10.28.2
FIRST AMENDMENT
TO SECURITY AGREEMENT
This FIRST AMENDMENT TO SECURITY AGREEMENT is dated as of December 15, 1997
(this "First Amendment"), by GENZYME TRANSGENICS CORPORATION, a Massachusetts
corporation with its principal place of business at Five Mountain Road,
Framingham, MA 01701, TSI CORPORATION, ARGUS RESEARCH LABORATORIES, INC.,
TRANSGENIC INVESTMENTS, INC., GTC MASON LABORATORIES, INC. (formerly TSI Mason
Laboratories, Inc.), TSI WASHINGTON LABORATORIES, INC., TSI REDFIELD
LABORATORIES, INC., HEALTH SCIENCES RESEARCH INCORPORATED, TSI HOLDINGS, INC.,
BIODEVELOPMENT LABORATORIES, INC. and GTC CANCER VACCINES, INC. (each of GTC and
such other corporations, a "Grantor" and collectively, the "Grantors") in favor
of GENZYME CORPORATION, a Massachusetts corporation having its principal offices
at One Kendall Square, Cambridge, Massachusetts 02139 (the "Guarantor"). All
capitalized terms used herein, unless otherwise defined, shall be defined as
provided in the Credit Agreement (as defined below).
WHEREAS, the Grantors entered into a Revolving Credit Agreement dated as of
July 3, 1995 (as the same may have been from time to time amended, modified or
supplemented) with The First National Bank of Boston (the "Bank") (hereinafter
referred to as the "Credit Agreement") pursuant to which the Bank makes loans,
advances and other extensions of credit to the Grantors;
WHEREAS, the Guarantor entered into that certain Guaranty dated July 3,
1995 (the "Guaranty") pursuant to which the Guarantor guaranteed the obligations
of the Grantors to the Bank;
WHEREAS, it was a condition of the Guarantor's execution of the Guaranty
that the Grantors execute and deliver to the Guarantor the Security Agreement
dated July 3, 1995 pursuant to which the Grantors assigned, conveyed, mortgaged,
pledged, hypothecated and transferred to the Guarantor, and thereby granted to
the Guarantor a security interest in such Grantor's right, title and interest in
certain collateral (the "Security Agreement");
WHEREAS, the Guarantor has consented to, and Genzyme Transgenics
Corporation ("GTC") and the The TSI Center for Diagnostic Products ("CDP") have
effected a merger of, CDP with and into GTC such that the separate corporate
existence of CDP has ceased and all the issued and outstanding stock of CDP,
which was pledged under the Security Agreement, has been cancelled;
WHEREAS, the Guarantor has consented to, and TSI Corporation has effected,
the transfer from TSI Corporation to TSI Holdings, Inc. ("TSI Holdings") of all
the issued and outstanding shares of common stock of TSI Redfield Laboratories,
Inc. and TSI Washington
<PAGE>
Laboratories, Inc. ("TSI Washington"), which shares are pledged under the
Security Agreement, on the condition that the Security Agreement be amended to
include TSI Holdings as a party; and
WHEREAS, the Guarantor has consented to, and TSI Washington has effected,
the transfer of certain of its assets to GTC Cancer Vaccines, Inc. ("GCV"),
pursuant to a Technology Transfer Agreement dated as of October 17, 1997 entered
into by and between TSI Washington and GCV, on the condition that the Security
Agreement be amended to include GCV as a party;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendment to Exhibit A of the Security Agreement. Exhibit A
of the Security Agreement is hereby deleted in its entirety and the attached
Exhibit A is substituted in place thereof.
Section 2. Amendment to Exhibit B of the Security Agreement. Exhibit B
of the Security Agreement is hereby deleted in its entirety and the attached
Exhibit B is substituted in place thereof.
Section 3. Effect of Amendment; Ratification, Etc. Except as expressly
amended hereby, the Security Agreement and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. The Security Agreement and this First
Amendment shall be read and construed as a single agreement. All references in
the Security Agreement or any related agreement or instrument to the Security
Agreement shall hereafter refer to the Security Agreement as amended hereby.
Section 4. No Waiver. Nothing contained herein shall constitute a
waiver of, impair or otherwise affect any obligations of, the Grantors or any
rights of the Guarantor consequent thereon.
Section 5. Counterparts. This First Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
Section 6. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to Security Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.
GENZYME CORPORATION
By: /s/ Evan M. Lebson
-----------------------------
Name: Evan M. Lebson
Title: Vice President and Treasurer
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Breen
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
TSI CORPORATION
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
GTC MASON LABORATORIES, INC.
(formerly TSI Mason Laboratories, Inc.)
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
-3-
<PAGE>
TSI WASHINGTON LABORATORIES, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
TSI REDFIELD LABORATORIES, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
ARGUS RESEARCH LABORATORIES, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
HEALTH AND SCIENCES RESEARCH INCORPORATED
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
TRANSGENIC INVESTMENTS, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
-4-
<PAGE>
TSI HOLDINGS, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
GTC CANCER VACCINES, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
BIODEVELOPMENT LABORATORIES, INC.
By: /s/ John B. Green
-----------------------------
John B. Green
Vice President, Treasurer and
Assistant Secretary
-5-
<PAGE>
EXHIBIT A
Securities
<TABLE>
<CAPTION>
No. of Certificate
Issuer Shares Number Holder
- ------ ------ ------------ ------
<S> <C> <C> <C>
GTC Cancer Vaccines, Inc. 100 1 Genzyme Transgenics
Corporation
Genzyme Transgenics Securities 100 1 Genzyme Transgenics
Corporation Corporation
SMI Genzyme Ltd. 1,000 1A-0003 Genzyme Transgenics
100 2C-0005 Corporation
100 2C-0006
100 2C-0007
100 2C-0008
500 4B-0001
50 4D-0002
10 4E-0009
10 4E-0010
5 4F-0002
1 4G-0005
1 4G-0006
1 4G-0007
1 4G-0008
TSI Corporation 100 1 Genzyme Transgenics
100 2 Corporation
Health and Sciences Research
Corporation 3,000 8 TSI Corporation
TSI Holdings, Inc. 3,000 1 TSI Corporation
2,100 2
Transgenic Investments, Inc. 1,000 C-1 TSI Corporation
Argus Research Laboratories, Inc. 260 2 TSI Holdings, Inc.
Exhibit A -- page 1
<PAGE>
Biodevelopment Laboratories, Inc. 100 102 TSI Holdings, Inc.
GTC Mason Laboratories, 4,500,000 C-2 TSI Holdings, Inc.
Inc. (formerly known as
"TSI Mason Laboratories, Inc.")
TSI Redfield Laboratories, Inc. 1,000 2 TSI Holdings, Inc.
TSI Washington Laboratories, Inc. 1,000 2 TSI Holdings, Inc.
</TABLE>
Exhibit A -- page 2
<PAGE>
EXHIBIT B
Principal Place of Business
Argus Research Laboratories, Inc.
905 Sheehy Drive, Building A
Horsham, Pennsylvania 19044
Biodevelopment Laboratories, Inc.
79-83 Rogers Street
Cambridge, MA 02138
Genzyme Transgenics Corporation
Five Mountain Road
Framingham, MA 01701
GTC Cancer Vaccines, Inc.
c/o Genzyme Transgenics Corporation
Five Mountain Road
Framingham, MA 01701
Transgenic Investments, Inc.
c/o Delaware Trust Capital
Management
900 Market Street
P.O. Box 8841
Wilmington, Delaware 19899
TSI Corporation
25 Birch Street
Milford, Massachusetts 01757
TSI Holdings, Inc.
c/o Genzyme Transgenics Corporation
Five Mountain Road
Framingham, MA 01701
GTC Mason Laboratories, Inc.
57 Union Street
Worcester, Massachusetts 01608
TSI Redfield Laboratories, Inc.
100 East Boone Street
Redfield, Arkansas 72132
TSI Washington Laboratories, Inc.
2 Taft Court
Rockville, Maryland 20850
Exhibit B -- page 1
<PAGE>
EXHIBIT 10.32.3
SECOND AMENDMENT TO
TERM LOAN AGREEMENT
THIS SECOND AMENDMENT TO TERM LOAN AGREEMENT (this "Second
Amendment") is made and entered into as of the 1st day of October, 1996, by
and between GENZYME TRANSGENICS CORPORATION, a Massachusetts corporation
having its principal place of business at One Mountain Road, Framingham,
Massachusetts 01701 (the "Borrower"), and THE FIRST NATIONAL BANK OF BOSTON
(the "Bank"), a national banking association with its head office at 100
Federal Street, Boston, Massachusetts 02110.
WHEREAS, the Borrower and the Bank entered into a Term Loan
Agreement dated as of December 15, 1995, as amended by the First Amendment to
Term Loan Agreement dated as of March 29, 1996 (as further amended and in
effect from time to time, the "Credit Agreement") pursuant to which the Bank
extended credit to the Borrower on the terms set forth therein;
WHEREAS, the Bank and the Borrower have agreed to amend the
Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without
definition have the meanings ascribed to them in the Credit Agreement.
2. Amendment to Term Loan Agreement. The following new
subsection (ix) is added to Section 7.2(a) of the Credit Agreement:
"and (ix) Indebtedness of TSI Corporation to Financing for
Science International, Inc. pursuant to the terms of the Master
Equipment Lease Agreement dated as of September 27, 1994 by and
between TSI Corporation and Financing for Science International,
Inc.; provided that the aggregate outstanding amount of all such
Indebtedness shall not exceed $5,200,000."
3. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the
other Loan Documents and all documents, instruments and agreements related
thereto are hereby ratified and confirmed in all respects and shall continue
in full force and effect. This Second Amendment and the Credit Agreement
shall hereafter be read and construed together as a single document, and all
references in the Credit Agreement or any related agreement or instrument to
the Credit Agreement shall hereafter refer to the Credit Agreement as amended
<PAGE>
by this Second Amendment. By executing this Second Amendment where indicated
below, the Guarantor hereby ratifies and confirms its guaranty of the
Obligations pursuant to the terms of the Guaranty, as amended, and
acknowledges and consents to the terms of this Second Amendment.
4. GOVERNING LAW.
THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE
EFFECT AS A SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
5. Counterparts. This Second Amendment may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which counterparts taken together shall be deemed to
constitute one and the same instrument. A complete set of counterparts shall
be lodged with the Bank.
6. Effectiveness. This Second Amendment shall become effective
upon its execution and delivery by the respective parties hereto.
7. Entire Agreement. THE CREDIT AGREEMENT AS AMENDED
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement under seal as of October 1, 1996.
THE BORROWER:
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
------------------------------
Name: John B. Green
Title: Vice President
Address of the Borrower:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
THE BANK:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Elizabeth C. Everett
------------------------------
Name: Elizabeth C. Everett
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2318
Fax: 617-434-0819
3
<PAGE>
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
-----------------------
Title: Vice President, Treasurer
4
<PAGE>
EXHIBIT 10.32.4
THIRD AMENDMENT TO
TERM LOAN AGREEMENT
THIS THIRD AMENDMENT TO TERM LOAN AGREEMENT (this "Third Amendment") is
made and entered into as of the 21st day of February, 1997, by and between
GENZYME TRANSGENICS CORPORATION, a Massachusetts corporation having its
principal place of business at One Mountain Road, Framingham, Massachusetts
01701 (the "Borrower"), and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"), a
national banking association with its head office at 100 Federal Street, Boston,
Massachusetts 02110.
WHEREAS, the Borrower and the Bank entered into a Term Loan Agreement dated
as of December 15, 1995, as amended by the First Amendment to Term Loan
Agreement dated as of March 29, 1996 and the Second Amendment to Term Loan
Agreement dated as of October 1, 1996 (as further amended and in effect from
time to time, the "Credit Agreement") pursuant to which the Bank extended credit
to the Borrower on the terms set forth therein;
WHEREAS, the Bank and the Borrower have agreed to amend the Credit
Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein without definition have
the meanings ascribed to them in the Credit Agreement.
2. Amendment to Term Loan Agreement. Effective as of December 30, 1996,
Section 7.2(a)(ix) of the Credit Agreement is hereby deleted in its entirety and
the following substituted in place thereof:
"and (ix) Indebtedness of (a) TSI Corporation to Finova Technology Finance,
Inc. (formerly Financing for Science International, Inc. ("Finova"))
pursuant to the terms of the Master Equipment Lease Agreement dated as of
September 27, 1994 by and between TSI Corporation and Financing for Science
International, Inc., and of the Parent, Argus Research Laboratories, Inc.,
TSI Mason Laboratories, Inc., TSI Redfield Laboratories, Inc., and TSI
Washington Laboratories, Inc. to Finova pursuant to guaranties of such
lease; and (b) the Parent to Transamerica Business Credit Corporation
("TBCC") pursuant to the terms of the Master Lease Agreement dated as of
December 30, 1996 by and between TBCC and the Parent, and of TSI
Corporation, BioDevelopment Laboratories, Inc., TSI Mason Laboratories,
Inc., TSI Washington Laboratories, Inc., TSI Redfield Laboratories, Inc.,
and Argus Research Laboratories, Inc. to TBCC pursuant to guaranties of
such lease provided that the aggregate outstanding amount of all such
Indebtedness shall not exceed $5,300,000."
<PAGE>
3. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the other Loan
Documents and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. This Third Amendment and the Credit Agreement shall hereafter be
read and construed together as a single document, and all references in the
Credit Agreement or any related agreement or instrument to the Credit Agreement
shall hereafter refer to the Credit Agreement as amended by this Third
Amendment. By executing this Third Amendment where indicated below, the
Guarantor hereby ratifies and confirms its guaranty of the Obligations pursuant
to the terms of the Guaranty, as amended, and acknowledges and consents to the
terms of this Third Amendment.
4. GOVERNING LAW.
THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A SEALED
INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
5. Counterparts. This Third Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Bank.
6. Effectiveness. This Third Amendment shall become effective upon its
execution and delivery by the respective parties hereto.
7. Entire Agreement. THE CREDIT AGREEMENT AS AMENDED REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of the date first set forth above.
THE BORROWER:
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
------------------------
Name: John B. Green
Title: Vice President
Address of the Borrower:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
THE BANK:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Elizabeth C. Everett
------------------------
Name: Elizabeth C. Everett
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2318
Fax: 617-434-0819
3
<PAGE>
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
- ------------------------------------
Title: Vice President and Treasurer
4
<PAGE>
Exhibit 10.32.6
FIFTH AMENDMENT TO
TERM LOAN AGREEMENT
THIS FIFTH AMENDMENT TO TERM LOAN AGREEMENT (this "Fifth
Amendment") is made and entered into as of March 20, 1998, by and between
GENZYME TRANSGENICS CORPORATION, a Massachusetts corporation having its
principal place of business at One Mountain Road, Framingham, Massachusetts
01701 (the "Borrower"), and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"), a
national banking association with its head office at 100 Federal Street, Boston,
Massachusetts 02110.
WHEREAS, the Borrower and the Bank entered into a Term Loan Agreement
dated as of December 15, 1995, as amended by the First Amendment to Term Loan
Agreement dated as of March 29, 1996, the Second Amendment to Term Loan
Agreement dated as of October 1, 1996, the Third Amendment to Term Loan
Agreement dated as of February 21, 1997, and the Fourth Amendment to Term Loan
Agreement dated as of June 17, 1997 (as further amended and in effect from time
to time, the "Credit Agreement") pursuant to which the Bank extended credit to
the Borrower on the terms set forth therein;
WHEREAS, the Bank and the Borrower have agreed to amend
the Credit Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms used herein
without definition have the meanings ascribed to them in the
Credit Agreement.
2. Amendment to Section 7.2(a) of the Credit Agreement. Section 7.2(a)
of the Credit Agreement is hereby amended by deleting the amount "$5,300,000"
which appears in clause (ix) of Section 7.2(a) and substituting in place thereof
the new amount "$7,250,000".
3. Amendment to Section 7.2(d) of the Credit Agreement. Section 7.2(d)
of the Credit Agreement is hereby deleted in its entirety and substituting in
place thereof the following:
"(d) the Borrower will not make, and will not permit
its Subsidiaries to make any distributions on or in respect of
its capital of any nature whatsoever, other than (i) dividends
payable solely in the
<PAGE>
2
shares of common stock or distributions by any Subsidiary
of the Borrower to such Subsidiary's shareholders and (ii)
in the case of the Borrower, any penalty or redemption
payments due to the purchasers of the Borrower's Series A
Convertible Preferrred Stock, in an aggregate amount not to
exceed $2,000,000 during the term of this Agreement;
provided, however, that no Default or Event of Default will
exist or be continuing at the time of such payments or
after making such payments and the Borrower shall have
delivered to the Bank a compliance certificate evidencing
pro forma calculations with respect thereto;"
4. Amendment to Section 7.2(e) of the Credit Agreement.
Section 7.2(e) of the Credit Agreement is hereby amended by inserting
immediately after the phrase "Sale-Leaseback transaction" the following:
", except for those sale-leaseback transactions
associated with certain Indebtedness described in clause (ix)
of Section 7.2(a) herein."
5. Ratification, etc.
Except as expressly amended hereby, the Credit Agreement, the other
Loan Documents and all documents, instruments and agreements related thereto are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. This Fifth Amendment and the Credit Agreement shall hereafter be
read and construed together as a single document, and all references in the
Credit Agreement or any related agreement or instrument to the Credit Agreement
shall hereafter refer to the Credit Agreement as amended by this Fifth
Amendment. By executing this Fifth Amendment where indicated below, the
Guarantor hereby ratifies and confirms its guaranty of the Obligations pursuant
to the terms of the Guaranty, as amended, and acknowledges and consents to the
terms of this Fifth Amendment.
6. GOVERNING LAW.
THIS FIFTH AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL TAKE EFFECT AS A
SEALED INSTRUMENT IN ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Fifth Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Bank.
<PAGE>
3
8. Effectiveness. This Fifth Amendment shall become effective upon its
execution and delivery by the Borrower, the Guarantor and the Bank; provided,
however, the amendment set forth in Section 4 hereof shall be deemed to have
been effective as of December 30, 1996.
9. Entire Agreement. THE TERM LOAN AGREEMENT AS AMENDED REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINING PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Fifth
Amendment under seal as of the date first set forth above.
THE BORROWER:
GENZYME TRANSGENICS
CORPORATION
By: /s/ John B. Green
----------------------
Name: John B. Green
Title: Vice President
Address of the Borrower:
One Mountain Road
Framingham, MA 01701
Tel: (508) 872-8400
Fax: (508) 872-0827
THE BANK:
BANKBOSTON, N.A. (formerly
known as The First National
Bank of Boston)
By: /s/ Walter J. Marullo
---------------------------
Name: Walter J. Marullo
Title: Vice President
Address:
100 Federal Street
Boston, MA 02110
Tel: 617-434-2308
Fax: 617-434-0819
<PAGE>
ACCEPTED AND AGREED
TO BY:
The Guarantor:
GENZYME CORPORATION
By: /s/ Evan M. Lebson
- ------------------------
Name:
Title: Vice President, Treasurer
<PAGE>
EXHIBIT 10.35.2
MODIFICATION OF
RESERVE
PLEDGE AND SECURITY AGREEMENT
Modification of Reserve Pledge and Security Agreement dated June 30, 1995
to the Reserve Pledge and Security Agreement entered into as of September 27,
1994 (the "Agreement") between FINANCING FOR SCIENCE INTERNATIONAL, INC. ("FSI")
and TSI CORPORATION ("Assignor").
1. The following new paragraph is hereby added to the end of Section 3(a):
With respect to any Rental Schedule dated after June 1, 1995, if (i) no
Event of Default shall have occurred, (ii) the Assignor shall have completed a
divestiture of Guy's Drug Research Unit Ltd. and (iii) such divestiture results
in an increase in cash or marketable securities of the Assignee of at least
$7,000,000, then FSI shall return a portion of the Security Reserve equal to 10%
of the Acquisition Cost to FSI to Assignee within 30 days of notice from the
Assignee of the completion of the divestiture on such terms.
2. Only with respect to the part of the Security Reserve and any accrued
interest thereon equal to twenty-five percent (25%) of the Acquisition Cost to
FSI for the Equipment leased pursuant to any and all Rental Schedules under the
Master Lease that have a date for the signature of Lessee on or after June 1,
1995 ("Subsequent Rental Schedules") the following Section 3(b) shall be a part
of the Agreement and the pre-existing Section 3(b) shall be renumbered as
Section 3(c).
(b) If Assignor is not in breach of its covenants and agreements in
the Lease or in this Agreement, the amount of the Security Reserve and any
accrued interest thereon then held by FSI shall be applied in payment of
the Basic Rent for the last six months of the Primary Term as defined in
the Lease for the Equipment leased under any of the Rental Schedules of the
Lease that have a date for the signature of the Lessee on or after June 1,
1995; provided, however, that if such amount is not sufficient to pay all
such Basic Rent such amount shall be applied to the payments last coming
due under all such Rental Schedules.
IN WITNESS WHEREOF, FSI and Assignor have executed this Agreement as of the
day and year first above written.
FINANCING FOR SCIENCE TSI CORPORATION
INTERNATIONAL, INC.
By: /s/ Duane E. Stan By: /s/ John B. Green
--------------------------- ------------------------
Duane E. Stan Title: Treasurer
Vice President
Asset Managerment
<PAGE>
EXHIBIT 10.38
GUARANTY OF LEASE
Guaranty (this "Guaranty"), dated December 26, 1996 made by Genzyme
Transgenics Corporation, a Delaware corporation, that has its executive
office and principal place of business at 25 Birch Street, Milford, MA 01757,
(the "Guarantor") in favor of FINOVA Technology Finance, Inc. ("FINOVA"), of
Farmington, Connecticut (hereinafter called, with its successors and assigns,
including the assignee from time to time of its rights under this Guaranty,
the "Beneficiary").
RECITALS
The Guarantor is a stockholder of or is otherwise financially interested
in TSI Corporation (the "Lessee"). The Guarantor has previously entered into
a guaranty of the obligations of the Lessee under the Master Equipment Lease
Agreement between Lessee, as lessee, and FINOVA (formerly named Financing For
Science International, Inc.) as lessor that was limited to $2,000,000.00, to
induce FINOVA to undertake additional leasing to the Lessee, and for Ten
Dollars ($10) and other good and valuable consideration, the receipt of which
by the Guarantor is hereby acknowledged, the Guarantor hereby covenants and
agrees as follows:
Section 1. Guaranty. The Guarantor unconditionally and irrevocably
guarantees to the Beneficiary:
(a) the prompt and full payment of any and all amounts payable by
the Lessee under the Lease including, but not limited to, payment of Basic
Rent and Additional Rent under and as defined by the Lease and of other debts
and obligations of the Lessee to the Beneficiary under the Lease including
for taxes, due to loss or damage of the Equipment and for default by the
Lessee under the Lease, as and when the same shall be due and payable
(whether on a date fixed for payment, by acceleration, upon any renewal,
expiration, termination or cancellation of the Lease Term (as defined in the
Lease), or at any other time) in accordance with the provisions of the Lease,
and any amounts payable to the Beneficiary by reason of any progress payments
to suppliers of the Equipment together with any time charges or interest on
the progress payments; and
(b) the prompt, full and faithful performance and discharge of all
obligations, undertakings (which term as used in this Guaranty shall include,
without limitation, covenants, commitments and duties to indemnify) and
liabilities of the Lessee under the Lease, whether or not liquidated in
amount, in accordance with the terms thereof.
If the Lessee shall fail to pay any such amount when and as the same
shall be due in accordance with the terms of the Lease, or if the Lessee
fails to perform and discharge any such obligation, undertaking or liability
in accordance with the terms of the Lease, the Guarantor will forthwith pay
such amount or perform and discharge such obligation, undertaking or
liability,
<PAGE>
as the case may be, not paid, performed or discharged by the Lessee, and will
further pay any and all damages that may be payable by the Lessee in
consequence thereof and all reasonable expenses, including attorneys' fees,
that are incurred by the Beneficiary in enforcing such obligations and
liabilities of the Lessee. In addition, the Guarantor shall pay all
reasonable expenses, including attorneys' fees, that may be incurred by the
Beneficiary in enforcing the covenants and agreements of the Guarantor in
this Guaranty. The Guarantor further guarantees that all payments made by the
Lessee to the Beneficiary with respect to any liabilities hereby guaranteed
will, when made, be final and agrees that if any such payment is recovered
from, or repaid by, the Beneficiary in whole or in part in any bankruptcy,
insolvency or other proceeding instituted by or against the Lessee, this
Guaranty shall continue to be fully applicable to such liabilities to the
same extent as though the payment so recovered or repaid had never been made.
Section 2. Unconditional Character of Obligations of Guarantor.
Nothing shall discharge or satisfy the liability of the Guarantor hereunder
except the full payment and performance of all of the Lessee's obligations,
undertakings and liabilities under the Lease, and the obligations and
commitments of the Guarantor hereunder shall be absolute, irrevocable and
unconditional, irrespective of, and shall not be altered or affected by, the
validity, regularity or enforceability of any provision of the Lease, the
recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of the obligations of the
Lessee under the Lease, or any other circumstance which might otherwise
constitute a legal or equitable defense or discharge of a guarantor or
surety, or which might otherwise limit recourse against the Guarantor by the
Beneficiary. The Guarantor authorizes the Beneficiary, in its sole
discretion, at any time after the occurrence of an Event of Default under the
Lease, to proceed under this Guaranty and against any property securing the
obligations of the Guarantor hereunder for the full amount of the Lessee's
obligations to the Beneficiary, with or without the Beneficiary's taking any
action against the Lessee or any other obligor with respect to the Lessee's
obligations under the Lease, and whether or not the Beneficiary has proceeded
against any property securing the obligations of Lessee or of the Guarantor
hereunder or of any other such obligor.
Section 3. Right to Deal with Lessee. At any time and from time to
time, without terminating, affecting or impairing the validity of this
Guaranty or the obligations of the Guarantor hereunder, the Beneficiary may
deal with the Lessee in the same manner and as fully as if this Guaranty did
not exist and shall be entitled, among other things, to grant to the Lessee
such extension or extensions of time to perform, or to waive any obligation
of the Lessee to perform, any act or acts as may seem advisable to the
Beneficiary.
Section 4. Continuing Guaranty. This Guaranty is a continuing guaranty
of all existing and future obligations and liabilities of the Lessee to the
Beneficiary and shall remain in full force and effect irrespective of any
interruption in the business relations of the Lessee with the Beneficiary.
Section 5. Guaranty Not Affected by Acts of Lessee or Assignments of
Beneficiary. The validity of this Guaranty, the obligations of the Guarantor
hereunder and the rights of the Beneficiary to enforce this Guaranty by
proceedings, whether by action at law, suit in equity or otherwise, shall not
be terminated, affected or impaired by reason of any filing by or against the
2
<PAGE>
Lessee of a petition under any bankruptcy or reorganization law or for the
appointment of a receiver, trustee or liquidator of the Lessee, or any
application of the Lessee for a moratorium or for an arrangement with the
Lessee's creditors or a material part thereof, or the making by the Lessee of
a general assignment for the benefit of creditors, or the taking by the
Lessee of any action for the purpose of effecting any of the foregoing, or
any limitations placed on the liability of the Lessee in any bankruptcy,
reorganization, moratorium or other proceedings, or any assignment by the
Beneficiary of any interest in the Lease or this Guaranty or any change in
the identity, or the ownership of capital stock, of the Lessee.
Section 6. Guaranty Not Affected by Amendments, etc. The validity of
this Guaranty and the obligations of the Guarantor hereunder shall not be
terminated, affected or impaired by reason of (a) any compromise, alteration,
release, renewal, extension, modification, amendment, termination or other
change of, or any waiver, consent or other action or omission or failure to
act in respect of, any of the terms, covenants or conditions of the Lease,
any of the transactions contemplated thereby, or any of the documents
referred to therein, (b) any assignment by any person of any interest under
the Lease, any of the transactions contemplated thereby, or any of the
documents referred to therein, or (c) the exercise by any person of, or any
waiver of or failure to enforce, any of the rights or remedies provided in
the Lease or otherwise.
Section 7. Guaranty Not Affected by Other Agreements. The covenants
and agreements of the Guarantor in this Guaranty shall not be terminated,
affected or impaired by reason of the existence or the terms or provisions of
any other guaranty or guarantees to FINOVA (or its assigns) of the
obligations of the Lessee under the Lease by the Guarantor or other agreement
or agreements to which the Lessee or the Guarantor shall be a party and,
notwithstanding any such guarantees, agreements, terms or provisions, the
obligations of the Guarantor shall be as herein expressed.
Section 8. Certain Rights and Powers of Beneficiary. The Beneficiary
may proceed to protect and enforce any or all of its rights under this
Guaranty by suit in equity, action at law or by other appropriate
proceedings, whether for the specific performance of any covenants or
agreements contained in this Guaranty, or otherwise, or to take any action
authorized or permitted under applicable law, and shall be entitled to
require and enforce the performance of all acts and things required to be
performed hereunder by the Guarantor. Each and every remedy shall, to the
extent permitted by law, be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity.
Section 9. Subordination of Guarantor. With respect to all amounts
paid by the Guarantor pursuant to this Guaranty, until the Beneficiary shall
have received full and complete payment and performance of all present and
future sums, undertakings, duties, liabilities, and obligations of the Lessee
to the Beneficiary, the Guarantor expressly waives and disclaims any right
to, and agrees not to seek or claim, contribution, indemnification or
reimbursement from the Lessee, or right of recourse to any security for the
debts and obligations of the Lessee to the Beneficiary. Any and all present
and future debts and obligations of, and other payments from, Lessee to the
Guarantor payable in money or monies, securities, other property, or any
combination thereof, including, without limitation, payments on any note of
Lessee at any time held by or payable to the order of the Guarantor, and any
distribution by Lessee of earnings and profits or of return of capital are
hereby waived and postponed in favor of and subordinated to
3
<PAGE>
the full payment and performance of all present and future debts and
obligations of the Lessee to the Beneficiary. At any time or times that any
such subordinated properties or payments are received by the Guarantor, they
shall be received in trust for the Beneficiary and promptly delivered to the
Beneficiary. The Guarantor shall cooperate with the Beneficiary to enable the
Beneficiary to receive the benefits of the subordination effected by this
Guaranty.
Section 10. Insolvency. If the Lessee or the Guarantor should at any
time become insolvent or make a general assignment for the benefit of
creditors, or if any petition in bankruptcy or any insolvency or
reorganization proceedings shall be filed or commenced by, against or in
respect of the Lessee or the Guarantor, any and all obligations of the
Guarantor hereunder shall, at the Beneficiary's option, forthwith become due
and payable without notice or demand. The Guarantor hereby grants power of
attorney to FINOVA to file claims against the Lessee in respect of the debts,
obligations and other payments subordinated by this Guaranty at any time that
the Lessee is insolvent or has made a general assignment for the benefit of
creditors, or if any petition in bankruptcy or any insolvency or
reorganization proceedings shall be filed or commenced by, against or in
respect of the Lessee. The Guarantor shall not file any claims in such
proceedings except with the advance written approval of the Beneficiary.
Section 11. Information on Guarantor. The Guarantor agrees to furnish
upon the request of FINOVA or its assign such financial, business and
operational information concerning the Guarantor as FINOVA or its assign may
from time to time reasonably request including copies of the tax returns of
the Guarantor. Additionally, the Guarantor shall furnish to FINOVA and its
assigns so long as there are any obligations guaranteed hereby in existence
and without notice or demand therefor two complete copies of (i) the
Guarantor's quarterly interim financial statements within 45 days of the
close of each of its first three fiscal quarters of every year certified by
its chief financial officer and (ii) the Guarantor's annual financial
statements within 90 days of the close of each of its fiscal years reported
on by its independent accountants without material adverse qualification or
comment. All such financial statements shall be prepared in accordance with
generally accepted accounting principles consistently applied, and shall
accurately and completely present the Guarantor's financial condition and the
results of its operations as of the dates of and for the periods covered by
such statements. Throughout the term of the Lease, the Guarantor shall
promptly furnish to the Beneficiary copies of any definitive proxy statements
or reports on Form 10-K, 10-Q, or 8-K or similar forms, or amendments
thereof, that it files with the SEC or any government agency.
Section 12. Representations and Warranties of Guarantor. The Guarantor
represents and warrants (and if requested by the Beneficiary, will provide an
opinion of counsel and other supporting documents to the effect) that as of
the date hereof: (i) the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, and is qualified and in good standing to do business wherever
necessary to carry on its present business and operations; (ii) the Guarantor
has the corporate power to enter into this Guaranty and to pay and perform
its obligations hereunder; (iii) this Guaranty has been duly authorized,
executed and delivered by the Guarantor, and constitutes the valid, legal and
binding obligation of the Guarantor enforceable in accordance with its terms;
(iv) no vote or consent of, or notice to, the holders of any class of stock
of the Guarantor is required, or if required, such vote or consent has been
obtained or given, to authorize the execution, delivery and performance of
this Guaranty; (v) neither the execution and delivery by the Guarantor of
this Guaranty nor
4
<PAGE>
compliance by the Guarantor with the provisions hereof conflicts with or
results in a breach of any of the provisions of the Certificate of
Incorporation or By-laws of the Guarantor or of any applicable law, judgment,
order, writ, injunction, decree, award, rule or regulation of any court,
administrative agency or other governmental authority, or of any indenture,
mortgage, deed of trust, agreement or other instrument of any nature to which
the Guarantor is a party or by which it is bound, or constitutes a default
under any thereof or will result in the creation of any lien, charge,
security interest or other encumbrance in favor of any one other than the
Beneficiary upon any of the assets of the Guarantor; (vi) no consent,
approval, withholding of objection or other authorization of or by any court,
administrative agency, other governmental authority or any other person is
required, except such consents, approvals or other authorizations which have
been duly obtained and are in full force and effect, in connection with the
execution, delivery or performance by the Guarantor of this Guaranty; (vii)
there are no actions, suits or proceedings pending, or, to the knowledge of
the Guarantor, threatened, in any court or before any administrative agency
or other governmental authority against or affecting the Guarantor, which, if
adversely decided would or could, individually or in the aggregate,
materially and adversely affect the business, operations, property or
financial condition of the Guarantor or the ability of the Guarantor to
perform any of its obligations under this Guaranty; (viii) no Event of
Default or event or condition which upon the passage of time, the giving of
notice, or both, would constitute an Event of Default under the Lease, exists
or is continuing; (ix) the financial statements of the Guarantor furnished to
the Beneficiary have been prepared in conformity with generally accepted
accounting principles consistently applied and accurately and completely
present the financial condition and the results of operations of the
Guarantor as of the dates of and for the periods covered by such statements;
and (x) there has been no material adverse change in the Guarantor's
financial or other condition, business, operations, properties, assets or
prospects since the date of the most recent financial statements of the
Guarantor furnished to the Beneficiary.
Section 13. Commercial Transaction. The Guarantor acknowledges that
the Transaction of which this Guaranty is a part is a commercial transaction,
and the Guarantor hereby waives such rights as the Guarantor may have to
notice and/or hearing under any applicable federal or state laws pertaining
to the exercise by the Beneficiary of such rights as the Beneficiary may
have, including but not limited to the right to deprive the Guarantor of or
affect the use or possession or enjoyment of any of the Guarantor's property
prior to the rendition of a final judgment against the Guarantor.
Section 14. Applicable Law. This Guaranty shall be governed by and
construed in accordance with Connecticut law.
Section 15. Venue and Personal Jurisdiction. The Guarantor hereby
consents and agrees that any action or proceeding arising directly,
indirectly or otherwise from this Guaranty shall be held within the State of
Connecticut and the Guarantor hereby consents and submits to such
jurisdiction and venue within the State of Connecticut and agrees that
mailing to Guarantor's last known address by registered mail of any process
shall constitute lawful process.
Section 16. Waiver of Jury. The Guarantor and the Beneficiary waive
any and all right to trial by jury in any action or proceeding relating in
any way to this Guaranty.
5
<PAGE>
Section 17. Failure or Indulgence not Waiver; Additional Rights of
Beneficiary. (a) No failure to exercise, and no delay in exercising, any
right, power or remedy hereunder on the part of the Beneficiary shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. Any waiver by the Beneficiary
of any right under this Guaranty must be in writing to be effective and shall
not be construed as a waiver of any subsequent breach thereof.
(b) The Beneficiary shall be entitled to injunctive relief in case of
the violation or attempted or threatened violation of any of the provisions
hereof, to a decree compelling performance of any of the provisions hereof,
and to any other remedies allowed in law or in equity.
Section 18. Acknowledgment: Other Waivers. The Guarantor acknowledges
that its officers and directors have read and understand the provisions of
this Guaranty and the Lease, and that the Beneficiary has made no
representation or warranty to them or to the Guarantor in respect of any
transaction contemplated hereby or thereby. The Guarantor hereby expressly
waives notice from the Beneficiary of its acceptance or reliance on this
Guaranty. The Guarantor also waives presentment and protest of any
instrument, and notice thereof, notice of default or dishonor, and all other
notices to which the Guarantor might otherwise be entitled.
Section 19. Notices. All notices, requests, demands and other
communications under this Guaranty or in respect hereof shall be in writing
and shall be hand delivered or mailed by first-class certified mail, postage
prepaid, to the parties hereto addressed as follows:
if to the Guarantor, to: Genzyme Transgenics Corporation
25 Birch Street
Milford, MA 01757
if to FINOVA, to: FINOVA Technology Finance, Inc.
10 Waterside Drive
Farmington, Connecticut 06032-3065
or to such other address as to a party hereto as such party shall designate
in a written notice to the other.
Section 20. Further Assurances. The Guarantor hereby agrees to execute
and deliver all such instruments and take such action as may from time to
time be reasonably requested by the Beneficiary in order fully to effectuate
the purposes of this Guaranty.
Section 21. Amendments. The terms of this Guaranty may not be altered,
modified, amended, supplemented or terminated in any manner whatsoever except
by written instrument signed by each party hereto.
Section 22. Counterparts. This Guaranty may be executed, accepted and
delivered in any number of counterparts, each of which shall be an original,
but such counterparts shall together constitute one and the same instrument.
6
<PAGE>
Section 23. Successors and Assigns. This Guaranty shall be binding
upon and shall inure to the benefit of the guarantor, the Beneficiary and
their respective heirs, executors, administrators, representatives,
successors and assigns. For the purposes of this Guaranty, "Lessee" shall
mean and include any successor of the Lessee including the Lessee as a debtor
in possession or any representative of the Lessee under the provisions of any
state or federal law governing bankruptcy, insolvency, receivership or
reorganization.
IN WITNESS WHEREOF, the parties have executed this Guaranty, as of the
day and year first above written.
Attest: GENZYME TRANSGENICS CORPORATION
(SEAL)
By:/s/ Lynnette C.Fallon By /s/ John B. Green
---------------------------- ----------------------------
Secretary/Assistant Secretary Its Vice President
Personally appeared John B. Green, Vice President of Genzyme Transgenics
Corporation signer and sealer of the foregoing instrument, and acknowledged
the same to be the free act and deed of said corporation executed pursuant to
a resolution of its Board of Directors, before me the 4th day of February,
1997.
/s/ Elaine B. Spinale
----------------------------------------
Notary Public
My Commission Expires: 11/17/2000
Accepted this 18th day of
March 1997 at
Farmington, Connecticut
FINOVA TECHNOLOGY FINANCE, INC.
By: /s/ Linda Moschitto
---------------------------
7
<PAGE>
Exhibit 10.49.1
LOAN AGREEMENT
THIS AGREEMENT made and entered into by and between TSI Redfield
Laboratories, Inc., an Arkansas corporation, ("Borrower"), and Simmons First
National Bank, a national banking association ("Lender"), WITNESSETH:
WHEREAS, Borrower has applied to Lender for a loan ("Loan") in the amount
of $1,050,000.00, to re-finance certain existing indebtedness and to provide
permanent financing for certain recently constructed improvements toBorrower's
operating facility in Redfield, Arkansas, and Lender has agreed to extend the
loan to Borrower upon certain conditions set forth herein.
NOW, THEREFORE, for and in consideration of the premises and other valuable
considerations, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed by and between the parties hereto as follows, to-wit:
l. Loan. Lender agrees to lend to Borrower up to the total sum of
$1,050,000.00 upon the conditions set forth herein.
2. Promissory Notes. Borrower will execute two (2) promissory notes to
evidence the indebtedness in the amount of $700,000.00 ("Note I") and
$350,000.00 ("Note II"). Note I shall bear interest at the rate of ten percent
(10%) per annum, be payable in twelve (12) monthly installments, the first
eleven (11) of which shall be in the amount of $9,250.55 each and the twelfth
(12th) and final installment in the amount of the outstanding principal and
accrued interest and shall contain Lender's customary terms and provisions.
Note II shall bear interest at the rate of ten percent (10%) per annum, be
payable in one hundred twenty (120) monthly installments, the first one hundred
nineteen (119) of which shall be in the amount of $4,625.28 each and the
one-hundred twentieth (120th) and final installment in the amount of the
outstanding principal and accrued interest and shall contain Lender's customary
terms and provisions.
3. Security. This indebtedness shall be secured by a mortgage
("Mortgage") on certain real property owned by the Borrower in Jefferson County,
Arkansas and a security interest in personal property belonging to Borrower as
described in that certain Security Agreement of even date here with. In
addition, Genzyme Transgenics Corporation ("GTC") and TSI Corporation,
affiliates of the Borrower, shall unconditionally guarantee all obligations of
the Borrower under all indebtedness of the Borrower to the Lender, including but
not limited to the Loan.
4. Financial Information. Borrower shall cause GTC to deliver to Lender
copies of its 10-Q and 10-K reports filed with the Securities and Exchange
Commission at the time such reports are so filed. Additionally, Borrower shall
furnish to Lender, from time to time, such financial information regarding the
operations and conditions of Borrower as may be reasonably requested by Lender.
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<PAGE>
5. Warranties, Representations and Covenants. Borrower warrants,
represents and covenants with and unto Lender that commencing upon the date
hereof and continuing until the repayment in full of all indebtedness evidenced
by Note I and Note II:
(a) Borrower shall remain in existence and in good standing with the State
of Arkansas.
(b) Borrower warrants and represents that there has been no material
adverse change in its financial condition since the date of the most recent
financial statements delivered to Lender.
(c) Borrower represents that on the date hereof and continuing through the
term of Note I and Note II, that the Borrower shall not: (i) have a receiver
appointed for all or any part of its assets; (ii) assign any of its properties
for the benefit of creditors; (iii) file any voluntary bankruptcy proceeding or
have been the object of any involuntary bankruptcy proceeding; and (iv) have
encountered any material adverse change in its financial condition or property
ownership.
(d) Borrower covenants, represents and warrants that to the extent it uses,
generates, manufactures, stores or disposes of, on, under or about the property
described in the Mortgage ("Property") or transports to or from the Property any
flammable explosives, radioactive materials, hazardous wastes, toxic substances,
or related materials (hereinafter "Hazardous Materials"), it will do so only in
full compliance with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.); the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.); the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); and all
other statutes and regulations governing, defining or regulating the manner and
method of storage, transportation or disposition of Hazardous Materials.
Borrower further agrees to indemnify and hold harmless Lender, its directors,
officers, employees and agents, from and against any and all liability (i)
including foreseeable and unforeseeable consequential damages, directly or
indirectly arising out of use, generation, storage or disposition of Hazardous
Materials by the Borrower or any operator of the Property during Borrower's
ownership thereof, and (ii) including, without limitation, the cost of any
required or necessary remediation, repair, cleanup or detoxification and the
preparation of any closure or other required plans, whether such action is
required or necessary prior to or following transfer of title to the Property,
to the full extent that such action is attributable, directly or indirectly, to
the presence or use, generation, storage, release, threatened release, or
disposal of Hazardous Materials by any person on the Property during Borrower's
ownership thereof, and the Borrower's obligations pursuant to this indemnity
shall survive satisfaction or discharge of this Loan and the Mortgage, and shall
survive, notwithstanding that the alleged liability of the Borrower shall be by
reason of any exercise by it of control or dominion over the Property or the
activities of the Borrower.
(f) Neither the Borrower nor any of the guarantors shall engage in or be
involved in any transaction, in which the majority ownership of the stock of
Borrower or TSI Corporation is acquired by any person, other than any person
which owned majority interest in such entity on the date of execution of this
Note, without the prior written consent of Lender.
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6. Default. A default by Borrower under the terms of this Agreement shall
constitute a default with regard to any and all indebtedness outstanding
hereunder and Lender may, at its option, thereupon immediately declare all such
indebtedness immediately due and payable, without notice, and may proceed to
enforce its rights and exercise its remedies under the Notes and under the
security therefor, together with any other rights and remedies Lender may have
at law or in equity.
7. Continuing Agreement. This Loan Agreement shall remain in effect
throughout the term of this loan and any promissory note or notes executed
pursuant hereto, and any extensions or renewals of this loan and shall apply
to all indebtedness of Borrower to Lender arising under this loan, even if in
excess of $1,050,000.00, the original principal amount.
IN WITNESS WHEREOF, the parties have hereunto placed their hands and seals
and caused this instrument to be executed this 22nd day of May, 1997.
TSI REDFIELD LABORATORIES, INC..
By /s/ John B. Green
---------------------------------
John B. Green, Treasurer
SIMMONS FIRST NATIONAL BANK
By: /s/ John W. Kelly
---------------------------------
Title: Vice President
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Exhibit 10.49.2
PROMISSORY NOTE
$700,000.00 Pine Bluff, Arkansas
May 22, 1997
For Value Received, the undersigned promise to pay to the order of Simmons
First National Bank, 501 Main Street, Pine Bluff, Arkansas, 71601, or at such
other address as the holder hereof may from time to time designate, the sum of
$700,000.00 bearing interest at the rate of ten percent (10%) per annum, to be
payable in thirteen (13) monthly installments of principal plus accrued interest
beginning on July 1, 1997, the first twelve (12) of which shall be in the amount
of $9,250.55 each, with the outstanding principal balance plus accrued interest
becoming due with the 13th and final installment. All installments shall be
applied first against accrued interest through the date of payment and the
balance of such installment shall be applied to reduce the outstanding principal
balance hereunder.
If any payment due hereunder is received ten (10) or more days after the
due date of such payment, the undersigned agrees to pay a late fee equal to the
lesser of $25.00 or 10% of the late payment. The maker herein, at his option,
may prepay the whole or any part of this note and on the part so paid the
running of interest shall stop at the date of such payment.
This note is secured by a Mortgage on certain real property in Jefferson
County, Arkansas, as more particularly described therein and a security
agreement on certain personal property, both of even date herewith, is
guaranteed by Genzyme Transgenics Corporation and TSI Corporation and is subject
to the terms of a Loan Agreement of even date herewith. If there shall be a
default in the payment of the indebtedness as aforesaid, or a default in the
provisions of the Mortgage or Security Agreement securing this note, the entire
unpaid indebtedness then due hereunder shall, at the option of the holder of
this note, become immediately due and payable without notice.
This note shall be governed by the terms of Article 3 of the Uniform
Commercial Code in effect in the State of Arkansas (A.C.A. Section 4-3-1 et
seq.), regardless of whether this instrument constitutes a negotiable instrument
thereunder.
The maker and endorser, if any, of this note hereby severally waive
presentment for payment, notice of nonpayment and protest and consent that the
time for payment of the above indebtedness or of any installment thereof may be
extended without notice and further, agree to pay a reasonable attorney's fee if
this note is placed in the hands of an attorney for collection.
TSI REDFIELD LABORATORIES, INC.
By /s/ John B. Green
------------------------------
John B. Green, Treasurer
<PAGE>
Exhibit 10.49.3
PROMISSORY NOTE
$350,000.00 Pine Bluff, Arkansas
May 22, 1997
For Value Received, the undersigned promise to pay to the order of Simmons
First National Bank, 501 Main Street, Pine Bluff, Arkansas, 71601, or at such
other address as the holder hereof may from time to time designate, the sum of
$350,000.00 bearing interest at the rate of ten percent (10%) per annum, to be
payable in one hundred twenty (120) monthly installments of principal plus
accrued interest beginning on July 1, 1997, the first one hundred nineteen (119)
of which shall be in the amount of $4,625.28 each, with the outstanding
principal balance plus accrued interest becoming due with the 120th and final
installment. All installments shall be applied first against accrued interest
through the date of payment and the balance of such installment shall be applied
to reduce the outstanding principal balance hereunder.
If any payment due hereunder is received ten (10) or more days after the
due date of such payment, the undersigned agrees to pay a late fee equal to the
lesser of $25.00 or 10% of the late payment. The maker herein, at his option,
may prepay the whole or any part of this note and on the part so paid the
running of interest shall stop at the date of such payment.
This note is secured by a Mortgage on certain real property in Jefferson
County, Arkansas, as more particularly described therein and a security
agreement on certain personal property, both of even date herewith, is
guaranteed by Genzyme Transgenics Corporation and TSI Corporation and is subject
to the terms of a Loan Agreement of even date herewith. If there shall be a
default in the payment of the indebtedness as aforesaid, or a default in the
provisions of the Mortgage or Security Agreement securing this note, the entire
unpaid indebtedness then due hereunder shall, at the option of the holder of
this note, become immediately due and payable without notice.
This note shall be governed by the terms of Article 3 of the Uniform
Commercial Code in effect in the State of Arkansas (A.C.A. Section 4-3-1 et
seq.), regardless of whether this instrument constitutes a negotiable instrument
thereunder.
The maker and endorser, if any, of this note hereby severally waive
presentment for payment, notice of nonpayment and protest and consent that the
time for payment of the above indebtedness or of any installment thereof may be
extended without notice and further, agree to pay a reasonable attorney's fee if
this note is placed in the hands of an attorney for collection.
TSI REDFIELD LABORATORIES, INC.
By /s/ John B. Green
-------------------------------
John B. Green, Treasurer
<PAGE>
Exhibit 10.49.4
MORTGAGE
KNOW ALL MEN BY THESE PRESENTS:
That for and in consideration of the sum of One Dollar cash in hand paid,
the receipt of which is hereby acknowledged, and the premises hereinafter set
forth, TSI Redfield Laboratories, Inc., ("Mortgagor"), does hereby grant,
bargain, sell and convey unto Simmons First National Bank, ("Mortgagee"), and
unto its successors and assigns forever, certain lands situated in Jefferson
County, Arkansas, as more particularly described on Appendix A Attached
hereto (hereinafter "Property").
Together with all buildings and other improvements now or hereafter
constructed on the Property and all and singular the tenements, hereditaments
and appurtenances thereunto belonging and all of the apparatus and fixtures
of every kind placed thereon for the purpose of supplying or distributing
heat, light, water, gas, power or air conditioning, including among other
things but without limitation, central heating and air conditioning systems,
electric wiring, electric light fixtures, hot water tanks, wash basins, water
closets, bath tubs, faucets, gas pipes, gas fixtures, window screens, door
screens, any shades, awnings, ornamental plants, shrubs and wall to wall
carpeting and also including built in dishwashers, cook tops and ovens
together with all similar apparatus or fixtures of any kind, similar or
dissimilar, in any building now or hereafter constructed upon the Property.
TO HAVE AND TO HOLD the same unto said Mortgagee, and unto its successors
and assigns forever, together with all improvements and all rights,
privileges and appurtenances thereunto belonging.
And Mortgagor does hereby covenant unto and with Mortgagee, its
successors and assigns, that Mortgagor is seized in fee simple of the said
real property included in this mortgage; that there are no liens or
encumbrances on the Property, other than as listed on Appendix B and that
Mortgagor will forever warrant and defend the title to the property hereby
mortgaged against the lawful claims of all persons whomsoever.
This conveyance, however, is made upon the following conditions, to-wit:
WHEREAS, this mortgage is given as security for an indebtedness, due
Mortgagee as is evidenced by two (2) promissory notes ("Notes") of Mortgagor
payable to Mortgagee of even date herewith, in the original principal amount
of $700,000 and $350,000, respectively, each bearing interest at the rate of
10% per annum, with interest and principal payable as set forth therein.
This conveyance is made to secure the prompt payment of the Notes, as and
when they become due, together with any and all renewals or extensions
thereof, and any other indebtedness which Mortgagor may come to owe Mortgagee
prior to the satisfaction or foreclosure of this mortgage, whether evidenced
by a note of the Mortgagor or by the records of the Mortgagee; and,
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WHEREAS, it is necessary to provide for the security of this mortgage and
to set forth certain understandings and conditions between Mortgagor and
Mortgagee with respect thereto, Mortgagor hereby covenants and agrees with
Mortgagee as follows:
1. Maintenance, Repair and Restoration of Improvements and Payment of
Prior Liens. Mortgagor shall (a) promptly repair, restore or rebuild any
buildings or improvements now or hereafter on the Property which may become
damaged or destroyed, except to the extent that such damage or destruction
shall be covered by insurance, in which event, the Mortgagee shall determine
whether the proceeds of such insurance coverage shall be used for repairs or
replacement or whether the same shall be applied against the outstanding
balance of one or both of the Notes hereby secured; (b) keep the Property in
good repair and condition, without waste committed thereon, and free from
liens of materialmen or mechanics or any other liens, except taxes not yet
due, not expressly subordinated to the lien hereof; (c) pay when due any
indebtedness which may be secured by a lien or charge on the Property which
is or might become superior to the lien hereof and upon request exhibit
satisfactory evidence of the discharge of such lien to the Mortgagee; and (d)
pay each item of indebtedness secured by this mortgage when due according to
the terms hereof.
2. Payment of Taxes. Mortgagor shall pay before penalty or default all
general taxes and any special assessments, water charges, sewer service
charges and other charges which accrue against the Property when due, and
shall, upon written request of the Mortgagee, furnish to the Mortgagee
duplicate receipts therefor. To prevent further default, the Mortgagor shall
pay in full and if necessary, under protest, any tax or assessment which the
Mortgagor may desire to contest.
In order to satisfy such obligation, the Mortgagor covenants and agrees
to deposit at a place to be designated by the Mortgagee, from time to time,
and in the absence of any specification, at the offices of the Mortgagee,
beginning on July 1, 1997, and on the first day of each month thereafter
until full payment of the indebtedness secured by this mortgage, a sum equal
to one-twelfth (1/12th) of the last total annual real property taxes and
special assessments on the Property or upon the anticipated taxes for the
next succeeding year to the extent that previous taxes have not included
improvements now or hereafter constructed upon the Property but based upon a
reasonable estimate as to the amount thereof (currently $2,433.51 per month).
In addition, Mortgagor upon execution of the Mortgage has deposited an
amount equal to six (6) monthly escrow payments, as necessary to cause the
escrow fund to contain a pro-rated current balance for 1997. Such deposits
shall be held, without interest, for the purpose of making payment, when due
and before default, of real property taxes and assessments on the mortgaged
premises. If the funds so deposited are insufficient to pay any such taxes
or assessments for any year when the same become due and payable, the
Mortgagor shall within ten (10) days after receipt of demand therefor deposit
such additional funds as may be necessary to pay such taxes or assessments in
full. If the funds so deposited shall exceed the amount required to pay real
property taxes or assessments for any years, such excess may be applied
toward subsequent payments on such future obligations.
3. Insurance. Mortgagor shall keep all buildings and improvements, now
or hereafter situated on the Property, insured against loss or damage by fire
and such other hazards as may
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reasonably be required by the Mortgagee, with standard mortgagee clauses
therein making the losses, if any, payable to the Mortgagee as its interest
may appear. All such insurance policies shall be in form, amount and issued
by companies satisfactory to the Mortgagee, and shall provide that the
coverage evidenced thereby shall not be terminated or modified materially
without ten (10) days prior written notice to the Mortgagee. Renewal
policies of insurance shall be delivered to the Mortgagee not less than ten
(10) days prior to the expiration date of the prior policies.
4. Adjustment of Losses and Application of Insurance Proceeds. In the
event of a loss by reason of an insured hazard to the improvements upon the
Property, the Mortgagee (or after entry of a decree of foreclosure, any
purchaser at the sale, or the decree creditor, as the case may be) is hereby
authorized either (a) to settle and adjust any claim under such insurance
policies without the Mortgagor's consent or joinder, or (b) to allow
Mortgagor to agree with the insurance company or companies on the amount to
be paid upon the loss. In either case, the Mortgagee is hereby fully
authorized and empowered to collect and receipt for any such insurance
proceeds. At the Mortgagee's option, insurance proceeds may either be
applied to the reduction of the indebtedness hereby secured, whether or not
due, or may be held by the Mortgagee and used to reimburse the Mortgagor for
the costs of rebuilding or restoring the buildings and improvements on the
Property.
In case of loss after foreclosure proceedings have been instituted, the
proceeds of any such insurance policy or policies, if not applied in
rebuilding or restoring the buildings or improvements upon the Property,
shall be used to pay the amount due in accordance with any decree of
foreclosure that may be entered in any such proceedings, and the balance, if
any, shall be paid to the owner of the equity of redemption, if such owner
shall then be entitled to the same or as the court may direct.
5. Effect of Extensions of Time. If the payment of said indebtedness or
any part thereof be extended or varied or if any part of the security is
released, all persons now or at any time hereafter liable therefor, or
interested in the Property, shall be held to agree to such extension,
variation or release, and their liability under the Notes, the lien created
hereunder and all provisions hereof shall continue in force, the right of
recourse against all such persons being expressly reserved by the Mortgagee,
notwithstanding such extension, variation or release.
6. Effect of Changes in Laws Regarding Taxation. In the event of the
enactment, after the date hereof, of any law of the State of Arkansas
deducting from the value of land, for the purpose of taxation, any
improvements thereon, or imposing upon the Mortgagee the obligation for the
payment of the whole or any part of the taxes, assessments, charges or liens
herein required to be paid by the Mortgagor, or imposing any taxation of
mortgages or debts secured by mortgages or any interest of the Mortgagee in
the Property, or in the manner of collection of taxes so as to affect this
mortgage or the debt secured hereby or the holder hereof, then in such event,
the Mortgagor, upon demand by the Mortgagee, shall pay such taxes or
assessments, or reimburse the Mortgagee therefor; provided, however, that if
in the opinion of counsel for the Mortgagee (a) it might be unlawful to
require Mortgagor to make such payment or (b) the making of any such payment
might result in the imposition of interest beyond the maximum amounts
permitted by law, then and in such event, the Mortgagee may elect, by notice
in writing, given to the Mortgagor, to declare all of the indebtedness
secured hereby to be due and payable sixty (60) days from and after the date
notice was given.
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7. Mortgagee's Performance of Defaulted Acts. In case of a default
herein by Mortgagor, the Mortgagee may, at its option, make any payment or
perform any act herein required of the Mortgagor in any form and in any
manner which it deems expedient, including the making of any full or partial
payments of principal and interest on prior encumbrances, if any, and may
purchase, discharge, compromise or settle any tax lien or other prior liens
or title or claim thereof, or redeem from any tax sale or forfeiture
affecting the Property or contest any tax or assessment, but all without any
obligation to do so. All moneys paid for any of the purposes herein
authorized and all expenses paid or incurred in connection therewith by the
Mortgagee, including attorneys fees, and any other moneys advanced by the
Mortgagee to protect the Property and the lien hereof, shall be additional
indebtedness secured hereby, and shall become immediately due and payable
without notice and with interest thereon at the highest legal rate of
interest per annum from the date of payment until repaid. Any inaction by the
Mortgagee shall not be construed as a waiver of any right granted hereunder
upon any default by Mortgagor.
8. Mortgagee's Reliance on Tax Bills. The Mortgagee in making any
payment hereby authorized: (a) relating to taxes and assessments, may do so
according to any bill, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of such bill, statement or
estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof; or (b) for the purchase, discharge,
compromise or settlement of any other prior lien, may do so without inquiry
as to the validity or amount of any claim for lien which may be asserted.
9. Acceleration of Indebtedness in Case of Default. If (a) default be
made for thirty (30) days in the due and prompt payment of one or both of the
Notes secured hereby, or any installment due in accordance with the terms
thereof, either of principal or interest, or any part thereof; or (b) the
Mortgagor shall file a petition under any bankruptcy law or have such a
petition filed against it, shall have a receiver appointed for any of its
assets, shall file any answer or responsive pleadings admitting insolvency or
inability to pay any of its indebtedness, or fail to obtain a vacation or
stay of any involuntary proceedings in solvency or bankruptcy against it
within thirty (30) days, as herein provided; or (c) all or any part of its
property shall be taken by execution, levy or any other involuntary
proceedings, or any court shall have taken jurisdiction of the property of
the Mortgagor or the major part thereof for reorganization, dissolution,
liquidation or winding up of its affairs, and such trustee or receiver shall
not be discharged or such jurisdiction relinquished or vacated or stayed on
appeal or otherwise stayed within thirty (30) days; or (d) the Mortgagor
shall make any assignment for the benefit of its creditors or shall admit in
writing its inability to pay its debts generally as they become due, or shall
consent to the appointment of a receiver or trustee or liquidator of all of
its property or the major part thereof; or (e) default shall be made in due
observance or performance of any other of the covenants, agreements, or
conditions, herein contained, required to be kept or performed or observed by
the Mortgagor and the same shall continue for thirty (30) days, then the
entire indebtedness hereby secured shall, at the option of the Mortgagee,
immediately become due and payable together with the accrued interest thereon
without notice to the Mortgagor, provided, however, that with respect to (c),
(d), and (e) notice of the claimed default has been given to the Mortgagor by
the Mortgagee within the time specified and the default has not been cured.
10. Foreclosure and Expense of Litigation. When the indebtedness hereby
secured, or any part thereof, shall become due, whether by acceleration or
otherwise, Mortgagee shall have the right
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to foreclose the lien hereof for such indebtedness or part thereof. In any
suit to foreclose the lien hereof, there shall be allowed and included an
additional indebtedness in the decree for sale all expenditures and expenses
which may be paid or incurred by or on behalf of the Mortgagee for attorneys
fees, appraisal charges, documentary and expert evidence, stenographer
charges, publication costs, and any costs, which may be estimated, for
procuring abstracts of title, title searches and examinations, title
insurance policies, and similar data and assurances with respect to title, as
the Mortgagee may deem reasonably necessary, either to prosecute such suit or
to evidence to bidders at any sale which may be made pursuant to such decree
the true condition of the title to or the value of the premises. All
expenditures and expenses of the nature set forth in this paragraph, and such
expenses and fees as may be incurred in the protection of the Property and
the maintenance of the lien of this mortgage, including the fees of any
attorney employed by the Mortgagee in any litigation or proceeding affecting
this mortgage, the Notes or the Property, including bankruptcy proceedings,
or in preparations for the commencement or defense of any proceedings or
threatened suit or proceeding, shall be immediately due and payable by the
Mortgagor, with interest thereon at the highest legal rate of interest per
annum, from the date expended until repaid and shall be secured by this
mortgage.
11. Application of Proceeds of Foreclosure Sale. The proceeds of any
sale at foreclosure of the Property shall be distributed and applied in the
following order of priority, subject to the decree of a court of competent
jurisdiction. First, for all costs and expenses incident to the foreclosure
proceedings, including all items as are mentioned in Paragraph 10 hereof;
second, all other items which under the terms hereof constitute secured
indebtedness additional to that evidenced by the Notes, with interest thereon
as herein provided; third, all principal and interest remaining unpaid on the
Notes with equal priority; fourth, any surplus to Mortgagor, its successors
or assigns, as its rights may appear.
12. Appointment of a Receiver. Upon, or at any time after, the filing
of a complaint to foreclose this mortgage, the court may appoint a receiver
of the Property. Such appointment may be made either before or after sale,
with or without notice, and without regard to the insolvency or solvency of
the Mortgagor at the time of the application for such receiver and without
regard to the then value of the Property. Such receiver shall have the power
to collect the rents, issues and profits of the Property during the pendency
of any such foreclosure suit and, in case of a sale and a deficiency, up to
time when possession shall be given to the purchaser at such foreclosure
sale, and all other powers which may be necessary or are usual in such cases
for the protection, possession, control, management and operation of the
Property during the whole of said period. The court from time to time may
authorize the receiver to apply the net income in its hands in payment in
whole or in part to (a) the indebtedness secured hereby, or by any decree
foreclosing this mortgage, or any tax, special assessment or other lien which
may be or become superior to the lien hereof or of such decree, provided such
application is made prior to foreclosure sale; and (b) the payment of the
deficiency in case of a sale under foreclosure and a deficiency judgment.
13. Assignment of Rents. To further secure the indebtedness secured
hereby, the Mortgagor does hereby sell, assign and transfer unto the
Mortgagee all of the rents, issues and profits, now due and which may
hereafter become due, under or by virtue of any lease, whether written or
oral, or any letting of, or of any agreement for the use or occupancy of the
premises or any part thereof, which may have been heretofore or may be
hereafter made or agreed
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to or which may be made or agreed to by the Mortgagee under the powers herein
granted, it being the intention hereby to establish an absolute transfer and
assignment of all of such leases and agreements, and all the avails
thereunder, unto the Mortgagee, and the Mortgagor does hereby irrevocably
appoint the Mortgagee as its true and lawful attorney and agent in its name
and stead (with or without the taking of possession of the Property as
authorized under Paragraph 14 hereof) to rent, lease and let all or any
portion of the Property to any party or parties at such rent and upon such
terms as the Mortgagee shall, in its discretion, determine, and to collect
all rents, issues and profits arising from or accruing hereafter, and all now
due or that may hereafter become due under each of the leases and agreements,
written or oral, or other tenancy existing, or which may hereafter exist on
the Property, with the same rights and powers and subject to the same
immunities, exoneration of liability and rights of recourse and indemnity set
forth in the provisions of Paragraph 14 hereof.
The Mortgagor represents and agrees that no rent has been or will be paid
by any person in possession of any portion of the Property for more than one
installment in advance and that the payment of none of the rents to accrue
for any portion of the Property has been or will be waived, released,
reduced, discounted or otherwise discharged or compromised by the Mortgagor.
The Mortgagor waives any right of set-off against any person in possession of
any portion of the Property. If any lease provides for the abatement of
rentals during repairs of the premises demised thereunder by reason of fire
or other casualty, the Mortgagor shall furnish to the Mortgagee rental
insurance, the policies to be in amounts and forms and written by such
insurance companies as shall be satisfactory to the Mortgagee. The Mortgagor
agrees that it will not assign any of the rents or profits of the Property,
except to a purchaser or grantee of premises.
Nothing herein contained shall be construed as constituting the Mortgagee
a Mortgagee in possession in the absence of the actual taking of possession
of the Property by the Mortgagee pursuant to Paragraph 14 hereof. In the
exercise of the powers herein granted to the Mortgagee, no liability shall be
asserted or enforced against the Mortgagee, all such liability being
expressly waived and released by the Mortgagor.
The Mortgagor further agrees to assign and transfer to the Mortgagee all
future leases upon all or any part of the Property and to execute and
deliver, at the request of the Mortgagee, all such further assurances and
assignments in the premises as the Mortgagee shall from time to time require.
Although it is the intention of the parties that the assignment contained
in this Paragraph 13 shall be a present assignment, it is expressly
understood and agreed anything herein contained to the contrary
notwithstanding, that the Mortgagee shall not exercise any of the rights or
powers conferred upon it by this Paragraph 13 until a default shall exist
hereunder.
So long as any part of the obligation hereby secured remains unpaid, the
Mortgagor, with respect to each such lease assigned hereunder, will not
modify nor in any way alter the terms of the lease; will not terminate the
term of the lease nor accept a surrender thereof unless required to do so by
the terms of the lease; will not waive nor release the lessee from any
obligations or conditions to be performed, and will, as lessor, fulfill or
perform each and every condition and covenant in the lease by the lessor to
be fulfilled or performed and to take every action required on its part to
preserve and continue the lease in force.
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14. Mortgagee's Right of Possession in Event of Default. In any case in
which under the provisions of this mortgage, the Mortgagee has a right to
institute foreclosure proceedings, whether before or after acceleration of
the entire balance of the principal secured hereby in accordance with its
option so to do, or whether before or after the institution of legal
proceedings to foreclose the lien hereof or before or after sale thereunder,
forthwith, upon demand of the Mortgagee, the Mortgagor shall surrender to the
Mortgagee and Mortgagee shall be entitled to take actual possession of the
Property or any part thereof personally, or by its agents or attorneys, as
for a condition broken, and the Mortgagee, in its discretion may, with or
without force and with or without process of law, enter upon and take and
maintain possession of all or any part of the Property, together with all
documents, books, records, papers and accounts of the Mortgagor or the then
owner of the premises relating thereto, and may exclude the Mortgagor, its
agents or servants wholly therefrom and may as attorney-in-fact or agent of
the Mortgagor, or in its own name as Mortgagee and under the powers herein
granted, hold, operate, manage, and control the Property and conduct the
business, if any, thereof, either personally or by its agents, and with full
power to use such measures, legal or equitable, as in its discretion or in
the proper discretion of its successors or assigns may be deemed proper or
necessary to enforce the payment or security of the rents, issues and profits
of the Property, including action for the recovery of rents, action in
unlawful detainer and actions in distress for rent, hereby granting full
power and authority to exercise each and every of the rights, privileges and
powers herein granted at any and all times hereafter, without notice to the
Mortgagor, and with full power to cancel or terminate any lease or sublease
for any cause on any ground which would entitle the Mortgagor to cancel the
same, to elect to disaffirm any lease or sublease made subsequent to this
mortgage or subordinated to the lien hereof, to make all necessary or proper
repairs, decorating, renewals, replacements, alterations, additions and
improvements to the Property as it may deem judicious, insure and reinsure
the same and all risks incident to Mortgagee's possession, operation and
management thereof and to receive all of such rents, issues and profits.
The Mortgagee shall not be obligated to perform or discharge, nor does it
hereby undertake to perform or discharge, any obligation, duty or liability
under any lease, and the Mortgagor shall and does hereby agree to indemnify
and hold the Mortgagee harmless of and from any and all liability, loss or
damage which it may incur under any such leases or by reason of the
assignment thereof and from any and all claims and demands whatsoever which
may be asserted against it by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants
or agreements contained in the leases. Should the Mortgagee incur any such
liability, loss or damage, under the leases or under or by reason of the
assignment thereof, or in the defense of any claims or demands, the amount
thereof including costs, expenses and reasonable attorneys fees, shall be
hereby secured, and the Mortgagor shall reimburse the Mortgagee therefor
immediately upon demand.
15. Application of Income Received by Mortgagee. The Mortgagee in the
exercise of the rights and powers hereinabove conferred upon it by Paragraph
13 and 14 hereof shall have full power to use and apply the rents, issues and
profits of the premises to the payment of or on account of the following, in
such order as the Mortgagee may determine: (a) to the payment of the
operating expenses of Property, including the cost of management and leasing
thereof (which shall include reasonable compensation to the Mortgagee and its
agents or agent, if management be delegated to an agent or agents, and shall
also include lease commissions and other compensations and expenses of
seeking and procuring tenants and entering into leases), established claims
for damages, if any,
7
<PAGE>
and premiums on insurance hereinabove authorized; (b) to the payment of taxes
and special assessments now due or which may hereafter become due on the
Property; (c) to the payment of all repairs, decorating, renewals,
replacements, alterations, additions, betterments and improvements on the
Property, including the cost of installing or replacing air conditioning or
heating units therein, and of placing said property in such condition as
will, in the judgment of the Mortgagee, make it readily rentable; (d) to the
payment of any indebtedness secured hereby or any deficiency which may result
from a foreclosure sale.
16. Environmental and Industrial Hygiene Compliance. Mortgagor
covenants, represents and warrants that to the extent it uses, generates,
manufactures, stores or disposes of, on, under or about the Property or
transports to or from the Property any flammable explosives, radioactive
materials, hazardous wastes, toxic substances, or related materials
(hereinafter "Hazardous Materials"), it will do so only in full compliance
with the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601 et seq.); the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801, et seq.); the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.); and all other
statutes and regulations governing, defining or regulating the manner and
method of storage, transportation or disposition of Hazardous Materials.
Mortgagor further agrees to indemnify and hold harmless the Mortgagee, its
directors, officers, employees and agents, from and against any and all
liability (i) including foreseeable and unforeseeable consequential damages,
directly or indirectly arising out of use, generation, storage or disposition
of Hazardous Materials by the Mortgagor or any operator of the Property
during Mortgagor's ownership thereof, and (ii) including, without limitation,
the cost of any required or necessary remediation, repair, cleanup or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following transfer
of title to the Premises, to the full extent that such action is
attributable, directly or indirectly, to the presence or use, generation,
storage, release, threatened release, or disposal of Hazardous Materials by
any person on the Property during Mortgagor's ownership thereof, and the
Mortgagor's obligations pursuant to this indemnity shall survive satisfaction
or discharge of this Mortgage, and shall survive, notwithstanding that the
alleged liability of the Mortgagee shall be by reason of any exercise by it
of control or dominion over the Property or the activities of the Mortgagor.
17. Mortgagee's Right of Inspection. The Mortgagee shall have the right
to inspect the mortgaged property at all reasonable times and access thereto
shall be permitted for that purpose.
18. Release. The Mortgagee shall release this instrument and the lien
hereof by proper instrument upon payment and discharge of all indebtedness
hereby secured and the payment of all costs to the Mortgagee for the
execution and recording of any such release.
19. Condemnation. Mortgagor hereby assigns, transfers and sets over
unto Mortgagee the entire proceeds of any award or any claim for damages for
any of the Property taken or damaged under the power of eminent domain or by
condemnation. Mortgagee may elect to apply the proceeds of the award upon or
in reduction of the indebtedness secured hereby, whether or not due, or to
require Mortgagor restore or rebuild, in which event the proceeds shall be
held the Mortgagee and used by it to reimburse the Mortgagor for the costs of
rebuilding or restoring of buildings or improvements on the Property, in
accordance with plans and specifications to be submitted to and approved, in
advance, by the Mortgagee. If the Mortgagor is obligated to restore or
replace the damaged or destroyed buildings or improvements under the terms of
any lease or leases which are or may be prior to the lien of this mortgage
and if such taking does not result in cancellation or
8
<PAGE>
termination of such lease, the award shall be used to reimburse the Mortgagor
for the cost of rebuilding or restoring of buildings or improvements on the
Property, provided the Mortgagor is not then in default under this mortgage.
In the event the Mortgagor is required or authorized, either by Mortgagee's
election, or by virtue of any such lease, to rebuild or restore, the proceeds
of the award shall be paid out in the same manner as provided in Paragraph 4
hereof for the payment of insurance proceeds toward the cost of rebuilding or
restoration. If the amount of such award is insufficient to cover the cost
of rebuilding or restoration, the Mortgagor shall pay such cost in excess of
the award before being entitled to reimbursement out of the award. Any
surplus which may remain out of rebuilding or restoration shall, at the
option of the Mortgagee, be applied to the indebtedness hereby secured or be
paid to any other party entitled hereto.
20. Giving of Notice. Any notice which either party may desire or be
required to give to the other party shall be in writing and the mailing
thereof by certified mail addressed to the Mortgagor at its telephone book
address or to the Mortgagee at its principal place of business or at such
other place as either party may by notice in writing designate as a place for
service of notice.
21. Waiver of Defenses and Statutory Rights. No action for the
enforcement of the lien or of any provision hereof shall be subject to any
defense which would not be available to the party interposing the same in an
action at law upon one or both of the Notes hereby secured. Mortgagor agrees
that it will not apply for or avail itself of any appraisement, stay,
valuation, extension or exemption laws or so-called "moratorium laws", now
existing or hereafter enacted, in order to prevent or hinder the enforcement
or foreclosure of this mortgage, and hereby waives the benefit of such laws,
and the Mortgagor specifically waives all rights of appraisement and
redemption and particularly all rights of redemption from any sale made by
decree of court upon foreclosure.
22. Successive Effect of the Obligations of this Mortgage. This
mortgage and all provisions hereof shall extend to and be binding upon the
Mortgagor and all persons claiming by, through or under the Mortgagor, and
the word "Mortgagor" when used herein shall include all persons liable for
the payment of the indebtedness secured hereby or any part thereof, whether
or not such persons shall have executed the Notes or this mortgage. The word
"Mortgagee" when used herein shall include the successors and assigns of the
Mortgagee named herein, and the holder or holders, from time to time, of
either or both of the Notes secured hereby.
23. Nonassumibility. Upon the sale or transfer of the Property, or any
part thereof, the entire outstanding principal balance and accrued interest
under the Notes shall, at the option of the Mortgagee, become immediately due
and payable.
24. Captions. The captions and headings of various paragraphs of this
mortgage are for convenience only and are not to be construed as defining or
limiting in any way, the scope or intent of the provisions hereof.
9
<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed
this 22nd day of May, 1997.
TSI REDFIELD LABORATORIES, INC.
By /s/ John B. Green
----------------------------------
John B. Green, Treasurer
ACKNOWLEDGEMENT
STATE OF ARKANSAS )
COUNTY OF Jefferson ) SS
BE IT REMEMBERED, that on this day appeared in person before me, the
undersigned, a Notary Public within and for the county and state aforesaid,
duly commissioned, qualified and acting, the within named John B. Green, to
me well known, who stated that he was the Treasurer of TSI Redfield
Laboratories, Inc., and that he was duly authorized in that capacity to
execute the foregoing instrument and that he had so executed the same for the
consideration and purposes therein mentioned and set forth, and I do hereby
so certify.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal as
such Notary Public this 22nd day of May 1997.
Alicia J. Kitchens
---------------------------------
Notary Public
My commission expires:
7-01-04
- ----------------------
10
<PAGE>
Exhibit 10.49.5
SECURITY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
In consideration of a loan extended by Simmons First National Bank
("Secured Party"), to TSI Redfield Laboratories, Inc. ("Debtor"), Debtor hereby
grants to Secured Party a security interest in the property described on Exhibit
"A" attached hereto ("Collateral"), and any proceeds of the future sale thereof.
The security interest herein granted is given for the purpose of providing
security for two (2) promissory notes ("Notes") in the original principal amount
of $700,000.00 and $350,000.00, respectively, bearing interest and becoming due
and payable as set forth therein, and any other indebtedness of whatsoever kind
or nature which is currently or may hereafter be due and owing from the Debtor
to the Secured Party.
In order to provide better security and protection for the Secured Party,
Debtor hereby warrants and covenants that:
1. LOCATION OF COLLATERAL. The Collateral will be kept and maintained at
its place of business, in Redfield, Arkansas, subject to the Debtor's right to
move and use the Collateral in the ordinary course of its business within the
State of Arkansas and that the Debtor will promptly notify Secured Party of any
permanent change in the location of the Collateral within the State of Arkansas
and will not permanently remove the Collateral from the State of Arkansas
without the written consent of the Secured Party.
2. PROHIBITION OF SALE OF COLLATERAL. The Debtor will not sell, offer for
sale, or transfer the Collateral or any interest therein, without the consent in
writing of the Secured Party.
3. INSURANCE. Debtor will have and maintain hazard insurance at all times
with respect to the insurable Collateral against all usual and ordinary risks,
including fire, theft, storm, collision and any other risks as the Secured Party
may require, pursuant to policies containing such terms, in such form, for such
periods, and by such companies as may be satisfactory to the Secured Party. The
proceeds of such insurance shall be payable to the Secured Party and the Debtor
as their respective interests may appear, and all policies of insurance shall
provide for a minimum of ten (10) days written notice to the Secured Party of
cancellation. Debtor shall furnish Secured Party with certificates or other
evidence satisfactory to Secured Party of compliance with the foregoing
insurance requirements and Secured Party is hereby authorized to act as
attorney-in-fact for and on behalf of Debtor in obtaining, adjusting, settling,
canceling, and releasing such insurance or any claims in connection therewith
and to endorse any check or draft in connection therewith for and on behalf of
the Debtor.
4. PROHIBITION OF ADVERSE LIENS. Except for liens in existence on the
date hereof, Debtor will keep the Collateral free from any additional adverse
lien, security
<PAGE>
interest, or encumbrance and in good condition and repair, and will not cause
or permit waste or destruction of the Collateral or any part thereof. Debtor
will not use the Collateral in violation of any statute or ordinance.
Secured Party may examine and inspect the Collateral at any time and wherever
located.
5. TAXES. Debtor will promptly pay when due all taxes and licenses upon
the Collateral or for its use or operation. Provided, Secured Party may, at its
option, discharge any taxes, liens, security interests, or other encumbrances at
any time placed or levied on the Collateral, may pay for insurance thereon, and
may pay for the maintenance and preservation of the Collateral. Debtor agrees
to reimburse Secured Party on demand for any such payments made or expenses
incurred by Secured Party pursuant to this authorization and to pay the cost of
collection hereof, including a reasonable attorney's fee for Secured Party's
attorneys.
6. POSSESSION OF COLLATERAL. Until a default hereunder, Debtor may have
possession of the Collateral subject hereto and use same in any lawful manner
not inconsistent with this agreement and not inconsistent with any policy of
insurance thereon.
7. DEFAULT. Debtor shall be in default under this agreement and the Notes
which it secures, upon the happening of any of the following events or
conditions:
(a) Default in payment or performance of any obligation, covenant or
liability contained or referred to in the Loan Agreement, Mortgage, Notes
or herein.
(b) Any warranty, representation, or statement made to Secured Party by or
on behalf of Debtor proves to have been false in any material respect when
made.
(c) Any event which results in the acceleration of the maturity of the
indebtedness of Debtor to others under any note, agreement, or undertaking
in excess of $100,000.
(d) Loss, theft, damage, destruction, sale, or encumbrance to or of any of
the Collateral, except as herein specifically authorized, or the making or
occurrence of any levy, seizure, or attachment thereof or thereon.
(e) Death, dissolution, termination of existence, insolvency, business
failure, appointment of receiver for any part of the property of the
Debtor, assignment for the benefit of creditors by, or the commencement of
any proceedings under any bankruptcy or insolvency laws by or against
Debtor, or any guarantor or surety for the Debtor.
Upon the occurrence of any such event of default and at any time
thereafter, Secured Party may, in addition to acceleration of the
indebtedness hereby secured, proceed with any of the remedies of a secured
party as provided in the Uniform Commercial Code of the State of Arkansas.
Secured Party may require the Debtor to assemble the Collateral and make it
available to the Secured Party at a place designated by the Secured Party
which is reasonably convenient to both parties. If the Collateral is
perishable or threaten to decline speedily in
<PAGE>
value or is of a type customarily sold on a recognized market, no notice of
such sale shall be given by the Secured Party to the Debtor. Otherwise,
Secured Party will give Debtor reasonable notice of the time and place of any
public sale or of the time after which any private sale or other intended
disposition is to be made. The requirements of a reasonable notice hereunder
shall be met if such notice is mailed by ordinary mail, postage prepaid,
addressed to the Debtor at its telephone book address or business address
first shown herein at least five (5) days before the time of such sale or
disposition. The expenses of taking, holding, preparing and selling the
Collateral shall include Secured Party's reasonable attorney's fees and legal
expenses.
8. WAIVER. No waiver by the Secured Party of any default shall operate as
a waiver of any other default or of the same default on a future occasion.
9. ASSIGNMENT. All rights of the Secured Party in, to and under this
agreement, the Notes and the Collateral shall pass to and may be exercised by
any assignee of one or both of the Notes and this agreement. Debtor agrees
that, in the event of an assignment of the Notes and this agreement and upon
receipt by the Debtor of notice of such assignment, the liability of the Debtor
to a holder for value of either or both of the Notes shall be immediate and
absolute and not affected by any default of the Secured Party. Debtor further
warrants that it will not set up any claim against the assigned party as a
defense, counterclaim, or set-off to any action for the unpaid balance owed
under the Notes or for possession brought by any such holder. All obligations
of the Debtor shall bind its successors or assigns.
IN WITNESS WHEREOF, the Debtor has executed this Security Agreement on this
22nd day of May, 1997.
TSI REDFIELD LABORATORIES, INC.
By /s/ John B. Green, Treasurer
----------------------------
John B. Green, Treasurer
<PAGE>
Exhibit 10.49.6
UNCONDITIONAL GUARANTY
KNOW ALL MEN BY THESE PRESENTS:
For a valuable consideration and specifically for the purpose of inducing
Simmons First National Bank, a national banking institution, ("Lender") to loan
and to continue to loan funds to TSI Redfield Laboratories, Inc., an Arkansas
corporation ("Borrower"), the undersigned ("Guarantor"), does hereby agree for
itself, its successors and assigns with and unto the Lender as follows:
1. Guarantee of Payment. The Guarantor hereby unconditionally guarantees
the full and timely payment of all indebtedness of every kind and nature of the
Borrower to the Lender, direct or indirect, without limit as to the amount of
such indebtedness, whether now existing or hereinafter incurred, whether or not
such indebtedness shall be similar or dissimilar, related or unrelated to any
existing indebtedness, including but not limited to an indebtedness evidenced by
two promissory notes in the amount of $700,000.00 and $350,000.00, of even date
herewith (collectively "Indebtedness").
2. Guarantee of Performance. The Guarantor further unconditionally
guarantees prompt, timely, and complete performance of and compliance by
Borrower of all the terms and conditions contained in any of the instruments and
documents, including but not limited to promissory notes, mortgages, security
agreements, pledges and collateral assignments ("Loan Documents"), given in
connection with the origination, extension or collection of the Indebtedness;
the timely payment of all real and personal property taxes, special assessments,
and premiums for insurance of every kind required under the terms of any of the
Loan Documents; and generally, the performance of each and every other covenant
and condition set forth and contained in the Loan Documents.
3. Waivers of Notice and Additional Authority. The Guarantor waives
notice of any default by Borrower upon the Indebtedness or of any transfer of
the title to any property securing any of the Indebtedness pursuant to any Loan
Document, and the Lender, or the holder of any note evidencing any of the
Indebtedness, shall not be required to resort to any collateral other than this
guaranty or attempt to recover upon the liability of Borrower in any way as a
condition prerequisite to recovering upon this Guaranty. The Lender and any
subsequent holder of any note evidencing any of the the Indebtedness, may,
without notice to the Guarantor, deal with the Borrower, or any one on its
behalf or if title to any property shall have been transferred, the owner
thereof, from time to time with respect to any of the Indebtedness and the
security therefor in any manner whatsoever, including the release of any obligor
or of any of the collateral, and Guarantor hereby specifically waives each and
every defense predicable upon such dealing including, without limitation, the
release of any part of the security for any of the Indebtedness or any of the
obligors thereon, except the defense of actual payment in cash on the
Indebtedness.
4. Continuation of the Guaranty. This Guaranty shall continue with
respect to the Indebtedness, and all continuations, extensions or renewals
thereof, in favor of the Lender and all subsequent holders of any note
evidencing any of the Indebtedness, notwithstanding that the
<PAGE>
Borrower shall have conveyed its title and notwithstanding that other obligors
may have assumed or guaranteed payment. It is understood and agreed that this
Guaranty shall, in all respects, run in favor of the holders of any note
evidencing any of the Indebtedness and notice to the Guarantor of any transfer,
endorsement or assignment of any such note shall not be required.
5. Waiver of Acceptance. The Guarantor further waives notice of the
acceptance of this Guaranty by the Lender and presentment, demand, notice of
nonpayment, notice of extension of the time of payment or of any dealings with
any obligor or any collateral.
6. Additional Covenants of Guarantor. The Guarantor agrees that the
liability of the Guarantor hereunder shall not in anyway be released,
diminished, impaired, reduced, or affected by:
(a) The taking or accepting of any other security or guaranty for any or
all of the Indebtedness;
(b) Any release, withdrawal, surrender, exchange, substitution,
subordination, or loss of any security or other guaranty at any time existing in
connection with any or all of the Indebtedness; any partial release of the
liability of any other Guarantor hereunder or under any of the Loan Documents
had, or to be had, in connection with, or as security for, any of the
Indebtedness, or the corporate dissolution, insolvency, bankruptcy, disability,
or lack of authority of Borrower, Guarantor, or any other guarantor or any party
at any time liable for the payment of any or all of the Indebtedness, whether
now existing or hereafter occurring;
(c) Any renewal, extension, modification, or rearrangement of the payment
of any or all of the Indebtedness, or the performance of any covenant contained
in any Loan Document had, or to be had, in connection with, or as security for,
the Indebtedness, either with or without notice to, or consent of, such
Guarantor or any adjustment, indulgence, forbearance, or compromise that may be
granted or given by Lender to any party; or
(d) Any neglect, delay, omission, failure, or refusal of Lender to take or
prosecute any action for the collection of any of the Indebtedness or to
foreclose or take or prosecute any action in connection with any lien, right, or
security existing or to exist in connection with, or as security for, any of the
Indebtedness; or to take any action hereunder; it being the intention hereof
that Guarantor shall remain liable as principal until the full amount of the
Indebtedness, together with interest, and any other sums due or to become due
upon or in connection with any of the same, shall have been fully paid,
performed and observed by Borrower.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed this 22nd day of May, 1997.
TSI CORPORATION, INC.
By /s/ John B. Green, Treasurer
-----------------------------
John B. Green, Treasurer
<PAGE>
Exhibit 10.49.7
UNCONDITIONAL GUARANTY
KNOW ALL MEN BY THESE PRESENTS:
For a valuable consideration and specifically for the purpose of inducing
Simmons First National Bank, a national banking institution, ("Lender") to
loan and to continue to loan funds to TSI Redfield Laboratories, Inc., an
Arkansas corporation ("Borrower"), the undersigned ("Guarantor"), does hereby
agree for itself, its successors and assigns with and unto the Lender as
follows:
1. Guarantee of Payment. The Guarantor hereby unconditionally
guarantees the full and timely payment of all indebtedness of every kind and
nature of the Borrower to the Lender, direct or indirect, without limit as to
the amount of such indebtedness, whether now existing or hereinafter
incurred, whether or not such indebtedness shall be similar or dissimilar,
related or unrelated to any existing indebtedness, including but not limited
to an indebtedness evidenced by two promissory notes in the amount of
$700,000.00 and $350,000.00, of even date herewith (collectively
"Indebtedness").
2. Guarantee of Performance. The Guarantor further unconditionally
guarantees prompt, timely, and complete performance of and compliance by
Borrower of all the terms and conditions contained in any of the instruments
and documents, including but not limited to promissory notes, mortgages,
security agreements, pledges and collateral assignments ("Loan Documents"),
given in connection with the origination, extension or collection of the
Indebtedness; the timely payment of all real and personal property taxes,
special assessments, and premiums for insurance of every kind required under
the terms of any of the Loan Documents; and generally, the performance of
each and every other covenant and condition set forth and contained in the
Loan Documents.
3. Waivers of Notice and Additional Authority. The Guarantor waives
notice of any default by Borrower upon the Indebtedness or of any transfer of
the title to any property securing any of the Indebtedness pursuant to any
Loan Document, and the Lender, or the holder of any note evidencing any of
the Indebtedness, shall not be required to resort to any collateral other
than this guaranty or attempt to recover upon the liability of Borrower in
any way as a condition prerequisite to recovering upon this Guaranty. The
Lender and any subsequent holder of any note evidencing any of the the
Indebtedness, may, without notice to the Guarantor, deal with the Borrower,
or any one on its behalf or if title to any property shall have been
transferred, the owner thereof, from time to time with respect to any of the
Indebtedness and the security therefor in any manner whatsoever, including
the release of any obligor or of any of the collateral, and Guarantor hereby
specifically waives each and every defense predicable upon such dealing
including, without limitation, the release of any part of the security for
any of the Indebtedness or any of the obligors thereon, except the defense of
actual payment in cash on the Indebtedness.
4. Continuation of the Guaranty. This Guaranty shall continue with
respect to the Indebtedness, and all continuations, extensions or renewals
thereof, in favor of the Lender and all subsequent holders of any note
evidencing any of the Indebtedness, notwithstanding that the
<PAGE>
Borrower shall have conveyed its title and notwithstanding that other
obligors may have assumed or guaranteed payment. It is understood and agreed
that this Guaranty shall, in all respects, run in favor of the holders of any
note evidencing any of the Indebtedness and notice to the Guarantor of any
transfer, endorsement or assignment of any such note shall not be required.
5. Waiver of Acceptance. The Guarantor further waives notice of the
acceptance of this Guaranty by the Lender and presentment, demand, notice of
nonpayment, notice of extension of the time of payment or of any dealings
with any obligor or any collateral.
6. Additional Covenants of Guarantor. The Guarantor agrees that the
liability of the Guarantor hereunder shall not in anyway be released,
diminished, impaired, reduced, or affected by:
(a) The taking or accepting of any other security or guaranty for any or
all of the Indebtedness;
(b) Any release, withdrawal, surrender, exchange, substitution,
subordination, or loss of any security or other guaranty at any time existing
in connection with any or all of the Indebtedness; any partial release of the
liability of any other Guarantor hereunder or under any of the Loan Documents
had, or to be had, in connection with, or as security for, any of the
Indebtedness, or the corporate dissolution, insolvency, bankruptcy,
disability, or lack of authority of Borrower, Guarantor, or any other
guarantor or any party at any time liable for the payment of any or all of
the Indebtedness, whether now existing or hereafter occurring;
(c) Any renewal, extension, modification, or rearrangement of the
payment of any or all of the Indebtedness, or the performance of any covenant
contained in any Loan Document had, or to be had, in connection with, or as
security for, the Indebtedness, either with or without notice to, or consent
of, such Guarantor or any adjustment, indulgence, forbearance, or compromise
that may be granted or given by Lender to any party; or
(d) Any neglect, delay, omission, failure, or refusal of Lender to take
or prosecute any action for the collection of any of the Indebtedness or to
foreclose or take or prosecute any action in connection with any lien, right,
or security existing or to exist in connection with, or as security for, any
of the Indebtedness; or to take any action hereunder; it being the intention
hereof that Guarantor shall remain liable as principal until the full amount
of the Indebtedness, together with interest, and any other sums due or to
become due upon or in connection with any of the same, shall have been fully
paid, performed and observed by Borrower.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed this 22nd day of May, 1997.
GENZYME TRANSGENICS CORPORATION
By /s/ John B. Green, Vice President
------------------------------------
John B. Green, Vice President
<PAGE>
EXHIBIT 10.52.1
AMENDED AND RESTATED
OPERATING AGREEMENT
of
ATIII LLC
dated as of January 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. FORMATION AND MEMBERSHIP 1
1.1 Continuation 1
1.2 Members 1
1.3 Management 1
ARTICLE 2. OFFICES, NAME, ETC. 2
2.1 Principal Office 2
2.2 Registered Office; Resident Agent 2
2.3 Name 2
2.4 Term 2
2.5 Business Ventures 2
ARTICLE 3. PURPOSES AND POWERS 2
3.1 Purpose 2
3.2 Powers 2
ARTICLE 4. MEMBERS AND THEIR CONTRIBUTIONS AND LOANS 2
4.1 Contributions 2
4.2 Capital Accounts 3
4.3 Loans 4
4.4 Additional Members 4
4.5 Liability of Members 4
4.6 Withdrawal of Members 4
ARTICLE 5. ALLOCATIONS 5
5.1 Certain Definitions 5
5.2 Allocations of Profit and Loss 6
5.3 Special Allocations 7
ARTICLE 6. DISTRIBUTIONS 8
6.1 Distribution of Company Funds 8
ARTICLE 7. INDEMNIFICATION 9
7.1 Indemnification of Members 9
ARTICLE 8. ASSIGNABILITY OF MEMBERSHIP INTERESTS 10
8.1 Assignment 10
8.2 Substitute Members 10
8.3 Rights of Assignees 11
8.4 Other Restrictions 11
ARTICLE 9. FISCAL YEAR, ACCOUNTING, INSPECTION OF BOOKS 11
9.1 Fiscal Year and Accounting 11
9.2 Inspection of Books 11
ARTICLE 10. DISSOLUTION 11
10.1 Events of Dissolution 11
10.2 Consent to Continue Company 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.3 Distribution Upon Dissolution 12
ARTICLE 11. GENERAL PROVISIONS 13
11.1 Complete Agreement; Modification 13
11.2 Governing Law; Severability 13
11.3 Notice 13
11.4 Pronouns 13
11.5 Titles 13
11.6 Successors and Assigns 13
11.7 Counterparts 13
</TABLE>
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
ATIII LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") is made and
adopted as of January 1, 1998 by and between Genzyme Corporation, a
Massachusetts corporation having its principal place of business at One Kendall
Square, Cambridge, Massachusetts 02139 ("Genzyme"), Genzyme Transgenics
Corporation, a Massachusetts corporation having its principal place of business
at Five Mountain Road, Framingham, Massachusetts 01701 ("GTC") and such other
persons who may become members of ATIII LLC (the "Company") in accordance with
law or the terms hereof (hereinafter collectively referred to as the "Members"
and individually as a "Member"). Capitalized terms used but not defined herein
shall be given the same meaning as provided in the Collaboration Agreement of
even date herewith among the Company, GTC and Genzyme (the "Collaboration
Agreement"). This Agreement amends and restates the Operating Agreement dated
December 17, 1997 between the Members.
ARTICLE 1. FORMATION AND MEMBERSHIP
1.1 Continuation. The Members hereby agree to continue Company as a limited
liability company pursuant to the Delaware Limited Liability Company Act (the
"Act"). The Act shall govern the rights and liabilities of the parties hereto
except as otherwise expressly stated herein.
1.2 Members. The initial Members of the Company were GTC, which held a *
percent (*%) and * percent (*%) interest in the Company. GTC and Genzyme each
granted the Company certain licenses to certain of their respective assets
pursuant to the Collaboration Agreement. The Company elected or will elect under
Section 754 of the Internal Revenue Code of 1986, as amended ("IRC"), to apply
the provisions of Sections 734(b) and 743(b) of the IRC. Thereafter, effective
upon execution and delivery of the Purchase Agreement of even date herewith by
and between GTC and Genzyme (the "Purchase Agreement"), GTC has sold and
assigned to Genzyme a * percent (*%) interest in the Company (subject to
adjustment as provided herein and in Section 4.1.5 of the Collaboration
Agreement). Hence, the Members of the Company are those persons listed on
Schedule A attached hereto, as amended from time to time.
1.3 Management. The Company shall be managed by the Steering Committee
provided for in Section 8.2 of the Collaboration Agreement
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ARTICLE 2. OFFICES, NAME, ETC.
2.1 Principal Office. The principal office of the Company shall be located
at One Kendall Square, Cambridge, Massachusetts 02139 or such place within the
Commonwealth of Massachusetts as may be determined by the Members from time to
time. The Company shall maintain its records at such address.
2.2 Registered Office; Resident Agent. The name and address of the
Company's registered agent for service of process in the State of Delaware shall
be Corporation Service Company, 1013 Centre Road, Wilmington, Delaware
19805-1297. The name and address of the Company's registered agent for service
of process in the Commonwealth of Massachusetts shall be Genzyme Corporation,
One Kendall Square, Cambridge, Massachusetts 02139.
2.3 Name. The business of the Company shall be conducted under the name of
"ATIII LLC".
2.4 Term. The term of the Company shall commence upon the filing of the
Certificate of Formation (the "Effective Date") and shall be perpetual until it
is terminated as hereinafter provided.
2.5 Business Ventures. Any Member may engage independently or with others
in other business ventures of every nature and description, and neither the
Company nor any Member shall have any rights in and to such independent ventures
or the income or profits derived therefrom; provided, however, that a Member's
participation in such venture is subject to and consistent with the provisions
of Section 2.2 of the Collaboration Agreement.
ARTICLE 3. PURPOSES AND POWERS
3.1 Purpose. The purpose of the Company is to: (i) develop and
commercialize the Collaboration Products; (ii) act as a partner in limited
partnerships, general partnerships and limited liability partnerships, and as a
member of limited liability companies; and (iii) engage in any other business
permitted under the Act that the Members shall deem desirable or expedient.
3.2 Powers. The Company shall have all the powers necessary or convenient
to the conduct, promotion or attainment of the business, trade, purposes or
activities of the Company, including, without limitation, all the powers of an
individual, partnership, corporation or other entity.
ARTICLE 4. MEMBERS AND THEIR CONTRIBUTIONS AND LOANS
4.1 Contributions.
4.1.1 Each Member has agreed to contribute the amounts and/or property set
forth in Sections 3.1, 3.3, 4.1 and 4.2 of the Collaboration Agreement. The
amount so contributed is hereinafter referred to as each Member's "Capital
Contribution". The cash and agreed value of any property contributed by each
Member as of the date hereof is set forth in Schedule A attached hereto.
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4.1.2 Pursuant to the terms of the Collaboration Agreement, GTC and Genzyme
have undertaken to make monthly Capital Contributions to the Company in the
amount equal to:
(i) (A) thirty percent (30%) and seventy percent (70%),
respectively (as described in more detail in the Collaboration
Agreement), of the Program Costs other than New Facility Costs (as each
term is defined in the Collaboration Agreement) until the Genzyme 70%
Funding Obligation (as defined in Section 4.1.3 of the Collaboration
Agreement) is met and (B) fifty percent (50%) each of all Program Costs
other than New Facility Costs each thereafter; and
(ii) fifty percent (50%) each of all New Facility Costs each
beginning as of the date hereof.
If either Genzyme or GTC fails to make all or any portion of a monthly
Capital Contribution, the other Member may elect to make such Contribution (or a
portion thereof). If either Genzyme or GTC fails to make all or any portion of a
monthly Capital Contribution, the Percentage Interests (as defined below) shall
be adjusted to correspond to the percentage of cumulative Capital Contributions
made by each Member and subsequent monthly Capital Contributions shall be made
by the Members in proportion to their adjusted Percentage Interests; provided,
however, that if the Percentage Interests are adjusted before the Genzyme 70%
Funding Obligation is met, then Genzyme and GTC shall continue to make capital
contributions in accordance with Section 4.1(b)(i)(A) until the Genzyme 70%
Funding Obligation is met and in proportion to their adjusted Percentage
Interests thereafter. For purposes of calculating adjustments to Percentage
Interests to be made pursuant to this paragraph, it shall be assumed that
cumulative Capital Contributions made by the Members in accordance with clause
(A) of Section 4.1(b)(i) were made fifty percent (50%) each by Genzyme and GTC.
4.1.3 No interest shall accrue on any Capital Contributions, and no Member
shall have the right to withdraw or to be repaid any capital it has contributed,
except as otherwise specifically provided in this Agreement.
4.1.4 Each Member's percentage interest ("Percentage Interest") is as set
forth in Schedule A hereto, subject to adjustment as provided in Section 4.1(b)
of this Agreement.
4.2 Capital Accounts. A separate account (a "Capital Account") shall be
maintained for each Member and adjusted in accordance with Treasury Regulation
Section 1.704-1(b) as follows:
4.2.1 There shall be credited to each Member's Capital Account the amount
of such Member's Capital Contribution as of the date, and to the extent, that
such Capital Contribution has been paid, and such Member's allocable share of
Net Profits (and any items in the nature of income or gain separately allocated
to such Member); and there shall be charged against each Member's Capital
Account the amount of all distributions to such Member and such Member's
allocable share of Net Losses (and any items in the nature of losses or
deductions separately allocated to such Member).
4.2.2 If the Company at any time distributes any of its assets in kind to
any Member, the Capital Account of each Member shall be adjusted to account for
that Member's allocable share (as determined under Section 5.1 below) of the Net
Profits or Net Losses that would have
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been realized by the Company had it sold the assets that were distributed at
their respective fair market values immediately prior to their distribution.
4.2.3 In the event any Member's interest is transferred in accordance with
the terms of this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred interest.
4.3 Loans. The Members shall not make loans to the Company unless the
Members unanimously agree in writing to make such loans.
4.4 Additional Members. Except as otherwise provided in Section 8.2 below
with respect to Substitute Members, additional Members may only be admitted with
the prior written unanimous approval of the Members. Such additional Members
shall execute and acknowledge a counterpart to this Agreement or shall otherwise
evidence in writing their agreement to be bound by the terms hereof in such
manner as the Members shall determine.
4.5 Liability of Members.
4.5.1 No Member shall be liable for the obligations of the Company solely
by reason of being a Member.
4.5.2 No Member shall be required to make any contributions to the capital
of the Company other than as provided in this Article 4.
(c) No Member shall be personally liable to the Company or its other
Members for monetary damages for breach of fiduciary duty as a Member to the
extent permitted by applicable law; provided, however, that this provision shall
not eliminate the liability of a Member (i) for any breach of the Member's duty
of loyalty to the Company or its other Members, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law or (iii) for any transaction from which the Member derived an improper
personal benefit. No amendment to or repeal of this Section 4.5(c) shall apply
to or have any effect on the liability or alleged liability of any Member for or
with respect to any acts or omissions of such Member occurring prior to such
amendment or repeal.
4.6 Withdrawal of Members. No Member shall have the right to withdraw from
the Company or to demand a return of its capital interest at any time except
upon termination and dissolution of the Company, unless agreed to by the
unanimous written consent of the other Members.
ARTICLE 5. ALLOCATIONS
5.1 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings given them in this Article 5:
5.1.1 "Adjusted Capital Account" for a Member means such Member's
Capital Account (i) reduced by the net adjustments,
allocations and distributions described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) which, as of the
end of the Company's taxable year are reasonably
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expected to be made to such Member, and (ii) increased by the
sum of (A) the amounts a Member is deemed obligated to restore
pursuant to the penultimate sentences of Treasury Regulation
Sections 1.704-2(g)(1) and 2(i)(5), (B) the excess, if any, of
such Member's Capital Contribution over such Member's actual
paid-in capital contribution and (C) that portion of any
indebtedness of the Company (other than "partner nonrecourse
debt" as defined in Treasury Regulation Section 1.704-2(b)(4))
with respect to which the Member bears the economic risk of
loss that such indebtedness would not be repaid out of the
assets of the Company if all of the assets of the Company were
sold at their respective book values as of the end of the
fiscal period and the proceeds from the sales together with
any amounts described in clause (B) above, were used to pay
the liabilities of the Company.
5.1.2 "Net Profits" and "Net Losses" mean the taxable income or
loss, as the case may be, for a period (or from a transaction)
as determined in accordance with Section 703(a) of the IRC
(for this purpose, all items of income, gain, loss or
deduction required to be separately stated pursuant to IRC
Section 703(a)(1) shall be included in taxable income or loss)
computed with the following adjustments:
5.1.2.1 To the extent required by (and in the manner
described in) Treasury Regulation 1.704-1(b)(2),
items of gain, loss and deduction shall be computed
based upon the book values of the Company's assets
rather than upon such assets' adjusted bases for
federal income tax purposes (if different);
5.1.2.2 Any tax-exempt income received by the Company shall
be included as an item of gross income;
5.1.2.3 The amount of any adjustments to the adjusted bases
(or book values if clause (i) above applies) of any
assets of the Company pursuant to IRC Section 743
shall not be taken into account; and
5.1.2.4 Any expenditure of the Company described or treated
as being described in IRC Section 705(a)(2)(B) shall
be treated as a deductible expense.
5.1.3 "Member Loan Nonrecourse Deductions" means any Company
deductions that would be Nonrecourse Deductions if they were
not attributable to a liability owed to or guaranteed by a
Member within the meaning and intent of Treasury Regulation
Section 1.704-2(i).
5.1.4 "Member Loan Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(3).
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5.1.5 "Minimum Gain" has the meaning set forth in Treasury
Regulation Section 1.704-2(d). Minimum Gain shall be computed
separately for each Member in a manner consistent with the
Treasury Regulations under IRC Section 704(b).
5.1.6 "Nonrecourse Deductions" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(1). The amount of Nonrecourse
Deductions for a taxable year of the Company shall be
determined according to the provisions of Treasury Regulation
Section 1.704-2(c).
5.1.7 "Nonrecourse Liability" means any liability of the Company
with respect to which no Member has personal liability, as
determined in accordance with IRC Section 752 and the Treasury
Regulations promulgated thereunder.
5.2 Allocations of Profit and Loss. As of the end of each fiscal year of
the Company, or at the time any allocation is determined to be necessary by the
Members, Net Profits or Net Losses shall be allocated as follows:
5.2.1 Except as provided in Sections 5.2(b) and 5.3 below, any allocation
required by this Section 5.2 to be made to the Members shall be allocated among
the Members in proportion to their respective Percentage Interests.
5.2.2 After making the special allocations provided for in Section 5.3
below, if the ratio of the cumulative amount of the Distribution Margin to the
cumulative amount of the Manufacturing Margin for a period is not proportionate
to the ratio of Genzyme's Percentage Interest to GTC's Percentage Interest for
the applicable period, then there shall be allocated to Genzyme and/or GTC, as
appropriate, items of gross income or deduction of the Company such that the
ratio of (i) the Distribution Margin plus the amount of the items allocated to
Genzyme pursuant to this clause (b), if any, to (ii) the Manufacturing Margin
plus items allocated to GTC pursuant to this clause (b), if any, is
proportionate to the ratio of Genzyme's Percentage Interest to GTC's Percentage
Interest for the applicable period.
5.2.3 With respect to the allocation of Net Losses or Net Profits pursuant
to this Section 5.2 among the Members for any fiscal year in which an additional
or substitute Member is admitted to the Company or there is an adjustment to the
Percentage Interests during such fiscal year, all Net Losses or Net Profits so
allocable shall be allocated in a manner which takes into account the varying
Percentage Interests during such fiscal year based on an accounting convention
chosen by the Members. In no event shall a retroactive allocation of Net Losses
be made pursuant to this Section 5.2.
5.3 Special Allocations. Notwithstanding the provisions of Section 5.2
above, the following allocations of Net Profits and Net Losses and items thereof
shall be made:
5.3.1 If, during any year a Member unexpectedly receives any adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) and, as a result of such adjustment,
allocation or distribution, such Member's Adjusted Capital Account has a
negative balance (computed with the adjustments set forth in clauses (i) and
(ii) of Section 5.1(a)), then items of gross income for such year (and, if
necessary, subsequent years) shall first
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be allocated to such Member in the amount necessary to eliminate such negative
balance as quickly as possible. This Section 5.3(a) is intended to constitute a
"qualified income offset" provision within the meaning of the above Treasury
Regulations, and shall be so interpreted.
5.3.2 Nonrecourse Deductions for a taxable year or other period shall be
specially allocated among the Members in proportion to their Percentage
Interests.
5.3.3 Any Member Loan Nonrecourse Deduction for any taxable year or other
period shall be specially allocated to the Member or Members who bear the risk
with respect to the loan to which the Member Loan Nonrecourse Deduction is
attributable in accordance with Treasury Regulation Section 1.704-2(b).
5.3.4 In no event shall Net Losses of the Company be allocated to a Member
if such allocation would cause or increase a negative balance in such Member's
Adjusted Capital Account.
5.3.5 Except as set forth in Treasury Regulation Section 1.704-2(f)(2), (3)
and (4), if, during any taxable year, there is a net decrease in Minimum Gain,
each Member, prior to any other allocation pursuant to this Article 5, shall be
specially allocated items of gross income and gain for such taxable year (and,
if necessary, subsequent taxable years) in an amount equal to that Member's
share of the net decrease in Minimum Gain, computed in accordance with Treasury
Regulation Section 1.704-2(g). Allocation of gross income and gain pursuant to
this Section 5.3(e) shall be made first from gain recognized from the
disposition of Company assets subject to non-recourse liabilities (within the
meaning of the Treasury Regulations promulgated under IRC Section 752), to the
extent of the Minimum Gain attributable to those assets, and thereafter, from a
pro rata portion of the Company's other items of income and gain for the taxable
year. It is the intent of the parties hereto that any allocation pursuant to
this Section 5.3(e) shall constitute a "minimum gain chargeback" under Treasury
Regulation Section 1.704-2(f). With respect to a net decrease in Member Loan
Minimum Gain, items of gross income shall be specially allocated consistent with
the preceding sentence, and Treasury Regulation Section 1.704- 2(i)(4).
5.3.6 In the event that Net Profits, Net Losses or items thereof are
allocated to one or more Members pursuant to paragraphs (a) or (d) above,
subsequent Net Profits and Net Losses will first be allocated (subject to the
provisions of paragraphs (a) through (d)) to the Members in a manner designed to
result in each Member having a Capital Account balance equal to what it would
have been had the original allocation of Net Profits, Net Losses or items
thereof pursuant to paragraphs (a) or (d) not occurred.
5.3.7 The respective Percentage Interests in the Net Profits and Net Losses
or items thereof shall remain as set forth above (subject to adjustment as
provided in Section 4.1(b) and Article 5) unless changed by amendment to this
Agreement or by an assignment of an interest in the Company authorized by the
terms of this Agreement. Except as otherwise provided herein, for tax purposes,
all items of income, gain, loss, deduction or credit shall be allocated to the
Members in the same manner as are Net Profits and Net Losses; provided, however,
that if, as a result of clause (i) of Section 5.1(b), the book value of any
property of the Company was used in computing Net Profits or Net Losses, then
items of income, gain, deduction or credit related to such property for tax
purposes shall be allocated among the Members so as to take account of the
variation between the adjusted basis of the property for tax purposes and its
book value in
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the manner provided for under IRC Section 704(c).
5.3.8 If a Member's Percentage Interest is reduced (provided the reduction
does not result in a complete termination of the Member's interest in the
Company), the Member's share of the Company's "unrealized receivables" and
"substantially appreciated inventory" (within the meaning of IRC Section 751)
shall not be reduced, so that, notwithstanding any other provisions of this
Agreement to the contrary, that portion of the Net Profit otherwise allocable
upon a liquidation or dissolution of the Company pursuant to Article 5 hereof
which is taxable as ordinary income (recaptured) for federal income tax purposes
shall, to the extent possible without increasing the total gain to the Company
or to any Member, be specially allocated among the Members in proportion to the
deductions (or basis reductions treated as deductions) giving rise to such
recapture.
5.3.9 In each taxable year of the Company, items of deduction and credit
attributable to Program Costs shall be allocated to the Members in proportion to
the Capital Contributions which funded the applicable expenditure.
ARTICLE 6. DISTRIBUTIONS
6.1 Distribution of Company Funds. The timing of distributions by the
Company (other than distributions in dissolution to which Section 10.3 applies)
shall be determined in accordance with the provisions of Section 4.3 of the
Collaboration Agreement. Such distributions shall be made (a) first to Genzyme
and/or GTC until Genzyme and/or GTC, as applicable, have received distributions
equal to the amount of items of gross income allocated to them respectively
pursuant to Section 5.2(b) hereof and (b) thereafter, to the Members in
proportion to their positive Capital Accounts reduced by the amounts of their
initial Capital Contributions listed in Schedule A hereto on the date hereof;
provided, however, that in the event that items of gross income are to be
distributed to both Genzyme and GTC pursuant to clause (a) hereof and there are
insufficient items of gross income available to distribute to both Genzyme and
GTC in full, the available items of gross income shall be distributed to Genzyme
and GTC on a pro rata basis based on the aggregate amounts distributable to
Genzyme and GTC, respectively, pursuant to clause (a) hereof; provided further
that the amount of Net Profit distributable to the Members pursuant to clause
(b) hereof shall be reduced by the amount required to fund the budgeted capital,
working capital and reserve requirements of the Company during the one hundred
and eighty (180) day period following the proposed distribution date and by such
other amounts as the Steering Committee reasonably determines to be necessary or
appropriate for the operation of the Company, which amounts may be used to the
extent necessary to make distributions of items of gross income allocated
pursuant to Section 5.2(b) hereof.
ARTICLE 7. INDEMNIFICATION
7.1 Indemnification of Members.
7.1.1 The Company shall, to the fullest extent permitted by the Act, as
amended from time to time, indemnify each Member, each Member's Affiliates, and
the respective directors, officers, employees and agents of each Member and its
Affiliates (collectively, "Indemnified Persons") from and against all expenses
and liabilities (including counsel fees, judgments, fines,
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excise taxes, penalties and amounts paid in settlements) reasonably incurred by
or imposed upon an Indemnified Person in connection with any threatened, pending
or completed action, suit or other proceeding, whether civil, criminal,
administrative or investigative, in which such Indemnified Person may become
involved by reason of (i) any act performed by such Indemnified Person in
connection with the performance of and within the scope of the authority
conferred by the Collaboration Agreement or (ii) such Indemnified Person's
service as a director, officer, manager or member of the Company or any of its
subsidiaries or, if such service was undertaken at the request of the Company,
such Indemnified Person's service as a director, officer or trustee of, or in a
similar capacity with, another organization.
7.1.2 Indemnification may include payment by the Company of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the Indemnified Person to
repay such payment if it is ultimately determined that such Indemnified Person
is not entitled to indemnification under this Article 7, which undertaking may
be accepted without reference to the financial ability of the Indemnified Person
to make such repayments.
7.1.3 The Company shall not indemnify any Indemnified Person in connection
with a proceeding (or part thereof) initiated by such person unless such
Indemnified Person is successful on the merits, the proceeding was authorized by
the Members or the proceeding seeks a declaratory judgment regarding such
Indemnified Person's own conduct.
7.1.4 The indemnification rights provided in this Article 7 (i) shall not
be deemed exclusive of any other rights to which Indemnified Persons may be
entitled under any law, agreement or vote of disinterested Members or otherwise
and (ii) shall inure to the benefit of the heirs, executors and administrators
of Indemnified Persons. The Company may, to the extent authorized from time to
time by its Members, grant indemnification rights to employees or agents of the
Company or persons other than Indemnified Persons serving the Company and such
rights may be equivalent to, or greater or less than, those set forth in this
Article 7.
(e) No indemnification shall be provided for any Indemnified Person with
respect to (i) any matter as to which such Indemnified Person shall have been
finally adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that such Indemnified Person's action was in the best
interests of the Company, (ii) any act which constitutes gross negligence or
wilful misconduct or (iii) any matter disposed of by a compromise payment by
such Indemnified Person, pursuant to a consent decree or otherwise, unless the
payment and indemnification thereof have been approved by the Members, which
approval shall not unreasonably be withheld, or by a court of competent
jurisdiction.
(f) Any amendment or repeal of the provisions of this Article 7 shall not
adversely affect any right or protection of an Indemnified Person with respect
to any act or omission of such Indemnified Person occurring prior to such
amendment or repeal.
ARTICLE 8. ASSIGNABILITY OF MEMBERSHIP INTERESTS
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8.1 Assignment.
8.1.1 Except in accordance with Article 13 of the Collaboration Agreement,
a Member may not assign his or her interest in whole or in part to any assignee
which is not already a Member without the prior written consent of all of the
other Members who may or may not consent in their absolute discretion.
8.1.2 An assignment of a Member's interest does not of itself dissolve the
Company or permit the assignee to participate in the business and affairs of the
Company or to become a Member or exercise any rights or powers of a Member.
8.2 Substitute Members. No assignee of a Member's interest (other than an
assignee which is already a Member) shall have the right to be admitted as a
substitute member in place of the assignor (a "Substitute Member") unless:
8.2.1 the assignor shall designate in writing satisfactory to the other
Members the intention that the assignee is to become a Substitute Member;
8.2.2 the assignee shall agree in writing to be bound by all of the terms
of this Agreement;
8.2.3 all of the other Members consent in writing to the admission of the
assignee as a Substitute Member, which consent may be withheld in their absolute
discretion;
8.2.4 the assignee shall execute and/or deliver such instruments, including
without limitation, an opinion of counsel satisfactory to the Members, to the
effect that such proposed assignment and substitution does not violate the
registration requirements of state or federal securities laws, and such
instrument as the Members deem necessary or desirable to effect such assignee's
admission as a Substitute Member and to evidence the assignee's acceptance of
the terms of this Agreement; and
8.2.5 the assignee shall pay all reasonable expenses in connection with the
assignee's admission as a Substitute Member.
8.3 Rights of Assignees. An assignee who does not become a Substitute
Member shall succeed only to the rights of the assignor to receive allocations
and distributions from the Company as provided in Articles 5, 6 and 10 hereof,
and shall not have the right to become a Member or exercise any rights or powers
of a Member.
8.4 Other Restrictions. A Member may not pledge, encumber or hypothecate
any of its interest without the consent of the other Members.
ARTICLE 9. FISCAL YEAR, ACCOUNTING, INSPECTION OF BOOKS
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9.1 Fiscal Year and Accounting. Except as otherwise approved by the
Members, or required by law, the fiscal year of the Company shall be the
calendar year and the books of the Company shall be kept on the accrual method.
9.2 Inspection of Books. The books of the Company shall at all times be
available for inspection and audit by any Member at the Company's principal
place of business during business hours. The Company shall furnish each Member
with all necessary tax reporting information as to its interest in the Company,
with an annual balance sheet and profit and loss statement and with a cash flow
statement showing any distributions made to the Members, within sixty (60) days
after the close of each fiscal year.
ARTICLE 10. DISSOLUTION
10.1 Events of Dissolution. The term of the Company shall commence on the
Effective Date and shall be in full force and effect until the earliest of the
following:
10.1.1 the sale or disposition of all or substantially all of the Company
property;
10.1.2 the dissolution of the Company by the unanimous written consent of
the Members;
10.1.3 the bankruptcy or dissolution of a Member; provided, however, that
if there are at least two (2) remaining Members, the Members may consent to the
continuation of the business of the Company after the occurrence of such an
event, pursuant to Section 18-802 of the Act and Section 10.2 of this Agreement;
10.1.4 the entry of a decree of judicial dissolution under Section 18-802
of the Act;
10.1.5 the occurrence of any event, other than those referred to in
paragraph (d), which causes dissolution of a limited liability company under the
Act; or
10.1.6 upon the occurrence of an event and at the time specified in Article
13 of the Collaboration Agreement.
Notwithstanding the dissolution of the Company, the business of the Company
shall continue to be governed by this Agreement until the winding up of the
Company occurs.
10.2 Consent to Continue Company. The Members may vote to continue the
business of the Company within ninety (90) days after the occurrence of an event
of dissolution set forth in Section 10.1(d) of this Agreement, pursuant to and
in accordance with Section 18-801(4) of the Act. The agreement of the remaining
Members holding a majority of the remaining Percentage Interests shall
constitute the consent of the Members to the continuation of the Company.
10.3 Distribution Upon Dissolution.
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10.3.1 After payment of liabilities owing to creditors, the Members or
liquidator shall set up such reserves as they deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the Company, including
the expenses of liquidation. Such reserves may be paid over by the Members or
liquidator to a bank, to be held in escrow for the purpose of paying any such
contingent or unforeseen liabilities or obligations and, at the expiration of
such period as the Members or liquidator may deem advisable, such reserves shall
be distributed to all of the Members or their assigns in the manner set forth in
Section 10.3(b) below. In the event that any part of such net assets consists of
securities or other non-cash assets, the Members or liquidator may (but shall
not be required to) take whatever steps they deem appropriate to convert such
assets into cash or into any other form that would facilitate the distribution
thereof.
10.3.2 After payment has been made pursuant to Section 10.3(a) above, the
Members or the liquidator shall cause the remaining net assets of the Company to
be distributed to and among the Members in proportion to and to the extent of
their positive Capital Account balances (after such balances have been adjusted
to reflect all allocations of Net Profits and Net Losses and distributions
pursuant to Article 6). Cash and non-cash assets shall be distributed to each
Member on a pro rata basis, or in such other manner as the Members may agree,
with all noncash assets being distributed on the basis of their fair market
value. For this purpose, the unamortized portion of any amortizable Program
Costs shall be valued at zero and the Capital Accounts of the Members shall be
reduced (in accordance with Section 4.2(b)) in proportion to their Capital
Contributions which funded such portion (determined in a manner consistent with
the principles of Section 5.3(i)).
10.3.3 The Company shall terminate when all property has been distributed
among the Members. Upon such termination, the Members shall execute and cause to
be filed a certificate of cancellation of the Company, as provided for in
Section 18-203 of the Act, and any and all other documents necessary in
connection with the termination of the Company.
ARTICLE 11. GENERAL PROVISIONS
11.1 Complete Agreement; Modification. This Agreement and the Collaboration
Agreement together contain a complete statement of all the agreements among the
parties with respect to the Company. There are no representations, agreements,
arrangements or undertakings, oral or written, between or among the parties to
this Agreement relating to the subject matter of this Agreement which are not
fully expressed in this Agreement. This Agreement may be amended or modified
only with the unanimous consent of the Members.
11.2 Governing Law; Severability. All questions with respect to the
construction of this Agreement and the rights and liabilities of the parties
shall be determined in accordance with the applicable provisions of the laws of
the State of Delaware, and this Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations of such state. If any provision of this
Agreement, or the application thereof to any person or circumstances, shall, for
any reason and to any extent, be invalid or unenforceable, the remainder of this
Agreement and the application of that provision to other persons or
circumstances shall not be affected but rather be enforced to the extent
permitted by law.
11.3 Notice. All notices, requests, consents and statements hereunder shall
be deemed
12
<PAGE>
to have been properly given if mailed from within the United States by prepaid
certified mail, return receipt requested, or if sent by prepaid telegram, or
overnight delivery service, or if hand delivered, addressed in each case if to
the Company at its principal place of business and, if to any Member, to the
address set forth herein, or to such other address or addresses as any such
Member shall have theretofore designated in writing to the Company in accordance
with this Section 11.3.
11.4 Pronouns. Feminine or masculine pronouns shall be substituted for the
neuter pronouns, neuter pronouns for masculine or feminine pronouns, plural for
the singular and the singular for the plural, in any place in this Agreement
where the context may require such substitution.
11.5 Titles. The titles of Articles and Sections are included only for
convenience and shall not be construed as a part of this Agreement or in any
respect affecting or modifying its provisions.
11.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of all parties hereto and their heirs, successors, assigns and
legal representatives.
11.7 Counterparts. This Agreement may be signed in one or more counterparts
and all counterparts so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all parties have not signed the original or
the same counterpart.
IN WITNESS WHEREOF, we have affixed our signatures as of the day first
above written.
MEMBERS:
GENZYME CORPORATION
By: /s/ Peter Wirth
---------------
Title: Executive Vice President
-------------------------
Date: December 29, 1997
-----------------
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
-----------------
Title: Vice President and Chief Financial Officer
------------------------------------------
Date: December 29, 1997
-----------------
13
<PAGE>
14
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Members Capital Contribution Percentage Interest
------- -------------------- -------------------
<S> <C> <C>
Genzyme Corporation $* 50.00%
Genzyme Transgenics Corporation $* 50.00%
TOTAL: $* 100.00%
</TABLE>
- --------------------
*Confidential treatment for indicated portions respectfully requested.
15
<PAGE>
EXHIBIT 10.52.2
PURCHASE AGREEMENT
between
GENZYME TRANSGENICS CORPORATION
and
GENZYME CORPORATION
dated as of January 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. PURCHASE AND SALE LLC INTEREST
1.1. Authorization 1
1.2. Sale, Assignment and Purchase of the LLC Interest; Payments 1
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF GTC 2
2.1. Organization and Qualification of GTC 2
2.2. ATIII LLC 2
2.3. Ownership of LLC Interest 2
2.4. Authority 3
2.5. Offer and Sale of LLC Interest 3
2.6. No Breach 3
2.7. Actions and Proceedings 3
2.8. Compliance with Laws 4
2.9. Brokerage 4
2.10. Full Disclosure 4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF GENZYME 4
3.1. Authority for Agreement 4
3.2. Investment 4
3.3. Restrictions on Transferability 5
3.4. Experience 5
3.5. Brokerage 5
ARTICLE 4. CONDITION PRECEDENT 5
4.1. Clerk's Certificate 5
5
ARTICLE 5. MISCELLANEOUS 5
5.1. Assignment 5
5.2. Severability 6
5.3. Notices 6
5.4. Applicable Law 7
5.5. Entire Agreement 7
5.6. Headings 7
5.7. Counterparts 7
</TABLE>
i
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT dated as of January 1, 1998 (the "Agreement") is
made by and among Genzyme Transgenics Corporation, a Massachusetts corporation
having its principal place of business at Five Mountain Road, Framingham,
Massachusetts 01701 ("GTC"), and Genzyme Corporation, a Massachusetts
corporation having its principal place of business at One Kendall Square,
Cambridge, Massachusetts 02139 ("Genzyme"). Capitalized terms not defined herein
shall have the respective meanings ascribed to them in the Collaboration
Agreement of even date herewith (the "Collaboration Agreement") by and among
GTC, Genzyme and ATIII LLC, a Delaware limited liability company having its
principal place of business at One Kendall Square, Cambridge, Massachusetts
02139 ("ATIII LLC"). GTC and Genzyme are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."
R E C I T A L S
WHEREAS, GTC, Genzyme and ATIII LLC have entered into a Collaboration
Agreement for the development and commercialization of Collaboration Products
throughout the world (excluding the SMIG Territory); and
WHEREAS, in contemplation of such collaboration, GTC and Genzyme have
formed ATIII LLC and own a * percent * and * percent * interest in ATIII LLC,
respectively;
WHEREAS, in connection with the collaboration, GTC desires to sell and
assign to Genzyme and Genzyme desires to purchase from GTC a * percent *
interest in ATIII LLC.
NOW THEREFORE, in consideration of the premises and of the covenants herein
contained, the Parties mutually agree as follows:
ARTICLE 1. PURCHASE AND SALE LLC INTEREST
1.1 Authorization. GTC has duly authorized the sale and assignment by GTC
to Genzyme of a * percent (*%) interest in ATIII LLC (subject to adjustment
pursuant to Section 4.1.5 of the Collaboration Agreement and pursuant to the
Operating Agreement of ATIII LLC of even date herewith (the "Operating
Agreement") by and between GTC and Genzyme (the "LLC Interest").
1.2 Sale, Assignment and Purchase of the LLC Interest; Payments.
Concurrently with the execution and delivery of this Agreement, GTC hereby
sells, assigns and transfers.
- ---------------------
* Confidential treatment for indicated portions respectfully requested.
1
<PAGE>
to Genzyme, and Genzyme hereby purchases from GTC the LLC Interest for an
aggregate purchase price of * dollars ($*) payable as follows: (i) ten dollars
($10) payable by Genzyme to GTC upon execution of this Agreement; (ii) * dollars
($*) after ($*) and (iii) ($*) dollars * upon *. All of the aforementioned
payments shall be made in United States dollars by certified bank check or wire
transfer.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF GTC
In connection with the sale and assignment of the LLC Interest by GTC to
Genzyme, GTC hereby makes the following representations and warranties to
Genzyme.
2.1 Organization and Qualification of GTC. GTC is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has full corporate power and lawful authority
to own, lease and operate its assets, properties and business and to carry on
its business as now being and as heretofore conducted. GTC is qualified or
otherwise authorized to transact business as a foreign corporation in each
jurisdiction (in the United States and outside of the United States) in which
such qualification or authorization is required by law and in which the failure
to so qualify or be authorized could have a material adverse effect on GTC or
its assets, properties, business, operations or condition (financial or
otherwise) (the "Business of GTC").
2.2 ATIII LLC. ATIII LLC is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and lawful authority to own, lease and operate its
assets, properties and business and to carry on its business as contemplated by
the Collaboration Agreement. The appropriate documents have been filed to
qualify ATIII LLC as a foreign limited liability company in the Commonwealth of
Massachusetts. Immediately prior to the execution and delivery of this
Agreement, GTC and Genzyme are the only members of ATIII LLC and GTC and Genzyme
hold a * percent (*%) and * percent (*%) interest in ATIII LLC, respectively.
GTC has previously exclusively licensed (subject to certain exceptions described
in the Collaboration Agreement) to ATIII LLC all of its right, title and
interest in tgATIII and technology relating thereto in the Territory, including
without limitation all patents, know-how, trade secrets, and preclinical and
clinical data.
2.3 Ownership of LLC Interest. GTC is the legal and beneficial owner of all
of the LLC Interest, free and clear of all liens, encumbrances, restrictions and
claims of all kinds. GTC has full legal right, power and authority to sell,
assign, convey, transfer and deliver the LLC Interest to Genzyme pursuant to
this Agreement. The assignment by GTC of the LLC Interest, together with the
execution of the Operating Agreement, pursuant to the provisions --------
A*Confidential treatment for indicated portions respectfully requested.
- ---------------------
* Confidential treatment for indicated portions respectfully requested.
2
<PAGE>
hereof will transfer to Genzyme valid title to the LLC Interest, free and clear
of all liens, encumbrances, restrictions and claims of every kind arising
through GTC.
2.4 Authority. The sale of the LLC Interest by GTC and the execution,
delivery and performance by GTC of this Agreement has been duly authorized by
all necessary corporate action, and this Agreement has been duly executed and
delivered by GTC. This Agreement constitutes the valid and binding obligation of
GTC enforceable against GTC in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium and similar laws affecting the rights and
remedies of creditors generally and to general principles of equity.
2.5 Offer and Sale of LLC Interest. Based in part on the representations
made by Genzyme set forth in Article 3 below, the offer and sale of the LLC
Interest pursuant to this Agreement is exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), and applicable state
securities laws. GTC has complied with all applicable federal and state
securities laws in connection with the offer and sale of the LLC Interest.
2.6 No Breach. The execution, delivery and performance of this Agreement,
the Collaboration Agreement and the Operating Agreement and the consummation of
the transactions contemplated hereby and thereby will not: (i) violate any
provision of the Articles of Organization or By-laws of GTC or the Certificate
of Formation of ATIII LLC; (ii) violate, conflict with or result in the breach
of any of the terms or conditions of, result in modification of the effect of,
or otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default under,
any material instrument, contract or other agreement to which GTC is a party or
to which any of the assets or properties of GTC or ATIII LLC may be bound or
subject; (iii) violate any order, judgment, injunction, award or decree of any
court, arbitrator or governmental or regulatory body against, or binding upon,
GTC or ATIII LLC or upon the securities, properties, assets or business of GTC
or ATIII LLC; (iv) violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to GTC or ATIII LLC or to the
securities, properties, assets or business of GTC or ATIII LLC, respectively;
(v) require the approval, consent or authorization of, or registration or filing
with, any foreign, federal, state, local or other governmental or regulatory
body or the approval, consent, waiver or notification of any stockholder,
creditor, lessor or other non-governmental and non-regulatory persons; or (vi)
result in the creation of any lien or other encumbrance on the assets or
properties of GTC or ATIII LLC, excluding from clauses (ii) - (vi) such matters
as would not in the aggregate have a material adverse effect on the Businesses
of GTC or ATIII LLC or upon the transactions contemplated hereby or by the
Collaboration Agreement or the Operating Agreement. Prior to the date hereof,
ATIII LLC was not a party to any contracts or agreements with a Third Party.
References in this Agreement to the Business of ATIII LLC mean the assets,
properties, business, operations or condition (financial or otherwise) of ATIII
LLC.
2.7 Actions and Proceedings. There are no outstanding orders, judgments,
3
<PAGE>
injunctions, awards or decrees of any court, governmental or regulatory body or
arbitration tribunal against GTC or ATIII LLC or affecting any of their
respective properties or rights. There are no actions, suits or claims or legal,
administrative or arbitral proceedings or, to the best knowledge of GTC,
investigations (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or, to the best knowledge of GTC,
threatened against GTC or ATIII LLC or affecting any of their respective
properties or rights. To the best knowledge of GTC, there is no fact, event or
circumstance that may give rise to any suit, action, claim, investigation or
proceeding that individually or in the aggregate could have a material adverse
effect upon the transactions contemplated hereby or upon the Businesses of GTC
or ATIII LLC.
2.8 Compliance with Laws. Neither GTC nor ATIII LLC is in violation of any
statute, law, rule or regulation, or in default with respect to any judgment,
writ, injunction, decree, rule or regulation of any court or governmental agency
or instrumentality specifically naming GTC or ATIII LLC, including without
limitation laws relating to environmental protection, except for such violations
or defaults which do not, individually or in the aggregate, materially and
adversely affect the Businesses of GTC or ATIII LLC.
2.9 Brokerage. No broker, finder, agent or similar intermediary has acted
on behalf of GTC in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finders fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with GTC or any action taken by GTC.
2.10 Full Disclosure. No representation or warranty of GTC contained in
this Agreement (i) contains 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 made, in the context in which made, not false or misleading or (ii)
omits to state a material fact that materially adversely affects, or (in the
reasonable business judgment of GTC based on facts of which it has knowledge) is
likely to materially adversely affect the Business of GTC, and, to the best
knowledge of GTC, no other document or paper furnished by or on behalf of GTC to
Genzyme (or any of its agents) pursuant to this Agreement or in connection with
the transactions contemplated hereby, taken as a whole as of the date hereof
together with the representations and warranties of GTC contained in this
Agreement contains an untrue statement of a material fact. There is no fact
known to GTC that has not been disclosed to Genzyme in this Agreement or
otherwise that materially adversely affects, or (in the reasonable business
judgment of GTC based on facts of which it has knowledge) is likely to
materially adversely affect the Business of ATIII LLC.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF GENZYME
In connection with the purchase by Genzyme of the LLC Interest from GTC,
Genzyme hereby makes the following representations and warranties to GTC.
4
<PAGE>
3.1 Authority for Agreement. The execution, delivery and performance by
Genzyme of this Agreement has been duly authorized by all necessary corporate
action, and this Agreement has been duly executed and delivered by Genzyme. This
Agreement constitutes the valid and binding obligation of Genzyme enforceable
against Genzyme in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting the rights and remedies of
creditors generally and to general principles of equity.
3.2 Investment. Genzyme is acquiring the LLC Interest solely for its own
account, for investment and not with a view to, or for sale in connection with,
any distribution thereof, nor with any present intention of distributing or
selling the same; Genzyme does not have any present plans to enter into any
contract, undertaking, agreement or arrangement relating thereto.
3.3 Restrictions on Transferability. Genzyme understands that the LLC
Interest has not been registered under the Securities Act or under the
securities laws of any state or other jurisdiction in reliance upon exemptions
thereunder. Genzyme acknowledges and is aware that the LLC Interest cannot be
resold unless the LLC Interest is registered under the Securities Act and any
applicable securities law of any state or other jurisdiction, or an exemption
from registration is available, and that it has no rights to require that the
LLC Interest be registered under the Securities Act or any state securities
laws.
3.4 Experience. Genzyme has carefully reviewed the representations
concerning GTC and ATIII LLC contained in this Agreement and has had the
opportunity to make detailed inquiry concerning GTC, ATIII LLC and their
respective businesses and personnel. The officers of GTC have made available to
Genzyme any and all written information which it has requested and have answered
to Genzyme's satisfaction all inquiries made by Genzyme. Genzyme has adequate
net worth and means of providing for its current needs and contingencies to
sustain a complete loss of its investment in ATIII LLC. Genzyme's overall
commitments to investments which are not readily marketable is not
disproportionate to its net worth, and Genzyme's investment in the LLC Interest
will not cause such overall commitment to become excessive. Genzyme has
sufficient knowledge and experience to evaluate the risk of its investment in
ATIII LLC.
3.5 Brokerage. No broker, finder, agent or similar intermediary has acted
on behalf of Genzyme in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finders fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with Genzyme, or any action taken by it.
5
<PAGE>
ARTICLE 4 CONDITION PRECEDENT
4.1 Clerk's Certificate. Contemporaneously with the execution of this
Agreement, GTC shall deliver to Genzyme resolutions of the Board of Directors of
GTC authorizing and approving all matters in connection with this Agreement and
the transactions contemplated hereby, certified by the Clerk of GTC as of the
date hereof.
ARTICLE 5 MISCELLANEOUS
5.1 Assignment. This Agreement may not be assigned or otherwise transferred
by any Party without the consent of the other Party; provided, however, that
either Party may, without such consent, assign its rights and obligations under
this Agreement (a) in connection with a corporate reorganization, to any member
of an affiliated group, all or substantially all of the equity interest of which
is owned and controlled by such Party or its direct or indirect parent
corporation or (b) in connection with a merger, consolidation or sale of
substantially all of such Party's assets to an unrelated Third Party; provided,
however, that such Party's rights and obligations under this Agreement shall be
assumed by its successor in interest in any such transaction and shall not be
transferred separate from all or substantially all of its other business assets,
including those business assets that are the subject of this Agreement. Any
purported assignment in violation of the preceding sentence shall be void. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement in writing.
5.2 Severability. Each Party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the Parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions, which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the Parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the Parties would not have entered into this Agreement
without the invalid provisions.
5.3 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier) or courier, postage prepaid (where
applicable), addressed to such other Party at its address indicated below, or to
such other address as the addressee shall have last furnished in writing to the
addressor in accordance with this Section 5.3, and shall be effective upon
receipt by the addressee.
6
<PAGE>
If to Genzyme Transgenics Corporation
GTC: Five Mountain Road Framingham,
Massachusetts 01701
Attention: President
Facsimile: (508) 370-3797
with a copy to: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701
Attention: General Counsel
Facsimile: (508) 370-3797.
If to Genzyme Corporation
Genzyme: One Kendall Square
Cambridge, Massachusetts 02139
Attention: President
Facsimile: (617) 374-7423
with a copy to: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: Chief Legal Officer
Facsimile: (617) 252-7553.
5.4 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts without regard to
any choice of law principle that would dictate the application of the laws of
another jurisdiction.
5.5 Entire Agreement. This Agreement together with the Collaboration
Agreement and the Operating Agreement contain the entire understanding of the
Parties with respect to the subject matter hereof. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by the Parties. Each of the Parties hereby acknowledges that this Agreement, the
Collaboration Agreement and the Operating Agreement are each the result of
mutual negotiation and therefore any ambiguity in their respective terms shall
not be construed against the drafting Party.
5.6 Headings. The captions to the several Articles and Sections hereof are
not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and
7
<PAGE>
the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
---------------------
Title: Vice President and Chief Financial Officer
------------------------------------------
Date: December 29, 1997
-----------------
GENZYME CORPORATION
By: /s/ Peter Wirth
-------------------
Title: Executive Vice President
-------------------------------
Date: December 29, 1998
-------------------
8
<PAGE>
EXHIBIT 10.52.3
COLLABORATION AGREEMENT
among
GENZYME CORPORATION,
GENZYME TRANSGENICS CORPORATION
and
ATIII LLC
dated as of January 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. DEFINITIONS................................................ 1
1.1 "Affiliate".............................................. 1
1.2 "Behring"................................................ 2
1.3 "BLA".................................................... 2
1.4 "*"...................................................... 2
1.5 "Collaboration Product".................................. 2
1.6 "Commercialization Costs"................................ 2
1.7 "Commercialization Plan"................................. 2
1.8 "Date of Execution"...................................... 3
1.9 "Development Costs"...................................... 3
1.10 "Development Plan"....................................... 3
1.11 "Development Program".................................... 3
1.12 "Distribution Margin".................................... 3
1.13 "Distributor's Discount"................................. 4
1.14 "Effective Date"......................................... 4
1.15 "Estimated Fully Absorbed Cost of Goods"................. 4
1.16 "Estimated Net Selling Price"............................ 4
1.17 "Field".................................................. 4
1.18 "FDA".................................................... 4
1.19 "Fully Absorbed Cost of Goods"........................... 4
1.20 "GAAP"................................................... 5
1.21 "Genzyme Patent Rights".................................. 5
1.22 "Genzyme Technology"..................................... 5
1.23 "Genzyme/GTC Patent Rights".............................. 5
1.24 "Genzyme/GTC Technology.................................. 5
1.25 "GTC Licensed ATIII Patent Rights........................ 5
1.26 "GTC Patent Rights"...................................... 5
1.27 "GTC Technology"......................................... 6
1.28 "Major Market Countries"................................. 6
1.29 "Manufacturer's Profit".................................. 6
1.30 "Manufacturing Know-How"................................. 6
1.31 "Manufacturing Margin"................................... 6
1.32 "Member"................................................. 6
1.33 "Net Profit"............................................. 6
1.34 "Net Sales".............................................. 7
1.35 "New Facility"........................................... 7
1.36 "New Facility Costs"..................................... 7
1.37 "Operating Agreement".................................... 8
1.38 "Patent Rights".......................................... 8
1.39 "Percentage Interest".................................... 8
1.40 "Program"................................................ 8
</TABLE>
- ------------------------
*Confidential treatment for indicated portion respectfully requested
(i)
<PAGE>
<TABLE>
<S> <C>
1.41 "Program Costs".......................................... 8
1.42 "Program Management Team"................................ 8
1.43 "Purchase Agreement"..................................... 8
1.44 "Regulatory Approvals"................................... 8
1.45 "Regulatory Scheme"...................................... 8
1.46 "SMIG"................................................... 8
1.47 "SMIG Territory"......................................... 8
1.48 "Specifications"......................................... 9
1.49 "Steering Committee"..................................... 9
1.50 "Technology"............................................. 9
1.51 "Territory".............................................. 9
1.52 "Third Party"............................................ 9
1.53 "Transgenic Animal"...................................... 9
1.54 "Transgenic ATIII"....................................... 9
ARTICLE 2. SCOPE AND STRUCTURE OF THE COLLABORATION .................. 9
2.1 General ................................................ 9
2.2 Exclusive Relationship.................................. 10
2.3 *....................................................... 10
2.4 SMIG Agreement.......................................... 11
ARTICLE 3. GRANTS AND RESERVATIONS OF RIGHTS ......................... 12
3.1 Licenses of Rights to ATIII LLC......................... 12
3.1.1 Grants from GTC.................................. 12
3.1.2 Grants from Genzyme.............................. 12
3.1.3 ATIII LLC Undertakings; Sublicenses.............. 13
3.1.4 Rights of ATIII LLC to Patent Rights or
Technology Developed Outside the Program......... 13
3.2 Sublicenses of Rights from ATIII LLC to GTC and
Genzyme................................................. 13
3.3 Reservation of Rights................................... 14
3.3.1 Reservation by GTC .............................. 14
3.3.2 Reservation by Genzyme........................... 14
ARTICLE 4. PROGRAM FUNDING; LLC INTEREST ............................. 14
4.1 Program Funding Commitments ............................ 14
4.1.1 1998 Funding .................................... 14
4.1.2 Funding After 1998 .............................. 14
4.1.3 New Facility Costs............................... 15
4.1.4 Adjustment to Percentage Interest and Funding
Commitment....................................... 15
4.2 Program Funding Capital Contributions .................. 15
4.2.1 Initial Capital Contributions ................... 15
4.2.2 Monthly Capital Contributions ................... 15
4.2.3 Quarterly Statements; Quarterly Reconciliation .. 15
4.3 Distributions .......................................... 16
</TABLE>
*Confidential treatment for indicated portion respectfully requested
(ii)
<PAGE>
<TABLE>
<S> <C>
4.4 Sale and Purchase of LLC Interest ...................... 16
4.5 Books of Account; Audit ................................ 16
ARTICLE 5. THE DEVELOPMENT PROGRAM.................................... 17
5.1 Conduct of the Development Program ..................... 17
5.1.1 General ......................................... 17
5.1.2 Development Plan ................................ 17
5.1.3 Initial and Updated Development Plan ............ 18
5.1.4 Execution and Performance ....................... 19
5.1.5 Attendance at Regulatory Meetings ............... 19
5.2 Development Information ................................ 19
5.2.1 Reports and Information Exchange ................ 19
5.2.2 Adverse Reaction Reporting ...................... 19
5.2.3 Clinical and Regulatory Audits .................. 19
5.3 Regulatory Approval Filings ............................ 20
5.4 Facilities Visits ...................................... 20
ARTICLE 6. SALES, MARKETING AND ADMINISTRATIVE SERVICES............... 20
6.1 Commercialization Plans ................................ 20
6.1.1 General ......................................... 20
6.1.2 Initial and Updated Commercialization Plans ..... 21
6.2 Exclusive Engagement ................................... 21
6.3 Orders and Forecasting ................................. 22
6.4 Prices and Payment Terms; Costs ........................ 22
6.4.1 Prices .......................................... 22
6.4.2 Terms of Payment ................................ 22
6.4.3 Marketing and Distribution Expenses ............. 22
6.5 Responsibilities of Genzyme ............................ 22
6.6 Responsibilities of ATIII LLC and GTC .................. 24
6.7 Third Party Distributors ............................... 24
6.8 General and Administrative Services .................... 24
ARTICLE 7. MANUFACTURE AND SUPPLY..................................... 24
7.1 Process Development; Manufacturing Approvals ........... 25
7.2 Manufacture and Supply of Collaboration Products ....... 25
7.2.1 General ......................................... 25
7.2.2 Manufacturing Facilities and Capacity
Requirements..................................... 26
7.2.3 Forecasts ....................................... 26
7.3 Certificates of Analysis ............................... 26
7.4 Certificates of Manufacturing Compliance ............... 26
7.5 Access to Facilities ................................... 26
ARTICLE 8. MANAGEMENT................................................. 27
8.1 Program Management Team ................................ 27
8.1.1 General ......................................... 27
8.1.2 Development Program Functions ................... 27
8.1.3 Commercialization Functions ..................... 27
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8.1.4 Minutes ......................................... 28
8.2 Steering Committee ..................................... 28
8.2.1 General ......................................... 28
8.2.2 Functions ....................................... 28
8.2.3 Minutes ......................................... 29
8.3 General Disagreements .................................. 29
ARTICLE 9. INTELLECTUAL PROPERTY RIGHTS............................... 29
9.1 Ownership .............................................. 29
9.1.1 Ownership and Assignment of Discoveries and
Improvements..................................... 29
9.1.2 Ownership of Trademarks ......................... 30
9.1.3 Cooperation of Employees ........................ 30
9.2 Filing, Prosecution and Maintenance of Patent Rights.... 30
9.2.1 Filing, Prosecution and Maintenance ............. 30
9.2.2 Patent Filing Costs ............................. 31
9.3 Cooperation ............................................ 31
9.4 Notification of Patent Term Restoration ................ 31
9.5 No Other Technology Rights ............................. 31
9.6 Enforcement of Patent Rights; Defense of Infringement
Actions................................................. 32
9.6.1 First Right to Respond .......................... 32
9.6.2 Sharing of Litigation and Settlement Expenses.... 32
9.6.3 Second Right to Respond ......................... 32
ARTICLE 10. CONFIDENTIALITY........................................... 32
10.1 Nondisclosure Obligations .............................. 32
10.2 Terms of this Agreement; Press Releases ................ 33
10.3 Publications ........................................... 33
ARTICLE 11. REPRESENTATIONS AND WARRANTIES............................. 34
11.1 Authorization ........................................... 34
11.2 Intellectual Property Rights ............................ 34
11.3 Warranties .............................................. 34
11.3.1 Genzyme Warranties .............................. 34
11.3.2 GTC Warranties .................................. 35
11.4 Disclaimer of Representations and Warranties............. 35
11.5 Limitation of Liability ................................. 35
ARTICLE 12. INDEMNITY................................................. 35
12.1 ATIII LLC Indemnity Obligations ........................ 35
12.2 Insurance .............................................. 35
ARTICLE 13. TERM AND TERMINATION..................................... 36
13.1 Term ................................................... 36
13.2 Termination ............................................ 36
13.2.1 For Certain Material Breaches .................. 36
13.2.2 For Failure to Make a Milestone Payment ........ 36
13.2.3 For Convenience ................................ 36
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13.2.4. Upon Bankruptcy ................................ 37
13.3. Effects of Termination .................................. 37
13.3.1. For Certain Material Breaches .................. 37
13.3.2. For Failure to Make a Milestone Payment......... 38
13.3.3. For Convenience ................................ 39
13.3.4 Upon Bankruptcy ................................ 40
13.3.5. * .............................................. 41
13.4. Inventory ............................................... 41
13.5. Survival of Rights and Duties ........................... 41
ARTICLE 14. MISCELLANEOUS......................................... 42
14.1. Cooperation ............................................. 42
14.2. Exchange Controls ....................................... 42
14.3. Withholding Taxes ....................................... 42
14.4. IRS Transfer Pricing Adjustments ........................ 42
14.5. Interest on Late Payments ............................... 42
14.6. Force Majeure ........................................... 43
14.7. Assignment .............................................. 43
14.8. Severability ............................................ 43
14.9. Notices ................................................. 43
14.10. Applicable Law........................................... 45
14.11. Arbitration.............................................. 45
14.11.1. General ........................................ 45
14.11.2. Procedure ...................................... 45
14.12. Injunctive Relief ....................................... 46
14.13. Entire Agreement ........................................ 46
14.14. Headings ................................................ 46
14.15. Independent Contractors ................................. 46
14.16. Waiver .................................................. 47
14.17. Counterparts ............................................ 47
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COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT dated as of January 1, 1998 (the
"Agreement") is made among Genzyme Corporation, a Massachusetts corporation
having its principal place of business at One Kendall Square, Cambridge,
Massachusetts 02139 ("Genzyme"), Genzyme Transgenics Corporation, a
Massachusetts corporation having its principal place of business at Five
Mountain Road, Framingham, Massachusetts 01701 ("GTC") and ATIII LLC, a
Delaware limited liability company having its principal place of business at
One Kendall Square, Cambridge, Massachusetts 02139 ("ATIII LLC"). Genzyme,
GTC and ATIII LLC are sometimes referred to herein individually as a "Party"
and collectively as the "Parties."
R E C I T A L S
A. GTC is developing recombinant human antithrombin III ("ATIII"),
produced in the milk of transgenic goats. ATIII is a principle inhibitor of
blood coagulation serine proteases, such as thrombin and Factor Xa and
certain other blood components, and assists in the maintenance of homeostatic
balance. Decreased levels of ATIII occur in individuals having a genetic or
an acquired deficiency. Acquired deficiencies can result from obstetrical or
surgical procedures, including without limitation coronary artery bypass
grafting ("CABG") procedures, and disease states, including without
limitation sepsis and septic shock, acute liver failure, disseminated
intravascular coagulation, burns, multiple trauma, organ transplantation and
hemodialysis. GTC is currently developing ATIII for the treatment of ATIII
deficiencies.
B. Genzyme has expertise in the areas of development and marketing of
bio-pharmaceutical products.
C. ATIII LLC has been organized by GTC and Genzyme as the vehicle for a
joint venture between GTC and Genzyme to develop and commercialize the
Collaboration Products (as defined herein) throughout the Territory (as
defined herein).
NOW THEREFORE, in consideration of the premises and of the covenants
herein contained, the Parties mutually agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement, the terms defined in this Article shall
have the meanings specified below. Certain other capitalized terms are
defined elsewhere in this Agreement.
1.1. "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under common control with a Party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock or other ownership interest of the
other corporation or entity, or if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or other entity or the
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power to elect or appoint more than fifty percent (50%) of the members of the
governing body of the corporation or other entity.
1.2. "Behring" shall mean Behringwerke Aktiengesellschaft, a subsidiary
of Hoechst Marion Roussel.
1.3. "BLA" shall mean a Biologics License Application filed with the FDA
after completion of human clinical trials to obtain marketing approval for a
Collaboration Product.
1.4. "*" shall mean *, a *.
1.5. "Collaboration Product" shall mean any product comprising tgATIII
together with any process developed for use in the Field by a Party
utilizing, based upon or arising out of the Genzyme Patent Rights, the GTC
Patent Rights, the GTC Licensed ATIII Patent Rights, the Genzyme/GTC Patent
Rights, the Genzyme Technology, the GTC Technology, the Genzyme/GTC
Technology or the Manufacturing Know-How owned or controlled by any Party,
including without limitation any and all improvements, combination products,
delivery systems and dosage forms related thereto.
1.6. "Commercialization Costs" with respect to a Collaboration Product
shall mean the variable costs and fixed costs incurred by ATIII LLC with
respect to work performed by the Parties and their Affiliates and
subcontractors in connection with the performance of the Commercialization
Plan for such Collaboration Product, including without limitation (a) GTC's
Fully Absorbed Cost of Goods for batches of Collaboration Product
manufactured and supplied by GTC in bulk form for use in connection with the
performance of the Commercialization Plan, (b) Genzyme's Fully Absorbed Costs
of Goods incurred in connection with the production of Collaboration Products
in finished form, including without limitation the performance of assay and
purification work, for use in connection with the performance of the
Commercialization Plan and (c) sales and marketing costs related to
performing market research, advertising, producing promotional literature,
sponsoring seminars and symposia, originating sales and providing
reimbursement and other patient support services. For purposes of this
Section 1.6, "variable costs" shall be deemed to be the cost of labor, raw
materials, supplies and other resources directly consumed in the conduct of
the Commercialization Plan and manufacture of Collaboration Product for use
in commercialization activities, as well as royalties payable to Third
Parties. For purposes of Section 1.6, "fixed costs" shall be deemed to be the
cost of facilities, utilities, insurance, equipment depreciation and other
fixed costs directly related to the conduct of the Commercialization Plan and
the manufacture of Collaboration Product for use in commercialization
activities, allocated based upon the proportion of such costs directly
attributable to support of the Commercialization Plan and the manufacture of
Collaboration Product for use in commercialization activities or by such
other method of cost allocation as may be approved by the Steering Committee.
All cost determinations made hereunder shall be made in accordance with GAAP.
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1.7. "Commercialization Plan" shall mean the comprehensive plan for the
commercialization of a Collaboration Product, as more specifically described
in Section 6.1.1 hereof.
1.8. "Date of Execution" shall mean the last date on which the Parties
executed this Agreement, as shown on the signature pages hereto.
1.9. "Development Costs" with respect to a Collaboration Product shall
mean the variable costs and fixed costs incurred by ATIII LLC with respect to
work performed by the Parties and their Affiliates and subcontractors in
connection with the conduct of the Development Plan for such Collaboration
Product, including without limitation (a) direct, out- of-pocket external
costs, including clinical grants, clinical laboratory fees, positive controls
and the cost of studies conducted and services provided by contract research
organizations and individuals, consultants, toxicology contractors, and
manufacturers necessary or useful for the purpose of obtaining Regulatory
Approvals for such Collaboration Product, (b) amounts paid to Genzyme and GTC
by ATIII LLC with respect to research and development and pre-
commercialization sales and marketing efforts as set forth in the Development
Plan for such Collaboration Product, including without limitation the efforts
of Genzyme and GTC to develop a process for the manufacture of such
Collaboration Product and the Fully Absorbed Cost of Goods for batches of
such Collaboration Product manufactured and supplied for use in preclinical
and clinical trials and pre-commercialization activities, (c) costs related
to data management, statistical designs and studies, document preparation and
other expenses associated with the clinical testing program for such
Collaboration Product and (d) costs for preparing, submitting, reviewing or
developing data or information for the purpose of submission of applications
to obtain Regulatory Approvals for such Collaboration Product. For purposes
of this Section 1.9, "variable costs" shall be deemed to be the cost of
labor, raw materials, supplies and other resources directly consumed in the
conduct of the Development Program and the manufacture of the Collaboration
Product for use in preclinical and clinical trials and pre-commercialization
activities. For purposes of this Section 1.9, "fixed costs" shall be deemed
to be the cost of facilities, utilities, insurance, facility and equipment
depreciation and other fixed costs directly related to the conduct of the
Development Program and the manufacture of the Collaboration Product for use
in preclinical and clinical trials and pre-commercialization activities,
allocated based upon the proportion of such costs directly attributable to
support of the Development Program and the manufacture of the Collaboration
Product for use in preclinical and clinical trials and pre-commercialization
activities or by such other method of cost allocation as may be approved by
the Steering Committee. All cost determinations made hereunder shall be made
in accordance with GAAP.
1.10. "Development Plan" shall mean the comprehensive plan and budget
for the development of a Collaboration Product under the Development Program,
as more specifically described in Section 5.1.2 hereof.
1.11. "Development Program" shall mean the preclinical and clinical
development of Collaboration Products, including the preparation and filing
of all applications for Regulatory Approvals for each Collaboration Product.
1.12. "Distribution Margin" with respect to Net Sales of a Collaboration
Product shall mean the amount of the Distributor's Discount plus the amount
by which Genzyme's
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actual selling price exceeds the Estimated Net Selling Price for such
Collaboration Product or, if Genzyme's actual selling price is less than the
Estimated Net Selling Price for such Collaboration Product, minus the amount
of such difference. For purposes of this Section 1.12, "Genzyme's actual
selling price" shall mean Genzyme's gross invoiced sales price billed to
customers reduced to reflect any amounts incurred resulting from any rebates,
chargebacks or refunds subsequently allowed and taken.
1.13. "Distributor's Discount" shall mean the dollar amount per unit of
Collaboration Product fixed by the Steering Committee as a discount from the
Estimated Net Selling Price at which Genzyme purchases such Collaboration
Product from ATIII LLC.
1.14. "Effective Date" shall mean the January 1, 1998.
1.15. "Estimated Fully Absorbed Cost of Goods" with respect to a
Collaboration Product shall mean GTC's Fully Absorbed Cost of Goods estimated
by the Steering Committee for quantities of Collaboration Product to be
purchased by ATIII LLC pursuant to Article 7 hereof. The Estimated Fully
Absorbed Cost of Goods for a Collaboration Product shall be set forth in the
Development Plan and Commercialization Plan for such Collaboration Product.
The Steering Committee may adjust the Estimated Fully Absorbed Cost of Goods
for a Collaboration Product to the extent necessary or appropriate to reflect
changes in market conditions and actual manufacturing experience.
1.16. "Estimated Net Selling Price" with respect to a Collaboration
Product shall mean the price estimated by the Steering Committee at which
such Collaboration Product will be sold by Genzyme to Third Party customers
purchasing such Collaboration Product for resale. The Estimated Net Selling
Price shall be set forth in the Commercialization Plan for such Collaboration
Product. The Steering Committee may adjust the Estimated Net Selling Price
for a Collaboration Product to the extent necessary or appropriate to reflect
changes in market conditions and actual sales experience.
1.17. "Field" shall mean any and all indications for ATIII, including
without limitation diagnosis, treatment or prevention of hereditary and
acquired ATIII deficiencies.
1.18. "FDA" shall mean the United States Food and Drug Administration,
any successor agency, or the regulatory authority of any country other than
the United States with responsibilities comparable to those of the United
States Food and Drug Administration.
1.19. "Fully Absorbed Cost of Goods" with respect to a Collaboration
Product shall mean (a) the variable costs and fixed costs incurred by a Party
associated with the manufacture (inclusive of finishing processes) of batches
of such Collaboration Product or (b) if such Collaboration Product is not
manufactured by the Parties, the transfer price for batches of such
Collaboration Product purchased from Third Party manufacturers. For purposes
of this Section 1.19, "variable costs" shall be deemed to be the cost of
labor, raw materials, supplies and other resources directly consumed in the
manufacture of batches of such Collaboration Product. For purposes of this
Section 1.19, "fixed costs" shall be deemed to be the cost of facilities,
utilities, insurance, facility and equipment depreciation and other fixed
costs directly related to the manufacture of batches of such Collaboration
Product. Fixed costs shall be allocated to such Collaboration Product based
upon the proportion of such costs directly attributable to support of the
manufacturing process for such
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Collaboration Product. If a facility is used to manufacture Collaboration
Products and products for other programs of either Genzyme or GTC (including
without limitation products for use or sale in the SMIG Territory), fixed
costs shall be allocated in proportion to the use of such facility for the
manufacture of Collaboration Products and products for such other programs.
Fully Absorbed Cost of Goods shall exclude all costs otherwise reimbursed
pursuant to this Agreement. In the event that either GTC or Genzyme
subcontracts with the other Party to perform any work on its behalf in
connection with the manufacturing responsibilities assigned to GTC or
Genzyme, respectively, pursuant to Section 7.2.1 hereof, GTC and Genzyme (i)
shall each directly charge ATIII LLC their respective Fully Absorbed Cost of
Goods and (ii) shall not include any part of the other Party's Fully Absorbed
Cost of Goods in the amount so charged to ATIII LLC. Except as otherwise
provided in this Agreement, all cost determinations made hereunder shall be
made in accordance with GAAP.
1.20. "GAAP" shall mean United States generally accepted accounting
principles, consistently applied, except when different accounting principles
are required under the terms of the Operating Agreement, in which case the
accounting principles mandated under the Operating Agreement shall control.
1.21. "Genzyme Patent Rights" shall mean all present Patent Rights owned
or controlled by, or licensed (with the right to sublicense where possible)
to, Genzyme, to the extent that such Patent Rights cover a compound,
composition, biological or other material, product-by-process, method,
apparatus, manufacturing or other process, relating to or useful for the
research, development, manufacture or commercialization of Collaboration
Products for use in the Field, including the Genzyme Patent Rights listed in
Schedule 1.21 hereto.
1.22. "Genzyme Technology" shall mean Technology owned or controlled by,
or licensed (with the right to sublicense) to, Genzyme relating to or useful
for the research, development, manufacture or commercialization of
Collaboration Products for use in the Field.
1.23. "Genzyme/GTC Patent Rights" shall mean the Patent Rights that
claim Joint Inventions (as such term is defined in Section 9.1.1 hereof) that
are jointly discovered, made or conceived during and in connection with the
Program to the extent that such Patent Rights cover a compound, composition,
biological or other material, product-by-process, method, apparatus,
manufacturing or other process, or transgenic technology relating to or
useful for the research, development, manufacture or commercialization of
Collaboration Products for use in the Field.
1.24. "Genzyme/GTC Technology" shall mean all Technology discovered,
made or conceived during and in connection with the Program, and future
Technology owned or controlled by, or licensed (with the right to sublicense
where possible) to, either Genzyme or GTC relating to or useful for the
research, development, manufacture or commercialization of Collaboration
Products for use in the Field.
1.25. "GTC Licensed ATIII Patent Rights" shall mean all present and
future Patent Rights in the Territory sublicensed (whether exclusively or
nonexclusively) by GTC from Behring pursuant to the Agreement dated September
29, 1990 by and between Behring, SMIG
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and GTC (as the successor to Genzyme's interest therein) (the "Original ATIII
Agreement"). Schedule 1.25 hereto lists the GTC Licensed ATIII Patent Rights
as of the Date of Execution.
1.26. "GTC Patent Rights" shall mean, except as to GTC Licensed ATIII
Patent Rights, all present Patent Rights owned or controlled by, or licensed
(with the right to sublicense where possible) to, GTC, to the extent that
such Patent Rights cover a compound, composition, biological or other
material, product-by-process, method, apparatus, manufacturing or other
process, or transgenic production technology relating to or useful for the
research, development, manufacture or commercialization of Collaboration
Products for use in the Field, including the GTC Patent Rights listed in
Schedule 1.26 hereto.
1.27. "GTC Technology" shall mean all present Technology owned or
controlled by, or licensed (with the right to sublicense where possible) to,
GTC relating to or useful for the research, development, manufacture or
commercialization of Collaboration Products for use in the Field.
1.28. "Major Market Countries" shall mean *. The Steering Committee may
from time to time designate additional countries as Major Market Countries or
remove countries from the list of designated Major Market Countries with
respect to a Collaboration Product to the extent necessary to reflect changes
in market conditions. Any such additions or deletions shall be set forth in
the Commercialization Plan for such Collaboration Product.
1.29. "Manufacturer's Profit" shall mean the dollar amount in excess of
GTC's Estimated Fully Absorbed Costs of Goods Sold included in the price at
which ATIII LLC purchases quantities of Collaboration Products in bulk form
from GTC. The Manufacturer's Profit shall only be payable in connection with
the purchase of Collaboration Products ultimately intended for commercial
sale.
1.30. "Manufacturing Know-How" shall mean all information, techniques,
inventions, discoveries, improvements, practices, methods, knowledge, skill,
experience and other technology, whether or not patentable or copyrightable,
and any patent applications, patents or copyrights based thereon, relating to
or necessary or useful for the production, purification, packaging, storage
and transportation of Collaboration Products, including without limitation
specifications, acceptance criteria, manufacturing batch records, standard
operating procedures, engineering plans, installation, operation and process
qualification protocols for equipment, validation records, master files
submitted to the FDA, process validation reports, environmental monitoring
processes, test data including pharmacological, toxicological and clinical
test data, cost data and employee training materials.
1.31. "Manufacturing Margin" shall mean the price at which ATIII LLC
purchases quantities of a Collaboration Product in bulk form from GTC less
GTC's actual Fully Absorbed Cost of Goods for such quantities.
1.32. "Member" shall have the meaning set forth in the Operating
Agreement.
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1.33. "Net Profit" of ATIII LLC for any period shall be equal to (a) the
sum during such period of all revenues recognized and recorded by ATIII LLC
during such period, including without limitation (i) revenues from Net Sales
of all Collaboration Products sold directly by ATIII LLC and (ii) all
revenues received by ATIII LLC from Third Parties as consideration for
sublicensing the manufacture, use, distribution or sale of Collaboration
Products, less (b) all expenses incurred by ATIII LLC during such period,
including without limitation expenses incurred in respect of Development
Costs, New Facility Costs and Commercialization Costs and facility and
equipment depreciation costs. All determinations made hereunder shall be made
in accordance with GAAP.
1.34. "Net Sales" with respect to a Collaboration Product shall mean the
gross invoiced sales price of such Collaboration Product billed to (a)
independent Third Party customers, including without limitation distributors,
in bona fide arms-length transactions and (b) Genzyme and its Affiliates,
less, for purposes only of calculating the payments set forth in Article 13
hereof, to the extent such amounts are included in the gross invoiced sales
price, actual: (i) freight and insurance costs incurred in transporting such
Collaboration Product to such customers; (ii) quantity, cash and other trade
discounts actually allowed and taken; (iii) customs duties, surcharges and
taxes and other governmental charges incurred in connection with the
exportation or importation of such Collaboration Product in final form; (iv)
bad debt expense; (v) amounts repaid or credited by reason of rejections (due
to Collaboration Product spoilage, damage, expiration of useful life or
otherwise) or retroactive price reductions; (vi) amounts incurred resulting
from governmental mandated rebate or discount programs; and (vii) Third Party
rebates and chargebacks actually allowed and taken, including without
limitation hospital buying group chargebacks, hospital buying group/group
purchasing organization administration fees or managed care organization
rebates. The Steering Committee shall determine how any transfers of
Collaboration Products by ATIII LLC to Genzyme or its Affiliates for use as
samples shall be treated for purposes of this Section 1.34, and ATIII LLC
shall make such transfers in accordance with such determination. The amount
of Net Sales for any period shall be determined on the basis of sales
recorded in such period in accordance with GAAP.
1.35. "New Facility" shall mean any new manufacturing facility (or
portion thereof) to be constructed after the Date of Execution to be used to
manufacture (inclusive of finishing processes) Collaboration Products.
1.36. "New Facility Costs" shall mean the variable costs and fixed costs
incurred by ATIII LLC with respect to (a) the design, construction,
validation and operation of the New Facility, including without limitation
(i) costs for preparing, submitting, reviewing or developing data or
information for the purpose of submission of applications to obtain
Regulatory Approval for the New Facility and (ii) the scale-up of the
manufacturing process (inclusive of finishing processes) for Collaboration
Products to be manufactured in the New Facility, and (b) the manufacture of
Collaboration Products in the New Facility. For purposes of this Section
1.36, 'variable costs' shall be deemed to be the cost of labor, raw
materials, supplies and other resources directly consumed in the design,
construction, validation and operation of the New Facility and in the
manufacture of Collaboration Products in the New Facility. For purposes of
this Section 1.36, "fixed costs" shall be deemed to be the cost of
facilities, utilities, insurance, equipment depreciation and other fixed
costs related to the operation of the New Facility and the manufacture of
Collaboration Products in the New Facility. If the New Facility is used to
manufacture Collaboration Products and products for
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other programs of either Genzyme or GTC (including without limitation
products for use or sale in the SMIG Territory), variable costs and fixed
costs shall be allocated in proportion to the use of the New Facility for the
manufacture of Collaboration Products and products for such other programs.
New Facility Costs shall exclude all costs otherwise reimbursed pursuant to
this Agreement. Except as otherwise provided in this Agreement, all cost
determinations made hereunder shall be made in accordance with GAAP.
1.37. "Operating Agreement" shall mean the Amended and Restated
Operating Agreement of ATIII LLC of even date herewith by and between GTC and
Genzyme.
1.38. "Patent Rights" shall mean patents, patent applications,
certificates of invention, or applications for certificates of invention,
together with any extensions, registrations, confirmations, reissues,
divisions, continuations or continuations-in-part, re-examinations or
renewals thereof.
1.39. "Percentage Interest" shall have the meaning set forth in the
Operating Agreement.
1.40. "Program" shall mean the collaboration among ATIII LLC, GTC and
Genzyme described in this Agreement.
1.41. "Program Costs" shall mean all Program-related costs, including
without limitation Development Costs, New Facility Costs and
Commercialization Costs, in each case as such costs are incurred or accrued
by ATIII LLC on or after the Effective Date.
1.42. "Program Management Team" shall mean the joint team composed of
representatives of Genzyme and GTC described in Section 8.1.1 hereof.
1.43. "Purchase Agreement" shall mean the Purchase Agreement of even
date herewith by and between GTC and Genzyme.
1.44. "Regulatory Approvals" shall mean all approvals from regulatory
authorities in any country required lawfully to market Collaboration Products
in any such country, including without limitation any BLA, any establishment
license application filed with the FDA to obtain approval of the facilities
and equipment to be used to manufacture a Collaboration Product, and any
product pricing approvals where applicable.
1.45. "Regulatory Scheme" shall mean the United States Public Health
Service Act and the regulations, interpretations and guidelines promulgated
thereunder by the FDA or the regulatory scheme applicable to the
Collaboration Products in any country other than the United States, as such
statutes, regulations, interpretations and guidelines or regulatory schemes
may be amended from time to time.
1.46. "SMIG" shall mean SMI Genzyme Limited, a Japanese corporation and
a joint venture between Genzyme and Sumitomo Metal Industries, Ltd.
1.47. "SMIG Territory" shall mean the territory in which SMIG has an
exclusive right and license with respect to ATIII pursuant to that certain
Research and Development Agreement dated September 11, 1990 by and between
SMIG and GTC (as the successor to
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Genzyme), as amended by that certain Amendment Agreement dated March 15, 1994
by and between SMIG and GTC and that certain letter agreement dated August 4,
1994 and that certain Agreement dated as of January 31, 1997 (as amended, the
"SMIG Research Agreement"), which territory consists of: Japan, China,
Taiwan, Thailand, India, Sri Lanka, Indonesia, Philippines, Vietnam,
Singapore, Malaysia, Hong Kong, Myanmar (Burma), Pakistan, Bangladesh, South
Korea, Laos, Cambodia and their respective succession states.
1.48. "Specifications" with respect to a Collaboration Product shall
mean the written specifications for such Collaboration Product determined by
the Program Management Team and approved by the Steering Committee; provided
that such specifications shall at all times comply with the relevant
Regulatory Scheme in the country of sale and in the country of use. The
Specifications may be amended from time to time by the Program Management
Team provided that such amendments are approved by the Steering Committee or
the written agreement of the Parties, as the case may be. Copies of such
Specifications shall be maintained by both GTC and Genzyme and shall become a
part of this Agreement as if incorporated herein.
1.49. "Steering Committee" shall mean the governing body of ATIII LLC
composed of representatives of GTC and Genzyme appointed as described in
Section 8.2.1 hereof.
1.50. "Technology" shall mean inventions, trade secrets, copyrights,
know-how, data and other intellectual property of any kind (including without
limitation any proprietary biological or other materials, compounds or
reagents, and transgenic production technology but not including Patent
Rights).
1.51. "Territory" shall mean the world excluding the SMIG Territory.
1.52. "Third Party" shall mean any entity other than ATIII LLC, GTC or
Genzyme and their respective Affiliates.
1.53. "Transgenic Animal" shall mean a non-human animal, or an egg,
sperm or embryo of such animal, which bears in its germline a foreign gene
derived from another animal species.
1.54. "Transgenic ATIII", which may be abbreviated as "tgATIII", shall
mean recombinant human ATIII produced by expression of a recombinant ATIII
gene or ATIII cDNA or combination thereof in the milk of a Transgenic Animal
bearing such gene, cDNA or combination in its genome.
ARTICLE 2. SCOPE AND STRUCTURE OF THE COLLABORATION
2.1. General. GTC and Genzyme formed ATIII LLC as the vehicle for a joint
venture between GTC and Genzyme to develop and commercialize Collaboration
Products in and throughout the Territory. GTC and Genzyme are the sole initial
members of ATIII LLC and own * percent (*%) and * percent (*%) interests in
ATIII LLC, respectively. In
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accordance with the terms of the Purchase Agreement to be executed
immediately hereafter, GTC will sell and assign to Genzyme a * percent (*%)
interest in ATIII LLC and consequently GTC and Genzyme will each own a fifty
percent (50%) interest in ATIII LLC (subject to adjustment pursuant to
Section 4.1.4 hereof and pursuant to the Operating Agreement). ATIII LLC will
undertake the Development Program for each Collaboration Product, with each
of the Parties assuming responsibility for those portions of the Development
Program allocated to it under this Agreement. Upon completion of the
Development Program, GTC will manufacture bulk quantities of the
Collaboration Products on behalf of ATIII LLC, Genzyme will provide finishing
processing of the Collaboration Products for commercial sale on behalf of
ATIII LLC and Genzyme will market and sell the Collaboration Products in the
Territory as exclusive distributor for ATIII LLC *, all on the terms and
conditions set forth in this Agreement or such other terms and conditions as
the Parties may agree upon.
2.2. Exclusive Relationship. During the term of this Agreement, neither
ATIII LLC, Genzyme nor GTC, nor any of their Affiliates shall independently,
or with a Third Party, conduct research or development activities regarding,
or engage in the manufacture, marketing, sale or distribution of, products
comprising tgATIII in the Field and in the Territory other than as part of
the Program; *. In addition, during the two-year period following termination
of this Agreement, neither (a) the breaching Party and its Affiliates in the
case of termination pursuant to Section 13.2.1 hereof, (b) Genzyme or its
Affiliates in the case of termination pursuant to Section 13.2.2 hereof, (c)
the terminating Party and its Affiliates in the case of termination pursuant
to Section 13.2.3 hereof or (d) the non- terminating Party and its Affiliates
in the case of termination pursuant to Section 13.2.4 hereof shall
independently, or with a Third Party, conduct research regarding, or engage
in the manufacture, marketing, sale or distribution of, products comprising
tgATIII in the Field and in the Territory; provided, however, that in the
event that this Agreement is terminated pursuant to Section 13.2.3 hereof and
the non-terminating Party does not exercise its option under Section 13.3.3
hereof, then the restrictions set forth in this sentence shall not apply.
Notwithstanding the foregoing, nothing herein is intended to restrict GTC or
Genzyme or their respective Affiliates from conducting research or
development activities regarding, or engaging in the manufacture, marketing,
sale or distribution of, products that have substantially different
biomedical pathways and are targeted to the same indications included
hereunder.
2.3. *. *, Genzyme, * recombinant human ATIII. * As soon as practicable
after the Date of Execution, Genzyme and GTC together, on behalf and in the
name of ATIII LLC, shall use their respective commercially reasonable and
diligent efforts (as such term is defined in Section 5.1.1 hereof) to *,
including without limitation, * must be approved in advance by the Steering
Committee. In the event that:
(a) (i) * or (ii) *, then *; or
(b) * and *, then *.
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2.4. SMIG Agreement. Genzyme and ATIII LLC each hereby acknowledge that
SMIG has exclusive rights to use, manufacture and sell tgATIII and products
comprising tgATIII in the SMIG Territory pursuant to the SMIG Research
Agreement. The Parties hereby agree that if any equipment, manufacturing
process and/or facility owned or leased by ATIII LLC is used for the
manufacture of products for use or sale by SMIG, (i) GTC and/or SMIG shall be
solely responsible for the costs of the manufacturing of such products, (ii)
at all times the manufacture of Collaboration Products in accordance with
Article 7 hereof shall be given priority with respect to the use of such
property and (iii) ATIII LLC shall be entitled to receive commercially
reasonable compensation for such use from GTC and/or SMIG.
The Parties acknowledge that, pursuant to Section 8.1 of the SMIG
Research Agreement, GTC will be entitled to receive and retain for its own
account milestone payments and royalty payments from SMIG with respect to
sales of tgATIII, products comprising tgATIII and Transgenic Animals and that
pursuant to Section 9.1 of the SMIG Research Agreement, SMIG will be entitled
to receive royalty payments with respect to sales of tgATIII, products
comprising tgATIII and Transgenic Animals a female of which secretes ATIII in
its milk in North and South America and in the Non Exclusive Territory (as
defined in the SMIG Research Agreement). The Parties hereby agree that such
royalties payable to SMIG shall be paid as follows: (a) *, and (b) * GTC
shall deliver to Genzyme quarterly reports setting forth (i) the aggregate
amount of all royalty and milestone payments received by GTC from SMIG after
the Date of Execution relating to tgATIII, products comprising tgATIII and
Transgenic Animals (excluding milestone payments for milestone events
achieved prior to the Date of Execution),*. The Parties
acknowledge that *. Such reports shall be subject to Genzyme's audit rights
set forth in Section 4.5 hereof. GTC shall not enter into any amendment or
modification of the SMIG Research Agreement relating to tgATIII, products
comprising tgATIII and Transgenic Animals without the prior written consent
of the Steering Committee after the Date of Execution.
ARTICLE 3. GRANTS AND RESERVATIONS OF RIGHTS
3.1. Licenses of Rights to ATIII LLC.
3.1.1. Grants from GTC.
(a) Exclusive Grant. Except as otherwise expressly provided herein, GTC
hereby grants to ATIII LLC an exclusive, irrevocable (during the term of this
Agreement), royalty-free right and sublicense, with the right to grant further
sublicenses, under the GTC Licensed ATIII Patent Rights (subject to Section 2.3
above), the Genzyme/GTC Patent Rights and the Genzyme/GTC Technology and any
associated Technology and Manufacturing Know- How owned or controlled by GTC to
develop, make, have made, use, offer for sale, sell, have sold, import and
export Collaboration Products for use in the Field and in the Territory.
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(b) Non-Exclusive Grant. Except as otherwise expressly provided
herein, GTC hereby grants to ATIII LLC a non-exclusive, irrevocable (during
the term of this Agreement), royalty-free right and license, with the right
to grant sublicenses, under the GTC Patent Rights and GTC Technology to
develop, make, have made, use, offer for sale, sell, have sold, import and
export Collaboration Products for use in the Field and in the Territory.
3.1.2. Grants from Genzyme.
(a) Exclusive Grant. Except as otherwise expressly provided herein,
Genzyme hereby grants to ATIII LLC an exclusive, irrevocable (during the term of
this Agreement), royalty-free right and sublicense, with the right to grant
further sublicenses, under the Genzyme/GTC Patent Rights and the Genzyme/GTC
Technology and any associated Technology and Manufacturing Know-How owned or
controlled by Genzyme to develop, make, have made, use, offer for sale, sell,
have sold, import and export Collaboration Products for use in the Field and in
the Territory.
(b) Non-Exclusive Grant. Except as otherwise expressly provided herein,
Genzyme hereby grants to ATIII LLC a non-exclusive, irrevocable (during the term
of this Agreement), royalty-free right and license, with the right to grant
sublicenses, under the Genzyme Patent Rights, Genzyme Technology and the
Manufacturing Know-How owned or controlled by Genzyme, to develop, make, have
made, use, offer for sale, sell, have sold, import and export Collaboration
Products for use in the Field and in the Territory.
3.1.3 ATIII LLC Undertakings; Sublicenses. In consideration of the
licenses granted under this Section 3.1, ATIII LLC hereby undertakes to pay all
royalties, sublicense fees and other costs or expenses payable to Third Parties
associated with the acquisition or use of such licenses by ATIII LLC. Schedule
3.1.3 hereto lists all of such obligations as of the Date of Execution. Except
as provided in Section 3.2 below, all sublicenses granted by ATIII LLC shall be
subject to prior approval by the Steering Committee. The Parties hereby
acknowledge that ATIII LLC may be required to *.
3.1.4. Rights of ATIII LLC to Patent Rights or Technology Developed
Outside the Program. In the event that either GTC or Genzyme develops, acquires
or otherwise comes to own or control or receives a license with respect to
Patent Rights, Technology or Manufacturing Know-How after the Date of Execution
other than in connection with the Program and such Patent Rights, Technology or
Manufacturing Know-How are useful in the Field and licensable by GTC or Genzyme,
as the case may be, the Party owning or controlling such Patent Rights,
Technology or Manufacturing Know-How shall grant to ATIII LLC an option
exercisable at the discretion of the Steering Committee to obtain an exclusive,
irrevocable (during the term of this Agreement) right and license, with the
right to grant sublicenses, to such Patent Rights, Technology or Manufacturing
Know-How limited to use in the Field and in the Territory to the extent
necessary or appropriate to enable ATIII LLC to develop, make, have made, use,
offer for sale, sell, have sold, import and export Collaboration Products, in
each case subject only to ATIII LLC's undertaking to pay (a) a commercially
reasonable portion of all costs incurred by GTC or Genzyme, as the case may be,
to acquire or develop such Patent Rights, Technology or Manufacturing Know-How,
(b) a commercially
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reasonable portion of any and all development costs incurred by GTC or
Genzyme, as the case may be, since the date such Party acquired or developed
such Patent Rights, Technology or Manufacturing Know-How and (c) all
royalties, sublicense fees and other costs or expenses payable to Third
Parties associated with the acquisition or use of such license by ATIII LLC;
provided, however, that if GTC or Genzyme, as the case may be, does not own
or have exclusive rights to such Patent Rights, Technology or Manufacturing
Know-How, the license subject to ATIII LLC's option hereunder shall be for
the same level of exclusivity as the rights held by GTC or Genzyme, as the
case may be, with respect to such Patent Rights, Technology or Manufacturing
Know-How.
3.2. Sublicenses of Rights from ATIII LLC to GTC and Genzyme. ATIII LLC
hereby grants to each of GTC and Genzyme a non-exclusive, irrevocable (during
the term of this Agreement), royalty-free right and sublicense under the Patent
Rights, Technology and Manufacturing Know-How licenses granted to it pursuant to
Section 3.1 solely to the extent required to permit such Party to perform its
duties under this Agreement. ATIII LLC also hereby grants Genzyme a
non-exclusive, irrevocable (during the term of this Agreement), royalty-free
right and license to use any and all present and future trademarks owned or
licensed (with the right to sublicense) to ATIII LLC in connection with the
commercialization of Collaboration Products in the Territory to the extent
required to permit Genzyme to perform its duties under this Agreement.
3.3. Reservation of Rights.
3.3.1. Reservation by GTC. Notwithstanding the license grants set forth
in Section 3.1, GTC at all times reserves the rights under the GTC Patent
Rights, the GTC Technology, the Genzyme/GTC Patent Rights, the Genzyme/GTC
Technology and the Manufacturing Know-How owned or controlled by GTC (a) to
make, have made and use Collaboration Products for research and development
purposes only, (b) to develop, make, have made, use, offer for sale, sell, have
sold, import and export (i) products outside the Field and/or outside the
Territory and (ii) products other than products comprising ATIII and (c) to
grant licenses to Third Parties for the foregoing purposes.
3.3.2. Reservation by Genzyme. Notwithstanding the license grants set
forth in Section 3.1, Genzyme at all times reserves the rights under the Genzyme
Patent Rights, the Genzyme Technology, the Genzyme/GTC Patent Rights, the
Genzyme/GTC Technology and Manufacturing Know-How owned or controlled by Genzyme
(a) to make, have made and use Collaboration Products for research and
development purposes only, (b) to develop, make, have made, use, offer for sale,
sell, have sold, import and export (i) products outside the Field and/or outside
the Territory and (ii) products other than products comprising ATIII and (c) to
grant licenses to Third Parties for the foregoing purposes.
ARTICLE 4. PROGRAM FUNDING; LLC INTEREST
4.1. Program Funding Commitments. Each of Genzyme and GTC hereby undertakes
to make capital contributions to ATIII LLC as follows:
4.1.1. 1998 Funding. For the 1998 calendar year, (a) Genzyme shall make
capital contributions to ATIII LLC sufficient to pay all Program Costs other
than New
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Facility Costs for 1998 until such time as (i) the aggregate amount of the
capital contributions paid by Genzyme for the 1997 and 1998 calendar years
(including all amounts paid by Genzyme to GTC during 1997 pursuant to Section
1.10 of the Convertible Debt Agreement) equals (ii) seventy percent (70%) of the
total Program Costs other than New Facility Costs (incurred and/or budgeted) for
the 1997 and 1998 calendar years (including without limitation all costs
incurred by GTC and Genzyme in 1997 in connection with the research, development
and manufacture of tgATIII)(the "Genzyme 1997/1998 Amount"), and (b) GTC shall
make capital contributions to ATIII LLC sufficient to pay all Program Costs
other than New Facility Costs for 1998 after such time as the Genzyme 1997/1998
Amount has been paid.
4.1.2. Funding After 1998. Beginning with the 1999 calendar year, (a)
Genzyme shall make capital contributions to ATIII LLC sufficient to pay (i)
seventy percent (70%) of all Program Costs other than New Facility Costs until
such time as the aggregate capital contributions paid by Genzyme pursuant to
this Section 4.1 (including all amounts paid by Genzyme to GTC during 1997
pursuant to Section 1.10 of the Convertible Debt Agreement) equals thirty three
million dollars ($33,000,000) (the "Genzyme 70% Funding Commitment") and (ii)
fifty percent (50%) of all Program Costs other than New Facility Costs
thereafter and (b) GTC shall make capital contributions to ATIII LLC sufficient
to pay (i) thirty percent (30%) of all Program Costs other than New Facility
Costs until the Genzyme 70% Funding Commitment has been satisfied and (ii) fifty
percent (50%) of all Program Costs other than New Facility Costs thereafter.
4.1.3. New Facility Costs Genzyme and GTC shall each also make capital
contributions to ATIII LLC sufficient to pay fifty percent (50%) of all New
Facility Costs to be incurred on or after the Effective Date.
4.1.4. Adjustment to Percentage Interest and Funding Commitment. In the
event that either GTC or Genzyme fails to make a capital contribution pursuant
to this Section 4.1 and Section 4.2 below, and the other Party does not elect to
terminate this Agreement pursuant to Section 13.2.1 hereof, then the Percentage
Interests in ATIII LLC and the future funding responsibility of the Members
shall be adjusted as provided in Section 4.1(b) of the Operating Agreement.
4.2. Program Funding Capital Contributions.
4.2.1. Initial Capital Contributions. No later than January 5, 1998,
GTC and Genzyme shall each make a capital contribution to ATIII LLC in an amount
equal to their respective capital contribution obligations pursuant to Section
4.1.1 and 4.1.3 above with respect to Program Costs budgeted to be incurred from
the Effective Date through and including January 31, 1998.
4.2.2. Monthly Capital Contributions. With respect to each calendar
month after December 1997, Genzyme and GTC shall each make capital contributions
to ATIII LLC, monthly in advance, not later than the fifteenth (15th) day of the
prior calendar month, in an aggregate amount equal to one-third of the Program
Costs budgeted to be incurred by ATIII LLC in any then-current Development Plan
or Commercialization Plan for the calendar quarter in which such calendar month
occurs, allocated between such Parties in accordance with the funding
responsibility assumed by Genzyme and GTC pursuant to Section 4.1 above. Upon
receipt of each such capital contribution from Genzyme or GTC, as the case may
be,
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ATIII LLC shall promptly pay the Parties that portion of the budgeted Program
Costs to which they are respectively entitled.
4.2.3. Quarterly Statements; Quarterly Reconciliation. Within twenty
(20) days after the end of each of the first three (3) calendar quarters of
each year and within fifty (50) days after the end of each calendar year,
each of GTC and Genzyme shall provide ATIII LLC with a detailed itemization
of its Program Costs actually incurred during the previous quarter. Each of
GTC and Genzyme shall provide the other Party with estimates of such costs
upon the reasonable request of the other Party prior to the dates such
statements are due. Within thirty (30) days following receipt of the
quarterly statement of actual Program Costs provided by each of GTC and
Genzyme, GTC and Genzyme shall each make an additional capital contribution
to ATIII LLC in the amount of any actual Program Costs shown thereon and not
yet paid for which such Party has assumed funding responsibility pursuant to
Section 4.1 above but only to the extent that such amount, together with all
prior capital contributions to date during such year, does not exceed one
hundred five percent (105%) of the total Program Costs budgeted year-to-date
through the end of the quarter to which such statement relates (except to the
extent such excess is approved by the Steering Committee pursuant to Section
5.1.3 hereof). If the aggregate amount stated to be due from ATIII LLC in
such quarterly statements for actual Program Costs is less than the amount
already contributed by the Parties to the capital of ATIII LLC with respect
to budgeted Program Costs for such calendar quarter, such excess shall be
credited pro rata against the next successive monthly capital contribution
due from Genzyme or GTC hereunder.
4.3. Distributions. Distributions shall be made annually to each Member
in amounts determined in accordance with the Operating Agreement. Amounts
available for distribution shall be calculated for each calendar quarter
after the date of the first sale of a Collaboration Product following
Regulatory Approval of such Collaboration Product and shall be reported to
each of GTC and Genzyme within ninety (90) days following the end of each
such quarter. All distributions to the Parties will be accompanied by a
report setting forth the basis for such distribution. Such reports shall be
subject to audit rights as set forth in Section 4.5 below, mutatis mutandis.
4.4. Sale and Purchase of LLC Interest. Immediately after the execution
of this Agreement and in accordance with the terms and conditions of the
Purchase Agreement, GTC shall sell, assign and transfer to Genzyme, and
Genzyme shall purchase from GTC, a * percent (*%) interest in ATIII LLC
(subject to adjustment pursuant to Section 4.1.4 hereof and pursuant to the
Operating Agreement) for an aggregate amount of * dollars ($*) payable as set
forth below:
(a) Genzyme shall pay to GTC an amount of ten dollars ($10) upon
execution of the Purchase Agreement;
(b) Genzyme shall pay to GTC an amount of * dollars ($*) after *; and
(c) Genzyme shall pay to GTC an amount of * dollars ($*) on *.
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Each of the aforementioned payments described in clauses (b) and (c) above shall
be made in United States dollars by certified or bank check or by wire transfer
within thirty (30) days following the occurrence and confirmation of each event.
4.5. Books of Account; Audit. ATIII LLC shall keep and maintain proper and
complete books of account. GTC shall initially keep and maintain such books on
behalf of ATIII LLC for the 1998 calendar year. No later than October 31st of
each year, the Steering Committee shall select either Genzyme or GTC to keep and
maintain such books on behalf of ATIII LLC for the subsequent calendar year
(beginning as of January 1st of such year). In the event that either GTC or
Genzyme reasonably deems the Program to be material to GTC or Genzyme, as the
case may be, for financial accounting purposes, then, upon such Party's request,
audited financial statements of ATIII LLC shall be prepared by an independent
accounting firm to be selected by the Steering Committee. Each of GTC and
Genzyme shall keep and maintain proper and complete records and books of account
documenting all Program Costs incurred by it. Each of ATIII LLC, GTC and Genzyme
shall permit independent accountants retained by the other Parties to have
access to its records and books for the sole purpose of determining the
appropriateness of Program Costs charged by the non- auditing Party hereunder.
Such examination shall be conducted during regular business hours and upon
reasonable notice, at the auditing Party's own expense and no more than once in
each calendar year during the term of this Agreement and once during the three
(3) calendar years following the termination hereof. If such examination reveals
that such Program Costs have been misstated, any adjustment shall be promptly
refunded or paid, as appropriate. The auditing Party shall pay the fees and
expenses of the accountant engaged to perform the audit, unless such audit
reveals an overcharge of five percent (5%) or more for the period examined, in
which case the Party who received such overpayment shall pay all reasonable
costs and expenses incurred by the auditing Party in the course of making such
determination, including the fees and expenses of the accountant.
ARTICLE 5. THE DEVELOPMENT PROGRAM
5.1. Conduct of the Development Program.
5.1.1. General. The Parties each agree to collaborate diligently in the
development of Collaboration Products in the Field and to use commercially
reasonable and diligent efforts to develop, obtain Regulatory Approvals for and
bring to market Collaboration Products in the Field and in the Territory as soon
as practicable, all in accordance with the Development Plan and the
Commercialization Plan for such Collaboration Products. The Parties agree to
execute and substantially perform and to cooperate with each other in carrying
out the Development Plan and the Commercialization Plan for each Collaboration
Product. Neither GTC nor Genzyme shall be required to undertake activities in
furtherance of the Development Plan or Commercialization Plan in the absence of
funding from ATIII LLC pursuant to the provisions of this Agreement. As used in
this Agreement, the term "commercially reasonable and diligent efforts" will
mean that level of effort which, consistent with the exercise of prudent
scientific and business judgment, is applied by the Party in question to its
other therapeutic products at a similar stage of development and with similar
commercial potential.
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5.1.2. Development Plan. The Development Program shall be conducted
by the Parties for ATIII LLC under a Development Plan which shall describe
the proposed overall program of development for each Collaboration Product,
including preclinical studies, toxicology, formulation, clinical trials and
regulatory plans and other key elements necessary to obtain Regulatory
Approvals for such Collaboration Product. Pursuant to the Development Plan,
development work may be subcontracted to Genzyme and GTC, at fully absorbed
costs determined by accepted accounting principals. The respective charges to
ATIII LLC shall be invoiced following completion of the work, and shall be
payable by ATIII LLC within a commercially reasonable time thereafter (but in
no event later than forty-five (45) days of the date of invoice therefor).
The Development Plan shall include a summary of estimated Development Costs
expected during the development process through obtaining such Regulatory
Approvals and a detailed description of and budget for all development
activities proposed for each calendar year for each Collaboration Product.
Until the initial Commercialization Plan is submitted in accordance with
Section 6.1.2 below, the Development Plan shall also include a summary of
estimated New Facility Costs expected during the period through obtaining
Regulatory Approval for the New Facility and a detailed description of and
budget for all activities related to the design, construction, validation and
operation of the New Facility proposed for the calendar year to which the
Development Plan relates.
5.1.3. Initial and Updated Development Plan. A preliminary initial
Development Plan for the period beginning on the Effective Date and ending on
December 31, 1998 has been prepared by GTC. The Program Management Team shall
submit a definitive initial Development Plan for the period beginning on the
Effective Date and ending on December 31, 1998 to the Steering Committee for
review and approval not later than thirty (30) days after the Effective Date.
Upon such approval, the definitive initial Development Plan shall be signed
by an authorized representative of each of Genzyme and GTC. The Development
Plan shall be updated annually by the Program Management Team and submitted
to the Steering Committee for review and approval not later than sixty (60)
days prior to January 1 of each year during the Development Program. Each
such updated Development Plan shall include (a) an overall development plan
for each Collaboration Product which sets forth all major development tasks
remaining to be accomplished prior to submission of filings for Regulatory
Approvals, (b) a detailed description and budget for the development and
pre-commercialization activities proposed for the forthcoming calendar year
and (c) until the initial Commercialization Plan is submitted in accordance
with Section 6.1.2 below, (i) an overall plan which sets forth all major
tasks remaining to be accomplished prior to submission of filings for
Regulatory Approval of the New Facility and (ii) a detailed description of
and budget for all activities related to the construction, validation and
operation of the New Facility proposed for the calendar year to which the
Development Plan relates, in each case including estimated time lines to
accomplish such major tasks or detailed activities. The Project Management
Team shall be primarily responsible for preparing the annual updates to the
Development Plan and, in connection with the preparation of such updates,
shall consult with Genzyme and GTC regarding the identification, timing and
execution of and budget for the major tasks and detailed activities required
to perform the updated Development Plan. Each such updated Development Plan
approved by the Steering Committee shall be signed by an authorized
representative of each of GTC and Genzyme. The members of the Program
Management Team shall actively consult with one another throughout the term
of the Development Plan so as to adjust the specific work performed under the
Development Plan to conform to evolving developments in technology and the
results of the development work
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performed. While minor adjustments to the Development Plan may be made from time
to time upon approval of the Program Management Team, significant changes in the
scope or direction of the work and any changes in funding exceeding * percent
(*%) of the total amount budgeted in any calendar year for the Development
Program must be approved by the Steering Committee, in the absence of which
approval the most recently approved Development Plan shall remain in effect. GTC
and Genzyme shall each submit reports to the Program Management Team no later
than the tenth (10th) business day of each calendar month stating such Party's
estimate of the amount by which Development Costs incurred by such Party during
the preceding calendar month exceeded the amount budgeted for the work
undertaken by such Party for such month, if any.
5.1.4. Execution and Performance. The Development Program shall
allocate among the Parties responsibility for each of the activities described
therein. The Parties shall use commercially reasonable and diligent efforts to
conduct the activities described in the Development Plan. The Development Plan
shall be supervised by the Program Management Team. The Program Management Team
will coordinate preclinical and clinical testing of the Collaboration Products
and work with designated individuals at GTC and Genzyme in the preparation of
Regulatory Approval filings for the Collaboration Products and for the New
Facility.
5.1.5. Attendance at Regulatory Meetings. Each Party shall provide the
others with prior notice of all meetings between representatives of the
notifying Party and regulatory authorities regarding any Collaboration Product.
Except as otherwise provided herein, the Party receiving such notice shall have
the right to have representatives present at all such meetings.
5.2. Development Information.
5.2.1. Reports and Information Exchange. ATIII LLC shall own all
clinical trial data accumulated from all clinical trials of Collaboration
Products conducted as part of the Program or otherwise funded or partially
funded by ATIII LLC. Each of GTC and Genzyme shall use commercially reasonable
and diligent efforts to disclose to ATIII LLC and to the other Party all
material information relating to any Collaboration Product promptly after it is
learned or its materiality is appreciated. The Party performing or supervising
clinical trials of Collaboration Products in accordance with the Development
Plan shall, on behalf and in the name of ATIII LLC, maintain the database of
clinical trial data accumulated from all clinical trials of Collaboration
Products and of adverse reaction information for all such Collaboration
Products. Each Party shall also keep the Program Management Team informed as to
its progress in the Development Plan. Within sixty (60) days following the end
of each calendar quarter during the Development Program, each of GTC and Genzyme
shall provide the other Parties with a reasonably detailed written report which
shall describe the progress to date of all activities for which such Party was
allocated responsibility during such quarter under the Development Plan.
5.2.2. Adverse Reaction Reporting. Each of GTC and Genzyme shall notify
the other Parties of any adverse reaction information relating to any
Collaboration Product
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within twenty-four (24) hours of the receipt of such information and as
necessary for compliance with regulatory requirements. "Adverse reaction
information" includes without limitation information relating to any experience
that (a) suggests a significant hazard, contraindication, side effect or
precaution, (b) is fatal or life threatening, (c) is permanently disabling, (d)
requires or prolongs inpatient hospitalization, (e) involves a congenital
anomaly, cancer or overdose or (f) is one not identified in nature, specificity,
severity or frequency in the current investigator brochure or the United States
labeling for the Collaboration Product.
5.2.3. Clinical and Regulatory Audits. Each of GTC and Genzyme shall
permit ATIII LLC and the other Party or the representatives of ATIII LLC or the
other Party to have access during regular business hours and upon reasonable
advance notice, at the auditing Party's own expense and no more than once in
each calendar year during the term of this Agreement, to the non-auditing
Party's records and facilities relating to the Development Program for the
purpose of monitoring compliance with Good Clinical Practice and other
applicable requirements of the Regulatory Scheme.
5.3. Regulatory Approval Filings. Regulatory Approval filings in the
Territory for the Collaboration Products and for the facilities used to
manufacture such Collaboration Products shall be filed in the name of ATIII LLC
or, if required with respect to filings to be made with governmental authorities
or deemed to be in the best interest of the Parties by the Steering Committee,
in the name of such other entity as may be agreed upon by the Steering Committee
(such as filings with European regulatory authorities). Prior to submission to
the FDA, the Parties, through the Program Management Team, shall consult,
cooperate in preparing and mutually agree on the content and scope of the
Regulatory Approval filings. In the event that Regulatory Approvals are required
to be filed in the name of an entity other than ATIII LLC, the Steering
Committee shall ensure that a duly authorized officer of such entity agrees in
writing that (a) such entity shall hold the licenses issued in respect of such
Regulatory Approval filings and maintain control over the manufacturing
facilities and equipment to the extent required by the Regulatory Scheme, (b)
such entity shall provide manufacturing and supply services to ATIII LLC (i) at
the Fully Absorbed Cost of Goods of Collaboration Products so manufactured and
supplied and (ii) in accordance with the terms and conditions set forth in
Article 7 hereof, and shall reimburse ATIII LLC for any New Facility Costs
incurred in connection with the use of such facilities for the manufacture and
supply of such Collaboration Products, (c) the Parties shall have an irrevocable
right of access and reference to such Regulatory Approval filings, licenses and
facilities and (d) such entity agrees to comply with the provisions of Article
13 hereof with respect to the ownership and/or disposition of such Regulatory
Approvals in the event this Agreement is terminated and to provide the level of
cooperation described in Section 14.1 hereof in connection therewith.
5.4. Facilities Visits. Representatives of GTC and Genzyme may visit all
manufacturing sites and the sites of any clinical trials or other experiments
being conducted by the other Party or ATIII LLC in connection with the
Development Program. If requested by the other Party, GTC and Genzyme shall
cause appropriate individuals working on the Development Program to be available
for meetings at the location of the facilities where such individuals are
employed at times reasonably convenient to the Party responding to such request.
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ARTICLE 6. SALES, MARKETING AND ADMINISTRATIVE SERVICES
6.1. Commercialization Plans.
6.1.1. General. The commercialization of each Collaboration Product
shall be governed by a Commercialization Plan which shall describe the overall
plan for commercializing such Collaboration Product, including without
limitation (a) a comprehensive marketing, sales, pricing, manufacturing,
distribution and licensing strategy for such Collaboration Product in all
applicable countries, including the identification of any Third Parties engaged
or to be engaged in connection with such activities and the arrangements with
them that have been or are proposed to be agreed upon (including policies and
procedures for adjustments, rebates, bundling and the like), (b) estimated
launch date, market and sales forecasts, in numbers of patients and local
currency, and competitive analysis for such Collaboration Product, (c) a
detailed budget for the Commercialization Costs to be incurred in connection
with performing such Commercialization Plan, (d) reasonable due diligence
obligations to be met by Genzyme and any Third Party distributor selected by the
Steering Committee pursuant to Section 6.7 below with respect to
commercialization objectives to be achieved during the calendar year to which
the Collaboration Plan relates (such as minimum annual sales objectives), (e) a
detailed manufacturing plan, including (i) if Regulatory Approval for the New
Facility has not been obtained, an overall plan which sets forth all major tasks
remaining to be accomplished prior to submission of filings for Regulatory
Approval of the New Facility and (ii) a detailed description of and budget for
all activities related to the design, construction, validation and operation of
and the manufacture of Collaboration Products in the New Facility proposed for
the calendar year to which the Commercialization Plan relates and (f) a list of
the Major Market Countries for such Collaboration Product if the Steering
Committee has changed such list pursuant to Section 1.28 hereof.
6.1.2. Initial and Updated Commercialization Plans. No later than
immediately prior to the completion of the submission of all Regulatory Approval
filings for a Collaboration Product in any given country, Genzyme shall develop
and submit to the Steering Committee for review and approval an initial
Commercialization Plan in accordance with its customary standard for a product
of comparable market potential, taking into consideration factors such as market
conditions, regulatory factors, competition and the costs and profits of such
Collaboration Product. Genzyme shall be primarily responsible for developing
each Commercialization Plan and, in connection therewith, shall consult with GTC
and any Third Party distributor selected by the Steering Committee pursuant to
Section 6.7 below regarding the identification, timing and execution of and
budget for the major commercialization tasks required to perform the
Commercialization Plan. Each Commercialization Plan shall be updated annually by
Genzyme, in consultation with GTC and any Third Party distributor selected by
the Steering Committee pursuant to Section 6.7 below as herein provided, and
shall be submitted to the Steering Committee for approval not later than sixty
(60) days prior to January 1 of each year. Each Commercialization Plan approved
by the Steering Committee shall be signed by an authorized representative of
each of GTC and Genzyme. While minor adjustments to the Commercialization Plan
may be made from time to time without Steering Committee approval, significant
changes in the scope or
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direction of the work and any changes in funding exceeding * percent (*%) of the
total amount budgeted in any calendar year for the Commercialization Plan must
be approved by the Steering Committee, and in the absence of such approval, the
provisions of the most recently approved Commercialization Plan shall remain in
effect.
6.2. Exclusive Engagement. ATIII LLC hereby engages Genzyme on a exclusive
basis (except * as provided in Section 6.7 below) to market and sell
Collaboration Products within the Territory for use within the Field. Genzyme
hereby accepts such engagement and agrees (by itself or through its Affiliates)
to use commercially reasonable and diligent efforts to establish each
Collaboration Product in the markets, fulfill market demand and meet the
marketing and distribution goals set forth in the Commercialization Plan for
such Collaboration Product. The Parties acknowledge that * with respect to the
distribution and sale of products in the Territory * and that *.
6.3. Orders and Forecasting. Genzyme shall purchase the Collaboration
Products exclusively from ATIII LLC. Genzyme shall place orders for the
Collaboration Products with ATIII LLC on a purchase order setting forth the
quantity of Collaboration Products ordered, any specifications therefor and the
date required. ATIII LLC, on the date set forth in the applicable purchase
order, shall sell the Collaboration Products to Genzyme for resale within the
Territory. All freight, insurance, duties and all other charges associated with
shipment of the Collaboration Products shall be considered Commercialization
Costs for such Collaboration Products only to the extent such costs are not
charged to Genzyme' customers.
6.4. Prices and Payment Terms; Costs.
6.4.1. Prices. Genzyme shall purchase Collaboration Products from ATIII
LLC at the Estimated Net Selling Price for such Collaboration Products less the
Distributor's Discount. The Distributor's Discount is intended by the Parties to
compensate Genzyme for acting as distributor for the Collaboration Products.
6.4.2. Terms of Payment. Unless otherwise agreed by the Parties in
writing, payment by Genzyme to ATIII LLC for Collaboration Products shall be due
within sixty (60) days of the date of invoice therefor.
6.4.3. Marketing and Distribution Expenses. Genzyme's ordinary expenses
incurred in the course of performing its marketing and distribution obligations
hereunder shall constitute Commercialization Costs and, as such, shall be
reimbursed by ATIII LLC, but only to the extent that such amounts, together with
all other Commercialization Costs to date during such calendar year, do not
exceed * percent (*%) of the Commercialization Costs budgeted in the
Commercialization Plan then in effect for such calendar year (except to the
extent such excess is approved by the Steering Committee pursuant to Section
6.1.2 above). Ordinary marketing and distribution expenses include, but are not
limited to, recruitment costs and salaries and associated expenses for sales and
marketing personnel and support staff, advertising and promotion costs,
transportation expenses including insurance (but only to the extent not charged
to customers and only such proportion of all such costs directly attributable to
support of the Commercialization Plan), duties and taxes, bad debt expense, and
costs
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*Confidential treatment for indicated portion respectfully requested
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associated with cash and other trade discounts and allowances and other
marketing concessions to customers actually allowed and taken.
6.5. Responsibilities of Genzyme. Genzyme shall be solely responsible for
all aspects of the marketing of the Collaboration Products in accordance with
the strategy, policies and procedures established in the Commercialization Plan,
including without limitation the responsibilities described in this Section 6.5.
(a) Genzyme shall be primarily responsible for the implementation of
each Commercialization Plan, including without limitation setting all terms of
sale, including establishing pricing policies, credit terms and cash discounts
and allowances, formulating marketing plans, providing patient information,
providing customer support services, providing reimbursement counseling services
and sales force training.
(b) Genzyme shall employ sufficiently trained and experienced
individuals in numbers adequate to carry out its responsibilities under this
Article 6. Sales and support personnel shall be familiar with the Collaboration
Products and with competitive products and shall respond promptly to customer
requests for support.
(c) Genzyme shall provide instructions and appropriate training to
customers in the proper use and handling of the Collaboration Products and shall
monitor performance of the Collaboration Products.
(d) Prior to sale, Genzyme shall store, maintain and handle
Collaboration Products in accordance with the requirements of the Regulatory
Scheme and the normal and customary commercial practice with respect to
regulated medical products.
(e) Genzyme shall comply with all laws and government regulations
applicable to the sale of Collaboration Products within the Territory.
(f) The Collaboration Products shall be sold under trademarks selected
by the Steering Committee and owned by or licensed to ATIII LLC in accordance
with Section 9.1.2 hereof.
(g) Genzyme shall not (i) establish any branch, sales offices,
warehouses or other facilities outside the Territory with respect to the
Collaboration Products, (ii) adopt a policy of actively selling Collaboration
Products outside the Territory nor undertake the active sale or promotion of
sales of Collaboration Products outside the Territory or (iii) seek customers or
solicit orders from a prospective customer with its principal address or place
of business located outside the Territory. Without ATIII LLC's prior consent,
Genzyme may not deliver or tender, or cause to be delivered or tendered,
Collaboration Products outside of the Territory. Genzyme shall not sell
Collaboration Products to a customer if Genzyme knows that such customer intends
to remove those Collaboration Products from the Territory. If Genzyme receives
an order from a prospective customer located outside of the Territory or who
Genzyme knows intends to remove the Collaboration Products from the Territory,
Genzyme shall immediately refer that customer to GTC.
(h) Genzyme shall maintain complete and accurate records of all
movements and transactions involving Collaboration Products by unit, by batch
number and
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by customer so that all such movements and transactions can be traced quickly
and effectively. Upon written request, Genzyme will provide copies of such
records to the other Parties, with access to facilities used by Genzyme in
performing its duties under this Article 6 during normal business hours and upon
reasonable advance notice for the purpose of inspecting such facilities for
compliance with the terms of this Agreement. The records maintained by Genzyme
pursuant to this clause (h) shall be subject to the other Parties' audit rights
under Section 4.5 hereof.
(i) Within forty-five (45) days after the end of each calendar quarter,
Genzyme will report to ATIII LLC the actual prices at which all sales of
Collaboration Products were made to its customers during the preceding calendar
quarter, future prospects for the Collaboration Products and related issues.
Genzyme shall report promptly to the Steering Committee in writing the
occurrence of each material incident of Collaboration Product performance
required to be reported to regulatory authorities, including without limitation
adverse reaction information in accordance with Section 5.2.2 hereof.
6.6. Responsibilities of ATIII LLC and GTC. ATIII LLC shall supply
Collaboration Products to Genzyme in accordance with purchase orders placed
pursuant to Section 6.3 above. Neither ATIII LLC nor GTC shall actively solicit
for its own account sales of Collaboration Products in the Territory. Any
solicitations or requests to purchase Collaboration Products received by ATIII
LLC or GTC from any customer or prospective customer with its principal address
or place of business located in the Territory or who ATIII LLC or GTC, as the
case may be, knows intends to use the Collaboration Products in the Territory or
ship such Collaboration Products into the Territory shall be immediately
referred to Genzyme.
6.7. Third Party Distributors. In the event that Genzyme fails to use
commercially reasonable and diligent efforts to establish a Collaboration
Product in a country identified in the Commercialization Plan for such
Collaboration Product, or to fulfill market demand or meet the marketing and
distribution goals for such country as set forth in the Commercialization Plan
for such Collaboration Product, and such failure to perform is not cured within
ninety (90) days of written notice thereof from GTC, then (a) GTC may elect to
cause Genzyme's rights under Section 6.2 hereof to market and sell such
Collaboration Product in such country to terminate and (b) the Steering
Committee shall promptly select a Third Party to be engaged by ATIII LLC to
market and sell such Collaboration Product in such country; provided, however,
that in the event that any such country is a Major Market Country, any election
made by GTC pursuant to clause (a) hereof shall be in lieu of any right to
terminate this Agreement that may arise under Section 13.2.1 (c) hereof with
respect to such failure to perform; provided further that any such termination
of Genzyme's rights under Section 6.2 hereof shall be on a country-by-country
basis and Genzyme's rights and obligations under Section 6.2 hereof with respect
to other Collaboration Products in such country and with respect to the rest of
the Territory shall remain in full force and effect. Any such Third Party
distributor selected by the Steering Committee pursuant to clause (b) above
shall be required to execute a written agreement with ATIII LLC pursuant to
which such Third Party shall agree to (i) use commercially reasonable and
diligent efforts to comply with the strategy, policies and procedures set forth
in each Commercialization Plan for such country, including without limitation
the responsibilities described in Section 6.5 above (with references therein to
Genzyme being deemed to refer to such Third Party and references therein to the
Territory being deemed to refer to the applicable country for purposes of this
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clause (i)) and (ii) reasonably cooperate with Genzyme in the preparation of
each Commercialization Plan or update thereto for such Collaboration Product.
6.8. General and Administrative Services. General and administrative
services required by ATIII LLC shall be provided at cost by either or both of
GTC and Genzyme as determined by the Steering Committee. All such costs, in
addition to general and administrative costs payable to Third Parties (such as
accountants) and general and administrative costs incurred by GTC and Genzyme in
satisfying their respective obligations under this Agreement, shall be
considered to be Program Costs.
ARTICLE 7. MANUFACTURE AND SUPPLY
Subject to the terms and conditions of this Agreement, Collaboration
Products shall be manufactured and supplied for preclinical and clinical testing
and for commercial sale upon the following terms and conditions:
7.1. Process Development; Manufacturing Approvals. The Parties will use
commercially reasonable and diligent efforts to develop a process for the
manufacture of each Collaboration Product and to scale up that process to a
scale sufficient to manufacture and supply (a) the anticipated demand for
preclinical studies and clinical trials of such Collaboration Product in
accordance with the projections set forth in the Development Plan and (b) the
anticipated market demand for such Collaboration Product at the time Regulatory
Approval is obtained for such Collaboration Product in accordance with the
projections set forth in the Commercialization Plan for such Collaboration
Product. The development of the process for the manufacture of Collaboration
Products as well as the scale up of such process and all material issues
incident to the development of the ability to produce Collaboration Products for
commercial purposes in sufficient quantity and in a timely manner will be within
the purview of the Program Management Team. The Parties will use commercially
reasonable and diligent efforts, and will cause any approved Third Party
supplier, to make filings necessary to obtain approval of any license
application for the New Facility which may be required as part of any Regulatory
Approval for the first Collaboration Product.
7.2. Manufacture and Supply of Collaboration Products. ATIII LLC shall
manufacture and supply Collaboration Products for preclinical and clinical
activities and commercial sale on the following terms and conditions:
7.2.1. General. ATIII LLC shall use commercially reasonable and
diligent efforts to manufacture and supply Collaboration Products (a) for
preclinical studies and clinical trials in quantities and within a time period
sufficient to conduct the activities set forth in the Development Plan and (b)
to meet market demand for Collaboration Products ordered in accordance with the
terms hereof. ATIII LLC may subcontract with GTC, Genzyme and Third Parties for
the manufacture or packaging of Collaboration Products, as determined by the
Steering Committee. In this regard, it is agreed that ATIII LLC will subcontract
with GTC for the manufacture and supply of Collaboration Products (i) in
clinical trial grade for preclinical and clinical trials, for which GTC shall be
entitled to charge ATIII LLC an amount equal to GTC's Fully Absorbed Cost of
Goods for such Collaboration Products, and (ii) in bulk form (i.e., generate raw
milk containing tg ATIII) ("bulk manufacturing") for use in connection with
commercialization activities, for which GTC shall
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be entitled to charge to ATIII LLC an amount equal to GTC's Fully Absorbed Cost
of Goods for such Collaboration Products plus, with respect to Collaboration
Products intended for commercial sale only, the Manufacturer's Profit. GTC
agrees to use commercially reasonable and diligent efforts in performing such
work. It is further agreed that the work required to produce the Collaboration
Products in clinical trial grade for preclinical and clinical trials and in
finished form, including without limitation performance of assays and
purification and packaging ("finish processing"), will be subcontracted to
Genzyme, for which Genzyme shall be entitled to charge to ATIII LLC its Fully
Absorbed Costs of Goods for such Collaboration Products. Genzyme agrees to use
commercially reasonable and diligent efforts in performing such work.
Notwithstanding the foregoing provisions of this Section 7.2.1, to the extent
required by the Regulatory Scheme, any entity selected by the Steering Committee
pursuant to Section 5.3 above may be engaged by ATIII LLC to manufacture
Collaboration Products. The respective charges to ATIII LLC shall be invoiced
following completion of the work, and shall be payable by ATIII LLC within a
commercially reasonable time thereafter (but in no event later than forty-five
(45) days of the date of invoice therefor). *
7.2.2. Manufacturing Facilities and Capacity Requirements. Supplies of
the Collaboration Product for preclinical and clinical trials and
commercialization activities will be manufactured in the facilities currently
being used for the manufacture of the Collaboration Products as of the Date of
Execution. The Parties acknowledge that in the event that the Steering Committee
determines that it is necessary or advisable to use a New Facility for the
manufacture of the Collaboration Products, the capital costs therefor shall be
borne by GTC and Genzyme pursuant to Sections 1.36, 1.41 and 4.1.3 hereof. The
Steering Committee shall approve the design and capacity requirements for the
New Facility.
7.2.3. Forecasts. The Program Management Team shall establish a
procedure for providing forecasts of customer orders for Collaboration Products
pursuant to Section 6.3 above, updating such forecasts and ordering
Collaboration Product, in each case within time periods sufficient to enable
ATIII LLC to manufacture such Collaboration Products to meet such forecasts in a
commercially reasonable and diligent manner.
7.3. Certificates of Analysis. ATIII LLC, Genzyme or GTC, as appropriate,
shall perform, or cause its contract manufacturer(s) to perform, quality
assurance and control tests on each lot of Collaboration Products bulk
manufactured or finish processed pursuant to this Agreement before delivery and
shall prepare, or cause its contract manufacturer(s) to prepare and deliver, a
written report of the results of such tests (the Party manufacturing a lot of
Collaboration Product is referred to in this Article 7 as the "Manufacturing
Party"). Each test report shall set forth for each lot delivered the items
tested, specifications and results in a certificate of analysis containing the
types of information which shall have been approved by the Program Management
Team or required by the FDA or other applicable regulatory authority. The
Manufacturing Party shall maintain such certificates for a period of not less
than five (5) years from the date of manufacture and for so long as required
under applicable requirements of the FDA or other applicable regulatory
authority.
7.4. Certificates of Manufacturing Compliance. The Manufacturing Party
shall prepare, or cause its contract manufacturer(s) to prepare and deliver, and
maintain for a period
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*Confidential treatment for indicated portion respectfully requested
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of not less than five (5) years and for so long as required under applicable
requirements of the FDA or other applicable regulatory authority for each lot of
Collaboration Products manufactured a certificate of manufacturing compliance
containing the types of information which shall have been approved by the
Program Management Team or required by the FDA or other applicable regulatory
authority, which certificate will certify that the lot of Collaboration Products
was manufactured in accordance with the Specifications and the Good
Manufacturing Practices of the FDA or other applicable regulatory authority as
the same may be amended from time to time. The Manufacturing Party shall advise
the other Parties immediately if an authorized agent of the FDA or other
regulatory authority visits any of the Manufacturing Party's manufacturing
facilities, or the facilities where the Collaboration Products are being
manufactured, for an inspection with respect to the Collaboration Products. The
Manufacturing Party shall furnish to the other Parties the report by such agency
of such visit, to the extent that such report relates to Collaboration Products,
within ten (10) business days of the Manufacturing Party's receipt of such
report.
7.5. Access to Facilities. Each Party shall have the right to inspect those
portions of the manufacturing, finish processing or storage facilities of the
Manufacturing Party where Collaboration Products are being manufactured,
finished or stored, or any subcontractor who is manufacturing, finishing or
storing Collaboration Products for the Manufacturing Party, at any time during
regular business hours and upon reasonable advance notice to ascertain
compliance with the Good Manufacturing Practices of the FDA or other applicable
regulatory authority, as the same may be amended from time to time. Any
confidential information disclosed to or otherwise gathered by the Party
conducting such inspection during any such inspection shall be deemed
"Information" as defined in Section 10.1 below.
ARTICLE 8. MANAGEMENT
8.1. Program Management Team.
8.1.1. General. The Parties have established a Program Management Team
to oversee and control development of Collaboration Products and to prepare for
and oversee the launch of Collaboration Products. The Program Management Team is
and shall continue to be composed of four (4) representatives appointed by GTC
and four (4) representatives appointed by Genzyme. Such representatives will
include individuals with expertise and responsibilities in such areas as
preclinical development, clinical development, manufacturing, regulatory
affairs, marketing, sales management and reimbursement. The Program Management
Team shall meet as needed but not less than bi-weekly. The Program Management
Team shall appoint one of its members to act as Secretary. Such meetings shall
be at times and places or in such form (e.g., telephone or video conference) as
the members of the Program Management Team shall agree. A Party may change one
or more of its representatives to the Program Management Team at any time.
Members of the Program Management Team may be represented at any meeting by
another member of the Program Management Team or by a deputy. Any approval,
determination or other action agreed to by a majority of the members of the
Program Management Team appointed by each of GTC and Genzyme or their deputies
present at the relevant Team meeting shall be the approval, determination or
other action of the Program Management Team, provided at least two (2)
representatives of each of GTC and Genzyme are present at such meeting.
Representatives of either GTC and Genzyme who are not members of the Program
Management Team may
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attend meetings of the Program Management Team as agreed to by the
representative members of the other Party. The Program Management Team may
designate project leaders to the extent it deems it necessary or advisable.
8.1.2. Development Program Functions. During the term of the
Development Program, the Program Management Team shall coordinate, expedite and
control the development of Collaboration Products to obtain Regulatory
Approvals. The Program Management Team will (a) develop and recommend to the
Steering Committee Development Plans (including annual development budgets), (b)
facilitate the flow of information with respect to development work being
conducted for each Collaboration Product throughout the Territory and (c)
discuss and cooperate regarding the conduct of such development work.
8.1.3. Commercialization Functions. Following submission of filings for
Regulatory Approvals for the first Collaboration Product, the Program Management
Team shall function as the operational staff of ATIII LLC and the functions of
the Program Management Team shall be expanded to include: (a) monitoring the
commercialization of Collaboration Products pursuant to the Commercialization
Plan, including oversight of planning, annual budgeting, manufacturing,
marketing, sales and distribution, and licensing of Collaboration Products; (b)
monitoring actual expenses incurred in the manufacture, marketing, sale and
distribution of Collaboration Products; and (c) facilitating cooperation
regarding the commercialization and marketing activities of the Parties.
8.1.4. Minutes. The Program Management Team shall keep accurate minutes
of its deliberations which shall record all proposed decisions and all actions
recommended or taken. The Secretary shall be responsible for the preparation of
draft minutes. Draft minutes shall be sent to all members of the Program
Management Team within five (5) working days after each meeting. All records of
the Program Management Team shall at all times be available to all of the
Parties.
8.2. Steering Committee.
8.2.1. General. The Parties have established a Steering Committee to
oversee and manage the collaboration contemplated by this Agreement. The
Steering Committee is and shall continue to be composed of three (3)
representatives appointed by GTC and three (3) representatives appointed by
Genzyme. Such representatives will be senior officers and/or managers of their
respective companies. Genzyme and GTC shall each designate one (1) of their
respective representatives on the Steering Committee to act as Co-Chairman. The
Steering Committee shall appoint one (1) of its members to act as Secretary. The
Steering Committee will meet as needed but not less than once each calendar
quarter. Such meetings shall be at times and places or in such form (e.g.,
telephone or video conference) as the members of the Steering Committee shall
agree. A Party may change one or more of its representatives to the Steering
Committee at any time. Members of the Steering Committee may be represented at
any meeting by another member of the Steering Committee or by a deputy. Any
approval, determination or other action agreed to by unanimous consent of the
members of the Steering Committee or their deputies present at the relevant
Steering Committee meeting shall be the approval, determination or other action
of the Steering Committee, provided at least two (2) representatives of each of
GTC and Genzyme are present at such meeting. Representatives of either GTC and
Genzyme who are not members
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of the Steering Committee may attend meetings of the Steering Committee as
agreed to by the representative members of the other Party.
8.2.2. Functions. The Steering Committee shall perform the following
functions: (a) determine the overall strategy for the Program in the manner
contemplated by this Agreement; (b) coordinate the activities of the Parties
hereunder; (c) settle disputes or disagreements that are unresolved by the
Program Management Team; (d) approve any agreements with Third Parties regarding
a Collaboration Product or which involve the grant of any rights related to the
development, manufacture or marketing of a Collaboration Product; (e) review and
approve each Development Plan, including each significant change and annual
update thereto, submitted to it pursuant to Section 5.1.3 hereof; (f) review and
approve each Commercialization Plan, including each significant change and
annual update thereto, submitted to it for approval pursuant to Section 6.1.2
hereof; (g) serve as the governing body of ATIII LLC; (h) set the Distributor's
Discount, the Estimated Fully Absorbed Cost of Goods, the Estimated Net Selling
Price and the Manufacturer's Profit for each Collaboration Product; (i) add or
remove countries from the list of Major Market Countries for each Collaboration
Product pursuant to Section 1.28 hereof; (j) select any Third Party distributor
to be engaged by ATIII LLC pursuant to Section 6.7 above; and (k) perform such
other functions as appropriate to further the purposes of this Agreement as
determined by the Parties. The Steering Committee shall use its best efforts to
ensure that the relative cumulative amounts of Distribution Margin and the
Manufacturing Margin for each Collaboration Product are proportionate to the
relative Percentage Interests of Genzyme and GTC. In the event that (I) the
relative amounts of the Distribution Margin and the Manufacturing Margin for a
Collaboration Product are disproportionate to the relative Percentage Interests
of Genzyme and GTC with respect to any two (2) consecutive calendar quarters or
(II) Genzyme and GTC's Percentage Interests are adjusted pursuant to Section
4.1.4 hereof, the Steering Committee shall promptly adjust the Distributor's
Discount and/or the Manufacturer's Profit, as appropriate, to comply with the
preceding sentence.
8.2.3. Minutes. The Steering Committee shall keep accurate minutes of
its deliberations which shall record all proposed decisions and all actions
recommended or taken. The Secretary shall be responsible for the preparation of
draft minutes. Draft minutes shall be sent to all members of the Steering
Committee within ten (10) working days after each meeting. All records of the
Steering Committee shall at all times be available to both GTC and Genzyme.
8.3. General Disagreements. All disagreements within the Program Management
Team and the Steering Committee shall be subject to the following:
(a) The representatives to the Program Management Team or
Steering Committee will negotiate in good faith for a period of not
less than thirty (30) days to attempt to resolve the dispute. In the
case of the Program Management Team, any unresolved dispute shall be
referred to the Steering Committee for good faith negotiations for an
additional period of not less than thirty (30) days to attempt to
resolve the dispute.
(b) In the event that the dispute is not resolved after the
period specified in clause (a), the representatives shall promptly
present the disagreement to the Chief
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Executive Officers of GTC and Genzyme or a designee of such Chief
Executive Officer reasonably acceptable to the other Party.
(c) Such executives shall meet or discuss in a telephone or
video conference each of GTC and Genzyme's views and explain the basis
for such dispute.
(d) If such executives cannot resolve such disagreement within
sixty (60) days after such issue has been referred to them, then such
dispute shall be referred to arbitration as described in Section 14.11
hereof.
ARTICLE 9. INTELLECTUAL PROPERTY RIGHTS
9.1. Ownership. The Parties acknowledge that the ownership rights set forth
herein (a) shall not be affected by the participation in the discovery or
development of an Invention (as defined below) by the Program Management Team or
the Steering Committee in the course of discharging their duties hereunder and
(b) are subject to the license grants set forth in Article 3 above.
9.1.1. Ownership and Assignment of Discoveries and Improvements. All
right, title and interest in all writings, inventions, discoveries, improvements
and other technology, whether or not patentable or copyrightable, and any patent
applications, patents or copyrights based thereon (collectively, the
"Inventions") that are discovered, made or conceived during and in connection
with the Program solely by employees of GTC or others acting on behalf of GTC
("GTC Inventions") shall be owned by GTC. All right, title and interest in all
Inventions that are discovered, made or conceived during and in connection with
the Program solely by employees of Genzyme or others acting on behalf of Genzyme
("Genzyme Inventions") shall be owned by Genzyme. All right, title and interest
in all Inventions that are discovered, made or conceived during and in
connection with the Program jointly by employees of GTC and Genzyme ("Joint
Inventions") shall be jointly owned by Genzyme and GTC. Each of GTC and Genzyme
shall promptly disclose to ATIII LLC and the other Party the making, conception
or reduction to practice of Inventions by employees or others acting on behalf
of such Party. All GTC Inventions, Genzyme Inventions and Joint Inventions shall
be automatically licensed to ATIII LLC pursuant to Section 3.1 hereof.
9.1.2. Ownership of Trademarks. The Steering Committee shall select and
ATIII LLC shall own all trademarks for the sale and use of Collaboration
Products in the Territory, and all expenses thereof shall be considered Program
Costs. All such trademarks shall be registered in the name of ATIII LLC if and
when registered. In the event that the applicable laws and regulations of any
country in which the Steering Committee elects to register any such trademark
require that such trademark be registered in the name of an entity other than
ATIII LLC, or if the Steering Committee determines that it is in the best
interests of the parties, then the Steering Committee shall select such entity
and ensure that a duly authorized officer of such entity agrees in writing that
such entity shall (a) grant ATIII LLC an exclusive, fully-paid, royalty-free,
irrevocable (during the term of this Agreement) right and license (with the
right to grant sublicenses) to use such trademark in the Territory and (b)
comply with the provisions of Article 13 hereof with respect to the ownership
and/or disposition of such trademark in the event this Agreement is terminated
and provide the level of cooperation described in Section 14.1 hereof in
connection therewith.
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9.1.3. Cooperation of Employees. Each of GTC and Genzyme represents and
agrees that all employees or others acting on its behalf in performing its
obligations under this Agreement shall be obligated under a binding written
agreement to assign to such Party, or as such Party shall direct, all Inventions
made or conceived by such employee or other person. In the case of non-employees
working for other companies or institutions on behalf of GTC or Genzyme, GTC or
Genzyme, as applicable, shall have the right to obtain licenses for all
Inventions made by such non-employees on behalf of GTC or Genzyme, as
applicable, in accordance with the policies of said company or institution. GTC
and Genzyme agree to undertake to enforce such agreements (including, where
appropriate, by legal action) considering, among other things, the commercial
value of such Inventions.
9.2. Filing, Prosecution and Maintenance of Patent Rights.
9.2.1. Filing, Prosecution and Maintenance. Each of GTC and Genzyme
shall be responsible for the filing, prosecution and maintenance of all patent
applications and patents which make up its Patent Rights. The Steering Committee
shall designate either GTC or Genzyme as the Party responsible for the filing,
prosecution and maintenance of all patent applications and patents which make up
the Genzyme/GTC Patent Rights. For so long as any of the license grants set
forth in Article 3 hereof remain in effect and upon request of the other Party,
each of GTC and Genzyme agrees to file and prosecute patent applications and
maintain the patents covering the Patent Rights for which it is responsible in
all countries in the Territory selected by the Steering Committee. Each of GTC
and Genzyme shall consult with and keep the other fully informed of important
issues relating to the preparation and filing (if time permits), prosecution and
maintenance of such patent applications and patents, and shall furnish to the
other Party copies of documents relevant to such preparation, filing,
prosecution or maintenance in sufficient time prior to filing such document or
making any payment due thereunder to allow for review and comment by the other
Party and, to the extent possible in the reasonable exercise of its discretion,
the filing Party shall incorporate all such comments.
9.2.2. Patent Filing Costs. All costs associated with filing,
prosecuting and maintaining patent applications and patents covering each of
GTC and Genzyme's Patent Rights and the Genzyme/GTC Patent Rights specific to
the Field in the Territory shall be deemed Development Costs; provided,
however, that if the claims of any such Patent Rights include claims outside
the Field, each of ATIII LLC and the Party filing, prosecuting and
maintaining such patents and patent applications shall bear one-half (1/2) of
such costs itself and the other half of such costs shall be deemed
Development Costs.
9.3. Cooperation. Each of GTC and Genzyme shall make available to the other
Party (or to the other Party's authorized attorneys, agents or representatives)
its employees, agents or consultants to the extent necessary or appropriate to
enable the appropriate Party to file, prosecute and maintain patent applications
and resulting patents with respect to inventions owned by a Party and for
periods of time sufficient for such Party to obtain the assistance it needs from
such personnel. Where appropriate, each of GTC and Genzyme shall sign or cause
to have signed all documents relating to said patent applications or patents at
no charge to the other Party.
9.4. Notification of Patent Term Restoration. Each of GTC and Genzyme shall
notify the other Party of (a) the issuance of each United States patent included
within the
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Patent Rights for which the notifying Party is responsible, giving the date
of issue and patent number for each such patent, and (b) each notice
pertaining to any patent included within the Patent Rights for which the
notifying Party is responsible which it receives as patent owner pursuant to
the Drug Price Competition and Patent Term Restoration Act of 1984, including
notices pursuant to Sections 101 and 103 of such Act from persons who have
filed an abbreviated NDA. Such notices shall be given promptly, but in any
event within ten (10) business days after receipt of each such notice
pursuant to such Act. Each of GTC and Genzyme shall notify the other Party of
each filing for patent term restoration under such Act, any allegations of
failure to show due diligence and all awards of patent term restoration
(extensions) with respect to the Patent Rights for which the notifying Party
is responsible.
9.5. No Other Technology Rights. Except as otherwise expressly provided in
this Agreement, under no circumstances shall a Party hereto, as a result of this
Agreement, obtain any ownership interest in or other right to the Patent Rights,
Technology or Manufacturing Know-How of the other Party, including items owned,
controlled or developed by the other Party, or transferred by the other Party to
said Party at any time pursuant to this Agreement. It is understood and agreed
that this Agreement does not grant either Party any license or other right in
the Patent Rights of the other Party for uses other than as specified in Article
3 hereof and this Article 9.
9.6. Enforcement of Patent Rights; Defense of Infringement Actions. GTC and
Genzyme shall each promptly notify the other in writing of any alleged or
threatened infringement of any patents or patent applications for which it is
responsible pursuant to Section 9.2 above or if either Party, or any of their
respective Affiliates, shall be individually named as a defendant in a legal
proceeding by a Third Party for infringement of a patent because of the
manufacture, use or sale of a Collaboration Product or because of attempts to
invalidate Patent Rights.
9.6.1. First Right to Respond. Each of GTC and Genzyme shall have the
first right to respond to or defend (in consultation with the Steering
Committee) against such challenge or infringement of the Patent Rights for which
it is responsible pursuant to Section 9.2 above or charge of infringement. In
the event such Party elects to so respond or defend, the other Party will
cooperate with the responding Party's legal counsel, join in such suits as may
be brought by the responding Party to enforce its Patent Rights, and be
available at the responding Party's reasonable request to be an expert witness
or otherwise to assist in such proceedings.
9.6.2. Sharing of Litigation and Settlement Expenses. The costs
incurred (a) in responding to or defending against a challenge to or
infringement of a Party's Patent Rights specific to the Field or a charge that
the manufacture, use or sale of Collaboration Products infringe upon the Patent
Rights of Third Parties, (b) in settling any such actions, which may not be done
without the prior written consent of the Steering Committee, and (c) as damages
paid as a result of such actions shall be deemed Program Costs.
9.6.3. Second Right to Respond. If a Party does not exercise its right
to respond to or defend against challenges or infringements of its Patent Rights
as provided in Section 9.6.1 above within sixty (60) days of becoming aware of
or being notified of such challenges or infringements, then the other Party
shall have the option to do so at its sole cost; provided that in such case all
amounts so recovered from such Third Party shall be
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retained by the Party undertaking such response or defense and the Party so
responding shall have no further obligations to the other Party with respect to
the response or defense thereof.
ARTICLE 10. CONFIDENTIALITY
10.1. Nondisclosure Obligations. Except as otherwise provided in this
Article 10, during the term of this Agreement and for a period of five (5) years
thereafter, the Parties shall maintain in confidence and use only for purposes
specifically authorized under this Agreement (a) confidential information and
data resulting from or related to the development of Collaboration Products and
(b) all information and data not described in clause (a) but supplied by the
other Party under this Agreement and marked or identified as "Confidential".
For purposes of this Article 10, information and data described in clause
(a) or (b) of the preceding paragraph shall be referred to as "Information." To
the extent it is reasonably necessary or appropriate to fulfil its obligations
or exercise its rights under this Agreement, a Party may disclose Information it
is otherwise obligated under this Section not to disclose to its Affiliates,
sublicensees, consultants, outside contractors and clinical investigators, on a
need-to-know basis and on the condition that such entities or persons agree to
keep the Information confidential for the same time periods and to the same
extent as such Party is required to keep the Information confidential; and a
Party or its sublicensees may disclose such Information to government or other
regulatory authorities to the extent that such disclosure is reasonably
necessary to obtain patents or authorizations to conduct clinical trials with
and to market commercially Collaboration Products. The obligation not to
disclose Information shall not apply to any part of such Information that: (i)
is or becomes patented, published or otherwise becomes publicly known other than
by acts of the Party obligated not to disclose such Information or its
Affiliates or sublicensees in contravention of this Agreement; (ii) can be shown
by written documents to have been disclosed to the receiving Party or its
Affiliates or sublicensees by a Third Party, provided that such Information was
not obtained by such Third Party directly or indirectly from the other Party
under this Agreement; (iii) prior to disclosure under this Agreement, was
already in the possession of the receiving Party or its Affiliates or
sublicensees, provided that such Information was not obtained directly or
indirectly from the other Party under this Agreement; (iv) can be shown by
written documents to have been independently developed by the receiving Party or
its Affiliates without breach of any of the provisions of this Agreement; or (v)
is disclosed by the receiving Party pursuant to a subpoena lawfully issued by a
court or governmental agency, provided that the receiving Party notifies the
other Party immediately upon receipt of any such subpoena.
10.2. Terms of this Agreement; Press Releases. The Parties further agree to
seek confidential treatment for the filing of this Agreement with the Securities
and Exchange Commission and shall agree upon the content of the request for
confidential treatment made by each Party in respect of such filing. Except as
permitted by the foregoing provisions or as otherwise required by law, GTC and
Genzyme each agree not to disclose any terms or conditions of this Agreement to
any Third Party without the prior consent of the other Party; provided that each
Party shall be entitled to disclose the terms of this Agreement without such
consent to potential investors or other financing sources on the condition that
such entities or persons agree to keep such terms confidential for the same time
periods and to the same extent as such Party is required to keep such terms
confidential. The Parties agree that all
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press releases related to the Program shall be issued jointly by GTC and Genzyme
and that the Party preparing any such press release shall provide the other
Party with a draft thereof reasonably in advance of disclosure so as to permit
the other Party to review and comment on such press release.
10.3. Publications. Each Party recognizes the mutual interest in obtaining
valid patent protection. Consequently, any Party, its employees or consultants
wishing to make a publication (including any oral disclosure made without
obligation of confidentiality) relating to work performed by such Party as part
of the Program (the "Publishing Party") shall transmit to the other Party (the
"Reviewing Party") a copy of the proposed written publication at least
forty-five (45) days prior to submission for publication, or an abstract of such
oral disclosure at least fifteen (15) days prior to submission of the abstract
or the oral disclosure, whichever is earlier. The Reviewing Party shall have the
right to (a) request a delay in publication or presentation in order to protect
patentable information, (b) propose modifications to the publication for patent
reasons or (c) request that the information be maintained as a trade secret.
If the Reviewing Party requests a delay as described in clause (a) above,
the Publishing Party shall delay submission or presentation of the publication
for a period of ninety (90) days to enable patent applications protecting each
Party's rights in such information to be filed. Upon the expiration of
forty-five (45) days, in the case of proposed written disclosures, or fifteen
(15) days, in the case of an abstract of proposed oral disclosures, from
transmission of such proposed disclosures to the Reviewing Party, the Publishing
Party shall be free to proceed with the written publication or the oral
presentation, respectively, unless the Reviewing Party has requested the delay
described above.
To the extent possible in the reasonable exercise of its discretion, the
Publishing Party shall incorporate all modifications proposed under clause (b)
above. If a trade secret that is the subject of a request made under clause (c)
above cannot be otherwise protected without unreasonable expense to the
Reviewing Party, such information shall be omitted from the publication.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
11.1. Authorization. Each Party warrants and represents to the other that
(a) subject to Section 2.3 above, it has the legal right and power to enter into
this Agreement, to extend the rights and licenses granted to the other in this
Agreement, and to perform fully its obligations hereunder, (b) this Agreement is
a valid and binding agreement of such Party, enforceable in accordance with its
terms, (c) such Party has obtained all necessary approvals to the transactions
contemplated hereby and (d) such Party has not made nor will it make any
commitments to others in conflict with or in derogation of such rights or this
Agreement.
11.2. Intellectual Property Rights.
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11.2.1. GTC hereby represents and warrants that, * and as of the Date
of Execution, (a) it possesses an exclusive right, title and interest in or, in
the case of GTC Licensed ATIII Patent Rights, an exclusive license (subject to
certain exceptions set forth in the license covering such Patent Rights) to, the
GTC Patent Rights, the GTC Licensed ATIII Patent Rights and the GTC Technology,
(b) that the GTC Patent Rights and the GTC Technology are free and clear of any
lien or other encumbrance and (c) that it has the right to (i) enter into the
obligations set forth in this Agreement and (ii) grant the rights and licenses
set forth in Article 3 hereof.
11.2.2. GTC hereby represents and warrants that it is not aware of any
issued patent that would be infringed by the manufacture and sale of
Collaboration Products as contemplated by this Agreement.
11.2.3. Genzyme hereby represents and warrants that as of the Date of
Execution (a) it possesses an exclusive right, title and interest in the Genzyme
Patent Rights and the Genzyme Technology, (b) the Genzyme Patent Rights and the
Genzyme Technology are free and clear of any lien or other encumbrance and (c)
it has the right to (i) enter into the obligations set forth in this Agreement
and (ii) grant the rights and licenses set forth in Article 3 hereof.
11.3. Warranties.
11.3.1. Genzyme Warranties. Genzyme warrants that (i) the Collaboration
Products delivered by Genzyme pursuant to Section 7.2 hereof will conform in all
material respects to the Specifications, the conditions of any applicable
Regulatory Approvals regarding the manufacturing process and any applicable
requirements of the Regulatory Scheme regarding the manufacturing process and
(ii) the Collaboration Products sold pursuant to Section 6.2 hereof will be
marketed and sold in all material respects in accordance with the conditions of
any applicable Regulatory Approvals and any applicable labeling claims.
11.3.2. GTC Warranties. GTC warrants that the Collaboration Products
delivered by GTC pursuant to Section 7.2 hereof will conform in all material
respects to the Specifications, the conditions of any applicable Regulatory
Approvals regarding the manufacturing process and any applicable requirements of
the Regulatory Scheme regarding the manufacturing process.
11.4. Disclaimer of Representations and Warranties. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, NONE OF GTC, GENZYME OR ATIII LLC MAKES
ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, AND THE NON-INFRINGEMENT OF ANY THIRD-PARTY PATENTS OR
PROPRIETARY RIGHTS. ALL UNIFORM COMMERCIAL CODE WARRANTIES ARE EXPRESSLY
DISCLAIMED BY THE PARTIES.
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11.5. Limitation of Liability. It is agreed by the Parties that no Party
shall have a right to or shall claim special, indirect or consequential damages,
including lost profits, for breach of this Agreement. Remedies shall be limited
to claims for amounts due hereunder or as otherwise provided in this Agreement,
including claims for indemnification as provided in Section 12.1 hereof.
ARTICLE 12. INDEMNITY
12.1. ATIII LLC Indemnity Obligations. The Operating Agreement shall
provide that ATIII LLC shall indemnify each of the Members and its Affiliates,
employees and agents (each an "Indemnified Person") for any act performed by
such Indemnified Person within the scope of the authority conferred upon such
Indemnified Person under this Agreement; provided that it shall be a condition
to such indemnity that (a) the Indemnified Person seeking indemnification acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of ATIII LLC, (b) the act for which indemnification is sought
did not constitute gross negligence or wilful misconduct by such Indemnified
Person and (c) payment and indemnification of any matter disposed of by a
compromise payment by such Indemnified Person, pursuant to consent decree or
otherwise, shall have been approved by the Members, which approval shall not be
unreasonably withheld or delayed, or by a court of competent jurisdiction.
12.2. Insurance. ATIII LLC shall maintain product liability insurance with
respect to development, manufacture and sales of Collaboration Products in an
amount reasonably believed by Genzyme and GTC to be adequate and customary for
the development, manufacture and sale of novel therapeutic products. Genzyme and
GTC shall be named as additional insureds on any such policy.
ARTICLE 13. TERM AND TERMINATION
13.1. Term. The term of this Agreement shall be perpetual unless terminated
pursuant to Section 13.2 below.
13.2. Termination. This Agreement may be terminated in the following
circumstances:
13.2.1. For Certain Material Breaches. If (a) either GTC or Genzyme
fails to use commercially reasonable and diligent efforts to perform any
material duty imposed upon such Party under this Agreement or a Development
Plan, (b) either GTC or Genzyme fails to make * or more capital contributions in
accordance with Article 4 hereof, or (c) Genzyme fails to use commercially
reasonable and diligent efforts to commercialize any Collaboration Product in
any Major Market Country in accordance with the Commercialization Plan for such
Collaboration Product or meet any of the material due diligence requirements set
forth in any Commercialization Plan and, in any case described in
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clauses (a) - (c), such failure to perform is not cured within ninety (90) days
of written notice thereof from the non-breaching Party, the non-breaching Party
may elect, in its sole discretion, to (i) enforce the terms of this Agreement
and seek any and all remedies available to it at law and in equity, (ii) in the
case of clause (b) above, waive the terms of Article 4 hereof with respect to
any one or more required capital contributions and cause the respective
Percentage Interests and future funding responsibilities of the Parties to be
adjusted in accordance with Section 4.1.4 hereof, (iii) in the case of clause
(c) above, cause ATIII LLC to engage a Third Party distributor for such country
in accordance with Section 6.7 hereof or (iv) terminate this Agreement with the
consequences set forth in Section 13.3 below. Such 90-day period shall be
extended to one hundred eighty (180) days if the breaching Party has engaged in
good faith efforts to remedy such default within such 90-day period and
indicated in writing to the non-breaching Party prior to the expiration of such
90-day period that it believes that it will be able to remedy the default within
such 180-day period, but such extension shall apply only so long as the
breaching Party is engaging in good faith efforts to remedy such default.
13.2.2. For Failure to Make a Milestone Payment. In the event that
Genzyme fails to make a milestone payment pursuant to Section 4.4 hereof and
such failure is not cured within sixty (60) days of written notice thereof from
GTC, GTC may elect, in its sole discretion, to either (a) enforce the terms of
this Agreement and seek any and all remedies available to it at law and in
equity or (b) terminate this Agreement with the consequences set forth in
Section 13.3 below.
13.2.3. For Convenience. Either GTC or Genzyme may elect to terminate
this Agreement for any reason at any time after the earlier of (i) such time as
ATIII LLC has received U.S. FDA approval for the BLA for the first Collaboration
Product or (ii) * if ATIII LLC has not received U.S. FDA approval of the BLA for
the first Collaboration Product on or before such date upon one (1) year prior
written notice to the other Party (during which one-year period the obligations
of the Parties, including without limitation obligations with respect to capital
contributions, shall continue in full force and effect).
13.2.4. Upon Bankruptcy. Either GTC or Genzyme may terminate this
Agreement with the consequences set forth in Section 13.3 below upon the
bankruptcy, insolvency, dissolution or winding-up of the other Party, except in
the case of a petition in bankruptcy filed involuntarily against a Party, if
such petition is dismissed within sixty (60) days of the date of its filing.
13.3. Effects of Termination.
13.3.1. For Certain Material Breaches. In addition to the rights and
duties set forth in Sections 13.4 and 13.5 below, GTC and Genzyme shall have the
following rights and duties upon termination of this Agreement pursuant to
Section 13.2.1(iv) above:
(a) the non-breaching Party shall obtain from the breaching Party the
irrevocable right and license, with the right to grant sublicenses, under the
breaching Party's Patent Rights, Technology and Manufacturing Know-How to
develop, make, have made, use,
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offer for sale, sell, have sold, import and export Collaboration Products in the
Field and in the Territory, and the breaching Party shall execute such documents
and take all action as may be necessary or desirable to affect the foregoing;
provided; that such license shall be for the same level of exclusivity as the
rights granted with respect thereto under Section 3.1 hereof; provided further
that any license granted hereunder shall be subject to the obligation of the
non-breaching Party to use commercially reasonable and diligent efforts to
develop and market Collaboration Products pursuant to such license;
(b) the breaching Party shall assign and transfer all of its interest
in ATIII LLC to the non-breaching Party, and the non-breaching Party may
dissolve ATIII LLC in its sole discretion;
(c) (i) all licenses granted pursuant to Article 3 shall be revoked,
(ii) if ATIII LLC is dissolved, any applicable Regulatory Approvals (other
than any Regulatory Approvals filed in the name of an entity other than ATIII
LLC pursuant to Section 5.3 hereof) and clinical data owned or licensed by
ATIII LLC and any trademarks owned or licensed by ATIII LLC (other than any
trademarks registered in the name of an entity other than ATIII LLC pursuant
to Section 9.1.2 hereof) shall be assigned or licensed to the non-breaching
Party and (iii) any Regulatory Approvals filed and any trademarks registered
in the name of an entity other than ATIII LLC shall be (A) exclusively
licensed to ATIII LLC, the non-breaching Party or any Third Party or
Affiliate designated by such Party until such time as ATIII LLC, the
non-breaching Party or its designee is qualified to hold such Regulatory
Approvals or trademarks under the applicable provisions of the Regulatory
Scheme and (B) transferred or assigned to ATIII LLC, the non-breaching Party
or its designee, as appropriate, as soon as practicable thereafter;
(d) the non-breaching Party shall become obligated to pay the breaching
Party an amount equal to * plus interest thereon at the Base Rate of interest
declared from time to time by The First National Bank of Boston in Boston,
Massachusetts from the date of termination to the date payment is made (the
"Breach Buyout Amount"), payable as follows:
(1) if the non-breaching Party elects to sell or otherwise
dispose of all or any portion of its or its Affiliates' right, title
and interest in the Collaboration Products, then the non-breaching
Party shall, upon any such sale or other disposition, pay the breaching
Party an amount equal to *;
(2) for as long as the non-breaching Party has not sold or
otherwise disposed of all or a portion of its right, title and interest
in the Collaboration Products which is equal to or greater than the
breaching Party's Percentage Interest as of the date of termination,
the non-breaching Party shall pay the breaching Party * which * shall
equal (i) *, (ii) * as described in the preceding paragraph; and
(3) on * the date of termination, the non- breaching Party
shall pay the breaching Party the difference between the aggregate
amounts paid pursuant to clauses (1) and (2) above and the Breach
Buyout Amount;
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provided, that the aggregate amount of all payments made under clauses (1), (2)
and (3) shall not exceed the Breach Buyout Amount; and
(e) if Genzyme has not paid all of the payments described in Section
4.4 hereof on or before the date of termination, termination of this Agreement
shall not relieve Genzyme of its obligations to pay any such unpaid amount at
such time as it becomes due and payable in accordance with the schedule set
forth in Section 4.4 hereof.
13.3.2. For Failure to Make a Milestone Payment. In addition to the
rights and duties set forth in Sections 13.4 and 13.5 below, GTC shall have the
following rights and duties upon termination of this Agreement pursuant to
Section 13.2.2(b) above:
(a) GTC shall obtain from Genzyme the irrevocable right and license,
with the right to grant sublicenses, under the Genzyme's Patent Rights,
Technology and Manufacturing Know-How to develop, make, have made, use, offer
for sale, sell, have sold, import and export Collaboration Products in the Field
and in the Territory, and Genzyme shall execute such documents and take all
action as may be necessary or desirable to affect the foregoing; provided, that
such license shall be for the same level of exclusivity as the rights granted
with respect thereto under Section 3.1; provided further that any license
granted hereunder shall be subject to the obligation of GTC to use commercially
reasonable and diligent efforts to develop and market Collaboration Products
pursuant to such license;
(b) Genzyme shall assign and transfer all of its interest in ATIII LLC
to GTC, and GTC may dissolve ATIII LLC in its sole discretion;
(c) (i) all licenses granted pursuant to Article 3 shall be revoked,
(ii) if ATIII LLC is dissolved, any applicable Regulatory Approvals (other than
any Regulatory Approvals filed in the name of an entity other than ATIII LLC
pursuant to Section 5.3 hereof) and clinical data owned or licensed by ATIII LLC
and any trademarks owned or licensed by ATIII LLC (other than any trademarks
registered in the name of an entity other than ATIII LLC pursuant to Section
9.1.2 hereof) shall be assigned or licensed to GTC and (iii) any Regulatory
Approvals filed and any trademarks registered in the name of an entity other
than ATIII LLC shall be (A) exclusively licensed to ATIII LLC, GTC or any Third
Party or Affiliate designated by GTC until such time as ATIII LLC, GTC or its
designee is qualified to hold such Regulatory Approvals or trademarks under the
applicable provisions of the Regulatory Scheme and (B) transferred or assigned
to ATIII LLC, GTC or its designee, as appropriate, as soon as practicable
thereafter; and
(d) GTC shall become obligated to pay Genzyme an amount equal to * plus
interest thereon at the Base Rate of interest declared from time to time by The
First National Bank of Boston in Boston, Massachusetts from the date of
termination to the date payment is made (the "Milestone Breach Buyout Amount"),
payable on the terms and conditions and in accordance with the schedule of
payments set forth in Section 13.3.1(d), mutatis mutandis.
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13.3.3. For Convenience. In addition to the rights and duties set forth
in Sections 13.4 and 13.5 below, GTC and Genzyme shall have the following rights
and duties upon termination of this Agreement pursuant to Section 13.2.3 above:
(a) the non-terminating Party shall have an option exercisable upon
written notice to the terminating Party within the one-year period provided in
Section 13.2.3 hereof to obtain from the terminating Party the irrevocable right
and license, with the right to grant sublicenses, under the terminating Party's
Patent Rights, Technology and Manufacturing Know-How to develop, make, have
made, use, offer for sale, sell, have sold, import and export Collaboration
Products in the Field and in the Territory, and the terminating Party shall
execute such documents and take all action as may be necessary or desirable to
affect the foregoing; provided, that such license shall be for the same level of
exclusivity as the rights granted with respect thereto under Section 3.1;
provided further that any license granted hereunder shall be subject to the
obligation of the non-terminating Party to use commercially reasonable and
diligent efforts to develop and market Collaboration Products pursuant to such
license;
(b) upon exercise of its license option provided in paragraph (a) of
this Section 13.3.3, the terminating Party shall assign and transfer all of its
interest in ATIII LLC to the non-terminating Party, and the non-terminating
Party may dissolve ATIII LLC in its sole discretion;
(c) upon exercise of its license option provided in paragraph (a) of
this Section 13.3.3, (i) all licenses granted pursuant to Article 3 shall be
revoked, (ii) if ATIII LLC is dissolved, any applicable Regulatory Approvals
(other than any Regulatory Approvals filed in the name of an entity other
than ATIII LLC pursuant to Section 5.3 hereof) and clinical data owned or
licensed by ATIII LLC and any trademarks owned or licensed by ATIII LLC
(other than any trademarks registered in the name of an entity other than
ATIII LLC pursuant to Section 9.1.2 hereof) shall be assigned to the
non-terminating Party and (iii) any Regulatory Approvals filed and any
trademarks registered in the name of an entity other than ATIII LLC shall be
(A) exclusively licensed to ATIII LLC, the non-terminating Party or any Third
Party or Affiliate designated by such Party until such time as ATIII LLC, the
non-terminating Party or its designee is qualified to hold such Regulatory
Approvals or trademarks under the applicable provisions of the Regulatory
Scheme and (B) transferred or assigned to ATIII LLC, the non-terminating
Party or its designee, as appropriate, as soon as practicable thereafter;
(d) upon the exercise of its license option provided in paragraph (a)
of this Section 13.3.3, the non-terminating Party shall become obligated to pay
to the terminating Party an amount equal to *plus interest thereon at the Base
Rate of interest declared from time to time by The First National Bank of Boston
in Boston, Massachusetts from the date of termination to the date payment is
made (the "Convenience Buyout Amount"), payable on the terms and conditions and
in accordance with the schedule of payments set forth in Section 13.3.1(d),
mutatis mutandis;
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(e) if the license option provided in paragraph (a) of this Section
13.3.3 is not exercised, then all right, title and interest in the Collaboration
Products shall be sold to the highest bidder within * from the date of
termination and the proceeds shall be allocated between the Members in
proportion to their Percentage Interests in ATIII LLC as of the date of
termination and ATIII LLC shall be dissolved; and
(f) if Genzyme has not paid all of the payments described in Section
4.4 hereof on or before the date of termination, termination of this Agreement
shall not relieve Genzyme of its obligations to pay any such unpaid amount at
such time as it becomes due and payable in accordance with the schedule set
forth in Section 4.4 hereof.
13.3.4. Upon Bankruptcy. In addition to the rights and duties set forth
in Sections 13.4 and 13.5 below, GTC and Genzyme shall have the following rights
and duties upon termination of this Agreement pursuant to Section 13.2.4 above:
(a) the terminating Party shall obtain from the non-terminating Party
the irrevocable right and license, with the right to grant sublicenses, under
the non-terminating Party's Patent Rights, Technology and Manufacturing Know-How
to develop, make, have made, use, offer for sale, sell, have sold, import and
export Collaboration Products in the Field and in the Territory, and the
non-terminating Party shall execute such documents and take all action as may be
necessary or desirable to affect the foregoing; provided, that such license
shall be for the same level of exclusivity as the rights granted with respect
thereto under Section 3.1 hereof; provided further that any license granted
hereunder shall be subject to the obligation of the terminating Party to use
commercially reasonable and diligent efforts to develop and market Collaboration
Products pursuant to such license;
(b) the non-terminating Party shall assign and transfer all of its
interest in ATIII LLC to the terminating Party, and the terminating Party may
dissolve ATIII LLC in its sole discretion;
(c) (i) all licenses granted to Article 3 shall be revoked, (ii) if
ATIII LLC is dissolved, any applicable Regulatory Approvals (other than any
Regulatory Approvals filed in the name of an entity other than ATIII LLC
pursuant to Section 5.3 hereof) and clinical data owned or licensed by ATIII LLC
and any trademarks owned or licensed by ATIII LLC (other than any trademarks
registered in the name of an entity other than ATIII LLC pursuant to Section
9.1.2 hereof) shall be assigned or licensed to the terminating Party and (iii)
any Regulatory Approvals filed and any trademarks registered in the name of an
entity other than ATIII LLC shall be (A) exclusively licensed to ATIII LLC the
terminating Party or any Third Party or Affiliate designated by such Party until
such time as ATIII LLC, the terminating Party or its designee is qualified to
hold such Regulatory Approvals or trademarks under the applicable provisions of
the Regulatory Scheme and (B) transferred or assigned to ATIII LLC, the
terminating Party or its designee, as appropriate, as soon as practicable
thereafter;
(d) the terminating Party shall become obligated to pay to the
non-terminating Party an amount equal to * plus interest thereon at the Base
Rate of interest declared from time to time by The First National Bank of
Boston in Boston, Massachusetts
- ------------------------
*Confidential treatment for indicated portion respectfully requested
40
<PAGE>
from the date of termination to the date payment is made (the "Bankruptcy Buyout
Amount"), payable on the terms and conditions and in accordance with the
schedule of payments set forth in Section 13.3.1(d), mutatis mutandis; and
(e) if Genzyme has not paid all of the payments described in Section
4.4 hereof on or before the date of termination, termination of this Agreement
shall not relieve Genzyme of its obligations to pay any such unpaid amount at
such time as it becomes due and payable in accordance with the schedule set
forth in Section 4.4 hereof.
13.3.5. *. For purposes of this Section 13.3, the * shall be *,
determined as of the date of termination, which determination shall be made by
the mutual agreement of GTC and Genzyme. In the event that GTC and Genzyme are
unable to agree upon * within * of the date of termination, the * shall be
determined * by mutual agreement of GTC and Genzyme, and the costs and expenses
incurred in connection with * shall be shared equally by GTC and Genzyme.
13.4. Inventory. Upon the termination of this Agreement, if Genzyme does
not obtain a license pursuant to Section 13.3 hereof, GTC shall have the option
to repurchase Genzyme's inventory of Collaboration Products acquired by Genzyme
pursuant to Article 6 hereof. Within ten (10) days after such termination, GTC
shall elect in writing to either (a) permit Genzyme to sell off its remaining
inventory of Collaboration Products, provided that Genzyme shall comply with all
of the terms and conditions of this Agreement restricting such selling
activities as in effect immediately prior to such termination, or (b) repurchase
Genzyme's inventory of Collaboration Products. If GTC fails to make such an
election, Genzyme shall be permitted to sell-off its remaining inventory of
Collaboration Products in accordance with clause (a) of this Section 13.4. Any
repurchase of Genzyme's inventory of Collaboration Products shall be at the
price * to be reasonably determined by the Parties in good faith.
13.5. Survival of Rights and Duties. No termination of this Agreement shall
eliminate any rights or duties of the Parties accrued prior to such termination.
The provisions of Articles 1, 10 and 12 and Sections 2.2, 2.3, 2.4 (the second
paragraph thereof only), 3.3, 4.3, 4.5, 9.1.1, 9.1.3, 9.3, 9.5, 13.3, 13.4,
13.5, 14.1, 14.3, 14.4, 14.5, 14.9, 14.10, 14.11 and 14.12 hereof shall survive
any termination of this Agreement.
ARTICLE 14. MISCELLANEOUS
14.1. Cooperation. If either GTC or Genzyme (the "Assuming Party") shall
assume the Program rights from the other Party (the "Responsible Party") in
accordance with the provisions of Article 13 hereof, the Responsible Party shall
promptly provide to the Assuming Party (or any Third Party or Affiliate
designated by the Assuming Party) all Technology, Manufacturing Know-How and
access to regulatory filings sufficient to allow the Assuming Party to perform
the duties assumed. The Responsible Party shall further use its best efforts to
provide all assistance required by the Assuming Party with respect to such
transfer so as to permit the Assuming Party to begin to perform such duties as
soon as possible to minimize
- ------------------------
*Confidential treatment for indicated portion respectfully requested
41
<PAGE>
any disruption in the continuity of supply or marketing of Collaboration
Products. In addition, if upon the date this Agreement is terminated
Collaboration Products are being manufactured in facilities owned or leased by
the Responsible Party (including facilities subleased by ATIII LLC from the
Responsible Party), the Responsible Party agrees to lease such facilities to the
Assuming Party on commercially reasonable terms for a period of up to
twenty-four (24) months.
14.2. Exchange Controls. All payments due hereunder shall be paid in United
States dollars. If at any time legal restrictions prevent the prompt remittance
of part or all payments with respect to any country in which Collaboration
Products are sold, payment shall be made through such lawful means or methods as
the Parties may determine in good faith.
14.3. Withholding Taxes. If applicable laws or regulations require that
taxes be withheld from payments made hereunder, the Party paying such taxes will
(a) deduct such taxes, (b) timely pay such taxes to the proper authority and (c)
send written evidence of payment to the Party from whom such taxes were withheld
within sixty (60) days after payment. Each Party will assist the other Party or
Parties in claiming tax refunds, deductions or credits at such other Party's
request and will cooperate to minimize the withholding tax, if available, under
various treaties applicable to any payment made hereunder.
14.4. IRS Transfer Pricing Adjustments. In the event that the Internal
Revenue Service or any local or state tax authority determines that amounts paid
to GTC or Genzyme by any Party for services performed in connection with the
Program are insufficient and adjusts the revenue reported by Genzyme or GTC
accordingly, then (i) in the case of any payment made by ATIII LLC to Genzyme or
GTC, the amount of the corresponding tax deduction available to ATIII LLC shall
be allocated to Genzyme or GTC, as the case may be, and (ii) in the case of any
payment by GTC or Genzyme to the other, the Party who made such payment shall
promptly pay Genzyme or GTC, as the case may be, an amount equal to the taxes
payable on the additional revenue attributed to such Party plus any interest
expense thereon, which amount shall be grossed-up for taxes payable on the
amount of such payment.
14.5. Interest on Late Payments. Any payments to be made hereunder that are
not paid on or before the date such payments are due under this Agreement shall
bear interest, to the extent permitted by applicable law, at the Base Rate of
interest declared from time to time by The First National Bank of Boston in
Boston, Massachusetts, calculated on the number of days payment is delinquent.
14.6. Force Majeure. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, including without limitation to contamination or
diseases affecting the herd of Transgenic Animals from which tgATIII is
produced, fire, floods, embargoes, war, acts of war (whether war is declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party; provided, however, that the Party so
affected shall use commercially reasonable and diligent efforts to avoid or
remove such causes of non-performance, and shall continue performance hereunder
with reasonable dispatch wherever such causes are removed. Each Party shall
provide the other Parties with prompt written notice of any delay or failure to
42
<PAGE>
perform that occurs by reason of force majeure. The Parties shall mutually seek
a resolution of the delay or the failure to perform in good faith.
14.7. Assignment. This Agreement may not be assigned or otherwise
transferred by any Party without the consent of the other Parties; provided,
however, that either GTC or Genzyme may, without such consent, assign its rights
and obligations under this Agreement (a) in connection with a corporate
reorganization, to any member of an affiliated group, all or substantially all
of the equity interest of which is owned and controlled by such Party or its
direct or indirect parent corporation or (b) in connection with a merger,
consolidation or sale of substantially all of such Party's assets to an
unrelated Third Party; provided, however, that such Party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including without limitation
those business assets that are the subject of this Agreement. Any permitted
assignee shall assume all obligations of its assignor under this Agreement. Any
purported assignment in violation of this Section 14.7 shall be void.
14.8. Severability. Each Party hereby agrees that it does not intend to
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the Parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the Parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the Parties would not have entered into this Agreement
without the invalid provisions.
14.9. Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier), by a next business day delivery
service of a nationally recognized overnight courier service or by courier,
postage prepaid (where applicable), addressed to such other Party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor in accordance with this Section 14.9 and
shall be effective upon receipt by the addressee.
If to GTC: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701
Attention: President
Facsimile: (508) 370-3797
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<PAGE>
with a copy to: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701
Attention: General Counsel
Facsimile: (508) 370-3797
If to Genzyme: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: President
Facsimile: (617) 374-7423
with a copy to: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: Chief Legal Officer
Facsimile: (617) 252-7553
If to ATIII ATIII LLC
LLC (if c/o Genzyme Corporation
such notice is One Kendall Square
sent by GTC): Cambridge, Massachusetts 02139
Attention: President
Facsimile: (617) 374-7423
with a copy to: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: Chief Legal Officer
Facsimile: (617) 252-7553
If to ATIII ATIII LLC
LLC (if Genzyme Transgenics Corporation
such notice is sent Five Mountain Road
by Genzyme): Framingham, Massachusetts 01701
Attention: President
Facsimile: (508) 370-3797
with a copy to: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, Massachusetts 01701
Attention: General Counsel
Facsimile: (508) 370-3797
14.10. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts without regard to
any choice of law principle that would dictate the application of the laws of
another jurisdiction.
44
<PAGE>
14.11. Arbitration. Any disputes arising between the Parties relating to,
arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of this Agreement (a "Dispute"),
which has not resolved in accordance with the provisions of Section 8.3 hereof,
shall be finally resolved by binding arbitration as herein provided.
14.11.1. General. Except as otherwise provided in this Section 14.11,
any arbitration hereunder shall be conducted under the commercial rules of the
American Arbitration Association. Each such arbitration shall be conducted in
the English language by a panel of three (3) arbitrators (the "Arbitration
Panel"). Each of GTC and Genzyme shall appoint one (1) arbitrator to the
Arbitration Panel and the third arbitrator shall be appointed by the two (2)
arbitrators appointed by GTC and Genzyme. The Arbitration Panel shall be
convened upon delivery of the Notice of Arbitration (as herein defined). Any
such arbitration shall be held in Boston, Massachusetts. The Arbitration Panel
shall have the authority to grant specific performance, and to allocate between
the Parties the costs of arbitration in such equitable manner as it shall
determine. Judgment upon the award so rendered may be entered in any court
having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be.
14.11.2. Procedure.
(a) Whenever a Party (the "Claimant") shall decide to institute
arbitration proceedings, it shall give written notice to that effect (the
"Notice of Arbitration") to the other Party (the "Respondent"). The Notice of
Arbitration shall set forth in detail the nature of the Dispute, the facts upon
which the Claimant relies and the issues to be arbitrated (collectively, the
"Arbitration Issues"). Within fifteen (15) days of its receipt of the Notice of
Arbitration, the Respondent shall send the Claimant and the Arbitration Panel a
written Response (the "Response"). The Response shall set forth in detail the
facts upon which the Respondent relies. In addition, the Response shall contain
all counterclaims which the Respondent may have against the Claimant which are
within the Arbitration Issues, whether or not such claims have previously been
identified. If the Response sets forth a counterclaim, the Claimant may, within
fifteen (15) days of the receipt of the Response, deliver to the Respondent and
the Arbitration Panel a rejoinder answering such counterclaim.
(b) Within fifteen (15) days after the later of (i) the expiration of
the period provided in Section 14.11.2(a) above for the Claimant to deliver a
rejoinder or (ii) the completion of any discovery proceedings authorized by the
Arbitration Panel: (A) the Claimant shall send to the Arbitration Panel a
proposed resolution of the Arbitration Issues and a proposed resolution of any
counterclaims set forth in the Response, including without limitation the amount
of monetary damages, if any, or other relief sought (the "Claimant's Proposal");
and (B) the Respondent shall send to the Arbitration Panel a proposed resolution
of the Arbitration Issues, a proposed resolution of any counterclaims set forth
in the Response and a proposed resolution of any rejoinder submitted by the
Claimant, including without limitation the amount of monetary damages, if any,
or other relief sought (the "Respondent's Proposal"). Once both the Claimant's
Proposal and the Respondent's Proposal have been submitted, the Arbitration
Panel shall deliver to each Party a copy of the other Party's proposal.
45
<PAGE>
(c) The Arbitration Panel shall issue an opinion with respect to any
Dispute, which opinion shall explicitly accept either the Claimant's Proposal or
the Respondent's Proposal in its entirety (the "Final Decision"). The
Arbitration Panel shall not have the authority to reach a Final Decision that
provides remedies or requires payments other than those set forth in the
Claimant's Proposal or the Respondent's Proposal. The concurrence of two (2)
arbitrators shall be sufficient for the entry of a Final Decision. The
arbitrators shall issue a Final Decision within one (1) month from the later of
(i) the last day for submission of proposals under Section 14.11.2(b) above or
(ii) the date of the final hearing on any Dispute held by the Arbitration Panel.
A Final Decision shall be binding on both Parties.
14.12. Injunctive Relief. The Parties hereby acknowledge that a breach
of their respective obligations under Article 10 hereof may cause irreparable
harm and that the remedy or remedies at law for any such breach may be
inadequate. The Parties hereby agree that, in the event of any such breach,
in addition to all other available remedies hereunder, the non-breaching
Party or Parties shall have the right to obtain equitable relief to enforce
Article 10 hereof.
14.13. Entire Agreement. This Agreement and the Operating Agreement contain
the entire understanding of the Parties with respect to the subject matter
hereof. All express or implied agreements and understandings, either oral or
written, heretofore made are expressly merged in and made a part of this
Agreement. This Agreement supersedes the Convertible Debt Agreement. It is
understood that the Amended and Restated Convertible Debt Agreement dated as of
September 4, 1997 by and between GTC and Genzyme shall remain in full force and
effect. This Agreement may be amended, or any term hereof modified, only by a
written instrument duly executed by both Parties hereto. Each of the Parties
hereby acknowledges that this Agreement and the Operating Agreement are both the
result of mutual negotiation and therefore any ambiguity in their respective
terms shall not be construed against the drafting Party.
14.14. Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
14.15. Independent Contractors. It is expressly agreed that GTC and Genzyme
shall be independent contractors and that, except as Members of ATIII LLC, the
relationship between the two Parties shall not constitute a partnership, joint
venture or agency. Neither GTC nor Genzyme shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior consent of the other
Party to do so.
14.16. Waiver. Except as expressly provided herein, the waiver by either
Party hereto of any right hereunder or of any failure to perform or any breach
by the other Party shall not be deemed a waiver of any other right hereunder or
of any other failure to perform or breach by said other Party, whether of a
similar nature or otherwise, nor shall any singular or partial exercise of such
right preclude any further exercise thereof or the exercise of any other such
right.
46
<PAGE>
14.17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
47
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
GENZYME CORPORATION
By: /s/ Peter Wirth
---------------------------------------------
Title: Executive Vice President
--------------------------------------------
Date: December 29, 1997
--------------------------------------------
GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
----------------------------------------------
Title: Vice President and Chief Financial Officer
--------------------------------------------
Date: December 29, 1997
----------------------------------------------
ATIII LLC
By: GENZYME CORPORATION
By: /s/ Peter Wirth
---------------------------------------------
Title: Executive Vice President
---------------------------------------------
Date: December 29, 1997
---------------------------------------------
By: GENZYME TRANSGENICS CORPORATION
By: /s/ John B. Green
---------------------------------------------
Title: Vice President and Chief Financial Officer
---------------------------------------------
Date: December 29, 1997
---------------------------------------------
48
<PAGE>
Schedule 1.21
Genzyme Patent Rights
<TABLE>
<CAPTION>
Title Country
----- -------
<S> <C> <C>
1. * *
2. "Protein Purification" U.S. Patent 5,179,199
Australia 79930/87
Canada 549,607
</TABLE>
- -------------
*Confidential treatment for indicated portion respectfully requested
49
<PAGE>
Schedule 1.25
GTC Licensed ATIII Patent Rights
--------------------------------
<TABLE>
<CAPTION>
<S> <C>
1. *
2. U.S. Patent Nos. 4,517,294 and 4,632,981;
3. *
</TABLE>
related applications worldwide (excluding the SMIG Territory).
- ------------------------
*Confidential treatment for indicated portion respectfully requested
50
<PAGE>
Schedule 1.26
<TABLE>
<CAPTION>
GTC Patent Rights
- --------------------------------------------------------------------------------
Title of Patent Application Serial No. Territory
or Patent Number
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Transgenic Animals Secreting * *
Desired Proteins in Milk
Patent No. 0264166 Europe
* *
- --------------------------------------------------------------------------------
2. * * *
- --------------------------------------------------------------------------------
3. * * *
- --------------------------------------------------------------------------------
4. Expression of Protein in Milk Patent No, 4,873,316 U.S.
(licensed from Biogen)
Patent No. 347,431 Europe
- --------------------------------------------------------------------------------
5. DNA Sequences to Target Patent No. 5,304,489 U.S.
Proteins to the Mammary
Gland for Efficient Secretion Patent No. 5,565,362 U.S.
(Licensed from Pharming)
* *
- --------------------------------------------------------------------------------
6. * * *
- --------------------------------------------------------------------------------
</TABLE>
- ------------------------
*Confidential treatment for indicated portion respectfully requested
51
<PAGE>
Schedule 3.1.3
Third Party Royalties and Fees
1. Patent Sublicense Agreement dated February 1, 1990 by and between DNX,
Inc. ("Chrysalis") and GTC (as successor to Genzyme).
2. Agreement dated September 29, 1990 by and among GTC (as successor to
Genzyme), SMIG and Centeon (as successor to Behring).
3. License Agreement dated December 26, 1990 by and between Pharming B.V.
(as successor to Biogen, Inc.) and GTC (as successor to Genzyme).
4. Cooperation Agreement dated September 6, 1988 by and between Tufts
University School of Veterinary Medicine and GTC (as successor to
Genzyme, the successor to Integrated Genetics, Inc.) as amended through
and including September 6, 1997.
52
<PAGE>
Exhibit 10.53
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of March 20,
1998, by and between GENZYME TRANSGENICS CORPORATION, a Massachusetts
corporation (the "Company"), and the undersigned investors (together with their
affiliates and any assignee or transferee of all of their rights hereunder, the
"Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell, in the aggregate, to the Initial Investors (i)
20,000 shares of its Series A Convertible Preferred Stock (the "Preferred
Stock") that are convertible into shares (the "Conversion Shares") of the
Company's common stock, par value $.01 per share (the "Common Stock"), upon the
terms and subject to the limitations and conditions set forth in the Vote of
Directors Establishing a Series of a Class of Stock with respect to such
Preferred Stock (the "Certificate of Designation") and (ii) warrants (the
"Warrants") to acquire Four Hundred Thousand (400,000) shares of Common Stock
(the "Warrant Shares"), upon the terms and subject to the limitations and
conditions set forth in the Warrants dated of even date herewith; and
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Initial
Investors hereby agree as follows:
<PAGE>
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investors and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "Registrable Securities" means the Conversion Shares and
the Warrant Shares (including any Conversion Shares issuable with respect to
Conversion Default Payments under the Certificate of Designation or in
redemption of any Preferred Stock and any Warrant Shares issuable with respect
to Exercise Default Payments under the Warrants) issued or issuable with respect
to the Warrants and the Preferred Stock and any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a distribution on or
in exchange for or otherwise with respect to any of the foregoing. As to any
particular securities, such Securities shall cease to be Registrable Securities
when they have been sold pursuant to an effective registration statement or in
compliance with Rule 144 or are eligible to be sold pursuant to Rule 144(k)
under the 1933 Act (or any similar rule then in force).
(iv) "Registration Statement" means a registration statement
of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
prior to the date which is twenty (20) business days after the date of the
Closing under the Securities Purchase Agreement (the "Closing Date"), file with
the SEC a Registration Statement on Form S-3 and pursuant to Rule 415 (or, if
Form S-3 is not then available, on Form S-1 (at the time provided for in Section
2(e)), to effect a registration of all of the Registrable Securities covering
the resale of the Registrable Securities underlying the Preferred Stock and
Warrants issued or issuable pursuant to the Securities Purchase Agreement, which
Registration Statement, to the extent allowable under the 1933 Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock and exercise
of the Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
<PAGE>
Price of the Preferred Stock in accordance with the terms of the Certificate of
Designation or the Exercise Price of the Warrants in accordance with the terms
thereof. The number of shares of Common Stock initially included in such
Registration Statement shall be no less than two (2) times the sum of the number
of Conversion Shares and Warrant Shares that are then issuable upon conversion
of the Preferred Stock or exercise of the Warrants without regard to any
limitation on the Investors' ability to convert the Preferred Stock or Warrants.
b. Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of the Initial Investors, shall
have the right to select one legal counsel and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
c. Payments by the Company. The Company shall use best efforts to
(A) obtain effectiveness of the Registration Statement as soon as practicable,
(B) exclusive of Allowed Delays, maintain the effectiveness of such Registration
Statement and the ability of the Investors to sell Registrable Securities
pursuant thereto, and (C) maintain the listing of the Common Stock for quotation
on the Nasdaq, NYSE or AMEX and trading thereon after the Registration Statement
has been declared effective If (i) the Registration Statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not declared effective by the SEC within ninety (90) days after
the Closing Date or if, after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the Registration
Statement, or (ii) the Common Stock is not listed or included for quotation on
any one or more of the Nasdaq National Market ("Nasdaq"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") after being so
listed or included for quotation, then the Company will make payments to the
Investors in such amounts and at such times as shall be determined pursuant to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each holder of the Preferred
Stock or Registrable Securities an amount equal to the face value of the
Preferred Stock ("Aggregate Share Price") multiplied by two hundredths (.020)
(or, solely for the first month of any period of delay in the initial
effectiveness of the Registration Statement after the end of such 90-day period,
one hundredth (.010)) times the sum of: (i) the number of months (prorated for
partial months) after the end of such 90-day period and prior to the date the
Registration Statement is declared effective by the SEC; provided, however, that
there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) exclusive of Allowed
Delays (as defined below), the number of months (prorated for partial months)
that sales cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly
<PAGE>
supplement or amend the prospectus included therein in accordance with the terms
of this Agreement or when such prospectus otherwise contains a material
misstatement or omission) and (iii) exclusive of Allowed Delays the number of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the Nasdaq, NYSE or AMEX or that trading thereon is
halted after the Registration Statement has been declared effective. (For
example, if the Registration Statement becomes effective one (1) month after the
end of such 90-day period, the Company would pay $20,000 for each $1,000,000 of
Purchase Price. If thereafter, sales could not be made pursuant to the
Registration Statement for an additional period of one (1) month (exclusive of
Allowed Delays), the Company would pay an additional $20,000 for each $1,000,000
of Purchase Price. Such amounts shall be paid in cash or, at each Investor's
option, may be convertible into Common Stock at the "Conversion Price" (as
defined in the Certificate of Designation).
Notwithstanding anything herein to the contrary, if the Company (1) fails to
cause the Registration Statement to be declared effective on or before the date
that is one hundred eighty (180) days following the Closing Date in a manner
which would allow the sale of Registrable Securities; or (2) such Registration
Statement lapses in effect (or sales otherwise cannot be made by the Holders
thereunder, whether by reason of the Company's failure to amend or supplement
the prospectus included therein in accordance with the Registration Rights
Agreement or otherwise) for more than forty-five (45) consecutive days or
seventy-five (75) days in any twelve (12) month period after such Registration
Statement becomes effective; or (3) the Common Stock is not listed or included
for quotation on the Nasdaq, NYSE or AMEX or that trading thereon is halted
after the Registration Statement has been declared effective for more than for
an aggregate of twenty (20) trading days or more in any twelve (12) month
period; then in each case the calculation of the payments to be made to the
Holders pursuant to the third sentence of the first paragraph of this Section
2(c ) shall be based upon the Aggregate Share Price multiplied by three
hundredths (.030) for the time periods specified in such sentence.
Any shares of Common Stock issued upon conversion of the foregoing amounts shall
be Registrable Securities. If any Investor desires to convert the amounts due
hereunder into Registrable Securities, it shall so notify the Company in writing
within two (2) business days of the date on which such amounts are first payable
in cash and such amounts shall be so convertible (pursuant to the mechanics set
forth under Article __ of the Certificate of Designation), beginning on the last
day upon which the cash amount would otherwise be due in accordance with the
following sentence. Payments of cash pursuant hereto shall be made within five
(5) days after the end of each period that gives rise to such obligation,
provided that, if any such period extends for more than thirty (30) days,
interim payments shall be made for each such thirty (30) day period. The term
"Purchase Price" means the purchase price paid by the Investors for the
Preferred Stock.
If at any time during the Registration Period, counsel to the Company should
determine in good faith that the filing of the Registration Statement or the
compliance by the Company with its disclosure obligations in connection with the
Registration Statement may require the disclosure of information which the Board
of Directors of the Company has identified as material and which the Board of
Directors has determined that the Company has a bona fide
<PAGE>
business purpose for preserving as confidential, the Company shall promptly, (i)
notify the Investors in writing of the existence of (but in no event, without
the prior written consent of an Investor, shall the Company disclose to such
investor any of the facts or circumstances regarding) material non-public
information and (ii) advise the Investors in writing to cease all sales under
the Registration Statement until such information is disclosed to the public or
ceases to be material. In such instance, the Company's obligation to make
payments under this Section 2(c) shall be suspended for a period (an "Allowed
Delay") expiring upon the earlier to occur of (A) the date on which such
material information is disclosed to the public or ceases to be material or the
Company is able to so comply with its disclosure obligations or (B) 15 trading
days after the Company first notifies the Investor of such good faith
determination. There shall not be more than two (2) Allowed Delays in any twelve
(12) month period nor more than three (3) Allowed Delays in any twenty-four (24)
month period.
d. Piggy-Back Registrations. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) at which time no
Registration Statement is then effective with resepct to the Registrable
Securities, the Company shall file with the SEC a Registration Statement
relating to an offering for its own account or the account of others (unless
inclusion therein would require the consent of such other party, and the Company
is unable, despite exercise of good faith efforts, to obtain such consent) under
the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8
or their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option, stock purchase or other employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not entitled to inclusion of such securities in such Registration Statement;
and provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities not
subject to a similar cut-back provision. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the
<PAGE>
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering.
e. Eligibility for Form S-3. The Company represents and warrants
that it meets the registrant eligibility and transaction requirements for the
use of Form S-3 for registration of the sale by the Investors of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3. In the event that the Company is advised by the SEC that it
is not eligible to use Form S-3 in connection with the registration of the
Registrable Securities, it shall file a Registration Statement covering the
Registrable Securities on Form S-1 or other available form as promptly as
practicable and not more than 20 business days after such advice from the SEC,
and the Company shall use its best efforts to obtain eligibility to use Form S-3
as promptly as practicable thereafter and shall convert, prior to its
effectiveness,the Form S-1 Registration Statement to a Form S-3 Registration
Statement as soon as it is permitted to do so thereafter.
f. Rule 416. The Company and the Investors each acknowledge that,
absent guidance from the SEC or other definitive authority to the contrary, an
indeterminate number of Registrable Securities shall be registered pursuant to
Rule 416 under the Securities Act so as to include in such Registration
Statement any and all Registrable Securities which may become issuable (i) as a
result of stock splits, stock dividends or similar transactions and (ii) by
reason of reductions in the Conversion Price of the Preferred Stock in
accordance with the terms thereof, including, but not limited to, the terms
which cause the Conversion Price to decrease to the extent the closing bid price
of the Common Stock decreases (collectively, the "Rule 416 Securities"). In this
regard, the Company agrees to take all steps necessary to ensure that all
Registrable Securities are registered pursuant to Rule 416 under the Securities
Act in the Registration Statement and, absent guidance from the SEC or other
definitive authority to the contrary, the Company shall affirmatively support
and not take any action adverse to the position that the Registration Statements
filed hereunder cover all of the Rule 416 Securities. If the Company determines
that the Registration Statements filed hereunder do not cover all of the Rule
416 Securities, the Company shall immediately provide to each Investor written
notice (a "Rule 416 Notice") setting forth the basis for the Company's position
and the authority therefor.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and, on or prior to the date which is
twenty (20) business days after the Closing Date, file with the SEC, a
Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), and thereafter use its best efforts to cause such
Registration Statement relating to Registrable Securities to become effective as
soon as possible after such filing, and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(i) the date on which all of the Registrable Securities have been sold and (ii)
the date on which the Registrable Securities (in the opinion of counsel to the
Initial Investors) may be immediately sold without restriction
<PAGE>
(including without limitation as to volume by each holder thereof) without
registration under the 1933 Act (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any 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.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement until such time
as all of such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement. In the event that Rule 416 is determined by
the SEC not to permit the registration of an indeterminate number of shares, and
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities issued
or issuable upon conversion of the Preferred Stock or exercise of the Warrants,
the Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. The provisions of Section 2(c) above shall be applicable with
respect to such obligation, with the ninety (90) days running from the day after
the date on which the Company reasonably first determines (or reasonably should
have determined) the need therefor.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor by
facsimile of the effectiveness of the Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing any Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall promptly file an acceleration request as soon as
practicable
<PAGE>
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.
d. The Company shall use best efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement under such
other securities or "blue sky" laws of such jurisdictions in the United States
as the Investors who hold a majority-in-interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. In the event Investors who hold a two-thirds majority-in-interest
of the Registrable Securities being offered in an offering registered hereunder
select underwriters for the offering, the Company shall enter into and perform
its obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
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, and use its best
efforts promptly (but subject to Allowed Delays as set forth in Section 2(c)) to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
h. The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of
<PAGE>
time prior to their filing with the SEC, and not file any document in a form to
which such counsel reasonably objects and will not request acceleration of the
Registration Statement without prior notice to such counsel. The sections of the
Registration Statement covering information with respect to the Investors, the
Investors' beneficial ownership of securities of the Company or the Investors'
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by the Investors.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement (i) an opinion, dated as of
such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters and the Investors
and (ii) a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other
<PAGE>
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein (or in any
other confidentiality agreement between the Company and any Investor) shall be
deemed to limit the Investor's ability to sell Registrable Securities in a
manner which is otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure the designation and
quotation, of all the Registrable Securities covered by the Registration
Statement on the Nasdaq National Market System or, if not eligible for the
Nasdaq National Market System on the Nasdaq Small Cap and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the Nasdaq National Market System as such with respect to such
Registrable Securities.
n. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters, if
any, or the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request, and,
within three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver and shall cause legal counsel selected by the Company to deliver to the
transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement) an
<PAGE>
instruction in the form attached hereto as Exhibit 1 and an opinion from such
counsel and a letter from the Company, which letter has been acknowledged by the
Company's transfer agent as sufficient to permit the issuance of unlegended
Conversion Shares and Warrant Shares which are not subject to a stop transfer
notation in the form attached hereto as Exhibit 2.
p. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to the Registration Statement.
q. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
r. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated by the SEC.)
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall each, on a several and not a joint basis, have the following
obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a two-thirds majority-in-interest
of the Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
<PAGE>
the managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, including any lock-up agreement with respect to any Registrable
Securities not being sold in such underwriting as may reasonably be requested by
the managing underwriter, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by the Company.
In addition, the Company shall pay all of the Investors' reasonable costs
(including legal fees) incurred in connection with the successful enforcement of
the Investors' rights hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter
(as defined in the 1933 Act) for the Investors, and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
<PAGE>
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse each Indemnified Person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in a preliminary prospectus or final prospectus or any supplement
thereto was corrected on a timely basis in the prospectus, as then amended or
supplemented as required by Section 3(f), such corrected prospectus was timely
made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect or
incomplete prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
<PAGE>
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by such Investor, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; and provided, further, that the Investor's liability
hereunder shall be limited in amount to the net amount of proceeds received by
such seller from the sale of Registrable Securities Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
<PAGE>
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees, for as long
as there shall be any Series A Convertible Preferred Stock, Warrants, Conversion
Shares or Warrant Shares held by an Investor, to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
<PAGE>
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or a portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act and
shall have made appropriate representations to that effect to the Company.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, the Initial
Investors (to the extent such Initial Investors still own Registrable
Securities) and Investors who hold a two-thirds majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular U.S. mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
<PAGE>
If to the Company:
Genzyme Transgenics Corporation
One Mountain Road
Framingham, MA 01701
Attn: Chief Financial Officer
Phone: 508-270-2579
Fax: 508-270-2303
With copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108-3190
Attn: Lynnette C. Fallon, Esq.
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of New York applicable to agreements made and to be
performed entirely within such State. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof. The parties hereto hereby submit to the exclusive jurisdiction of the
United States Federal Courts located in New York with respect to any dispute
arising under this Agreement or the transactions contemplated hereby.
e. This Agreement, the Securities Purchase Agreement (including all
schedules and exhibits thereto), and the Warrants constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement and the Warrants supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
<PAGE>
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a two-thirds majority of the Registrable Securities,
determined as if the all of the shares of Preferred Stock and Warrants then
outstanding have been converted into or exercised for Registrable Securities.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
<PAGE>
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.
GENZYME TRANSGENICS CORPORATION
By:/s/ John B. Green
-------------------------------
Name: John B. Green
Title: Vice President, Finance
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne D. Block
-------------------------------
Name: Wayne D. Block
Its: Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Fax: (610) 617-0570
Telephone: (610) 617-5900
Attn: Wayne Bloch
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
By:/s/ Brian J. Stark
-------------------------------
Name: Brian J. Stark
Managing Member, Staro Asset Management, LLC
Investment Manager, Shepherd Investments International, Ltd.
DATE: 3-20-98
RESIDENCE: British Virgin Islands
ADDRESS: c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (414) 241-7704; and
Tel: (414) 241-7728 x15
Attn: Mr. Brian Davidson
STARK INTERNATIONAL
By:/s/ Brian J. Stark
-------------------------------
Name: Brian J. Stark
Managing Member, Staro Asset Management, LLC
Investment Manager, Stark International
DATE: 3-20-98
RESIDENCE: Bermuda
ADDRESS: c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (414) 241-7704; and
Tel: (414) 241-7728 x15
Attn: Mr. Brian Davidson
<PAGE>
Exhibit 10.54
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of March
20, 1998, by and between GENZYME TRANSGENICS CORPORATION, a Massachusetts
corporation, with headquarters located at Five Mountain Road, Framingham, MA,
01701 (the "Company"), and the Buyers set forth on the signature page hereto
(the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended, (the "1933 Act"), and Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
B. The Company has authorized a new series of preferred stock, designated as its
Series A Convertible Preferred Stock (the "Preferred Stock"), having the voting
powers, preferences and rights set forth in the Certificate of Vote of Directors
Establishing a Series of a Class of Stock attached hereto as Exhibit "A" (the
"Certificate of Designation");
C. The Preferred Stock is convertible into shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock"), upon the terms and subject
to the limitations and conditions set forth in the Certificate of Designation;
D. The Company has authorized the issuance to the Buyers of warrants, to
purchase in the aggregate 400,000 shares of Common Stock, in the form attached
hereto as Exhibit "B" (the "Warrants");
E. The Buyers desire to purchase from the Company and the Company desires to
issue and sell to the Buyers, upon the terms and conditions and in reliance on
the representations and warranties set forth in this Agreement, (i) Twenty
Thousand (20,000) shares of Preferred Stock, and (ii) the Warrants, for an
aggregate purchase price of Twenty Million Dollars ($20,000,000); and
F. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit "C" (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide to the Buyers certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
<PAGE>
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares and Warrants. The Company shall
issue and sell to the Buyers and the each Buyer agrees, on a several and not a
joint basis, to purchase from the Company such number of shares of Preferred
Stock (together with any Preferred Stock issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance with the terms
thereof, the "Preferred Shares") and Warrants set forth under Buyer's name on
the signature page hereto executed by each Buyer, for an aggregate purchase
price of Twenty Million U.S. Dollars (the "Purchase Price") and a per share of
Preferred Stock purchase price of $1,000. The issuance, sale and purchase of the
Preferred Shares and Warrants shall take place at the closing (the "Closing"),
subject to the satisfaction (or waiver) of the conditions thereto set forth in
Section 6 and Section 7 below. At the Closing, the Company shall issue and sell
to the Buyers and the Buyers shall purchase from the Company Twenty Thousand
(20,000) Warrants for each $1,000,000 of Preferred Shares purchased.
b. Form of Payment. The Purchasers shall pay the Purchase Price for
the Preferred Shares by wire transfer to the account designated pursuant to the
Escrow Agreement by and among the Company, each Purchaser and the escrow agent
("Escrow Agent") designated therein in the form attached hereto as Exhibit "D"
("Escrow Agreement"), all in accordance with the terms of the Escrow Agreement.
Upon satisfaction of the other conditions to Closing specified herein, the
escrowed Purchase Price shall be released to the Company against delivery of
duly executed certificates representing the number of Preferred Shares and
Warrants which the Buyers are purchasing.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, and further
subject to the terms and conditions of the Escrow Agreement, the date and time
of the issuance and sale of the Preferred Shares and Warrants pursuant to this
Agreement shall be 10:00 a.m. Pacific Standard Time on March 20, 1998 or such
other mutually agreed upon date or time (the "Closing Date").
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants to the Company as of the date
hereof and as of the Closing, severally and solely with respect to itself and
its purchase hereunder and not with respect to any other Buyer, as set forth in
this Section 2. Each Buyer makes no other representations or warranties, express
or implied, to the Company in connection with the transactions contemplated
hereby and any and all prior representations and warranties, if any, which may
have been made by the Buyers to the Company in connection with the transactions
contemplated hereby shall be deemed to have been merged in this Agreement and
any such prior representations and warranties, if any, shall not survive the
execution and delivery of this Agreement.
<PAGE>
a. Investment Purpose. As of the date hereof, the Buyer is
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "Conversion Shares") and the Warrants and the shares of
Common Stock issuable upon exercise thereof (the "Warrants Shares", and
collectively with the Preferred Shares, Conversion Shares and Warrants, the
"Securities") for its own account for investment only and not with a present
view towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D. Buyer has delivered an
Investor Questionnaire in the form of Exhibit "E" to the Company and Shoreline
Pacific (as defined below).
c. Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.
d. Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer acknowledges and
understands that its investment in the Securities involves a significant degree
of risk, including the risks reflected in the SEC Documents (as defined below).
e. Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the 1933 Act or any applicable state securities
laws and consequently the Buyer may have to bear the risk of owning the
Securities for an indefinite period of time, and the Securities may not be
transferred unless (a) subsequently included in an effective registration
statement under the 1933 Act; (b) the Buyer shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred
<PAGE>
may be sold or transferred pursuant to an exemption from such registration; (c)
sold under Rule 144 promulgated under the 1933 Act (or a successor rule) or (d)
sold or transferred to an affiliate (as defined in Rule 144) of the Buyer; (ii)
any sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement. The Buyer covenants it
will not make any sale, transfer or other disposition of the Securities in
violation of federal or state securities laws.
g. Legends. The Buyer understands that the certificates representing
the Preferred Shares, Warrants and, until such time as the Conversion Shares and
Warrants Shares have been registered under the 1933 Act or otherwise may be sold
by the Buyer under Rule 144, as contemplated by the Registration Rights
Agreement, the Conversion Shares and Warrant Shares, may bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities have been acquired for
investment and may not be sold, transferred or assigned in the absence of
an effective registration statement for the securities under applicable
securities laws, or unless offered, sold or transferred pursuant to an
available exemption from the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any certificate upon which it
is stamped, if, unless otherwise required by applicable state securities laws,
(a) the Securities represented by such certificate are registered for sale under
an effective registration statement filed under the 1933 Act, and a conversion
notice or exercise notice containing a representation and covenant with respect
to compliance with applicable prospectus delivery requirements, if any, has been
delivered to the Company with respect to the Conversion Shares or Warrant Shares
to be issued without legend or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Securities may be made without registration under the 1933 Act and such
sale either has occurred or may occur without restriction on the manner of such
sale or transfer or (c) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144(k) under the 1933 Act
(or a successor
<PAGE>
rule thereto). The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if any, or
otherwise in compliance with the requirements for an exemption from registration
under the 1933 Act and the rules and regulations promulgated thereunder.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
i. Residency. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
j. Compliance with Short Sale Regulations. To the extent the Buyer
engages in any hedging transaction involving "short sales" of the Company's
Common Stock, the Buyer agrees to comply with applicable rules and regulations,
including exemptions therefrom, applying to short sales.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyers that:
a. Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is duly incorporated, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of
all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on (i) the
business, operations, assets or financial condition or prospects of the Company
or its Subsidiaries, if any, taken as a whole, or (ii) on the ability of the
Company to perform its obligations hereunder or under the agreements or
instruments to be entered into or filed in connection herewith, or (iii) the
Securities. "Subsidiaries" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, 50% or more of the equity or other ownership interests.
<PAGE>
b. Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation and to enter into and to perform its obligations
under this Agreement, the Registration Rights Agreement, the Escrow Agreement
and the Warrants and to consummate the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the terms hereof and
thereof, (ii) the execution, delivery and performance of this Agreement, the
Registration Rights Agreement and the Warrants by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the filing of the Certificate of Designation, the
issuance of the Preferred Shares and the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board or Directors, or its shareholders is required, (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement and the Warrants have been
duly executed and delivered and the Certificate of Designation has been duly
filed by the Company, and (iv) each of this Agreement , the Registration Rights
Agreement, the Escrow Agreement, the Warrants and the Certificate of Designation
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 40,000,000 shares of Common Stock of which
17,406,912 shares are issued and outstanding, 4,115,000 shares are reserved for
issuance pursuant to the Company's employee and director stock option plans,
210,600 shares are reserved for issuance pursuant to securities (other than
securities issued under the foregoing plans, the Preferred Shares and the
Warrants) exercisable for, or convertible into or exchangeable for shares of
Common Stock and 3,149,141 shares are reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(h) below); (ii)
5,000,000 shares of undesignated preferred stock, par value $.01 per share, of
which no shares are issued and outstanding. All of such outstanding shares of
capital stock are, or upon issuance will be, duly authorized, validly issued,
fully paid and nonassessable. No shares of capital stock of the Company,
including the Securities, are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
Schedule 3(c) and except for the transactions contemplated hereby, as of the
date of this Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into, exercisable
for, or exchangeable for any shares of capital stock of the Company or any of
its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the
<PAGE>
1933 Act (except the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that will
be triggered by the issuance of the Preferred Shares, Conversion Shares,
Warrants or Warrant Shares. The Company has furnished to the Buyers true and
correct copies of the Company's Certificate of Incorporation, as amended, as in
effect on the date hereof ("Certificate of Incorporation"), the Company's
By-laws as in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock of the Company and
the material rights of the holders thereof in respect thereto. The Company shall
provide each Buyer with a written update of this representation signed by the
Company's Chief Executive or Treasurer on behalf of the Company as of the
Closing Date.
d. Issuance of Shares. The Preferred Shares, Conversion Shares and
Warrant Shares are duly authorized and, upon issuance in accordance with the
terms of this Agreement (including the issuance of the Conversion Shares upon
conversion of the Preferred Shares in accordance with the Certificate of
Designation and the issuance of the Warrant Shares upon exercise of the Warrants
in accordance with the terms thereof) will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims, encumbrances, and
charges with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of stockholders of the Company and will not
impose personal liability on the holders thereof. The term Conversion Shares
includes the shares of Common Stock issuable upon conversion of the Preferred
Shares, including without limitation, such additional shares, if any, as are
issuable as a result of the events described in Section 2(c) of the Registration
Rights Agreement. The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the Conversion Shares and
Warrant Shares upon conversion or exercise of the Preferred Shares or Warrants.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Certificate of Designation and
the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company. Taking the foregoing into account, the Company's Board of Directors
has determined that the issuance of the Securities and the consummation of the
other transactions contemplated hereby are in the best interests of the Company
and its stockholders.
e. Series of Preferred Stock. Other than the Preferred Stock the
Company has not designated or established any other preferred stock of the
Company. The terms, designations, powers, preferences and relative,
participating, and optional or special rights, and the qualifications,
limitations, and restrictions of the Preferred Stock are as stated in the
Certificate of Designation.
f. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the filing of the Certificate of
Designation and the issuance and
<PAGE>
reservation for issuance of the Preferred Shares, Warrants, Conversion Shares
and Warrant Shares) will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws or (ii) except as
described in Schedule 3(f), violate or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment (including without limitation, the triggering
of any anti-dilution provision), acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including U.S. federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, breaches, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that (and no event has occurred which,
without notice or lapse of time or both) would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity, the failure to
comply with which would, individually or in the aggregate, have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws or any
listing agreement with any securities exchange or automated quotation system,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants or to perform its obligations under the Certificate of
Designation in each case in accordance with the terms hereof or thereof. Except
as discussed in Schedule 3(f), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of Nasdaq (as defined
below) and does not reasonably anticipate that the Common Stock will be delisted
by Nasdaq in the foreseeable future. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing.
<PAGE>
g. SEC Documents, Financial Statements. Since January 1, 1996, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act or the 1933 Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the financial statements included in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business subsequent to December 31, 1996 of
the type required under generally accepted accounting principles to be reflected
in such financial statements. Such liabilities incurred subsequent to December
31, 1996 are not, in the aggregate, material to the financial condition or
operating results of the Company.
h. Absence of Certain Changes. Except as disclosed in the SEC
Documents, since December 31, 1996, there has been no material adverse change
and no material adverse development in the assets, liabilities, business,
properties, operations, financial condition, prospects or results of operations
of the Company or any of its Subsidiaries.
i. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries or any of its officers or
directors acting as such that could, individually or in the aggregate, have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries are
aware of any facts or circumstances which would reasonably be expected to give
rise to any action or
<PAGE>
proceeding described in the foregoing sentence. Schedule 3(i) contains a
complete list and summary description of any pending or, to the knowledge of the
Company, threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it could have a Material Adverse Effect.
j. Patents, Copyrights, etc. The Company and each of its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("Intellectual Property") necessary to enable it to conduct
its business as now operated (and, except as set forth in Schedule 3(j) hereof,
to the best of the Company's knowledge, as presently contemplated to be operated
in the future); there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company's knowledge threatened, which challenges
the right of the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now operated (and,
except as set forth in Schedule 3(j) hereof, to the best of the Company's
knowledge, as presently contemplated to be operated in the future); to the best
of the Company's knowledge, the Company's or its Subsidiaries' products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
k. No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
which in the reasonable judgment of the Company's officers has or is expected to
have a Material Adverse Effect.
l. Tax Status. Except as set forth on Schedule 3(l), the Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
state or local tax.
<PAGE>
Except as set forth on Schedule 3(l), none of the Company's tax returns is
presently being audited by any taxing authority.
m. Certain Transactions. Except as disclosed in the SEC Documents or
as set forth on Schedule 3(m) and except for arm's length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options or the ownership of other securities and rights disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
n. Disclosure. All information relating to or concerning the Company
or any of its Subsidiaries set forth in this Agreement and provided to the
Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).
o. Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm's length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
advice given by any Buyer or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby is merely
incidental to the Buyer's purchase of the Securities and has not been relied on
by the Company in any way. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
p. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales
<PAGE>
in any security or solicited any offers to buy any security under circumstances
that would require registration under the 1933 Act of the issuance of the
Securities to the Buyers. The issuance of the Securities to the Buyers will not
be integrated with any other issuance of the Company's securities (past, current
or future) for purposes of the 1933 Act or any applicable rules of Nasdaq.
q. No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby,
except for dealings with Shoreline Pacific Institutional Financial, the
Institutional Division of Financial West Group ("Shoreline Pacific"), whose
commissions and fees will be paid for by the Company.
r. Permits; Compliance. The Company and each of its Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted except those the failure of which to possess would
not, individually or in the aggregate, have a Material Adverse Effect
(collectively, the "Company Permits"), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since December 31, 1996, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations would
not have a Material Adverse Effect.
s. Environmental Matters.
(i) Except as set forth in Schedule 3(s), there are, to the
Company's knowledge, with respect to the Company or any of its Subsidiaries or
any predecessor of the Company, no past or present violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants contaminants, or toxic
or hazardous substances or wastes (collectively, "Hazardous Materials") into the
environment,
<PAGE>
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released on
or about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its Subsidiaries.
(iii) Except as set forth in Schedule 3(s), to the best
knowledge of the Company, there are no underground storage tanks on or under any
real property owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
t. Title to Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(t) or such
as would not have a Material Adverse Effect. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.
u. Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
v. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
<PAGE>
w. Employment Matters. The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours except where failure to be in compliance would
not have a Material Adverse Effect. There are no pending investigations
involving the Company or any of its Subsidiaries by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state, local or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of its Subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of its Subsidiaries. Except as set forth in
Schedule 3(w), no representation question exists respecting the employees of the
Company or any of its Subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of its
subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
its Subsidiaries. No material labor dispute with the employees of the Company or
any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.
x. ERISA Matters. Except as set forth on Schedule 3(x), the Company
has no "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, or intended to be
qualified under Section 401(a) of the Internal Revenue Code.
y. Investment Company Status. The Company is not and upon
consummation of the sale of the Securities will not be an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
z. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities
<PAGE>
for sale to the Buyers pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to the Closing Date. The Company agrees to file a Form
8-K disclosing this Agreement and the transactions contemplated hereby with the
SEC within ten (10) business days following the Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The Company's
Common Stock is registered under Section 12(b) of the 1934 Act. Throughout the
Registration Period (as defined in the Registration Rights Agreement), the
Company shall timely file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company currently
meets, and will take all reasonably necessary action to continue to meet, the
"registrant eligibility" requirements set forth in the general instructions to
Form S-3.
d. Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares and Warrants in the manner set forth in Schedule 4(d)
attached hereto and made a part hereof and shall not otherwise, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
its direct or indirect Subsidiaries).
e. Expenses. The Company and the Buyers shall each be liable for
their own expenses incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other agreements to be executed
in connection herewith, including, without limitation, attorneys' and
consultants' fees and expenses.
f. Financial Information. The Company agrees to file all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the 1934 Act. The financial
statements of the Company will be prepared in accordance with generally accepted
accounting principles, consistently applied, and will fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries and results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The Company agrees to send the following reports to
each Buyer until such Buyer transfers, assigns, or sells all of the Securities:
(i) within ten (10) days after the filing with the SEC, a copy of its Annual
Report on Form 10-K, its Quarterly Reports on Form 10- Q and any Current Reports
on Form 8-K; (ii) within one (1) day after release, copies of all press releases
issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
with the making available or giving to the stockholders of the Company, copies
of any notices or other information the Company makes available or gives to such
stockholders.
g. Reservation of Shares. Subject to the Maximum Share Amount, the
Company shall at all times have authorized, and reserved for the purpose of
issuance, a sufficient number of shares of Common Stock to provide for the full
conversion of the
<PAGE>
outstanding Preferred Shares and issuance of the Conversion Shares in connection
therewith (based on the Conversion Price of the Preferred Shares in effect from
time to time) and the full exercise of the Warrants and the issuance of the
Warrant Shares in connection therewith (based upon the Exercise Price of the
Warrants in effect from time to time). The Company shall not reduce the number
of shares of Common Stock reserved for issuance upon conversion of the Preferred
Shares or exercise of the Warrants without the consent of the Buyers, which
consent will not be unreasonably withheld. The Company shall use its best
efforts at all times to maintain the number of shares of Common Stock so
reserved for issuance at no less than the lesser of (i)) the Maximum Share
Amount (as defined in the Certificate of Designation or (ii) two (2) times the
number that is then actually issuable upon full conversion of the Preferred
Shares plus the number that is then actually issuable upon full exercise of the
Warrants (based on the Conversion Price of the Preferred Shares or Exercise
Price of the Warrants in effect from time to time). If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the number
of Conversion Shares and Warrant Shares issued and issuable upon conversion of
the Preferred Shares and exercise of the Warrants (based on the Conversion Price
of the Preferred Shares and Exercise Price of the Warrants then in effect), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of shareholders to authorize additional shares to meet the
Company's obligations under this Section 4(g), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain shareholder
approval of an increase in such authorized number of shares.
h. Listing. The Company shall, on or before 10 business days
following the date hereof, secure the listing of the Conversion Shares and
Warrant Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain such listing of all Conversion
Shares and Warrant Shares from time to time issuable (subject to the Maximum
Share Limit (as defined in the Certificate of Designation)) upon conversion or
exercise of the Preferred Shares and the Warrants. The Company will use its best
efforts to obtain and maintain the listing and trading of its Common Stock on
the Nasdaq National Market System ("Nasdaq"), the American Stock Exchange
("AMEX") or the New York Stock Exchange ("NYSE"), and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Nasdaq or other exchanges, as applicable. The Company
shall promptly provide to each Buyer copies of any notices it receives regarding
the continued eligibility of the Common Stock for listing on the Nasdaq or other
principal exchange or quotation system on which the Common Stock is listed or
traded.
i. Corporate Existence. So long as a Buyer beneficially owns any
Securities, the Company shall maintain its corporate existence in good standing
under the laws of the jurisdiction in which it is incorporated and shall not
sell all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and
<PAGE>
instruments entered into or filed in connection herewith and (ii) is a publicly
traded corporation whose Common Stock is listed for trading on AMEX, Nasdaq or
NYSE.
j. Solvency; Compliance with Law. The Company (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets have a fair market value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead it to
reasonably conclude that the Company would not have, nor does it intend to take
any action that would impair, its ability to pay its debts from time to time
incurred in connection therewith as such debts mature. The Company will conduct
its business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations the failure to comply with which would have a Material Adverse
Effect.
k. Insurance. The Company shall maintain liability, casualty and
other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.
l. No Integration. The Company will not conduct any future offering
that will be integrated with the issuance of the Securities for purposes of the
rules promulgated by the SEC or NASD.
m. No Qualified Opinion. The Company did not receive a qualified
opinion from its auditors with respect to its most recent fiscal year end and
does not anticipate or know of any basis upon which its auditors might issue a
qualified opinion in respect of its current fiscal year.
n. Additional Equity Capital; Right of First Refusal. Subject to the
exceptions described below, the Company will not, without the prior written
consent of the Buyer, negotiate or contract with any party to obtain additional
equity financing (including debt financing with an equity component) that
involves (A) the issuance of Common Stock at a discount to the market price of
the Common Stock on the date of original issuance of such securities (including
Common Stock issued directly or indirectly upon conversion or exercise of such
security, and in each case taking into account the value of any warrants or
options issued in connection therewith) or (B) the issuance of convertible
securities that are convertible into an indeterminate number of shares of Common
Stock during the period (the "Lock-up Period") beginning on the Closing Date and
ending on the later of (i) ninety (90) days from the Closing Date and (ii)
thirty (30) days from the date the Registration Statement (as defined in the
Registration Rights Agreement) is declared effective (the limitations referred
to in this sentence are referred to as the "Capital Raising Limitations"). The
Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule
<PAGE>
415 under the 1933 Act),(ii) issuances of securities as consideration for a
merger, consolidation or sale of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital) or financing arrangement with an affiliated company, or in
connection with the disposition or acquisition of a business, product or license
by the Company or (iii) the issuance of up to $10,000,000 in the aggregate of
common stock at prevailing market prices within 120 days following the Closing
Date. The Capital Raising Limitations also shall not apply to the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof or to the grant
of additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan approved by the
Company's board of directors.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent to
issue certificates, registered in the name of each Buyer or its nominee, for the
Conversion Shares and Warrant Shares in such amounts as specified from time to
time by such Buyer to the Company upon conversion or exercise of the Preferred
Shares and the Warrants on and following the date that is 90 days following the
Closing Date, or such earlier date as a registration statement is effective with
respect to the Conversion Shares and/or Warrant Shares, respectively (the
"Irrevocable Transfer Agent Instructions"). All such certificates shall bear the
restrictive legend as and when specified in Section 2(g) of this Agreement. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares or
Warrant Shares, prior to registration of the Conversion Shares or Warrant Shares
under the 1933 Act), will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel in form,
substance and scope customary for opinions of counsel in comparable
transactions, that registration of a resale by such Buyer of any of the
Securities is not required under the 1933 Act or the Buyer provides the Company
with reasonable assurances that such Securities may be sold under Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion Shares or
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be entitled, in
addition to all other available remedies, to an injunction
<PAGE>
restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares and the Warrants to a Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this Agreement, the
Registration Rights Agreement and the Escrow Agreement, and delivered the same
to the Company and the Escrow Agent.
b. The applicable Buyer shall have delivered the Purchase Price to
the Escrow Agent in accordance with Section 1(b) above, and an aggregate
Purchase Price of at least $15,000,000 shall have been received by the Escrow
Agent.
c. The Certificate of Designation shall have been filed with the
Secretary of State of the State of Massachusetts.
d. The representations and warranties of the applicable Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date which representations and warranties
shall be correct as of such date), and the applicable Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the applicable Buyer at or prior to the Closing Date.
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred Shares
and the Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions, provided that these conditions
are for each such Buyer's respective benefit and may be waived by each such
Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement, the Registration
Rights Agreement and the Escrow Agreement, and delivered the same to the Buyer.
<PAGE>
b. The Certificate of Designation shall have been filed with the
Secretary of State of the State of Massachusetts, and evidence thereof
reasonably satisfactory to the applicable Buyer shall have been delivered to
such Buyer.
c. The Company shall have delivered to the Escrow Agent duly
executed certificates (in such denominations as the applicable Buyer shall
reasonably request) representing the Preferred Shares and the Warrants being so
purchased in accordance with Section 1(b) above.
d. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date which representations and warranties
shall be true and correct as of such date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyers shall have
received a certificate or certificates, executed by the Chief Executive Officer
or the Treasurer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such Buyer
including, but not limited to certificates with respect to the Company's
Certificate of Incorporation, By-laws, Board of Directors' resolutions relating
to the transactions contemplated hereby and the incumbency and signatures of
each of the officers of the Company who shall execute on behalf of the Company
any document delivered on the Closing Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
f. Trading and listing of the Common Stock on Nasdaq shall not have
been suspended by the SEC or Nasdaq.
g. The Buyers shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyers and in substantially the same form as Exhibit "F"
attached hereto.
h. The Buyers shall have received an officer's certificate described
in Section 3(c) above, dated as of the Closing Date.
i. The Common Stock required to be authorized and reserved pursuant
to Section V(A) of the Certificate of Designation shall have been duly
authorized and reserved by the Company.
<PAGE>
j. An aggregate Purchase Price of at least $20,000,000 shall have
been received by the Escrow Agent.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by
and interpreted in accordance with the laws of New York State without regard to
the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal and state courts located in
New York, New York with respect to any dispute arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby.
b. Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular U.S. mail, or upon receipt,
if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:
<PAGE>
If to the Company:
Genzyme Transgenics Corporation
Five Mountain Road
Framingham, MA 01701
Attn: Chief Financial Officer
Phone: (508) 270-2579
Fax: (508) 270-2303
With a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108-3190
Attn: Lynnette C. Fallon, Esq.
Phone: (617) 573-0220
Fax: (617) 227-4420
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor any Buyer shall assign this
Agreement, the Registration Rights Agreement or the Warrants or any rights or
obligations hereunder or thereunder without the prior written consent of the
other. Notwithstanding the foregoing, any Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction from a Buyer or
to any of its "affiliates," as that term is defined under the 1934 Act, without
the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder notwithstanding any due diligence investigation conducted
by or on behalf of any Buyer. The Company agrees to indemnify and hold harmless
each Buyer and all such Buyer's respective officers, directors, employees,
partners, members, affiliates, and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4 hereof
or any of its
<PAGE>
covenants and obligations under this Agreement or the Registration Rights
Agreement, including advancement of expenses as they are incurred.
j. Publicity. The Company and each Buyer shall have the right to
review a reasonable period of time before issuance of any press releases, or
relevant portions of any SEC or Nasdaq filings, or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Buyers, to make
any press release or SEC or Nasdaq filings with respect to such transactions as
is required by applicable law and regulations (although the Buyers shall be
consulted by the Company in connection with any such press release prior to its
release and filing and shall be provided with a copy thereof and be given an
opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
m. Equitable Relief. The Company recognizes that in the event that
it fails to perform, observe, or discharge any or all of its obligations under
this Agreement, any remedy at law may prove to be inadequate relief to the
Buyers. The Company therefore agrees that the Buyers shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
COMPANY:
GENZYME TRANSGENICS CORPORATION
By:/s/ John B. Green
----------------------------
Name: John B. Green
Title: Vice President, Finance
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
BUYERS:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne D. Block
------------------------
Name: Wayne D. Bloch
Its: Managing Director
Aggregate Subscription Amount: $10,000,000
No. of Shares of Preferred Stock: 10,000
No. of Warrants: 200,000
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Fax: (610) 617-0570
Telephone: (610) 617-5900
Attn: Wayne Bloch
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
BUYER SIGNATURES CONTNUED:
SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
By:/s/ Brian J. Stark
-------------------------------
Name: Brian J. Stark
Managing Member, Staro Asset Management, LLC
Investment Manager, Shepherd Investments International, Ltd.
DATE: 3-20-98
Aggregate Subscription Amount: $5,000,000
No. of Shares of Preferred Stock: 5,000
No. of Warrants: 100,000
RESIDENCE: British Virgin Islands
ADDRESS: c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (414) 241-7704; and
Tel: (414) 241-7728 x15
Attn: Mr. Brian Davidson
STARK INTERNATIONAL
By:/s/ Brian J. Stark
-------------------------------
Name: Brian J. Stark
Managing Member, Staro Asset Management, LLC
Investment Manager, Stark International
DATE:3-20-98
Aggregate Subscription Amount: $5,000,000
No. of Shares of Preferred Stock: 5,000
No. of Warrants: 100,000
<PAGE>
RESIDENCE: Bermuda
ADDRESS: c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Fax: (414) 241-7704; and
Tel: (414) 241-7728 x15
Attn: Mr. Brian Davidson
<PAGE>
Exhibit A
Certificate of Designation
<PAGE>
Exhibit B
Stock Purchase Warrant
<PAGE>
Exhibit C
Registration Rights Agreement
<PAGE>
Exhibit D
Form of Escrow Agreement
<PAGE>
ESCROW AGREEMENT
The undersigned parties hereby establish Chase Manhattan Bank and Trust
Company, N.A. Escrow No. C27381A (the "Escrow") and agree to be bound by this
Escrow Agreement, dated as of March 20, 1998, as follows:
1. Parties and Transaction. The following entities are parties to this Escrow
Agreement:
(a) Seller: Genzyme Transgenics Corporation
Five Mountain Road
Framingham, MA 01701-3797
Attention: John B. Green
Phone: (508) 270-2579
Fax: (508) 270-2303 ("Seller").
(b) Buyers:
(i) RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attn: Mr. Wayne Bloch
Telephone: (610) 617-5900
Fax: (610) 617-0570;
(ii) Shepherd Investments International, Ltd.
c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Attn: Mr. Brian Davidson
Tel: (414) 241-7728 x15
Fax: (414) 241-7704; and
(iii) Stark International
c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, WI 53092
Attn: Mr. Brian Davidson
Tel: (414) 241-7728 x15
Fax: (414) 241-7704;
(each a "Buyer", and collectively "Buyers").
<PAGE>
(c) Shoreline: Shoreline Pacific Institutional Finance, the Institutional
Division of Financial West Group, Three Harbor Drive, Suite 211,
Sausalito, California, 94965, Attn: General Counsel, telephone number
(415) 332-7800, facsimile number (415) 332-7808 ("Shoreline").
Shoreline is acting as agent for Buyers and Seller in this transaction
and will be paid a commission of five percent 5% by Seller. No
commission is being charged to Buyers. Shoreline will not receive any
payment for order flow relating to any of the securities offered by
Seller in connection with this transaction, including any shares of
Seller's common stock.
(d) Escrow Holder: Chase Manhattan Bank and Trust Company, N.A., a
subsidiary of Chase Manhattan Corporation, 101 California Street, Suite 2725,
San Francisco, California, 94111, telephone number: (415) 954-9518, facsimile
number: (415) 693-8850 ("Escrow Holder").
This Escrow Agreement contains the closing information for the transaction
effected between and on behalf of Buyers and Seller involving the sale by
Seller and the purchase by Buyers of 20,000 shares of Seller's Series A
Convertible Preferred Stock ("Preferred Shares"), at a purchase price of
$1,000 per share, for an aggregate purchase price of Twenty Million Dollars
($20,000,000) U.S., pursuant to the Securities Purchase Agreement dated as of
March 20, 1998 ("Purchase Agreement"), by and among Seller and Buyers.
Seller represents that said Preferred Shares are issued by Seller pursuant to
Section 4(2) of the Securities Act of 1933, as amended and/or Regulation D
thereunder. Upon request of any party hereto, Escrow Holder will furnish the
date and time this transaction took place.
In the event funds transfer instructions are given by any party to this
Agreement (other than in writing at the time of execution of the Agreement),
whether in writing, by telecopier or otherwise, the Escrow Agent is
authorized to seek confirmation of such instructions by telephone call-back
to the person or persons designated above, and the Escrow Agent may rely upon
the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for call-backs may be changed
only in a writing actually received and acknowledged by the Escrow Agent.
The parties to this Agreement acknowledge that such security procedure is
commercially reasonable.
2. Deliveries.
(a) Deliveries By Seller. Seller shall deliver the following documents
to Escrow Holder or to Shoreline, as provided herein, no later 12:00 P.M.
Pacific Standard Time on the "Closing Date," as such term is defined below:
(1) Seller shall deliver to Escrow Holder, with a copy to
Shoreline, a copy of this Escrow Agreement, duly executed by Seller (which
delivery may be made by facsimile so long as a manually executed original of
the Escrow Agreement is delivered to Escrow Holder by Seller by overnight
courier within one (1) business day following the Closing Date).
<PAGE>
(2) Seller shall deliver to Escrow Holder Twenty Thousand (20,000)
Preferred Shares in the name of each Buyer and in face amounts and
denominations more particularly set forth in the Closing Schedule annexed
hereto as Exhibit C (the "Preferred Share Certificates"). The Preferred
Share Certificates shall each bear substantially the following legend:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state of the United States. The securities have been acquired for
investment and may not be sold, transferred or assigned in the absence of
an effective registration statement for the securities under applicable
securities laws, or unless offered, sold or transferred pursuant to an
available exemption from the registration requirements of those laws.
A copy of the form of Seller's Preferred Share Certificate is attached hereto as
Exhibit A and is incorporated herein by this reference.
(b) Deliveries By Buyer. Each Buyer shall deliver the following to Escrow
Holder or to Shoreline, as provided herein, not later than 12:00 P.M. Pacific
Standard Time on the Closing Date:
(1) Each Buyer shall deliver to Escrow Holder, with a copy to
Shoreline, a copy of this Escrow Agreement, duly executed by such Buyer (which
delivery may be made by facsimile so long as a manually executed original of the
Escrow Agreement is delivered to Escrow Holder by Buyer by overnight courier
within one (1) business day following the Closing Date).
(2) Each Buyer shall wire funds in the amount specified for such
Buyer on Exhibit C hereof to Escrow Holder at the account set forth below:
[ESCROW HOLDER'S WIRING INSTRUCTIONS]
(3) Each Buyer shall deliver to Escrow Holder, with copy to
Shoreline, a written confirmation in the form attached hereto as Exhibit B (the
"Closing Confirmation", delivery of which may be made by facsimile so long as a
manually executed original thereof is delivered to the Escrow Agent by Buyer by
overnight courier within one (1) business day of the Closing Date), stating
that, subject to Escrow Holder's receipt of the items to be delivered by Seller
specified in Section 2(a) hereof, all of the conditions to the Closing in
Section 7 of the Purchase Agreement have been satisfied in full or waived as of
the date of delivery of such confirmation with respect to Buyer.
3. Closing. The closing of the purchase by Buyers (the "Closing") is
scheduled to occur on March 20, 1998 or on such other date as Seller, Buyers,
and Shoreline shall agree (the "Closing Date"). At the Closing, Escrow Holder
shall undertake the following:
(a) Original Deliveries to Buyer. Escrow Holder shall deliver to each
Buyer at the
<PAGE>
addresses noted in Exhibit C hereto, by overnight courier, the original
Preferred Share Certificates.
(b) Deliveries to Shoreline. Escrow Holder shall deliver to Shoreline, by
wire transfer, its commission in the amount of One Million Dollars ($1,000,000)
U.S. The wiring instructions for Shoreline are as follows:
[SHORELINE WIRING INSTRUCTIONS]
(c) Deliveries to Seller. Escrow Holder shall deliver to Seller, by wire
transfer, the funds delivered to it by Buyer less (i) the commission payable to
Shoreline specified in Section 3(b), and (ii) Escrow Holder's fees and charges
as specified in Section 5. The wiring instructions for Seller are as follow:
[SELLER WIRE INSTRUCTIONS]
4. Authorization to Escrow Holder to Close. By their signatures appearing
below, and subject to the provisions of Section 6(k) hereof, each Buyer, Seller
and Shoreline each authorize Escrow Holder to close the Escrow upon occurrence
of the following:
(a) Escrow Holder's receipt from Seller of all documents as set forth in
Section 2(a) hereof;
(b) Escrow Holder's receipt from each Buyer of wire transfers in the
amounts set forth in the Closing Schedule annexed hereto as Exhibit C and all
documents as set forth in Section 2(b) hereof;
(c) Escrow Holder's receipt of a Closing Confirmation from each Buyer;
and
(d) Escrow Holder's notification from Shoreline that copies of the
documents required to be received from Seller and Buyers pursuant to the
Purchase Agreement have been received by Shoreline and receipt from Shoreline of
written notice to close the Escrow (the "Shoreline Closing Notice"), which
notice may be delivered by facsimile transmission, provided that a manually
executed original thereof shall be delivered to Escrow Holder within one (1)
business day following the Closing.
Each party understands and agrees that its signature appearing below confirms
its approval of
<PAGE>
the documents and instruments delivered to Escrow Holder and that, except for
delivery of the Closing Confirmation, no further approval of any of the
documents and instruments is required by any party. Each Buyer and Seller each
agree that Escrow Holder is authorized to close the Escrow upon receipt of the
items specified in this Section 4.
5. Costs and Charges Due to Escrow Holder. Seller, each Buyer and Shoreline
each hereby authorize Escrow Holder to make the following charges:
(a) Escrow Holder's charges shall be borne by and billed to Seller, and
Escrow Holder shall debit Seller and credit itself with its customary fees, not
to exceed in the aggregate $1,000. Neither Buyer nor Shoreline shall have any
liability to pay Escrow Holder's charges; provided however, that if the Closing
does not occur and fees are due to Escrow Holder as a result thereof, Shoreline
will bear all of Escrow Holder's reasonable charges incurred in connection
herewith, up to a maximum of $500.00, plus any reasonable out of pocket
expenses.
6. Additional Provisions.
(a) Indemnification. Seller, each Buyer and Shoreline acknowledge and
agree that Escrow Holder is acting as an escrow agent in this transaction and in
no other capacity. Except for the negligence or willful misconduct of Escrow
Holder, Seller, each Buyer and Shoreline each hereby agree to indemnify and to
hold Escrow Holder harmless from any claim, liability, cost, expense or damage,
including reasonable attorneys' fees and costs, incurred by Escrow Holder in
connection with any action taken or not taken by Escrow Holder pursuant to this
Escrow Agreement. Seller, each Buyer and Shoreline, jointly and severally,
shall reimburse Escrow Holder for all of its reasonable expenses covered by the
foregoing indemnification as and when such expenses are incurred.
(b) Facsimile Signatures. Facsimile signatures on this Escrow Agreement
and the documents referred to herein are binding upon any party submitting same.
(c) Notices. Any notice, request, demand, instruction or other
communication given hereunder by any party must be in writing and will be
validly and timely given or made to another party if (i) delivered personally,
(ii) deposited in the United States mail, certified or registered, with postage
prepaid and return receipt requested, (iii) delivered by overnight courier, or
(iv) sent by telecopier, to each of the parties at the addresses and facsimile
numbers contained in Section 1 hereof. If such notice is served personally,
such notice will
<PAGE>
be deemed to be given at the time of such personal delivery. If notice is
served by mail, such notice will be deemed to be given two days after the
deposit of same in any United States mail post office box. If such notice is
served by overnight courier, such notice will be deemed to be given on the next
business day following the acceptance of such notice for delivery by such
overnight courier. If such notice is served by telecopier, such notice will be
deemed to be given upon confirmation of transmission. Any person entitled to
receive notice under this agreement may change the address or telecopier number
to which such notice may be sent, by giving notice thereof pursuant to this
Section 6(c).
(d) Attorneys' Fees. Should any legal action be brought for the
enforcement of this Escrow Agreement or any term hereof, or due to any alleged
dispute, breach, default or misrepresentation in connection with any provisions
herein contained, the prevailing party shall be entitled to its reasonable
attorneys' fees and costs and other costs incurred in any such action or
proceeding and including any such action which results in an arbitration of the
matters herein, in addition to such other relief as may be granted by the courts
or arbitration proceedings.
(e) Applicable Law. The existence, validity, and construction of this
Escrow Agreement and all matters pertaining hereto shall be determined in
accordance with the laws of the State of New York.
(f) Further Assurances. Each of the parties agrees that it will, without
further consideration, execute, acknowledge and deliver such other documents and
take such other actions as may be reasonably requested by the other party in
order to consummate the purposes and subject matter hereof.
(g) Assignment. No party hereto shall have any right whatsoever to
voluntarily assign its rights or delegate its duties hereunder to any third
party, without the prior written consent of the other parties.
(h) Validity. If any provision of this Escrow Agreement may be prohibited
by law or otherwise held invalid, such prohibition or invalidity shall be
effective only to the extent of such prohibition or invalidity and shall not
invalidate or otherwise render ineffective the remaining provisions of this
Escrow Agreement.
(i) Counterparts. This Escrow Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
<PAGE>
(j) Survival. The representations, warranties and covenants contained in
this Escrow Agreement shall survive the Closing, if any.
(k) Timing. If at any time any party hereto has made written demand upon
Escrow Holder for the return of documents and/or funds deposited by such party,
Escrow Holder may withhold and stop all further proceedings in this Escrow upon
notice to the parties, and may then return all documents and/or funds to the
party from which received within two business days of receipt of said notice,
without liability for interest on funds held or for damages. Additionally,
should the Closing not occur by 5 PM Central Time on March 27, 1998, then Escrow
Holder shall, on the next business day, return to each Buyer by wire transfer
any and all funds received by Escrow Holder from such Buyer(s) and return to
Seller by overnight mail service all Preferred Share Certificates received from
Seller.
(l) Reliance Upon Provided Information. It is understood that the Escrow
Agent and the beneficiary's banks in any funds transfer may rely solely upon any
account numbers or similar identifying number provided by any of the parties
hereto to identify (i) the beneficiary, (ii) the beneficiary's bank, or (iii) an
order it executes using any such identifying number, even where its use may
result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary's bank, or an intermediary bank
designated.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
(m) Representation or Warranties of Escrow Holder. Escrow Holder shall
make no representation or warranty with respect to the genuineness or any other
matter concerning any document or instrument deposited herein and shall have no
liability to any other party hereto with respect to such items; provided,
however, that Escrow Holder shall inspect the Preferred Share Certificates to
(i) confirm that required number of Preferred Share Certificates have been
delivered by Seller, in the denominations and face amounts set forth on the
Closing Schedule annexed hereto as Exhibit C, and (ii) that the legend appearing
on the Preferred Share Certificates conforms to the legend language set forth in
Section 2(a)(2) above.
THE COMPANY:
GENZYME TRANSGENICS CORPORATION
By:______________________________
Name:
Title:
DATE:_________________________
BUYERS:
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.
Investment Manager
By: RGC General Partner Corp.
By:_____________________________
Name:
Title:
DATE:_________________________
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
BUYERS:
SHEPHERD INVESTMENTS INTERNATIONAL, LTD.
By:
Name:
Managing Member, Staro Asset Management, LLC
Investment Manager, Shepherd Investments International, Ltd.
DATE:
STARK INTERNATIONAL
By:
Name:
Managing Member, Staro Asset Management, LLC
Investment Manager, Stark International
DATE:
[SIGNATURES CONTINUED ONTO NEXT PAGE]
<PAGE>
SHORELINE:
SHORELINE PACIFIC INSTITUTIONAL FINANCE,
THE INSTITUTIONAL DIVISION
OF FINANCIAL WEST GROUP
By:
Harlan P. Kleiman
President
DATE:
ESCROW HOLDER:
CHASE MANHATTAN BANK AND TRUST COMPANY, N.A.,
a subsidiary of Chase Manhattan Corporation
By:
Chii Ling Lei
Assistant Vice President
DATE:
<PAGE>
EXHIBIT A
Form of Preferred Share Certificate
<PAGE>
EXHIBIT B
[INVESTOR'S LETTERHEAD]
[DATE]
Facsimile No. (415) 693-8850
Ms. Chii Ling Lei
Assistant Vice President
Chase Manhattan Bank and Trust Company, N.A.
101 California Street, Suite 2725
San Francisco, California 94111
Re: Genzyme Transgenics Corporation Financing; Closing Confirmation
Dear Ms. Lei:
Please accept this letter as confirmation from [INVESTOR] that, subject to your
receipt of the items specified in Section 2(a) of the Escrow Agreement dated
[DATE], the conditions to the Closing in Sections 6 and 7 of the Securities
Purchase Agreement have been satisfied in full or waived as of the date hereof.
Accordingly, this shall serve as our Closing Confirmation as required pursuant
to Section 4(c) of said Escrow Agreement.
Please call me if you have any questions or require further information.
Sincerely,
Name:
Title:
cc: Shoreline Pacific
<PAGE>
CLOSING SCHEDULE - EXHIBIT C
<TABLE>
<CAPTION>
INVESTOR/CERTIFICATE DELIVERY ADDRESS: AGGREGATE NO. OF PREFERRED SHARE CERTIFICATE
PREFERRED SHARES DENOMINATIONS:
PURCHASED/AGGREGATE
PURCHASE PRICE:
<S> <C> <C>
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P. 10,000 Preferred Shares 10 Preferred Share certificates each representing
Attn: Gary S. Kaminsky 1,000 Preferred Shares/$1,000,000
3 Bala Plaza East, Suite 200 $10,000,000
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Telephone: (610) 617-5900
Fax: (610) 617-0570
Shepherd Investments International,
Ltd.
c/o Staro Asset Management 5,000 Preferred Shares 5 Preferred Share certificates each representing
Mr. Joe Lucas, CFO 1,000 Preferred Shares/$1,000,000
1500 West Market Street, Suite 200 $5,000,000
Mequon, WI 53092
Tel: (414) 241-1810
Fax: (414) 241-1888
Stark International
c/o Staro Asset Management 5,000 Preferred Shares 5 Preferred Share certificates each representing
Mr. Joe Lucas, CFO 1,000 Preferred Shares/$1,000,000
1500 West Market Street, Suite 200 $5,000,000
Mequon, WI 53092
Tel: (414) 241-1810
Fax: (414) 241-1888
</TABLE>
<PAGE>
Exhibit E
Form of Investor Questionnaire
<PAGE>
INVESTOR QUESTIONNAIRE
and
REPRESENTATION AGREEMENT
Explanatory Note: The purpose of this Investor Questionnaire and Representation
Agreement is to determine whether an investor meets the accreditation standards
established for the offer and sale of Series A Convertible Preferred Stock (the
"Preferred Shares") of Genzyme Transgenics Corporation (the "Company") and to
obtain information necessary for the Company to file their registration
statement with respect to the common shares issuable upon conversion of the
Preferred Shares (the "Conversion Shares"). In order to meet such accreditation
standards, the Company must determine whether an investor is "accredited" as
that term is defined and construed pursuant to Regulation D under the Securities
Act of 1933, as amended (the "Act"). Neither the Preferred Shares nor any shares
of the Company's common stock issuable upon the conversion of the Preferred
Shares (collectively, the "Securities") have been registered under the Act or
qualified under state securities laws in reliance upon exemptions from such
registration and qualification requirements for transactions not involving a
public offering. Information supplied through this Questionnaire will be used to
ensure compliance with the requirements of such exemptions. Special care must be
taken to correctly identify the full legal name of the investing entity.
Name of Investor:
Address:
Telephone & Fax:
The undersigned Investor represents and warrants to the Company that:
(a) The information contained herein is complete and accurate and may be
relied upon by the Company;
and
(b) Investor will notify the Company immediately of any change in any of such
information occurring prior to the Investor's purchase of the Preferred
Shares.
1. FOR ALL INVESTORS: (complete as necessary and initial each item (a)
through (d) below):
Initial ____ (a) The undersigned is the "beneficial owner" (as that term
is defined in Rule 13d-3 under the Securities Exchange Act of
1934) of ____________ shares of the Company's common stock
(exclusive of the shares of the Company's common stock underlying
the Preferred Shares (the "Additional Shares"). [You must include
the number of shares of common stock beneficially owned. If none,
state "none."]
<PAGE>
Initial ____ (b) The undersigned understands that ownership of the
Additional Shares will be reported in the Registration Statement.
The undersigned requests that footnote or other disclosure be made
of the following information concerning the undersigned's
beneficial ownership of the Additional Shares:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Initial ____ (c) The undersigned represents and warrants that it does not
have, and during the past three years has not had, any position,
office or relationship (other than as a security holder) with the
Company or any of its affiliates.
Initial ____ (d) The undersigned (i) has read the section entitled "Plan
of Distribution" attached to this Questionnaire as Appendix 1,
(ii) understands that the section will be included in the
Registration Statement and (iii) represents and warrants that all
sales made by the undersigned pursuant to the Registration
Statement will be made in compliance with the methods of
distribution described in the section.
2. FOR CORPORATIONS, BUSINESS TRUSTS, OR PARTNERSHIPS:
Initial ____ (a) The undersigned certifies that it was not formed for the
specific purpose of acquiring the Securities and that it has total
assets in excess of $5,000,000. or
Initial ____ (b) The undersigned certifies that all of its equity owners
are accredited investors (i.e., each (i) has an individual net
worth, or a net worth combined with his or her spouse, of at least
$1,000,000; or (ii) had individual income of more than $200,000 in
the two calendar years preceding the year in which this
Questionnaire is submitted and reasonably expects to have
individual income in excess of $200,000 during the calendar year
in which this Questionnaire is submitted; or (iii) together with
his or her spouse, had joint income of more than $300,000 in the
two calendar years preceding the year in which this Questionnaire
is submitted and reasonably expects to have joint income in excess
of $300,000 during the calendar year in which this Questionnaire
is submitted). Please list below the names of all equity owners
and the manner in which they qualify (check the applicable
category):
$200,000 (individual)
$1,000,000 or $300,000 (joint)
Names of All Equity Owners Net Worth Minimum Income
- -------------------------- --------- --------------
() ()
______________________________________
() ()
______________________________________
() ()
______________________________________
<PAGE>
______________________________________
() ()
______________________________________
() ()
______________________________________
3. FOR TRUSTS:
Initial ____ (a) The undersigned financial institution certifies that it
is (i) a bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association, or other financial institution as
defined in Section 3(a)(5) of the Act; (ii) acting in its
fiduciary capacity as trustee; and (iii) subscribing for the
purchase of the Preferred Shares on behalf of the subscribing
trust.
or
Initial ____ (b) The undersigned certifies that the subscribing trust has
total assets in excess of $5,000,000, and that the person making
the investment decision on behalf of the trust has such knowledge
and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of an investment in the
Securities.
or
Initial ____ (c) The undersigned certifies that it is a revocable trust
that may be amended or revoked at any time by the grantors
thereof, and all of the grantors are accredited investors as
described in 2(b) above. Please list below the names of all
grantors and the manner in which they qualify (check the
applicable category below):
$200,000 (individual)
$1,000,000 or $300,000 (joint)
Names of All Grantors Net Worth Minimum Income
- --------------------- --------- --------------
() ()
______________________________________
() ()
______________________________________
() ()
______________________________________
4. FOR EMPLOYEE BENEFIT PLANS (INCLUDING KEOGH PLANS):
Initial ____ (a) The undersigned is an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the decision to invest in the Company was
made by a plan fiduciary (as defined in Section 3(21) of ERISA),
which is either a bank, savings and loan association, insurance
company or registered investment advisor. With respect to
undersigned, none of the Company, Shoreline Pacific Institutional
Finance, the Institutional Division of Financial West Group
("Shoreline Pacific"), counsel for the Company nor, to the
knowledge of the undersigned, any of their affiliates, is
currently, has within the prior 12 months or will (other than as
may occur through the Purchase Agreement relating to the Preferred
Shares) exercise, or have exercised, any discretionary authority
or control over plan management or plan assets; render, or have
rendered, investment advice
<PAGE>
with respect to plan assets for a direct or indirect fee or other
compensation; or have, or have had, any discretionary authority or
responsibility in plan administration. Please state the name of
each plan fiduciary with respect to the plan:
__________________________________________________________________
__________________________________________________________________
or
Initial ____ (b) The undersigned is an employee benefit plan within the
meaning of ERISA and has total assets in excess of $5,000,000.
With respect to undersigned, none of the Company, Shoreline
Pacific, counsel for the Company nor, to the knowledge of the
undersigned, any of their affiliates, is currently, has within the
prior 12 months or will (other than as may occur through the
Purchase Agreement relating to the Preferred Shares) exercise, or
have exercised, any discretionary authority or control over plan
management or plan assets; render, or have rendered, investment
advice with respect to plan assets for a direct or indirect fee or
other compensation; or have, or have had, any discretionary
authority or responsibility in plan administration.
or
Initial ____ (c) The undersigned is an employee benefit plan within the
meaning of ERISA, the plan is self-directed, and the investment
decision is being made by a plan participant who is an accredited
investor with a net worth of at least $1,000,000 or with annual
income of at least $200,000 (individual) or $300,000 (joint). With
respect to undersigned, none of the Company, Shoreline Pacific,
counsel for the Company nor, to the knowledge of the undersigned,
any of their affiliates, is currently, has within the prior 12
months or will (other than as may occur through the Purchase
Agreement relating to the Preferred Shares) exercise, or have
exercised, any discretionary authority or control over plan
management or plan assets; render, or have rendered, investment
advice with respect to plan assets for a direct or indirect fee or
other compensation; or have, or have had, any discretionary
authority or responsibility in plan administration. Please list
below the names of all such participants and the manner in which
they qualify (check the applicable category below):
$200,000 (individual)
$1,000,000 or $300,000 (joint)
Names of All Participants Net Worth Minimum Income
- ------------------------- --------- --------------
() ()
______________________________________
() ()
______________________________________
() ()
______________________________________
and (for all employee benefit plans)
Initial ____ (d) The undersigned is an employee benefit plan within the
meaning of ERISA and (i) the investment is not a "prohibited
transaction" within the
<PAGE>
meaning of ERISA, the Internal Revenue Code, or the regulations
promulgated thereunder, respectively, and such purchase is a
"prudent investment" within the meaning of ERISA; and (ii) the
undersigned agrees to indemnify and hold harmless the Company and
its agents, successors and assigns from and against any and all
liability, loss, cost and expense (including attorney's fees)
resulting from any adverse claim or determination by the
Department of Labor or the Internal Revenue Service respecting the
propriety, suitability or legality of the investment.
5. FOR 501(c)(3) ORGANIZATIONS:
Initial ____ (a) The undersigned hereby certifies that it is an
organization described in section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, not formed for the specific
purpose of acquiring the Securities, with total assets in excess
of $5,000,000.
DATED: ___________________, 19__
INVESTOR:
________________________________
(Print Name of Investor)
________________________________
(Signature)
________________________________
(Print Name of Signatory)
________________________________
(Print Title of Signatory)
<PAGE>
APPENDIX 1
PLAN OF DISTRIBUTION
The Conversion Shares may be sold from time to time by the Selling Shareholders
or their pledgees or donees. Such sales may be made in the over-the-counter
market or in negotiated transactions, at prices and on terms then prevailing or
at prices related to the then current market price or at negotiated prices. The
Conversion Shares may be sold by means of (a) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus and/or (b) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. In effecting sales, brokers or dealers engaged
by Selling Shareholders may arrange for other brokers or dealers to participate.
Brokers or dealer will receive commissions or discounts from Selling
Shareholders in amounts to be negotiated immediately prior to the sale which
amounts will not be greater than that normally paid in connection with ordinary
trading transactions.
<PAGE>
Exhibit F
Form of Legal Opinion
<PAGE>
Palmer & Dodge LLP
One Beacon Street, Boston Massachusetts 02108
TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420
March 20, 1998
RGC International Investors, LDC
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, Pennsylvania 19004
Shepherd Investments International, Ltd.
c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, Wisconsin 53092
Stark International
c/o Staro Asset Management, LLC
1500 West Market Street, Suite 200
Mequon, Wisconsin 53092
Shoreline Pacific Institutional Finance
Three Harbor Drive, Suite 211
Sausalito, California 94965
Re: Genzyme Transgenics Corporation
Ladies and Gentlemen:
We have acted as counsel to Genzyme Transgenics Corporation, a
Massachusetts corporation (the "Company"), in connection with (i) the execution
and delivery by the Company of the Securities Purchase Agreement dated as of
March 20, 1998 (the "Securities Purchase Agreement"), among RGC International
Investors, LDC, Shepherd Investments International, Ltd. and Stark International
(collectively, the "Purchasers") and the Company and (ii) the transactions
contemplated to be consummated by the Company under the Securities Purchase
Agreement on the date hereof. We are rendering this opinion pursuant to Section
7(g) of the Securities Purchase Agreement. Capitalized terms used and not
otherwise defined herein shall have the same meanings as are ascribed thereto in
the Securities Purchase Agreement.
As counsel in this capacity, we have examined the following: (i) the
Securities Purchase Agreement, (ii) the Certificate of Designation, (iii) the
Registration Rights Agreement, (iv) the Warrants, (v) the Escrow Agreement,
(vi) the Common Stock Purchase Warrant issued to Shoreline Pacific
Institutional Finance Company (the "Shoreline Warrant"), (vii) Irrevocable
Instructions to Transfer Agent, (viii) a copy of the Restated Articles of
Organization and Bylaws of the Company, including any amendments thereto to
date, (ix) records of certain proceedings and actions of the Company, (x)
certificates of public officials, and (xi) such other documents, records and
items as we have deemed necessary or relevant for purposes of the opinions
hereinafter expressed. Items (i) through (vii) above are collectively
referred to as the "Transaction Documents."
<PAGE>
For purposes of this opinion, we have also made the following assumptions
and have not made any factual, legal or other inquiry or investigation with
respect thereto:
(i) that the Transaction Documents have been duly authorized, executed and
delivered by the Purchasers and each other party thereto (other than the
Company);
(ii) that all persons signing the Transaction Documents on behalf of the
Purchasers and each other party thereto (other than the Company) have the legal
existence, power, authority and right so to sign;
(iii) that each of the agreements made by each of the parties in each
Transaction Document executed by the Purchasers is authorized by all appropriate
corporate or other actions of the Purchasers and each other party thereto (other
than the Company) and is in compliance with all applicable laws and regulations
affecting the Purchasers;
(iv) the genuineness of all signatures on documents not signed in our
presence (other than those of the officers of the Company), and the authenticity
of all documents submitted to us as originals and the conformity with original
documents of all documents submitted to use as copies;
(v) that (w) each Transaction Document is enforceable against each
Purchaser and each other party thereto (other than the Company); (x) all actions
required to be taken and all conditions and requirements required to be
fulfilled under the Transaction Documents in order to allow each Purchaser
(other than conditions and requirements to be fulfilled by the Company) to
enforce its rights thereunder have been duly and effectively taken and
fulfilled; and (y) each Purchaser has complied with all laws that may be
applicable to it with respect to the execution and delivery of the Transaction
Documents, and purchasing the Preferred Stock and Warrants and other actions
taken or that may be taken by it thereunder;
(vi) that the representations and warranties made by each Purchaser within
the Securities Purchase Agreement and the other Transaction Documents are true
and complete in all material respects, and do not fail to state any fact or
information the statement of which is necessary to make them not misleading in
any material respect; and
(vii) that there are no documents or agreements other than the Transaction
Documents between the Purchasers and the Company or others which expand or
otherwise modify the obligations of the Company with respect to the transactions
contemplated by the Transaction Documents and would have an effect on the
opinions set forth below.
For purposes of this opinion, we have relied upon the accuracy of: (i) the
representations and warranties of each of the parties set forth in the
Transaction Documents, (ii) the representations of officers and directors of the
Company, and (iii) the certificates of public officials. In addition to the
assumptions set forth above, this opinion is subject to the following
qualifications and exceptions:
(a) enforcement may be limited by (i) applicable bankruptcy,
insolvency, fraudulent conveyance, preference, reorganization, moratorium
or other similar laws of general application affecting creditors' rights
(including equitable subordination) and (ii) the application of the rules
of equity including those respecting availability of specific
<PAGE>
performance and general principles of public policy (regardless of whether
enforcement is sought in equity or at law);
(b) we express no opinion as to (i) the enforceability of the choice
of New York law by a federal court or by a state court outside the State
of New York, (ii) conflicts of law principles generally; (iii) the
validity, binding effect or enforceability of any provision of the
Transaction Documents purporting to (A) prohibit oral amendment or waiver
of such documents or limiting the effect of a course of dealings between
the parties or (B) indemnify any person for its own negligence, gross
negligence or wilful misconduct or release such person from the
consequences thereof, and (iv) the enforceability of any provision in the
Transaction Documents purporting to relate to delay by any party to the
Transaction Documents to exercise any right, remedy or option under the
provisions thereof not operating as a waiver;
(c) with respect to our opinions as to the good standing and foreign
qualification of the Company we have relied solely on good standing
certificates delivered to us by public officials from the relevant
jurisdictions;
(d) the qualification that any right to indemnification and
contribution contained in the Transaction Documents may be limited by
United States federal or state securities laws or the policies underlying
such laws; and
(e) we express no opinion as to (i) the enforceability of any
monetary fees payable by the Company pursuant to the Certificate of
Designation or Registration Rights Agreement in connection with the
Company's failure to timely perform certain actions specified therein and
(ii) the treatment of the Preferred Stock in any bankruptcy, liquidation,
insolvency or similar proceeding.
We express no opinion as to the laws of any jurisdiction other than (i)
the laws of the State of New York (for the purposes of the enforceability
opinion in paragraph 5 below only), (ii) the laws of the Commonwealth of
Massachusetts and (iii) the federal laws of the United States of America to the
extent specifically referred to herein. We express no opinion as to any
ordinances, administrative decisions or the rules and regulations of counties,
towns, municipalities and special political subdivisions.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts, and has the
requisite corporate power to own and operate its properties and assets and to
carry on its business as presently conducted. Each subsidiary incorporated under
the laws of a state of the United States of the Company (each, a "Domestic
Subsidiary") set forth on Schedule 3(a) to the Securities Purchase Agreement is
a corporation in good standing under the laws of the jurisdiction in which it is
incorporated. The Company and each Domestic Subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in all of the
jurisdictions indicated on Schedule 3(a) to the Securities Purchase Agreement.
2. The offer and sale of the Preferred Stock, the Warrants and the
Shoreline Warrant in conformity with the terms of the Transaction Documents
constitute, and the issuance of the Conversion Shares and the offer and sale of
the Warrant Shares and the shares of Common
<PAGE>
Stock issuable on exercise of the Shoreline Warrant (the "Shoreline Shares") in
conformity with the terms of the Transaction Documents will constitute,
transactions exempt from the registration requirements of Section 5 of the
Securities Act.
3. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required in
connection with (i) the valid execution and delivery of the Transaction
Documents, (ii) the offer, sale or issuance of the Preferred Stock, Warrants,
the Shoreline Warrant, the Conversion Shares, the Warrant Shares and the
Shoreline Shares (iii) the consummation of any other transaction contemplated by
the Transaction Documents, with the exception of: (1) acceptance of the
Certificate of Designation by the Secretary of State of the Commonwealth of
Massachusetts; (2) the filing of a Form D with the SEC, (3) the filing of a Form
10b-17 with Nasdaq, (4) the filing one or more Registration Statements pursuant
to the Registration Rights Agreement, and (5) to the extent that the Company is
obligated to pay certain amounts to the Purchasers in excess of $2,000,000, such
payments will cause a default under loan agreements with BankBoston N.A.
4. The Company has all requisite corporate power and authority to execute
and deliver the Transaction Documents and to carry out all its obligations
thereunder, including the sale and issuance of the Preferred Stock, Warrants,
the Shoreline Warrant, the Conversion Shares, the Warrant Shares and the
Shoreline Shares in accordance with the terms of the Transaction Documents.
5. Each of the Transaction Documents has been duly and validly authorized
by all necessary corporate action, and has been executed and delivered by, and
constitutes a valid and binding agreement of, the Company and is enforceable
against the Company in accordance with its terms.
6. The authorized capital stock of the Company is as stated in Section
3(c) of the Securities Purchase Agreement. To our knowledge, there have not been
any shares of the capital stock of the Company issued which are not validly
issued, fully paid and non-assessable. All issued and outstanding shares of
common stock are free of any preemptive or similar rights contained in the
Articles of Organization or Bylaws of the Company or, to our knowledge, in any
agreement by which the Company is bound.
7. Upon the closing under the Securities Purchase Agreement, the Preferred
Stock, the Warrants and the Shoreline Warrant will be validly issued, fully
paid, nonassessable, and free of any preemptive or similar rights contained in
the Articles of Organization or Bylaws of the Company or, to our knowledge, of
any agreement by which the Company is bound. The Conversion Shares, the Warrant
Shares and the Shoreline Shares have been duly and validly reserved, and when
issued in accordance with the terms of the Certificate of Designation, the
Warrants and the Shoreline Warrant, respectively, will be validly issued, fully
paid, nonassessable, and free of any preemptive or similar rights contained in
the Articles of Organization or Bylaws of the Company or, to our knowledge, of
any agreement by which the Company is bound.
8. The execution and delivery of, and compliance with, the Transaction
Documents, including the consummation of the issuance of the Preferred Stock,
Warrants, the Shoreline Warrant, the Conversion Shares, the Warrant Shares and
the Shoreline Shares, as contemplated by such documents, do not and will not
conflict with or result in a breach of default by the Company of any of the
terms or provisions of: (i) the Articles of Organization or Bylaws of the
<PAGE>
Company, (ii) to our knowledge, any existing applicable decree, judgment or
order of any court, federal or state regulatory body, administrative agency, or
other governmental body having jurisdiction over the Company or any of its
property or assets, or (iii) to our knowledge, conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company is a party (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect) and except
that the payment of certain amounts to the Purchasers in excess of $2,000,000
will cause a default under loan agreements with BankBoston N.A.
9. To our knowledge except as disclosed in the Schedules to the Securities
Purchase Agreement, but without investigation of court dockets, there is no
litigation pending or threatened which could or which would impair the ability
of the Company to issue and deliver the Preferred Stock, the Warrants, the
Shoreline Warrant, the Conversion Shares, the Warrant Shares, or the Shoreline
Shares or to comply with the provisions of the Transaction Documents or
otherwise have a Material Adverse Effect.
10. The Company's Common Stock is quoted on the Nasdaq National Market. To
our knowledge, no suspension of trading in the Common Stock on the Nasdaq
National Market is in effect, nor is any such suspension threatened on the date
hereof.
This opinion is furnished to the Purchasers and Shoreline solely for their
benefit in connection with the sale and issuance of the Preferred Stock,
Warrants and Conversion Shares as contemplated by the Transaction Documents and
may not be relied upon by any other person (other than the Company) or for any
other purpose without our prior written consent. This opinion is limited to
matters expressly set forth herein and no opinion may be inferred or implied
beyond the matters expressly stated in this opinion on the date hereof. We shall
have no obligation to update any of the matters set forth in this opinion.
Very truly yours,
PALMER & DODGE LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Genzyme Transgenics Corporation on Forms S-3 (File Nos. 33-82982, 33-97024, and
333-25769) and Forms S-8 (File Nos. 33-69516, 33-69518, 33-69520, 33-84706,
33-88030, 33-92970, 33- 92998, 333-04535, 333-29059, 333-29975, 333-29977, and
333-34119) of our report dated February 25, 1998, except as to the information
presented in Note 13 for which the date is March 20, 1998, on our audits of the
consolidated financial statements of Genzyme Transgenics Corporation as of
December 28, 1997 and December 29, 1996 and for each of the three fiscal years
in the period ended December 28, 1997, which report is included in this 1997
Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000904973
<NAME> GENZYME TRANSGENICS CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> DEC-28-1997
<CASH> 6,383
<SECURITIES> 0
<RECEIVABLES> 10,907
<ALLOWANCES> (390)
<INVENTORY> 678
<CURRENT-ASSETS> 24,400
<PP&E> 32,906
<DEPRECIATION> (6,609)
<TOTAL-ASSETS> 70,980
<CURRENT-LIABILITIES> 32,823
<BONDS> 9,862
0
0
<COMMON> 174
<OTHER-SE> 27,204
<TOTAL-LIABILITY-AND-EQUITY> 70,980
<SALES> 62,938
<TOTAL-REVENUES> 62,938
<CGS> 54,829
<TOTAL-COSTS> 71,290
<OTHER-EXPENSES> (186)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,129
<INCOME-PRETAX> (9,295)
<INCOME-TAX> 48
<INCOME-CONTINUING> (9,343)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,343)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)<F1>
<FN><F1> PER SHARE AMOUNTS HAVE BEEN RESTATED TO REFLECT ADOPTION OF SFAS 128.
HOWEVER, DUE TO THE COMPANY'S NET LOSS FROM CONTINUING OPERATIONS AND NET LOSS
FOR THE 3 FISCAL YEARS TO THE PERIOD ENDED DEC. 28, 1997, EARNINGS PER SHARE
HAVE NOT CHANGED AND, THEREFORE, RESTATED FINANCIAL DATA SCHEDULES WILL NOT BE
SUBMITTED.
</FN>
</TABLE>
<PAGE>
Exhibit 99
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
March 1998
From time to time, Genzyme Transgenics Corporation ("GTC" or the
"Company"), through its management, may make forward-looking public
statements, such as statements concerning then expected future revenues or
earnings or concerning projected plans, performance, product development and
commercialization as well as other estimates relating to future operations.
Forward-looking statements may be in reports filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in press releases or
in oral statements made with the approval of an authorized executive officer.
The words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," or similar expressions
are intended to identify "forward-looking statements" within the meaning of
Section 21E of the Exchange Act and Section 27A of the Securities Act of
1933, as amended, as enacted by the Private Securities Litigation Reform Act
of 1995.
The Company wishes to caution readers not to place undue reliance on
these forward-looking statements which speak only as of the date on which
they are made. In addition, the Company wishes to advise readers that the
factors listed below, as well as other factors not currently identified by
management, could affect the Company's financial or other performance and
could cause the Company's actual results for future periods to differ
materially from any opinions on statements expressed with respect to future
periods or events in any current statement.
The Company will not undertake and specifically declines any obligation
to publicly release any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated
events which may cause management to re-evaluate such forward-looking
statements.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby filing
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially form those projected in
forward-looking statements of the Company made by or on behalf of the Company.
History of Operating Losses; Need for Additional Funds. GTC has had
operating losses since its inception and expects such losses to continue for
the next several years. For the period from its inception in 1993 to
December 28, 1997, the Company incurred cumulative losses of approximately
$27.3 million. GTC's losses have resulted principally from costs incurred in
connection with research activities and from expenses in excess of revenues
from the Company's contract research organization ("CRO") services. GTC's
sources of revenues to date have consisted primarily of research and
development contracts and CRO services. Such revenues to date have not been
sufficient to generate profits. The
<PAGE>
Company expects to continue to incur significant operating losses until such
time as product sales and CRO service revenues are sufficient to fund its
operations. No assurance can be given that the Company will become
profitable.
The Company currently believes that existing cash resources and
available financing will be sufficient to meet its operating cash flow needs
and capital requirements at least for the next year. The development of
transgenic products by the Company will require the commitment of substantial
resources to conduct costly and time-consuming research, preclinical testing
and clinical trials necessary to bring such products to market. If GTC's
businesses do not achieve profitable operations at or prior to the time such
existing resources are exhausted, the Company will need to obtain additional
financing, through public or private financings, including debt or equity
financings, or through collaborative or other arrangements with corporate
partners, as appropriate. Adequate funds for the Company's operations from
such sources may not be available when needed or on terms acceptable to the
Company. If additional financing cannot be obtained when needed or on
acceptable terms, GTC could be forced to delay, scale back or eliminate
certain of its research and development programs or to license to other
parties rights to commercialize products or technologies that the Company
would otherwise seek to develop internally as well as delaying or forgoing
timely expansion, improvement or investment in the Company's contract
research services.
The foregoing forward-looking statements regarding the Company's
expectations of the need for additional funds are subject to risks and
uncertainties. The Company's cash requirements may vary materially from
those now planned, depending upon the results of existing businesses, the
terms of future collaborations, results of research and development,
competitive and technological advances, regulatory requirements and other
factors.
Early Stage of Transgenic Technology. Development of products based on
transgenic technology is subject to a number of significant technological
risks and the time period required for any such development is both lengthy
and uncertain. Neither GTC nor, to GTC's knowledge, any other entity has
completed human clinical trials of any protein produced in the milk of
transgenic animals, and there can be no assurance that GTC will be able to do
so successfully. There can be no assurance that any transgenically produced
protein will be safe or effective. All of the proteins that GTC is
developing will require significant additional research, development and
testing and will require the expenditure of substantial additional capital
prior to their commercialization. In addition, there can be no assurance that
research and discoveries by others will not render GTC's technology obsolete
or noncompetitive.
No Assurance of Commercial Success of Transgenic Products. The
successful commercialization of any transgenic protein product by the Company
will depend on many factors, including the successful completion of clinical
testing, the response of medical professionals to the data from clinical
trials, the Company's ability to create or access a sales force able to
market such transgenic products, the Company's ability to supply a sufficient
amount of product to meet market demand, the degree to which third-party
reimbursement for use of such product is available and the number and
relative efficacy of competitive products that may subsequently enter the
market, as well as, with respect to transgenic products designed to replace
or supplement products currently being marketed, the relative
cost-effectiveness of the transgenic products. There can be no assurance
that the Company or its collaborative partners
2
<PAGE>
will be successful in efforts to develop and implement a commercialization
strategy for any such products.
GTC does not currently have a sales force to market any transgenic
products it may develop. The Company anticipates that, for products it
develops independently, it will enter into marketing arrangements with larger
pharmaceutical or biotechnology companies which have established sales forces
that are able to market such products. There can be no assurance that any
marketing or distribution arrangements will be available on acceptable terms
or that, in the alternative, GTC will be able to establish its own sales
force successfully. Unforeseen delays in this process may have an adverse
effect on the commercialization of any of the Company's products.
Third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new
therapeutic products. The successful commercialization of any products
developed by the Company may depend on obtaining coverage and reimbursement
for the use of these products from third-party payors.
In addition, the successful commercialization of the Company's products
will require that medical professionals become convinced of the efficacy of
the products in treating a particular condition and incorporate such products
as standard practice in relevant therapeutic protocols. There can be no
assurance that any transgenic product developed by GTC will be accepted by
the medical profession.
Government Regulation. Transgenic products will require approval by the
U.S. Food and Drug Administration ("FDA") prior to marketing in the United
States. In addition, the manufacturing and marketing of such products, and
certain areas of research related to them, are subject to regulations by
other U.S. governmental authorities including the United States Department of
Agriculture (the "USDA") and the Environmental Protection Agency (the "EPA").
Comparable authorities are involved in other countries.
In cases where the Company expects to obtain revenue from the sale of
transgenic products, whether through direct sales, marketing relationships
with others or royalty arrangements, the Company will incur the risk of such
product failing to satisfy applicable regulatory requirements prior to
marketing. The approval process involves two parts, governing first the
approval of an individual pharmaceutical product as safe and effective and
second the approval of the manufacturing process as complying with applicable
FDA current good manufacturing practices regulations ("GMPs"). In 1995, the
FDA and comparable European regulatory authorities issued guidelines
regarding the production of therapeutic proteins in transgenic animals.
While the FDA's guidelines, known as Points to Consider guidelines ("Points
to Consider"), cover issues specific to transgenic production, the basic
regulatory framework for FDA approval will also apply to transgenic
therapeutic products submitted for approval. To GTC's knowledge, no protein
produced in the milk of a transgenic animal has been submitted for regulatory
approval in the United States or elsewhere.
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of therapeutic pharmaceutical products
through lengthy and detailed laboratory and clinical testing procedures,
sampling activities and other costly and time-consuming
3
<PAGE>
procedures. Satisfaction of these requirements typically takes several years
or more and can vary substantially based upon the type, complexity and
novelty of the product. With respect to therapeutic products, the standard
FDA approval process includes preclinical laboratory and animal testing,
submission of an IND to the FDA, appropriate human clinical trials to
establish safety and effectiveness and submission of either a Biologics
License Application or a New Drug Application ("NDA") prior to market
introduction. With respect to obtaining approval for the production
facilities to be used in producing a therapeutic product, the Company expects
to be subject to both the requirements for establishment license applications
and the Points to Consider issued with respect to transgenic recombinant
products.
The effect of government regulation may be to delay marketing of the
Company's products for a considerable or indefinite period of time, impose
costly procedural requirements upon the Company's activities and may furnish
a competitive advantage to larger companies or companies more experienced in
regulatory affairs. There can be no assurance that the FDA or other
regulatory approvals for any products developed by the Company will be
granted on a timely basis or at all. Any delay in obtaining or any failure
to obtain such approvals could adversely affect the Company's ability to
generate revenue. Even if initial regulatory approvals for the Company's
product candidates are obtained, the Company, its products and its transgenic
manufacturing processes would be subject to continual review and periodic
inspection. There can be no assurance that the FDA will permit the marketing
of any transgenic product for any particular indication, if at all.
The Company's operations are also subject to federal, state and local
laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal
of certain materials and waste, including but not limited to animal waste and
waste water.
Dependence of Testing Services on Current Government Regulatory
Requirements. The market for GTC's preclinical testing services is dependent
upon the maintenance of strict standards for the conduct of laboratory and
clinical tests and related procedures which are promulgated by governmental
entities responsible for public health and welfare, including the FDA, and by
regulatory authorities in foreign countries. The process of obtaining these
approvals varies according to the nature and use of the product and routinely
involves lengthy and detailed laboratory and clinical testing and other
costly and time-consuming procedures. The Company offers the customers of
its preclinical testing and development services the necessary expertise to
comply with these complex regulations. If the regulatory structure were to
change in a way which reduced the need for such services, the Company could
be materially adversely affected.
Dependence on Genzyme. GTC has entered into a number of contractual
agreements with Genzyme, including a research and development agreement
pursuant to which Genzyme provides purification services to GTC for
transgenically produced proteins (the "Genzyme R&D Agreement"), a lease of
GTC's facility in Framingham, Massachusetts, and an agreement to provide
funding for the development of AT-III (the "Genzyme Collaboration Agreement").
Under the Genzyme R&D Agreement, Genzyme is obligated to use
commercially reasonable efforts to perform purification services for GTC.
GTC does not currently have personnel
4
<PAGE>
capable of undertaking such purification services. Until such time, if ever,
as GTC develops its own capabilities in this regard, there can be no
assurance that Genzyme will be able to provide such services when and as
required by GTC or that GTC would be able to obtain comparable services
elsewhere.
Under the Genzyme Collaboration Agreement, Genzyme has agreed to provide
funding for transgenic AT-III development in exchange for co-marketing rights
to AT-III in all territories other than Asia. The term of the agreement is
perpetual, except that either party may terminate the agreement for certain
material breaches, failure to make payments, and either upon the grant, or
certain absences of a grant, by the FDA of a license to market an AT-III
product. There can be no assurance, should the agreement terminate before
completion of the development of an AT-III product, that Genzyme and GTC
could reach an agreement to extend Genzyme's development funding, that the
Company would be able to fund such program on its own or that the Company
would be able to obtain such funding from a third party on acceptable terms,
if at all.
Potential Conflicts of Interest with Genzyme. Genzyme is the largest
single stockholder of GTC. Assuming exercise of a currently exercisable
warrant for 145,000 shares of Common Stock, Genzyme beneficially owns
approximately 44% of the outstanding Common Stock of GTC.
Genzyme's ownership interest gives it significant influence over any
election of directors and any other action requiring approval by the holders
of a majority of the Common Stock. Three members of GTC's Board of Directors
also serve as directors and/or executive officers of Genzyme. The interests
of Genzyme on the one hand and GTC on the other hand may, from time to time,
differ.
Dependence on Collaborators. The success of GTC's transgenic protein
production business will depend, in large part, on GTC's ability to enter
into arrangements with biotechnology and pharmaceutical companies for the
transgenic production of proteins to which such companies have proprietary
rights or to fund the development of transgenic proteins which are in the
public domain or the subject of expiring patents. To date, the scope of
these agreements has generally been limited to demonstrating the feasibility
of transgenic production of targeted proteins in particular animal species.
There can be no assurance that these feasibility studies will be successful
or lead to agreements for the commercial production of any proteins.
Depending upon the terms of any future collaborations, the Company's role in
such collaborations may be limited to the production aspects of the proteins
under development. As a result, GTC may also be dependent on collaborators
for other aspects of the development, preclinical and clinical testing,
regulatory approval and commercialization of any transgenic product.
Uncertainty Regarding Patents and Proprietary Technology. GTC has
relied upon trade secrets, proprietary know-how and continuing technological
innovation to develop and maintain its competitive position and to protect
its proprietary technology. In part, these legal rights are protected by
contracts with employees, consultants and business partners. There can be no
assurance that trade secrets possessed by GTC will be maintained, that
secrecy obligations will be honored or that others will not independently
develop similar or superior technology. There is no assurance that patent
applications filed by GTC will result in patents being issued or that
5
<PAGE>
any patents issued to or licensed by GTC will be held valid. The Company may
also be subject to claims that result in the revocation of patent rights
previously licensed to GTC as a result of which the Company may be required
to obtain licenses from others to continue to develop, test or commercialize
its products. There can be no assurance that GTC will be able to obtain such
licenses on acceptable terms, if at all. In addition, there may be pending
or issued patents held by parties not affiliated with GTC that relate to the
technology utilized by GTC. As a result, GTC may need to acquire licenses
to, or contest the validity of, such patents or any other similar patents
which may be issued. GTC could incur substantial costs in defending itself
against challenges to patent or infringement claims made by third parties or
in enforcing any patent rights of its own. The loss or exposure of trade
secrets possessed by GTC could also adversely affect its business.
Risk of Service or Product Liability. GTC's business exposes it to
potential product and professional liability risks which are inherent in the
testing, production, marketing and sale of human therapeutic products. While
GTC has obtained product and professional liability insurance under an
insurance policy arrangement with Genzyme and Genzyme's affiliates, there can
be no assurance that such insurance will be sufficient to cover any claim.
Uninsured product or service liability could have a material adverse effect
on the financial results of GTC. In addition, there can be no assurance that
any insurance will provide GTC with adequate protection against potential
liabilities. Potential liability also may arise from the handling by GTC of
clinical samples containing human blood and tissues, which may contain human
pathogens; liability may also arise from handling animal blood and tissue
which may contain zoonotic pathogens. Although such products are used only
in the laboratory, inadvertent human contact may occur.
Retention of Key Personnel. Although GTC believes that the size and
qualifications of its current staff are adequate for its current business,
the Company must continue to attract and retain qualified scientific,
technical, marketing and management personnel as its business expands. There
is intense competition for qualified personnel in the areas of the Company's
activities, and there can be no assurance that GTC will be able to continue
to attract and retain the qualified personnel necessary for the development
of its business. Loss of the services of, or failure to recruit, key
scientific and technical personnel could have a material adverse effect on
GTC's business.
Public Concerns. Certain of GTC's activities involve animal testing and
genetic engineering in animals. Such activities have been the subject of
controversy and adverse publicity. Animal rights groups and various other
organizations and individuals have attempted to stop animal testing and
genetic engineering activities by pressing for legislation and regulation in
these areas. To the extent the activities of such groups are successful,
GTC's business may be adversely affected.
6
