<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OSIRIS THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8071 34-1728301
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer Identification
of incorporation or Classification Code Number) Number)
organization)
</TABLE>
------------------------
2001 ALICEANNA STREET
BALTIMORE, MARYLAND 21231
(410) 522-5005
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
JAMES S. BURNS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OSIRIS THERAPEUTICS, INC.
2001 ALICEANNA STREET
BALTIMORE, MARYLAND 21231
(410) 522-5005
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------------
COPIES TO:
ALAN L. DYE, ESQ. GORDON M. BAVA, ESQ.
GEORGE P. BARSNESS, ESQ. ALLEN Z. SUSSMAN, ESQ.
HOGAN & HARTSON L.L.P. MANATT, PHELPS & PHILLIPS, LLP
555 THIRTEENTH STREET, N.W. 11355 WEST OLYMPIC BOULEVARD
WASHINGTON, DC 20004-1109 LOS ANGELES, CALIFORNIA 90064
(202) 637-5600 (310) 312-4000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share.......... 4,025,000 $10.50 $42,262,500 $12,807
</TABLE>
(1) Includes 525,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 16, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
3,500,000 SHARES
[LOGO]
COMMON STOCK
----------------
All of the 3,500,000 shares of Common Stock offered hereby are being sold by
Osiris Therapeutics, Inc. ("Osiris" or the "Company").
Prior to this offering (the "Offering"), there has not been a public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $8.50 and $10.50 per share. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price. Application has been made to have the Common
Stock quoted on The Nasdaq Stock Market's National Market under the symbol
"OSRS."
Of the 3,500,000 shares offered hereby, 350,000 will be offered to a
stockholder of the Company pursuant to a contractual pre-emptive right. See
"Underwriting."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share $ $ $
Total (3) $ $ $
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $650,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
525,000 additional shares of Common Stock solely to cover over-allotments,
if any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively.
------------------------------
The shares of Common Stock are being offered by the Underwriters named
herein, subject to prior sale, when, as and if accepted by them and subject to
certain conditions. It is expected that certificates for the shares of Common
Stock offered hereby will be available for delivery on or about ,
1997, at the office of Smith Barney Inc., 333 West 34th Street, New York, New
York 10001.
------------------------
SMITH BARNEY INC. SBC WARBURG INC.
A SUBSIDIARY OF SWISS BANK CORPORATION
, 1997
<PAGE>
[ARTWORK OR SCHEMATIC DEPICTING THE MESENGENIC PROCESS]
SCHEMATIC DIAGRAM DEPICTING THE EVENTS WHICH THE COMPANY BELIEVES ARE INVOLVED
IN THE REGENERATION OF TISSUE. MESENCHYMAL STEM CELLS ("MSCS") FIRST UNDERGO
MULTIPLE DIVISIONS (PROLIFERATION), AFTER WHICH THEY PROCEED DOWN A PARTICULAR
TISSUE DEVELOPMENT PATHWAY (COMMITMENT), LEADING ULTIMATELY TO THE FORMATION OF
SPECIALIZED CELLS (DIFFERENTIATION) AND THE FABRICATION OF UNIQUE EXTRACELLULAR
MATRIX COMPONENTS (MATURATION) CHARACTERISTIC OF HEALTHY, MATURE CONNECTIVE
TISSUE.
[ARTWORK OR SCHEMATIC DEPICTING PROPOSED REGENERATIVE TISSUE THERAPY]
SCHEMATIC DIAGRAM DEPICTING THE PROCESS WHICH THE COMPANY BELIEVES WOULD BE
INVOLVED IN CLINICAL REGENERATIVE TISSUE THERAPY. A SMALL SAMPLE OF BONE MARROW
WOULD BE HARVESTED FROM THE PATIENT, AFTER WHICH MSCS WOULD BE ISOLATED,
PURIFIED AND CULTURE-EXPANDED (MULTIPLIED) UNDER CONTROLLED MANUFACTURING
CONDITIONS AND THEN EITHER REINFUSED DIRECTLY INTO THE PATIENT AS SUPPORTIVE
TREATMENT FOLLOWING CANCER CHEMOTHERAPY OR FORMULATED AS AN IMPLANT TO
REGENERATE CONNECTIVE TISSUE.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF
REGULATION M UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED HEREIN, THE
INFORMATION IN THIS PROSPECTUS: (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION; (II) GIVES EFFECT TO THE ISSUANCE AND SALE BY THE COMPANY
TO NOVARTIS PHARMA AG IN JUNE 1997 OF 1,176,500 SHARES OF COMMON STOCK; (III)
ASSUMES APPROVAL BY THE COMPANY'S STOCKHOLDERS OF CERTAIN AMENDMENTS TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, AND OTHER MATTERS
TO BE CONSIDERED AT THE 1997 ANNUAL MEETING OF STOCKHOLDERS ON AUGUST 8, 1997;
AND (IV) GIVES EFFECT TO THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED
STOCK INTO 9,367,003 SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING.
SEE "GLOSSARY OF SCIENTIFIC TERMS" FOR DEFINITIONS OF CERTAIN TERMS USED HEREIN.
THE COMPANY
Osiris Therapeutics, Inc. ("Osiris" or the "Company") is engaged in the
research and development of therapeutic products for the regeneration of human
connective tissues (E.G., bone marrow stroma, bone, cartilage, muscle, tendon,
ligament and fat) through the use of mesenchymal stem cells ("MSCs") which the
Company believes to be the progenitor cells responsible for the formation of
such tissues. The Company believes that its proprietary MSC technology will
provide a broad platform for developing and commercializing cell therapy
products and biopharmaceuticals for the regeneration of connective tissues
damaged through injury, aging or degenerative disease.
Connective tissue disorders, including orthopaedic injuries and degenerative
diseases, rank first among all disorders in terms of frequency of visits to
physicians and second in terms of frequency of hospitalizations. In the field of
cancer treatment, damage to bone marrow typically occurs following high-dose
chemotherapy or radiation, which often destroys the patient's hematopoietic
(I.E., blood-forming) system and bone marrow stroma. The Company believes that
its tissue regeneration technology, if developed successfully, could improve the
treatment of connective tissue disorders by restoring the natural functioning of
the tissue, improving the quality of the repair and providing a better long-term
and cost-effective result compared to current therapies.
In the early embryo, the middle layer of cells (known as the mesoderm) and
certain portions of the outer cell layers give rise to groups of cells that
differentiate into bone marrow stroma, bone, cartilage, muscle, tendon,
ligament, fat and other connective tissues. Based upon laboratory and
preclinical research to date, the Company believes that the process of tissue
regeneration follows a sequence of events similar to that of embryonic tissue
formation and that throughout life, individuals maintain a reserve of
mesenchymal progenitor cells that are capable of differentiating into new
connective tissues. The Company refers to the progenitor cells that initiate
tissue formation as mesenchymal stem cells and the formation of these tissues as
"mesengenesis."
The Company believes that the field of tissue regeneration is moving toward
a new class of treatments involving cell therapy. The Company intends to
commercialize products that result in site-directed tissue regeneration based on
the use of MSCs. Such products would originate from a small sample of bone
marrow cells collected by needle aspiration from a patient using a local
anesthetic. The bone marrow aspirate would be transferred to the Company's
processing facilities and the MSCs would be isolated and culture-expanded. The
culture-expanded cells would then be returned to the patient for infusion or
implantation. The MSCs would be combined in some instances with a biodegradable
matrix or other delivery device capable of stabilizing the cells at the implant
site.
Osiris is focusing its initial product development efforts on the
regeneration of bone marrow stroma following high-dose cancer chemotherapy and
on the regeneration of bone in long bone and spinal defects. In addition, the
Company is collaborating with Novartis Pharma AG, one of the world's largest
pharmaceutical companies, and its U.S. affiliate, Novartis Pharmaceuticals
Corporation (collectively, "Novartis"), for the research and development of MSC
products for treating degenerative diseases such as osteoporosis
3
<PAGE>
and osteoarthritis, for regenerating damaged cartilage and for certain potential
gene therapy applications using MSCs as target delivery cells.
The Company intends to selectively pursue strategic research, development
and marketing collaborations with pharmaceutical and medical device companies in
order to accelerate the introduction of MSC products. In June 1997, the Company
entered into a multi-year collaboration with Novartis under which Novartis
Pharma AG purchased 1,176,500 shares of the Company's Common Stock for
$10,000,250, and Novartis Pharmaceuticals Corporation made an up-front payment
to the Company of $3,000,000. In connection with the collaboration as currently
contemplated, the Company also may receive from Novartis Pharmaceuticals
Corporation up to $143,000,000, consisting of up to $50,000,000 of research and
development support and up to $93,000,000 of milestone payments. There can be no
assurance, however, that the Company will become entitled to the full amount of
the research and development funding or that any or all of the products
currently contemplated for development will achieve the specified milestones
entitling the Company to any or all of the milestone payments. In consideration
for its funding, Novartis has received the exclusive, worldwide license to use
and sell certain MSC products to be developed during the collaboration. In
addition, Novartis has agreed to pay the Company royalties based upon the net
sales, if any, of such products. The Company has retained the right to
manufacture for sale in North America any MSC products in the osteoporosis,
osteoarthritis and cartilage injury fields. See "Business--Collaborative
Research and Licensing Agreements--Novartis Agreement."
The Company and its academic collaborators have isolated, purified and
culture-expanded MSCs from both humans and animals. Culture-expanded MSCs have
been transplanted to the site of an injured animal tissue to regenerate that
tissue in a number of preclinical models, thereby establishing the scientific
proof-of-principle and preclinical safety and efficacy of such technique. In
addition, an initial human clinical safety study of cancer patients in remission
using autologous (I.E., derived from a patient's own cells) MSCs has been
completed successfully. A second human clinical safety study in advanced breast
cancer patients, under an approved Investigational New Drug ("IND") application,
is currently underway at the University Hospitals of Cleveland, Ireland Cancer
Center.
The Company's intellectual property portfolio includes five issued patents
in the United States relating to: (i) the composition of human MSCs; (ii) a
method for isolating, purifying and expanding human MSCs IN VITRO; (iii) the use
of human MSCs for treating connective tissue disorders; (iv) genetically
engineered human MSCs for potential use in gene therapy applications; and (v)
antibodies to characterize and isolate bone-forming cells from human MSCs. The
Company also owns or has licenses to over thirty-five United States and foreign
patent applications directed to MSC technology. The Company intends to continue
to use its scientific expertise to pursue additional patent filings for new
compositions, methods and uses of human mesenchymal stem cells and related
know-how to enhance the Company's leadership in MSC technology.
The Company was incorporated in Delaware on December 23, 1992. The Company's
principal executive offices are located at 2001 Aliceanna Street, Baltimore,
Maryland, and its telephone number is (410) 522-5005.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered......................... 3,500,000 shares
Common Stock to be outstanding after this
Offering................................... 18,375,744 shares (1)
Use of proceeds.............................. Research and development, preclinical and
human clinical trials, capital expenditures,
working capital and general corporate
purposes.
Proposed Nasdaq National Market symbol....... OSRS
</TABLE>
- ------------------------
(1) Based on the number of outstanding shares of Common Stock as of June 30,
1997, after giving effect to the conversion of all outstanding shares of
Preferred Stock into 9,367,003 shares of Common Stock upon the completion of
this Offering. Does not include: (i) 1,553,756 shares of Common Stock
reserved for issuance under the Company's 1994 Incentive Stock Plan (the
"Stock Plan"), pursuant to which options to purchase a total of 615,710
shares are outstanding; (ii) 1,121,225 shares of Common Stock issuable upon
exercise of outstanding warrants to purchase Common Stock; and (iii) up to
525,000 shares of Common Stock that may be sold by the Company pursuant to
the Underwriters' over-allotment option.
5
<PAGE>
SUMMARY FINANCIAL AND PRO FORMA DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FROM FROM
INCEPTION TO YEAR ENDED DECEMBER 31, INCEPTION TO MARCH 31,
DECEMBER 31, ------------------------------- DECEMBER 31, --------------------
1993 1994 1995 1996 1996 1996 1997
------------- --------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Collaborative research and grant
income......................... $ -- $ 33 $ -- $ 1,067 $ 1,100 $ -- $ 500
Interest income.................. 30 230 169 522 951 93 115
------------- --------- --------- --------- ------------- --------- ---------
Total revenues............... 30 263 169 1,589 2,051 93 615
------------- --------- --------- --------- ------------- --------- ---------
Expenses:
Research and development......... 338 2,341 4,533 7,364 14,576 1,111 2,096
General and administrative....... 822 1,266 1,477 1,861 5,426 313 473
Interest expense................. 8 10 97 576 691 129 165
------------- --------- --------- --------- ------------- --------- ---------
Total expenses............... 1,168 3,617 6,107 9,801 20,693 1,553 2,734
------------- --------- --------- --------- ------------- --------- ---------
Net loss........................... $ (1,138) $ (3,354) $ (5,938) $ (8,212) $ (18,642) $ (1,460) $ (2,119)
------------- --------- --------- --------- ------------- --------- ---------
------------- --------- --------- --------- ------------- --------- ---------
Pro Forma Data (1):
Net loss per common share and
common share equivalents....... $ (0.63) $ (0.16)
--------- ---------
--------- ---------
Weighted average common shares
and common share equivalents
outstanding.................... 13,053 13,616
--------- ---------
--------- ---------
<CAPTION>
FROM
INCEPTION
TO
MARCH 31,
1997
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Collaborative research and grant
income......................... $ 1,600
Interest income.................. 1,066
-----------
Total revenues............... 2,666
-----------
Expenses:
Research and development......... 16,672
General and administrative....... 5,899
Interest expense................. 856
-----------
Total expenses............... 23,427
-----------
Net loss........................... $ (20,761)
-----------
-----------
Pro Forma Data (1):
Net loss per common share and
common share equivalents.......
Weighted average common shares
and common share equivalents
outstanding....................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
-------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
PRO FORMA
1995 1996 ACTUAL PRO FORMA (2) AS ADJUSTED (3)
--------- --------- --------- ------------- ---------------
BALANCE SHEET DATA:
Cash, cash equivalents and securities
available-for-sale............................... $ 6,926 $ 9,612 $ 7,092 $ 17,092 $ 47,365
Working capital.................................... 5,927 7,973 5,569 15,570 45,842
Total assets....................................... 9,425 18,778 16,395 26,395 56,668
Long-term debt and capital lease obligations, less
current portion.................................. 1,277 6,660 6,377 6,377 6,377
Deficit accumulated during the development stage... (10,430) (18,642) (20,761) (20,761) (20,761)
Total stockholders' equity......................... 6,995 9,887 7,768 17,768 48,041
</TABLE>
- ------------------------
(1) See Note 14 of Notes to Consolidated Financial Statements.
(2) Gives effect to: (i) the issuance and sale by the Company of 1,176,500
shares of Common Stock to Novartis in June 1997 for an aggregate purchase
price of $10,000,250; and (ii) the conversion of all outstanding shares of
Preferred Stock into 9,367,003 shares of Common Stock upon the completion of
this Offering. See Note 14 of Notes to Consolidated Financial Statements.
(3) Gives effect to the sale of 3,500,000 shares of Common Stock in the Offering
assuming an initial public offering price of $9.50 per share (the mid-point
of the range of the estimated initial public offering prices per share) and
the application of the net proceeds as described in "Use of Proceeds."
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT"), THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS
REGARDING THE COMPANY'S STRATEGIES, PLANS, OBJECTIVES AND INTENTIONS. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED OR
DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
THE CAUTIONARY STATEMENTS MADE IN THIS PROSPECTUS SHOULD BE READ AS BEING
APPLICABLE TO ALL RELATED FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN
THIS PROSPECTUS.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN
ADDITION TO THE OTHER INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
UNPROVEN TECHNOLOGY; EARLY STAGE OF DEVELOPMENT
Osiris Therapeutics, Inc. is engaged in the research and development of
therapeutic products for the regeneration of human connective tissues (E.G.,
bone marrow stroma, bone, cartilage, muscle, tendon, ligament and fat) through
the use of mesenchymal stem cells ("MSCs"), which the Company believes to be the
progenitor cells responsible for the formation of such tissues. The Company's
product candidates are designed to deliver MSCs to tissue defect sites requiring
regeneration of connective tissue. The effectiveness of the Company's technology
is untested in human clinical trials and is not well-known in or accepted
generally by the clinical medical community. The physiology of connective tissue
regeneration is highly complex and the biological processes involved are not
fully understood. Although research and preclinical data gathered by the Company
and its scientific founders and collaborators support the Company's approach,
there can be no assurance that MSCs give rise to all human connective tissues,
or that the Company's technology will be able to control consistently the
ability of MSCs to mature and differentiate into connective tissues following
isolation and expansion. Furthermore, there can be no assurance that MSCs or the
Company's product candidates can be implanted successfully at tissue defect
sites, that, once implanted, they will generate connective tissue at all, or
that such tissue will be of therapeutic benefit. Results attained in preclinical
studies and early human clinical trials of the Company's product candidates may
not be indicative of results that will be obtained in later human clinical
trials. The failure of the Company to establish the efficacy of its technology
or the ability to implant successfully its product candidates at tissue defect
sites would have a material adverse effect on the Company. See "Business--
Mesenchymal Stem Cell Technology," "--Cell Therapy Using Mesenchymal Stem
Cells," "--Gene Therapy" and "--Biopharmaceuticals."
UNCERTAINTY OF PRODUCT DEVELOPMENT
The Company has not completed the development of any products and does not
expect to have products to sell commercially for at least two years, if ever.
The Company's potential therapeutic products are in early stages of research and
development and will require substantial additional research and development
time and expense, as well as preclinical and clinical testing, prior to
commercialization, which may never occur. The Company's potential products for
regeneration of bone marrow stroma are currently in clinical and preclinical
studies, and the Company's product candidates for bone regeneration are
currently in preclinical trials. The Company's proposed cartilage and tendon
regeneration products are currently undergoing animal studies, and the Company's
biopharmaceutical, gene therapy, cardiac muscle and other soft tissue and
degenerative disorder product candidates are all in early research stages. There
can be no assurance that any of the Company's product candidates will be
developed successfully, perform in the manner anticipated or be commercially
viable. Development of the Company's products will depend on acquiring or
developing biodegradable matrix materials and delivery devices for use in its
products. There can be no assurance that such matrix materials and delivery
devices can be developed or obtained from third parties. There can also be no
assurance that the Company's proposed therapeutic products, if developed, will
prove to be safe and efficacious in human clinical trials, will receive the
necessary regulatory approvals, will be accepted by the clinical medical
community, will be commercially producible at prices acceptable to the medical
and insurance communities or will be of superior therapeutic benefit compared to
existing competitive products. Finally, there can be no assurance that
competitors will not hold proprietary rights which preclude the Company from
marketing its products, or that competitors do not or will not offer superior
products. The likelihood of the Company's future success must be considered in
light of these and other difficulties, expenses and delays frequently
encountered in connection with the
7
<PAGE>
development and commercialization of therapeutic products. See
"Business--Product Development Programs" and "--Government Regulation."
HISTORY OF OPERATING LOSSES; ANTICIPATION OF FUTURE LOSSES
The Company has incurred a net loss in each year since its inception,
including net losses of approximately $8,212,000 during 1996 and $2,119,000
during the three months ended March 31, 1997. These losses have resulted in an
accumulated deficit of $20,761,000 at March 31, 1997. The Company expects to
incur substantial additional losses over at least the next several years, which
will likely increase as the Company expands its research and development
efforts. The Company has not generated any revenues from product sales to date.
Most of the Company's revenues have been generated from payments under
collaborative research agreements and research grants. The Company's ability to
generate significant revenue and become profitable in the future will depend in
large part on its receipt of additional research grants and its ability to enter
into additional collaborative agreements, obtain regulatory approvals on a
timely basis where necessary and, with its collaborators, successfully develop
and commercialize the Company's potential products. There can be no assurance
that the Company will ever generate significant revenues or become profitable
even if it is able to commercialize any of its products. The failure of the
Company to generate significant additional revenues and achieve profitability
could impair the Company's ability to sustain its operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
DEPENDENCE UPON COLLABORATIVE PARTNERS
A principal element of the Company's strategy is to enter into collaborative
arrangements with established multinational pharmaceutical and medical device
companies which will finance or otherwise assist in the development, marketing
and manufacture of products incorporating the Company's technology. The Company
expects to derive its revenues for the foreseeable future principally from
research and development fees, license fees, milestone payments and royalties
from collaborative partners such as Novartis. The Company's prospects,
therefore, will depend in large part upon its ability to attract and retain
collaborative partners and to develop technologies and products that meet the
requirements of prospective collaborative partners. In addition, the Company's
collaborative partners will generally have the right to abandon research
projects and terminate applicable agreements, including funding obligations,
prior to or upon the expiration of the agreed-upon research terms. There can be
no assurance that the Company will be successful in establishing future
collaborative arrangements on acceptable terms or at all, that current or future
collaborative partners will not terminate funding before completion of projects,
that the Company's existing or future collaborative arrangements will result in
successful product commercialization or that the Company will derive any
revenues from such arrangements. To the extent that the Company is not able to
maintain existing or establish new collaborative arrangements, it would require
substantial additional capital to undertake research, development and
commercialization activities on its own. See "Risk Factors--Need for Substantial
Additional Funds."
In varying degrees for each of its products, the Company will likely rely on
its collaborative partners to research, develop, conduct human clinical trials
on, obtain regulatory approvals for, manufacture, market and/or commercialize
its products. Such partners' diligence and dedication of resources in conducting
these activities will depend on, among other things, their own competitive,
marketing and strategic considerations, including the relative advantages of
competitive products. The failure of the Company's collaborative partners to
conduct their collaborative activities successfully and diligently would have a
material adverse effect on the Company. In addition, the Company anticipates
that most collaborative partners will receive exclusive or co-exclusive rights
to market products incorporating the Company's technology in a particular field
of use or a particular territory. The grant of such rights will limit the
Company's alternatives in commercializing certain of its products. Furthermore,
while the Company may enter into multiple concurrent collaborative arrangements
to pursue the development of therapeutic
8
<PAGE>
products in different disease areas, there can be no assurance that the Company
will be able to manage multiple collaborative arrangements or be able to develop
simultaneous products successfully. See "Risk Factors--Lack of Manufacturing,
Marketing or Sales Capabilities," "Business--Collaborative Research and
Licensing Agreements" and "Business--Government Regulation."
NEED FOR SUBSTANTIAL ADDITIONAL FUNDS
The development and operation of the Company's business will require
substantial additional capital resources. The Company believes that its existing
capital resources and the net proceeds from this Offering will be sufficient to
fund its projected operating and capital expenditures through the next two
years, although there can be no assurance that the Company will not require, or
choose to raise, additional funds prior to the end of such period. In addition,
the Company's future capital requirements may vary materially based on many
factors, such as the progress of research and development programs, results of
human clinical trials, agreements with corporate collaborators, changes in
existing collaborative arrangements and establishment of future collaborative
arrangements, the costs of prosecuting and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
the costs of establishing manufacturing and marketing capacity, the cost of
acquiring additional technologies or businesses and other competitive and
regulatory factors. While the Company may be able to obtain additional funds
through research contracts, strategic collaborations, additional equity
offerings or other sources, there can be no assurance that such funds will be
available to the Company when required or on terms acceptable to the Company, if
at all. Future equity financings may result in significant dilution to existing
stockholders. In the event the Company is unable to raise additional funds, the
Company may be required to delay, reduce or eliminate certain of its research
and development programs or relinquish marketing, distribution, development,
manufacturing or other rights to the Company's products under development. Any
of such actions could have a material adverse effect on the Company. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
LIMITED CLINICAL TRIAL EXPERIENCE
Although physician-sponsored human clinical studies involving MSC technology
have been conducted to date, neither the Company nor its collaborators have
sponsored directly any human clinical trials with respect to any of the
Company's product candidates. The clinical testing process is governed by
stringent regulation and is highly complex and time-consuming. While certain of
the Company's personnel have been involved in clinical testing in connection
with prior employment, there can be no assurance that the Company has or will
possess the necessary expertise to establish, conduct and organize the results
of human clinical trials in a manner compliant with regulatory requirements or
sufficient to establish the safety and efficacy of any product candidates. In
addition, the Company may not be able to procure the financing, study subjects
and other resources necessary to commence and sustain proper clinical testing
through the successful development of any product candidates. Further, there can
be no assurance that the Company's corporate collaborators will conduct human
trials successfully. Finally, there can be no assurance that the U.S. Food and
Drug Administration (the "FDA") or other regulatory authorities will agree with
the Company's interpretation of testing results or that such results will be
favorable to the development, commercialization, clinical acceptance or
reimbursement for any of the Company's potential products. The failure of the
Company or its collaborators to conduct human clinical trials successfully or of
the Company to capitalize on the results of human clinical trials for its
product candidates would have a material adverse effect on the Company.
LACK OF MANUFACTURING, MARKETING OR SALES CAPABILITIES
The Company has not established manufacturing, marketing or sales
capabilities. In the event the Company decides to establish such capabilities,
it will require substantial additional funds and personnel
9
<PAGE>
and, in the case of manufacturing resources, compliance with extensive
regulations applicable to such manufacturing facilities. The decision to develop
such capabilities will be based in part upon the availability of alternatives to
in-house manufacturing, marketing and sales activities, such as licensing
arrangements, partnerships and other collaborations with third parties. There
can be no assurance that the Company will be able to develop successfully its
own manufacturing, marketing and sales capabilities or alternatives thereto. In
addition, for certain applications of its MSC technology, the Company intends to
enter into collaborative development, manufacturing and marketing agreements,
which would grant limited exclusive or co-exclusive manufacturing or marketing
rights. There can be no assurance that the Company will be able to consummate
collaborative partner agreements on terms satisfactory to the Company, if at
all, or that the Company's collaborative partners will be successful in
manufacturing or marketing its products. The failure of the Company to develop
its own manufacturing, marketing and sales capabilities or to develop
alternative third-party arrangements could have a material adverse effect on the
Company.
UNCERTAINTY OF REGULATORY APPROVAL; GOVERNMENT REGULATION
The Company's research and development activities, preclinical studies,
human clinical trials and anticipated manufacturing and marketing of its
potential products are subject to extensive regulation by the FDA and other
regulatory authorities in the United States and abroad. In the United States,
the Company's product candidates are potentially subject to regulation as
cellular tissue-based or biological products under the Public Health Service
Act, as medical devices under the Federal Food, Drug and Cosmetic Act, or as
combination biological products/medical devices. Different regulatory
requirements may apply to the Company's product candidates depending on how they
are categorized by the FDA under these laws. The FDA is in the process of
developing its requirements with respect to cellular and tissue-based products
and recently proposed a regulatory framework for their regulation. Depending on
whether this proposal is finalized and the nature of the product candidates, the
FDA may require extensive multi-center human clinical trials prior to market
approval. Any such additional regulatory or approval requirement could
significantly delay the introduction of the Company's product candidates to the
market and have a material adverse effect on the Company. Until the FDA issues
definitive regulations covering the Company's product candidates, the regulatory
requirements for approval of such product candidates will continue to be subject
to significant uncertainty.
The Company has not yet submitted any of its potential products to the FDA
or any other regulatory authority for approval. Before marketing, the products
developed by the Company will likely undergo an extensive regulatory approval
process. This process, which includes preclinical studies and human clinical
trials to establish safety and efficacy, takes many years and requires
substantial resources. Data obtained from preclinical and clinical activities
are susceptible to varying interpretations which could delay, limit or prevent
FDA approval. In addition, the Company may experience delays or rejections based
upon changes in FDA policy and regulations during the period of product
development or the approval process. Similar delays may be encountered in
foreign countries. There can be no assurance that, even after the expenditure of
substantial time and financial resources, regulatory approval will be obtained
for any products developed by the Company. The failure of the Company to obtain
regulatory approval of any of its principal product candidates would have a
material adverse effect on the Company. Moreover, if regulatory approval of a
product is obtained, such approval may be subject to limitations on the
indicated uses for which the product may be marketed. Further, an approved
product, its manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections by the FDA, and discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on such product or manufacturer, including a withdrawal of the
product from the market. Failure to comply with the applicable regulatory
requirements can, among other things, result in fines, suspensions of regulatory
approvals, product recalls, operating restrictions and criminal prosecution, any
of which could have a material adverse effect on the Company. In addition to the
FDA, approval of regulatory authorities of foreign countries where the Company's
products may be marketed will be required, which may impose
10
<PAGE>
requirements more stringent than those of the FDA. Further, additional
government regulation may be established which could prevent or delay regulatory
approval of the Company's product candidates. See "Business--Government
Regulation."
UNCERTAIN AVAILABILITY OF HEALTH CARE REIMBURSEMENT
The Company's ability to successfully commercialize its product candidates
will depend in part on the extent to which the costs of such products and
related treatments will be reimbursed by government health administrative
authorities, private health insurers and other organizations, both in the United
States and other countries. Significant uncertainty exists as to the
reimbursement of newly approved health care products, and there can be no
assurance that adequate third-party insurance coverage will be available for the
Company to establish and maintain price levels sufficient to realize an
appropriate return on its investment in developing new therapies. Payors are
increasingly attempting to contain health care costs by limiting both coverage
and reimbursement for newly approved therapeutic products and, in some cases, by
refusing coverage entirely for development-stage products for certain disease
indications which have not yet received full marketing approval of the FDA.
Failure by payors to cover adequately and reimburse usage of the Company's
products could have a material adverse effect on the Company's ability to
generate revenues.
RAPID TECHNOLOGICAL CHANGE; COMPETITION
The Company is engaged in fields which are characterized by extensive
worldwide research efforts, rapid technological progress and intense competition
by pharmaceutical companies, medical device companies, specialized biotechnology
companies and academic institutions. The Company's future success will depend in
large part on its ability to maintain a competitive position with respect to
evolving technologies. The use of MSCs to regenerate bone marrow stroma, bone,
cartilage and soft tissues (E.G., tendon, ligament, muscle and fat) will compete
with existing therapies such as allograft bone, tendon, ligament and cartilage
tissue, synthetic bone tissue substitutes and metal/polymer prostheses. Most of
the Company's numerous competitors have substantially greater financial,
research and development, clinical, regulatory, production, marketing and sales
resources than the Company and are better equipped than the Company to develop,
market and manufacture competitive products. Several competitors have developed,
or have initiated active product development programs for the development of,
osteogenic tissue growth factors, cell transplantation and allograft tissues, as
well as synthetic soft and hard tissues. There can be no assurance that existing
or future therapies developed by others will not render the Company's potential
products obsolete or noncompetitive. See "Business--Competition."
PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on its ability to obtain
patents on its products, obtain licenses to use third-party technologies,
protect its trade secrets and operate without infringing the proprietary rights
of others. The Company owns or has an exclusive license to five patents granted
in the United States relating to: (i) isolated human mesenchymal stem cells and
therapeutic compositions containing such cells; (ii) producing bone or cartilage
through the use of human mesenchymal stem cells; (iii) repairing connective
tissue damage through the use of human mesenchymal stem cells; (iv) isolated
human mesenchymal stem cells transfected with genetic material for potential use
in gene therapy; and (v) certain antibodies against human osteogenic cells and
the use thereof. The Company also owns or has licenses to over thirty-five
United States and foreign patent applications directed to MSC technology. The
Company intends to continue to use its scientific expertise to pursue and patent
new developments with respect to uses, compositions and factors related to
mesenchymal stem cells to enhance the Company's leadership in the MSC field. The
protection afforded by the granted United States patents with respect to
isolated human mesenchymal stem cells and transfected human mesenchymal stem
cells, respectively, will not be obtained outside the United States. Legal
standards regarding the scope of claims and validity of
11
<PAGE>
biotechnology patents are uncertain and evolving. There can be no assurance that
the Company's pending patent applications will be approved, that any issued or
pending patent will provide the Company with significant competitive advantages,
or that challenges will not be instituted against the validity or enforceability
of any patent owned by the Company. The cost of litigation to uphold the
validity and prevent infringement of a patent is substantial. Furthermore, there
can be no assurance that others will not independently develop substantially
equivalent technologies not covered by patents to which the Company owns rights
or obtain access to the Company's know-how. In addition, the laws of certain
countries may not adequately protect the Company's intellectual property.
Competitors of the Company may possess or obtain patents on products or
processes that are necessary or useful to the development, use or manufacture of
the Company's products. The Company is aware of a granted United States patent
owned by a subsidiary of Novartis which covers the use of EX VIVO gene therapy
in humans. If a license is not obtained under such patent, the Company or any of
its future collaborators may not be able to exploit in the United States EX VIVO
gene therapy with the Company's mesenchymal stem cell technology. There can be
no assurance that such a license will be available on commercially acceptable
terms, if at all. There can be no assurance that the Company's proposed
technology will not infringe patents or proprietary rights owned by others, with
the result that others may bring infringement claims against the Company and
require the Company to license such proprietary rights, which may not be
available on commercially reasonable terms, if at all. No assurance can be given
that any such litigation, if instituted, will not have a material adverse effect
on the Company, including the imposition of monetary penalties, diversion of
management resources and injunction against continued manufacture, use or sale
of certain products or processes. Certain of the Company's technology has
resulted and will result from research funded by agencies of the United States
government. As a result of such funding the United States government has certain
rights in the technology developed with the funding. These rights include a
non-exclusive, paid-up, worldwide license under such inventions for any
governmental purpose. In addition, under certain conditions, the government has
the right to require the Company to grant third parties licenses to such
technology. Any of the foregoing events could have a material adverse effect on
the Company.
The Company also relies upon nonpatented proprietary know-how. There can be
no assurance that the Company can adequately protect its rights in such
nonpatented proprietary technology, or that others will not independently
develop substantially equivalent proprietary information or techniques or gain
access to the Company's proprietary know-how. While it is the Company's policy
to enter into confidentiality agreements with its officers, employees,
consultants, contractors, manufacturers, outside scientific collaborators and
other parties, there can be no assurance that such agreements will be honored or
found to be enforceable or that adequate remedies for the breach of such
agreements will be available. Furthermore, there can be no assurance that former
employers of the Company's present and future employees will not assert claims
that such employees improperly disclosed confidential or proprietary information
to the Company. Any such claims, with or without merit, can be time consuming
and expensive to defend, cause product development delays or require the Company
to enter into licensing agreements, which may not be available on favorable
terms, if at all. See "Business--Collaborative Research and Licensing
Agreements" and "--Patents and Intellectual Property."
PRODUCT LIABILITY AND INSURANCE
The testing and use of human cell therapeutics and biopharmaceuticals entail
an inherent risk of adverse effects or medical complications to patients and, as
a result, product liability claims may be asserted against the Company. A
product liability claim or product recall could have a material adverse effect
on the Company. The Company currently has product liability insurance in the
aggregate amount of $2,000,000 per occurrence per year for the
physician-sponsored clinical trial currently underway at the University
Hospitals of Cleveland, Ireland Cancer Center ("University Hospitals" or "UHC").
There can be no assurance, however, that product liability insurance will
continue to be available to the Company in the future on acceptable terms, if at
all, or that the coverage will be adequate to protect the Company against
product liability claims. The Company has obtained indemnification from Novartis
relating to
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<PAGE>
liabilities arising from the manufacture, sale or use of products by Novartis in
its collaboration with the Company. The Company also will attempt to obtain
indemnification from its collaborative partners against product liability claims
for products that are developed and commercialized by such partners. However,
there can be no assurance that such partners will honor any such indemnification
obligations to the Company or that such indemnification will be adequate to
offset any liability of the Company. In the event of a successful claim against
the Company, insufficient insurance or indemnification rights could result in
liability to the Company which could have a material adverse effect on the
Company.
DEPENDENCE ON KEY PERSONNEL
Because of the specialized nature of the Company's technology and its
contribution to the development of future products, the Company is highly
dependent upon existing personnel and on its ability to attract and retain
qualified executive officers and scientific personnel for research, clinical
studies and development activities conducted or sponsored by the Company. As a
development stage company, the Company currently is seeking to recruit
additional qualified scientific and technical personnel. There is intense
competition for qualified personnel in the Company's fields of research and
development, and there can be no assurance that the Company will be able to
continue to attract and retain the personnel necessary for the development and
commercialization of its product candidates. See "Management." The loss of, or
the failure to recruit, scientific, technical and managerial personnel could
have a material adverse effect on the Company. In addition, the Company relies
on its scientific advisory board and consultants to formulate research and
development strategy, all of whom have other professional commitments which
limit their availability to the Company.
CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS
Upon completion of this Offering, the Company's executive officers and
directors and their affiliates will beneficially own up to 21.7% of the
Company's Common Stock (21.1% if the Underwriters' over-allotment option is
exercised in full). Accordingly, the Company's executive officers and directors
and their affiliates will be able to influence the election of directors and
corporate actions requiring stockholder approval. See "Principal Stockholders"
and "Certain Transactions." In addition, the Company is obligated under certain
circumstances to nominate a representative of Novartis for election to the Board
of Directors.
HANDLING OF HAZARDOUS MATERIALS
The Company's research and development activities involve the controlled use
of hazardous materials, chemicals, human blood and tissue, biological waste and
various radioactive compounds. The risk of accidental contamination or injury
from these materials cannot be completely eliminated. The Company is subject to
federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of such materials and certain waste products. In
the event of any contamination or injury from these materials, the Company could
be held liable for any damages that result and any such liability could exceed
the resources of the Company. Furthermore, the failure to comply with current or
future regulations could result in the imposition of substantial fines against
the Company, suspension of production or operations, alteration of its
manufacturing processes or cessation of operations. There can be no assurance
that the Company will not be required to incur significant costs to comply with
any such laws and regulations in the future, or that such laws or regulations
will not have a material adverse effect on the Company. Any failure by the
Company to control the use, disposal, removal or storage of, to adequately
restrict the discharge of, or to assist in the cleanup of hazardous, infectious
or toxic chemicals or substances could subject the Company to significant
liabilities, including joint and several liability under certain statutes. The
imposition of such liabilities could have a material adverse effect on the
Company.
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<PAGE>
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
The Company's Restated Certificate of Incorporation, as amended, and Bylaws,
as amended, as well as Delaware corporate law, contain certain provisions that
could have the effect of delaying, deferring or preventing a change in control
of the Company. These provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Common Stock. Certain of
such provisions allow the Company to issue, without stockholder approval,
Preferred Stock having rights senior to those of the Common Stock. Other
provisions impose various procedural and other requirements that could make it
difficult for stockholders to effect certain corporate actions. See "Description
of Capital Stock-- Delaware Law and Certain Charter, Bylaw and Other Provisions"
and "--Preferred Stock."
DILUTION
The existing stockholders of the Company acquired their shares of Common
Stock at an average cost substantially below the offering price set forth on the
cover page of this Prospectus. Accordingly, investors in this Offering will
suffer an immediate and substantial dilution in the pro forma net tangible book
value of the Common Stock of $6.89 assuming an initial public offering price of
$9.50 per share (the mid-point of the range of estimated initial offering prices
per share). To the extent that outstanding options or warrants are exercised,
there will be further dilution to new investors. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
this Offering could adversely affect the prevailing market price of the Common
Stock and the Company's ability to raise capital in the future. Upon completion
of this Offering, the Company will have a total of 18,375,744 shares of Common
Stock outstanding, of which the 3,500,000 shares offered hereby will be freely
tradable without restriction under the Securities Act of 1933, by persons other
than "affiliates" of the Company, as defined under the Securities Act. The
remaining 14,875,744 shares of Common Stock outstanding are "restricted
securities" as that term is defined by Rule 144 promulgated under the Securities
Act (the "Restricted Shares"). Of the Restricted Shares, 13,215,561 shares will
become eligible for sale in the public market 90 days after completion of the
Offering, subject in some cases to certain volume restrictions and other
conditions imposed under Rules 144 and 701. The remaining 1,660,183 shares will
be eligible for sale upon the expiration of their respective holding periods as
set forth in Rule 144. A total of 14,434,424 of the Restricted Shares are
subject to lock-up agreements and may not be sold for up to 180 days following
the date of this Prospectus. See "Underwriting" and "Shares Eligible for Future
Sale."
Following the date of this Prospectus, the Company intends to register on
one or more registration statements on Form S-8 shares of Common Stock issuable
under its 1994 Amended and Restated Stock Incentive Plan. Of the 2,000,000
shares issuable under the Stock Plan, 615,710 shares are subject to outstanding
options as of March 31, 1997, 235,000 of which shares are subject to the
above-referenced lock-up agreements. Subject to the lock-up agreements, shares
issued upon the exercise of such options will upon issuance to employees
pursuant to the Stock Plan immediately be eligible for sale in the public
market. In addition, the Company has issued warrants to purchase 1,121,225
shares of Common Stock which are currently exercisable, of which 721,894 shares
are subject to the lock-up agreements referenced above. See "Management--Stock
Option and Employee Benefit Plans," "Certain Transactions" and "Shares Eligible
for Future Sale."
The holders of approximately 4,592,490 shares of Common Stock, including
shares acquired upon exercise of certain outstanding warrants, are entitled to
certain registration rights with respect to such shares. If such holders, by
exercising their registration rights, cause a large number of shares to be
registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Company's Common Stock. See
"Description of Capital Stock--Registration Rights Agreements" and "Shares
Eligible for Future Sale." In addition, if the Company is required to include in
a
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<PAGE>
registration statement shares held by such persons pursuant to "piggyback"
registration rights, such sales could have a material adverse effect on the
Company's ability to raise capital.
NO DIVIDENDS
The Company has not paid cash dividends on its Common Stock and does not
expect to do so in the foreseeable future. See "Dividend Policy."
POSSIBLE LOSS OF NET OPERATING LOSS CARRYFORWARDS
As of March 31, 1997, for federal income tax purposes, the Company had
generated net operating loss carryforwards of approximately $20,000,000, which
are scheduled to expire on various dates beginning from the year 2008 through
2011 if not utilized. However, there may be limitations on the annual
utilization of these net operating loss carryforwards as a result of certain
changes in the Company's ownership, including prior ownership changes, this
Offering and future issuances of securities of the Company. See Note 6 of Notes
to Consolidated Financial Statements and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
NO PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY
Prior to this Offering there has been no public market for the Common Stock
and an active public market for the Common Stock may not develop or be
sustained. The initial public offering price will be determined through
negotiation between the Company and the Representatives of the Underwriters
based on several factors that may not be indicative of future market prices. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. The trading price of the Common Stock and the
price at which the Company may sell securities in the future could be subject to
wide fluctuations in response to a wide variety of factors, including but not
limited to announcements of clinical results, research activities, technological
innovations or new products of the Company or its competitors, changes in
government regulation, developments concerning proprietary rights, variations in
the Company's operating results, announcements by the Company of regulatory
developments, litigation, disputes concerning patents or proprietary rights,
public concern regarding the safety, efficacy or other implications of the
Company's products or methodologies, general market conditions or the Company's
liquidity or ability to raise additional funds. In addition, the stock markets
have experienced extreme fluctuations in price and volume. This volatility has
significantly affected the market prices for securities of emerging
biotechnology companies for reasons frequently unrelated to or disproportionate
to the operating performances of such companies. These market fluctuations as
well as general fluctuations in the stock markets may adversely affect the
market price of the Common Stock.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from this Offering are estimated to be
$30,272,500 ($34,910,875 if the Underwriters exercise their over-allotment
option in full), at an assumed initial public offering price of $9.50 per share
(the mid-point of the range of the estimated initial public offering prices per
share) and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company.
The Company intends to use approximately $15,200,000 of the net proceeds to
fund product development activities, including preclinical and human clinical
trials; approximately $8,000,000 for research activities; approximately
$5,000,000 for MSC process development activities; and approximately $2,000,000
for capital expenditures, including the construction of a pilot manufacturing
facility and possible expansion of the Company's research and development
facilities during 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." The
remaining net proceeds will be used for working capital and other general
corporate purposes, including scheduled repayments of obligations under
equipment leases. The Company also expects from time to time to evaluate the
acquisition of products, technologies and businesses that complement the
Company's business, for which a portion of the net proceeds also may be used.
The Company does not have any agreements, arrangements or understandings with
respect to any such acquisitions and no portion of the net proceeds has been
allocated for any specific acquisition. Pending such uses, the net proceeds will
be invested in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying cash dividends in the foreseeable future.
It is the present policy of the Company's Board of Directors to retain earnings,
if any, to finance the development of the Company's business. The payment of
dividends is within the discretion of the Company's Board of Directors, and will
depend upon, among other things, the Company's earnings, financial condition and
capital requirements, general business conditions and any restrictions in credit
agreements.
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DILUTION
The Company's pro forma net tangible book value at March 31, 1997 was
$17,705,759, or $1.19 per share. Pro forma net tangible book value per share
represents the Company's tangible net worth (net tangible assets less total
liabilities) divided by the number of shares of Common Stock outstanding as of
March 31, 1997, after giving effect to: (i) the sale of 1,176,500 shares of
Common Stock to Novartis in June 1997; and (ii) the conversion of all
outstanding shares of Preferred Stock into Common Stock.
After giving effect to the sale of 3,500,000 shares of Common Stock in this
Offering at an assumed initial public offering price of $9.50 per share (the
mid-point of the range of the estimated initial public offering prices per
share) and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, the pro forma net tangible book value
of the Company as of March 31, 1997 would have been $47,978,259, or $2.61 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.42 per share to existing stockholders and an immediate dilution in
pro forma net tangible book value of $6.89 per share to purchasers of Common
Stock in this Offering. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................... $ 9.50
Pro forma net tangible book value per share as of March 31, 1997........ $ 1.19
Increase per share attributable to new investors........................ 1.42
---------
Pro forma net tangible book value per share after this Offering............... 2.61
---------
Dilution per share to new investors........................................... $ 6.89
---------
---------
</TABLE>
The following table summarizes, as of March 31, 1997, on a pro forma basis
and after giving effect to the Offering, the differences between the existing
stockholders and the new investors with respect to the number of shares of
Common Stock purchased, the total consideration paid and the average price per
share paid (based upon an assumed initial public offering price of $9.50 per
share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. 14,875,744 81% $ 38,773,745 54% $ 2.61
New investors...................................... 3,500,000 19 33,250,000 46 9.50
------------ --- ------------- ---
Total.......................................... 18,375,744 100% $ 72,023,745 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
The foregoing tables assume no exercise of outstanding options or warrants.
At March 31, 1997, 1,553,756 shares of Common Stock were reserved for issuance
under the Stock Plan, pursuant to which options to purchase a total of 615,710
shares are outstanding, and 1,121,225 shares of Common Stock are issuable upon
exercise of outstanding warrants to purchase Common Stock. In the event such
options and warrants are exercised, investors may experience further dilution.
See "Management--Stock Option and Employee Benefit Plans," "Description of
Capital Stock--Warrants" and Notes 8 and 14 of Notes to Consolidated Financial
Statements.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997: (i) on an actual basis; (ii) on a pro forma basis to give effect to
the sale of 1,176,500 shares of Common Stock to Novartis in June 1997 for an
aggregate purchase price of $10,000,250 and the conversion into 9,367,003 shares
of Common Stock of all outstanding shares of Preferred Stock upon completion of
this Offering; and (iii) on a pro forma basis as adjusted to give effect to the
sale by the Company of the 3,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $9.50 per share (the mid-point of the
range of the estimated initial public offering prices per share) and the
application of the net proceeds therefrom as described under "Use of Proceeds."
This table is qualified in its entirety by, and should be read in conjunction
with, the Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt:
Note payable, net of current portion...................................... $ 619 $ 619 $ 619
Obligations under capital leases, net of current portion.................. 5,758 5,758 5,758
---------- ----------- -----------
Total long-term debt................................................ 6,377 6,377 6,377
Stockholders' equity:
Preferred Stock, $.001 par value, 20,000,000 shares authorized; 9,268,963
shares issued and outstanding, actual; no shares issued and outstanding,
pro forma as adjusted (1)............................................... 28,460 -- --
Common Stock, $.001 par value; 30,000,000 shares authorized; 4,332,241
shares issued and outstanding, actual; 14,875,744 shares issued and
outstanding, pro forma; 18,375,744 shares issued and outstanding, pro
forma as adjusted (1)................................................... 4 14 18
Additional paid-in capital.................................................. 309 38,759 69,028
Deferred compensation and loans to officers for the purchase of stock....... (244) (244) (244)
Deficit accumulated during the development stage............................ (20,761) (20,761) (20,761)
---------- ----------- -----------
Total stockholders' equity.............................................. 7,768 17,768 48,041
---------- ----------- -----------
Total capitalization................................................ $ 14,145 $ 24,145 $ 54,418
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(1) Does not include: (i) 1,553,756 shares of Common Stock reserved for issuance
under the Stock Plan, pursuant to which options to purchase a total of
615,710 shares are outstanding; and (ii) 1,121,225 shares of Common Stock
issuable upon exercise of outstanding warrants to purchase Common Stock. See
"Management--Stock Option and Employee Benefit Plans," "Description of
Capital Stock-- Warrants" and Notes 8 and 14 of Notes to Consolidated
Financial Statements.
18
<PAGE>
SELECTED FINANCIAL AND PRO FORMA DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected financial and pro forma data of the
Company. The selected financial data as of December 31, 1995 and 1996 and for
each of the years ended December 31, 1994, 1995 and 1996 and for the period from
inception to December 31, 1996 have been derived from the Company's audited
consolidated financial statements included elsewhere in the Prospectus. The
selected financial data as of December 31, 1993 and 1994 and for the period from
the Company's inception to December 31, 1993 have been derived from the
Company's audited consolidated financial statements not included in the
Prospectus. The selected financial data as of March 31, 1997, for each of the
three-month periods ended March 31, 1996 and 1997 and for the period from
inception to March 31, 1997 have been derived from the Company's unaudited
consolidated financial statements included elsewhere in the Prospectus. The
Company's unaudited consolidated financial statements have been prepared on the
same basis as the audited consolidated financial statements and, in the opinion
of management, contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the consolidated financial
position and consolidated results of operations for this period. The data set
forth below are qualified by reference to, and should be read in conjunction
with, the consolidated financial statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
FROM
FROM FROM THREE MONTHS INCEPTION
INCEPTION TO YEAR ENDED DECEMBER 31, INCEPTION TO ENDED MARCH 31, TO
DECEMBER 31, ------------------------------- DECEMBER 31, -------------------- MARCH 31,
1993 1994 1995 1996 1996 1996 1997 1997
------------- --------- --------- --------- ------------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Collaborative research and grant
income........................ $ -- $ 33 $ -- $ 1,067 $ 1,100 $ -- $ 500 $ 1,600
Interest income................. 30 230 169 522 951 93 115 1,066
------------- --------- --------- --------- ------------- --------- --------- -----------
Total revenues............ 30 263 169 1,589 2,051 93 615 2,666
------------- --------- --------- --------- ------------- --------- --------- -----------
Expenses:
Research and development........ 338 2,341 4,533 7,364 14,576 1,111 2,096 16,672
General and administrative...... 822 1,266 1,477 1,861 5,426 313 473 5,899
Interest expense................ 8 10 97 576 691 129 165 856
------------- --------- --------- --------- ------------- --------- --------- -----------
Total expenses............ 1,168 3,617 6,107 9,801 20,693 1,553 2,734 23,427
------------- --------- --------- --------- ------------- --------- --------- -----------
Net loss.......................... $ (1,138) $ (3,354) $ (5,938) $ (8,212) $ (18,642) $ (1,460) $ (2,119) $ (20,761)
------------- --------- --------- --------- ------------- --------- --------- -----------
------------- --------- --------- --------- ------------- --------- --------- -----------
Pro Forma Data (1):
Net loss per common share and
common share equivalents...... $ (0.63) $ (0.16)
--------- ---------
--------- ---------
Weighted average common shares
and common share equivalents
outstanding................... 13,053 13,616
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1997
------------------------------------------ ---------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 ACTUAL
--------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Cash, cash equivalents and securities available-for-sale......... $ 4,052 $ 4,797 $ 6,926 $ 9,612 $ 7,092
Working capital.................................................. 4,292 4,035 5,927 7,973 5,569
Total assets..................................................... 4,679 5,988 9,425 18,778 16,395
Long-term debt and capital lease obligations, less current
portion........................................................ -- 184 1,277 6,660 6,377
Deficit accumulated during the development stage................. (1,138) (4,492) (10,430) (18,642) (20,761)
Total stockholders' equity....................................... 4,432 5,019 6,995 9,887 7,768
<CAPTION>
<S> <C>
PRO
FORMA (2)
-----------
BALANCE SHEET DATA:
Cash, cash equivalents and securities available-for-sale......... $ 17,092
Working capital.................................................. 15,570
Total assets..................................................... 26,395
Long-term debt and capital lease obligations, less current
portion........................................................ 6,377
Deficit accumulated during the development stage................. (20,761)
Total stockholders' equity....................................... 17,768
</TABLE>
- ------------------------
(1) See Note 14 of Notes to Consolidated Financial Statements.
(2) Gives effect to: (i) the issuance and sale by the Company of 1,176,500
shares of Common Stock to Novartis in June 1997 for an aggregate purchase
price of $10,000,250; and (ii) the conversion of all outstanding shares of
Preferred Stock into 9,367,003 shares of Common Stock upon the completion of
this Offering. See Note 14 of Notes to Consolidated Financial Statements.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
CONTAINED IN THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE RELATED NOTES
THERETO AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE HEREIN.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT, THAT
INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS REGARDING THE COMPANY'S
STRATEGIES, PLANS, OBJECTIVES AND INTENTIONS. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED OR DISCUSSED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE CAUTIONARY STATEMENTS MADE IN
THIS PROSPECTUS SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED
FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS PROSPECTUS.
OVERVIEW
Since its inception, the Company has been in the development stage and has
engaged in research and product development, both on its own and in conjunction
with various collaborative partners. The Company expects that its revenue
sources for at least the next several years will continue to be limited to grant
revenues and research funding, milestone payments and licensing fees from
corporate collaborators. In certain circumstances, such as under the Company's
Research Collaboration and License Agreement with Novartis Pharmaceuticals
Corporation, a collaborator may conduct and fund product development and
regulatory approval activities for certain of the Company's product candidates.
The timing and amount of revenues, if any, will be subject to significant
fluctuations, based in part on the success of the Company's research activities,
the timing of the achievement of certain milestones and the extent to which
associated costs are reimbursed under grant or other arrangements. Research and
development expenses may fluctuate as various expenditures arise during the
several stages of the Company's research and clinical development programs and
are expected to increase as product development programs and applications
progress. As a result of these factors, the Company's results of operations have
fluctuated and are expected to continue to fluctuate significantly from year to
year and from quarter to quarter and therefore may not be comparable to or
indicative of the results of operations for other periods.
Over the past several years, the Company's net loss has increased,
consistent with the growth in the scope and size of the Company's research and
development activities. In the near term, the Company plans to expand its
personnel in the areas of product development, research, clinical and regulatory
affairs and administration and if such expansion occurs, the Company's operating
expenses will continue to increase as a result. The Company has been
unprofitable since its inception and does not anticipate having net income in
the foreseeable future. Through March 31, 1997, the Company had an accumulated
deficit of $20,761,000. There can be no assurance that the Company will be able
to achieve profitability on a sustained basis, if at all.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
REVENUES. Total revenues were $615,000 in the quarter ended March 31, 1997
compared to $93,000 in 1996. The increase is principally associated with
payments received under the research contract with the U.S. Defense Advanced
Research Projects Agency ("DARPA") awarded in the second quarter of 1996.
Interest income was $115,000 in the first quarter of 1997 compared to $93,000 in
the first quarter of 1996.
EXPENSES. Total expenses were $2,734,000 in the first quarter of 1997 and
$1,553,000 in the first quarter of 1996. The increase in the first quarter 1997
costs and expenses, compared with the same period in 1996, is primarily the
result of an increase in research and development expense to $2,096,000 in the
first quarter of 1997 from $1,111,000 in 1996. The increase in research and
development expense reflects an
20
<PAGE>
increase in research, preclinical studies, clinical development and product
development activities. General and administrative expenses were $473,000 in the
first quarter of 1997 and $313,000 in 1996. The increase in general and
administrative expenses in the first quarter of 1997 reflects an increase in
finance, legal and other administrative expenses which are expected to continue
to increase in support of the Company's increasing product development and
research activities. Interest expense was $165,000 in the first quarter of 1997
and $129,000 in the same period in 1996, reflecting varying amounts outstanding
under capital leases during the periods.
NET LOSS. The Company's net loss was $2,119,000 in the first quarter of
1997 and $1,460,000 in the same period in 1996. The Company expects to report
substantial net losses for the foreseeable future.
FISCAL 1996, 1995 AND 1994
REVENUES. Total revenues were $1,589,000 in 1996, $169,000 in 1995 and
$263,000 in 1994. Collaborative research and grant revenues increased to
$1,067,000 in 1996 from $0 in 1995, which had decreased from $33,000 in 1994,
reflecting the timing of the receipt of payments under the research contract
with DARPA and grant awards and related research activities to the extent that
associated costs are reimbursed under the grants. Research and grant revenues
accounted for 67%, 0% and 13% of total revenues for the years ended December 31,
1996, 1995 and 1994, respectively, and are recorded on a milestone achievement
and cost-reimbursement basis. Interest income was $522,000 in 1996, $169,000 in
1995 and $230,000 in 1994. The increase in interest income in 1996 is due
primarily to corresponding increases in the levels of cash, cash equivalents and
short-term investments for such periods.
EXPENSES. Total expenses were $9,801,000 in 1996, $6,107,000 in 1995 and
$3,617,000 in 1994. The increase in costs and expenses is primarily the result
of an increase in research and development expense to $7,364,000 in 1996 from
$4,533,000 in 1995 and $2,341,000 in 1994. The increase in research and
development expense reflects an increase in research, preclinical studies,
clinical development and product development activities. General and
administrative expenses were $1,861,000 in 1996, $1,477,000 in 1995 and
$1,266,000 in 1994. The increase in general and administrative expenses in 1996
and 1995 reflects an increase in finance, legal and other administrative
expenses which are expected to continue to increase in support of the Company's
increasing product development and research activities. Interest expense was
$576,000 in 1996, $97,000 in 1995 and $10,000 in 1994, reflecting varying
amounts outstanding under capital leases during the periods.
NET LOSS. The Company's net loss was $8,212,000 in 1996, $5,938,000 in 1995
and $3,354,000 in 1994. The Company expects to report substantial net losses for
the foreseeable future.
TAXATION
The Company has not generated any net income to date and therefore has not
paid any federal or state income taxes since inception. At December 31, 1996,
the Company had deferred tax assets totaling $7,345,000, consisting primarily of
net operating loss carryforwards and research tax credits that begin to expire
from 2008 through 2011, if not utilized. A full valuation allowance for deferred
tax assets has been provided. Utilization of federal income tax carryforwards is
subject to certain limitations under Section 382 of the Internal Revenue Code of
1986, as amended. The completion of this Offering and prior ownership changes
are likely to limit the Company's ability to utilize federal income tax
carryforwards under Section 382. The annual limitation could result in
expiration of net operating losses and research and development credits before
their complete utilization.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private placements of securities. Net proceeds from such issuances since
inception through June 30, 1997 have totaled approximately $37,842,000. To a
lesser degree, the Company has financed its operations through grant funding,
21
<PAGE>
payments received under research agreements and collaborations, interest earned
on cash, cash equivalents and short-term investments and funding under equipment
leasing agreements. These financing sources have historically allowed the
Company to maintain adequate levels of cash and other liquid investments.
The Company's pro forma combined cash, cash equivalents and securities
available-for-sale, adjusted for the sale of shares of Common Stock to Novartis
in June 1997, totaled $17,092,000 at March 31, 1997. The primary uses of cash,
cash equivalents and securities available-for-sale during fiscal 1996 included
$7,008,000 to finance the Company's operations and working capital requirements,
$313,000 in property and equipment additions and $845,000 in principal payments
on capital lease obligations and bank borrowings. In addition to the Novartis
purchase of Common Stock in June 1997 for $10,000,250, during fiscal 1996 the
Company received $10,852,000 in net proceeds from sales of Common Stock, Series
D and Series E Convertible Preferred Stock. The Company plans to continue its
policy of investing excess funds in short-term, investment-grade,
interest-bearing instruments.
In June 1997, the Company completed construction of a pilot manufacturing
facility in its Baltimore, Maryland headquarters. The Company plans to invest a
total of $1,500,000 during 1997 to construct and equip the pilot manufacturing
facility. These expenditures will be funded out of existing cash balances
maintained by the Company and potentially a portion of the proceeds from this
Offering. In addition, the Company anticipates that it will spend approximately
$500,000 in other capital expenditures during 1997 for its research and
development activities and is currently conducting a feasibility study for
expansion of its research and development facility to accommodate an increase in
staffing for Novartis funded research and Company funded product and process
development. The proposed expansion would include the exercise of an expansion
option in the Company's current lease agreement for an additional 50,000 square
feet. Pursuant to the lease agreement, the State of Maryland has a best efforts
commitment to finance or guarantee financing for up to $7,000,000 in tenant
improvements for this planned expansion. In addition, the Company has the option
to purchase the building under certain circumstances. To date, the Company has
not entered into any firm commitment for this expansion.
The Company's future cash requirements will depend on many factors,
including continued scientific progress in the Company's research and
development programs, the scope and results of human clinical trials, the time
and costs involved in obtaining regulatory approvals, the costs involved in
filing, prosecuting and enforcing patents, competing technological and market
developments and the costs of product commercialization. The Company does not
expect to generate a positive cash flow from operations for several years, if at
all, due to the expected increase in spending for research and development
programs and the expected cost of commercializing product candidates.
The Company anticipates that the net proceeds of this Offering, together
with the Company's available cash, cash equivalents and securities
available-for-sale, and expected interest income thereon, will be sufficient to
finance its research and development and other working capital requirements for
at least two years. The Company expects that its primary sources of capital for
the foreseeable future will be through collaborative arrangements and the public
or private sale of its equity securities. There can be no assurance that such
collaborative arrangements, or any public or private financing transactions,
will be available on acceptable terms, if at all, or can be sustained in the
future. If adequate funds are not available, the Company may be required to
delay, reduce the scope of, or eliminate one or more of its research and
development programs, which could have a material adverse effect on the Company.
See "Risk Factors--Dependence Upon Collaborative Partners" and "--Need for
Substantial Additional Funds" and Notes to Consolidated Financial Statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" ("SFAS 128"), which specifies the computation,
presentation and disclosure requirements for earnings per share. SFAS 128 is
effective for financial statements ending after December 15, 1997. The Company
does not anticipate that the adoption of SFAS 128 will have a material effect on
its financial statements.
22
<PAGE>
BUSINESS
GENERAL
Osiris Therapeutics, Inc. ("Osiris" or the "Company") is engaged in the
research and development of therapeutic products for the regeneration of human
connective tissues (E.G., bone marrow stroma, bone, cartilage, muscle, tendon,
ligament and fat) through the use of mesenchymal stem cells ("MSCs") which the
Company believes to be the progenitor cells responsible for the formation of
such tissues. The Company believes that its proprietary MSC technology will
provide a broad platform for developing and commercializing cell therapy
products and biopharmaceuticals for the regeneration of connective tissues
damaged through injury, aging or degenerative disease.
Connective tissue disorders, including orthopaedic injuries and degenerative
diseases, rank first among all disorders in terms of frequency of visits to
physicians and second in terms of frequency of hospitalizations. In the field of
cancer treatment, damage to bone marrow typically occurs following high-dose
chemotherapy or radiation, which often destroys the patient's hematopoietic
(I.E., blood-forming) system and bone marrow stroma.
The Company and its academic collaborators have isolated, purified and
expanded MSCs from both humans and animals and transplanted the culture-expanded
MSCs to the site of injured animal tissue to regenerate that tissue in a number
of preclinical models, thereby establishing the scientific proof-of-principle
and preclinical safety and efficacy of such techniques. In addition, an initial
physician-sponsored human clinical safety study of cancer patients in remission
using autologous (I.E., derived from a patient's own cells) MSCs has been
completed successfully. A second physician-sponsored human clinical safety study
in advanced breast cancer patients, under an approved IND, is underway currently
at the University Hospitals of Cleveland, Ireland Cancer Center ("UHC").
The Company believes that its tissue regeneration technology, if developed
successfully, could improve the treatment of connective tissue disorders by
restoring the natural functioning of the tissue, improving the quality of the
repair, and by providing a better long-term and cost-effective result compared
to current therapies. For example, (i) regenerating bone marrow stroma following
high-dose cancer chemotherapy could reduce the need for costly platelet and
growth factor infusions, decrease the length, number and costs of hospital stays
and improve patient tolerance to higher or more frequent doses of cancer
chemotherapy; (ii) regenerating bone in spinal fusion and segmental defect
procedures could eliminate the need for harvesting normal bone tissue from the
patient or donors; and (iii) regenerating cartilage in defects that could
otherwise result in joint osteoarthritis could obviate the need for treating the
end-stage disease with a joint implant.
Osiris is focusing its initial product development efforts on the
regeneration of bone marrow stroma following high-dose cancer chemotherapy and
on the regeneration of bone in long bone and spinal defects. In addition, the
Company is collaborating with Novartis in the research and development of MSC
products for treating degenerative diseases such as osteoporosis and
osteoarthritis, for regenerating cartilage damaged by injury, and for certain
gene therapy applications using MSCs as delivery cells.
The Company intends to selectively pursue the establishment of strategic
research, development and marketing collaborations with pharmaceutical and
medical device companies to accelerate the introduction of MSC products. In June
1997, the Company entered into a multi-year collaboration with Novartis of
Basel, Switzerland, one of the world's largest pharmaceutical companies, which
was formed in December 1996 through the merger of Sandoz AG and Ciba-Geigy AG.
Under the Novartis collaboration, Novartis paid to the Company an initial
up-front payment of $3,000,000 and purchased 1,176,500 shares of the Company's
Common Stock for $10,000,250. In addition, Novartis has agreed to fund, during
the five-year term of the collaboration, up to $50,000,000 of MSC research by
the Company and to fund all costs for clinical development, regulatory
approvals, manufacturing and marketing of the MSC products developed from the
collaboration. The Company also could receive milestone payments of up to
23
<PAGE>
$93,000,000, contingent upon the achievement of specified regulatory milestones
in connection with the development of products pursuant to the Novartis
collaboration. There can be no assurance, however, that the Company will become
entitled to the full $50,000,000 of research and development funding or that any
or all of the products currently contemplated for development pursuant to the
Novartis Agreement will achieve the specified milestones entitling the Company
to any or all of the $93,000,000 of milestone payments. In consideration for its
funding, Novartis has received an exclusive, worldwide license to use and sell
MSC products to be developed during the collaboration. Novartis has agreed to
pay the Company royalties based upon the net sales, if any, of such products.
The Company has retained the right to manufacture for sale in North America any
MSC products in the osteoporosis, osteoarthritis and cartilage injury fields.
The Company's intellectual property portfolio includes five issued patents
in the United States relating to: (i) the composition of human MSCs; (ii) a
method for isolating, purifying and expanding human MSCs IN VITRO; (iii) the use
of human MSCs for treating connective tissue disorders; (iv) genetically
engineered human MSCs for potential use in gene therapy applications; and (v)
antibodies to characterize and isolate bone-forming cells from human MSCs. The
Company also owns or has licenses to over thirty-five United States and foreign
patent applications directed to MSC technology. The Company intends to continue
to use its scientific expertise to pursue addtional patent filings for new
compositions, methods and uses of human mesenchymal stem cells and related
know-how to enhance the Company's leadership in MSC technology.
PLATFORM TECHNOLOGY
The Company is developing its MSC technology as a broad, proprietary
platform capable of being applied to multiple products and disease indications.
The Company believes that tissue regeneration through MSC cell therapy may be
able to address multiple types of connective tissues with a common class of
therapies and prove effective for multiple types of damage to the same tissue,
such as damage arising
from injury, aging or degenerative diseases (including osteoporosis,
osteoarthritis and age-related bone fractures). Advances in the Company's
research and development of MSC technology, including the results of preclinical
studies and clinical trials in various tissue disorders, may provide support for
future submissions to the FDA in other indications. Furthermore, success in
treating multiple tissue disorders may also provide the Company with a valuable
database for exploring new opportunities in cardiac tissue regeneration, skin
regeneration and reconstructive surgery. In the area of biopharmaceuticals, the
Company believes its MSC research may provide new drug targets for the treatment
of connective tissue disorders and cancer. The Company believes that successful
development of its MSC technology as a platform with multiple applications would
provide Osiris with a leading position in this emerging market.
BUSINESS STRATEGY
The Company's goal is to sustain its leadership in MSC technology and to
achieve leadership in the emerging tissue regeneration therapy market. The
Company's strategy involves the following elements:
PURSUE PRODUCT COMMERCIALIZATION. The Company intends to actively pursue
opportunities to commercialize its MSC technology. One of the Company's initial
objectives is to complete the formulation and commence human clinical trials of
MSC products for the regeneration of bone marrow stroma and bone and, in
conjunction with Novartis, products for the treatment of osteoporosis and
osteoarthritis and the regeneration of articular cartilage. In addition, the
Company has initiated validation procedures for its newly constructed pilot
plant for the production of autologous MSCs for human clinical trials and plans
to seek FDA certification for the facility in late 1997.
ESTABLISH STRATEGIC CORPORATE COLLABORATIONS. The Company intends to
selectively pursue the establishment of corporate collaborations to accelerate
the introduction of MSC products. The Company has
24
<PAGE>
entered into a collaboration with Novartis in the areas of osteoporosis,
osteoarthritis, cartilage regeneration and selected aspects of MSC gene therapy.
The Company intends to pursue additional corporate collaborations for specific
areas of its MSC technology. This strategy would allow the Company to build and
sustain leadership in MSC technology, while utilizing the clinical expertise,
distribution infrastructure and financial resources of multiple strategic
partners. The Company intends to develop potential products to a late
preclinical or early clinical stage and then to collaborate with pharmaceutical
or medical device companies for the later stages of clinical development and
commercialization. The Company will, however, also consider developing certain
products on its own.
ENHANCE MSC RESEARCH LEADERSHIP. MSC technology was pioneered by the
Company and its scientific founders. The Company intends to continue focusing
its core research and development programs on the characterization and mechanism
of action for the growth, differentiation and maturation of MSCs, both IN VITRO
and IN VIVO. Increasing the Company's understanding of the role of mesenchymal
stem cells in tissue formation and interactions with surrounding tissue will be
important in tailoring MSC products to specific disorders. The Company also
intends to continue expanding its network of academic research and clinical
collaborators and advisors, both in support of its core MSC technology and in
related technologies. Through this network, located throughout the U.S. and
Europe, the Company intends to identify additional indications for MSC products
and to extend the research on existing applications.
SUSTAIN AND PROTECT INTELLECTUAL PROPERTY ADVANTAGE. The Company intends to
sustain and protect its intellectual property advantage in MSC technology by:
(i) accelerating the rate of new patent filings for its MSC technology; (ii)
licensing related technology from members of its academic and clinical network;
(iii) disseminating the Company's MSC technology to selected academic
researchers in exchange for licenses to new applications of such technology; and
(iv) vigorously protecting the Company's patents and know-how.
OPTIMIZE STRATEGIC AND FINANCIAL FLEXIBILITY. The Company intends to
optimize its strategic and financial flexibility by, among other things,
obtaining multi-year research, development and milestone funding from the
Company's corporate collaborators. The Company intends, where possible, to have
corporate collaborators fund a substantial portion of the expenses for product
development programs, most or all of the costs involved in multi-site human
clinical trials and all of the costs of regulatory submissions. In addition, the
Company plans to continue seeking non-equity grant support to fund new research
initiatives for its MSC technology. To date, the Company has been awarded U.S.
Government contracts and grants for approximately $7,000,000 for MSC research.
These funds allow the Company to explore multiple MSC opportunities
simultaneously while reducing financial and operating risks.
MESENCHYMAL STEM CELL TECHNOLOGY
MESENGENESIS
In the early embryo, the middle layer of cells (known as the mesoderm) and
certain portions of the outer cell layers give rise to groups of cells that
differentiate into bone marrow stroma, bone, cartilage, muscle, tendon,
ligament, fat and other connective tissues. Based upon laboratory and
preclinical research to date, the Company believes that the process of tissue
regeneration follows a sequence of events similar to that of embryonic tissue
formation and that throughout life, individuals maintain a reserve of
mesenchymal progenitor cells that are capable of differentiating into new
connective tissues. The Company refers to the progenitor cells that initiate
tissue formation as mesenchymal stem cells and the formation of these tissues as
mesengenesis.
The schematic on the inside cover of this Prospectus illustrates the
sequence of events which the Company believes are involved in the formation of
connective tissues. MSCs proliferate (I.E., undergo multiple divisions) to
generate increased numbers of MSCs. Many of these expanded MSCs then undergo
25
<PAGE>
a commitment step and enter a particular lineage pathway (E.G., bone-forming,
cartilage-forming or tendon-forming), leading ultimately to the formation of
differentiated, tissue-specific cells.
Once committed to a specific pathway, the cells undergo distinctive
conformational changes during the process of lineage progression. Eventually,
the cells in each pathway undergo a differentiation process in which they no
longer divide, but rather fabricate unique components (E.G., extracellular
matrix, membrane receptors, bioactive factors) in a sequence of synthesis and
assembly steps comparable to that originally observed when the embryo first
develops specialized mesodermal tissues. The modulation of these synthesis and
assembly steps is often referred to as maturation, as the newly formed tissue
takes on its final form.
CELL THERAPY USING MESENCHYMAL STEM CELLS
The Company believes that the field of tissue regeneration is moving toward
a new class of treatments involving cell therapy. The Company intends to
commercialize products that result in site-directed tissue regeneration based on
the use of MSCs. Such products would originate from a small sample of bone
marrow cells collected by needle aspiration from a patient using a local
anesthetic. The bone marrow aspirate would be transferred to the Company's
processing facilities and the MSCs would be isolated and culture-expanded. The
culture-expanded cells would then be returned to the patient for infusion or
implantation. The MSCs would be combined in some instances with a biodegradable
matrix or other delivery device capable of stabilizing the cells at the implant
site.
Results of preclinical studies indicate that, by increasing the quantity of
MSCs at the defect site, the natural progression of mesengenesis will result in
the regeneration of tissue and the repair of tissue defects. As a result, the
Company intends to commercialize custom, autologous MSC infusions for treating
the destructive effects of cancer chemotherapy and radiation therapy and custom,
autologous MSC implants for orthopaedic tissue regeneration. The schematic on
the inside cover of this Prospectus illustrates the process which the Company
intends to utilize for clinical tissue regeneration.
GENE THERAPY
Gene therapy is a novel approach to the treatment of disease in which genes
are inserted into a patient's cells to induce these cells to produce therapeutic
proteins or to replace defective or missing genes. The Company believes that
MSCs may be useful clinically for gene therapy applications, including the IN
VIVO production of therapeutic drugs through their expression in connective
tissues. The Company has shown that therapeutic genes can be transferred into
MSCs in a highly efficient and reliable manner and can serve as a delivery
vehicle for gene therapy applications. MSCs could be useful particularly as
delivery cells for gene therapy based on the evidence that MSCs can: (i)
efficiently incorporate the gene into MSCs, which can then be expanded in
culture to produce a sufficient quantity of genetically-engineered cells for
therapeutic treatment; (ii) replicate as stem cells IN VIVO to provide
additional quantities of gene-modified cells; and (iii) retain gene expression
during cellular differentiation into the desired connective tissue.
The Company's business opportunity will depend, in part, upon the successful
development of individual gene therapy applications currently under development
by third parties such as Novartis. The Company's collaboration with Novartis is
limited to three specific genes, together with a right of first refusal to
additional genes specified on or before December 31, 1997. The Company currently
retains the ability to license rights to develop therapies for additional gene
targets outside of the scope of the Novartis collaboration.
BIOPHARMACEUTICALS
The Company believes that specific hematopoietic and mesengenic factors
exist that control and modulate mesengenesis. The isolation of these factors
could lead to biopharmaceuticals for regulating MSC proliferation and
stimulating their differentiation into new mesenchymal tissues. These
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biopharmaceuticals could be used alone or in conjunction with the Company's MSC
cell therapy applications. The development of these factors is complementary to
the development of the Company's MSC technology because such factors could,
among other things, enhance the production of MSCs during the culture-expansion
phase of MSC manufacturing. To date, the Company has identified eight novel
target molecules for possible biopharmaceutical development and has discovered
the presence on MSCs of four target molecules previously identified by other
groups, which are thought to play a direct role in MSC proliferation and
differentiation.
PRODUCT DEVELOPMENT PROGRAMS
The MSC platform technology is being developed by the Company and with
collaborative partners who provide funding, research and development and
commercialization expertise for multiple MSC product applications. The Company's
product development programs and the commercialization rights and development
status of such programs are summarized below:
<TABLE>
<CAPTION>
COMMERCIALIZATION
PRODUCT DEVELOPMENT PROGRAMS RIGHTS DEVELOPMENT STATUS (1)
- ---------------------------------------- -----------------------
<S> <C> <C>
CELL THERAPY
Treatment following cancer Company Clinical Trials,
chemotherapy Preclinical Trials
Bone Regeneration:
Spinal fusion Company Preclinical Trials
Bone defects/Non-unions Company Preclinical Trials
Cartilage Regeneration Novartis(2) Animal Studies
Degenerative Disorders:
Osteoporosis Novartis(2) Animal Studies
Osteoarthritis Novartis(2) Research
Tendon Regeneration Company Animal Studies
Cardiac Muscle and Other Soft Tissue Company Research
GENE THERAPY
Vaccine delivery Company Research/Development
Three therapeutic genes Novartis Research
Other therapeutic genes Company Research
BIOPHARMACEUTICALS
Mesengenic Factors Company Research
Hematopoietic Factors Company Research
</TABLE>
- --------------------------
(1) Development Status refers to the following stages ranging from early
research through human clinical trials leading to market approval by the FDA
or other regulatory agencies.
(a) "Clinical Trials" refer to physician-sponsored human safety and efficacy
studies.
(b) "Preclinical Trials" refer to various animal studies which determine a
product's initial safety and efficacy in preparation for filing of IND
applications.
(c) "Animal Studies" refer to various animal models which are used to
demonstrate clinical proof-of-principle for a therapeutic approach or
procedure. The same animal studies may serve as the basis for an IND
application.
(d) "Development" refers to laboratory studies leading to a product
prototype which may be subsequently used in animal or preclinical
studies.
(e) "Research" refers to exploratory studies or to basic studies which may
lead ultimately to a product development effort.
(2) The Company has retained the right to manufacture for sale in North America
MSC products in the osteoporosis, osteoarthritis and cartilage injury
fields.
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CELL THERAPY
STROMA REGENERATION
Autologous bone marrow transplants and peripheral blood progenitor cell
transplants are used increasingly as supportive therapy for cancer patients who
have undergone high-dose chemotherapy, particularly for lymphoma, leukemia,
breast cancer and several other types of solid tumors. These transplants are
required because certain cancer drugs, radiation treatments and high-dose
chemotherapy regimens destroy hematopoietic and mesenchymal cells, which limits
the patient's ability to recover. Mesenchymal stem cells give rise to marrow
stromal cells, which produce the spongy stromal matrix that comprises the bone
marrow microenvironment. These marrow stromal cells contribute directly to blood
cell formation by producing the extracellular matrix in which blood cell
development takes place and by providing cytokines and other molecules that
direct or stimulate the production of mature blood cells.
MSCS FOR CANCER THERAPY. The Company's research is seeking to determine
whether MSC therapy is able to regenerate the bone marrow microenvironment and
restore normal marrow function. The benefits of MSC therapy may include
decreases in: (i) costly platelet and growth factor infusions following
transplantation; (ii) length and costs of hospital stay and the number of
readmissions; and (iii) fatalities associated with the use and readministration
of high-dose chemotherapy procedures. In addition, MSC cell therapy may also be
used to restore the marrow microenvironment in certain diseases characterized by
stromal failure, such as multiple myeloma, spontaneous cytopenias and aplastic
anemia.
DEVELOPMENT STATUS. The Company has completed four preclinical studies of
stromal cell regeneration at the Fred Hutchinson Cancer Research Center in
Seattle, Washington. These studies have shown that infusion of therapeutic doses
of MSCs is safe and does not result in adverse side effects. Preliminary data
from these studies also suggest a reduction in the time for hematopoietic cell
recovery, with fewer platelet infusions and without the use of growth factor
infusions during recovery. In addition, these preclinical studies indicate that
intravenously infused MSCs localize to the bone marrow, a critical proof-
of-concept for use in cancer therapy.
In a physician-sponsored clinical trial conducted at UHC, MSCs were isolated
and culture-expanded from a small starting sample of autologous bone marrow
collected from 15 volunteer cancer patients either at the time of bone marrow
harvest or during routine diagnostic bone marrow evaluation. As reported in the
December 1995 issue of BONE MARROW TRANSPLANTATION, reinfusions of 1,000,000,
10,000,000 and 50,000,000 autologous MSCs into groups of five patients at each
cell level in this dose-escalation safety study were well tolerated and did not
produce any significant adverse effects.
The Company has also provided a grant-in-aid to researchers at UHC to help
support a Phase I safety study using autologous MSCs infused into advanced
breast cancer patients following high-dose chemotherapy. The goal of this
clinical trial, which was initiated in October 1996, is to demonstrate the
safety of MSCs in a therapeutic setting in breast cancer patients receiving
co-administration of autologous hematopoietic progenitor cell infusions. The
therapeutic goal of this and future clinical studies is to improve the marrow
microenvironment, to facilitate engraftment of peripheral blood progenitor cells
and to enhance recovery of blood counts after ablative therapy.
The Company is evaluating the preclinical and clinical results to date and
formulating plans for a Phase I/II human clinical trial of MSC technology for
stroma regeneration. The Company plans to commence such Phase I/II human
clinical trials for stroma regeneration in 1998.
MARKET OPPORTUNITY. Nearly 30,000 bone marrow transplants are performed
annually worldwide involving hematopoietic reconstitution following chemotherapy
or radiation of solid tumors and other bone marrow disorders. With improved
clinical outcomes for solid tumor treatment and increased third-party coverage,
the Company believes that the opportunity for the use of hematopoietic and
mesenchymal stem cell therapy could more than triple to over 100,000 transplants
annually by 2001. In the breast cancer
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setting specifically, there are approximately 190,000 new cases in the U.S. per
year, of which 25-30% involve metastatic spread, which may benefit from
intensified chemotherapy and MSC stromal regeneration therapy. In addition, the
Company believes that oncologists will increasingly use high-dose chemotherapy
with bone marrow transplants for ovarian, testicular and other solid tumors, as
well as for leukemia and lymphoma.
The Company estimates that as many as 300,000 patients could benefit from
combination high-dose chemotherapy and stem cell reinfusion protocols using both
hematopoietic progenitor and mesenchymal stem cell therapy. However, there can
be no assurances that any safe and efficacious MSC product for stroma
regeneration will be developed or receive regulatory approval. Successful
development of the Company's MSC product for stroma regeneration will require
additional research and development, including clinical testing, and will be
subject to the Company's ability to finance such activities. See "Risk
Factors--Uncertainty of Product Development" and "--Need for Substantial
Additional Funds."
BONE REGENERATION
Many bone fracture patients suffer difficult or prolonged healing
situations, such as non-unions, delayed unions, malunions and age-related
fractures. While internal fixation, external fixation and bone growth
stimulation devices comprise the principal products which currently assist in
the repair of complex fractures, many of these high-risk fractures require bone
grafts or other extensive surgical intervention. Currently, bone graft
procedures using either a patient's own bone ("autograft") or donor-derived bone
("allograft") are performed in connection with the surgical procedures to repair
non-unions, delayed unions, spinal fusions and tumor resections of long bone.
The Company believes that allograft bone transplants now account for over
one-half of the bone graft market, having replaced the exclusive use of bone
autografts obtained by surgical excision of patients' normal tissue. Despite the
reduction of operative risks, chronic pain and deformity associated with
autografts, bone allografts often do not integrate fully with surrounding normal
tissue, are not completely penetrated by host blood vessels and may not be
tolerated immunologically in some patients.
Segmental bone defects often arise when sections of long bones are removed
surgically as a result of metastatic bone cancer, osteosarcoma (I.E., primary
bone cancer) or multiple myeloma (I.E., bone marrow cancer). If malignant, both
the involved and adjacent tissues are typically resected, generally leaving a
large segmental bone defect which will not regenerate and which cannot generally
be reconstructed.
Spinal fusions are performed to treat degenerative diseases, deformities and
spinal conditions created by traumatic injuries. Degenerative diseases typically
occur in mature adults and result in immobility, pinched nerves and associated
pain for the patient. Deformities, unless treated at a young age, prevent proper
growth of the spine and can be life threatening if allowed to progress.
Currently, spinal implants are used to facilitate the fusion of two or more
vertebrae in the spine.
MSCS FOR BONE REGENERATION. MSCs are advantageous because they can directly
form the cells and matrix of mature bone tissue (I.E., osteogenic). By adding an
optimal number of MSCs to the repair site in an appropriate formulation, the
Company believes that it will be able to accelerate the proliferation of MSCs,
the differentiation of MSCs into bone-forming cells and the vascularization of
bone tissue. The MSC product will likely consist of autologous MSCs formulated
with FDA-approved biodegradable matrix materials. The Company believes that MSC
cell therapy will result in: (i) an improvement in the rate and quality of bone
regeneration; (ii) elimination of painful autograft procedures; (iii) a delay,
reduction or elimination of costly second-site tissue harvests; (iv) a cost
reduction and decrease in the amount of time spent by physicians performing
autograft procedures; and (v) a higher rate of healing in multi-level spinal
fusions.
DEVELOPMENT STATUS. Results from the Company's research studies have
established that culture-expanded MSCs can rapidly fill a porous matrix with
bone. These results suggest that MSCs could be
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<PAGE>
useful in an autologous grafting technique for spinal fusion, reconstruction of
long bone after tumor excision, joint reconstruction, prosthesis fixation and
repair of age-related fractures.
The Company is continuing to build on its research experience with further
studies in preclinical models involving the regeneration of bone following
surgical resection and spinal fusion. The Company has shown that MSCs have been
able to regenerate bone in large femoral defects in small animal models, and the
Company is collaborating with Tufts University to demonstrate this effect in
larger animal models. In addition, the Company is sponsoring a collaborative
study at the Cleveland Clinic Foundation, and will commence projects at other
academic institutions, to study spinal fusion in large animal models. Initial
results in both indications show that MSCs can regenerate new bone directly into
large bone defects. In addition, the Company has demonstrated in
immune-deficient animal models that human MSCs can regenerate a large bone
defect, a critical proof-of-principle for the use of human MSCs in regenerating
bone.
The Company is testing a number of formulations of MSCs and matrix materials
for bone regeneration in preclinical models, evaluating the preclinical results
to date and formulating plans for a Phase I/II human clinical trial of MSC
technology for bone regeneration. The Company plans to initiate human clinical
trials of the MSC technology in bone regeneration in 1998.
MARKET OPPORTUNITY. The Company believes that there is a significant
commercial opportunity for MSC technology to regenerate bone in orthopaedic
procedures. The number of procedures for which the Company believes MSC bone
regeneration products could be used exceeds 1.1 million in the United States.
These procedures include non-healing fractures (170,000), spinal fusions
(202,000), maxillofacial reconstructions (219,000), prosthetic fixations
(541,000) and gap fillings (31,000).
In addition, the Company estimates that there are approximately 1.3 million
age-related fractures each year in the U.S. Of these, approximately one-third
are hip fractures, one-third are vertebral fractures and the remaining are wrist
and upper arm fractures. The Company believes that age-related fractures
represent a substantial market for bone regeneration products utilizing MSC cell
therapy. However, there can be no assurances that any safe and efficacious MSC
product for bone regeneration will be developed or receive regulatory approval.
Successful development of the Company's MSC products for bone regeneration will
require additional research and development, including clinical testing, and
will be subject to the Company's ability to finance such activities. See "Risk
Factors--Uncertainty of Product Development" and "--Need for Substantial
Additional Funds."
CARTILAGE REGENERATION
Joint cartilage is designed to absorb the repeated shock of compressive and
mechanical stress on the surface of articulating joints. Articular cartilage
damage generally occurs as a result of a sports injury, traumatic injury or
osteoarthritic degeneration. Despite various attempts to regenerate cartilage
using collagen implants and cartilage tissue transplants, there is currently no
reliable or proven treatment to regenerate damaged cartilage.
MSC THERAPY FOR CARTILAGE REGENERATION. The Company's research and
development is directed toward developing products for articular cartilage
regeneration using autologous human MSCs, which can form both cartilage and
bone. The Company believes that MSCs will be able to differentiate into
cartilage-forming and bone-forming cells and regenerate tissue in full-thickness
osteochondral (I.E., articular cartilage and underlying bone) defects with the
appropriate formulation for stabilizing the implant in the cartilage defect
during the regeneration process. Unlike MSC therapy, current chondrocyte
therapies cannot repair osteochondral defects, nor are they indicated for the
treatment of osteoarthritic lesions. The Company believes that an MSC product
for cartilage regeneration could: (i) decrease the long-term risk of developing
osteoarthritis; (ii) increase the repair rate for certain surgical procedures;
and (iii) potentially restore naturally functioning cartilage. In addition, the
Company has entered into a corporate collaboration with Novartis to develop MSC
cell therapy products for the regeneration of surface and full-thickness
cartilage defects. See "Business--Collaborative Research and Licensing
Agreements--Novartis Agreement."
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<PAGE>
DEVELOPMENT STATUS. The Company and its collaborators have conducted
preclinical studies using transplanted MSCs that have resulted in the
regeneration of articular cartilage which appeared to be equivalent to normal
joint cartilage as determined by microscopy and immuno-histochemistry.
Preclinical studies to date have been conducted principally in small animal
models. In addition, the Company has made substantial advances in understanding
the structure of natural cartilage extracellular matrix. Collectively, these
results have helped the Company establish formulations, surgical techniques and
demonstration of feasibility to permit pivotal preclinical studies commencing in
1998.
MARKET OPPORTUNITY. The Company believes that a substantial market
opportunity exists for MSC products for cartilage regeneration. In 1995, there
were approximately 570,000 recreational and sports-associated cartilage injuries
in the United States. Nearly half of these injuries were treated surgically,
including meniscectomies to repair knee cartilage between joint articulating
surfaces. However, there can be no assurances that any safe and efficacious MSC
product for cartilage regeneration will be developed or receive regulatory
approval. Successful development of the Company's MSC products for cartilage
regeneration will require additional research and development, including
clinical testing, and will be subject to the Company's ability to maintain and
operate successfully under its collaborative agreement with Novartis. See "Risk
Factors--Uncertainty of Product Development."
DEGENERATIVE DISORDERS
OSTEOPOROSIS. Osteoporosis is a progressive disease characterized by loss
of bone mass and subsequent risk of brittle bone fractures, resulting mainly
from the decrease in naturally occurring estrogen levels in postmenopausal
women. Hormone replacement therapy and antiresorption products that decrease the
rate of bone loss are currently the most effective methods for preventing or
treating osteoporosis. However, the Company believes that approximately 10-20%
of postmenopausal women do not tolerate these products or may not respond to
conventional osteoporosis treatments. The Company believes that MSCs may be
useful in treating patients by directly regenerating bone lost during
osteoporosis. The goal is to reverse osteoporosis by forming bone directly from
MSCs (I.E., osteogenesis).
OSTEOARTHRITIS. Osteoarthritis is the final, end-stage of cartilage and
joint failure. Hip and knee osteoarthritis are the two most common forms of
joint cartilage degeneration. Osteoarthritis can be a primary degenerative
process or result from childhood joint disorders. More frequently,
osteoarthritis develops following adult joint injury, infection, metabolic
disorder or abnormal bone formation. Many acute injuries of articular joint
cartilage treated by current methods result in osteoarthritic lesions within a
5-10 year period. The Company believes that MSCs may be useful in regenerating
osteoarthritic lesions of joint cartilage by forming new cartilage and the
underlying bone at the defect site. The goal of the Company's research program
in osteoarthritis is to stabilize or reverse the arthritic process using
cartilage-forming MSCs (I.E., chondrogenesis).
DEVELOPMENT STATUS. The Company is sponsoring research studies involving
infusions of MSCs in animal models of osteoporosis. Preliminary results suggest
an osteogenic effect of MSCs. In osteoarthritis, research is focusing on the
formulation of MSCs for introduction into the arthritic joint. MSC
osteoarthritis products are likely to develop from formulations used for acute
cartilage defects. In collaboration with Novartis, the Company is conducting
further research on systemic infusions or local implants of MSCs with the goal
of reversing bone loss in osteoporosis and reforming joint cartilage in
osteoarthritis.
MARKET OPPORTUNITY. According to the National Osteoporosis Foundation,
osteoporosis affects as many as 24 million postmenopausal women in the U.S., and
the Company believes that more than twice that number are affected throughout
Europe and Asia. Osteoporosis accounts for approximately 1.3 million bone
fractures per year in the U.S. with as many as two to three times that number
throughout other developed countries. Osteoarthritis is one of the most common
chronic connective tissue disorders, affecting nearly 16 million patients in the
United States. Each year, 1.1 million patients are admitted to U.S. hospitals
for osteoarthritis treatment. In addition, there are more than 500,000 total hip
and knee
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replacements and as many as 250,000 non-weight bearing joint replacements
performed in the U.S. each year, principally the result of degenerative
arthritis.
However, there can be no assurance that any safe and efficacious MSC product
for degenerative disorders will be developed or receive regulatory approval.
Successful development of the Company's MSC products for degenerative disorders
will require additional research and development, including clinical testing,
and will be subject to the Company's ability to maintain and operate
successfully under its collaborative agreement with Novartis. See "Risk
Factors--Uncertainty of Product Development."
TENDON REGENERATION
No products currently exist to regenerate torn tendons and ligaments.
Various materials have been tested by others, but these materials generally
produce inadequate results, such as poor compatibility, tissue rejection,
ligament breakage or irritating debris. Even autologous grafts are not without
problems, including graft weakness, extensive time to revascularize, progressive
joint laxity and muscle weakness above the graft site.
DEVELOPMENT STATUS. The Company believes that MSC products for tendon
regeneration can speed the healing rate of torn tissue and potentially provide a
treatment for large gap tendon ruptures. The Company has demonstrated that MSCs
are able to regenerate a torn tendon in a critical size tendon defect in small
animal models. Results from the Company's tendon regeneration studies
demonstrate that MSCs can regenerate severed tendons to approximately two-thirds
the strength of normal tissue within as little as four weeks. The Company plans
to continue these studies utilizing a proprietary MSC tendon fixation device for
which the Company has a pending patent application. The tendon fixation device
would serve to stabilize the tendon defect and provide a support for the MSC
products. In March 1997, the Company was awarded a $750,000 Phase II Small
Business Innovation Research ("SBIR") grant to develop further the potential of
MSCs for tendon regeneration.
MSC PRODUCTS FOR TENDON REGENERATION. There are currently over 150,000
surgical procedures annually involving the repair of tendons and rotator cuffs.
However, there can be no assurance that any safe and efficacious MSC product for
tendon regeneration will be developed or receive regulatory approval. Successful
development of the Company's MSC products for tendon regeneration will require
additional research and development, including clinical testing, and will be
subject to the Company's ability to finance such activities. See "Risk
Factors--Uncertainty of Product Development" and "--Need for Substantial
Additional Funds."
CARDIAC MUSCLE AND OTHER SOFT TISSUE
The Company believes that a substantial opportunity exists for the
regeneration of cardiac (heart) muscle damaged by ischemic (I.E., tissue death)
heart disease from congestive heart failure ("CHF") or by other cardiac
diseases. Heart disease is a leading cause of death and disability in the United
States, with more than 1,000,000 CHF patients who will die within two years
following their diagnosis. The market for MSC regeneration of cardiac muscle is
estimated by the Company at 300,000 patients in the United States, and over
1,000,000 patients worldwide. The Company believes that cardiac tissue
regeneration represents an important application for its MSC technology because:
(i) prior studies have shown that MSCs are capable of differentiating into
muscle cells; (ii) recent research by other groups have demonstrated the
potential for implanted tissue to integrate into cardiac muscle; and (iii) a
significant economic benefit exists for treating heart muscle otherwise
incapable of regenerating itself. The Company has submitted a grant application
in the amount of $2,000,000 to the U.S. National Institute for Standards and
Technology to pursue cardiac muscle regeneration using MSC technology. If
awarded, the Company intends to commit additional funds to the program.
The Company also intends to pursue research and development of fat tissue
regeneration with a view toward MSC products for plastic and reconstructive
surgery using a patient's own fat-generating MSCs.
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The Company believes that improved contours and implant retention would result
from soft tissue implants or injections that combine MSCs with an appropriate
collagen matrix. The Company believes that approximately 100,000 craniofacial
and breast augmentation patients could be candidates for plastic or
reconstructive treatment involving MSC products each year in the United States.
The Company intends to seek research grants and corporate collaborators to
co-develop MSC products for both cardiac muscle and fat tissue regeneration.
However, there can be no assurance that the Company will be awarded any grants,
that the funding will be adequate, that corporate collaborations can be
developed, or that research results will be suitable to commercialize any MSC
products for cardiac muscle regeneration or plastic and reconstructive surgery.
See "Risk Factors--Uncertainty of Product Development" and "--Need for
Additional Substantial Funds."
GENE THERAPY
Gene therapy is a therapeutic approach with the potential to alter the
course of certain genetic diseases and to deliver useful drugs within the body.
Gene therapies are generally designed to introduce a missing normal gene into
otherwise defective human tissue, or to introduce a novel biopharmaceutical into
the body via a gene not present. The therapeutic gene of interest is inserted
into a suitable vector that can be used to transport and integrate the gene into
the DNA of the target cell. The gene then produces the newly coded protein
within the target cell. The Company believes that MSCs may be useful clinically
for gene therapy to correct inborn or acquired tissue disorders or for the IN
VIVO production of therapeutic drugs through their expression in tissues derived
from genetically modified MSCs.
MSCS FOR GENE THERAPY. The Company believes that the ability to incorporate
into MSCs a desired DNA sequence through a vector represents a significant
enabling technology for gene therapy. The ability to use a self-renewing stem
cell that can be culture-expanded and provides continuing gene expression IN
VIVO has eluded gene therapy companies. The Company has demonstrated that MSCs
can be isolated and culture-expanded directly IN VITRO, maintain their stem cell
state and express inserted genes at high frequency IN VIVO. Furthermore,
mesenchymal tissues are replaced at a slower rate than hematopoietic cells,
permitting potentially longer term gene expression.
DEVELOPMENT STATUS. The Company has demonstrated that MSCs can be
transduced at high efficiency and that MSCs containing the added DNA (I.E.,
transduced cells) can be further expanded to high levels of purity in culture.
The Company was issued a U.S. patent covering transduced MSCs for use in gene
therapy. The Company intends to focus further research activities on improving
the efficiency of its core gene transduction technology. In addition, research
will be directed toward the expression of other genes IN VIVO. The Company has
entered into a collaboration with Novartis to pursue these studies in three
target genes. See "Business--Collaborative and Licensing Agreements--Novartis
Agreement."
MSC PRODUCTS FOR GENE THERAPY. There are no gene therapy products on the
market, although a number are undergoing human clinical trials. Significant
research is being conducted currently in the field of gene therapy and therapies
may be developed for the treatment of inflammatory and autoimmune diseases,
neurodegenerative diseases, cardio-pulmonary diseases and other diseases
resulting from a missing or defective gene. However, there can be no assurance
that the Company will be able to develop safe and efficacious applications of
MSC products for gene therapy. Successful development of the Company's MSC
products for gene therapy will require substantial additional research and
development, including clinical testing, and will be subject to the Company's
ability to operate successfully under its collaborative agreement with Novartis,
enter into additional collaborations and finance such activities on its own
where necessary. See "Risk Factors--Uncertainty of Product Development" and
"--Need for Substantial Additional Funds."
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BIOPHARMACEUTICALS
MESENGENIC FACTORS
The Company is conducting research into mesengenic growth and
differentiation factors, focusing on molecules that regulate MSC growth and
stimulatory factors for lineage commitment. Osiris has commenced research to
identify the growth factors and stimulatory factors that are required for the
self-renewal, proliferation and differentiation of MSCs. To date, the Company
has identified a number of mesengenic factors which are unique or novel to MSCs.
If successful in identifying and purifying these factors, the Company intends to
pursue further development of these factors as biopharmaceuticals which affect
the proliferation and differentiation of MSCs. These factors could be used alone
or in conjunction with cell therapy products containing MSCs. The Company
intends to pursue commercialization of mesengenic biopharmaceuticals through one
or more corporate collaborators.
HEMATOPOIETIC FACTORS
Mesenchymal stem cells and hematopoietic stem cells are distinct and unique
progenitors, each of which can give rise to complex, multicellular pathways that
ultimately produce cells and tissues which have completely different structures
and functions. Both stem cells appear to be in close cell-to-cell contact and
are believed to be the source of yet unidentified growth factors, principally
those made by MSCs, which are partly responsible for regulating the formation of
mature blood cells. The interaction of the two stem cells in the bone marrow
represents a major new field of cell transplant medicine and immune system
biology. The Company believes that the interaction between MSCs and HSCs in bone
marrow could lead to a new class of biopharmaceuticals that are based on the
expression of unique cross-signaling molecules between MSCs and HSCs.
The Company is using its knowledge of mesenchymal and hematopoietic stem
cells to detect molecules that regulate HSC proliferation and differentiation
into mature blood cells. The Company has initiated research on mesengenic
factors that affect the signaling pathways associated with hematopoietic stem
cells in order to develop novel biopharmaceuticals for the treatment of cancer,
blood and immune disorders. The Company intends to pursue commercialization of
hematopoietic biopharmaceuticals through one or more corporate collaborators.
However, there can be no assurance that any safe and efficacious mesenchymal
or hematopoietic biopharmaceuticals will be developed by the Company or receive
regulatory approval. Successful development of the Company's mesenchymal and
hematopoietic biopharmaceuticals will require substantial additional research
and development, including clinical testing, and will be subject to the
Company's ability to enter into and operate successfully under future
collaborative agreements and finance such activities on its own, where
necessary. See "Risk Factors--Uncertainty of Product Development" and "--Need
for Substantial Additional Funds."
COLLABORATIVE RESEARCH AND LICENSING AGREEMENTS
Where consistent with its business strategy, the Company intends to enter
into collaborations or to license product and marketing rights to selected
strategic collaborators to capitalize on the research, production, development,
regulatory and marketing capabilities of these organizations. The Company's
principal collaborative research, license and technology agreements are set
forth below.
NOVARTIS AGREEMENT
In June 1997, the Company entered into a Research and Licensing Agreement
with Novartis Pharmaceuticals Corporation (the "Novartis Agreement") for the
development of MSC products for osteoporosis, osteoarthritis, cartilage injury
and selected gene therapy applications. Pursuant to the Novartis Agreement, the
Company is entitled, subject to certain conditions, to receive up to $50,000,000
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during the five-year period of the agreement for research and development
funding of the Company's osteoporosis, osteoarthritis, cartilage and certain
portions of its gene therapy research programs. The Company also could receive
milestone payments of up to $93,000,000, contingent upon the achievement of
specified regulatory milestones in connection with the development of products
pursuant to the Novartis Agreement. There can be no assurance, however, that the
Company will become entitled to the full $50,000,000 of research and development
funding or that any of the products currently contemplated for development
pursuant to the Novartis Agreement will achieve the specified milestones
entitling the Company to any of the milestone payments. In connection with
entering into the Novartis Agreement, Novartis Pharmaceuticals Corporation also
paid the Company an initial up-front payment of $3,000,000 and Novartis Pharma
AG purchased 1,176,500 shares of Common Stock for $10,000,250.
In return, Novartis Pharmaceuticals Corporation received exclusive worldwide
rights to use and sell certain MSC products in the osteoporosis, osteoarthritis,
cartilage injury and gene therapy fields developed during the collaboration.
Novartis Pharmaceuticals Corporation is required to pay the Company royalties
based upon net sales, if any, for such products. The Company has retained
exclusive rights to manufacture MSC products for sale in North America in the
osteoporosis, osteoarthritis and cartilage injury fields at cost plus a
percentage profit, subject to certain conditions.
Under the Novartis Agreement, in addition to the up-front payment, the
equity investment and the research and milestone payments noted above, Novartis
Pharmaceuticals Corporation is responsible for funding the cost of all clinical
development, regulatory submissions, marketing and sales and manufacturing
(excluding North America) of MSC products, if any, developed pursuant to the
collaboration. As a result, the Company is dependent upon Novartis
Pharmaceuticals Corporation to seek regulatory approvals for, to conduct trials
for and to determine the ultimate commercialization of the MSC products subject
to the collaboration.
DEFENSE ADVANCED RESEARCH PROJECTS AGENCY AGREEMENT
In June 1996, the U.S. Defense Advanced Research Projects Agency ("DARPA"),
awarded a sole-source, multi-year research contract to the Company for research
into the use of human MSCs as a strategic platform for detection and treatment
of biological and chemical agents. The $6,000,000 in funding provided under the
DARPA Agreement, consisting of $2,000,000 per year for three years (supplemented
by cost-sharing contributions from the Company in the form of equipment and
indirect costs), is being used to conduct two projects focusing on: (i) a novel
delivery system for vaccines using MSCs; and (ii) a novel detection system for
toxic or biological agents using MSCs. The Company retains all commercial rights
to inventions which result from its research under the DARPA agreement. In May
1997, the Company received approval for the second year of funding under the
contract, having successfully completed the first year's milestones.
SMALL BUSINESS INNOVATION RESEARCH GRANTS
In March 1997, the Company was awarded a $750,000 Phase II SBIR grant for a
two-year continuation of research into tendon regeneration. The Company intends
to match the funding received under this grant in order to accelerate its
product development efforts in tendon regeneration. Under the SBIR program, the
Company retains the rights to commercialize technology developed with the SBIR
funding, subject to certain limitations. Previously, the Company was awarded two
Phase I research grants under the SBIR Program for research on the use of MSC
therapy in tendon regeneration and facial joint repair.
ACADEMIC COLLABORATIONS
CASE WESTERN RESERVE UNIVERSITY. In February 1995, the Company entered into
a three-year, $1,440,000 agreement with Case Western Reserve University ("CWRU")
for research in the laboratories of the Company's scientific founders. The CWRU
research agreement is focused on research in four areas
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of the Company's long-term product interest, namely: (i) the regeneration of
bone which has been depleted by osteoporosis; (ii) the regeneration of joint
cartilage which has degenerated through osteoarthritis; (iii) the regeneration
of meniscal knee cartilage to prevent subsequent osteoarthritis; and (iv) the
identification and synthesis of a bioactive factor(s) which support the IN VIVO
proliferation of MSCs. Rights to discoveries and patentable inventions resulting
from the CWRU research agreement are licensed exclusively to the Company. Under
the Technology Transfer and License Agreement with CWRU (the "CWRU License
Agreement"), the Company purchased the rights to its first three issued patents
and, subject to rights retained by the U.S. Government and research rights
retained by CWRU, the Company has an exclusive, worldwide license to all
additional MSC patents relating thereto developed by Drs. Caplan and Haynesworth
or persons working under their direction at CWRU. The License Agreement provides
for royalty-free ownership under the first three patents and requires the
Company to pay royalties on revenues related to technology covered by subsequent
CWRU patents, with royalty payments commencing on the third anniversary of the
date on which such products are first sold.
THE JOHNS HOPKINS UNIVERSITY. In December 1994, Gryphon Pharmaceuticals,
Inc. ("Gryphon") entered into a Research and License Agreement with The Johns
Hopkins University (the "JHU Agreement") under which Gryphon agreed to sponsor
for up to five years the hematopoietic stem cell research of Drs. Curt I. Civin
and Donald Small. Research under the JHU Agreement is focused specifically on
identifying unique cell signaling molecules that regulate the self-renewal,
commitment and differentiation of hematopoietic stem cells and their progenitor
cells. Dr. Civin is the original discoverer of the CD34 antibody that is used
commercially to separate hematopoietic stem cells and their progenitor cells
from mature blood cells and platelets during bone marrow transplantation.
Gryphon is a majority-owned subsidiary of the Company and was formed to
research, develop and ultimately commercialize HSC growth factors,
differentiation molecules and the biopharmaceuticals based on the Civin/Small
technology. Gryphon will provide $2,200,000 in research funding to the
Civin/Small laboratories over five years. Under a Share and Warrant Purchase
Agreement dated December 23, 1994, the Company agreed to provide Gryphon
$1,200,000 over a three-year period ending July 1, 1997, as well as a $1,000,000
loan over the following two-year period, for use towards this research funding.
In exchange for this research funding, Gryphon will receive worldwide exclusive
commercial rights to hematopoietic stem and progenitor cell discoveries under
the JHU Agreement. Gryphon has granted the Company an exclusive license to
mesenchymal stem cell discoveries under a separate License Agreement dated
December 23, 1994.
Gryphon is expected to conduct the majority of its research and development
activities through its own staff and facilities and those of The Johns Hopkins
School of Medicine. Gryphon intends to pursue, as part of its primary
commercialization strategy, research and development agreements with
biotechnology companies and with major international pharmaceutical companies to
substantially broaden and accelerate development of its hematopoietic stem cell
technology. It is anticipated that Gryphon will require substantial additional
funds to conduct its planned operations prior to the time, if ever, that Gryphon
realizes revenues from such agreements, product sales or royalties on product
sales. There can be no assurance that Gryphon will be able to obtain additional
funds through such means or any other means. If additional funds are raised by
issuing equity securities, the Company's ownership interest in Gryphon will be
diluted and the Company may no longer own a majority of Gryphon's outstanding
voting stock.
CENTRO DI BIOTECNOLOGIE AVANZATE, GENOA, ITALY. In July 1997, the Company
entered into a three-year, $1,000,000 agreement with the Centro di Biotecnologie
Avanzate for research in the laboratories of Dr. Ranieri Cancedda (the "CBA
Agreement"). The CBA Agreement is focused on research in three areas of the
Company's long-term product interest, namely: (i) regeneration of bone marrow
stroma and other elements of bone marrow following chemotherapy; (ii)
regeneration of bone which has been depleted by cancer chemotherapy or
osteoporosis; and (iii) regeneration of damaged skeletal and connective tissue
in orthopaedic applications. Rights to discoveries and patentable inventions
resulting from the CBA Agreement will be licensed exclusively to the Company.
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FRED HUTCHINSON CANCER RESEARCH CENTER. The Company is sponsoring
preclinical studies for stromal cell reconstitution at the Fred Hutchinson
Cancer Research Center in Seattle, Washington. The goal of these studies is to
determine the ability of MSCs to enhance hematopoietic reconstitution and marrow
engraftment following cancer chemotherapy or radiation ablation therapy. See
"Business--Stroma Regeneration--Development Status" for details on the content
and results of this research collaboration.
IRELAND CANCER CENTER AT UNIVERSITY HOSPITALS OF CLEVELAND. Osiris has
provided a grant-in-aid in support of an investigator-sponsored clinical trial
using human MSCs derived from the bone marrow of patients receiving ablative
chemotherapy treatment for advanced breast cancer. The trial is primarily a
safety study to identify any toxicities associated with infusion of MSCs and to
determine whether the combination of MSCs and peripheral blood stem/progenitor
cells accelerates engraftment and blood-formation relative to historical
controls.
TUFTS UNIVERSITY AND THE CLEVELAND CLINIC FOUNDATION. The Company is
sponsoring preclinical studies at Tufts University to determine the efficacy of
MSCs for the regeneration of segmental bone defects. The Company is sponsoring
preclinical studies at the Cleveland Clinic Foundation to determine the efficacy
of MSCs for the regeneration of bone in a spinal fusion indication.
PATENTS AND INTELLECTUAL PROPERTY
The Company seeks to protect its technology through normal trade secret
protection and, where appropriate, U.S. and foreign patent filings. The Company
owns or has an exclusive license to five patents granted in the United States
relating to: (i) isolated human mesenchymal stem cells and therapeutic
compositions containing such cells; (ii) producing bone or cartilage through the
use of human mesenchymal stem cells; (iii) repairing connective tissue damage
through the use of human mesenchymal stem cells; (iv) isolated human mesenchymal
stem cells transfected with genetic material for potential use in gene therapy;
(v) certain antibodies against human osteogenic cells and the use thereof. The
Company also owns or has licenses to over thirty-five United States and foreign
patent applications directed to MSC technology.
The Company also relies on trade secrets and unpatentable know-how which it
seeks to protect, in part, by confidentiality agreements. It is the Company's
policy to require its officers, employees, consultants, contractors,
manufacturers, outside scientific collaborators and sponsored researchers and
other advisors to execute confidentiality agreements. These agreements provide
that all confidential information developed or made known to the individual
during the course of the individual's relationship with the Company is to be
kept confidential and not disclosed to third parties except in specific limited
circumstances. The Company also requires signed confidentiality or material
transfer agreements from any company that is to receive its confidential data.
In the case of employees, consultants and contractors, the agreements generally
provide that all inventions conceived by the individual while rendering services
to the Company shall be assigned to the Company as the exclusive property of the
Company. There can be no assurance, however, that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets or unpatentable know-how will not otherwise become
known or be independently developed by competitors. See "Risk Factors--Patents
and Proprietary Rights."
COMPETITION
The Company is developing products that compete with existing products and
may compete with products being developed by other companies. Competition in the
development of human therapeutics is particularly intense and includes many
large pharmaceutical and medical device companies, biopharmaceutical companies,
specialized biotechnology firms, universities and other research institutions.
Some of these competitors have extensive financial, marketing and human
resources which give them a significant competitive advantage. Pharmaceutical
companies have extensive experience in conducting
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human clinical trials, in obtaining regulatory approval to market products and
in large-scale manufacturing. Other biopharmaceutical companies also have more
resources and experience in these areas than the Company. A number of
pharmaceutical companies have entered or expanded their presence in
biotechnology by collaborating with these companies.
The technology underlying the development of human therapeutic products is
expected to continue to undergo rapid and significant advancement and change. In
the future, the Company's technological and commercial success will be based on
its ability to develop proprietary positions in key scientific areas and
efficiently evaluate potential product opportunities.
The Company's products may compete directly with various morphogenic
proteins (I.E., growth factors) being developed by certain companies for the
repair of musculoskeletal tissue. Genetics Institute, Inc., Chiron Corporation,
Genentech, Inc., Creative BioMolecules, Inc. and Amgen Inc. are developing
recombinant morphogenic proteins for enhancing or augmenting the repair of
musculoskeletal defects. In addition, the Company believes that a number of
pharmaceutical companies, such as Bristol-Myers Squibb Company, Merck & Co.,
Inc., Rhone-Poulenc Rorer Inc., Eli Lilly & Company and SmithKline Beecham Plc,
are developing other recombinant human proteins (primarily growth factors) for
use in the repair of musculoskeletal defects.
Other products and therapies that may compete with the Company's MSC
products include various bone fill or bone replacement products such as
demineralized bone matrix, hydroxyapatite and tricalcium phosphate ceramics.
Certain companies, such as Osteotech, Inc., CryoLife, Inc. and LifeCell
Corporation, are processing allograft musculoskeletal tissues and derivative
products for the repair of tissue defects. While these products have proven to
be effective in treating certain musculoskeletal injuries, their widespread use
may be limited by availability of cadaver donor tissue. Other companies utilize
electrical or ultrasonic stimulation devices to augment the repair of
fractures-at-risk and bone non-unions.
In the area of soft tissue repair, companies such as Advanced Tissue
Sciences, Inc., Integra LifeSciences Corporation, Genzyme Corporation (Tissue
Repair Division) and Organogenesis Inc. are pursuing projects to develop
products for cartilage repair, with or without the inclusion of cultured
chondrocytes. The Company believes that these approaches will not be as
effective as MSC products because, unlike MSCs, they may not form the proper
extracellular matrix characteristic of normal tissue formed from stem cells.
A number of biotechnology and pharmaceutical companies are pursuing the
development of recombinant growth factors and hormones for the treatment of
osteoporosis. These companies include Chiron Corporation, Amgen Inc., Creative
BioMolecules, Inc., Genetics Institute, Inc. and others. Other major
pharmaceutical companies have developed or are pursuing the development of
traditional drugs for the prevention of osteoporosis. The Company believes that
it is the only company seeking to develop an autologous cell-based osteoporosis
treatment for the regeneration of bone to reverse the course of bone loss.
In addition to competing with pharmaceutical and biotechnology companies,
the Company's products and technologies will also compete with those developed
by academic institutions, governmental agencies and other public organizations
conducting research that may discover new therapies, seek patent protection or
establish collaborative arrangements for product research.
The Company believes that in addition to patent position, efficacy and
price, the timing of a product's introduction may be a major factor in
determining eventual commercial success and profitability. Early entry may have
important advantages in gaining product acceptance and market share.
Accordingly, the relative speed with which the Company can complete preclinical
and clinical testing, obtain regulatory approvals and supply commercial
quantities of the product is expected to have an important impact on the
Company's competitive position, both in the United States and international
markets. Other companies
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may succeed in developing similar products that are introduced earlier, are more
effective or are produced and marketed more effectively. There can be no
assurance that research and development by others will not render any of the
Company's products obsolete or noncompetitive. See "Risk Factors--Rapid
Technological Change; Competition."
SALES AND MARKETING
The Company's strategy is to market products through large pharmaceutical,
medical device or biotechnology companies. Implementation will depend in large
part on the market potential of any products the Company develops as well as on
the Company's financial resources. Novartis has the worldwide right to market
future products, if any, resulting from the collaboration with the Company with
respect to osteoporosis, osteoarthritis, cartilage repair and selected gene
therapy applications. The Company does not expect to have a direct sales
capability for at least the next several years. For the foreseeable future, the
Company plans to focus its activities on the research, development and
manufacturing of multiple products from its broad MSC technology platform.
MANUFACTURING
The Company has completed construction of a 1,300 square foot pilot
manufacturing plant at its facility in Baltimore, Maryland, for use in its
planned human clinical trials for MSC products. The Company is pursuing the
validation and certification of the facility by the FDA for use as a clinical
cell processing facility. As such, the facility will be subjected to regulation
by the FDA under current and planned GMP procedures for the operation of a cell
processing facility. There can be no assurance that the facility will be
validated or approved for the manufacture of MSC products for clinical use. In
addition, the Company will be required to develop a production scale processing
facility for the manufacture of products, if any are developed, for its MSC
technologies. The inability to finance, validate or manufacture any MSC product
could adversely affect the Company's ability to develop and deliver commercially
feasible products on a timely and competitive basis. See "Risk Factors--Lack of
Manufacturing, Marketing or Sales Capabilities."
GOVERNMENT REGULATION
Biological products, medical devices, combination products and human tissue
products, including the Company's products under development, are subject to
extensive and rigorous regulation by the federal government, principally the
FDA, and by state and local governments. If these products are marketed outside
the U.S., they also are subject to export requirements and to regulation by
foreign governments. The applicable regulatory clearance process, which must be
completed prior to the commercialization of a product, is lengthy and expensive.
There can be no assurance that the Company or its collaborative partners will be
able to obtain necessary regulatory approvals on a timely basis, if at all, for
any of the Company's products under development. Delays in or failure to receive
such approvals, the loss of previously received approvals, or failure to comply
with existing or future regulatory requirements could have a material adverse
effect on the Company.
The FDA requirements for the Company's products under development will vary
depending upon whether the product is regulated as a biological product, medical
device, combination product or cellular or tissue-based product. Because the
Company is still at the early stages of product development and because certain
FDA policies with regard to tissue products are still evolving, it is not
possible to determine which statutory and regulatory requirements will apply to
any products eventually developed by the Company. It is not possible at the
present time to predict either the timeframe for completion of various
regulatory initiatives which could affect the Company's future products, or the
ultimate effect that they could have, if any, on the products under development
by the Company.
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Furthermore, it is uncertain if and when the Company or its corporate
collaborators will submit any applications, if required, for any of its cell
therapy products and biopharmaceuticals under development for any indications.
There can be no assurance that any studies will be completed or, if completed,
will demonstrate that the products are safe and effective for their intended
uses, or that approval, if required, will be granted by the FDA or other
comparable international agency on a timely basis, or at all, for any of these
products for any studied indications. Failure of the Company or its corporate
collaborators to obtain any required marketing approval of any of its products
would have a material adverse effect on the Company.
FDA PROPOSED REGULATION OF HUMAN CELLULAR AND TISSUE-BASED PRODUCTS
In March 1997, the FDA proposed a comprehensive framework for the regulation
of human cellular and tissue-based products ("FDA's Proposed Approach to
Regulation of Cellular and Tissue-Based Products"). Although this announcement
represents the FDA's current view in this area of regulation, it is only at the
proposed stage and there is no assurance that this is the framework the agency
ultimately will adopt. If this proposal is implemented, it may apply to some of
the Company's cell therapy products and biopharmaceuticals. The products for
which it does not apply will be regulated under the FDA's biological product,
medical device and combination product laws and regulations.
The FDA's Proposed Approach to Regulation of Cellular and Tissue-Based
Products would subject human cell and tissue products to a tiered approach to
regulation. The level of regulation will depend on the level of risk posed by
the product. Under this proposed scheme, disease screening, testing and
manufacturing under "Good Tissue Practices" ("GTPs") would be recommended for
tissue that is processed only through minimal manipulation. Minimally processed
structural tissue (E.G., ligaments, bones, cartilage, tendons) used for its
normal function and having no non-tissue parts would be subject to GTPs, but
would not require a premarket approval submission to the FDA. Metabolic tissue
(I.E., tissue that affects the function of the entire body) that has been
manipulated, or is used for other than its normal function, or has nontissue
parts, would be subject to more comprehensive processing controls than GTPs, and
premarket approval by the FDA would be required. Given the nature of the
Company's products, premarket approval is likely to be required for the
Company's cell therapy products and biopharmaceuticals under development. If
premarket approval is required, the standard for effectiveness would be
consistent with that required for comparable medical devices and biological
product approvals.
Certain of the Company's cell therapy products under development utilize
autologous MSCs taken from a patient and isolated, purified and expanded IN
VITRO using the Company's proprietary process. After expansion, the cells are
transplanted back to the same patient to regenerate injured or defective tissue.
The FDA currently considers the isolation, purification and expansion processes
as more than minimal manipulation and is likely to require that a Biologic
License Application ("BLA") under the FDA's biological product regulations be
filed for MSC products. See "--Regulation of Biological Products."
ORPHAN PRODUCT STATUS
The Company may seek orphan product designation for certain cell therapy
products intended for low incidence (fewer than 200,000 patients) indications.
Before a product can receive marketing exclusivity associated with orphan
product status, it must receive orphan product designation. If a product
receives such designation and it is the first FDA-approved application for the
specified indication, the applicant would receive seven years of marketing
exclusivity. The Company or its collaborative partners ultimately may not seek
orphan product designation. Further, if such designation is sought, the FDA may
not grant it. Moreover, other companies also may receive orphan designation and
obtain FDA marketing approval first. If this occurs and another company receives
seven-year marketing exclusivity for the same product, the Company and its
collaborative partners would not be permitted to market its product in the U.S.
during the exclusivity period. If the FDA regulates the product as a cell,
tissue or medical device rather than as a biological, the product would not be
eligible for orphan drug designation, approval or exclusivity.
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REGULATION OF BIOLOGICAL PRODUCTS
Some of the Company's cell therapy products and biopharmaceuticals may be
subject to the biological product regulations. During their clinical
development, biological products are regulated pursuant to IND requirements.
Product development and approval takes a number of years, involves the
expenditure of substantial resources and is uncertain. Many biological products
that appear promising ultimately do not reach the market because they cannot
meet FDA or other regulatory requirements. In addition, there can be no
assurance that the current regulatory framework will not change through
regulatory, legislative or judicial actions or that additional regulation will
not arise during the Company's product development that may affect approval,
delay the submission or review of an application, if required, or require
additional expenditures by the Company.
The activities required before a new biological product may be approved for
marketing in the U.S. primarily begin with preclinical testing, which includes
laboratory evaluation and animal studies to assess the potential safety and
efficacy of the product as formulated. Results of preclinical studies are
summarized in an IND application to the FDA. Human clinical trials may begin 30
days following submission of an IND application, unless the FDA requires
additional time to review the application.
Clinical testing involves the administration of the biological product to
healthy human volunteers or to patients under the supervision of a qualified
principal investigator, usually a physician, pursuant to an FDA-reviewed
protocol. Each clinical study is conducted under the auspices of an
institutional review board ("IRB") at each of the institutions at which the
study will be conducted. A clinical plan, or "protocol," accompanied by the
approval of an IRB, must be submitted to the FDA prior to commencement of each
clinical trial. Human clinical trials are conducted typically in three
sequential phases. Phase I trials consist of, primarily, testing the product's
safety in a small number of patients or healthy volunteers. In Phase II, the
safety and efficacy of the product is evaluated in a patient population. Phase
III trials typically involve additional testing for safety and clinical efficacy
in an expanded population at geographically dispersed sites. The FDA may order
the temporary or permanent discontinuance of a preclinical or clinical trial at
any time for a variety of reasons, particularly if safety concerns exist.
A company seeking FDA approval to market a biological product must file a
BLA. In addition to reports of the preclinical and human clinical trials
conducted under the FDA-approved IND application, the BLA includes evidence of
the product's safety, purity, potency and efficacy, as well as manufacturing,
product identification and other information. Submission of a BLA does not
assure FDA approval for marketing. The application review process generally
takes one to three years to complete, although reviews of drugs and biological
products for life-threatening diseases may be accelerated or expedited. However,
the process may take substantially longer.
The FDA requires at least one and often two properly conducted, adequate and
well-controlled clinical studies demonstrating efficacy with sufficient levels
of statistical assurance. However, additional information may be required.
Notwithstanding the submission of such data, the FDA ultimately may decide that
the BLA does not satisfy the regulatory criteria for approval and not approve
the application. The FDA may impose post-approval obligations, such as
additional clinical tests following BLA approval to confirm safety and efficacy
(Phase IV human clinical trials). The FDA may, in some circumstances, also
impose restrictions on the use of the biological product that may be difficult
and expensive to administer. Further, the FDA requires reporting of certain
safety and other information that becomes known to a manufacturer of an approved
biological product. Product approvals may be withdrawn if compliance with
regulatory requirements is not maintained or if problems occur after the product
reaches the market.
Prior to approving an application, the FDA will inspect the prospective
manufacturer to ensure that the manufacturer conforms to the FDA's current Good
Manufacturing Practices ("GMP") regulations. To comply with the GMP regulations,
manufacturers must expend time, money and effort in product recordkeeping and
quality control to assure that the product meets applicable specifications and
other requirements. The FDA periodically inspects manufacturing facilities in
the U.S. and abroad in order to
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assure compliance with applicable GMP requirements. Failure of the Company to
comply with the FDA's GMP regulations or other FDA regulatory requirements could
have a significant adverse effect on the Company.
After a product is approved for a given indication in a BLA, subsequent new
indications or dosage levels for the same product are reviewed by the FDA via
the filing and approval of a BLA supplement. The BLA supplement is more focused
than the BLA and deals primarily with safety and effectiveness data related to
the new indication or dosage. The Company will be required to comply with
certain post-approval obligations, such as compliance with GMPs.
REGULATION OF COMBINATION PRODUCTS
Some of the cell therapy products which the Company intends to develop may
be regulated as combination biological product/medical devices. The cellular
therapy products, which the Company anticipates will include both MSCs and
biomatrices, may be considered combination biological/medical devices. If a
product is a combination product, in most instances a single application will be
filed with the FDA and one center at the FDA (E.G., the Center for Biologics
Evaluation and Research) will have primary jurisdiction over the application.
The application may contain both a medical device premarket approval ("PMA")
application and a BLA. Accordingly, both sets of applicable regulations to the
product (E.G., the biological products laws and regulations and, as described in
detail below, the medical device laws and regulations) may be applied to the
combination product.
REGULATION OF MEDICAL DEVICES
If a product contains a device as part of a combination product, the Company
and/or its collaborative partners will need to obtain premarket clearance or PMA
for the device component from the FDA under the medical device authorities of
the FDC Act. In general, companies are required to obtain clearance of a
premarket notification ("510(k) notification") submission or approval of a PMA
application from the FDA before it begins to market a medical device in the
United States.
If a medical device manufacturer or distributor can establish that a device
is "substantially equivalent" to a legally marketed predicate device, the
manufacturer or distributor may seek clearance from the FDA to market the device
by filing a 510(k) notification. If a manufacturer of a medical device cannot
establish that a proposed device is substantially equivalent to a legally
marketed predicate device, the manufacturer must seek PMA of the proposed device
from the FDA through the submission of a PMA application. A PMA application,
like a BLA, must be supported by extensive data, including preclinical and
clinical trial data, to demonstrate the safety and effectiveness of the device.
If human clinical trials of a device are required and the device presents a
"significant risk," the manufacturer of the device must file an investigational
device exemption ("IDE") application prior to commencing human clinical trials.
Following receipt of the PMA application, if the FDA determines that the
application is sufficiently complete to permit a substantive review, the agency
will "file" the application. Once the submission is filed, the FDA begins a
review of the PMA application. The FDA has 180 days to review a PMA application,
although the reviews of such applications more often occur over a significantly
protracted time period of two years or more from the date of filing.
During the review of a PMA application, an advisory committee likely will be
convened to review and evaluate the application. Although the committee's
recommendation is not binding on the agency, the vote likely will influence the
agency's decision. In addition, prior to approval, the FDA will inspect the
manufacturing facility to ensure compliance with the FDA quality system
regulations for medical devices. If granted, the PMA may include significant
limitations on the indicated uses for which the product may be marketed, and the
agency may require post-marketing studies of the device. The FDA also requires
reporting of certain safety and other information that becomes known to the
manufacturer.
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FOREIGN REQUIREMENTS
Whether or not FDA approval has been obtained, approval of a product by the
comparable regulatory authorities of foreign countries must be obtained prior to
the commencement of marketing of the product in those countries. The approval
process varies from country to country and the time required may be longer or
shorter than that required for FDA approval. The export of unapproved products
also is subject to FDA regulation.
OTHER REGULATIONS
The Company is subject to numerous federal, state and local laws relating to
such matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control and disposal of hazardous or potentially
hazardous substances. In addition, advertising and promotional materials
relating to biological products and medical devices are, in certain instances,
subject to regulation by the Federal Trade Commission or the FDA. There can be
no assurance that the Company will not be required to incur significant costs to
comply with such laws and regulations in the future or that such laws or
regulations will not have a materially adverse effect upon the Company's ability
to do business.
PERSONNEL
The Company currently has 69 full-time employees and one part-time employee,
of which 60 are engaged in research and development activities (25 with M.D.,
Ph.D. or D.V.M. degrees) and the remainder in general and administrative
functions. The Company plans to hire up to 40 additional research and
administrative personnel by the end of 1997, in part to meet the contractual
requirements of the Novartis, DARPA and SBIR research agreements. None of the
Company's employees are covered by collective bargaining agreements and
management considers relations with its employees to be good.
FACILITIES
The Company entered into a Sublease Agreement with the Maryland Economic
Development Corporation to lease its principal offices and laboratories in the
Fells Point area of Baltimore's Inner Harbor. Under terms of the Sublease
Agreement, the State of Maryland provided grants, guaranteed renovation loans
and bond financing of approximately $4,700,000 to construct 30,000 square feet
of office and wet lab facilities. The Company has the right to lease 50,000
square feet or more of expansion space and to purchase the building
(approximately 185,000 square feet) under certain circumstances. The State of
Maryland has committed its best efforts to arrange additional expansion
financing for the Company of up to $7,000,000.
In June 1997, the Company completed construction of a pilot processing
facility to provide MSC isolation, culturing and processing services to support
the Company's plans for human clinical studies for bone marrow stroma
reconstitution and other clinical studies over the next several years. The
Company has initiated validation procedures for its newly constructed pilot
plant for the production of autologous MSCs for human clinical trials and plans
to seek FDA certification for the facility in late 1997. This facility, located
within the Company's principal laboratory and office facility, will have the
ability to handle multiple clinical trials and has a capacity of approximately
300 patients per year, which the Company expects will increase with improvements
in MSC culture-expansion techniques.
LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings, although from
time to time it may become involved in disputes in connection with the operation
of its business.
43
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, KEY EMPLOYEES AND CONSULTANTS
The following table sets forth certain information regarding the Company's
directors, executive officers, key employees and consultants:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------- --------- --------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Max Link, Ph.D. (1)(2)(3)................... 56 Chairman of the Board
James S. Burns (1).......................... 50 President, Chief Executive Officer and
Director
Daniel R. Marshak, Ph.D..................... 40 Senior Vice President, Research and
Development and Chief Technology Officer
Michael J. Demchuk, Jr...................... 42 Vice President & Chief Financial Officer and
Secretary
David J. Fink, Ph.D......................... 53 Vice President, International Technology
Development
Stephen L. Gordon, Ph.D..................... 52 Vice President, Advanced Technology
Development
Jack L. Bowman.............................. 64 Director
Peter Friedli (1)(2)(3)..................... 43 Director and Consultant
Mark Novitch, M.D........................... 65 Director
OTHER KEY EMPLOYEES AND CONSULTANTS
Stewart Craig, Ph.D......................... 36 Vice President, Product & Process
Development
Ernst B. Hunziker, M.D...................... 49 Executive Director, Orthopaedic Research
Scott P. Bruder, M.D., Ph.D................. 35 Director, Bone Regeneration
Mark A. Thiede, Ph.D........................ 41 Director, Cancer & Metabolic Bone Disease
Randell G. Young, D.V.M..................... 39 Associate Director, Tendon & Preclinical
Studies
Frank P. Barry, Ph.D........................ 39 Associate Director, Cartilage Research &
Analytical Biochemistry
Joseph P. Mosca, Ph.D. ..................... 43 Associate Director, Immunology & Gene
Therapy
</TABLE>
- ------------------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
44
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
MAX LINK, PH.D., has been Chairman of the Board since December 1994. Dr.
Link has extensive experience in pharmaceutical and biotechnology management,
with particular emphasis on the creation of major transplant and immune therapy
businesses based on stem cells, immunosuppressants for organ and tissue
transplants and monoclonal antibodies. From 1993 to 1994, he was the Chief
Executive Officer of Corange, Limited/Boehringer Mannheim (U.K.), a diversified,
multinational health care company with major market positions in
biopharmaceuticals, therapeutics, clinical diagnostics and orthopaedic devices.
From 1987 to 1993, Dr. Link was the Chief Executive Officer and subsequently the
Chairman of Sandoz Pharma Ltd., based in Basel, Switzerland, a worldwide
developer and marketer of pharmaceuticals, particularly transplant
pharmaceuticals. Prior thereto, Dr. Link was President and Chief Executive
Officer of Sandoz, Inc., the U.S. subsidiary of Sandoz AG. Dr. Link currently
serves on the Boards of Directors of Procept, Inc. and Protein Design Labs, Inc.
Dr. Link received his Ph.D. in Economics from St. Gallen University in
Switzerland.
JAMES S. BURNS is a founder of the Company and has served as President and
Chief Executive Officer since its inception in December 1992. Mr. Burns has
extensive experience in founding, managing and funding new companies based on
biomedical science. Prior to founding the Company, he was the Vice Chairman of
HealthCare Investment Corporation and was a founding general partner of
HealthCare Ventures, L.P., venture capital funds specializing in forming new
health care product and service companies. Previously, Mr. Burns was Group
President of Becton Dickinson and Company, responsible for biotechnology and
emerging health care businesses. He also served as Vice President and Partner
for Technology Management Services at Booz Allen & Hamilton, Inc., a
multinational management consulting firm. He earned his B.S. and M.S. degrees in
Biological Sciences from the University of Illinois and an M.B.A. from DePaul
University.
DANIEL R. MARSHAK, PH.D., has served as the Company's Senior Vice President,
Research and Development and Chief Technology Officer since October 1994. From
April 1986 until October 1994, Dr. Marshak was Senior Staff Investigator at the
Cold Spring Harbor Laboratory, Cold Spring Harbor, New York. He also served as
Assistant Professor, Department of Physiology & Biophysics, School of Medicine,
State University of New York at Stony Brook and Assistant Professor, Departments
of Biochemistry & Cell Biology, Graduate School, State University of New York.
Dr. Marshak has extensive research experience in the isolation, purification,
cloning and characterization of cells and signal transduction molecules involved
in cancer and neurological disorders. Dr. Marshak received his B.S. from Harvard
University and his Ph.D. from the Rockefeller University.
MICHAEL J. DEMCHUK, JR., has served as the Company's Vice President & Chief
Financial Officer and Secretary since November 1996. Mr. Demchuk has extensive
experience in the financial and administrative management of emerging life
science and health care service companies. From February 1995 until October
1996, Mr. Demchuk was Vice-President--Acquisitions for Integrated Health
Services, Inc., a national post-acute health care services provider. From
September 1992 until January 1995, he served as Vice President and Chief
Financial Officer for Gliatech, Inc., a company engaged in the development of
products for the prevention of surgical adhesions and central nervous system
disorders. He has also served as the Vice President and Chief Financial Officer
for Nova Pharmaceutical Corporation, a bio-pharmaceutical research and
development company focused on drugs for treating inflammatory and neurological
disorders. Mr. Demchuk is a certified public accountant and received his B.S. in
Business Administration from the University of Maryland.
DAVID J. FINK, PH.D., has served as Vice President, International Technology
Development since June 1997 having previously served as the Vice President of
Osiris Research, Inc. since December 1994 and as Director, Biomatrix
Development, since January 1993. He is also Adjunct Assistant Professor in the
Department of Biology at Case Western Reserve University. Dr. Fink has served as
President of Bio-
45
<PAGE>
Integration Incorporated and was previously President of CollaTek, Inc. which
developed a novel processing technology for manufacturing medical implant
devices from biopolymers. Dr. Fink was previously a research manager at the
Battelle Columbus Division where he managed or participated in over 100 research
projects. Dr. Fink received his Ph.D. in Chemical Engineering from the
University of Michigan.
STEPHEN L. GORDON, PH.D., has served as Vice President for Advanced
Technology Development since July 1995, responsible for academic collaborations,
seeking external support of specific research projects and managing grant
research programs at the Company. From 1979 until 1995, Dr. Gordon served as the
Chief, Musculoskeletal Diseases Branch, of the National Institute of Arthritis
and Musculoskeletal and Skin Diseases. He managed, planned, developed and
evaluated a large grant portfolio in orthopaedic and related research. Dr.
Gordon received his B.S., M.S. and Ph.D. from Drexel University.
JACK L. BOWMAN has been a Director since June 1997. Mr. Bowman has extensive
prior experience as a senior executive in multinational health care companies,
with particular emphasis on ethical and OTC pharmaceuticals, clinical
diagnostics and medical devices. From 1987 to 1994, he was Group Chairman of
Johnson & Johnson, responsible for much of its global pharmaceutical, diagnostic
and OTC businesses. From 1980 to 1987, Mr. Bowman served as Executive Vice
President of American Cyanamid and as President of its Lederle Laboratories
Division. Prior thereto, he served as the Executive Vice President,
Pharmaceutical Division of the Ciba-Geigy Corporation. Mr. Bowman is a Director
of NeoRx Corporation, Cell Therapeutics, Inc., CytRx Corporation, Targeted
Genetics Corporation and Cellegy Pharmaceuticals, Inc. Mr. Bowman received his
B.A. in Education and is a graduate of the Stanford University Senior Executive
and Financial Management Programs.
PETER FRIEDLI, a director of the Company, has been a principal of the
investment banking firm Friedli Corporate Finance, Inc. since 1986. He worked in
the field of international management consulting for service and industrial
companies in Europe and the United States from 1978 until 1986. He has over a
decade of experience as an independent investment manager in corporate finance
and has successfully managed various venture investment companies in the United
States. Mr. Friedli is actively involved in the management of several public and
private companies and serves on the Boards of Directors of five of those private
companies.
MARK NOVITCH, M.D., retired in December 1993 as Vice Chairman of The Upjohn
Company, where he was responsible for pharmaceutical control, regulatory
affairs, strategy and planning, business development, legal, government affairs
and public relations. Dr. Novitch also previously served as Executive Vice
President and as Senior Vice President, Science Administration at The Upjohn
Company. Prior thereto, Dr. Novitch served as Acting Commissioner and as Deputy
Commissioner of the FDA. He has also served as Associate Commissioner for Health
Affairs and as a Federal Executive Fellow at the Brookings Institution.
Presently, Dr. Novitch serves as Adjunct Professor of Health Care Sciences at
George Washington University. Dr. Novitch was the recipient of the FDA Award of
Merit and the Presidential Meritorious Executive Award. Dr. Novitch serves on
the Boards of Directors of Alteon, Inc., Calypte Biomedical Corporation, Guidant
Corporation, Kos Pharmaceuticals, Inc. and Neurogen Corporation. He received an
A.B. from Yale University and an M.D. from New York Medical College.
OTHER KEY EMPLOYEES AND CONSULTANTS
STEWART CRAIG, PH.D., is Vice President, Product & Process Development.
Prior to joining Osiris, from June 1995 to June 1996 Dr. Craig served as Vice
President, Product & Process Development and Quality Compliance and from January
1994 to June 1995 as Director of Protein Chemistry at Systemix Inc., a
hematopoietic stem cell therapy company. At SyStemix, Dr. Craig was responsible
for managing the development of methods, devices and controls for the isolation,
analysis and EX VIVO manipulation of hematopoietic stem cells for clinical
application. From 1987 through 1993, Dr. Craig served in various research and
development positions at British Biotech Pharmaceuticals Ltd., Oxford, England,
working on design, purification and characterization of various recombinant
cytokine, growth factor and thrombolytic
46
<PAGE>
protein molecules. Dr. Craig received his B.Sc. in Biochemistry and Ph.D. in
Physical Biochemistry from the University of Newcastle Upon Tyne, UK.
ERNST B. HUNZIKER, M.D., is Executive Director, Orthopaedic Research,
responsible for the Company's research programs in cartilage regeneration, bone
regeneration and osteoarthritis. He is also a member of the osteoporosis and
tendon program teams. Since 1989, Dr. Hunziker has served as Professor of
Biomechanics and Director of the M. E. Muller Institute for Biomechanics at the
University of Bern, Switzerland. Dr. Hunziker is the author of many studies
covering the structure, function and repair of cartilage and bone. He is the
Co-Chairman of the Swiss Connective Tissue Society and serves on the Editorial
Boards of the Journal of Bone and Joint Surgery (U.S.) and the Journal of
Histochemistry and Cell Biology. Dr. Hunziker received his M.D. degree from the
University of Bern.
SCOTT P. BRUDER, M.D., PH.D., has been Senior Research Scientist and
Director, Bone Regeneration, responsible for establishing cell biology and
biochemical assay methods for the isolation and purification of mesenchymal stem
cells, as well as the Company's research efforts in bone regeneration products
since February 1994. Dr. Bruder is also Adjunct Assistant Professor in the
Department of Orthopaedics at CWRU. He completed a medical internship and was
pursuing an ophthalmology residency prior to joining Osiris. Dr. Bruder received
his M.D. and Ph.D. degrees from CWRU.
MARK A. THIEDE, PH.D., has been a Senior Research Scientist with the Company
since October 1994 and is presently Director, Cancer & Metabolic Bone Disease,
responsible for the development of MSC products used in bone marrow stroma
regeneration and osteoporosis. Dr. Thiede also leads the Company's program to
identify mesengenotrophic agents produced by hematopoietic cells. From 1991
until joining the Company, Dr. Thiede was a Senior Research Scientist with the
Osteoporosis Group at Pfizer Central Research where he designed and implemented
preclinical IN VIVO studies which provided molecular profiles of promising drug
discovery candidates. Prior thereto, Dr. Thiede completed a postdoctoral
fellowship with the Osteoporosis and Bone Biology Group at Merck Sharp and Dohme
Research Laboratories and remained on thereafter as a Senior Research
Biochemist. Dr. Thiede received his Ph.D. in Molecular Biology from the
University of Connecticut Health Center.
RANDELL G. YOUNG, D.V.M., has been a Senior Research Scientist since
November 1993 and has served as Associate Director, Tendon & Preclinical Studies
since July 1997. Dr. Young previously served as a Senior Research Associate in
the Skeletal Research Center at CWRU from 1991 to November 1993, where he was
responsible for designing and implementing the various animal protocols used to
test the role of mesenchymal stem cell transplants for cartilage, tendon,
ligament, bone and muscle disorders. Dr. Young is also a principal veterinary
surgeon involved in collaborative research programs with the Department of
Orthopaedics at the University Hospitals of Cleveland. He received his D.V.M.
degree from Ohio State University.
FRANK P. BARRY, PH.D., has served as a Senior Research Scientist since
October 1994 and has served since July 1997 as Associate Director, Cartilage
Research & Analytical Biochemistry, responsible for the development of biomatrix
materials for use in mesenchymal stem cell implants, with particular emphasis on
cartilage regeneration. From 1992 until joining the Company, Dr. Barry was a
Research Fellow at Shriners Hospital for Crippled Children, Tampa, Florida, and
Assistant Professor in Biochemistry and Molecular Biology at the University of
South Florida College of Medicine. Prior thereto, he was a College Lecturer in
Biochemistry at the National University of Ireland, preceded by research studies
at the Kennedy Institute of Rheumatology in London, England. Dr. Barry received
his Ph.D. from the National University of Ireland.
JOSEPH P. MOSCA, PH.D., has served as Senior Research Scientist since
January 1996 and has served since July 1997 as Associate Director, Immunology &
Gene Therapy, responsible for human mesenchymal stem cell surface expression,
MSC interactions with hematopoietic progenitor cells as related to the use of
the MSC as an antigen presenting cell. Before joining Osiris, Dr. Mosca spent
seven years as Principal Investigator at the Henry M. Jackson Foundation.
Previous to that, Dr. Mosca was an Assistant Professor
47
<PAGE>
at The Johns Hopkins Oncology Center. Dr. Mosca has extensive research
experience in interferon research, herpes virology, gene therapy at both the
stromal and hematopoietic level, human immunodeficiency virus type-1 expression
and inhibition, in addition to stimulation of T cells through the CD28 receptor.
Dr. Mosca received his Ph.D. in Biochemistry from Temple University Medical
Center in Philadelphia, and did his post-doctoral work at The Johns Hopkins
University.
SCIENTIFIC ADVISORY BOARD AND CONSULTANTS
Osiris has established a Scientific Advisory Board ("SAB") consisting of
scientists and clinicians in the fields of cartilage regeneration, implantable
biomaterials, orthopaedic surgery, osteoarthritis, cell biology, tissue
biochemistry, cell cycle and differentiation, soft tissue medicine and molecular
biology. The SAB and the Company's consultants evaluate projects and
collaborations proposed by the Company's management, evaluate the Company's
research programs, advise the Company with respect to MSC technology and related
matters, and recommend personnel and academic and industry collaborations. The
SAB members and consultants are as follows:
<TABLE>
<CAPTION>
NAME POSITION/AFFILIATION AREA OF EXPERTISE
- --------------------------------- ------------------------------------- ----------------------------
<S> <C> <C>
Victor M. Goldberg, M.D.......... Professor & Chairman, Orthopaedic Surgery and
Department of Orthopaedics Bio-Orthopaedics
Case Western Reserve University
David L. Butler, Ph.D. .......... Professor of Engineering Orthopaedic Soft Tissue
Mechanics and Biomedical Engineering Biomechanics
University of Cincinnati
Arnold I. Caplan, Ph.D. ......... Director of Skeletal Research Center Developmental Biology and
Professor of Biology, Biophysics and MSC Research
Physiology
Case Western Reserve University
Curt I. Civin, M.D. ............. Director and King Fahd Stem Cell Regulation,
Professor of Pediatric Oncology Cancer & Transplantation
The Johns Hopkins University
Stanton L. Gerson, M.D. ......... Professor and Director Bone Marrow Stroma
Division of Hematology-Oncology and Gene Therapy
Case Western Reserve University
Dick K. Heinegard, M.D., Ph.D. .. Professor of Physiological Chemistry Cartilage Proteins and
University of Lund, Sweden Biochemistry
Daniel R. Marshak, Ph.D. ........ Senior Vice President, Cell and Molecular Biology,
Research & Development Protein Chemistry and
Osiris Therapeutics, Inc. Cell Cycle Regulation
</TABLE>
VICTOR M. GOLDBERG, M.D., a founder of the Company, is Professor & Chairman,
Department of Orthopaedics, Case Western Reserve University. He is also Director
of the University Musculoskeletal Institute at the University Hospitals of
Cleveland, one of the largest multidisciplinary academic clinical centers in the
U.S. specializing in the entire range of bone, muscle, joint and spine
disorders. Dr. Goldberg's research activity over the past two decades has
involved the basic mechanisms of cartilage degeneration and repair,
osteoarthritis progression, allograft bone and cartilage transplants. He has
served as a member of the National Musculoskeletal NIH Study Section, the
National Arthritis Advisory Board
48
<PAGE>
and as President of the Orthopaedic Research Society. Dr. Goldberg has twice
received the Kappa Delta Award for Research Excellence in Orthopaedic Surgery
from the American of Orthopaedic Surgeons.
DAVID L. BUTLER, PH.D., is Professor of Engineering Mechanics and Biomedical
Engineering, University of Cincinnati. Dr. Butler's research over the past
twenty years has focused on the biomechanics of soft tissue, particularly,
tendon, ligament and cartilage tissues. Dr. Butler has authored or co-authored
over 150 publications dealing with the repair or replacement of tendon and
ligaments after injury. He is a Founding Fellow of the American Institute of
Medical and Biological Engineering. Dr. Butler is the recipient of numerous
honors for his work in orthopaedic biomechanics, including the Kappa Delta Award
from the American Academy of Orthopaedic Surgeons, the Cabaud Award from the
American Orthopaedic Society of Sports Medicine and the Gustus L. Larson
Memorial Award from the American Society of Mechanical Engineers.
ARNOLD I. CAPLAN, PH.D., a founder of the Company, is Professor, Department
of Biology; Professor of General Medical Sciences; Professor of Biophysics and
Physiology; and Director of the Skeletal Research Center at Case Western Reserve
University. For more than 20 years, Dr. Caplan has led the field of tissue
embryogenesis, resulting in the identification and isolation of human
mesenchymal stem cells in 1988. Dr. Caplan has been responsible for over $15
million in research grants focusing on the cellular mechanisms underlying the
regeneration of bone, ligament, tendon and cartilage. Dr. Caplan is a recipient
of the Elizabeth Winston Lanier/Kappa Delta Award given by the American Academy
of Orthopaedic Surgeons for his pioneering work in MSCs.
CURT I. CIVIN, M.D., is the Director and King Fahd Professor of Pediatric
Oncology, The Johns Hopkins University and Medical Institutions. Dr. Civin has
extensive research experience in hematopoietic stem cell biology, as well as in
leukemia biology and monoclonal antibodies. His discovery of the CD34 monoclonal
antibody pioneered hematopoietic stem cell purification for research and
clinical stem cell transplants used in the treatment of cancer and selected
inherited disorders and in gene therapy. Dr. Civin's current research focuses on
the discovery and functional investigation of stem cell molecules involved in
the developmental regulation of the hematopoietic and immune systems. His
clinical practice is concentrated on the care of childhood cancers, with special
focus on leukemia and bone marrow transplantation. Dr. Civin has served on
numerous extramural research committees and corporate boards, and is the
recipient of key honors such as Scholar of the Leukemia Society of America.
STANTON L. GERSON, M.D., is Professor of Medicine, Director of the Division
of Hematology-Oncology, Department of Medicine, Case Western Reserve University
School of Medicine. Dr. Gerson has had extensive research and clinical
experience in the treatment of leukemias/lymphomas and the protection of normal
cells during treatment. He is also a principal investigator on the use of MSCs
during bone marrow transplantation and their use as gene therapy for the
treatment of single gene tissue disorders. Dr. Gerson is a member of the
National Cancer Institute Gene Therapy Programs Review Committee and the
National Cancer Institute Special Review Committee.
DICK K. HEINEGARD, M.D., PH.D., is Chairman and Professor, Department of
Medical and Physiological Chemistry at Lund University. Dr. Heinegard's
extensive research has focused on the identification, purification and
characterization of proteoglycans and matrix proteins from bone and cartilage,
working toward determining the role of various matrix constituents in bone and
cartilage matrix assembly/ disassembly. Of particular interest are several bone
proteins which mediate bone resorption and turnover. Dr. Heinegard was the 1989
recipient of the Hilda and Alfred Erikssons prize for "contributions to the
understanding of disease" by the Swedish Royal Academy of Sciences.
DANIEL R. MARSHAK, PH.D., is described under "Executive Officers, Directors,
Key Employees and Consultants" above.
49
<PAGE>
BOARD DESIGNATION RIGHT OF NOVARTIS
In connection with the Company's sale of 1,176,500 shares of Common Stock to
Novartis, the Company agreed to use reasonable best efforts to cause, at the
request of Novartis, the election to the Board of Directors a nominee of
Novartis deemed reasonably acceptable by the Board of Directors. Novartis' right
to nominate a representative to the Board of Directors expires upon the earlier
of the termination of the Novartis Agreement or the first date following June
16, 2000 on which Novartis owns less than 4% of the Company's outstanding shares
of Common Stock. In lieu of designating a nominee to the Board of Directors,
Novartis may designate a representative, reasonably acceptable to the Company,
who shall be permitted to attend meetings of the Board of Directors as an
observer.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee which has the
powers and authority of the full Board of Directors on all matters, except as
those limited by law. Dr. Link, Mr. Friedli and Mr. Burns are the members of the
Executive Committee. The Company has also established a Compensation Committee
which is responsible for determining compensation for the Company's executive
officers and administering the Stock Plan. Dr. Link and Mr. Friedli are the
members of the Compensation Committee. The Company has also established an Audit
Committee of non-employee directors which is responsible for making
recommendations concerning the engagement of independent public accountants,
reviewing the plans and results of the audit engagement with the independent
public accountants, reviewing the independence of the independent public
accountants, considering the range of audit and non-audit fees and reviewing the
adequacy of the Company's internal accounting controls. Dr. Link and Mr. Friedli
are the members of the Audit Committee.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash for their services. However,
directors who are not employees of the Company receive an initial grant of
options under the Stock Plan to purchase 18,750 shares of Common Stock vesting
over a three-year period and receive grants of 500 shares of Common Stock for
each Board meeting that they attend. An aggregate of 20,000 shares of Common
Stock have been granted to date to the directors pursuant to such arrangements.
No other non-cash compensation was paid to directors of the Company in their
capacities as directors during 1996. For a discussion of certain consulting
arrangements between the Company and Dr. Link and Mr. Friedli, respectively, see
"-- Compensation Committee Interlocks and Insider Participation."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Link and Mr. Friedli served as members of the Company's Compensation
Committee during 1996. In November 1994, the Company and Dr. Link entered into a
consulting agreement (the "Link Agreement") pursuant to which the Company agreed
to retain Dr. Link to provide business and financial advisory services for a
three-year term and to serve as the Company's Chairman of the Board. Under the
terms of the Link Agreement, Dr. Link purchased 80,000 shares of Common Stock
for a purchase price of $0.34 per share and purchased 52,550 shares of Series D
Preferred Stock at $2.55 per share. Of such shares of Common Stock, 10,000 were
issued without vesting restrictions and the remaining vest over three years and
upon the satisfaction of certain performance milestones. The Company expects
that all outstanding shares of Series D Preferred Stock will convert into Common
Stock upon completion of the Offering.
In November 1995, the Company and Friedli Corporate Finance AG ("Friedli
AG") entered into a Consulting Agreement (the "Friedli AG Agreement") pursuant
to which the Company agreed to retain Friedli AG to provide business and
financial advisory services for a seven-year term. In consideration of the
services provided by Friedli AG, the Company pays a fee of $4,000 per month and
will also pay for certain expenses of Friedli AG, up to $15,000 per year. In
addition, pursuant to the Friedli AG Agreement,
50
<PAGE>
the Company granted to Friedli AG a pre-emptive right to purchase up to 10% of
the shares offered by the Company in its initial public offering at the price to
the public of such offering. Accordingly, 350,000 shares (and 10% of any shares
purchased upon exercise of the Underwriters' over-allotment option) of Common
Stock will be offered to Friedli AG in this Offering. See "Underwriting." Mr.
Friedli and certain related entities also have purchased securities in various
private placements by the Company since 1993.
In connection with the 1995 Private Placement Offering of Series D Preferred
Stock, the Company sold, for nominal consideration, warrants to purchase from
the Company 226,627 shares of Common Stock at an exercise price of $3.00 per
share pursuant to an agreement with Friedli AG. A total of 151,947 warrants will
be exercisable until December 1, 2002, and 74,680 will be exercisable until
January 1, 2003.
In connection with the 1996 Series E Preferred Stock sale, the Company sold,
for nominal consideration, warrants to purchase from the Company 86,675 shares
of Common Stock at an exercise price of $4.50 per share pursuant to a placement
agency agreement with Friedli AG. Such warrants will be exercisable until
January 1, 2003.
EXECUTIVE COMPENSATION
The following table summarizes the 1996 compensation paid to or earned by
the Company's Chief Executive Officer and the only other executive officer whose
salary and bonus for services rendered in all capacities to the Company during
1996 exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- -----------------
OTHER ANNUAL ALL OTHER SECURITIES UNDER-
NAME AND PRINCIPAL POSITION(S) SALARY ($) COMPENSATION ($) COMPENSATION ($) (1) LYING OPTIONS (#)
- ----------------------------------------- ---------- ---------------- --------------------- -----------------
<S> <C> <C> <C> <C>
James S. Burns........................... $ 250,000 -- $ 3,264 --
President and Chief
Executive Officer
Daniel R. Marshak, Ph.D.................. 161,343 $ 18,500(2) 1,535 25,000
Senior Vice President,
Research and Development
</TABLE>
- ------------------------
(1) These amounts represent the premium for life insurance policies which the
Company maintains on Mr. Burns and Dr. Marshak for the benefit of their
designees.
(2) This amount represents the forgiveness of a portion of a $50,000 loan to Dr.
Marshak for the relocation of his residence pursuant to his employment
agreement and an automobile allowance of $500 per month.
51
<PAGE>
1996 OPTION GRANTS
The following table contains information about stock option grants to the
Named Executive Officers in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION
PERCENTAGE OF TOTAL FOR OPTION
NUMBER OF OPTIONS GRANTED TERM (3)
SECURITIES UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION --------------------
NAME OPTIONS GRANTED (1) FISCAL YEAR PRICE (2) DATE 5% 10%
- -------------------------------- ----------------------- ----------------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Daniel R. Marshak, Ph.D......... 25,000 8% $ 0.80 3/8/2006 $ 12,578 $ 31,875
</TABLE>
- ------------------------
(1) The option vested 20% immediately and the remaining 80% vest in four equal
annual installments beginning on March 8, 1997.
(2) The exercise price of the option is equal to the fair market value of the
underlying shares of Common Stock on the date of grant, as determined by the
Board of Directors.
(3) The 5% and 10% assumed rates of appreciation are established by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
OPTION EXERCISES AND YEAR-END VALUES
The following table provides information about the exercise of options by
the Named Executive Officers during 1996 and the number and value of options
held by the Named Executive Officers at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS AT
UNDERLYING UNEXERCISED FISCAL
OPTIONS AT FISCAL YEAR END
SHARES YEAR END (1)
ACQUIRED ON VALUE -------------------------- -----------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------------- ----------------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Daniel R. Marshak, Ph.D.................... -- -- 10,000 15,000 $ 10,000
<CAPTION>
NAME UNEXERCISABLE
- ------------------------------------------- -------------
<S> <C>
Daniel R. Marshak, Ph.D.................... $ 15,000
</TABLE>
- ------------------------
(1) The option value represents the fair market value of the underlying
securities on December 31, 1996 minus the aggregate exercise price of the
option. For purposes of this calculation, a fair market value of $1.80 per
share was used, the fair market value of the securities on December 31, 1996
as determined by the Board of Directors.
EMPLOYMENT AGREEMENTS
On March 11, 1993, the Company and James S. Burns entered into an Employment
Agreement (the "Burns Agreement") pursuant to which the Company agreed to employ
Mr. Burns as the President and Chief Executive Officer of the Company for a
period of three years, beginning on January 1, 1993, subject to renewal for
two-year periods unless otherwise terminated. Under the terms of the Burns
Agreement, as
amended in 1995, Mr. Burns is entitled to receive $250,000 in annual base
compensation through December 31, 1997. Mr. Burns is also entitled to receive a
bonus payment each year of up to 50% of base
52
<PAGE>
compensation based on the satisfaction of milestones established for such year
by the Board of Directors. Mr. Burns is also entitled to receive certain
employee benefits and other perquisites, including: (i) coverage for him and his
dependents under the Company's medical and disability plans; (ii) $1,000,000 of
life insurance naming Mr. Burns' designees as the beneficiaries; and (iii) an
option to purchase 37,500 shares of the Company's Common Stock.
In the event of a termination without cause, Mr. Burns is entitled to
receive severance pay equal to the greater of: (i) the cash compensation Mr.
Burns would have received through the end of the remaining employment term; and
(ii) the cash compensation he would have received during a twelve month period,
in each case based on the cash compensation for the immediately preceding year
of service. Mr. Burns is also entitled to continue his participation in the
Company's medical and disability plans for the same period of time on which his
severance pay is based. In the event of a termination resulting from Mr. Burns'
death or disability, Mr. Burns is entitled to receive a severance payment
calculated in the same manner as described in the preceding sentence but based
on a period of twelve months; however, in the case of a termination upon Mr.
Burns' death, such payment is subject to a dollar-for-dollar offset by the
proceeds of any life insurance maintained by the Company for the benefit of Mr.
Burns or his designees. The Burns Agreement contains confidentiality and
intellectual property covenants and a two-year non-compete covenant.
On October 1, 1994, the Company and Daniel R. Marshak, Ph.D., entered into
an Employment Agreement (the "Marshak Agreement") pursuant to which the Company
agreed to employ Dr. Marshak as Senior Vice President, Research and Development
and Chief Technology Officer of the Company for a period of three years, subject
to renewal for two-year periods unless otherwise terminated. Under the terms of
the Marshak Agreement, Dr. Marshak is entitled to receive $150,000 in annual
base compensation, which increases each October 1 by the greater of the
Company's local consumer price index ("CPI") or 5%. Dr. Marshak is also entitled
to receive a bonus payment each year of up to 30% of base compensation based on
the satisfaction of certain milestones established by the Chief Executive
Officer and approved by the Board of Directors. Dr. Marshak is also entitled to
receive certain employee benefits and other perquisites. In addition, Dr.
Marshak purchased 200,000 shares of Common Stock for a purchase price of $0.34
per share, which purchase amount of $68,000 was loaned to Dr. Marshak by the
Company. Of such shares, 18,750 were issued to Dr. Marshak and the remaining
shares vest over two years and upon the satisfaction of certain performance
milestones. The Marshak Agreement also contains provisions regarding
termination, severance payments, confidentiality, intellectual property and non-
competition which are substantially similar to those contained in the Burns
Agreement.
STOCK OPTION AND EMPLOYEE BENEFIT PLANS
AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
The Company has adopted the Amended and Restated 1994 Stock Incentive Plan
(the "Stock Plan"), under which up to 2,000,000 shares of the Company's Common
Stock may be granted pursuant to stock options or granted or sold as restricted
stock to directors, officers and employees of and consultants and advisors to
the Company. As of March 31, 1997, 1,553,756 shares of Common Stock were
reserved for issuance under the Stock Plan, pursuant to which options to
purchase a total of 615,710 shares were outstanding, and 359,494 shares of
restricted stock were granted or sold to officers, employees and consultants.
All of these options and shares are subject to vesting requirements based on
duration of employment (typically 25% per year of employment) or satisfaction of
certain performance milestones, and as of March 31, 1997, 188,080 of such shares
had vested.
The Stock Plan is administered by the Compensation Committee of the Board of
Directors. Subject to limitations set forth in the Stock Plan, the Committee
determines to whom options are granted, the option term, the exercise price,
vesting schedules and the rate at which options may be exercised. The maximum
term of options granted under the Stock Plan is ten years and the exercise price
may be equal to, less than or greater than the fair value of such shares. Under
the Stock Plan, the exercise price may be payable in
53
<PAGE>
cash or, at the discretion of the Board of Directors, in Common Stock or a
combination of cash and Common Stock.
SAVINGS PLAN
The Company has adopted the Osiris Therapeutics, Inc. Retirement Savings
Plan (the "Savings Plan"). The Savings Plan is intended to be a qualified
retirement plan under the Internal Revenue Code. Employees of the Company are
eligible to participate in the Savings Plan upon the completion of three
consecutive months of employment. Participants may make salary deferral
contributions to the Savings Plan, subject to limitations imposed by the
Internal Revenue Code. The Company may, but is not required to, make matching
contributions to the Savings Plan based on the participants' contributions.
Employer contributions are subject to a graduated vesting schedule based upon
length of service with the Company. The Company has not made any matching
contributions under the Savings Plan to date.
54
<PAGE>
CERTAIN TRANSACTIONS
From its inception in December 1992 to the date of this Prospectus, the
Company has sold and issued Common Stock and Preferred Stock which will convert
automatically into an aggregate of 9,367,003 shares of Common Stock upon the
completion of this Offering. See "Description of Capital Stock." The purchasers
of the Preferred Stock and Common Stock included, among others, the following
executive officers, directors and beneficial holders of more than 5% of the
Company's Common Stock (assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock) at prices ranging from $0.000278 to $8.50 per
share. The Company believes that all such purchases occurred in arm's-length
transactions on terms substantially equivalent to those offered to
non-affiliates.
<TABLE>
<CAPTION>
SERIES SERIES SERIES SERIES
NAME A C D E COMMON
- ---------------------------------------------------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Peter Friedli............................................. 630,750 -- 643,340 301,333 327,826
Arnold I. Caplan, Ph.D.................................... -- -- -- -- 1,266,000
Novartis Pharma AG........................................ -- -- -- -- 1,176,500
Invesco Trust Company..................................... -- 735,293 -- --
James S. Burns............................................ 16,750 -- 66,668 -- 735,000
Max Link, Ph.D............................................ -- -- 52,550 53,333 84,000
Daniel R. Marshak, Ph.D................................... -- -- -- -- 207,500
Mark Novitch, M.D......................................... -- -- -- -- 21,750
</TABLE>
For information regarding transactions with directors of the Company who
served in 1996 on the Compensation Committee of the Board of Directors, see
"Management--Compensation Committee Interlocks and Insider Participation,"
"--Executive Compensation" and "--Employment Agreements;" and "Consolidated
Financial Statements--Consolidated Statement of Changes in Stockholders'
Equity." For information regarding transactions with Novartis Pharma AG, see
"Business--Collaborative Research and Licensing Agreements--Novartis Agreement."
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 14, 1997 (adjusted to reflect the
conversion of all outstanding shares of Preferred Stock into Common Stock) and
as adjusted to reflect the sale of 3,500,000 shares of Common Stock in this
Offering: (i) by each person (or group of affiliated persons) known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock; (ii) by each of the Named Executive Officers; (iii) by each director of
the Company; and (iv) by all of the Company's directors and executive officers
as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARED BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING
(1) (1)
----------------------- -----------------------
<S> <C> <C> <C> <C>
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------
Peter Friedli (2).................................................... 2,738,381 17.7% 2,738,381 14.4%
Novartis Pharma AG (3)............................................... 1,176,500 7.9 1,176,500 6.4
Arnold I. Caplan, Ph.D. (4).......................................... 1,036,000 7.0 1,036,000 5.6
James S. Burns (4)................................................... 843,418 5.7 843,418 4.6
Invesco Trust Company (5)............................................ 833,333 5.6 833,333 4.6
Daniel R. Marshak, Ph.D. (6)......................................... 229,500 1.4 229,500 1.2
Max Link, Ph.D....................................................... 214,883 1.4 214,883 1.2
Mark Novitch, M.D.................................................... 21,750 * 21,750 *
Jack L. Bowman....................................................... 18,750 * 18,750 *
All directors and executive officers as a group (9 persons).......... 4,126,682 26.5% 4,126,682 21.7%
</TABLE>
- ------------------------
* Less than one percent.
(1) Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial
ownership of any securities as to which such person, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise
has or shares voting power and/or investment power and as to which such
person has the right to acquire such voting and/or investment power within
60 days. Percentage of beneficial ownership as to any person or group as of
a particular date is calculated by dividing the number of shares
beneficially owned by such person or group by the sum of the number of
shares outstanding as of such date and the number of shares as to which such
person or group has the right to acquire voting and/or investment power
within 60 days.
(2) Includes 50,000 shares and 212,000 shares issuable upon exercise of
warrants. Also includes the following shares and shares issuable upon the
exercise of warrants, as to which Mr. Friedli has investment power: 282,100
shares and 35,000 shares issuable upon exercise of warrants, held by Ascent
Holding AG; 168,750 shares and 20,000 shares issuable upon exercise of
warrants, held by Cruiseinvest Ltd.; 120,000 shares and 35,000 shares
issuable upon exercise of warrants, held by Eagle Growth Ltd.; 105,576
shares and 212,132 shares issuable upon exercise of warrants, held by Joyce
Ltd.; 333,340 shares held by Nikatech, Inc.; 100,000 shares and 71,000
shares issuable upon exercise of warrants, held by Pine Inc.; 233,562 shares
held by Spring Technology, Inc.; 250,000 shares held by USVentech, Inc.; and
205,000 shares held by Venturetec, Inc. Pursuant to Friedli AG's pre-emptive
right to purchase up to 10% of the shares offered by the Company in its
initial public offering, 350,000 shares (and 10% of any shares purchased
upon exercise of the Underwriters' over-allotment option) will be offered to
Friedli AG in this Offering. See "Underwriting." Mr. Friedli's address is
Freigutstrasse 5, 8002 Zurich, Switzerland.
(3) The address of Novartis Pharma AG is CH-4002 Basel, Switzerland.
(4) The address of Arnold I. Caplan, Ph.D., and James S. Burns is c/o Osiris
Therapeutics, Inc., 2001 Aliceanna Street, Baltimore, MD 21231.
(5) The address of Invesco Trust Company is 7800 East Union Drive, Suite 800,
Denver, Colorado 80237.
(6) Includes 22,000 shares issuable upon exercise of vested stock options.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock, $0.001
par value per share. Upon the consummation of this Offering, the Company will
have 18,375,744 shares of Common Stock outstanding (including 9,367,003 shares
of Common Stock to be issued upon conversion of all outstanding shares of
Preferred Stock). Each stockholder of record is entitled to one vote for each
outstanding share of Common Stock owned by him on every matter properly
submitted to the stockholders for their vote. Stockholder actions generally
require the approval of the holders of a majority of the Company's outstanding
shares of Common Stock.
Subject to the preferences which may be granted to holders of the Preferred
Stock, holders of Common Stock are entitled to any dividend declared by the
Board of Directors out of funds legally available for such purpose and to
receive on a pro rata basis all assets of the Company available for distribution
to the stockholders after the payment of liabilities in the event of the
liquidation, dissolution, or winding up of the Company. Holders of Common Stock
do not have any conversion, preemptive or other rights to become subscribers or
purchasers of additional shares of any class of the Company's capital stock, and
there are no redemption rights or sinking fund provisions with respect to the
Common Stock.
PREFERRED STOCK
As of the closing of this Offering, no shares of Preferred Stock will be
outstanding. Thereafter, the Board of Directors will be authorized, without
further stockholder approval, to issue up to 20,000,000 shares of Preferred
Stock in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences and to fix the number of
shares constituting any series and the designations of such series.
The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company and may discourage bids for the
Company's Common Stock at a premium over the market price of the Common Stock.
The issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to the holders of Common Stock or could adversely
affect the rights and powers, including voting rights, of the holders of the
Common Stock. In certain circumstances, such issuance could have the effect of
decreasing the market price of the Common Stock. The Company currently has no
plans to issue any shares of Preferred Stock.
WARRANTS
In connection with certain of its private placements of Preferred Stock and
business transactions, the Company has granted, or sold for nominal
consideration, warrants to purchase Common Stock and Preferred Stock to certain
investors, placement agents and business partners. The Company has outstanding
warrants to purchase an aggregate of 309,841 shares of Common Stock at $2.60 per
share, which are exercisable through September 24, 1998; warrants to purchase up
to an aggregate of 136,762 shares of Preferred Stock at $3.00 per share, which
are exercisable through the fifth anniversary of the completion of this
Offering; warrants to purchase an aggregate of 324,320 shares of Common Stock at
$3.00 per share, which are exercisable through December 1, 2002; warrants to
purchase an aggregate of 230,627 shares of Common Stock at $3.00 per share,
which are exercisable through January 1, 2003; warrants to purchase an aggregate
of 86,675 shares of Common Stock at $4.50 per share, which are exercisable
through January 1, 2002; and warrants to purchase an aggregate of 33,000 shares
of Preferred Stock at $3.00 per share, which are exercisable through seven years
from date of grant. Upon consummation of the Offering, all warrants to purchase
Preferred Stock will become exercisable to purchase an equal number of shares of
Common Stock at an equal exercise price.
57
<PAGE>
REGISTRATION RIGHTS AGREEMENTS
Following the sale of the shares of Common Stock offered hereby, the holders
of 3,246,228 shares issued upon the conversion of the Preferred Stock will have
certain rights to register those shares under the Securities Act. These rights
are provided under the terms of certain agreements among the Company and the
holders of such shares.
SERIES C AND SERIES C1 CONVERTIBLE PREFERRED STOCK. In connection with the
sale and issuance of the Series C and Series C1 Convertible Preferred Stock,
purchasers received certain demand and piggyback registration rights with
respect to the Common Stock issuable upon conversion of those shares (the
"Converted Series C and C1 Shares"). At any time following the earlier of six
months after the effective date of the registration statement for this Offering
and May 25, 1998, the holders of at least 50% of the Converted Series C and C1
Shares may require, on two occasions, that the Company register such shares for
public resale. In addition, if the Company registers any of its securities for
its own account (other than for the sale of securities under a stock option or
employee benefit plan), the holders of registrable shares are entitled to
include their shares in such registration. The participation of such holders in
any registration of the Company's securities is subject to the right of the
underwriters to limit the number of shares included in these offerings. The
holders of the Converted Series C and C1 Shares may also require the Company, on
two occasions every 12 months, to register all or a portion of their registrable
securities on Form S-3, when use of such form becomes available to the Company.
These registration rights, however, are subject to certain limitations,
including a requirement that the aggregate selling price must be at least
$1,000,000. All of the foregoing registration rights expire upon the fifth
anniversary of the Company's initial public offering of securities which yields
at least $7,500,000 in gross proceeds and a price per share to the public of at
least $13.60. With certain exceptions, all fees, costs and expenses of
registrations will be borne by the Company.
SERIES D CONVERTIBLE PREFERRED STOCK. One of the holders of the Company's
Series D Preferred Stock has certain demand and piggyback registration rights
with respect to the Common Stock issuable upon conversion of those shares (the
"Converted Series D Shares"). Within 30 days after the completion of this
Offering, the holder of the Converted Series D Shares may request that the
Company register no later than 180 days after completion of this Offering such
shares for public resale. In addition, if the Company registers any of its
securities for its own account (other than for the sale of securities under a
stock option or employee benefit plan), the holder is entitled to include its
shares in such registration. The participation of such holder in any
registration of the Company's securities is subject to the right of the
underwriters to limit the number of shares included in these offerings. With
certain exceptions, all fees, costs and expenses of registrations will be borne
by the Company.
SERIES E CONVERTIBLE PREFERRED STOCK. The holders of the Company's Series E
Preferred Stock have certain demand registration rights with respect to the
Common Stock issuable upon conversion of those shares (the "Converted Series E
Shares"). Within 30 days after the completion of this Offering, the holder of
the Converted Series E Shares may request that the Company register no later
than 180 days after completion of this Offering such shares for public resale.
These registration rights expire on December 22, 1997. With certain exceptions,
all fees, costs and expenses of registrations will be borne by the Company.
WARRANTS. Certain holders of the Company's warrants to purchase Common
Stock and Preferred Stock (which will be exercisable for an equal number of
shares of Common Stock upon consummation of this Offering) have certain demand
and piggyback registration rights with respect to the Common Stock issuable upon
exercise of those warrants (the "Warrant Shares"). If the Company registers any
of its securities for its own account (other than for the sale of securities
under a stock option or employee benefit plan), all such warrant holders are
entitled to include their Warrant Shares in such registration. The participation
of such holders in any registration of the Company's securities is subject to
the right of the underwriters to limit the number of shares included in these
offerings. In addition, certain warrant holders may require, on two occasions,
that the Company register their Warrant Shares for public resale. Other
58
<PAGE>
holders of the Company's warrants may, subject to certain limitations, require
the Company, on two occasions, to register all or a portion of their Warrant
Shares on Form S-3, when use of such form becomes available to the Company.
The existence and exercise of the foregoing registration rights may hinder
efforts by the Company to arrange future financing for the Company and may have
an adverse effect on the market price of the Common Stock. See "Risk
Factors--Need For Substantial Additional Funds."
DELAWARE LAW AND CERTAIN CHARTER, BYLAW AND OTHER PROVISIONS
The Company's Restated Certificate of Incorporation (the "Charter") allows
the Company to issue, without stockholder approval, Preferred Stock having
rights senior to those of the Common Stock. In addition, the Company will be
subject to the provisions of Section 203 of the Delaware General Corporation
Law. Section 203 prohibits publicly held Delaware corporations from engaging in
a "business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. These provisions could have the effect of
delaying, deferring or preventing a change in control of the Company or reducing
the price that certain investors might be willing to pay in the future for
shares of the Common Stock.
The Charter limits the personal liability of the Company's directors to the
fullest extent permitted by the Delaware General Corporation Law. Therefore, the
directors of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability: (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law, relating to prohibited
dividends or distributions or the repurchase or redemption of stock; or (iv) for
any transaction from which the director derives an improper personal benefit. As
a result of this provision, the Company and its stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Additionally, the Charter provides for indemnification of the Company's
directors and officers to the fullest extent permitted by law. The Company has
entered into indemnification agreements with its directors and officers which
may, in certain cases, be broader than the specific indemnification provisions
contained under applicable law. The indemnification agreements may require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers of the Company, to advance the expenses incurred by such
parties as a result of any threatened claims or proceedings brought against them
as to which they could be indemnified and to cover such officers or directors
under the Company's directors' and officers' liability insurance policies to the
maximum extent that insurance coverage is maintained.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer & Trust Company.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common Stock
of the Company. Sales of substantial amounts of Common Stock in the public
market following this Offering could adversely affect the prevailing market
price of the Common Stock and the Company's ability to raise capital in the
future.
Upon completion of this Offering, the Company will have a total of
18,375,744 shares of Common Stock outstanding, of which the 3,500,000 shares
offered hereby will be freely transferable without restriction under the
Securities Act by persons other than "affiliates" of the Company as defined in
Rule 144 under the Securities Act.
The remaining 14,875,744 shares of Common Stock outstanding are "restricted
securities" as the term is defined in Rule 144 (the "Restricted Shares"). Of the
Restricted Shares, 13,215,561 shares will become eligible for sale 90 days after
completion of the Offering, subject in some cases to certain volume restrictions
and other conditions imposed under Rules 144 and 701. The remaining 1,660,183
shares will be eligible for sale upon the expiration of their respective holding
periods as set forth in Rule 144. In addition, the holders of approximately
4,592,490 of the Restricted Shares, including shares acquired upon exercise of
certain outstanding warrants, are entitled to certain registration rights with
respect to such shares. See "Description of Capital Stock--Registration Rights
Agreements." Notwithstanding these rights, however, 14,434,421 of the Restricted
Shares are subject to lock-up agreements and may not be sold for 180 days
following the date of this Prospectus, although such agreements provide that
Smith Barney Inc. may, in its sole discretion and at any time without notice,
release all or a portion of the shares from these lock-up agreements.
Following the date of this Prospectus, the Company may register on one or
more registration statements on Form S-8 shares of Common Stock issuable under
the Stock Plan. Of the 2,000,000 shares issuable under the Stock Plan, 615,710
are subject to outstanding options as of March 31, 1997, 235,000 of which are
subject to lock-up agreements. Subject to the lock-up agreements, shares covered
by such registration statements will upon issuance pursuant to the Stock Plan
immediately be eligible for sale in the public market. In addition, the Company
has issued warrants to purchase 1,121,225 shares of Common Stock which are
currently exercisable, of which 721,894 shares are subject to the lock-up
agreements described above. See "Management--Stock Option and Employee Benefit
Plans."
In general, under Rule 144, a person (or persons whose shares are
aggregated), including an affiliate, who has beneficially owned shares for at
least one year (including holding periods of prior owners other than affiliates)
is entitled to sell, within any three-month period commencing 90 days after the
closing of this Offering, a number of shares that does not exceed the greater
of: (i) 1% of the then outstanding Common Stock (approximately 183,750 shares
immediately after this Offering, assuming no exercise of the Underwriters'
over-allotment option); or (ii) the average weekly trading volume in the public
market during the four calendar weeks preceding the sale, subject to the filing
of a Form 144 with respect to the sale and other limitations. In general, shares
issued in compliance with Rule 701 may be sold by non-affiliates subject to the
manner of sale requirements of Rule 144, but without compliance with the other
requirements of Rule 144. Affiliates may sell shares they acquired under Rule
701 in compliance with the provisions of Rule 144, except that there is no
required holding period. A person who is not an affiliate, has not been an
affiliate within three months prior to sale and has beneficially owned
restricted securities for at least two years, is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.
The Company has also agreed not to sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or grant any rights to acquire
Common Stock for a period of 180 days after the date of this Prospectus, without
the prior written consent of Smith Barney Inc., subject to certain limited
exceptions (including exercises of stock options).
60
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below (the
"Underwriters") has severally agreed to purchase, and the Company has agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Smith Barney Inc...........................................................
SBC Warburg Inc............................................................
-----------------
Total.................................................................. 3,500,000
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc. and SBC Warburg Inc. are acting
as the representatives (the "Representatives"), propose to offer part of the
shares directly to the public at the public offering price set forth on the
cover page of this Prospectus and part of the shares to certain dealers at a
price which represents a concession not in excess of $ per share under the
public offering price. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $ per share to certain other dealers. After the
initial offering of the shares to the public, the public offering price and such
concessions may be changed by the Representatives. The Representatives have
advised the Company that the Underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 525,000 additional
shares of Common Stock at the price to public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.
The Company, its officers and directors, and certain stockholders of the
Company, holding in the aggregate approximately 14,434,421 shares of Common
Stock, have agreed that, for a period of 180 days from the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell, or otherwise dispose of, any shares of
Common Stock of the Company or any securities convertible into, or exercisable
or exchangeable for, Common Stock.
Prior to this Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Shares
of Common Stock included in this Offering has been determined by negotiations
between the Company and the Representatives. Among the factors considered in
determining such price were the history of and prospects for the Company's
business and the industry in which it competes, an assessment of the Company's
management and the present state of development of the Company and its proposed
products, the past and present revenues of the Company, the prospects for
earnings of the Company, the current state of the economy in the United States
and the current level of economic activity in the industry in which the Company
competes and in related or comparable industries, and currently prevailing
conditions in the securities markets, including current market valuations of
publicly traded companies which are comparable to the Company.
61
<PAGE>
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
At the request of the Company, approximately 150,000 shares of Common Stock
offered hereby are being reserved for sale to certain persons, including Company
employees and others who have a business relationship with the Company. In
addition, the Underwriters will offer 350,000 shares (and 10% of any shares
purchased upon exercise of the Underwriters' over-allotment option) to Friedli
AG in satisfaction of a pre-emptive right under a consulting agreement between
the Company and Friedli AG. See "Management--Compensation Committee Interlocks
and Insider Participation."
In connection with this Offering and in compliance with applicable law, the
Underwriters may over-allot (I.E., sell more Common Stock than the total amount
shown on the list of Underwriters and participations which appears above) and
may effect transactions which stabilize, maintain or otherwise affect the market
price of the Common Stock at levels above those which might otherwise prevail in
the open market. Such transactions may include placing bids for the Common Stock
or effecting purchases of the Common Stock for the purpose of pegging, fixing or
maintaining the price of the Common Stock or for the purpose of reducing a
syndicate short position created in connection with the Offering. A syndicate
short position may be covered by exercise of the option described above rather
than by open market purchases. In addition, the contractual arrangements among
the Underwriters include a provision whereby, if, prior to termination of price
and trading restrictions, the Representatives purchase Common Stock in the open
market for the account of the underwriting syndicate and the securities
purchased can be traced to a particular Underwriter or member of the selling
group, the underwriting syndicate may require the Underwriter or selling group
member in question to purchase the Common Stock in question at the cost to the
syndicate or may recover from (or decline to pay to) the Underwriter or selling
group member in question, the selling concession applicable to the securities in
question. The Underwriters are not required to engage in any of these activities
and any such activities, if commenced, may be discontinued at any time.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Hogan & Hartson L.L.P., Washington, D.C. Certain legal
matters will be passed upon for the Underwriters by Manatt, Phelps & Phillips,
LLP, Los Angeles, California.
EXPERTS
The consolidated balance sheets as of December 31, 1995 and 1996 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996, and for the
period December 23, 1992 (date of inception) to December 31, 1996 included in
this Prospectus have been included herein in reliance upon the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
The statements in this Prospectus concerning the patents and patent
applications either owned or licensed by the Company under the captions "Risk
Factors--Uncertainty Regarding Patents and Proprietary Rights" and
"Business--Patents and Proprietary Rights" and the other references herein
concerning the patents and patent applications either owned or licensed by the
Company have been reviewed and approved by Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein, P.A., Roseland, New Jersey, patent counsel to the
Company, as experts on such matters and are included herein in reliance upon
that review and approval.
62
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act, of which this
Prospectus is a part, with respect to the Common Stock offered hereby. This
Prospectus omits certain information contained in the Registration Statement and
reference is made to the Registration Statement for further information with
respect to the Company and the Common Stock offered hereby. Statements contained
herein concerning the provisions of documents are necessarily summaries of such
documents and when any such document is an exhibit to the Registration
Statement, each such statement is qualified in its entirety by reference to the
copy of such document filed with the Commission. The Registration Statement,
including the exhibits and schedules thereto, may be inspected without charge at
the principal office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and the Commission's Regional Offices at Seven World Trade Center,
New York, New York 10048 and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621-2511 and copies may be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Registration Statement,
including all exhibits and schedules and such reports and other information may
also be accessed electronically by means of the Commission's site on the World
Wide Web, at http://www.sec.gov.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by its independent certified public accountants and
make available to its stockholders quarterly reports containing unaudited
financial data for the first three quarters of each fiscal year.
63
<PAGE>
GLOSSARY OF SCIENTIFIC TERMS
ABLATION: Surgical, chemotherapeutic or radiation excision of any part of
the body, such as bone marrow during high-dose chemotherapy.
ACUTE: Term used to describe disorders or symptoms that occur abruptly or
disorders or symptoms that run a short course.
ALLOGRAFT: A cellular, organ or tissue transplant derived from another
genetically distinct individual of the same species.
APLASTIC ANEMIA: A serious, progressive disease characterized by the bone
marrow's inability to produce blood cells, caused by certain medications,
diseases or toxic substances.
ARTICULAR SURFACE: The tissue surface of a joint which is composed of
cartilage.
AUTOLOGOUS: A cellular, organ or tissue transplant derived from the same
individual.
BIOMATRIX: A biological or biodegradable material used to contain MSCs or
other therapeutic material in a tissue regeneration implant.
BONE MARROW STROMA: The bone marrow matrix (derived from mesenchymal stem
cells) which provides a structural and growth factor microenvironment for
hematopoiesis.
BONE MARROW TRANSPLANTATION (BMT): The removal and storage of bone marrow
and subsequent transplantation following high-dose radiation and/or
chemotherapy. BMT involves the transplant of autologous marrow (patient to self)
or allogeneic marrow (donor to patient).
CARTILAGE: A white, cushiony connective tissue attached to the articular
ends of bone.
CHEMOTHERAPY: Treatment of disease by using chemicals that have a direct
effect on disease-causing organisms or disease cells; widely used in the
treatment of cancer
CHONDROCYTES: Cartilage-forming and cartilage-maintaining cells,
respectively.
CHONDROGENESIS: The process of forming cartilage from mesenchymal stem
cells.
CHRONIC: Term used to describe long-lasting diseases or conditions.
COLLAGEN: A group of fibrous protein constituents of bone, cartilage and
connective tissue.
CONNECTIVE TISSUE: Tissue of the embryonic mesoderm characterized by
extensive fibrous material which forms the human body's basic support structure.
EXTRACELLULAR MATRIX: Molecular scaffolding located outside of the cell.
GENE: Structure (DNA sequence) within a chromosome that is responsible for
inheritance of a particular characteristic.
GENE THERAPY: Direct insertion of a foreign gene or DNA sequence into a
host cell's genetic material to change the way cells function, to alter the
production of proteins that cells should make but cannot, or to stop the
production of aberrant or excess proteins.
HEMATOPOIESIS: The human body's replenishment process for the
differentiation, growth and maturation of all of the various blood cell
lineages.
64
<PAGE>
HEMATOPOIETIC STEM CELLS (HSCS): An undifferentiated, self-renewing,
pluripotent progenitor cell population consisting of less than 0.05% of bone
marrow cells which gives rise to all red and white blood cells.
LIGAMENT: Sheet or band of fibrous tissue connecting two or more bones or
cartilages.
MESENCHYMAL STEM CELLS (MSCS): Embryonic-like cell capable of
differentiating into multiple tissues of the mesoderm, including cartilage,
bone, tendon, ligament, muscle, stroma and fat.
MESENCHYMAL TISSUE: Structural and connective tissues of the body resulting
from the differentiation of mesenchymal stem cells and the subsequent production
of tissue-specific extracellular matrix.
MESENGENESIS: The proliferation, commitment, differentiation and maturation
of cells forming structural and connective tissue arising from mesenchymal stem
cells.
MESENGENIC FACTORS: Biologic factors, including stimulating factors,
cytokines and interleukins, which cause the differentiation, growth,
proliferation and maturation of specific cells in mesenchymal tissue.
MESODERM: The embryonic middle layer from which develop connective tissue,
bone, cartilage, muscle, ligament, tendon, the urogenital tract and vascular
system.
MULTIPLE MYELOMA: A blood cancer beginning in the bone marrow.
OSTEOARTHRITIS: Degenerative joint disease.
OSTEOCHONDRAL: Bone and cartilage components of a full-thickness joint
defect.
OSTEOGENESIS: The process of forming bone from mesenchymal stem cells.
OSTEOPOROSIS: A disease characterized by bone loss, resulting from
undersynthesis of new bone, especially in postmenopausal women.
OSTEOSARCOMA: A form of bone cancer.
PLATELETS: Blood components that promote coagulation.
PROGENITOR CELLS: Embryonic-like cells from which cells of one or more
phenotype are derived.
PROTEIN: One of the classes of complex biological macromolecules, composed
of amino acids; essential for the growth, structure maintenance and repair of
tissue.
REGENERATION OF TISSUE: The process by which culture-expanded mesenchymal
stem cells are transplanted into an injured or diseased tissue to cause an
embryonic-like reformation of structurally and functionally normal tissue.
RESECTION: The surgical removal of part of an organ or tissue.
SEGMENTAL BONE DEFECT: Large gaps in long bones resulting from resection,
usually the result of bone tumor excision.
STEM CELL: A self-renewing cell capable of differentiating into cells of
mature tissue.
STROMA OF MARROW: The connective tissue on which blood cells form in bone
marrow.
SYSTEMIC: Affecting or pertaining to the entire body rather than one of its
parts, usually referring to that which is delivered by way of the blood vessels.
TENDON: A band of tough, inelastic fibrous tissue which connects a muscle
to bone.
65
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-------------
<S> <C>
Report of Independent Accountants.................................................................. F-1
Consolidated Balance Sheets........................................................................ F-2
Consolidated Statements of Operations.............................................................. F-3
Consolidated Statements of Stockholders' Equity.................................................... F-4
Consolidated Statements of Cash Flows.............................................................. F-5
Notes to Consolidated Financial Statements......................................................... F-6 to F-19
</TABLE>
66
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Osiris Therapeutics, Inc.
We have audited the accompanying consolidated balance sheets of Osiris
Therapeutics, Inc. and Subsidiaries (the "Company"), a Development Stage
Enterprise, as of December 31, 1995 and 1996 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996 and for the period December
23, 1992 (date of inception) to December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Osiris
Therapeutics, Inc. and Subsidiaries as of December 31, 1995 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 and for the period December
23, 1992 (date of inception) to December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Rockville, Maryland
January 31, 1997
F-1
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, MARCH 31,
------------------------ MARCH 31, 1997 (NOTE
1995 1996 1997 14)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents (Note 2)..................... $ 6,925,613 $ 3,267,649 $ 1,639,402 $11,639,652
Securities available-for-sale (Note 2)................. -- 6,344,804 5,452,352 5,452,352
Contract revenue receivable............................ -- 347,862 500,000 500,000
Other current assets................................... 154,469 243,752 227,372 227,372
----------- ----------- ----------- -------------
Total current assets................................. 7,080,082 10,204,067 7,819,126 17,819,376
Property and equipment, net (Note 4)..................... 2,184,812 8,327,179 8,331,161 8,331,161
Other assets............................................. 160,053 246,931 244,700 244,700
----------- ----------- ----------- -------------
Total assets......................................... $ 9,424,947 $18,778,177 $16,394,987 $26,395,237
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 206,012 $ 568,888 $ 633,975 $ 633,975
Accrued expenses (Note 11)............................. 651,195 597,421 524,883 524,883
Note payable (Note 5).................................. 48,913 65,217 65,217 65,217
Obligations under capital leases (Note 9).............. 247,000 999,456 1,025,716 1,025,716
----------- ----------- ----------- -------------
Total current liabilities............................ 1,153,120 2,230,982 2,249,791 2,249,791
Note payable (Note 5).................................... 701,087 635,870 619,565 619,565
Obligations under capital lease (Note 9)................. 575,456 6,024,321 5,757,826 5,757,826
----------- ----------- ----------- -------------
Total liabilities.................................... 2,429,663 8,891,173 8,627,182 8,627,182
----------- ----------- ----------- -------------
Commitments and contingencies (Note 9)
Stockholders' equity:
Convertible Preferred Stock, issuable in series $.001
par value, authorized 20,000,000 shares; issued and
outstanding 6,326,187 shares, 9,268,963 shares and
9,268,963 shares (unaudited), respectively; no shares
(unaudited) issued and outstanding pro forma
(liquidation preference of $31,470,253 at December
31, 1996 and March 31, 1997 (unaudited))............. 17,266,547 28,459,961 28,459,961 --
Common Stock, $.001 par value, authorized 30,000,000
shares; issued and outstanding 4,284,014 shares,
4,332,116 shares and 4,332,241 shares (unaudited),
respectively; 14,875,744 shares (unaudited) issued
and outstanding pro forma............................ 4,285 4,331 4,331 14,875
Additional paid-in-capital............................. 298,713 309,128 309,203 38,758,870
Deferred compensation and loans to officers for the
purchase of stock.................................... (144,750) (244,551) (244,551) (244,551)
Deficit accumulated during the development stage....... (10,429,511) (18,641,865) (20,761,139) (20,761,139)
----------- ----------- ----------- -------------
Total stockholders' equity........................... 6,995,284 9,887,004 7,767,805 17,768,055
----------- ----------- ----------- -------------
Total liabilities and stockholders' equity........... $ 9,424,947 $18,778,177 $16,394,987 $26,395,237
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
F-2
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD FROM FOR THE THREE MONTHS PERIOD FROM
FOR THE YEAR ENDED DECEMBER 31, INCEPTION TO ENDED MARCH 31, INCEPTION TO
---------------------------------- DECEMBER 31, ------------------------ MARCH 31,
1994 1995 1996 1996 1996 1997 1997
---------- ---------- ---------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues:
Collaborative research and
grant income................ $ 33,305 $ -- $1,066,984 $1,100,289 $ -- $ 500,000 $1,600,289
Interest income............... 229,435 169,505 521,886 951,119 93,482 114,835 1,065,954
---------- ---------- ---------- ------------ ----------- ----------- ------------
Total revenues.............. 262,740 169,505 1,588,870 2,051,408 93,482 614,835 2,666,243
---------- ---------- ---------- ------------ ----------- ----------- ------------
Expenses:
Research and development...... 2,340,873 4,533,374 7,364,086 14,575,575 1,111,019 2,096,216 16,671,791
General and administrative.... 1,266,136 1,476,807 1,860,981 5,426,395 313,364 472,895 5,899,290
Interest expense.............. 9,608 96,934 576,157 691,303 128,721 164,998 856,301
---------- ---------- ---------- ------------ ----------- ----------- ------------
Total expenses.............. 3,616,617 6,107,115 9,801,224 20,693,273 1,553,104 2,734,109 23,427,382
---------- ---------- ---------- ------------ ----------- ----------- ------------
Net loss........................ $(3,353,877) $(5,937,610) $(8,212.354) ($18,641,865) ($1,459,622) ($2,119,274) ($20,761,139)
---------- ---------- ---------- ------------ ----------- ----------- ------------
---------- ---------- ---------- ------------ ----------- ----------- ------------
Pro Forma Data (unaudited):
Net loss per common share and
common share equivalents
(Note 14)................... $ (.63) $ (.16)
---------- -----------
---------- -----------
Weighted average common shares
and common share equivalents
outstanding (Note 14)....... 13,053,068 13,615,591
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION TO MARCH 31, 1997
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------------- ----------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------------ ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 23, 1992.................... -- $ -- -- $ -- $ --
Initial capital contribution ($.0033 per
share)........................................ -- -- 210,000 210 70
Stock issued pursuant to Exchange Agreement
($.0028 per share)............................ -- -- 1,800,000 1,800 (1,300)
Stock sold pursuant to Employee and Consulting
Agreements ($.002 per share).................. -- -- 956,245 957 1,863
Stock sold pursuant to License Agreement
($.00133 per share)........................... -- -- 90,000 90 30
Stock sold pursuant to subscription and Board of
Directors Agreements ($.004 per share)........ -- -- 600,000 600 1,800
Conversion of convertible note payable ($2.00
per share).................................... -- -- 62,500 63 124,937
Conversion of convertible note payable, related
parties ($3.00 per share)..................... 58,625 175,000 -- -- --
Issuance of Preferred Stock Series A, net of
offering expenses ($3.00 per share)........... 2,010,000 5,264,357 -- -- --
Net loss for the period December 23, 1992 (date
of inception) to December 31, 1993............ -- -- -- -- --
------------ ------------ ----------- ---------- ------------
Balance at December 31, 1993.................... 2,068,625 5,439,357 3,718,745 3,720 127,400
Issuance of Preferred Stock Series B, net of
offering expenses ($3.00 per share)........... 619,750 1,723,503 -- -- --
Stock sold pursuant to 1994 Stock Incentive Plan
($.004 to $.34 per share)..................... -- -- 333,750 334 103,721
Stock sold pursuant to Consulting, Board of
Directors and Stock Purchase Agreements ($.30
to $.34 per share)............................ -- -- 52,250 52 15,623
Issuance of Preferred Stock Series C, net of
offering expenses ($3.40 per share)........... 735,294 2,197,878 -- -- --
Loans made to officers for the purchase of
stock......................................... -- -- -- -- --
Net loss for the year ended December 31, 1994... -- -- -- -- --
------------ ------------ ----------- ---------- ------------
Balance at December 31, 1994.................... 3,423,669 9,360,738 4,104,745 4,106 246,744
Issuance of Preferred Stock Series D, net of
offering expenses ($3.00 per share)........... 2,902,518 7,905,809 -- -- --
Stock sold pursuant to 1994 Stock Incentive Plan
($.30 to $.34 per share)...................... -- -- 84,269 84 19,764
Stock sold pursuant to Consulting and Research
Agreements ($.30 to $.34 per share)........... -- -- 95,000 95 32,205
Loans made to officers for the purchase of
stock......................................... -- -- -- -- --
Net loss for the year ended December 31, 1995... -- -- -- -- --
------------ ------------ ----------- ---------- ------------
Balance at December 31, 1995.................... 6,326,187 17,266,547 4,284,014 4,285 298,713
Issuance of Preferred Stock Series D, net of
offering expenses ($3.00 per share)........... 579,884 1,555,324 -- -- --
Issuance of Preferred Stock Series D, pursuant
to Consulting and Employment Agreements ($3.00
per share).................................... 116,668 350,004 -- -- --
Issuance of Preferred Stock Series E, net of
offering expenses ($4.50 per share)........... 2,246,224 9,288,086 -- -- --
Stock transactions pursuant to Consulting,
Employment and Research Agreements............ -- -- 28,102 26 (1,225)
Issuance of Common Stock for services rendered
by Directors ($.34 to $1.50 per share)........ -- -- 20,000 20 11,640
Net loss for the year ended December 31, 1996... -- -- -- -- --
------------ ------------ ----------- ---------- ------------
Balance at December 31, 1996.................... 9,268,963 $ 28,459,961 4,332,116 $ 4,331 $ 309,128
Stock sold pursuant to 1994 Stock Incentive
Plan.......................................... -- -- 125 -- 75
Net loss for the quarter ended March 31, 1997... -- -- -- -- --
------------ ------------ ----------- ---------- ------------
Balance at March 31, 1997 (Unaudited)........... 9,268,963 28,459,961 4,332,241 4,331 309,203
Pro forma conversion of Convertible Preferred
Stock......................................... (9,268,963) (28,459,961) 9,367,003 9,367 28,450,594
Issuance of Common Stock ($8.50 per share)...... -- -- 1,176,500 1,177 9,999,073
------------ ------------ ----------- ---------- ------------
Pro forma balance, March 31, 1997 (unaudited)... -- $ -- 14,875,744 $ 14,875 $ 38,758,870
------------ ------------ ----------- ---------- ------------
------------ ------------ ----------- ---------- ------------
<CAPTION>
DEFERRED
COMPENSATION
AND LOANS DEFICIT
TO OFFICERS ACCUMULATED
FOR THE DURING THE TOTAL
PURCHASE DEVELOPMENT STOCKHOLDERS'
OF STOCK STAGE EQUITY
---------------- ------------- ------------
<S> <C> <C> <C>
Balance at December 23, 1992.................... $ -- $ -- $ --
Initial capital contribution ($.0033 per
share)........................................ -- -- 280
Stock issued pursuant to Exchange Agreement
($.0028 per share)............................ -- -- 500
Stock sold pursuant to Employee and Consulting
Agreements ($.002 per share).................. -- -- 2,820
Stock sold pursuant to License Agreement
($.00133 per share)........................... -- -- 120
Stock sold pursuant to subscription and Board of
Directors Agreements ($.004 per share)........ -- -- 2,400
Conversion of convertible note payable ($2.00
per share).................................... -- -- 125,000
Conversion of convertible note payable, related
parties ($3.00 per share)..................... -- -- 175,000
Issuance of Preferred Stock Series A, net of
offering expenses ($3.00 per share)........... -- -- 5,264,357
Net loss for the period December 23, 1992 (date
of inception) to December 31, 1993............ -- (1,138,024) (1,138,024)
---------------- ------------- ------------
Balance at December 31, 1993.................... -- (1,138,024) 4,432,453
Issuance of Preferred Stock Series B, net of
offering expenses ($3.00 per share)........... -- -- 1,723,503
Stock sold pursuant to 1994 Stock Incentive Plan
($.004 to $.34 per share)..................... -- -- 104,055
Stock sold pursuant to Consulting, Board of
Directors and Stock Purchase Agreements ($.30
to $.34 per share)............................ -- -- 15,675
Issuance of Preferred Stock Series C, net of
offering expenses ($3.40 per share)........... -- -- 2,197,878
Loans made to officers for the purchase of
stock......................................... (100,550) -- (100,550)
Net loss for the year ended December 31, 1994... -- (3,353,877) (3,353,877)
---------------- ------------- ------------
Balance at December 31, 1994.................... (100,550) (4,491,901) 5,019,137
Issuance of Preferred Stock Series D, net of
offering expenses ($3.00 per share)........... -- -- 7,905,809
Stock sold pursuant to 1994 Stock Incentive Plan
($.30 to $.34 per share)...................... -- -- 19,848
Stock sold pursuant to Consulting and Research
Agreements ($.30 to $.34 per share)........... -- -- 32,300
Loans made to officers for the purchase of
stock......................................... (44,200) -- (44,200)
Net loss for the year ended December 31, 1995... -- (5,937,610) (5,937,610)
---------------- ------------- ------------
Balance at December 31, 1995.................... (144,750) (10,429,511) 6,995,284
Issuance of Preferred Stock Series D, net of
offering expenses ($3.00 per share)........... -- -- 1,555,324
Issuance of Preferred Stock Series D, pursuant
to Consulting and Employment Agreements ($3.00
per share).................................... (110,001) -- 240,003
Issuance of Preferred Stock Series E, net of
offering expenses ($4.50 per share)........... -- -- 9,288,086
Stock transactions pursuant to Consulting,
Employment and Research Agreements............ 10,200 -- 9,001
Issuance of Common Stock for services rendered
by Directors ($.34 to $1.50 per share)........ -- -- 11,660
Net loss for the year ended December 31, 1996... -- (8,212,354) (8,212,354)
---------------- ------------- ------------
Balance at December 31, 1996.................... $ (244,551) $ (18,641,865) $9,887,004
Stock sold pursuant to 1994 Stock Incentive
Plan.......................................... -- -- 75
Net loss for the quarter ended March 31, 1997... -- (2,119,274) (2,119,274)
---------------- ------------- ------------
Balance at March 31, 1997 (Unaudited)........... (244,551) (20,761,139) 7,767,805
Pro forma conversion of Convertible Preferred
Stock......................................... -- -- --
Issuance of Common Stock ($8.50 per share)...... -- -- 10,000,250
---------------- ------------- ------------
Pro forma balance, March 31, 1997 (unaudited)... $ (244,551) $ (20,761,139) $17,768,055
---------------- ------------- ------------
---------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED DECEMBER 31, FROM
------------------------------------------- INCEPTION TO
1994 1995 1996 DECEMBER 31, 1996
------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Development stage activities:
Net loss................................................... $ (3,353,877) $ (5,937,610) $ (8,212,354) $ (18,641,865)
Adjustments to reconcile net loss to net cash used in
development stage activities:
Depreciation and amortization.......................... 124,806 390,071 1,167,116 1,681,993
Non cash compensation expense.......................... -- -- 251,663 251,663
Increase (decrease) in cash resulting from changes in
assets and liabilities:
Increase in contract revenue receivable................ -- -- (347,862) (347,862)
Other current assets................................... 14,115 3,916 (89,283) (108,557)
Other assets........................................... (41,412) (26,753) (86,878) (163,870)
Accounts payable....................................... 293,554 (118,858) 362,876 568,889
Accrued expenses and other............................. (27,792) 463,381 (53,774) 597,421
------------- ------------- ------------- -------------------
Net cash used in development stage activities.............. (2,990,606) (5,225,853) (7,008,496) (16,162,188)
Investing activities:
Purchases and sales of short-term investments, net....... -- -- (6,344,804) (6,344,804)
Purchases of property and equipment...................... (637,471) (1,006,807) (312,550) (2,005,182)
Technology rights........................................ -- -- -- (83,061)
------------- ------------- ------------- -------------------
Net cash used in investing activities...................... (637,471) (1,006,807) (6,657,354) (8,433,047)
------------- ------------- ------------- -------------------
Financing activities:
Proceeds from bank borrowing............................. -- 750,000 -- 750,000
Principal payments on capital lease obligations and bank
borrowing.............................................. (17,642) (166,959) (844,525) (1,029,126)
Proceeds from note payable, officer...................... -- -- -- 50,500
Proceeds from convertible notes payable.................. -- -- -- 250,000
Restricted cash.......................................... (216,000) 216,000 -- --
Proceeds from the issuance of preferred and common stock,
net.................................................... 4,156,561 7,562,562 10,852,411 27,841,511
------------- ------------- ------------- -------------------
Net cash provided by financing activities................ 3,922,919 8,361,603 10,007,886 27,862,885
------------- ------------- ------------- -------------------
Net increase (decrease) in cash and cash equivalents....... 294,842 2,128,943 (3,657,964) 3,267,650
Cash and cash equivalents at beginning of period........... 4,501,828 4,796,670 6,925,613 --
------------- ------------- ------------- -------------------
Cash and cash equivalents at end of period................. $ 4,796,670 $ 6,925,613 $ 3,267,649 $ 3,267,650
------------- ------------- ------------- -------------------
------------- ------------- ------------- -------------------
Supplemental disclosure of cash flow information:
Cash paid for interest................................... $ 8,857 $ 96,934 $ 576,157 $ 690,552
Supplemental schedule of noncash investing and financing
activities:
Conversion of note payable, officer to preferred stock... -- -- -- $ 50,000
Conversion of convertible notes payable, related party to
preferred stock........................................ -- -- -- $ 125,000
Conversion of convertible notes payable to common
stock.................................................. -- -- -- $ 125,000
Capital lease obligation incurred to acquire equipment
and facilities......................................... $ 258,081 $ 748,976 $ 6,996,933 $ 8,003,990
Loans to officers for the purchase of stock.............. $ 100,550 $ 44,200 $ (10,200) $ 134,550
Preferred stock sold pursuant to subscription............ -- $ 135,195 -- $ 135,195
Preferred stock issued pursuant to advance
subscriptions.......................................... -- $ 216,000 -- $ 216,000
Preferred stock issued to placement agent for services
rendered............................................... -- $ 300,000 -- $ 300,000
Preferred stock issued pursuant to employment and
consulting agreements.................................. -- -- $ 350,004 $ 350,004
Common stock issued to directors for services rendered... -- -- $ 11,660 $ 11,660
<CAPTION>
FOR THE THREE MONTHS FOR THE PERIOD
ENDED MARCH 31, FROM
---------------------------- INCEPTION TO
1996 1997 MARCH 31, 1997
------------- ------------- -----------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Development stage activities:
Net loss................................................... $ (1,459,622) $ (2,119,274) $ (20,761,139)
Adjustments to reconcile net loss to net cash used in
development stage activities:
Depreciation and amortization.......................... 105,321 357,092 2,039,085
Non cash compensation expense.......................... -- -- 251,663
Increase (decrease) in cash resulting from changes in
assets and liabilities:
Increase in contract revenue receivable................ -- (152,138) (500,000)
Other current assets................................... (136,506) 16,380 (92,177)
Other assets........................................... 20,662 2,230 (161,640)
Accounts payable....................................... 131,088 65,087 633,976
Accrued expenses and other............................. (265,666) (72,538) 524,883
------------- ------------- -----------------
Net cash used in development stage activities.............. (1,604,723) (1,903,161) (18,065,349)
Investing activities:
Purchases and sales of short-term investments, net....... -- 892,452 (5,452,352)
Purchases of property and equipment...................... 17,481 (361,072) (2,366,254)
Technology rights........................................ -- -- (83,061)
------------- ------------- -----------------
Net cash used in investing activities...................... 17,841 531,380 (7,901,667)
------------- ------------- -----------------
Financing activities:
Proceeds from bank borrowing............................. -- -- 750,000
Principal payments on capital lease obligations and bank
borrowing.............................................. (125,243) (256,539) (1,285,665)
Proceeds from note payable, officer...................... -- -- 50,500
Proceeds from convertible notes payable.................. -- -- 250,000
Restricted cash.......................................... -- -- --
Proceeds from the issuance of preferred and common stock,
net.................................................... 1,555,324 75 27,841,586
------------- ------------- -----------------
Net cash provided by financing activities................ 1,430,081 (256,464) 27,606,421
------------- ------------- -----------------
Net increase (decrease) in cash and cash equivalents....... (156,801) (1,628,245) 1,639,405
Cash and cash equivalents at beginning of period........... 6,925,613 3,267,650 --
------------- ------------- -----------------
Cash and cash equivalents at end of period................. $ 6,768,812 $ 1,639,405 $ 1,639,405
------------- ------------- -----------------
------------- ------------- -----------------
Supplemental disclosure of cash flow information:
Cash paid for interest................................... $ 128,721 $ 164,998 $ 855,550
Supplemental schedule of noncash investing and financing
activities:
Conversion of note payable, officer to preferred stock... -- -- $ 50,000
Conversion of convertible notes payable, related party to
preferred stock........................................ -- -- $ 125,000
Conversion of convertible notes payable to common
stock.................................................. -- -- $ 125,000
Capital lease obligation incurred to acquire equipment
and facilities......................................... $ 5,544,778 -- $ 8,003,990
Loans to officers for the purchase of stock.............. -- -- $ 134,550
Preferred stock sold pursuant to subscription............ -- -- $ 135,195
Preferred stock issued pursuant to advance
subscriptions.......................................... -- -- $ 216,000
Preferred stock issued to placement agent for services
rendered............................................... -- -- $ 300,000
Preferred stock issued pursuant to employment and
consulting agreements.................................. -- -- $ 350,004
Common stock issued to directors for services rendered... -- -- $ 11,660
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
BUSINESS
Osiris Therapeutics, Inc. and Subsidiaries (the "Company") is primarily
engaged in the research and development of novel therapeutic products for
regenerative tissue therapy of diseased or injured tissue based on human
mesenchymal stem cells, the progenitor cells responsible for the formation of
structural and connective tissues, including bone marrow stroma, bone,
cartilage, muscle, tendon, ligament, fat and other connective tissues. The
Company is developing cell therapy products to regenerate tissue damaged by
acute injury or degenerative diseases and biopharmaceuticals that regulate the
growth and differentiation of human mesenchymal stem cells during tissue
regeneration.
The Company began operations on December 23, 1992 and is currently in the
development stage, as operations consist primarily of research and development
activities and securing adequate capital for anticipated growth and operations.
REGISTRATION STATEMENT
In July 1997, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission for the initial public
offering of shares of the Company's Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of Osiris
Therapeutics, Inc., its wholly owned subsidiary Osiris Research, Inc. and its
65% owned subsidiary Gryphon Pharmaceuticals, Inc. ("Gryphon"), a development
stage enterprise formed as a joint venture with The Johns Hopkins University
School of Medicine (see Note 10). The Company records 100% of Gryphon's net loss
in consolidation. Intercompany transactions are eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
SECURITIES AVAILABLE-FOR-SALE
Marketable securities at December 31, 1996 are considered available-for-sale
and are carried at amortized cost which approximates fair market value, with
unrealized gains and losses, if any, reported as a separate component of
stockholders' equity.
The Company's marketable securities are held for an unspecified period of
time and are sold to meet liquidity needs. Accordingly, marketable securities at
December 31, 1996 are classified as current assets.
CONCENTRATION OF CREDIT RISK
The Company has invested its excess cash, generally, in securities of the
U.S. Treasury, U.S. Government Agencies, commercial paper with strong credit
ratings, overnight repurchase agreements and
F-6
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
deposits with a major bank. The Company has not experienced any significant
losses on its investments. The Company's contract revenue receivable consists of
amounts due from its collaborative partners. The Company periodically assesses
the financial strength of its collaborative partners and provides allowances for
anticipated losses when necessary.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Laboratory and office equipment
and leasehold improvements are depreciated using the straight-line method over
the shorter of the estimated useful life or the term of the lease (four to seven
years).
REVENUE
Revenue from research grants is recognized as the related research
expenditures are incurred. Revenue from contract research agreements is recorded
when earned as defined under the terms of the agreement.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs are expensed as incurred.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the estimated future
tax consequences of temporary differences and income tax credits. Temporary
differences are primarily the result of the differences between the tax bases of
assets and liabilities and their financial reporting amounts. Deferred tax
liabilities and assets are measured by applying enacted statutory tax rates
applicable to the future years in which deferred tax liabilities or assets are
expected to be settled or realized. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense consists of the taxes payable for the current period and the
change during the period in deferred tax assets and liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" ("SFAS 128"), which specifies the computation,
presentation and disclosure requirements for earnings per share. SFAS 128 is
effective for financial statements ending after December 15, 1997. The Company
does not anticipate that the adoption of SFAS 128 will have a material effect on
its financial statements.
F-7
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATION
Certain prior year balances have been reclassified to conform to the 1996
financial statement presentation.
3. RELATED PARTY TRANSACTIONS
During 1995, the Company loaned $50,000 to an officer of the Company to aid
in the relocation of his residence. The loan earns interest at 7.5% and will be
forgiven at a rate of 25% per annum, beginning in 1996, pending the officer's
continued employment by the Company. At December 31, 1996, $37,500 was included
in other assets related to this loan.
The Company has entered into agreements for the provision of research and
financial consulting services with three non-management members of the Board of
Directors. The aggregate compensation paid under these agreements was $168,000
per annum in 1995 and 1996. Consulting compensation for any individual
non-management director did not exceed $60,000 per annum. In addition, a member
of the Board of Directors was previously affiliated with the European Placement
Agent used by the Company for its Series D and Series E Preferred Stock
Offerings (See Note 8).
4. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following:
<TABLE>
<CAPTION>
1995 1996
------------ -------------
<S> <C> <C>
Research and development facility................................ $ 309,217 $ 6,560,733
Computer and laboratory equipment................................ 1,175,240 3,355,585
Construction in progress......................................... 1,215,232 92,854
------------ -------------
2,699,689 10,009,172
Less accumulated depreciation and amortization................... (514,877) (1,681,993)
------------ -------------
$ 2,184,812 $ 8,327,179
------------ -------------
------------ -------------
</TABLE>
5. NOTE PAYABLE
During June 1995, the Company issued a $750,000 promissory note to Signet
Bank in connection with certain site and facility renovations to the Company's
facility in Baltimore, Maryland (see Note 9). The note, which contains a partial
guarantee of $500,000 by the State of Maryland, matures in December 2007 and
bears interest at LIBOR plus 2.0% to 2.5% (7.4% to 7.9% at December 31, 1996).
Compensating balance arrangements with Signet Bank require the Company to
maintain a cash balance of 105.0% of the non-guaranteed portion of the note. At
December 31, 1996 and 1995, the Company's compensating bank balance was
$262,500.
F-8
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. NOTE PAYABLE (CONTINUED)
Annual maturities of the note payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 65,217
1998.............................................................................. 65,217
1999.............................................................................. 65,217
2000.............................................................................. 65,217
2001.............................................................................. 65,217
Thereafter........................................................................ 375,002
----------
$ 701,087
----------
----------
</TABLE>
6. INCOME TAXES
The components of the Company's net deferred tax asset as of December 31 are
as follows:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.............................. $ 3,934,000 $ 6,957,000
Research and experimentation credit carryforwards............. 133,000 327,000
Fixed assets.................................................. 18,000 109,000
Other......................................................... 6,000 42,000
------------- -------------
4,091,000 7,435,000
Valuation allowance............................................. (4,091,000) (7,435,000)
------------- -------------
Net deferred tax asset.......................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The realization of deferred tax assets is dependent, primarily, on the
Company's ability to generate future taxable income, which is uncertain.
Accordingly, a full valuation allowance was recorded against these assets as of
December 31, 1995 and 1996.
As of December 31, 1996, the Company had available, for federal income tax
purposes, $18,000,000 of net operating loss carryforwards and $327,000 of
research and experimentation credit carryforwards, which expire beginning in
2008. The net operating loss carryforwards may be subject to limitation on
utilization as a result of certain ownership changes since the Company's
inception.
F-9
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. PREFERRED STOCK RIGHTS AND PREFERENCES
The Company's Convertible Preferred Stock consists of the following
designated shares at December 31:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Series A Convertible Preferred Stock, $.001 par value; designated 2,122,000 shares;
issued and outstanding 2,068,625 shares at December 31, 1995 and 1996............ $ 5,439,357 $ 5,439,357
Series B Convertible Preferred Stock, $.001 par value; designated 750,000 shares;
issued and outstanding 619,750 shares at December 31, 1995 and 1996.............. 1,723,503 1,723,503
Series C Convertible Preferred Stock, $.001 par value; designated 739,999 shares;
issued and outstanding 735,294 shares at December 31, 1995 and 1996.............. 2,197,878 2,197,878
Series C-1 Convertible Preferred Stock, $.001 par value; 1 share designated; none
issued or outstanding............................................................ -- --
Series D Convertible Preferred Stock, $.001 par value; designated 3,600,000 shares;
issued and outstanding 2,902,518 shares at December 31, 1995 and 3,599,070 shares
at December 31, 1996............................................................. 7,905,809 9,811,137
Series E Convertible Preferred Stock, $.001 par value; designated 3,000,000 shares;
none issued and outstanding at December 31, 1995; issued and outstanding
2,246,224 shares at December 31, 1996............................................ -- 9,288,086
------------- -------------
$ 17,266,547 $ 28,459,961
------------- -------------
------------- -------------
</TABLE>
The rights and preferences of the Convertible Preferred Stock are as
follows:
CONVERSION PROVISION
The holders of Preferred Stock are entitled at any time to convert each
share of Preferred Stock into one share of Common Stock (the "Conversion Rate").
The Conversion Rate is subject to adjustment upon the occurrence of certain
events. On September 24, 1998, shares of Series A, Series B, Series D and Series
E Preferred Stock then outstanding will automatically be converted into shares
of Common Stock at the Conversion Rate. Outstanding shares of Series A, Series
B, Series D and Series E Preferred Stock will also be automatically converted
into shares of Common Stock at the Conversion Rate upon the occurrence of
certain specific events, subject to certain terms and conditions, including an
underwritten public offering or immediately prior to the consummation of a
consolidation or merger of the Company with or into another corporation.
Each share of Series C and Series C-1 Preferred Stock will automatically be
converted into shares of Common Stock at the Conversion Rate immediately upon
the consummation of an underwritten public offering of Common Stock of the
Company, subject to certain terms and conditions, or on the date specified by
written consent or agreement of the holders of 66 2/3% of the then outstanding
shares of Series C and Series C-1 Preferred Stock, consenting or agreeing
together as a single class.
F-10
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. PREFERRED STOCK RIGHTS AND PREFERENCES (CONTINUED)
The holder of any shares of Preferred Stock converted into common stock in
connection with such a public offering or other transaction will be entitled to
payment of all declared but unpaid dividends, if any, payable with respect to
such shares up to and including the date of the closing of such public offering
or other transaction.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Company as
defined ("Liquidation Event"), the stockholders of the Company are entitled to
preferential liquidating distributions as follows:
<TABLE>
<CAPTION>
ORDER OF DISTRIBUTION STOCK CLASSIFICATION DISTRIBUTION PREFERENCE
- ---------------------- ---------------------- -----------------------------------------------------------------
<S> <C> <C>
First................. Series E $1.10 per share liquidation distribution
Second................ Series E, Series C and $0.40 per share liquidation distribution
Series C-1
Third................. All Preferred Stock $3.00 per share liquidation distribution plus accumulated and
unpaid dividends, if any
Fourth................ Common Stock $0.30 per share liquidation distribution
Fifth................. Series C and C-1, Remainder (Series C and C-1 subject to the limits noted below)
Common Stock
</TABLE>
Notwithstanding the foregoing, the aggregate amount per share to be received
by the holders of Series C and Series C-1 Preferred Stock shall not exceed $8.00
if the Liquidation Event takes place on or before May 26, 1997 and $12.00 if the
Liquidation Event occurs after May 26, 1997.
DIVIDENDS AND VOTING RIGHTS
Holders of Convertible Preferred Stock are entitled to receive dividends on
an as-if-converted basis at the same rate as common stockholders, if and when
declared. In addition, holders of Convertible Preferred Stock are entitled to a
number of votes per share of Convertible Preferred Stock equal to the number of
shares of Common Stock into which such shares of Convertible Preferred Stock are
convertible. Holders of Convertible Preferred Stock vote together with the
holders of Common Stock as a single class, except as otherwise required by law.
REGISTRATION RIGHTS
In the event that the Company completes an initial public offering of any of
its securities, certain holders of Preferred Stock have demand registration
rights, subject to certain terms and conditions. In addition, holders of the
Series C and Series C-1 Preferred Stock have certain other demand registration
rights. The registration rights granted to the holders of Series C and Series
C-1 Preferred Stock will terminate after five years following the consummation
of the sale of securities pursuant to a registration statement filed by the
Company in connection with a firm commitment underwritten offering of its
securities to the general public.
The Company will bear the expenses of the registration of the investors'
shares, except any underwriting discounts and commissions.
F-11
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMON STOCK, OPTIONS AND WARRANTS
Since inception, the Company has sold Common Stock to certain officers,
directors, employees, founding consultants and Scientific Advisory Board
members. A portion of the shares purchased is subject to forfeiture, through
calendar 1997, if certain vesting requirements are not satisfied.
The Company has reserved sufficient shares of Common Stock for issuance upon
the conversion of outstanding Preferred Stock and the exercise of stock options
and stock warrants.
In connection with the 1993 Private Placement Offering of Series A Preferred
Stock, the Company sold, for nominal consideration, warrants to purchase from
the Company 309,841 shares of Common Stock pursuant to the Placement Agency
Agreement. The exercise price for shares purchased upon exercise of such
warrants is $2.60 per share at December 31, 1996, as adjusted pursuant to
"weighted average" anti-dilution provisions that are triggered if the Company
sells shares of Common Stock or Common Stock Equivalents at a price per share
less than $2.60 (except in the case of sales to employees, directors,
consultants and other limited exceptions). Such warrants will be exercisable
until September 24, 1998.
In connection with the 1995 Private Placement Offering of Series D Preferred
Stock, the Company sold, for nominal consideration, warrants to purchase from
the Company 230,627 shares of Common Stock at an exercise price of $3.00 per
share pursuant to an agreement with the European Placement Agent. A total of
151,947 warrants will be exercisable until December 1, 2002, and 78,680 will be
exercisable until January 1, 2003. In addition, the Company also sold, for
nominal consideration, warrants to purchase from the Company 324,320 shares of
Common Stock at an exercise price of $3.00 per share to certain holders of
Series A Preferred Stock. Such warrants will be exercisable until December 1,
2002.
In connection with the 1996 Series E Preferred Stock sale, the Company sold,
for nominal consideration, warrants to purchase from the Company 86,675 shares
of Common Stock at an exercise price of $4.50 per share pursuant to an agreement
with the European Placement Agent. Such warrants will be exercisable until
January 1, 2003.
The Company's 1993 Stock Incentive Plan (the "1993 Plan") was replaced by
the Company's 1994 Amended and Restated Stock Incentive Plan (the "1994 Plan").
The 1994 Plan provides for the granting of restricted stock and option rights,
consisting of incentive stock options or nonqualified stock options, to
officers, employees, consultants and advisors to purchase shares of Common Stock
at prices which may be equal to, less than or greater than such fair market
value of the stock on the dates options are granted and vest over a period of up
to four years. Options expire no more than ten years after grant. The Company
has reserved 2,000,000 shares of Common Stock for issuance under the 1994 Plan.
As of December 31, 1996, a net total of 930,479 shares of restricted stock and
options to purchase Common Stock have been granted under the 1994 Plan and
119,521 shares are available for grant. As of December 31, 1996, a net total of
359,494 shares of restricted stock have been issued of which 195,000 shares are
subject to certain vesting terms.
F-12
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMON STOCK, OPTIONS AND WARRANTS (CONTINUED)
Stock option activity in the 1994 Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
----------- -----------------
<S> <C> <C>
Balance, December 31, 1993...................................... 102,500
Granted....................................................... 96,450
Exercised..................................................... (1,250)
Forfeited..................................................... --
-----------
Balance, December 31, 1994...................................... 197,700 $ .24
Granted....................................................... 105,375 .44
Exercised..................................................... (27,375) .01
Forfeited..................................................... (48,500) .32
-----------
Balance, December 31, 1995...................................... 227,200 $ .34
Granted....................................................... 321,210 1.19
Exercised..................................................... (58,000) .17
Forfeited..................................................... (6,050) .77
-----------
Balance, December 31, 1996...................................... 484,360 $ .92
-----------
-----------
</TABLE>
All options and restricted stock purchase awards for Common Stock were made
at an exercise or purchase price equal to the fair market value at the date of
grant in 1996 and 1995. At December 31, 1996 the range of exercise prices for
all the outstanding stock options was $0.34 to $1.50. Of the outstanding options
at December 31, 1996, 146,965 were exercisable at a weighted average exercise
price of $0.47 per share.
The Company adopted the disclosure only provisions of Statement of Financial
Accounting Standards No. 123, STOCK BASED COMPENSATION ("SFAS 123"), for its
stock option plans. Had compensation cost for the Company's stock option plans
been determined on the fair value on the date of grant for awards in 1995 and
1996, consistent with the provisions of SFAS 123, the Company's net loss for
1995 and 1996 would have increased by $23,844 and $58,437 respectively. The
weighted average fair value at the date of grant for Common Stock options
granted during 1995 and 1996 was $0.32 and $0.92, respectively.
The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
<TABLE>
<CAPTION>
ALL YEARS
-----------
<S> <C>
Expected life (years)............................................................... 5
Risk free interest rate............................................................. 7.5%
Volatility.......................................................................... 100%
Dividend Yield...................................................................... N/A
</TABLE>
F-13
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. COMMITMENTS
FACILITY LEASE
Rent expense was $114,707 and $120,636 for the years ended December 31, 1994
and 1995, respectively, and $236,903 for the period from inception to December
31, 1996. There was no rent expense for the year ended December 31, 1996.
During January 1995, the Company entered into a sublease agreement with the
Maryland Economic Development Corporation, whereby the Company agreed to
relocate its principal offices and laboratories to Baltimore, Maryland. Certain
site and tenant improvements, consisting of the construction of approximately
30,000 sq. ft. of office and wet lab facilities, were made to a portion of the
building occupied by the Company.
The initial lease term is 6 1/2 years, expiring in December 2001 and
contains an initial extension term of 6 1/2 years plus two 5 year terms
thereafter. The sublease also contains a purchase and an expansion option. The
purchase option provides the Company with the right to purchase the entire
facility, consisting of 185,000 sq. ft., for a purchase price ranging from $6.1
million to $6.7 million through June 30, 1998, plus additional payments
associated with the site and tenant improvements. The expansion option provides
the Company with the right to lease up to 50,000 additional sq. ft. through June
30, 1998 and a right of first offer as to other expansion space within the
building. The Company occupied the facility in January 1996, upon completion of
the tenant improvements.
In consideration for arranging the financing and providing the guarantees
discussed above, the Company granted to the State of Maryland (the "State") and
City of Baltimore (the "City") warrants for the purchase of 33,000 shares of
Series D Convertible Preferred Stock at $3.00 per share for a term of seven
years. As an additional incentive, the State and City purchased 233,338 shares
of Series D Convertible Preferred Stock at $3.00 per share from the Company.
EQUIPMENT LEASES
The Company leases certain of its equipment under various financing
arrangements. In February 1994, the Company entered into a Master Lease Line
Agreement (the "Lease Line") with Dominion Ventures, Inc. ("Dominion") in the
amount of $1,500,000, whereby the Company would use the Lease Line to acquire
computers and laboratory equipment. During June 1995, pursuant to an amendment,
the Company increased the Lease Line to $4,300,000. Lease terms range from 36 to
48 months.
The Lease Line includes a grant by the Company to Dominion for a warrant to
purchase 52,762 shares of Series A Convertible Preferred Stock, at a price of
$3.00 per share. As additional consideration for the increase in the Lease Line
to $4,300,000, the Company granted to Dominion a warrant to purchase up to
84,000 shares of Series D Preferred Stock at a price of $3.00 per share. Both
warrants are exercisable until the later of the tenth anniversary of the date of
grant or the fifth anniversary of the Company's initial public offering.
F-14
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS (CONTINUED)
The terms of these facility and equipment arrangements meet the criteria
requiring capitalization specified in Statement of Financial Accounting
Standards No. 13, ACCOUNTING FOR LEASES. Included in the balance sheets are the
following amounts at December 31, 1995 and 1996, for capitalized leases:
<TABLE>
<CAPTION>
1995 1996
---------- -------------
<S> <C> <C>
Research and development facility................................. $ -- $ 5,003,163
Computer and laboratory equipment................................. 1,007,057 3,000,827
Less accumulated amortization..................................... (184,151) (1,217,089)
---------- -------------
$ 822,906 $ 6,786,901
---------- -------------
---------- -------------
</TABLE>
Future minimum annual rental commitments under these facility and equipment
arrangements are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 FACILITY EQUIPMENT TOTAL
- ---------------------------------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
1997.................................................................. $ 580,415 $ 985,585 $ 1,566,000
1998.................................................................. 580,415 935,313 1,515,728
1999.................................................................. 601,359 532,284 1,133,643
2000.................................................................. 608,817 144,824 753,641
2001.................................................................. 616,537 -- 616,537
Thereafter............................................................ 4,329,798 -- 4,329,798
------------- ------------ -------------
Total minimum lease payments.......................................... 7,317,341 2,598,006 9,915,347
------------- ------------ -------------
Less amounts representing interest.................................... (2,502,862) (388,708) (2,891,570)
------------- ------------ -------------
Present value of minimum lease payments............................... $ 4,814,479 $ 2,209,298 $ 7,023,777
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
AGREEMENTS
The Company has entered into a Technology Transfer and License Agreement
(the "License Agreement") with Case Western Reserve University ("CWRU") under
which the Company has purchased any and all rights to certain human MSC and
related technology and patents thereto and has an exclusive, worldwide license
to newly developed MSC technology and patents developed by the scientific
founders or persons working under their direction at CWRU since the Company's
inception (the "CWRU Developed Technology"). The License Agreement is
royalty-free as to purchased patents and requires the Company to pay royalties
on revenues related to CWRU Developed Technology covered by issued patents with
royalty payments commencing on the third anniversary of the date on which
products are sold. As a result of the License Agreement, the Company currently
owns three issued U.S. patents, numerous U.S. patent applications which are
pending or in preparation and is licensed by CWRU on one issued U.S. patent and
a number of other U.S. patent applications covering CWRU Developed Technology.
The Company has also commenced filing its own patent applications relating to
composition-of-matter for MSC products, clinical uses for MSC technology and its
delivery thereof.
F-15
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS (CONTINUED)
In October 1994, the Company agreed to enter into a sponsored Research
Agreement and extensions to consulting agreements with the founding scientists
that will provide $1,440,000 in funding for mesenchymal stem cell research in
their laboratories over a three-year period ($120,000 per quarter) commencing in
January 1995. The Company will receive exclusive, worldwide rights to any
intellectual property resulting from such research that is not already the
subject of the Technology Transfer and License Agreement between CWRU and the
Company.
10. GRYPHON PHARMACEUTICALS, INC.
In December 1994, the Company entered into a Share Purchase Agreement,
Stockholders Agreement and Registration Rights Agreement (the "Gryphon
Agreement") with The Johns Hopkins University School of Medicine ("JHU") for
research funding and the purchase of equity in Gryphon Pharmaceuticals, Inc.
("Gryphon"), a newly incorporated entity. Gryphon, a Delaware corporation, is
engaged in the research and development of human hematopoietic stem cell and
progenitor cell growth factors, regulatory molecules and the biopharmaceuticals
based on these molecules. Pursuant to the Gryphon Agreement:
- The Company purchased 3,000,000 shares of Gryphon Series A Convertible
Preferred Stock entitling the Company to 65% voting control.
- The Company was issued a warrant to purchase 1,000,000 shares of Gryphon
common stock at $.01 per share, subject to certain terms and conditions.
- The Company will provide Gryphon with $1,200,000 in research funding over
a three-year period through 1997. In addition, at the option of Gryphon,
the Company will provide $1,000,000 in contingent funding over a two-year
period in the form of a loan if certain financing milestones are not
achieved. Gryphon will use all such research support money to fund work at
the JHU laboratories of Drs. Curt I. Civin and Donald Small to further
develop core licensed technologies. During 1996 and 1995, the Company paid
$425,000 and $490,000, respectively, to Gryphon for research funding at
JHU.
- Gryphon entered into a License Agreement with JHU regarding rights to
commercially develop, manufacture and distribute products resulting from
the funded research.
The Company and Gryphon entered into a separate cross-license agreement,
specifying that Gryphon discoveries relating to mesenchymal stem cells will be
licensed to the Company and jointly-owned discoveries relating to hematopoiesis
will be licensed to Gryphon.
F-16
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACCRUED EXPENSES
Accrued expenses of the Company consist of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Accrued external research............................................. $ 197,400 $ 353,205
Accrued private placement agent fees.................................. 200,000 --
Accrued professional fees............................................. 121,250 --
Other................................................................. 132,545 244,216
---------- ----------
$ 651,195 $ 597,421
---------- ----------
---------- ----------
</TABLE>
12. DEFINED CONTRIBUTION PLAN
In 1994, the Company adopted a 401(k) plan available to all employees.
Employee contributions are voluntary and are determined on an individual basis
up to the amount allowable under federal tax regulations. Employer contributions
to the plan are at the discretion of management. Employer contributions vest
over a seven-year period, beginning after the third year of eligibility. No
employer contributions have been made to date.
13. RESEARCH COLLABORATION AGREEMENTS
In June 1996, the Company was awarded a sole source, $6,000,000, three year
research agreement from the U.S. Defense Advanced Research Projects Agency
("DARPA"). Annual funding of $2,000,000 from DARPA will be supplemented by
approximately $1,000,000 of cost-sharing contributions from the Company in the
form of equipment and indirect costs. The research is aimed at developing human
mesenchymal stem cell systems genetically engineered for the sequential release
of multiple vaccines and the recognition and neutralization of toxic or
infectious agents. Under the agreement, the Company retains worldwide
intellectual property and commercialization rights subject to a non-exclusive,
paid-up license to the U.S. government. During 1996, the Company recognized
$1,025,289 of revenue pursuant to the agreement with DARPA.
14. UNAUDITED INFORMATION
BASIS OF PRESENTATION
The unaudited interim consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. The unaudited interim consolidated
financial statements reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly present
the consolidated financial position, results of operations and changes in cash
flows as of and at the end of the periods presented. The unaudited interim
consolidated financial information should be read in conjunction with the
audited consolidated financial statements and related notes thereto, appearing
elsewhere herein.
F-17
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. UNAUDITED INFORMATION (CONTINUED)
The results for the interim periods presented are not necessarily indicative of
results to be expected for the full year.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited pro forma financial information gives effect to: (i) the issuance
and sale by the Company of 1,176,500 shares of Common Stock to Novartis in June
1997 for an aggregate purchase price of $10,000,250; and (ii) the conversion of
all outstanding shares of Preferred Stock into 9,367,003 shares of Common Stock.
Pro forma net loss per share is based upon the net loss and the weighted
average number of common shares and common share equivalents outstanding during
the period. Common shares and common share equivalents issued by the Company at
prices below the public offering price during the twelve-month period preceding
the proposed offering date have been included in the calculation as if they were
outstanding for all periods presented using the treasury stock method. Common
share equivalents issued by the Company prior to the aforementioned twelve-month
period have not been included in the per share calculation because their
inclusion would be anti-dilutive. Upon completion of the Company's proposed
initial public offering, all 9,268,963 shares of Preferred Stock will
automatically convert into 9,367,003 shares of Common Stock. As a result, all
outstanding shares of Preferred Stock are assumed to have been converted to
Common Stock at the time of issuance, except for those shares issued during the
aforementioned twelve-month period which are treated as outstanding for all
periods presented.
Historical net loss per share information is not considered meaningful due
to the significant changes in the Company's capital structure which will occur
upon the closing of the proposed IPO; accordingly, such per share data
information is not presented.
NOVARTIS AGREEMENT
In June 1997, the Company entered into a research and licensing agreement
with Novartis Pharmaceuticals Corporation ("the Novartis Agreement") for the
development of MSC products for osteoporosis, osteoarthritis, cartilage injury
and selected gene therapy applications. Pursuant to the Novartis Agreement, the
Company is entitled, subject to certain conditions, to receive up to $50,000,000
during the five-year period of the agreement for research and development
funding of certain portions of the Company's bone, cartilage and gene therapy
research programs. The Company could also receive milestone payments of
$93,000,000 if it achieves all of its development and regulatory objectives. In
addition, Novartis paid the Company an initial up-front payment of $3,000,000
and purchased 1,176,500 shares of Common Stock for $10,000,250.
In return, Novartis received exclusive worldwide rights to use and sell
certain MSC products developed in the osteoporosis, osteoarthritis, cartilage
injury and gene therapy fields. Novartis is required to pay the Company
royalties based upon net sales, if any, for such products. The Company has
retained the option to manufacture MSC products in the osteoporosis,
osteoarthritis and cartilage therapy field at cost plus a percentage profit,
subject to certain conditions.
Under the Novartis Agreement, in addition to making the equity investment
and the research and milestone payments noted above, Novartis is responsible for
funding the cost of all clinical development, regulatory submissions, marketing,
sales and manufacturing (excluding North America) of MSC products,
F-18
<PAGE>
OSIRIS THERAPEUTICS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. UNAUDITED INFORMATION (CONTINUED)
if any, developed pursuant to the collaborations. As a result of these
collaborations, the Company is dependent upon Novartis to seek regulatory
approvals for, to conduct trials and to determine the ultimate commercialization
of the MSC products subject to the collaboration.
OTHER AGREEMENTS
In March 1997, the Company was awarded a $750,000 Phase II Small Business
Innovation Research Grant for a two-year continuation of research into tendon
regeneration.
In May 1997, the Company's cost sharing contribution to DARPA was increased
to $1.6 million per annum.
In July 1997, the Company entered into a three-year $1,000,000 agreement
with the Centro di Biotechnologie Avanzate whereby the Company will help fund
research and development activities related to: (i) regeneration of stroma and
other elements of bone marrow following chemotherapy; (ii) regeneration of bone
which has been depleted by cancer chemotherapy or osteoporosis; and (iii)
regeneration of damaged skeletal and connective tissue in orthopedic
applications.
COMMON STOCK OPTIONS
Stock option activity for the three months ended March 31, 1997 was as
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
NUMBER OF SHARES PER SHARE
----------------- -----------------
<S> <C> <C>
Balance, December 31, 1996............................... 484,360 $ .92
Granted................................................ 133,350 3.00
Exercised.............................................. 125 .60
Forfeited.............................................. 1,875 1.32
-------
Balance, March 31, 1997.................................. 615,710 $ 1.36
-------
-------
</TABLE>
The Company calculated deferred compensation expense of $200,325 related to
certain options granted during the three months ended March 31, 1997. The
Company will recognize compensation expense over the vesting period of those
stock options. However, the Company did not record any adjustments for deferred
compensation expense since it will not have a material effect on total
stockholders equity as of March 31, 1997.
F-19
<PAGE>
[ARTWORK TO BE ADDED]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 6
Use of Proceeds................................. 15
Dividend Policy................................. 15
Dilution........................................ 16
Capitalization.................................. 17
Selected Financial and Pro Forma Data........... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 19
Business........................................ 22
Management...................................... 43
Certain Transactions............................ 53
Principal Stockholders.......................... 54
Description of Capital Stock.................... 55
Shares Eligible for Future Sale................. 58
Underwriting.................................... 59
Legal Matters................................... 60
Experts......................................... 60
Additional Information.......................... 61
Glossary of Scientific Terms.................... 62
Index to Consolidated Financial Statements...... 64
</TABLE>
--------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3,500,000 SHARES
OSIRIS THERAPEUTICS, INC.
COMMON STOCK
[LOGO]
------
PROSPECTUS
, 1997
---------
SMITH BARNEY INC.
SBC WARBURG INC.
A SUBSIDIARY OF SWISS BANK CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All amounts shown are
estimates except for the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Securities and Exchange Commission registration fee................................ $ 12,807
NASD filing fee.................................................................... 4,727
Nasdaq National Market fee......................................................... 50,000
Blue sky qualification fees and expenses........................................... 20,000
Accounting fees and expenses....................................................... *
Legal fees and expenses............................................................ *
Printing and engraving expenses.................................................... *
Transfer agent and registrar fees.................................................. *
Miscellaneous expenses............................................................. *
Total.......................................................................... *
---------
$ *
---------
---------
</TABLE>
- ------------------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Certificate of Incorporation, as amended, (the "Charter")
provides for the indemnification of the Company's directors and officers to the
fullest extent permitted by law. Insofar as indemnification for liabilities
under the Securities Act may be permitted to directors, officers or controlling
persons of the Company pursuant to the Charter and Bylaws, as amended, of the
Company and the Delaware General Corporation Law, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable.
The Charter limits the personal liability of the Company's directors to the
fullest extent permitted by the Delaware General Corporation Law. Therefore, the
directors of the Company are not personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability: (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 of the Delaware General Corporation Law, relating to prohibited
dividends or distributions or the repurchase or redemption of stock; or (iv) for
any transaction from which the director derives an improper personal benefit. As
a result of this provision, the Company and its stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Additionally, the Company has entered into indemnification agreements, in
the form attached hereto as Exhibit 10.31 with certain of its directors,
officers and other key personnel, which may, in certain cases, be broader than
the specific indemnification provisions contained under applicable law. The
indemnification agreement may require the Company, among other things, to
indemnify such officers, directors and key personnel against certain liabilities
that may arise by reason of their status or service as directors, officers or
employees of the Company, to advance the expenses incurred by such parties as a
result of any threatened claims or proceedings brought against them as to which
they could be indemnified and to cover such officers, directors and key
employees under the Company's directors' and officers' liability insurance
II-1
<PAGE>
policies to the maximum extent that insurance coverage is maintained. The
Company maintains an insurance policy, providing an aggregate of $2,000,000 in
coverage, insuring all of its directors and officers against certain liabilities
arising from actions taken in their official capacities as directors and
officers.
The Underwriting Agreement, in the form attached hereto as Exhibit 1.1,
provides for the indemnification of directors, officers, employees, agents and
controlling persons of the Company by the Underwriters under certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On December 1, 1994, the Company entered into a three-year consulting
agreement with Max Link, Ph.D., Chairman of the Company's Board of Directors.
The agreement entitled Dr. Link to purchase a total of 80,000 shares of Common
Stock at a price of $0.34 per share and to purchase 100,000 shares of Series D
Preferred Stock for $2.55 per share.
On January 18, 1995, the Company entered into a Sublease Agreement with the
Maryland Economic Development Corporation ("MEDCO") for 30,000 square feet of
renovated laboratory and office space in Baltimore, Maryland. Under the Sublease
Agreement and related agreements, MEDCO (together with the City of Baltimore)
guaranteed renovation bond financing for up to $3,600,000 to renovate the
Company's facilities. As part of the transaction, the State of Maryland and the
City of Baltimore purchased $700,000 of the Company's Series D Convertible
Preferred Stock ("Series D Preferred Stock") and received warrants to purchase
33,000 shares of Series D Preferred Stock at an exercise price of $3.00 per
share.
On various dates in 1995 and 1996, the Company sold 3,599,070 shares of
Series D Preferred Stock for an aggregate of $10,623,004 to various existing and
new investors. In connection with these sales, the Company sold, for nominal
consideration, warrants to purchase 230,497 shares of Common Stock at an
exercise price of $3.00 per share pursuant to an agreement with the European
Placement Agent.
On various dates in 1996, the Company sold 2,246,224 shares of Series E
Convertible Preferred Stock ("Series E Preferred Stock") for an aggregate of
$10,108,004 to various existing and new investors. In connection with these
sales, the Company sold, for nominal consideration, warrants to purchase 86,675
shares of Common Stock at an exercise price of $4.50 per share pursuant to an
agreement with the European Placement Agent.
On June 16, 1997, the Company issued and sold 1,176,500 shares of Common
Stock to Novartis Pharma AG ("Novartis") for $10,000,250. In addition, the
Company entered into a Research and Licensing Agreement with Novartis
Pharmaceuticals Corporation, the U.S. affiliate of Novartis, pursuant to which
Novartis Pharmaceuticals Corporation paid the Company an initial up-front
payment of $3,000,000 for rights to the MSC technology in the fields of treating
degenerative diseases, regenerating cartilage and certain gene therapy
applications. In exchange, the Company will receive, subject to certain
conditions, up to $50,000,000 over five years for research and development
funding of certain portions of the Company's bone, cartilage and gene therapy
research programs.
Since June 30, 1994, the Company has granted an aggregate of 20,000 shares
of Common Stock to its directors as compensation for attending Board of Director
meetings.
The issuances described above were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving a public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Form of Restated Certificate of Incorporation, as amended.
3.1.1 Proposed Form of Amendment to Restated Certificate of Incorporation, as amended.
3.2 Form of Bylaws, as amended.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Hogan & Hartson L.L.P. with respect to the legality of the securities being
registered.*
10.1 Share Purchase Agreement for Gryphon Pharmaceuticals, Inc. stock, dated December 23, 1994, by
and between the Company and The Johns Hopkins University.
10.2 Stockholders Agreement for Gryphon Pharmaceuticals, Inc., dated December 23, 1994, by and
between the Company and The Johns Hopkins University.
10.3 Registration Rights Agreement for Gryphon Pharmaceuticals, Inc. stock, dated December 23,
1994, by and between the Company and The Johns Hopkins University.
10.4 Form of Registration Rights Agreement by and among the Company and the Investors in the
Series C Convertible Preferred offering.
10.5 Form of Registration Rights Agreement by and among the Company and the Investors in the
Series D Convertible Preferred offering.
10.6 Form of Registration Rights Agreement by and among the Company and the Investors in the
Series E Convertible Preferred offering.
10.7 Stock Purchase Agreement, dated June 16, 1997, by and between the Company and Novartis Pharma
AG.*
10.8 Technology Transfer and License Agreement, dated March 31, 1993, by and between the Company
and Case Western Reserve University.*
10.9 Research and License Agreement, dated December 23, 1994, by and between Gryphon
Pharmaceuticals, Inc. and The Johns Hopkins University.*
10.10 License Agreement, dated December 23, 1994, by and between the Company and Gryphon
Pharmaceuticals, Inc.*
10.11 Research Agreement, dated February 22, 1995, by and between the Company and Case Western
Reserve University.*
10.12 Material Transfer and Research Agreement, dated April 1, 1995, by and between the Company and
the Fred Hutchinson Cancer Research Center, with amendments.
10.13 Research Contract, dated June 11, 1996, as amended on May 31, 1997, by and between the
Company and the Defense Advanced Research Projects Agency.*
10.14 Clinical Study Support Agreement, dated October 28, 1996, by and between the Company,
University Hospitals of Cleveland, Ireland Cancer Center and Case Western Reserve University.
10.15 Research and Licensing Agreement, dated June 16, 1997, by and between the Company and
Novartis Pharmaceuticals Corporation.*
10.16 Master Equipment Lease Agreement, dated as February 28, 1994 and as amended on June 20, 1995,
by and between Dominion Ventures, Inc. and Osiris Therapeutics, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
10.17 Master Lease Agreement, dated January 18, 1995, by and between Saga Limited Partnership and
Maryland Economic Development Corporation.
<S> <C>
10.18 Sublease Agreement effective January 18, 1995, as amended on June 2, 1995, by and between
Maryland Economic Development Corporation and Osiris Therapeutics, Inc.
10.19 Financing and Construction Loan Agreement, dated as of June 2, 1995, by and among Maryland
Economic Development Corporation, The Whiting-Turner Contracting Company, Mayor and City
Council of Baltimore, Signet Trust Company and the Company.
10.20 Loan Agreement, dated June 1, 1995, by and between the Company and Signet Bank/ Maryland.
10.21 Consulting Agreement, dated March 11, 1993, by and between the Company and Arnold I. Caplan,
Ph.D.
10.22 Consulting Agreement, dated March 11, 1993, by and between the Company and Victor M.
Goldberg, M.D.
10.23 Consulting Agreement, dated March 11, 1993, by and between the Company and Stephen
Haynesworth, Ph.D.
10.24 Employment Agreement, dated March 11, 1993, as amended, by and between the Company and James
S. Burns.
10.25 Employment Agreement, dated October 1, 1994, by and between the Company and Daniel R.
Marshak, Ph.D.
10.26 Consulting Agreement, dated November 23, 1994, by and between the Company and Max Link, Ph.D.
10.27 1994 Amended and Restated Stock Incentive Plan, as amended, and form of Stock Option
Agreements.
10.28 Consulting Agreement, dated November 1, 1995, by and between the Company and Friedli
Corporate Finance AG.
10.29 Employment Agreement, dated November 1, 1996, by and between the Company and Michael J.
Demchuk, Jr.
10.30 Employment Agreement, dated June 1, 1997, by and between the Company and David J. Fink, Ph.D.
10.31 Form of Indemnification Agreement.
10.32 License Agreement between the Company and the Centro di Biotecnologie Avanzate.*
10.33 Research Agreement between the Company and the Centro di Biotecnologie Avanzate.*
11.1 Statement re computation of pro forma net loss per share.
21.1 Subsidiaries.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).*
23.3 Consent of Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, P.A.*
24.1 Power of Attorney (see page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
II-4
<PAGE>
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set forth
therein is not applicable or is included elsewhere in the Consolidated Financial
Statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Baltimore, State of
Maryland on the 16 day of July, 1997.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
-----------------------------------------
James S. Burns
President, Chief Executive Officer,
Treasurer and Director
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James S. Burns and Michael J. Demchuk, Jr., and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement or any
registration statement relating to this Registration Statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ JAMES S. BURNS Officer,
- ------------------------------ Treasurer and Director July 16, 1997
James S. Burns (Principal Executive
Officer)
Vice President & Chief
Financial
/s/ MICHAEL J. DEMCHUK, JR. Officer, Secretary and
- ------------------------------ Assistant Treasurer July 16, 1997
Michael J. Demchuk, Jr. (Principal Financial and
Accounting Officer)
/s/ MAX LINK, PH.D. Chairman of the Board
- ------------------------------ July 14, 1997
Max Link, Ph.D.
II-6
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ JACK L. BOWMAN Director
- ------------------------------ July 14, 1997
Jack L. Bowman
<C> <S> <C>
/s/ ARNOLD I. CAPLAN Director
- ------------------------------ July 14, 1997
Arnold I. Caplan, Ph.D.
/s/ PETER FRIEDLI Director
- ------------------------------ July 14, 1997
Peter Friedli
/s/ VICTOR M. GOLDBERG Director
- ------------------------------ July 14, 1997
Victor M. Goldberg, M.D.
/s/ MARK NOVITCH, M.D. Director
- ------------------------------ July 14, 1997
Mark Novitch, M.D.
</TABLE>
II-7
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
OSIRIS THERAPEUTICS, INC.
The present name of the corporation is Osiris Therapeutics, Inc. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on December 23, 1992. This Restated
Certificate of Incorporation was duly adopted by the Board of Directors and the
stockholders of the Corporation in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware.
FIRST: The name of the corporation is Osiris Therapeutics, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is The Corporation Trust Company, 1209 Orange Street, City of
Wilmington, County of New Castle, Delaware 19801. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: Section 1. Authorized Stock. The total number of shares which
the Corporation is authorized to have issued is 65,000,000 shares, consisting of
20,000,000 shares of Preferred Stock, par value $.001 per share (hereinafter
called "Preferred Stock"), and 45,000,000 shares of Common Stock, par value
$.001 per share (hereinafter called "Common Stock").
Upon the effectiveness of this Restated Certificate of Incorporation, each
share of the Corporation's capital stock that is outstanding immediately prior
to the effectiveness of this Restated Certificate of Incorporation shall be
reclassified and converted, without any action by the holders of such shares,
into three hundred (300) shares of Common Stock.
After the effectiveness of this Restated Certificate of Incorporation, each
holder of any certificate or certificates representing shares of capital stock
of the Corporation outstanding immediately prior to the effectiveness of this
Restated Certificate of Incorporation shall, upon the surrender of such
certificate or certificates to the Corporation, receive a certificate or
certificates representing the shares of Common Stock of the Corporation which
such holder is entitled to receive pursuant to the terms and conditions of this
Section 1 of Article FOURTH. Pending such surrender of such certificate or
certificates, such certificate or certificates shall be deemed for all purposes,
as a result of said reclassification and conversion and without any action on
the part of the holders thereof, to evidence only the right to receive one or
<PAGE>
more certificates representing shares of Common Stock in accordance with the
terms and conditions of this Section 1 of Article FOURTH.
Section 2. Preferred Stock. The Preferred Stock may be issued, subject
to any limitations prescribed by law, this Restated Certificate of Incorporation
as from time to time amended (hereinafter, this "Certificate of Incorporation"),
or the By-Laws of the Corporation as from time to time amended (the "By-Laws"),
from time to time in one or more series of any number of shares, and with
distinctive serial designations. Subject to any limitations prescribed by law,
this Certificate of Incorporation or the By-Laws, the Board of Directors hereby
is authorized to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations and
restrictions thereof.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
a. The designation of the series, which may be by distinguishing
number, letter and title;
b. The number of shares of the series, which number may thereafter
(except where otherwise provided in the creation of the series) increase or
decrease (but not below the number of shares thereof then outstanding);
c. The dividends, if any, for shares of the series (which may be
cumulative or noncumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or of any other series of stock;
d. The redemption rights, if any, and price or prices for shares of
the series;
e. The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
f. The rights of such shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
g. Whether the shares of the series shall be convertible into shares
of any other class or series of shares of the Corporation, and, if so, the
specification of such other class or series, the conversion price or prices
or rate or rates, any adjustments thereof, the date or dates as of
-2-
<PAGE>
which such shares shall be convertible and all other terms and conditions
upon which such conversion may be made;
h. The voting rights, if any, of the holders of such series; and
i. Such other designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 3. Common Stock. a. Subject to the limitations prescribed by
law, this Certificate of Incorporation or the By-Laws, with respect to the
closing of the transfer books or the fixing of a record date for the
determination of stockholders entitled to vote and except as otherwise provided
by law, this Certificate of Incorporation or the By-Laws, or by the terms and
conditions of any and all series of Preferred Stock issued pursuant to the terms
of this Certificate of Incorporation, the holders of outstanding shares of
Common Stock shall exclusively possess voting power for the election of
Directors and for all other purposes, each holder of record of shares of Common
Stock being entitled to one vote for each share of Common Stock standing in his
or her name on the books of the Corporation.
b. Except as otherwise provided by law, this Certificate of Incorporation
or the By-Laws, or by the terms and conditions of any and all series of
Preferred Stock issued pursuant to the terms of this Certificate of
Incorporation, the holders of Common Stock shall be entitled, to the exclusion
of the holders of Preferred Stock of any and all series, to receive such
dividends as from time to time may be declared by the Board of Directors.
c. Except as otherwise provided by law, this Certificate of Incorporation
or the By-laws, or by the terms and conditions of any and all series of
Preferred Stock issued pursuant to the terms of this Certificate of
Incorporation, in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Common Stock shall
be entitled, to the exclusion of the holders of any other capital stock of the
Corporation, to share ratably according to the number of shares of Common Stock
held by them, in all remaining assets of the Corporation available for
distribution to its stockholders.
FIFTH: Elections of directors need not be by written ballot except and to
the extent provided in the By-Laws.
SIXTH: To the full extent permitted by the General Corporation Law of the
State of Delaware or any other applicable laws presently or hereafter in effect,
no director of the Corporation shall be personally liable to the Corporation or
its stockholders for or with respect to any acts or omissions in the performance
of his or her duties as a director of the Corporation. Any repeal or
modification of this Article SIXTH shall not adversely affect any right or
protection of a director of the Corporation existing immediately prior to such
repeal or modification.
-3-
<PAGE>
SEVENTH: Each person who is or was or had agreed to become a director or
officer of the Corporation, or each such person who is or was serving or who had
agreed to serve at the request of the Board of Directors or an officer of the
Corporation as an employee or agent of the Corporation or as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise (including the heirs, executors, administrators or
estate of such person), shall be indemnified by the Corporation to the full
extent permitted by the General Corporation Law of the State of Delaware or any
other applicable laws as presently or hereafter in effect. The right of
indemnification provided in this Article SEVENTH shall not be exclusive of any
other rights to which any person seeking indemnification may otherwise be
entitled, and shall be applicable to matters otherwise within its scope
irrespective of whether such matters arose or arise before or after the adoption
of this Article SEVENTH. Without limiting the generality or the effect of the
foregoing, the Corporation may enter into one or more agreements with any person
which provide for indemnification greater or different than that provided in
this Article SEVENTH. Any repeal or modification of this Article SEVENTH shall
not adversely affect any right or prosecution existing hereunder immediately
prior to such repeal or modification.
EIGHTH: In furtherance and not in limitation of the rights, powers,
privileges, and discretionary authority granted or conferred by the General
Corporation Law of the State of Delaware or other statutes or laws of the State
of Delaware, the Board of Directors is expressly authorized to make, alter,
amend or repeal the By-Laws of the Corporation, without any action on the part
of the stockholders, but the stockholders may make additional By-Laws and may
alter, amend or repeal any By-Law whether adopted by them or otherwise. The
Corporation may in its By-Laws confer powers upon its Board of Directors in
addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board of Directors by applicable law.
NINTH: The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed herein or by applicable law; and all rights,
preferences and privileges of whatsoever nature conferred upon stockholders,
directors or any other persons whomsoever by and pursuant to this Certificate or
Incorporation in its present form or as hereafter amended are granted subject to
this reservation.
[this space is intentionally left blank]
-4-
<PAGE>
IN WITNESS WHEREOF, the foregoing Restated Certificate of Incorporation,
having been duly adopted by the stockholders of Osiris Therapeutics, Inc. in a
Written Consent of Stockholders pursuant to Section 228 of the General
Corporation Law of the State of Delaware, has been duly signed by James S.
Burns, President of the Corporation, and attested by Arnold I. Caplan, Secretary
of the Corporation, this 23rd day of September, 1993.
OSIRIS THERAPEUTICS, INC.
/s/ JAMES S. BURNS
-------------------------
James S. Burns
President
ATTEST:
By: /s/ ARNOLD I. CAPLAN
-----------------------
Arnold I. Caplan
Secretary
-5-
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Osiris Therapeutics, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Restated Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.001 per share, designated as Series A Convertible
Preferred Stock:
RESOLVED, that pursuant to Article FOURTH of the Restated
Certificate of Incorporation of the Corporation, where by 20,000,000
shares of Preferred Stock are authorized, there be and hereby is created
a series of Preferred Stock designated as Series A Convertible Preferred
Stock, par value $.001 per share (the "Series A Preferred Stock "), with
such series to consist of 12,300,000 shares, and that the powers,
preferences and rights of, and qualifications, limitations and
restrictions on, the Series A Preferred Stock are set forth on Exhibit B
hereto and shall become Subdivision A-1 of Section 2 of such Article
FOURTH of the Restated Certificate of Incorporation.
The Corporation further certifies that attached hereto as Appendix I
is a true, correct and complete copy of said Exhibit B referred to in the
foregoing resolution.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be executed by its President and attested to by its Secretary
this 23rd day of September, 1993.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
--------------------------
James S. Burns, President
ATTEST:
/s/ ARNOLD I. CAPLAN
- --------------------------
Arnold I. Caplan,
Secretary
-2-
<PAGE>
APPENDIX I
EXHIBIT B
SERIES A CONVERTIBLE PREFERRED STOCK
1. Dividends.
The holders of shares of Series A Convertible Preferred Stock ("Series
A Preferred Shares") shall be entitled, when and if declared by the Board of
Directors of the Corporation, to dividends payable in cash and/or property out
of funds legally available for that purpose; provided, however, that the
Corporation shall not declare or pay any dividends on any shares of Common Stock
("Common Shares") unless it shall, at the same time, declare and pay to each
holder of Series A Preferred Shares a dividend equal to the dividend which would
have been payable to each holder if such Series A Preferred Shares had been
converted into Common Stock on the date of determination of holders of Common
Stock entitled to receive such dividend.
2. Liquidation, Dissolution or Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of Series A Preferred
Shares shall be entitled to be paid out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock, before
any payment or declaration and setting apart for payment of any amount shall be
made in respect of any Common Shares but after and subject to the payment in
full of all amounts required to be paid to the holders of any other series or
class of Preferred Stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Shares, an amount equal to $.75 per share
(as adjusted to reflect any share split, combination, reclassification or
similar event involving the Series A Preferred Shares), plus all accrued and
unpaid dividends, if any, to and including the date full payment shall be
tendered to the holders of the Series A Preferred Shares with respect to such
liquidation, dissolution or winding up. If the assets of the Corporation
available for such distribution to the holders of the Series A Preferred Shares
shall be insufficient to permit the payment in full to the holders of the Series
A Preferred Shares of the amounts thus distributable, then the entire assets of
the Corporation available for such distribution shall be distributed ratably
among the holders of the Series A Preferred Shares based upon the aggregate
liquidation preference of the Series A Preferred Shares held by each such holder
and the aggregate liquidation preference of all outstanding Series A Preferred
Shares. After such payment shall have been made in full to the holders of the
<PAGE>
Series A Preferred Shares or funds necessary for such payment shall have been
set aside by the Corporation in trust for the account of holders of the Series A
Preferred Shares so as to be available for such payment, the holders of Series A
Preferred Shares shall have no further rights with respect to any remaining
assets of the Corporation legally available for distribution to the holders of
its capital stock. Whenever the distribution provided for in this Section 2
shall be payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good faith by
not less than a majority of the Directors then serving on the Board of Directors
of the Corporation. A reorganization of the Corporation, or a consolidation or
merger of the Corporation with or into another corporation or entity, or a sale
or other disposition of all or substantially all of the assets of the
Corporation, shall not be treated as a liquidation, dissolution or winding up of
the Corporation within the meaning of this Section 2.
3. Voting Rights.
(a) In addition to any voting rights provided by law, each holder of
Series A Preferred Shares shall be entitled to vote on all matters submitted to
a vote of the holders of Common Shares and shall be entitled to that number of
votes equal to the largest number of whole Common Shares into which such
holder's Series A Preferred Shares could be converted pursuant to the provisions
of Section 4 of this Subdivision A-1 on the record date for the determination of
stockholders entitled to vote on such matter or, if no record date is
established, on the date such vote is taken or any written consent of
stockholders is first executed. Except as otherwise required by law, the
holders of Series A Preferred Shares and Common Shares shall vote together as a
single class on all matters.
(b) Except as otherwise provided by law, the Corporation shall not
amend, alter or repeal the preferences, special rights or other powers of the
Series A Preferred Shares so as to affect adversely the Series A Preferred
Shares without the written consent or affirmative vote of the holders of at
least 66-2/3% of the then outstanding Series A Preferred Shares, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class. For this purpose, the authorization or issuance of any
series of Preferred Stock with preference or priority over, or on a parity with,
the Series A Preferred Shares as to any preferences, rights or powers
(including, without limitation, voting rights or the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation) shall not be deemed so to affect adversely such Series A
Preferred Shares.
4. Conversion Rights.
(a) Optional Conversion. Subject to the terms and conditions of this
Section 4, the holder of any Series A Preferred Shares shall have the right, at
its
-2-
<PAGE>
option at any time and from time to time, to convert all or any portion of
such shares into such number of fully paid and nonassessable Common Shares as is
obtained by multiplying the number of Series A Preferred Shares to be converted
by $.75 and dividing the result by the conversion price of $.75 per share or, in
the event any adjustment of such conversion price has taken place pursuant to
the provisions of this Section 4, by the conversion price in effect on the date
such Series A Preferred Shares are surrendered for conversion (such conversion
price, or such conversion price as last adjusted, being referred to herein as
the "Conversion Price"); provided, however, that in the event of the
liquidation, dissolution or winding up of the Corporation, the holders of Series
A Preferred Shares shall only be entitled to convert their shares in accordance
with the terms of this Section 4 at any time prior to the earlier of the tenth
day following the date on which such liquidation, distribution or winding up was
approved by the stockholders of the Corporation and the date which is three days
prior to the distribution of the proceeds from such liquidation, dissolution or
winding up of the Corporation.
(b) Automatic Conversion.
(i) All outstanding Series A Preferred Shares shall be converted
automatically into the number of Common Shares into which such Series A
Preferred Shares are then convertible pursuant to this Section 4, without any
action by the holders of such shares and whether or not the certificate
representing such shares are surrendered to the Corporation or its transfer
agent, at the earliest of: (A) the time the Corporation consummates an
underwritten public offering of Common Shares where the price per share paid by
the public for such shares is at least $3.00 (as adjusted to reflect any share
split, combination, reclassification or similar event subsequent to September
24, 1993 affecting the Common Shares); (B) the moment immediately prior to the
consummation of a consolidation or merger of the Corporation with or into
another corporation or entity or a sale or transfer of all or substantially all
of the assets of the Corporation pursuant to which holders of Common Shares
(assuming the conversion of all outstanding Series A Preferred Shares into
Common Shares immediately prior thereto) will receive cash and/or securities
and/or property having an aggregate value (as determined by the Corporation's
Board of Directors) of at least $3.00 per share (as adjusted to reflect any
share split, combination, reclassification or similar event subsequent to
September 24, 1993 affecting the Common Shares); and (C) September 24, 1998.
(ii) Upon the occurrence of an event triggering the automatic
conversion of Series A Preferred Shares as provided in the preceding
subparagraph (i), the Corporation shall promptly give written notice to all
holders of Series A Preferred Shares of such event. As soon as practicable
after giving such notice, the Corporation shall issue and deliver or cause to be
issued and delivered a certificate or certificates for the number of full Common
Shares issuable upon such conversion, together with any cash payment to be made
in lieu of fractional shares as provided in Subsection 4(f) of this Article
FOURTH and any accrued but unpaid dividends on
-3-
<PAGE>
such Series A Preferred Shares, in exchange for the certificates representing
the Series A Preferred Shares converted pursuant to this Subsection 4(b),
together with proper assignments of such certificates.
(c) Mechanics of Conversion. The rights of conversion under
Subsection 4(a) shall be exercised by a holder of Series A Preferred Shares by
(i) surrendering the certificates representing such shares, together with
written notice of such holder's election to convert such shares (the "Conversion
Notice"), and a proper assignment of such certificates to the Corporation. The
Conversion Notice shall state the names and addresses in which and to which the
certificates representing the Common Shares issuable or, if applicable, the
other shares, other securities, cash or other property issuable, deliverable or
payable, upon such conversion shall be issued, delivered or paid, as the case
may be. The date upon which the certificates representing the Series A
Preferred Shares to be converted, the Conversion Notice and the proper
assignment have all been received by the Corporation is referred to herein as
the "Conversion Date." As promptly as practicable after the Conversion Date,
the Corporation shall issue and deliver or cause to be issued and delivered, as
specified in the Conversion Notice, certificates for the number of full Common
Shares issuable upon such conversion together with any cash instead of
fractional shares as provided in Subsection 4(f) and any accrued but unpaid
dividends. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder of the converted Series A Preferred Shares shall cease and
the person or persons in whose name or names any certificate or certificates for
Common Shares shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby.
(d) Subdivision or Combination of Stock. In case the Corporation
shall at any time split or subdivide its outstanding Common Shares into a
greater number of shares other than through a stock dividend in which the
holders of the Series A Preferred Shares participate pursuant to Section 1 of
this Subdivision A-1, the Conversion Price for the Series A Preferred Shares in
effect immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the outstanding Common Shares of the Corporation shall
be combined into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
(e) Reorganization, Reclassification, Consolidation or Merger. In
the event of any capital reorganization or reclassification of the outstanding
capital stock of the Corporation, or any consolidation of the Corporation with,
or merger of the Corporation with or into, another corporation or entity, or the
sale of all or substantially all of the assets of the Corporation (each of such
events being hereinafter, referred to as an "Extraordinary Event"), where, in
connection with such Extraordinary Event, the holders of Common Shares will be
entitled to receive stock, securities, cash and/or other property with respect
to or in exchange for such
-4-
<PAGE>
Common Shares, then each Series A Preferred Share shall, at the effective
time of such Extraordinary Event, be converted into, without any action on
the part of the holder thereof, such shares of stock, securities, cash and/or
other property as may be issuable or payable with respect to or in exchange
for the number of Common Shares which would otherwise have been issuable to
the holder of such Series A Preferred Share upon the conversion thereof
pursuant to this Section 4.
(f) Fractional Shares. No fractional Common Shares (or other shares
or other securities) or scrip representing fractional shares shall be issued
upon conversion of any of the Series A Preferred Shares. Instead, the
Corporation shall pay cash in an amount equal to the fair market value of such
fractional share at the time of such conversion, as determined in good faith by
the Board of Directors of the Corporation.
(g) Reservation of Common Shares. The Corporation shall at all times
reserve and keep available and free of preemptive rights out of its authorized
but unissued Common Shares, solely for the purpose of effecting the conversion
of the Series A Preferred Shares, such number of its Common Shares (or other
shares or other securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series A Preferred
Shares, and if at any time the number of authorized but unissued Common Shares
(or such other shares or other securities) shall not be sufficient to effect the
conversion of all then outstanding Series A Preferred Shares, the Corporation
shall take such action as may be necessary to increase its authorized but
unissued Common Shares (or other shares or other securities) to such number of
shares as shall be sufficient for such purpose.
(h) Costs of Conversion. The Corporation shall pay all documentary,
stamp or other similar taxes attributable to the issuance or delivery of Common
Shares (or other shares or other securities) of the Corporation upon conversion
of any of the Series A Preferred Shares. However, the Corporation shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the Series A Preferred Shares in respect
of which such shares are being issued.
-5-
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Osiris Therapeutics, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Restated Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.001 per share, designated as Series B Convertible
Preferred Stock:
RESOLVED, that pursuant to Article FOURTH of the Restated
Certificate of Incorporation of the Corporation, whereby 20,000,000
shares of Preferred Stock are authorized, there be and hereby is
created a series of Preferred Stock designated as Series B Convertible
Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock"), with such series to consist of 3,000,000 shares, and that the
powers, preferences and rights of, and qualifications, limitations and
restrictions on, the Series B Preferred Stock are set forth on Exhibit
A to this written consent and shall become Subdivision A-2 of Section
2 of such Article FOURTH of the Restated Certificate of Incorporation.
The Corporation further certifies that attached hereto as Appendix I
is a true, correct and complete copy of said Exhibit A referred to in the
foregoing resolution.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be executed by its President and attested to by its Secretary
this 22nd day of February, 1994.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
---------------------------
James S. Burns, President
ATTEST:
/s/ ARNOLD I. CAPLAN
- --------------------------
Arnold I. Caplan,
Secretary
-2-
<PAGE>
APPENDIX I
SUBDIVISION A-2
SERIES B CONVERTIBLE PREFERRED STOCK
1. Dividends.
The holders of shares of Series B Convertible Preferred Stock
("Series B Preferred Shares") shall be entitled, when and if declared by the
Board of Directors of the Corporation, to dividends payable in cash and/or
property out of funds legally available for that purpose; provided, however,
that the Corporation shall not declare or pay any dividends on any shares of
Common Stock ("Common Shares") unless it shall, at the same time, declare and
pay to each holder of Series B Preferred Shares a dividend equal to the dividend
which would have been payable to each holder if such Series B Preferred Shares
had been converted into Common Stock on the date of determination of holders of
Common Stock entitled to receive such dividend.
2. Liquidation, Dissolution or Winding Up.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of Series B Preferred
Shares shall be entitled to be paid out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock, before
any payment or declaration and setting apart for payment of any amount shall be
made in respect of any Common Shares but after and subject to the payment in
full of all amounts required to be paid to the holders of any other series or
class of Preferred Stock of the Corporation ranking on liquidation prior and in
preference to the Series B Preferred Shares, an amount equal to $.75 per share
(as adjusted to reflect any share split, combination, reclassification or
similar event involving the Series B Preferred Shares), plus all accrued and
unpaid dividends, if any, to and including the date full payment shall be
tendered to the holders of the Series B Preferred Shares with respect to such
liquidation, dissolution or winding up. Notwithstanding the foregoing, if the
assets of the Corporation available for such distribution to the holders of the
Series B Preferred Shares and the holders of the Series A Preferred Shares (as
defined in Subdivision A-1 of this Section 2 of Article Fourth) shall be
insufficient to permit the payment in full to the holders of the Series B
Preferred Shares and the holders of the Series A Preferred Shares of the amounts
distributable to them under this Article Fourth as a result of such liquidation,
distribution or winding up, then the entire assets of the Corporation available
for such distribution shall be distributed ratably among the holders of the
Series B Preferred Shares and the holders of the Series A Preferred Shares based
upon the respective aggregate liquidation preference of each holder of Series B
Preferred Shares and each holder of Series A Preferred Shares. After such
payment shall have been made in full to the holders of the Series B Preferred
Shares or funds necessary for such payment shall have been set aside by the
Corporation in trust for the account of holders of the Series B Preferred Shares
so as to be available for such payment, the holders of Series B Preferred Shares
shall have no further rights with respect to any
<PAGE>
remaining assets of the Corporation legally available for distribution to the
holders of its capital stock. Whenever the distribution provided for in this
Section 2 shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by not less than a majority of the Directors then serving on the
Board of Directors of the Corporation. A reorganization of the Corporation,
or a consolidation or merger of the Corporation with or into another
corporation or entity, or a sale or other disposition of all or substantially
all of the assets of the Corporation, shall not be treated as a liquidation,
dissolution or winding up of the Corporation within the meaning of this
Section 2.
3. Voting Rights.
(a) In addition to any voting rights required by law, each holder of
Series B Preferred Shares shall be entitled to vote on all matters submitted to
a vote of the holders of Common Shares and shall be entitled to that number of
votes equal to the largest number of whole Common Shares into which such
holder's Series B Preferred Shares could be converted pursuant to the provisions
of Section 4 of this Subdivision A-2 on the record date for the determination of
stockholders entitled to vote on such matter or, if no record date is
established, on the date such vote is taken or any written consent of
stockholders is first executed. Except as otherwise required by law, the
holders of the Series A Preferred Shares, Series B Preferred Shares and Common
Shares shall vote together as a single class on all matters.
(b) Except as otherwise provided by law, the Corporation shall not
amend, alter or repeal the preferences, special rights or other powers of the
Series B Preferred Shares so as to affect adversely the Series B Preferred
Shares unless (i) a corresponding amendment, alteration or repeal of the
preferences, special rights or other powers of the Series A Preferred Shares has
been approved by the holders of such number of Series A Preferred Shares that
would have represented at least 66 2/3% of the Series A Preferred Shares and
Series B Preferred Shares if such shares were taken together as a single class,
in which case no separate vote or approval of the holders of the Series B
Preferred Shares shall be required; or (ii) such amendment, alteration or repeal
has been approved by the written consent or affirmative vote of the holders of
at least 66 2/3% of the then outstanding Series B Preferred Shares given in
writing or by vote at a meeting (as the case may be). For this purpose, the
authorization or issuance of any series of Preferred Stock with preference or
priority over, or on a parity with, the Series B Preferred Shares as to any
preferences, rights or powers (including, without limitation, voting rights or
the right to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation) shall not be deemed so to affect
adversely such Series B Preferred Shares.
4. Conversion Rights.
(a) Optional Conversion. Subject to the terms and conditions of this
Section 4, the holder of any Series B Preferred Shares shall have the right, at
its option at any time and from time to time, to convert all or any portion of
such shares
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<PAGE>
into such number of fully paid and nonassessable Common Shares as is
obtained by multiplying the number of Series B Preferred Shares to be converted
by $.75 and dividing the result by the conversion price of $.75 per share or, in
the event any adjustment of such conversion price has taken place pursuant to
the provisions of this Section 4, by the conversion price in effect on the date
such Series B Preferred Shares are surrendered for conversion (such conversion
price, or such conversion price as last adjusted, being referred to herein as
the "Conversion Price"); provided, however, that in the event of the
liquidation, dissolution or winding up of the Corporation, the holders of Series
B Preferred Shares shall only be entitled to convert their shares in accordance
with the terms of this Section 4 at any time prior to the earlier of the tenth
day following the date on which such liquidation, distribution or winding up was
approved by the stockholders of the Corporation and the date which is three days
prior to the distribution of the proceeds from such liquidation, dissolution or
winding up of the Corporation.
(b) Automatic Conversion.
(i) All outstanding Series B Preferred Shares shall be converted
automatically into the number of Common Shares into which such Series B
Preferred Shares are then convertible pursuant to this Section 4, without any
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, at the earliest of: (A) the time the Corporation consummates an
underwritten public offering of Common Shares where the price per share paid by
the public for such shares is at least $3.00 (as adjusted to reflect any share
split, combination, reclassification or similar event subsequent to September
24, 1993 affecting the Common Shares); (B) the moment immediately prior to the
consummation of a consolidation or merger of the Corporation with or into
another corporation or entity or a sale or transfer of all or substantially all
of the assets of the Corporation pursuant to which holders of Common Shares
(assuming the conversion of all outstanding Series B Preferred Shares into
Common Shares immediately prior thereto) will receive cash and/or securities
and/or property having an aggregate value (as determined by the Corporation's
Board of Directors) of at least $3.00 per share (as adjusted to reflect any
share split, combination, reclassification or similar event subsequent to
September 24, 1993 affecting the Common Shares); (C) the time at which the
Series A Preferred Shares are converted into Common Shares; and (D) September
24, 1998.
(ii) Upon the occurrence of an event triggering the automatic
conversion of Series B Preferred Shares as provided in the preceding
subparagraph (i), the Corporation shall promptly give written notice to all
holders of Series B Preferred Shares of such event. As soon as practicable
after giving such notice, the Corporation shall issue and deliver or cause to be
issued and delivered a certificate or certificates for the number of full Common
Shares issuable upon such conversion, together with any cash payment to be made
in lieu of fractional shares as provided in Subsection 4(f) of this Article
FOURTH and any accrued but unpaid dividends on such Series B Preferred Shares,
in exchange for the certificates representing the Series B Preferred
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<PAGE>
Shares converted pursuant to this Subsection 4(b), together with proper
assignments of such certificates.
(c) Mechanics of Conversion. The rights of conversion under
Subsection 4(a) shall be exercised by a holder of Series B Preferred Shares by
(i) surrendering the certificates representing such shares, together with
written notice of such holder's election to convert such shares (the "Conversion
Notice"), and a proper assignment of such certificates to the Corporation. The
Conversion Notice shall state the names and addresses in which and to which the
certificates representing the Common Shares issuable or, if applicable, the
other shares, other securities, cash or other property issuable, deliverable or
payable, upon such conversion shall be issued, delivered or paid, as the case
may be. The date upon which the certificates representing the Series B
Preferred Shares to be converted, the Conversion Notice and the proper
assignment have all been received by the Corporation is referred to herein as
the "Conversion Date." As promptly as practicable after the Conversion Date,
the Corporation shall issue and deliver or cause to be issued and delivered, as
specified in the Conversion Notice, certificates for the number of full Common
Shares issuable upon such conversion together with any cash instead of
fractional shares as provided in Subsection 4(f) and any accrued but unpaid
dividends. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder of the converted Series B Preferred Shares shall cease and
the person or persons in whose name or names any certificate or certificates for
Common Shares shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby.
(d) Subdivision or Combination of Stock. In case the Corporation
shall at any time split or subdivide its outstanding Common Shares into a
greater number of shares other than through a stock dividend in which the
holders of the Series B Preferred Shares participate pursuant to Section 1 of
this Subdivision A-2, the Conversion Price for the Series B Preferred Shares in
effect immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the outstanding Common Shares of the Corporation shall
be combined into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
(e) Reorganization, Reclassification, Consolidation or Merger. In
the event of any capital reorganization or reclassification of the outstanding
capital stock of the Corporation, or any consolidation of the Corporation with,
or merger of the Corporation with or into, another corporation or entity, or the
sale of all or substantially all of the assets of the Corporation (each of such
events being hereinafter, referred to as an "Extraordinary Event"), where, in
connection with such Extraordinary Event, the holders of Common Shares will be
entitled to receive stock, securities, cash and/or other property with respect
to or in exchange for such Common Shares, then each Series B Preferred Share
shall, at the effective time of such Extraordinary Event, be converted into,
without any action on the part of the holder thereof, such shares of stock,
securities, cash and/or other property as may be issuable
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<PAGE>
or payable with respect to or in exchange for the number of Common Shares
which would otherwise have been issuable to the holder of such Series B
Preferred Share upon the conversion thereof pursuant to this Section 4.
(f) Fractional Shares. No fractional Common Shares (or other shares
or other securities) or scrip representing fractional shares shall be issued
upon conversion of any of the Series B Preferred Shares. Instead, the
Corporation shall pay cash in an amount equal to the fair market value of such
fractional share at the time of such conversion, as determined in good faith by
the Board of Directors of the Corporation.
(g) Reservation of Common Shares. The Corporation shall at all times
reserve and keep available and free of preemptive rights out of its authorized
but unissued Common Shares, solely for the purpose of affecting the conversion
of the Series B Preferred Shares, such number of its Common Shares (or other
shares or other securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series B Preferred
Shares, and if at any time the number of authorized but unissued Common Shares
(or such other shares or other securities) shall not be sufficient to effect the
conversion of all then outstanding Series B Preferred Shares, the Corporation
shall take such action as may be necessary to increase its authorized but
unissued Common Shares (or other shares or other securities) to such number of
shares as shall be sufficient for such purpose.
(h) Costs of Conversion. The Corporation shall pay all documentary,
stamp or other similar taxes attributable to the issuance or delivery of Common
Shares (or other shares or other securities) of the Corporation upon conversion
of any of the Series B Preferred Shares. However, the Corporation shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the Series B Preferred Shares in respect
of which such shares are being issued.
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<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES C CONVERTIBLE PREFERRED STOCK
AND
SERIES C-1 CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Osiris Therapeutics, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Restated Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.001 per share, designated as Series C Convertible
Preferred Stock and a series of its Preferred Stock, par value $.001 per share,
designated as Series C-1 Convertible Preferred Stock:
RESOLVED, that pursuant to Article FOURTH of the Restated
Certificate of Incorporation of the Corporation, whereby 20,000,000
shares of Preferred Stock are authorized, there be and hereby is
created a series of Preferred Stock designated as Series C Convertible
Preferred stock, par value $.001 per share (the "Series C Preferred
Stock"), with such series to consist of 2,941,177 shares, and a series
of Preferred Stock designated as Series C-1 Convertible Preferred
Stock, par value $.001 per share (the "Series C-1 Preferred Stock"),
with such series to consist of one share, and that the powers,
preferences and rights of, and qualifications, limitations and
restrictions on, the Series C Preferred Stock and the Series C-1
Preferred Stock are set forth on Exhibit A presented to this meeting
and shall become Subdivision A-3 of Section 2 of such Article FOURTH
of the Restated Certificate of Incorporation.
The Corporation further certifies that attached hereto as Appendix I
is a true, correct and complete copy of said Exhibit A referred to in the
foregoing resolution.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be executed by its President and attested to by its Assistant
Secretary this 19th day of May, 1994.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
--------------------------------
James S. Burns, President
ATTEST:
/s/ NANCY G. RUBIN
- ------------------------------------
Nancy G. Rubin, Assistant Secretary
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<PAGE>
APPENDIX I
Subdivision A-3
SERIES C AND SERIES C-1 CONVERTIBLE PREFERRED STOCK
1. Dividends. The holders of shares of Series C Convertible
Preferred Stock ("Series C Preferred Stock") and Series C-1 Convertible
Preferred Stock ("Series C-1 Preferred Stock") shall be entitled, when and if
declared by the Board of Directors of the Corporation, to dividends payable in
cash and/or property out of funds legally available for that purpose; provided,
however, that the Corporation shall not declare or pay any dividends on any
shares of Common Stock or upon any other junior securities of the Corporation
unless it shall, at the same time, declare and pay to each holder of Series C
Preferred Stock and to each holder of Series C-1 Preferred Stock a dividend
equal to the dividends which would have been payable to each holder if such
Series C Preferred Stock or Series C-1 Preferred Stock had been converted into
Common Stock (or such other junior securities on a Common Stock-equivalent
basis) on the date of determination of holders of Common Stock (or such other
junior securities) entitled to receive such dividend.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of shares of
Series C Preferred Stock and Series C-1 Preferred Stock shall be entitled to
receive prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Series B Preferred Shares, Series A Preferred
Shares or Common Stock, but after and subject to the payment in full of all
amounts required to be paid to the holders of any other class or series of
Preferred Stock of the Corporation ranking on liquidation prior and in
preference to the Series C Preferred Stock and Series C-1 Preferred Stock, an
amount per share equal to the sum of $.10 (as adjusted to reflect any stock
splits, combination, reclassification or similar event involving the Series C
Preferred Stock or Series C-1 Preferred Stock) for each outstanding share of
Series C Preferred Stock and Series C-1 Preferred Stock (the "Series C
Liquidation Preference"). If, upon the occurrence of such an event, the assets
and funds thus distributed among the holders of the Series C Preferred Stock and
Series C-1 Preferred Stock shall be insufficient to permit the payment to such
holders of he full aforesaid preferential amounts, then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series C Preferred Stock and Series C-1
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive in respect of such shares.
(b) Upon the completion of the distributions required by
subsection (a) of this Section 2, the holders of the Series C Preferred Stock
and Series C-1 Preferred Stock shall be entitled to receive prior and in
preference to any distribution of assets to the holders of Common Stock but
after and subject to the
<PAGE>
payment in full of all amounts required to be paid to the holders of any
other class or series of Preferred Stock of the Corporation ranking on
liquidation prior and in preference to the Series C Preferred Stock and
Series C-1 Preferred Stock, an amount equal to $.75 per share (as adjusted to
reflect any stock split, combination, reclassification or similar event
involving the Series C Preferred Stock and Series C-1 Preferred Stock), plus
all accrued and unpaid dividends, if any, to and including the date full
payment shall be tendered to the holders of Series C Preferred Stock and
Series C-1 Preferred Stock with respect to such liquidation, dissolution or
winding up. Notwithstanding the foregoing, if the assets of the Corporation
available for such distribution to the holders of the Series C Preferred
Stock and Series C-1 Preferred Stock, and the distribution required to be
made to the holders of the Series B Preferred Shares (as defined in
Subdivision A-2 of this Section 2 of Article Fourth) and the Series A
Preferred Shares (as defined in Subdivision A-1 of this Section 2 of Article
Fourth) pursuant to Section 2 of such Subdivisions shall be insufficient to
permit the payment in full to the holders of the Series C Preferred Stock,
the Series C-1 Preferred Stock, the Series D Preferred Shares and the Series
A Preferred Shares of the amounts distributable to them under this Article
Fourth as a result of such liquidation, distribution or winding up, then the
entire assets of the Corporation available for such distribution shall be
distributed ratably among the holders of the Series C Preferred Stock,
holders of the Series C-1 Preferred Stock, holders of the Series B Preferred
Shares and holders of the Series A Preferred Shares in proportion to the
respective aggregate liquidation preference each such holder is otherwise
entitled to receive in respect of such shares.
(c) Upon the completion of the distributions contemplated by
subsections (a) and (b) of this Section 2, the holders of the Common Stock shall
be entitled to receive an amount equal to $.075 per share (as adjusted to
reflect any stock split, combination, reclassification or similar event
involving the Common Stock). Notwithstanding the foregoing, if the assets of
the Corporation available for such distribution to the holders of the Common
Stock shall be insufficient to permit the payment in full to the holders of the
Common Stock of the amounts distributable to them under this subsection (c) of
this Section 2 as a result of such liquidation, dissolution or winding up, then
the entire assets of the Corporation available for such distribution shall be
distributed ratably among the holders of the Common Stock in proportion to the
respective aggregate liquidation preference each such holder is otherwise
entitled to receive in respect of such shares.
(d) Upon the completion of the distributions required by
subsections (a), (b) and (c) of this Section 2 and any other distributions
required under the Corporation's Certificate of Incorporation, the remaining
assets of the Corporation available for distribution to stockholders shall be
distributed among the holders of Series C Preferred Stock and the holders of the
Series C-1 Preferred Stock, the holders of such other series of Preferred Stock
or other capital stock of the Corporation as may be so entitled and the holders
of the Common Stock pro rata based on the number of shares of Common Stock held
by each (with any shares of Common Stock issuable upon conversion of all such
Series C Preferred Stock and Series C-1 Preferred Stock and such other series of
Preferred Stock and capital stock deemed to be held by such
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<PAGE>
holders for the purposes of such calculation). Notwithstanding the
foregoing, the aggregate amount per share to be received by the holders of
Series C Preferred Stock and Series C-1 Preferred Stock pursuant to
subsections (a), (b) and (c) of this Section 2 and this subsection (d) shall
not exceed $2.00 (as adjusted for any stock split, combination,
reclassification or similar event involving the Series C Preferred Stock and
Series C-1 Preferred Stock) if such dissolution, liquidation or winding up
takes place prior to the third anniversary of the Purchase Date (as defined
below) or $3.00 (as adjusted for any stock split, combination,
reclassification or similar event involving the Series C Preferred Stock and
Series C-1 Preferred Stock) if such event takes place on or after the third
anniversary of the Purchase Date; provided, however, that no such limitation
shall apply unless substantially similar limitations apply to each other
Series of Preferred Stock of the Corporation entitled to participate in such
distribution of remaining assets of the Corporation other than any such
series as to which the affirmative vote or written consent of the holders of
the Series C and Series C-1 Preferred stock has been obtained pursuant to
Section 5(b)(ii) hereof.
(e) For purposes of this Section 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, or to
include, (A) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation, but excluding any
merger affected exclusively for the purpose of changing the domicile of the
Corporation) in which outstanding shares of the Corporation are exchanged for
securities or other consideration issued, or caused to be issued by the
acquiring corporation or its subsidiary, or (B) a sale of all or substantially
all of the assets of the Corporation, unless in each case the Corporation's
stockholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale (by virtue of securities
issued as consideration for the Corporation's acquisition or sale or otherwise)
hold at least 50% of the voting power of the surviving or acquiring entity.
(f) Whenever the distribution provided for in this Section 2
shall be payable in property other than cash, the value of such property shall
be the fair market value thereof as determined in good faith by not less than a
majority of the Directors then serving on the Board of Directors of the
Corporation.
3. Redemption. The Series C Preferred Stock and Series C-1
Preferred Stock are not redeemable.
4. Conversion. The holders of the Series C Preferred Stock and
Series C-1 Preferred Stock shall have conversion rights as follows (the
"Conversion Rights'):
(a) Right to Convert. Each share of Series C Preferred Stock
and Series C-1 Preferred Stock shall be convertible, at the option of the holder
hereof at any time after the date of issuance of such share at the office of the
Corporation or any transfer agent for such stock; provided, however, that in the
event of the liquidation, dissolution or winding up of the Corporation, the
holders of Series C Preferred Stock and Series C-1 Preferred Stock shall only be
entitled to convert their
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<PAGE>
shares in accordance with the terms of this Section 4 at any time prior to
the earlier of the tenth day following the date on which such liquidation,
dissolution or winding up is approved by the stockholders of the Corporation
and the date which is three days prior to the distribution of the proceeds
from such liquidation, dissolution or winding up of the Corporation. Each
share of Series C Preferred Stock and Series C-1 Preferred Stock shall be
convertible into the number of fully paid and nonassessable shares of Common
Stock which results from dividing the "Conversion Price" in effect for the
series at the time of conversion into the "Conversion Value" for such series.
The Conversion Price for the Series C Preferred Stock shall sometimes
hereinafter be referred to as the "Series C Conversion Price", and the
Conversion Price for the Series C-1 Preferred Stock shall sometimes
hereinafter be referred to as the "Series C-1 Conversion Price". The number
of shares of Common Stock into which each share of Series C Preferred Stock
or Series C-1 Preferred Stock is convertible is hereinafter referred to as
the "Conversion Rate" for such series. The initial Series C Conversion Price
and the initial Series C-1 Conversion Price shall each be $.85. the
Conversion value per share of Series C Preferred Stock and Series C-1
Preferred Stock shall be $.85. The initial Series C Conversion Price and
Series C-1 Conversion Price shall be subject to adjustment as set forth below.
(b) Automatic Conversion.
(i) Each share of Series C Preferred Stock and Series C-1
Preferred Stock shall automatically be converted into shares of Common Stock at
the then effective Conversion Rate for such series, without any action by the
holder of such share and whether or not a certificate representing such share is
surrendered to the Corporation or its transfer agent, as follows: (i)
immediately upon the closing of the Corporation's sale of its Common Stock in a
firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended, the public offering
price of which is not less than $3.40 per share (subject to adjustment for stock
splits, combinations, reclassifications or similar events) and which results in
gross proceeds of not less than $7,500,000 in the aggregate; or (ii) on the date
specified by written consent or agreement of the holders of sixty-six and
two-thirds percent (66 2/3%) of the then outstanding shares or Series C
Preferred Stock and Series C-1 Preferred Stock, consenting or agreeing together
as a single series.
(ii) (A) Each share of Series C Preferred Stock held by a
Non-participating Investor (as defined below) shall automatically be converted
upon the closing of a Series C Dilutive Issuance (as defined below) into a share
of Series C-1 Preferred Stock at a conversion rate of one fully paid and
nonassessable share of Series C-1 Preferred Stock for each share of Series C
Preferred Stock held by such holder; provided, however, that the time of such
automatic conversion there shall be a sufficient number of shares of Series C-1
Preferred Stock to permit such conversion.
(B) For purposes of this paragraph (ii) of subsection 4(b),
the following definitions shall apply:
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<PAGE>
(1) "Pro Rata Share" shall mean the ratio of (x) the
sum of the number of shares of Common Stock issuable upon conversion of the
Series C Preferred Stock held by a holder to (y) the total number of shares of
Common stock then issuable upon conversion of all of the then outstanding shares
of Preferred Stock of the Corporation.
(2) "Non-participating Investor" shall mean any holder
of Series C Preferred Stock that fails to agree to purchase at least its Pro
Rata Share of a Series C Dilutive Issuance (as defined below); provided,
however, that such term shall not include a holder of Series C Preferred Stock
that so fails to purchase at least its Pro Rata Share of a Series C Dilutive
Issuance if such holder is an investment company registered under the Investment
Company Act of 1940 (the "1940 Act") if in the opinion of counsel to such
holder, the purchase by such holder of its Pro Rata Share would either cause the
holder to violate the 1940 Act or the regulations promulgated thereunder or
create a substantial likelihood that such a violation would occur.
(3) "Series C Dilutive Issuance" shall mean an
issuance of Additional Stock (as defined below): (x) for a consideration per
share less than the Series C Conversion Price in effect immediately prior to
such issuance and (y) as to which each holder of Series C Preferred Stock has
been given the opportunity to purchase at least its Pro Rata Share pursuant to a
contractual right of first offer or otherwise.
(C) Upon the conversion of the Series C Preferred held by a
Non-participating Investor, such shares of Series C Preferred Stock shall no
longer be outstanding and the Non-participating Investor shall be treated for
all purposes as the record holder of shares of Series C-1 Preferred Stock as of
the date of the first closing of the Series C Dilutive Issuance.
(iii) Upon the occurrence of an event triggering the
automatic conversion of Series C Preferred Stock and/or Series C-1 Preferred
Stock as provided in the preceding paragraphs (i) and (ii), the Corporation
shall promptly give written notice of such event to all holders of Series C
Preferred Stock or Series C-1 Preferred Stock whose shares have automatically
converted into Common Stock as a result of such event. As soon as practicable
after giving such notice the Corporation shall issue and deliver or cause to be
issued and delivered a certificate or certificates for the number of full shares
of Common Stock issuable upon such conversion, as determined in accordance with
subsection 4(j)(i) hereof, together with any accrued and unpaid dividends on
such Series C Preferred Stock or Series C-1 Preferred Stock, in exchange or the
certificates representing the shares of Series C Preferred Stock or Series C-1
Preferred Stock converted pursuant to this subsection 4(b), together with proper
assignments of such certificates.
(c) Mechanics of Conversion. Before any holder of Series C
Preferred Stock or Series C-1 Preferred Stock shall be entitled to convert the
same into shares of Common Stock, such holder shall surrender the certificate
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<PAGE>
or certificates therefor, duly endorsed, at the office of the Corporation or
of any transfer agent for the Series C Preferred Stock or the Series C-1
Preferred Stock, and shall give written notice to the Corporation at its
principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series C Preferred Stock or Series C-1 Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Series C
Preferred Stock or Series C-1 Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders
of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act of 1933, as amended, the conversion may, at the option of
any holder tendering Series C Preferred Stock or Series C-1 Preferred Stock
for conversion, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Series C
Preferred Stock or Series C-1 Preferred Stock shall not be deemed to have
converted such shares until immediately prior to the closing of such sale of
securities.
(d) Conversion Price Adjustments of Series C Preferred Stock.
The Conversion Price of the Series C Preferred Stock shall be subject to
adjustment from time to time as set forth below.
(i) (A) If the Corporation shall issue, after the date
upon which any shares of Series C Preferred Stock were first issued (the
"Purchase Date"), any Additional Stock (as defined below) without consideration
or for a consideration per share less than the Conversion Price for the Series C
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, such Conversion Price shall forthwith (except as otherwise provided in
this clause (i)) be reduced to the price per share at which the Corporation
issued or sold, or is deemed to have issued or sold, such Additional Stock.
(B) Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of the Conversion Price pursuant to
this Subsection 4(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
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<PAGE>
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined in good
faith by the Board of Directors.
(E) In the case of the issuance (after the Purchase
Date) of options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
the following provisions shall apply for all purposes of this subsection 4(d)(i)
and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including without limitation, the
passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of time,
but without taking into account potential antidilution adjustments)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof, shall be deemed to have been issued at the time such
securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the
Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be
received by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to
the Corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
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<PAGE>
securities (excluding a change resulting solely from the antidilution
provisions thereof if such change results from an event which gives
rise to an antidilution adjustment under this subsection 4(d)), the
Series C Conversion Price, to the extent in any way affected by or
computed using the original issuance of such options, rights or
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such
options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Series C Conversion Price, to the extent
in any way affected by or computed using the original issuance of such
options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(d)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E)) by the
Corporation after the Purchase Date in a transaction the primary purpose of
which (as determined in good faith by the Board of Directors of the Corporation)
is to raise capital. "Additional Stock" shall in no event include
(A) Common Stock issued pursuant to a transaction described
in subsection 4(e) hereof;
(B) shares of Common Stock to be issued (or deemed to be
issued pursuant to subsection 4(d)(i)(E)) to current or former employees,
officers, advisors, consultants or directors of the Corporation or any
subsidiary of the Corporation pursuant to a stock option or stock award approved
by the Board of Directors of the Corporation; or
(C) Common Stock issued or issuable upon conversion of the
Series A Preferred Shares, the Series B Preferred Shares or the Series C
Preferred Stock.
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<PAGE>
(D) Common Stock issued (or deemed to have been issued
pursuant to subsection 4(d)(i)(E)) by the Corporation in connection with:
(x) the issuance of senior indebtedness to financial institutions, (y) equipment
or other leases approved by the Board of Directors, (z) any acquisition of
licenses or other rights, assets or technology from third parties, corporate
partnering arrangements or acquisition of another entity, provided that in any
such case such issuance is approved by the Board of Directors.
(e) In the event the Corporation should at any time or from time
to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Series C
Conversion Price and the Series C-1 Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Series C Preferred Stock and Series C-1 Preferred Stock shall be
increased in proportion to such increase in the aggregate of shares of Common
Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(f) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Series C Conversion Price and the Series C-1 Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series C Preferred Stock and Series C-1 Preferred
Stock shall be decreased in proportion to such decrease in outstanding shares.
(g) Other Distributions. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(i), then, in
each such case for the purpose of this subsection 4(g), the holders of the
Series C Preferred Stock and holders of the Series C-1 Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the Corporation into
which their shares of Series C Preferred Stock and Series C-1 Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the Corporation entitled to receive such distribution.
(h) Recapitalization. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this
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<PAGE>
Section 4) provision shall be made so that the holders of the Series C
Preferred Stock and the holders of the Series C-1 Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series C Preferred
Stock and Series C-1 Preferred Stock the number of shares of stock or other
securities or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of the Series C Preferred Stock and the Series C-1 Preferred Stock
after the recapitalization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price then in effect and the number of
shares issuable upon conversion of the Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.
(i) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series C Preferred Stock and the Series
C-1 Preferred Stock against impairment.
(j) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series C Preferred Stock or the Series
C-1 Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series C Preferred Stock or Series C-1 Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Series C Conversion Price or the Series C-1 Conversion Price pursuant to
this Section 4, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series C Preferred Stock or Series C-1 Preferred
Stock, as the case may be, a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series C Preferred Stock or Series C-1 Preferred Stock, as
the case may be, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
applicable Conversion Price at the time in effect, and (C) the number of shares
of Common Stock and the amount, if any, of other property which at
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<PAGE>
the time would be received upon the conversion of a share of Series C
Preferred Stock or Series C-1 Preferred Stock, as the case may be.
(k) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series C Preferred Stock and to each holder of
Series C-1 Preferred Stock, at least ten (10) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
(l) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock and Series C-1
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Series C Preferred Stock and Series C-1 Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred Stock and the Series C-1 Preferred Stock, in addition to such other
remedies as shall be available to the holders of the Series C Preferred Stock
and the Series C-1 Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary amendment
to these provisions.
(m) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series C Preferred Stock or
Series C-1 Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Corporation.
(n) Costs of Conversion. The Corporation shall pay all
documentary, stamp or other similar taxes attributable to the issuance or
delivery of Common Stock (or other shares or other securities) of the
Corporation upon conversion of any shares of the Series C Preferred Stock or
Series C-1 Preferred Stock. However, the Corporation shall not be required to
pay any taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificate for such shares in a name other than
that of the holder of the Series C Preferred Stock or Series C-1 Preferred Stock
in respect of which such shares are being issued.
5. Voting Rights.
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<PAGE>
(a) In addition to any voting rights required by law, each
holder of Series C Preferred Stock and each holder of Series C-1 Preferred Stock
shall be entitled to vote on all matters submitted to a vote of the holders of
Common Stock and shall be entitled to that number of votes equal to the largest
number of whole shares of Common Stock into which such holder's Series C
Preferred Stock or Series C-1 Preferred Stock could be converted pursuant to the
provisions or Section 4 of this Subdivision A-3 on the record date for the
determination of stockholders entitled to vote on such matter or, if no record
date is established, on the date such vote is taken or any written consent of
stockholders is first executed. Except as otherwise required by law or as
provided herein, the holders of the Series A Preferred Shares, Series B
Preferred Shares, Series C Preferred Stock, Series C-1 Preferred Stock and
Common Shares shall vote together as a single class on all matters.
(b) The Corporation shall not, without the written consent or
affirmative vote of the holders of at least 66 2/3% of the then outstanding
Series C Preferred Stock and Series C-1 Preferred Stock (voting together as a
single series) given in writing or by vote at a meeting (as the case may be):
(i) amend, alter or repeal in any respect the rights,
preferences, privileges, and other terms and provisions of the Series C
Preferred Stock or the Series C-1 Preferred Stock;
(ii) authorize or issue or obligate itself to issue, (x) any
convertible debt or (y) any equity security, including any other equity security
or debt instrument convertible into or exchangeable for any such equity
security, having a preference over the Series C Preferred Stock or the Series
C-1 Preferred Stock, with respect to dividends, redemption or liquidation;
(iii)declare or pay any dividends on, or make any
distributions with respect to the Common Stock, or redeem or repurchase any
outstanding equity securities of the Corporation except for repurchases of
unvested or restricted shares of Common Stock at cost from employees, officers,
consultants, or members of the Board of Directors of the Corporation or any
subsidiary of the Corporation pursuant to repurchase options of the Corporation
currently outstanding or hereafter entered into and approved by the
Corporation's Board of Directors;
provided, however, that in the event that the affirmative vote or written
consent of the holders of Series C Preferred Stock and Series C-1 Preferred
Stock is required pursuant to the preceding clause (ii), such affirmative vote
or written consent shall not be unreasonably withheld; and provided further,
however, that in the event of the authorization or issuance of any equity
security with a per share liquidation preference greater than that of the Series
C Preferred Stock, such security shall not be deemed to have a preference over
the Series C Preferred Stock so long as the holders of such security are not
entitled to receive any distributions upon a liquidation, dissolution or winding
up prior to the making of such distribution to the holders of the Series C
Preferred Stock.
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<PAGE>
6. Status of Converted Stock. In the event any shares of Series C
Preferred Stock or Series C-1 Preferred Stock shall be converted pursuant to
Section 4 hereof, the shares so converted shall be canceled and shall not be
issuable by the Corporation, and all accrued and unpaid dividends (whether or
not declared) with respect to such converted shares shall be canceled. The
Certificate of Incorporation of the Corporation may be appropriately amended
from time to time to effect the corresponding reduction in the Corporation's
authorized capital stock.
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OSIRIS THERAPEUTICS, INC.
Osiris Therapeutics, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify:
1. The Board of Directors of the Corporation, pursuant to a unanimous
written consent dated as of September 16, 1994, adopted a resolution proposing
and declaring advisable amendments (the "Amendments") to Article FOURTH of the
Restated Certificate of Incorporation (a) at the end of Article FOURTH adding a
new Subdivision B reading in its entirety as follows:
SUBDIVISION B
ONE-FOR-FOUR REVERSE STOCK SPLIT
At the close of business on the date on which the Certificate of
Amendment containing this Subdivision B of Article FOURTH is filed with the
Secretary of State of the State of Delaware (the "effective date"), each
outstanding share of: (i) Common Stock shall be converted into one-fourth
(1/4) of a share of Common Stock, (ii) Series A Preferred Stock shall be
converted into one-fourth (1/4) of a share of Series A Preferred Stock,
(iii) Series B Preferred Stock shall be converted into one-fourth (1/4) of
a share of Series B Preferred Stock, and (iv) Series C Preferred Stock
shall be converted into one-fourth (1/4) of a share of Series C Preferred
Stock ; provided, however, that upon such conversion, the Corporation shall
not issue fractional shares, but shall instead pay cash to any shareholder
who would be entitled to receive a fractional share as the result of such
conversion in an amount equal to the fair market value of such fractional
share as determined by the Board of Directors of the Corporation, which
determination shall be conclusive.
After the effective date of this Amendment, each holder of any
certificate or certificates representing shares of capital stock of the
Corporation, upon surrender of the same to the Corporation, shall receive a
certificate or certificates representing the whole number of shares of the
applicable class or series of stock which such holder is entitled to
receive pursuant to the terms and conditions of this Subdivision B of
Article FOURTH. Pending such surrender of any certificate or certificates,
such certificate or certificates for shares of capital
<PAGE>
stock of the Corporation shall be deemed for all purposes, as a result of
such conversion as provided in this Subdivision B of Article FOURTH and
without any action on the part of the holders thereof, to evidence only the
right to receive one or more certificates representing shares of Common
Stock, Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as the case may be, in accordance with the terms and
conditions of this Subdivision B of Article FOURTH.
and (b) further amending Article FOURTH of the Restated Certificate of
Incorporation such that, the first paragraph of Article FOURTH would be amended
to read in its entirety as follows:
Section 1. Authorized Stock. The total number of shares which the
Corporation is authorized to have issued is 30,000,000 shares, consisting
of (a) 10,000,000 shares of Preferred Stock, par value $.001 per share
(hereinafter "Preferred Stock"), 2,122,000 shares of Preferred Stock
designated as Series A Preferred Stock, 750,000 shares of Preferred Stock
designated as Series B Preferred Stock and 740,000 shares of Preferred
Stock designated as Series C Preferred Stock, and (b) 20,000,000 shares of
Common Stock, par value $.001 per share (hereinafter called "Common
Stock").
2. The stockholders of the Corporation, at a meeting held on September 16,
1994, adopted the foregoing Amendments.
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<PAGE>
3. That the foregoing Amendments were duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by James S. Burns, its President, and attested by Nancy Rubin, its
Assistant Secretary, this 31st day of October, 1994.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
------------------------------------
James S. Burns, President
Attest:
/s/ NANCY G. RUBIN
- --------------------------------
Nancy Rubin, Assistant Secretary
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<PAGE>
AMENDED
CERTIFICATE OF DESIGNATION OF
SERIES D CONVERTIBLE PREFERRED STOCK OF
OSIRIS THERAPEUTICS, INC.
(Pursuant to Section 151 of the Delaware General Corporation Law)
WHEREAS, Osiris Therapeutics, Inc., a Delaware corporation (the
"Corporation"), filed with the Secretary of State of the State of Delaware on
January 9, 1995 a Certificate of Designation (the "Certificate") setting forth
the powers, preferences and rights of, and qualifications, limitations and
restrictions on, its Series D Convertible Preferred Stock (the "Series D
Preferred Stock"); and
WHEREAS, the Corporation desires to amend the Certificate to revise
certain terms of the Series D Preferred Stock.
The Corporation hereby certifies that (1) no shares of Series D
Preferred Stock have been issued and (2) pursuant to the authority contained in
Article Fourth of its Restated Certificate of Incorporation, and in accordance
with the provisions of Section 151 of the General Corporation Law of the State
of Delaware, its Board of Directors has adopted the following resolution
amending the Certificate:
RESOLVED, that pursuant to Article FOURTH of the Restated Certificate
of Incorporation of the Corporation, whereby 20,000,000, shares of Preferred
Stock are authorized, the series of Preferred Stock designated as Series D
Convertible Preferred Stock, par value $.001 per share (the "Series D Preferred
Stock"), established in the Certificate of Designation filed with the State of
Delaware on or about January 9, 1995, shall consist of 3,600,000 shares, and
that the powers, preferences and rights of, and qualifications, limitations and
restrictions on, the Series D Preferred Stock as set forth on Subdivision A-4,
as amended, of Section 2 of such Article FOURTH of the Restated Certificate of
Incorporation, be, and they hereby are, amended to read in their entirety as set
forth in Exhibit A hereto.
The Corporation further certifies that attached hereto as Appendix I
is a true, correct and complete copy of said Exhibit A referred to in the
foregoing resolution.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amendment to be
executed by its President and Chief Executive Officer and attested to by its
Secretary this 15th day of August, 1995.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
-------------------------------
James S. Burns
President and Chief Executive
Officer
ATTEST:
/s/ ROBERT J. WALDEN
- ----------------------------------
Name: Robert J. Walden
Title: Vice President--Finance and
Administration
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<PAGE>
EXHIBIT A
APPENDIX I
Subdivision A-4
SERIES D CONVERTIBLE PREFERRED STOCK
1. Dividends.
The holders of shares of Series D Convertible Preferred Stock ("Series D
Preferred Shares") shall be entitled, when and if declared by the Board of
Directors of the Corporation, to dividends payable in cash and/or property out
of funds legally available for that purpose; provided, however, that the
Corporation shall not declare or pay any dividends on any shares of Common Stock
("Common Shares") unless it shall, at the same time, declare and pay to each
holder of Series D Preferred Shares a dividend equal to the dividend which would
have been payable to each holder if such Series D Preferred Shares had been
converted into Common Stock on the date of determination of holders of Common
Stock entitled to receive such dividend.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of Series C Preferred
Shares and Series C-1 Preferred Shares shall be entitled to be paid out of the
assets of the Corporation available for distribution to holders of the
Corporation's capital stock, before any payment or declaration and setting apart
for payment of any amount shall be made in respect of any Common Shares but
after and subject to the payment in full of all amounts required to be paid to
the holders of any other series or class of Preferred Stock of the Corporation
ranking on liquidation prior and in preference to the Series C Preferred Shares
and Series C-1 Preferred Shares, an amount equal to $.40 per share (as adjusted
to reflect any share split, combination, reclassification or similar event
involving the Series C Preferred Shares or Series C-1 Preferred Shares).
Notwithstanding the foregoing, if the assets of the Corporation available for
distribution under this Subsection (a) shall be insufficient to permit the
payment in full to the holders of Series C Preferred Shares and Series C-1
Preferred Shares distributable to them under this Subsection (a), then the
entire assets of the Corporation available for such distribution shall be
distributed ratably among the holders of Series C Preferred Shares and Series
C-1 Preferred Shares based upon the respective aggregate liquidation preference
of the holders of such series of Preferred Shares.
(b) Upon the completion of the distributions required by Subsection
(a) of this Section 2, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among the holders of Series D
Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares, Series
B Preferred Shares and Series A Preferred Shares pro rata based on the number of
shares of Common Stock issuable upon conversion of such shares of Preferred
Stock. Notwithstanding the
<PAGE>
forgoing, the aggregate amount per share to be received by the holders
of Series D Preferred Shares, C Series Preferred Shares, Series C-1
Preferred Shares, Series B Preferred Shares and Series A Preferred
Shares pursuant to this Subsection (b) shall not exceed $3.00 per share
(as adjusted for any stock split, combination, reclassification or
similar event involving the Preferred Stock). Further, if the assets of
the Corporation available for such distribution to the holders of the
Series D Preferred Shares, Series C Preferred Shares, Series C-1
Preferred Shares, Series B Preferred Shares and Series A Preferred
Shares shall be insufficient to permit the payment in full of the
maximum amount distributable to them under this Subsection (b), then the
entire assets of the Corporation available for such distribution shall
be distributed ratably among the holders of the Series D Preferred
Shares, Series C Preferred Shares, Series C-1 Preferred Shares, Series B
Preferred Shares and Series A Preferred Shares based upon the respective
aggregate liquidation preference of the holders of such series of
Preferred Shares.
(c) After payment shall have been made in full to the holders of the
Series D Preferred Shares pursuant to Subsection (b) of this Section 2, or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the account of holders of the Series D Preferred Shares so as to be
available for such payment, the holders of Series D Preferred Shares shall have
no further rights with respect to any remaining assets of the Corporation
legally available for distribution to the holders of its capital stock.
(d) Whenever the distribution provided for in this Section 2 shall be
payable in property other than cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by not less than
a majority of the Directors then serving on the Board of Directors of the
Corporation.
(e) For purposes of this Section 2, a reorganization of the
Corporation, or a consolidation or merger of the Corporation with or into
another corporation or entity, or a sale or other disposition of all or
substantially all of the assets of the Corporation, shall not be treated as a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 2.
3. Voting Rights.
(a) In addition to any voting rights required by law, each holder of
Series D Preferred Shares shall be entitled to vote on all matters submitted to
a vote of the holders of Common Shares and shall be entitled to that number of
votes equal to the largest number of whole Common Shares into which such
holder's Series D Preferred Shares could be converted pursuant to the provisions
of Section 4 of this Subdivision A-4 on the record date for the determination of
stockholders entitled to vote on such matter or, if no record date is
established, on the date such vote is taken or any written consent of
stockholders is first executed. Except as otherwise required by law or this
Certificate of Incorporation, the holders of the Series A Preferred Shares,
Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred
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<PAGE>
Shares, Series D Preferred Shares and Common Shares shall vote together as a
single class on all matters.
(b) Except as otherwise provided by law, the Corporation shall not
amend, alter or repeal the preferences, special rights or other powers of the
Series D Preferred Shares so as to affect adversely the Series D Preferred
Shares unless (i) a corresponding amendment, alteration or repeal to the Series
A Preferred Shares and the Series B Preferred Shares has been approved by the
holders of such number of Series A Preferred Shares, Series B Preferred Shares
and Series D Preferred Shares that would have represented at least 66 2/3% of
the Series A Preferred Shares, Series B Preferred Shares and Series D Preferred
Shares if such shares were taken together as a single class, in which case no
separate vote or approval of the holders of the Series D Preferred Shares shall
be required; or (ii) such amendment, alteration or repeal has been approved by
the written consent or affirmative vote of the holders of at least 66 2/3% of
the then outstanding Series D Preferred Shares; such approval in either case to
be given in writing or by vote at a meeting (as the case may be). For this
purpose, the authorization or issuance of any series of Preferred Stock with
preference or priority over, or on a parity with, the Series D Preferred Shares
as to any preferences, rights or powers (including, without limitation, voting
rights or the right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation) shall not be deemed
to so affect adversely such Series D Preferred Shares.
4. Conversion Rights.
(a) Optional Conversion. Subject to the terms and conditions of this
Section 4, the holder of any Series D Preferred Shares shall have the right, at
its option at any time and from time to time, to convert all or any portion of
such shares into such number of fully paid and nonassessable Common Shares as is
obtained by multiplying the number of Series D Preferred Shares to be converted
by $3.00 and dividing the result by the conversion price of $3.00 or, in the
event any adjustment of such conversion price has taken place pursuant to the
provisions of this Section 4, by the conversion price in effect on the date such
Series D Preferred Shares are surrendered for conversion (such conversion price,
or such conversion price as last adjusted, being referred to herein as the
"Conversion Price"); provided, however, that in the event of the liquidation,
dissolution or winding up of the Corporation, the holders of Series D Preferred
Shares shall only be entitled to convert their shares in accordance with the
terms of this Section 4 at any time prior to the earlier of the tenth day
following the date on which such liquidation, distribution or winding up was
approved by the stockholders of the Corporation and the date which is three days
prior to the distribution of the proceeds from such liquidation, dissolution or
winding up of the Corporation.
(b) Automatic Conversion.
(i) All outstanding Series D Preferred Shares shall be converted
automatically into the number of Common Shares into which such Series D
Preferred
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<PAGE>
Shares are then convertible pursuant to this Section 4, without any action
by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its transfer
agent, at the earliest of (A) the moment immediately prior to the
Corporation's consummation of an underwritten public offering of Common
Shares; (B) the moment immediately prior to the consummation of a
consolidation or merger of the Corporation with or into another corporation
or entity or a sale or transfer of all or substantially all of the assets of
the Corporation pursuant to which holders of Common Shares (assuming the
conversion of all outstanding Series D Preferred Shares into Common Shares
immediately prior thereto) will receive cash and/or securities and/or
property having an aggregate value (as determined in good faith by not less
than a majority of the Directors then serving on the Corporation's Board of
Directors) of at least $12.00 per share (as adjusted to reflect any share
split, combination, reclassification or similar event subsequent to December
30, 1994 affecting the Common Shares); (C) the time at which the Series A
Preferred Shares and the Series B Preferred Shares are converted into Common
Shares; and (D) September 24, 1998.
(ii) Upon the occurrence of an event triggering the automatic
conversion of Series D Preferred Shares as provided in the preceding
subparagraph (i), the Corporation shall promptly give written notice to all
holders of Series D Preferred Shares of such event. As soon as practicable
after giving such notice, the Corporation shall issue and deliver or cause to be
issued and delivered a certificate or certificates for the number of full Common
Shares issuable upon such conversion, together with any cash payment to be made
in lieu of fractional shares as provided in Subsection 4(f) of this Article
FOURTH and any accrued but unpaid dividends on such Series D Preferred Shares,
in exchange for the certificates representing the Series D Preferred Shares
converted pursuant to this Subjection 4(b), together with proper assignments of
such certificates.
(c) Mechanics of Conversion. The rights of conversion under
Subsection 4(a) shall be exercised by a holder of Series D Preferred Shares by
(i) surrendering the certificates representing such shares together with written
notice of such holder's election to convert such shares (the "Conversion
Notice"), and a proper assignment of such certificates to the Corporation. The
Conversion Notice shall state the names and addresses in which and to which the
certificates representing the Common Shares issuable or, if applicable, the
other shares, other securities, cash or other property issuable, deliverable or
payable, upon such conversion shall be issued, delivered or paid, as the case
may be. The date upon which the certificates representing the Series D
Preferred Shares to be converted, the Conversion Notice and the proper
assignment have all been received by the Corporation is referred to herein as
the "Conversion Date." As promptly as practicable after the Conversion Date,
the corporation shall issue and deliver or cause to be issued and delivered, as
specified in the Conversion notice, certificates for the number of full Common
Shares issuable upon such conversion together with any cash instead of
fractional shares as provided in Subsection 4(f) and any accrued but unpaid
dividends. Such conversions shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder of the converted Series D
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<PAGE>
Preferred Shares shall cease and the person or persons in whose name or names
any certificate or certificates for Common Shares shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the Common Shares represented thereby.
(d) Subdivision or Combination of Stock. In case the Corporation
shall at any time split or subdivide its outstanding Common Shares into a
greater number of shares other than through a stock dividend in which the
holders of the Series D Preferred Shares participate pursuant to Section 1 of
this Subdivision A-4, the Conversion Price for the Series D Preferred Shares in
effect immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the outstanding Common Shares of the Corporation shall
be combined into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
(e) Reorganization, Reclassification, Consolidation or Merger. In
the event of any capital reorganization or reclassification of the outstanding
capital stock of the Corporation, or any consolidation of the Corporation with,
or merger of the Corporation with or into, another corporation or entity, or the
sale of all or substantially all of the assets of the Corporation (each of such
events being hereinafter referred to as an "Extraordinary Event"), where, in
connection with such Extraordinary Event, the holders of Common Shares will be
entitled to receive stock, securities, cash and/or other property with respect
to or in exchange for such Common Shares, then each Series D Preferred Share
shall, at the effective time of such Extraordinary Event, be converted into,
without any action on the part of the holder thereof, such shares of stock,
securities, cash and/or other property as may be issuable or payable with
respect to or in exchange for the number of Common Shares which would otherwise
have been issuable to the holder of such Series D Preferred Share upon the
conversion thereof pursuant to this Section 4.
(f) Fractional Shares. No fractional Common Shares (or other shares
or other securities) or scrip representing fractional shares shall be issued
upon conversion of any of the Series D Preferred Shares. Instead, the
Corporation shall pay cash in an amount equal to the fair market value of such
fractional share at the time of such conversion, as determined in good faith by
the Board of Directors of the Corporation.
(g) Reservation of Common Shares. The Corporation shall at all times
reserve and keep available and free of preemptive rights out of its authorized
but unissued Common Shares, solely for the purpose of effecting the conversion
of the Series D Preferred Shares, such number of its Common Shares (or other
shares or other securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series D Preferred
Shares, and if at any time the number of authorized but unissued Common Shares
(or such other shares or other securities) shall not be sufficient to effect the
conversion of all then outstanding Series D Preferred Shares, the Corporation
shall take such action as may be necessary to
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<PAGE>
increase its authorized but unissued Common Shares (or other shares or other
securities) to such number of shares as shall be sufficient for such purpose.
(h) Costs of Conversion. The Corporation shall pay all documentary,
stamp or other similar taxes attributable to the issuance or delivery of Common
Shares (or other shares or other securities) of the Corporation upon conversion
of any of the Series D preferred Shares. However, the Corporation shall not be
required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the holder of the Series D Preferred Shares in respect
of which such shares are being issued.
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<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES E CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
(Pursuant to Section 151 of the General Corporation Law
of the State of Delaware)
Osiris Therapeutics, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Restated Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.001 per share, designated as Series E Convertible
Preferred Stock:
RESOLVED, that pursuant to Article FOURTH of the Restated Certificate
of Incorporation of the Corporation, whereby 20,000,000 shares of Preferred
Stock are authorized, there be and hereby is created a series of Preferred Stock
designated as Series E Convertible Preferred Stock, par value $.001 per share
(the "Series E Preferred Stock"), with such series to consist of 3,000,000
shares, and that the powers, preferences and rights of, and qualifications,
limitations and restrictions on, the Series E Preferred Stock are set forth on
Exhibit A to this resolution shall become Subdivision A-5 of Section 2 of such
Article FOURTH of the Restated Certificate of Incorporation.
The corporation further certifies that attached hereto as Appendix I
is a true, correct and complete copy of said Exhibit A referred to in the
foregoing resolution.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be executed by its Present and attested to by its Secretary this
16th day of September, 1996.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
----------------------------------
James S. Burns, President &
Chief Executive Officer
ATTEST:
/s/ DANIEL R. MARSHAK
- --------------------------------------
Daniel R. Marshak, Assistant Secretary
<PAGE>
APPENDIX I
Subdivision A-5
SERIES E CONVERTIBLE PREFERRED STOCK
1. Dividends.
The holders of shares of Series E Convertible Preferred Stock ("Series
E Preferred Shares") shall be entitled, when and if declared by the Board of
Directors of the Corporation, to dividends payable in cash and/or property out
of funds legally available for that purpose; provided, however, that the
Corporation shall not declare or pay any dividends on any shares of Common Stock
("Common Shares") unless it shall, at the same time, declare and pay to each
holder of Series E Preferred Shares a dividend equal to the dividend which would
have been payable to each holder if such Series E Preferred Shares had been
converted into Common Stock on the date of determination of holders of Common
Stock entitled to receive such dividend.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of
Series E Preferred Shares shall be entitled to be paid out of the
assets of the Corporation available for distribution to holders
of the Corporation's capital stock, before any payment or
declaration and setting apart for payment of any amount shall be
made in respect of any Common Shares, Series C Preferred Shares,
Series C-1 Preferred Shares, Series D Preferred Shares, Series B
Preferred Shares or Series A Preferred Shares but after and
subject to the payment in full of all amounts required to be paid
to the holders of any other series or class of Preferred Stock of
the Corporation ranking in liquidation prior and in preference to
the Series E Preferred Shares, an amount equal to $1.10 per share
(as adjusted to reflect any share split, combination,
reclassification or similar event). Notwithstanding the
foregoing, if the assets of the Corporation available for
distribution under this Subsection (a) shall be insufficient to
permit the payment in full to the holders of Series E Preferred
Shares distributable to them under this Subsection (a), then the
entire assets of the Corporation available for such distribution
shall be distributed ratably among the holders of Series E
Preferred Shares based upon the respective aggregate liquidation
preference of the holders of such Series E Preferred Shares.
(b) Upon the completion of the distributions required by Subsection
(a) of this Section 2, each holder of Series E Preferred Shares,
Series C Preferred Shares and Series C-1 Preferred Shares shall
be entitled to be paid out of the assets of the Corporation
available for
<PAGE>
distribution to holders of the Corporation's capital stock,
before any payment or declaration and setting apart for payment
of any amount shall be made in respect of any Common Shares,
Series D Preferred Shares, Series B Preferred Shares or Series A
Preferred Shares, an amount equal to $.40 per share (as adjusted
to reflect any share split, combination, reclassification or
similar event involving the Series E Preferred Shares, Series C
Preferred Shares or Series C-1 Preferred Shares). Notwithstanding
the foregoing, if the assets of the Corporation available for
distribution under this Subsection 9(b) shall be insufficient to
permit the payment in full to the holders of Series E Preferred
Shares, Series C Preferred Shares and Series C-1 Preferred Shares
distributable to them under this Subsection (b), then the entire
assets of the Corporation available for such distribution shall
be distributed ratably among the holders of Series E Preferred
Shares, Series C Preferred Shares and Series C-1 Preferred Shares
based upon the respective aggregate liquidation preference of the
holders of such series of Preferred Shares.
(c) Upon the completion of the distributions required by Subsections
(a) and (b) of this Section 2, the remaining assets of the
Corporation available for distribution to stockholders shall be
distributed, before any payment or declaration and setting apart
for payment of any amount shall be made in respect of any Common
Shares, among the holders of Series E preferred Shares, Series D
Preferred Shares, Series C Preferred Shares, Series C-1 Preferred
Shares, Series B Preferred Shares and Series A Preferred Shares
pro rata based on the number of shares of Common Stock issuable
upon conversion of such Preferred Shares. Notwithstanding the
foregoing, the aggregate amount per share to be received by the
holders of Series E Preferred Shares, Series D Preferred Shares,
Series C Preferred shares, series C-1 Preferred Shares, Series B
Preferred Shares and Series A Preferred Shares pursuant to this
Subsection 9(c) shall not exceed $3.00 per share (and adjusted
for any stock split, combination, reclassification or similar
event involving the Preferred Shares). Further, if the assets of
the Corporation available for such distribution to the holders of
the Series E Preferred Shares, Series D Preferred Shares, Series
C Preferred Shares, Series C-1 Preferred Shares, Series B
Preferred Shares and Series A Preferred Shares shall be
insufficient to permit the payment in full of the maximum amount
distributable to them under this Subsection (c), then the entire
assets of the Corporation available for such distribution shall
be distributed ratably among the holders of the Series E
Preferred Shares, Series D Preferred Shares, Series C Preferred
Shares, Series C-1 Preferred Shares, Series B Preferred Shares
and Series
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<PAGE>
A Preferred Shares based upon the respective aggregate liquidation
preference of the holders of such series of Preferred Shares.
(d) After payment shall have been made in full to the holders of the
Series E Preferred Shares pursuant to Subsection (a), (b) and (c)
of this Section 2, or funds necessary for such payment shall have
been set aside by the Corporation in trust for the account of
holders of the Series E Preferred Shares so as to be available
for such payment, the holders of Series E Preferred Shares shall
have no further rights with respect to any remaining assets of
the Corporation legally available for distribution to the holders
of its capital stock.
(e) Whenever the distribution provided for in this Section 2 shall be
payable in property other than cash, the value of such
distribution shall be the fair market value of such property as
determined in good faith by not less than a majority of the
directors then serving on the Board of Directors of the
Corporation.
(f) For purposes of this Section 2, a reorganization of the
Corporation, or a consolidation or merger of the Corporation with
or into other corporation or entity, or a sale or other
disposition of all or substantially all of the assets of the
Corporation, shall not be treated as a liquidation, dissolution
or winding up of the Corporation within the meaning of this
Section 2.
3. Voting Rights.
(a) In addition to any voting rights required by law, each holder of
Series E Preferred Shares shall be entitled to vote on all
matters submitted to a vote of the holders of Common Shares and
shall be entitled to that number of votes equal to the largest
number of whole Common Shares into which such holder's Series E
Preferred Shares could be converted pursuant to the provisions of
Section 4 of this Subdivision A-5 on the record date for the
determination of stockholders entitled to vote on such matter or,
if no record date is established, on the date such vote is taken
or any written consent of stockholders is first executed. Except
as otherwise required by law or this Certificate of
Incorporation, the holders of Series A Preferred Shares, Series B
Preferred Shares, Series C Preferred Shares, Series C-1 Preferred
Shares, Series D Preferred Shares, Series E Preferred Shares and
Common Shares shall vote together as a single class on all
matters.
(b) Except as otherwise provided by law, the Corporation shall not
amend, alter or repeal the preferences, special rights or other
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<PAGE>
powers of the Series E Preferred Shares so as to affect adversely
the Series E Preferred Shares unless (i) a corresponding
amendment, alteration or repeal to the Series A Preferred Shares,
the Series B preferred Shares, the Series D Preferred Shares and
the Series E Preferred Shares has been approved by the holders of
such number of Series A Preferred Shares, Series B Preferred
Shares, Series D Preferred Shares and Series E Preferred Shares
that would have represented at least 66 2/3% of the Series E
Preferred Shares if such shares were taken together as a single
class, in which case no separate vote or approval of the holders
of the Series E Preferred Shares shall be required; or (ii) such
amendment, alteration or repeal has been approved by the written
consent or affirmative vote of the holders of at least 66 2/3% of
the then outstanding Series E Preferred Shares; such approval in
either case to be given in writing or by vote at a meeting (as
the case may be). For this purpose, the authorization or
issuance of any series of Preferred Stock with preference or
priority over, or on a parity with, the Series E Preferred Shares
as to any preferences, rights or powers (including, without
limitation, voting rights or the right to receive either
dividends or amounts distributable upon liquidation, dissolution
or winding up of the Corporation) shall not be deemed to so
affect adversely such Series E Preferred Shares.
4. Conversion Rights.
(a) Optional Conversion. Subject to the terms and conditions of
this section 4, the holder of any Series E Preferred Shares
shall have the right, at its option at any time and from
time to time, to convert all or any portion of such shares
into such number of fully paid and nonassessable Common
Shares as its obtained by multiplying the number of Series E
Preferred Shares to be converted by $4.50 and dividing the
result by the conversion price of $4.50 or, in the event any
adjustment of such conversion price has taken place pursuant
to the provisions of this Section 4, by the conversion price
in effect on the date such Series E Preferred Shares are
surrendered for conversion (such conversion price, or such
conversion price as last adjusted, being referred to herein
as the "Conversion Price"); provided, however, that in the
event of the liquidation, dissolution or winding up of the
Corporation, the holders of Series E Preferred Shares shall
only be entitled to convert their shares in accordance with
the terms of this Section 4 at any time prior to the earlier
of the tenth day following the date on which such
liquidation, distribution or winding up was approved by the
stockholders of the Corporation and the date which is three
days prior to the distribution of the proceeds from such
liquidation, dissolution or winding up of the Corporation.
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<PAGE>
(b) Automatic Conversion.
(i) All outstanding Series E Preferred Shares shall be converted
automatically into the number of Common Shares into which
such Series E Preferred Shares are then convertible pursuant
to this Section 4, without any action by the holders of such
shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer
agent, at the earliest of: (A) the moment immediately prior
to the Corporation's consummation of an underwritten public
offering of Common Shares; (B) the moment immediately prior
to the consummation of a consolidation or merger of the
Corporation with or into another corporation or entity or
sale or transfer of all or substantially all of the assets
of the Corporation pursuant to which holders of Common
Shares (assuming the conversion of all outstanding Series E
Preferred Shares into Common Shares immediately prior
thereto) will receive cash and/or securities and/or property
having an aggregate value as determined in good faith by not
less than a majority of the Directors then serving on the
Corporation's Board of Directors (as adjusted to reflect any
share split, combination, reclassification or similar event
affecting the Common Shares); (C) the time at which the
Series A Preferred Shares and the Series B Preferred Shares
and the Series D Preferred Shares are converted into Common
Shares; and (D) September 24, 1998.
(ii) Upon the occurrence of an event triggering the automatic
conversion of Series E Preferred Shares as provided in the
preceding subparagraph (i), the Corporation shall promptly
give written notice to all holders of Series E Preferred
Shares of such event. As soon as practicable after giving
such notice, the Corporation shall issue and deliver or
cause to be issued and delivered a certificate or
certificates for the number of full Common Shares issuable
upon such conversion, together with any cash payment to be
made in lieu of fractional shares as provided in Subsection
4(f) of this Article FOURTH and any accrued but unpaid
dividends on such Series E Preferred Shares, in exchange for
the certificates representing the Series E Preferred Shares
converted pursuant to Subsection 4(b), together with proper
assignments of such certificates.
(c) Mechanics of Conversion. The rights of conversion under
Subjection 4(a) shall be exercised by a holder of Series E
Preferred Shares by (i) surrendering the certificates
representing such
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<PAGE>
shares, together with written notice of such holder's election
to convert such shares (the "Conversion Notice"), and a proper
assignment of such certificates to the Corporation. The
Conversion Notice shall state the names and addresses in which
and to which the certificates representing the Common Shares
issuable or, if applicable, the other shares, other
securities, cash or other property issuable or, if applicable,
the other shares, other securities, cash or other property
issuable, deliverable or payable, upon such conversion shall be
issued, delivered or paid, as the case may be. The date upon
which the certificates representing the Series E Preferred Shares
to be converted, the Conversion Notice and the proper assignment
have all been received by the Corporation is referred to herein
as the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and deliver or cause
to be issued and delivered, as specified in the Conversion
Notice, certificates for the number of full Common Shares
issuable upon such conversion together with any cash instead of
fractional shares as provided in Subsection 4(f) and any accrued
but unpaid dividends. Such conversion shall be deemed to have
been effected immediately prior to the close of business on the
Conversion Date, and at such time the rights of the holder of the
converted Series E Preferred Shares shall cease and the person or
persons in whose name or names any certificate or certificates
for Common Shares shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the
Common Shares represented thereby.
(d) Subdivision or Combination Stock. In case the Corporation shall
at any time split or subdivide its outstanding Common Shares into
a greater number of shares other than through a stock dividend in
which the holders of the Series E Preferred Shares participate
pursuant to Section 1 of this Subdivision A-5, the Conversion
Price for the Series E Preferred Shares in effect immediately
prior to such subdivision shall be proportionately reduced, and,
conversely, in case the outstanding Common Shares of the
Corporation shall be combined into a smaller number of shares,
the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) Reorganization, Reclassification, Consolidation or Merger. In
the event of any capital reorganization or reclassification of
the outstanding capital stock of the Corporation, or any
consolidation of the Corporation with, or merger of the
Corporation with or into, another corporation or entity, or the
sale of all or substantially all of the assets of the Corporation
(each of such events being hereinafter referred to as an
"Extraordinary Event"), where, in
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<PAGE>
connection with such Extraordinary Event, the holders of Common
Shares will be entitled to receive stock, securities, cash and/or
other property with respect to or in exchange for such Common
Shares, that each Series E Preferred Share shall, at the effective
time of such Extraordinary Event, be converted into, without any
action on the part of the holder thereof, such shares of stock,
securities, cash and/or other property as may be issuable or
payable with respect to or in exchange for a number of Common
Shares which would otherwise have been issuable to the holder of
such Series E Preferred Share upon the conversion thereof pursuant
to this Section 4.
(f) Fractional Shares. No fractional Common Shares (or other shares
or other securities) or scrip representing fractional shares
shall be issued upon conversion of any of the Series E Preferred
Shares. Instead, the Corporation shall pay cash in an amount
equal to the fair market value of such fractional share at the
time of such conversion, as determined in good faith by the Board
of Directors of the Corporation.
(g) Reservation of Common Shares. The Corporation shall at all times
reserve and keep available and free of preemptive rights out of
its authorized but unissued Common Shares, solely for the purpose
of effecting the conversion of the Series E Preferred Shares,
such number of its Common Shares (or other shares or other
securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series E
Preferred Shares, and if at any time the number of authorized but
unissued Common Shares (or such other shares or other securities)
shall not be sufficient to effect the conversion of all then
outstanding Series E Preferred Shares, the Corporation shall take
such action as may be necessary to increase its authorized but
unissued Common Shares (or other shares or other securities) to
such number of shares as shall be sufficient for such purpose.
(h) Costs of Conversion. The Corporation shall pay all documentary,
stamp or other similar taxes attributable to the issuance or
delivery of Common Shares (or other shares or other securities)
of the Corporation upon conversion of any of the Series E
Preferred Shares. However, the Corporation shall not be required
to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such
shares in a name other than that of the holder of the Series E
Preferred Shares in respect of which such shares are being
issued.
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<PAGE>
CERTIFICATE OF CORRECTION
OF THE
CERTIFICATE OF DESIGNATION
OF
SERIES E CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
Osiris Therapeutics, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Certificate of Designation of the Series E Convertible
Preferred Stock of the Corporation, filed by the Corporation with the Secretary
of State of Delaware on October 1, 1996 (the "Certificate of Designation"), is
an inaccurate record of the corporate action referred to therein, insofar as it
sets forth the number of shares of authorized Preferred Stock of the Corporation
comprising the Series E Convertible Preferred Stock.
SECOND: That, in order to reflect accurately the corporate action referred to
therein, the Certificate of Designation is hereby corrected, pursuant to Section
103(f) of the General Corporation Law of the State of Delaware, to provide as
follows:
RESOLVED, that pursuant to Article FOURTH of the Restated Certificate
of Incorporation of the Corporation, whereby 10,000,000 shares of Preferred
Stock are authorized, there be and hereby is created a series of Preferred
Stock designated as Series E Convertible Preferred Stock, par value $.001
per share (the "Series E Preferred Stock"), with such series to consist of
2,788,000 shares, and that the powers, preferences and rights of, and
qualifications, limitations and restrictions on, the Series E Preferred
Stock are set forth on Exhibit A to this resolution and shall become
Subdivision A-5 of Section 2 of such Article FOURTH of the Restated
Certificate of Incorporation.
THIRD: That, pursuant to Section 103(f) of the General Corporation Law of the
State of Delaware, this Certificate of Correction is effective as of October 1,
1996.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be signed by its President and attested by its Secretary this 29th
day of April, 1997.
OSIRIS THERAPEUTICS, INC
By: /s/ JAMES S. BURNS
---------------------------
James S. Burns, President &
Chief Executive Officer
ATTEST:
/s/ MICHAEL J. DEMCHUK, JR.
- ---------------------------
Michael J. Demchuk, Jr.,
Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OSIRIS THERAPEUTICS, INC.
Osiris Therapeutics, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, during a telephonic
meeting held on October 20, 1995, duly adopted a resolution having the effect of
amending the first paragraph of Article FOURTH of the Restated Certificate of
Incorporation of the Corporation to read in its entirety as follows:
Section 1. Authorized Stock. The total number of shares which the
Corporation is authorized to have issued is 50,000,000 shares,
consisting of (a) 20,000,000 shares of Preferred Stock, par value $.001
per share (hereinafter "Preferred Stock"), 2,122,000 shares of
Preferred Stock designated as Series A Preferred Stock, 750,000 shares
of Preferred Stock designated as Series B Preferred Stock, 740,000
shares of Preferred Stock designated as Series C Preferred Stock, and
3,600,000 shares of Preferred Stock designated as Series D Preferred
Stock, and (b) 30,000,000 shares of Common Stock, par value $.001 per
share (hereinafter "Common Stock").
SECOND: That the stockholders of the Corporation, at a meeting held on January
12, 1996, duly approved the foregoing amendment.
THIRD: That the foregoing amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment
to be signed by its President and attested by its Secretary this 29th day of
April, 1997.
OSIRIS THERAPEUTICS, INC
By: /s/ JAMES S. BURNS
-----------------------------
James S. Burns, President and
Chief Executive Officer
ATTEST:
/s/ MICHAEL J. DEMCHUK, JR.
- ------------------------
Michael J. Demchuk, Jr.,
Secretary
-2-
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES F CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
(Pursuant to Section 151 of the General Corporation
of the State of Delaware)
Osiris Therapeutics, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FOURTH of its
Restated Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its Board
of Directors has adopted the following resolution creating a series of its
Preferred Stock, par value $.001 per share, designated as Series F Convertible
Preferred Stock:
RESOLVED, that pursuant to Article FOURTH of the Restated Certificate of
Incorporation of the Corporation, whereby 20,000,000 shares of Preferred Stock
are authorized, there be and hereby is created a series of Preferred Stock
designated as Series F Convertible Preferred Stock, par value $.001 per share
(the "Series F Preferred Stock"), with such series to consist of 1,176,500
shares, and that the powers, preferences and rights of, and qualifications,
limitations and restrictions on, the Series F Preferred Stock are set forth on
Exhibit A to this resolution and shall become Subdivision A-6 of Section 2 of
such Article FOURTH of the Restated Certificate of Incorporation.
The Corporation further certifies that attached hereto as Appendix I is a
true, correct and complete copy of said Exhibit A referred to in the foregoing
resolution.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be executed by its President and attested to by its Secretary
this 13th day of June 1997.
OSIRIS THERAPEUTICS, INC.
By: /s/ JAMES S. BURNS
-----------------------------
James S. Burns, President and
Chief Executive Officer
ATTEST:
/s/ MICHAEL J. DEMCHUK, JR
- ----------------------------------
Michael J. Demchuk, Jr., Secretary
<PAGE>
EXHIBIT A
APPENDIX I
Subdivision A-6
SERIES F CONVERTIBLE PREFERRED STOCK
1. Dividends.
The holders of shares of Series F Convertible Preferred Stock
("Series F Preferred Shares") shall be entitled, when and if declared by the
Board of Directors of the Corporation, to dividends payable in cash and/or
property out of funds legally available for that purpose; provided, however,
that the Corporation shall not declare or pay any dividends on any shares of
Common Stock ("Common Shares") unless it shall, at the same time, declare and
pay to each holder of Series F Preferred Shares a dividend equal to the
dividend which would have been payable to each holder if such Series F Preferred
Shares had been converted into Common Stock on the date of determination of
holders of Common Stock entitled to receive such dividend.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, each holder of Series F
Preferred Shares shall be entitled to be paid out of the assets of the
Corporation available for distribution to holders of the Corporation's
capital stock, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of any Common Shares,
Series E Preferred Shares, Series D Preferred Shares, Series C
Preferred Shares, Series C-1 Preferred Shares, Series B Preferred
Shares or Series A Preferred Shares but after and subject to the
payment in full of all amounts required to be paid to the holders of
any other series or class of Preferred Stock of the Corporation
ranking in liquidation prior and in preference to the Series F
Preferred Shares, an amount equal to $4.00 per share (as adjusted to
reflect any share split, combination, reclassification or similar
event). Notwithstanding the foregoing, if the assets of the
Corporation available for distribution under this Subsection (a) shall
be insufficient to permit the payment in full to the holders of Series
F Preferred Shares distributable to them under this Subsection (a),
then the entire assets of the Corporation available for such
distribution shall be distributed ratably among the holders of Series
F Preferred Shares based upon the respective aggregate liquidation
preference of the holders of such Series F Preferred Shares.
(b) Upon the completion of the distributions required by Subsection (a) of
this Section 2, each holder of Series F Preferred Shares and Series E
<PAGE>
Preferred Shares shall be entitled to be paid out of the assets of the
Corporation available for distribution to holders of the Corporation's
capital stock, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of any Common Shares,
Series D Preferred Shares, Series C Preferred Shares, Series C-1
Preferred Shares, Series B Preferred Shares or Series A Preferred
Shares, an amount equal to $1.10 per share (as adjusted to reflect any
share split, combination, reclassification or similar event involving
the Series F Preferred Shares or Series E Preferred Shares).
Notwithstanding the foregoing, if the assets of the Corporation
available for distribution under this Subsection (b) shall be
insufficient to permit the payment in full to the holders of Series F
Preferred Shares and Series E Preferred Shares distributable to them
under this Subsection (b), then the entire assets of the Corporation
available for such distribution shall be distributed ratably among the
holders of Series F Preferred Shares and Series E Preferred Shares
based upon the respective aggregate liquidation preference of the
holders of such series of Preferred Shares.
(c) Upon the completion of the distributions required by Subsections (a)
and (b) of this Section 2, each holder of Series F Preferred Shares,
Series E Preferred Shares, Series C Preferred Shares and Series C-1
Preferred Shares shall be entitled to be paid out of the assets of the
Corporation available for distribution to holders of the Corporation's
capital stock, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of any Common Shares,
Series D Preferred Shares, Series B Preferred Shares or Series A
Preferred Shares, an amount equal to $.40 per share (as adjusted to
reflect any share split, combination, reclassification or similar
event involving the Series F Preferred Shares, Series E Preferred
Shares, Series C Preferred Shares or Series C-1 Preferred Shares).
Notwithstanding the foregoing, if the assets of the Corporation
available for distribution under this Subsection (c) shall be
insufficient to permit the payment in full to the holders of Series F
Preferred Shares, Series E Preferred Shares, Series C Preferred Shares
and Series C-1 Preferred Shares distributable to them under this
Subsection (c), then the entire assets of the Corporation available
for such distribution shall be distributed ratably among the holders
of Series F Preferred Shares, Series E Preferred Shares, Series C
Preferred Shares and Series C-1 Preferred Shares based upon the
respective aggregate liquidation preference of the holders of such
series of Preferred Shares.
(d) Upon the completion of the distributions required by Subsections (a),
(b) and (c) of this Section 2, the remaining assets of the Corporation
available for distribution to stockholders shall be distributed,
before any payment or declaration and setting apart for payment of any
amount shall be made in respect of any Common Shares, among the
holders of
-2-
<PAGE>
Series F Preferred Shares, Series E Preferred Shares, Series D
Preferred Shares, Series C Preferred Shares, Series C-1 Preferred
Shares, Series B Preferred Shares and Series A Preferred Shares pro
rata based on the number of shares of Common Stock issuable upon
conversion of such Preferred Shares. Notwithstanding the foregoing,
the aggregate amount per share to be received by the holders of
Series F Preferred Shares, Series E Preferred Shares, Series D
Preferred Shares, Series C Preferred Shares, Series C-1 Preferred
Shares, Series B Preferred Shares and Series A Preferred Shares
pursuant to this Subsection (d) shall not exceed $3.00 per share
(as adjusted for any stock split, combination, reclassification or
similar event involving the Preferred Shares). Further, if the assets
of the Corporation available for such distribution to the holders of
the Series F Preferred Shares, Series E Preferred Shares, Series D
Preferred Shares, Series C Preferred Shares, Series C-1 Preferred
Shares, Series B Preferred Shares and Series A Preferred Shares shall
be insufficient to permit the payment in full of the maximum amount
distributable to them under this Subsection (d), then the entire
assets of the Corporation available for such distribution shall be
distributed ratably among the holders of the Series F Preferred Shares,
Series E Preferred Shares, Series D Preferred Shares, Series C
Preferred Shares, Series C-1 Preferred Shares, Series B Preferred
Shares and Series A Preferred Shares based upon the respective
aggregate liquidation preference of the holders of such series of
Preferred Shares.
(e) After payment shall have been made in full to the holders of the
Series F Preferred Shares pursuant to Subsections (a), (b), (c) and
(d) of this Section 2, or funds necessary for such payment shall have
been set aside by the Corporation in trust for the account of holders
of the Series F Preferred Shares so as to be available for such
payment, the holders of Series F Preferred Shares shall have no
further rights with respect to any remaining assets of the Corporation
legally available for distribution to the holders of its capital
stock.
(f) Whenever the distribution provided for in this Section 2 shall be
payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good
faith by not less than a majority of the directors then serving on the
Board of Directors of the Corporation.
(g) For purposes of this Section 2, a reorganization of the Corporation,
or a consolidation or merger of the Corporation with or into another
corporation or entity, or a sale or other disposition of all or
substantially all of the assets of the Corporation, shall not be
treated as a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 2.
-3-
<PAGE>
3. Voting Rights.
(a) In addition to any voting rights required by law, each holder of
Series F Preferred Shares shall be entitled to vote on all matters
submitted to a vote of the holders of Common Shares and shall be
entitled to that number of votes equal to the largest number of whole
Common Shares into which such holder's Series F Preferred Shares could
be converted pursuant to the provisions of Section 4 of this
Subdivision A-6 on the record date for the determination of
stockholders entitled to vote on such matter or, if no record date is
established, on the date such vote is taken or any written consent of
stockholders is first executed. Except as otherwise required by law
or this Certificate of Incorporation, the holders of Series A
Preferred Shares, Series B Preferred Shares, Series C Preferred
Shares, Series C-1 Preferred Shares, Series D Preferred Shares, Series
E Preferred Shares, Series F Preferred Shares and Common Shares shall
vote together as a single class on all matters.
(b) Except as otherwise provided by law, the Corporation shall not amend,
alter or repeal the preferences, special rights or other powers of the
Series F Preferred Shares so as to affect adversely Series F Preferred
Shares unless (i) a corresponding amendment, alteration or repeal to
the Series A Preferred Shares, the Series B Preferred Shares, the
Series D Preferred Shares, and the Series E Preferred Shares has been
approved by the holders of such number of Series A Preferred Shares,
Series B Preferred Shares, Series D Preferred Shares, Series E
Preferred Shares and Series F Preferred Shares that would have
represented at least 66 2/3% of the Series A Preferred Shares, Series
B Preferred Shares, Series D Preferred Shares, Series E Preferred
Shares and Series F Preferred Shares if such shares were taken
together as a single class, in which case no separate vote or approval
of the holders of the Series F Preferred Shares shall be required; or
(ii) such amendment, alteration or repeal has been approved by the
written consent or affirmative vote of the holders of at least 66 2/3%
of the then outstanding Series F Preferred Shares; such approval in
either case to be given in writing or by vote at a meeting (as the
case may be). For this purpose, the authorization or issuance of any
series of Preferred Stock with preference or priority over, or on a
parity with, the series F Preferred Shares as to any preferences,
rights or powers (including, without limitation, voting rights or the
right to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation) shall not
be deemed to so affect adversely such Series F Preferred Shares.
4. Conversion Rights.
(a) Optional Conversion. Subject to the terms and conditions of this
Section 4, the holder of any Series F Preferred Shares shall have the
right, at its
-4-
<PAGE>
option at any time and from time to time, to convert all or any portion
of such shares into such number of fully paid and nonassessable Common
Shares as is obtained by multiplying the number of Series F Preferred
Shares to be converted by $8.50 and dividing the result by the
conversion price of $8.50 or, in the event any adjustment of such
conversion price has taken place pursuant to the provisions of this
Section 4, by the conversion price in effect on the date such Series F
Preferred Shares are surrendered for conversion (such conversion price,
or such conversion price as last adjusted, being referred to herein at
the "Conversion Price"): provided, however, that in the event of the
liquidation, dissolution or winding up of the Corporation, the holders
of Series F Preferred Shares shall only be entitled to convert their
shares in accordance with the terms of this Section 4 at any time
prior to the earlier of the tenth day following the date on which such
liquidation, distribution or winding up was approved by the
stockholders of the Corporation and the date which is three days prior
to the distribution of the proceeds from such liquidation, dissolution
or winding up of the Corporation.
(b) Automatic Conversion.
(i) All outstanding Series F Preferred Shares shall be converted
automatically into the number of Common Shares into which such
Series F Preferred Shares are then convertible pursuant to this
Section 4, without any action by the holders of such shares and
whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent, at the
earliest of: (A) the moment immediately prior to the
Corporation's consummation of an underwritten public offering of
Common Shares; (B) the moment immediately prior to the
consummation of a consolidation or merger of the Corporation with
or into another corporation or entity or sale or transfer of all
or substantially all of the assets of the Corporation; and (C)
June 30, 1999.
(ii) Upon the occurrence of an event triggering the automatic
conversion of Series F Preferred Shares as provided in the
preceding subparagraph (i), the Corporation shall promptly give
written notice to all holders of Series F Preferred Shares of
such event. As soon as practicable after giving such notice, the
Corporation shall issue and deliver or cause to be issued and
delivered a certificate or certificates for the number of full
Common Shares issuable upon such conversion, together with any
cash payment to be made in lieu of fractional shares as provided
in Subsection 4(f) of this Article FOURTH and any accrued but
unpaid dividends on such Series F Preferred Shares, in exchange
for the certificates representing the Series F Preferred Shares
-5-
<PAGE>
converted pursuant to Subsection 4(b), together with proper
assignments of such certificates.
(c) Mechanics of Conversion. The rights of conversion under
subsection 4(a) shall be exercised by a holder of Series F
Preferred Shares by (i) surrendering the certificates representing
such shares, together with written notice of such holder's
election to convert such shares (the "Conversion Notice"), and a
proper assignment of such certificates to the Corporation. The
Conversion Notice shall state the names and addresses in which
and to which the certificates representing the Common Shares
issuable or, if applicable, the other shares, other securities,
cash or other property issuable, deliverable or payable, upon
such conversion shall be issued, delivered or paid, as the case
may be. The date upon which the certificates representing the
Series F Preferred Shares to be converted, the Conversion Notice
and the proper assignment have all been received by the
Corporation is referred to herein as the "Conversion Date."
As promptly as practicable after the Conversion Date, the
Corporation shall issue and deliver or cause to be issued and
delivered, as specified in the Conversion Notice, certificates
for the number of full Common Shares issuable upon such conversion
together with any cash instead of fractional shares as provided
in Subsection 4(f) and any accrued but unpaid dividends. Such
conversion shall be deemed to have been effected immediately prior
to the close of business on the Conversion Date, and at such time
the rights of the holder of the converted Series F Preferred
Shares shall cease and the person or persons in whose name or
names any certificate or certificates for Common Shares shall be
issuable upon such conversion shall be deemed to have become the
holder or holders of record of the Common Shares represented
thereby.
(d) Subdivision or Combination of Stock. In case the Corporation
shall at any time split or subdivide its outstanding Common Shares
into a greater number of shares, other than through a stock
dividend in which the holders of the Series F Preferred Shares
participate pursuant to Section 1 of this Subdivision A-6, the
Conversion Price for the Series F Preferred Shares in effect
immediately prior to such subdivision shall be proportionately
reduced, and, conversely, in case the outstanding Common Shares
of the Corporation shall be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(e) Reorganization, Reclassification, Consolidation or Merger. In the
event of any capital reorganization or reclassification of the
outstanding capital stock of the Corporation, or any consolidation
of the Corporation with, or merger of the Corporation with or
into, another corporation or entity, or the sale of all or
substantially all of the assets of the Corporation (each of such
events being hereinafter referred to as an "Extraordinary Event"),
-6-
<PAGE>
where, in connection with such Extraordinary Event, the holders
of Common Shares will be entitled to receive stock, securities,
cash and/or other property with respect to or in exchange for
such Common Shares, each Series F Preferred Share shall, at the
effective time of such Extraordinary Event, be converted into,
without any action on the part of the holder thereof, such shares
of stock, securities, cash and/or other property as may be
issuable or payable with respect to or in exchange for a number
of Common Shares which would otherwise have been issuable to the
holder of such Series F Preferred Share upon the conversion
thereof pursuant to this Section 4.
(f) Fractional Shares. No fractional Common Shares (or other shares
or other securities) or scrip representing fractional shares
shall be issued upon conversion of any of the Series F Preferred
Shares. Instead, the Corporation shall pay cash in an amount
equal to the fair market value of such fractional share at the
time of such conversion, as determined in good faith by the Board
of Directors of the Corporation.
(g) Reservation of Common Shares. The Corporation shall at all times
reserve and keep available and free of preemptive rights out of
its authorized but unissued Common Shares, solely for the purpose
of effecting the conversion of the Series F Preferred Shares,
such number of its Common Shares (or other shares or other
securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series F
Preferred Shares, and if at any time the number of authorized but
unissued Common Shares (or such other shares or other securities)
shall not be sufficient to effect the conversion of all then
outstanding Series F Preferred Shares, the Corporation shall take
such action as may be necessary to increase its authorized but
unissued Common Shares (or other shares or other securities) to
such number of shares as shall be sufficient for such purpose.
(h) Costs of Conversion. The Corporation shall pay all documentary,
stamp or other similar taxes attributable to the issuance or
delivery of Common Shares (or other shares or other securities) of
the Corporation upon conversion of any the Series F Preferred
Shares. However, the Corporation shall not be required to pay
any taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any certificate for such shares in
a name other than that of the holder of the Series F Preferred
Shares in respect of which such shares are being issued.
-7-
<PAGE>
CERTIFICATE OF INCREASE
TO
CERTIFICATE OF DESIGNATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
OF
OSIRIS THERAPEUTICS, INC.
(Pursuant to Section 151 of the General Corporation
of the State of Delaware)
WHEREAS, Osiris Therapeutics, Inc., a Delaware corporation (the
"Corporation"), filed with the Secretary of State of Delaware on January 9,
1995, a Certificate of Designation setting forth the powers, preferences and
rights of, and qualifications, limitations and restrictions on, its Series D
Convertible Preferred Stock (the "Series D Stock");
WHEREAS, the Corporation filed with the Secretary of State of Delaware
on August 15, 1995, an Amended Certificate of Designation of the Series D Stock,
wherein the Corporation amended certain terms of the Series D Convertible
Preferred Stock (the "Series D Stock") and established the number of authorized
shares of Series D Stock at 3,600,000; and
WHEREAS, the Board of Directors of the Corporation has duly adopted a
resolution increasing the number of authorized shares of Series D Stock to
3,716,070.
The Corporation hereby certifies that, pursuant to the authority
contained in Article FOURTH of its Restated Certificate of Incorporation, and in
accordance with the provisions of Section 151(g) of the General Corporation Law
of the State of Delaware, its Board of Directors has duly adopted the following
resolution authorizing and directing an increase in the number of authorized
shares of Series D Stock to 3,716,070:
RESOLVED, that the number of shares of authorized Preferred
Stock designated as Series D Convertible Preferred Stock is hereby established
at 3,716,070.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Increase to be executed by its President and attested to by its Secretary this
3rd day of July, 1997.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
-----------------------------
James S. Burns, President and
Chief Executive Officer
ATTEST:
/s/ Michael J. Demchuk
- ----------------------------------
Michael J. Demchuk, Jr., Secretary
-2-
<PAGE>
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Page 1
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PROPOSED FORM OF
CERTIFICATE OF AMENDMENT
SECOND AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OSIRIS THERAPEUTICS, INC.
OSIRIS THERAPEUTICS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, at a meeting
held on July 3, 1997, duly adopted resolutions proposing and declaring
advisable amendments to the Restated Certificate of Incorporation of the
Corporation and directing that such amendments be submitted to the
stockholders of the Corporation for their consideration and approval.
The resolutions setting forth the proposed amendments are as follows:
RESOLVED, that it is advisable and in the best interests of
the Corporation to amend clause (A) of Section 4(b)(i) of each of
Subdivisions A-1 and A-2 of Section 2 of Article FOURTH of the Restated
Certificate of Incorporation of the Corporation (the "Restated Certificate")
to read in its entirety as follows:
(A) the moment immediately prior to the Corporation's consummation of
an underwritten public offering of Common Shares;
FURTHER RESOLVED, that it is advisable and in the best interests of
the Corporation to amend clause (i) of Section 4(b)(i) of Subdivision A-3 of
Section 2 of Article FOURTH of the Restated Certificate to read in its entirety
as follows:
(i) the moment immediately prior to the Corporation's consummation of
an underwritten public offering of Common Stock;
<PAGE>
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Page 2
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<PAGE>
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Page 3
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FURTHER RESOLVED, that it is advisable and in the best interests of
the Corporation to amend Section 4(a) of Subdivision A-1 of Section 2 of Article
FOURTH of the Restated Certificate to read in its entirety as follows:
(a) Optional Conversion. Subject to the terms and conditions of
this Section 4, the holder of any Series A Preferred Shares shall
have the right, at its option at any time and from time to time,
to convert all or any portion of such shares into such number of
fully paid and nonassessable Common Shares as is obtained by
multiplying the number of Series A Preferred Shares to be
converted by $3.00 (after giving effect to the 1-for-4 reverse
stock split of the Series A Preferred Shares effected by the
Corporation on or about November 1, 1994) and dividing the result
by the conversion price of $3.00 (after giving effect to the 1-for-4
reverse stock split of the Common Shares effected by the Corporation
on or about November 1, 1994) per share or, in the event any adjustment
of such conversion price has taken place pursuant to the provisions of
this Section 4, by the conversion price in effect on the date such
Series A Preferred Shares are surrendered for conversion (such
conversion price, or such conversion price as last adjusted, being
referred to herein as the "Conversion Price"); provided, however, that
in the event of the liquidation, dissolution or winding up of the
Corporation, the holders of Series A Preferred Shares shall only be
entitled to convert their shares in accordance with the terms of this
Section 4 at any time prior to the earlier of the tenth day following
the date on which such liquidation, distribution or winding up was
approved by the stockholders of the Corporation and the date which is
three days prior to the distribution of the proceeds from such
liquidation, dissolution or winding up of the Corporation.
FURTHER RESOLVED, that it is advisable and in the best interests of
the Corporation to amend Section 4(a) of Subdivision A-2 of Section 2 of Article
FOURTH of the Restated Certificate to read in its entirety as follows:
(a) Optional Conversion. Subject to the terms and conditions of
this Section 4, the holder of any Series B Preferred Shares shall have
the right, at its option at any
<PAGE>
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Page 4
- --------------------------------------------------------------------------------
time and from time to time, to convert all or any portion of such
shares into such number of fully paid and nonassessable Common
Shares as is obtained by multiplying the number of Series B Preferred
Shares to be converted by $3.00 (after giving effect to the 1-for-4
reverse stock split of the Series B Preferred Shares effected by the
Corporation on or about November 1, 1994) and dividing the result by
the conversion price of $3.00 (after giving effect to the 1-for-4
reverse stock split of the Common Shares effected by the
Corporation on or about November 1, 1994) per share or, in the event
any adjustment of such conversion price has taken place pursuant to
the provisions of this Section 4, by the conversion price in effect
on the date such Series B Preferred Shares are surrendered for
conversion (such conversion price, or such conversion price as last
adjusted, being referred to herein as the "Conversion Price");
provided, however, that in the event of the liquidation, dissolution
or winding up of the Corporation, the holders of Series B
Preferred Shares shall only be entitled to convert their shares in
accordance with the terms of this Section 4 at any time prior to the
earlier of the tenth day following the date on which such
liquidation, distribution or winding up was approved by the
stockholders of the Corporation and the date which is three days
prior to the distribution of the proceeds from such liquidation,
dissolution or winding up of the Corporation.
FURTHER RESOLVED, that it is advisable and in the best interests of
the Corporation to amend the last three sentences of Section 4(a) of Subdivision
A-3 of Section 2 of Article FOURTH of the Restated Certificate to read in their
entirety as follows:
The Series C Conversion Price and the Series C1 Conversion Price shall
each be $3.40 (after giving effect to the 1-for-4 reverse stock split
of the Common Stock effected by the Corporation on or about November
1, 1994). The Conversion Value per share of Series C Preferred Stock
and Series C1 Preferred Stock shall be $3.40 per share (after giving
effect to the 1-for-4 reverse stock split of the Series C Preferred
Stock and the Series C1 Preferred Stock effected by the Corporation
on or about November 1, 1994). The Series C Conversion Price and
Series C1 Conversion Price shall be subject to further
<PAGE>
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adjustment as set forth below.
FURTHER RESOLVED, that it is advisable and in the best interests of
the Corporation to amend the Restated Certificate so as to delete entirely
Section 6 of Subdivision A-3 of Section 2 of Article FOURTH thereof.
<PAGE>
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Page 6
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FURTHER RESOLVED, that it is advisable and in the best interests of
the Corporation to amend the Restated Certificate so as to add the following
paragraph after the second paragraph of Section 2 of Article FOURTH thereof:
Unless otherwise provided in the certificate of
designations relating to a series of Preferred Stock, shares of a
series of Preferred Stock that are convertible into shares of any
other class or series of shares of the Corporation shall, upon their
conversion, be deemed authorized but unissued and undesignated shares
of Preferred Stock.
SECOND: That the stockholders of the Corporation, at a meeting held on
August 8, 1997, duly approved the foregoing amendments.
THIRD: That the foregoing amendments were duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President and attested by its Secretary this ___
day of August, 1997.
OSIRIS THERAPEUTICS, INC
By:
--------------------------
James S. Burns, President and
Chief Executive Officer
ATTEST:
- ----------------------------
Michael J. Demchuk, Jr.,
Secretary
<PAGE>
Exhibit 3.2
CONFIDENTIAL
OSIRIS THERAPEUTICS, INC.
BY-LAWS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE I MEETINGS OF STOCKHOLDERS.................................................... 1
Section 1. Time and Place of Meetings................................................ 1
Section 2. Annual Meeting............................................................ 1
Section 3. Special Meetings.......................................................... 1
Section 4. Notice of Meetings........................................................ 1
Section 5. Quorum.................................................................... 2
Section 6. Voting.................................................................... 2
ARTICLE II DIRECTORS.................................................................. 2
Section 1. Powers.................................................................... 2
Section 2. Number and Term of Office................................................. 2
Section 3. Vacancies and New Directorships........................................... 3
Section 4. Regular Meetings.......................................................... 3
Section 5. Special Meetings.......................................................... 3
Section 6. Quorum.................................................................... 3
Section 7. Written Action............................................................ 3
Section 8. Participation in Meetings by Conference Telephone......................... 3
Section 9. Committees................................................................ 4
Section 10. Compensation.............................................................. 4
Section 11. Rules..................................................................... 4
ARTICLE III NOTICES.................................................................... 4
Section 1. Generally................................................................. 4
Section 2. Waivers................................................................... 4
ARTICLE IV OFFICERS................................................................... 5
Section 1. Generally................................................................. 5
Section 2. Compensation.............................................................. 5
Section 3. Succession................................................................ 5
Section 4. Authority and Duties...................................................... 5
Section 5. Chairman.................................................................. 5
Section 6. President................................................................. 5
Section 7. Execution of Documents and Action with Respect to Securities of Other
Corporations............................................................. 5
Section 8. Vice President............................................................ 6
Section 9. Secretary and Assistant Secretaries....................................... 6
Section 10. Treasurer and Assistant Treasurers........................................ 6
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V STOCK........................................................................ 7
Section 1. Certificates.............................................................. 7
Section 2. Transfer.................................................................. 7
Section 3. Lost, Stolen or Destroyed Certificates.................................... 7
Section 4. Record Date............................................................... 7
ARTICLE VI GENERAL PROVISIONS.......................................................... 8
Section 1. Fiscal Year............................................................... 8
Section 2. Corporate Seal............................................................ 8
Section 3. Reliance upon Books Reports and Records................................... 8
Section 4. Time Periods.............................................................. 9
Section 5. Dividends................................................................. 9
ARTICLE VII AMENDMENTS................................................................. 9
Section 1. Amendments................................................................ 9
</TABLE>
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<PAGE>
OSIRIS THERAPEUTICS, INC.
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, within or without the State of Delaware, as may be designated by the
Board of Directors, or by the Chairman of the Board, the President or the
Secretary in the absence of a designation by the Board of Directors, and stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the stockholders shall be
held on the last Wednesday in April if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10:00 a.m., or at such
other date and time as shall be designated from time to time by the Board of
Directors, at which meeting the stockholders shall elect by a plurality vote the
directors to succeed those whose terms expire and shall transact such other
business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by law or by Certificate of
Incorporation, may be called by the Board of Directors, the Chairman of the
Board or the President, and shall be called by the President or the Secretary at
the request in writing of stockholders owning a majority in interest of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall be sent to the President and the Secretary and shall
state the purpose or purposes of the proposed meeting.
Section 4. Notice of Meetings. Written notice of every meeting of the
stockholders, stating the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, written notice of the place, date and time of the adjourned
meeting shall be given in conformity herewith. At any
1
<PAGE>
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
Section 6. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder "shall be entitled at every
meeting of thestockholders to one vote for each share of stock having voting
power standing in the name of such stockholder on the books of the Corporation
on the record date for the meeting and such votes may be cast either in person
or by written proxy. Every proxy must be duly executed and filed with the
Secretary of the Corporation. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. The vote upon any question
brought before a meeting of the stockholders may be by voice vote, unless, the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon present in person or by proxy at such meeting shall so
determine. Every vote taken by written ballot shall be counted by one or more
inspectors of election appointed by the Board of Directors. When a quorum is
present at any meeting, the vote of the holders of a majority of the stock which
has voting power present in person or represented by proxy and which has
actually voted shall decide any question properly brought before such meeting,
unless the question is one upon which by express provision of law, the
Certificate of Incorporation or these by-laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
ARTICLE II
DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors, which may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation directed or required to be
exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall consist
of one or more members. The number of directors shall be fixed by resolution of
the Board of Directors or by the stockholders at the annual meeting or a special
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meeting. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 3 of this Article, and each director
elected shall hold office until his or her successor is elected and qualified,
except as required by law. Any decrease in the authorized number of directors
shall not be effective until the expiration of the term of the directors then in
office, unless, at the time of such decrease, there shall be vacancies on the
Board which are being eliminated by such decrease.
Section 3. Vacancies and New Directorships. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
which occur between annual meetings of the stockholders may be filled by a
majority of the directors then in office, though lest than a quorum, or by a
sole remaining director, and the directors so elected shall hold office until
the next annual meeting of the stockholders and until their successors are
elected and qualified, except as required by law.
Section 4. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 5. Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board or the President on one day's written
notice to each director by whom such notice is not waived, given either
personally or by mail or telegram, and shall be called by the President or the
Secretary.
Section 6. Quorum. At all meetings of the Board of Directors, a majority of
the total number of directors then in office shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time to another place, time or date, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7. Written Action. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes or proceedings of the Board or Committee.
Section 8. Participation in Meetings by Conference Telephone. Members of
the Board of Directors, or any committee designated by the Board of Directors,
may participate in a meeting of the Board of Directors, or any such committee,
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
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<PAGE>
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation and each to have
such lawfully delegable powers and duties as the Board may confer. Each such
committee shall serve at the pleasure of the Board of Directors. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Except as otherwise provided by law, any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Any committee or committees so
designated by the Board shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Unless otherwise
prescribed by the Board of Directors, a majority of the members of the committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the members present at a meeting at which there is a quorum shall be
the act of such committee. Each committee shall prescribe its own rules for
calling and holding meetings and its method of procedure, subject to any rules
prescribed by the Board of Directors, and shall keep a written record of all
actions taken by it.
Section 10. Compensation. The Board of Directors may establish such
compensation for, and reimbursement of the expenses of, directors for attendance
at meetings of the Board of Directors or committees, or for other services by
directors to the Corporation, as the Board of Directors may determine.
Section 11. Rules. The Board of Directors may adopt such special rules and
regulations for the conduct of their meetings and the management of the affairs
of the Corporation as they may deem proper, not inconsistent with law or these
by-laws.
ARTICLE III
NOTICES
Section 1. Generally. Whenever by law or under the provisions of the
Certificate of Incorporation or these by-laws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram or telephone.
Section 2. Waivers. Whenever any notice is required to be given by law or
under the provisions of the Certificate of Incorporation or these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time of the event for which notice is to be
given, shall be deemed
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<PAGE>
equivalent to such notice. Attendance of a person at a meeting shall constitute
a waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE IV
OFFICERS
Section 1. Generally. The officers of the Corporation shall be elected by
the Board of Directors and shall consist of a President, a Secretary and a
Treasurer. The Board of Directors may also choose any or all of the following: a
Chairman of the Board of Directors, one or more Vice Presidents, and one or more
Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person.
Section 2. Compensation. The compensation of all officers and agents of the
Corporation who are also directors of the Corporation shall be fixed by the
Board of Directors. The Board of Directors may delegate the power to fix the
compensation of other officers and agents of the Corporation to an officer of
the Corporation.
Section 3. Succession. The officers of the Corporation shall hold office
until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors.
Section 4. Authority and Duties. Each of the officers of the Corporation
shall have such authority and shall perform such duties as are stated in these
by-laws or as may be specified by the Board of Directors in a resolution which
is not inconsistent with these by-laws.
Section 5. Chairman. The Chairman shall preside at all meetings of the
stockholders and of the Board of Directors and have such other duties and
responsibilities as may be assigned to him or her by the Board of Directors. The
Chairman may delegate to any qualified person authority to chair any meeting of
the stockholders, either on a temporary or a permanent basis.]*
Section 6. President. The President shall be responsible for the active
management and direction of the business and affairs of the Corporation. In case
of the inability or failure of the Chairman to perform the duties of that
office, the President shall perform the duties of the Chairman, unless otherwise
determined by the Board of Directors.
Section 7. Execution of Documents and Action with Respect to Securities of
Other Corporations. The President shall have and is hereby given, full power and
authority, except as otherwise required by law or directed by the Board of
Directors, (a) to execute, on behalf of the Corporation, all duly authorized
contracts, agreements,
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<PAGE>
deeds, conveyances or other obligations of the Corporation, applications,
consents, proxies and other powers of attorney, and other documents and
instruments, and (b) to vote and otherwise act on behalf of the Corporation,
in person or by proxy, at any meeting of stockholders (or with respect to any
action of such stockholders) of any other corporation in which the Corporation
may hold securities and otherwise to exercise any and all rights and powers
which the Corporation may possess by reason of its ownership of securities of
such other corporation. In addition, the President may delegate to other
officers, employees and agents of the Corporation the power and authority to
take any action which the President is authorized to take under this Section 7,
with such limitations as the President may specify; such authority so delegated
by the President shall not be re-delegated by the person to whom such execution
authority has been delegated.
Section 8. Vice President. Each Vice President, however titled, shall
perform such duties and services and shall have such authority and
responsibilities as shall be assigned to or required from time to time by the
Board of Directors or the President.
Section 9. Secretary and Assistant Secretaries. (a) The Secretary shall
attend all meetings of the stockholders and all meetings of the Board of
Directors and record all proceedings of the meetings of the stockholders and of
the Board of Directors and shall perform like duties for the standing committees
when requested by the Board of Directors or the President. The Secretary shall
give, or cause to be given, notice of all meetings of the stockholders and
meetings of the Board of Directors. The Secretary shall perform such duties as
may be prescribed by the Board of Directors or the President. The Secretary
shall have charge of the seal of the Corporation and authority to affix the seal
to any instrument. The Secretary or any Assistant Secretary may attest to the
corporate seal by handwritten or facsimile signature. The Secretary shall keep
and account for all books, documents, papers and records of the Corporation
except those for which some other officer or agent has been designated or is
otherwise properly accountable. The Secretary shall have authority to sign stock
certificates.
(b) Assistant Secretaries, in the order of their seniority, shall assist
the Secretary and, if the Secretary is unavailable or fails to act, perform the
duties and exercise the authorities of the Secretary.
Section 10. Treasurer and Assistant Treasurers. (a) The Treasurer shall
have the custody of the funds and securities belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Treasurer with the prior approval of the Board of Directors or the President.
The Treasurer shall disburse the funds and pledge the credit of the Corporation
as may be directed by the Board of Directors and shall render to the Board of
Directors and the President, as and when required by them, or any of them, an
account of all transactions by the Treasurer.
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<PAGE>
(b) Assistant Treasurers, in the order of their seniority, shall assist the
Treasurer and, if the Treasurer is unable or fails to act, perform the duties
and exercise the powers of the Treasurer.
ARTICLE V
STOCK
Section 1. Certificates. Certificates representing shares of stock of the
Corporation shall be in such form as shall be determined by the Board of
Directors, subject to applicable legal requirements. Such certificates shall be
numbered and their issuance recorded in the books of the Corporation, and such
certificate shall exhibit the holder's name and the number of shares and shall
be signed by, or in the name of the Corporation by the President and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
of the Corporation. Any or all of the signatures and the seal of the
Corporation, if any, upon such certificates may be facsimiles, engraved or
printed.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 3. Lost, Stolen or Destroyed Certificates. The Secretary may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact, satisfactory
to the Secretary, by the person claiming the certificate of stock to be lost,
stolen or destroyed. As a condition precedent to the issuance of a new
certificate or certificates the Secretary may require the owner of such lost,
stolen or destroyed certificate or certificates to give the Corporation a bond
in such sum and with such surety or sureties as the Secretary may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or
the issuance of the new certificate.
Section 4. Record Date. (a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of
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<PAGE>
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
a Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed
from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may adopt a corporate
seal and use the same by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 3. Reliance upon Books, Reports and Records. Each director, each
member of a committee designated by the Board of Directors, and each officer of
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<PAGE>
the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation
by any of the Corporation's officers or employees, or committees of the Board
of Directors, or by any other person as to matters the director, committee
member or officer believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
Section 4. Time Periods. In applying any provision of these by-laws which
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded and the day of the event shall be included.
Section 5. Dividends. The Board of Directors may from time to time declare
and the Corporation may pay dividends upon its outstanding shares of capital
stock, in the manner and upon the terms and conditions provided by law and the
Certificate of Incorporation.
ARTICLE VII
AMENDMENTS
Section 1. Amendments. These by-laws may be altered, amended or repealed,
or new by-laws may be adopted, by the stockholders or by the Board of Directors.
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<PAGE>
OSIRIS THERAPEUTICS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESABLE SHARES OF COMMON STOCK,
PAR VALUE $.001 PER SHARE, OF
OSIRIS THERAPEUTICS, INC.
transferable on the books of the Corporation by the holder hereof, in person
or by duly authorized attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented bereby are subject to
the laws of the State of Delaware and to the Certificate of Incorporation and
By-Laws of the Corporation as now or hereafter amended.
WITNESS the signatures of the Corporation's duly authorized officers.
Dated:
SECRETARY PRESIDENT
<PAGE>
OSIRIS THERAPEUTICS, INC.
The Corporation is authorized to issue nore than one class of stock. The
Corporation will furnish without charge to each stockholder upon written
request the full text of the preferences, voting powers, qualifications and
special and relative rights of the shares of each class of stock (and any
series thereof) authorized to be issued by the Corporation as set forth in
the Certificate of Incorporation of the Corporation and amendments thereto
filed with the Secretary of State of the Stae of Delaware.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS,
NEITHER SUCH SHARES NOR ANY PORTION THEREOF OR INTERESTJ THERIN MAY BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AND
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION SHALL HAVE
RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION
SATISFACTOY TO THE CORPORATION (WHICH MAY INCLUDE AMONG OTHER THINGS, AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
UNIF GIFT MIN ACT -- ......Custodian.....
TEN COM -- as tenants in common (Cust) (Minor)
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors Act
survivorship and not as ten-
ants in common .................................
(State)
Additional abbreviations may also be used though not in the above list.
-----------------
For Value Received, ____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURTIY OR OTHER
INDENTIFYING NUMBER OF ASSIGNEE
_________________________________________________________________
_________________________________________________________________
PLEASE PRINT OR TYPE NAME AND ADDRESS OF ASSIGNEE
_________________________________________________________________
___________________________________________________ of the 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
Corporations with full power of substitution in the premises.
Dated: _______________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ANY CHANGE
WHATEVER.
<PAGE>
Exhibit 10.1
SHARE AND WARRANT PURCHASE AGREEMENT
BETWEEN
GRYPHON PHARMACEUTICALS, INC.,
and
OSIRIS THERAPEUTICS, INC.
---------------------------
Dated as of December 23, 1994
<PAGE>
SHARE AND WARRANT PURCHASE AGREEMENT
THIS SHARE AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated as of
December 23, 1994, is made by and between Gryphon Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and Osiris Therapeutics, Inc., a Delaware
corporation ("Osiris" or the "Investor").
RECITALS
A. The Investor desires to acquire from the Company, and the Company
desires to issue and sell to the Investor, in the manner and on the terms and
conditions hereinafter set forth, shares of Series A Convertible Preferred Stock
("Preferred Shares") of the Company.
B. In connection with the Investor's purchase of the Preferred Shares,
the Company and the Investor desire to establish certain rights and obligations
between themselves.
AGREEMENTS
NOW, THEREFORE, the Company and the Investor agree as follows:
SECTION l. DEFINITIONS
The following terms when used in this Agreement shall have the following
respective meanings:
"Affiliate" means with respect to any Person, any (i) officer, director, or
holder of more than 10% of the outstanding shares or equity interests of such
Person, (ii) any Relation of such Person or any Affiliate of such Person, or
(iii) any other Person which directly or indirectly controls, is controlled by,
or is under common control with such Person. A Person shall be deemed to
control another Person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
"controlled" Person, whether through ownership of voting securities, by
contract, or otherwise.
"Amended Certificate" means the Amended and Restated Certificate of
Incorporation of the Company as on file with the Secretary of State of the State
of Delaware on the date hereof, a copy of which is attached as Exhibit A hereto.
"By-Laws" means the Amended and Restated By-Laws of the Company, a copy of
which is attached as Exhibit B hereto.
"Certificate of Incorporation" means the Certificate of Incorporation of
the Company on file with the Secretary of State
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of the State of Delaware immediately prior to the filing of the Amended
Certificate.
"Closing" shall have the meaning set forth in Section 3.1 hereof.
"Closing Date" shall have the meaning set forth in Section 3.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Shares" means shares of the Common Stock, par value $.00l per
share, of the Company.
"Contract" means any contract, agreement, undertaking or commitment
(written or oral) to which the Company or any of its Subsidiaries is a party or
by which the Company, any of its Subsidiaries, or any of their respective assets
are bound.
"Founder Stockholders" means each of the Curt I. Civin, M.D. ("Dr. Civin")
and Donald Small, M.D., Ph.D ("Dr. Small").
"Governmental Authority" means the United States, any state or
municipality, the government of any foreign country, any subdivision of any of
the foregoing, or any authority, department, commission, board, bureau, agency,
court, or instrumentality of any of the foregoing.
"Gryphon Business" means the research, development and commercialization of
novel stem cell and progenitor cell populations, their genes and gene products,
including, but not limited to, growth factor receptors, protein kinases and
other signal transduction molecules involved in the self-renewal, proliferation
or inhibition and differentiation of hematopoietic stem/progenitor cells and the
resulting biopharmaceuticals.
"Indebtedness" of any Person means (i) indebtedness for borrowed money;
(ii) indebtedness for the deferred purchase price of property or services; (iii)
obligations under a lease which is capitalized on the balance sheet of such
Person; (iv) obligations under direct or indirect guaranties of indebtedness or
obligations of others of the type referred to in clause (i), (ii) or (iii)
above; and (v) nonrecourse indebtedness secured by a Lien on the property of
such Person.
"Investment Documents" means this Agreement, the Amended Certificate, the
Stockholders Agreement, the Stock Purchase Warrant and the Registration Rights
Agreement.
"JHU" means The Johns Hopkins University.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
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"1933 Act" means the Securities Act of 1933, as amended.
"Organizational Proceedings" shall mean (a) the transfer of technology by
JHU to the Company pursuant to the License Agreement, (b) the purchase of Common
Shares by each of the Founder Stockholders and JHU pursuant to subscription
agreements, and (c) the Founder Stockholders entering into Consulting Agreements
with the Company.
"Person" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization, or Governmental Authority.
"Preferred Shares" means shares of the Series A Convertible Preferred
Stock, par value $.001 per share ("Series A Preferred Shares"), of the
Company.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Stockholders in the form attached as Exhibit C
hereto.
"Relation" shall mean with respect to any Person, such Person's spouse and
the parents, grandparents, brothers and sisters, children, and grandchildren of
such Person or of such Person's spouse.
"SEC" means the Securities and Exchange Commission.
"Second Round Financing" means the receipt by the Company of proceeds from
the sales of its equity securities, whether pursuant to a venture capital
investment or a corporate collaboration or other similar transaction, after the
date of this Agreement (and not to include any amounts payable by the Investor
under this Agreement) in a gross aggregate amount equal to or greater than
$5,000,000.
"Shares" means the Preferred Shares and Common Shares collectively.
"Stock Purchase Warrant" means the Stock Purchase Warrant entered into
between the Company and the Investor in the form attached as Exhibit F hereto.
"Stockholders" shall mean Osiris, the Founder Stockholders and JHU.
"Stockholders Agreement" means the Stockholders Agreement among the
Company, the Investor, the Founder Stockholders and JHU in the form attached as
Exhibit D hereto.
"Subsidiary" means any Person or business in which the Company owns,
directly or indirectly, an equity interest representing at least a majority of
the voting stock or voting interests of such Person or business.
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"License Agreement" means the Research and License Agreement entered into
between the Company and JHU in the form attached as Exhibit E hereto.
SECTION 2. PURCHASE AND SALE OF SHARES
2.1 Issuance of Preferred Shares. At the Closing, the Company shall issue
and sell to the Investor, and the Investor shall purchase from the Company, (a)
3,000,000 Preferred Shares and (b) a Stock Purchase Warrant exercisable for
1,000,000 Common Shares, for an aggregate consideration consisting of (i)
1,000,000 Common Shares presently held by Investor, (ii) certain cash payments
and reimbursements as set forth below, (iii) the provision of certain services
and equipment as set forth below and (iv) the offer to provide the R&D Loan (as
defined below), such consideration being valued in the aggregate at $3,000,000
(the "Consideration").
2.2 Payment of Consideration The Consideration shall be payable as
follows:
(a) Start Up Funding. The Investor shall pay the Company $45,000
($25,000 of which is paid herewith and an additional $20,000 of which will be
paid on May 30, 1995) to permit it to (i) pay JHU licensing fees and annual
maintenance fees under the License Agreement, (ii) reimburse JHU for its past
patent costs with respect to the technology that is the subject of the License
Agreement, and (iii) reimburse JHU for up to $5,000 of legal fees incurred in
connection with the negotiation of this Agreement and the related transactions.
(b) Research Funding. Commencing as of July 1, 1994, the Investor
shall provide a total of $1,200,000 ($60,000 of which has been provided to
date) to be used by the Company to fund research at JHU with respect to the
Business ("Research Funding"). The timing of the payment of such funds shall
be as follows:
During the twelve-month period commencing July 1, 1994: $87,500 per
calendar quarter
During the twelve-month period commencing July 1, 1995: $100,000 per
calendar quarter
During the twelve-month period commencing July 1, 1996: $112,500 per
calendar quarter
Such quarterly payments of the Research Funding shall be made on the first
business day of the applicable calendar quarter, commencing January 2, 1995,
with such January 2, 1995 payment to consist of a payment in arrears for the
immediately preceding two calendar quarters less the amounts prepaid by the
Investor through such date.
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(c) Equipment and Technician. The Investor shall make available to
the Company, for use by the Company and the Founder Stockholders in their
laboratories at JHU, during the period commencing on the date hereof through
June 30, 1997, an oligonucleotide synthesizer (of a model mutually agreeable
to the Founder Stockholders and the Investor) (the "Synthesizer") under the
Investor's Master Equipment Lease Agreement with Dominion Ventures, Inc. In
addition, until December 31, 1997, the Investor shall provide the Company (i)
reasonable salary support (direct, indirect and fringe benefits) for a
technician to operate the Synthesizer, (ii) a service agreement covering
the Synthesizer and (iii) up to $25,000 per year in supplies to operate and
maintain the Synthesizer.
(d) "In-Kind" Support. The Investor shall provide to the Company
certain legal, administrative, accounting, facility and equipment utilization
services and certain related funding (the "In-Kind Services") until the earlier
of (i) the consummation of Second Round Financing or (ii) October 1, 1997. Such
services shall include:
(i) usual and customary organizational, legal and accounting
expenses (such as expenses attributable to the initial capitalization of the
Company, the technology transfers, customary legal agreements) and related
management services;
(ii) start-up and organizational Chief Executive Officer
services (which shall be provided by James Burns or another individual
reasonably acceptable to the Founder Stockholders) and administrative and
general support (such as strategic development and business plan
preparation);
(iii) business and patent strategy consulting services;
(iv) monitoring and reviewing of scientific progress;
(v) wet lab and administrative space at the Investor's facility
in Baltimore, Maryland (the "Osiris Facility");
(vi) access to certain common equipment at the Osiris Facility
(such as ultra centrifuge, tissue culture facilities, incubators, cold room, and
refrigerators);
(vii) services relating to the recruitment of a full-time
Chief Executive Officer and senior scientific personnel;
(viii) arranging and negotiating the Second Round Financing;
and
(ix) reimbursement for the costs incurred by the Company to
obtain and preserve any necessary or desirable U.S. and
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foreign patents for the Company's technology (as described in the License
Agreement).
In the event of any dispute between the Company and the Investor with respect
to the Investor's satisfaction of its obligation to provide In-Kind Services,
such dispute shall be considered by the members of the Company's Board of
Directors who have not been designated solely by the Investor. In the event
such dispute is not resolved to the satisfaction of such Directors, it shall
be submitted to an arbitration to be conducted in accordance with the rules
of the American Arbitration Association.
(e) DNA Instrument. The Investor shall make available to the Company
an automated DNA sequencing instrument, reasonably satisfactory to the Founder
Stockholders, for use at the Osiris Facility. Use of such sequencing instrument
by the Company will be on an equal-time basis with the Investor. A reagent
budget for the sequencer will also be provided to the Company by the Investor
for use by the Founder Stockholders in an amount not to exceed $75,000 per year.
Commencing on October 4, 1994 and continuing until a sequencing instrument is
operational at the Osiris Facility, the Investor will reimburse the Company for
sequencing services provided at JHU's facilities which are requested by the
Founder Stockholders, up to an annual amount of $75,000.
(f) Scientist Funding. Commencing on or before January 1, 1996,
and until the earlier of such time as the Company consummates the Second
Round Financing and October 1, 1997, the Investor shall provide to the
Company an amount equal to annual salary and fringe benefit support necessary
to enable the Company to retain a full-time scientist at the Ph.D. level and
two full-time technicians selected by the Founder Stockholders specifically
for Company projects. In the event the Second Round Financing is
consummated, the Investor shall be repaid one-half of the amount provided for
such salary and fringe benefits from the funds raised in the Second Round
Financing.
(g) R&D Loan. The Investor, at the election of the Company, shall
loan to the Company $1,000,000 (the "R&D Loan") if the Second Round Financing
has not been consummated on or before July 1, 1997. The R&D Loan will be
provided in quarterly installments of $125,000 commencing on July 1, 1997.
The Company shall repay the R&D Loan from the proceeds received by the
Company in the Second Round Financing or, if such financing is not
consummated by March 31, 1998, then the Investor shall be entitled to proceed
pursuant to Section 6.9 of this Agreement. The outstanding principal amount
of such R&D Loan shall bear interest at a rate equal to the greater of 10%
per annum or the Citibank prime rate, and shall be secured by the technology
and other assets of the Company.
(h) Surrender of Investor Common Stock. On the Closing Date the
Investor shall surrender to the Company for cancellation the 1,000,000 Common
Shares held by the Investor.
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2.3 Failure of Consideration. (a) In the event the Investor fails to
provide any of the Research Funding other than as a result of an Event of
Default and such failure continues for a period of 30 days, the Company may,
by written notice delivered to the Investor, accelerate and declare due and
payable the remaining Research Funding. In the event the Investor does not
provide the Company with the remaining Research Funding within 15 days after
receipt of notice from the Company, (i) the Investor shall surrender to the
Company a number of the Preferred Shares equal to the product of 1,200,000
and a fraction, the numerator of which is the aggregate amount of the
payments of the Research Funding that have not been made and the denominator
of which is $1,200,000 and (ii) the provisions of Sections 6.4, 6.7 and
6.9(b) of this Agreement, Sections 2.2 and 6 of the Stockholders' Agreement
and Section 1 of the Registration Rights Agreement shall be deemed null and
void, and the Investor shall consent to the filing with the Secretary of
State of Delaware of an amendment to the Amended Certificate which removes
the redemption rights contained in Article FOURTH, Section 3 of the Amended
Certificate, and the special voting rights contained in Article FOURTH,
Sections 5(b) (ii) and (iv) of the Amended Certificate, (iii) the Investor
shall no longer be required to provide the R&D Loan, (iv) the Investor shall
thereafter be entitled to appoint only one director to the Company's Board of
Directors pursuant to Section 2.1(a) of the Stockholder's Agreement, (v) JHU
shall have the right to appoint a majority of the Company's Board of
Directors and (vi) the Investor shall surrender and assign the Stock Purchase
Warrant to the Company. The foregoing remedies shall be the sole remedies of
the Company in the event the Investor fails to make any payment required
under Section 2.2 (b).
(b) In the event the arbitrator appointed under Section 2.2
determines that the Investor failed to provide any of the In-Kind Services, the
Investor shall surrender to the Company a number of Preferred Shares equal to
the product of 1,200,000 and a fraction, the numerator of which is the portion
of the Applicable Year Aggregate Services represented by such In-Kind Services
determined by the arbitrator not to have been provided and the denominator of
which is $1,200,000. For the purposes of this paragraph (b), the term
"Applicable Year Aggregate Services" shall mean (i) $660,000 for the period
ended June 30, 1995, (ii) $300,000 for the 12 month period ended June 30, 1996
and (iii) $240,000 for the 12 month period ended June 30, 1997. The foregoing
surrender of Preferred Shares shall be the sole remedy of the Company in the
event the Investor fails to provide the In-Kind Services as determined by an
arbitrator pursuant to Section 2.2(d) hereof.
SECTION 3. THE CLOSING
3.1 Closing. The closing of the issuance and sale of the Preferred Shares
pursuant to Section 2.1 hereof and certain of the other transactions
contemplated hereby (the "Closing") shall take place at the offices of JHU -
Office of Technology Licensing,
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Baltimore, Maryland at 10:00 a.m. on December 23, 1994 (the "Closing Date"),
or at such other time or place as the parties shall mutually agree.
3.2 Deliveries by the Company. At the Closing, the Company shall, as a
condition to the Closing, deliver or cause to be delivered to the Investor the
following items (in addition to any other items required to be delivered to the
Investor pursuant to any other provision of this Agreement):
(a) certificates representing the Preferred Shares being issued and sold
by the Company to the Investor pursuant to Section 2.1 hereof, duly recorded on
the books of the Company in the name of the Investor, together with such other
supporting documents as may in the opinion of the Investor's counsel be
reasonably necessary to permit the Investor to acquire title to the Preferred
Shares free of any adverse claim;
(b) the Certificate of Designation of Series A Convertible Preferred Stock
certified by the Secretary of State of the State of Delaware as of a date within
ten days prior to the Closing Date;
(c) a certificate of the Secretary of State of the State of Delaware as to
the good standing of the Company dated within ten days prior to the Closing
Date;
(d) a certificate of the Secretary of the Company, in form and substance
satisfactory to counsel for the Investor, certifying that attached thereto are
true and correct copies of (i) the By-Laws of the Company, and (ii) resolutions
duly and validly adopted by the Board of Directors of the Company authorizing
the execution and delivery of the Investment Documents and the consummation of
the transactions contemplated hereby and thereby;
(e) a counterpart of the Stockholders Agreement, duly executed by the
Company and each of the Stockholders;
(f) a counterpart of the Registration Rights Agreement, duly executed by
the Company and each of the Stockholders; and
(g) a counterpart of the Stock Purchase Warrant duly executed by the
Company and the Investor.
3.3 Deliveries by the Investor. At the Closing, the Investor shall, as a
condition to the Closing, deliver or cause to be delivered to the Company the
following items (in addition to any other items required to be delivered to the
Company pursuant to any other provision of this Agreement):
(a) a counterpart of the Stockholders Agreement, duly executed by the
Investor; and
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(b) a counterpart of the Registration Rights Agreement, duly executed by
the Investor;
(c) a counterpart of the Stock Purchase Warrant duly executed by the
Investor; and
(d) the certificate representing the Common Shares held by the Investor
prior to the Closing Date and endorsed to the Company.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. In order to induce the
Investor to purchase the Preferred Shares, the Company represents and warrants
to the Investor as follows (each of which shall be deemed to have been made
after giving effect to the Organizational Proceedings):
(a) Organization and Standing. The Company is duly incorporated and
validly existing under the laws of the State of Delaware and has all requisite
corporate power and authority to own or lease its properties and assets and to
conduct the Gryphon Business as it is presently being conducted. The Company
was incorporated on August 22, 1994, and is not a successor to any other
corporation, partnership or other entity. The Company does not own any equity
interest, directly or indirectly, in any other Person or business enterprise,
has never owned any such equity interest, and has never operated as a subsidiary
or a division of any other Person. Attached as Exhibit A and Exhibit
B are true, correct and complete copies of the Amended Certificate and By-Laws
of the Company as currently in effect.
(b) Capitalization. The authorized capital of the Company consists of (i)
15,000,000 shares of Common Stock, of which 2,650,000 shares are issued and
outstanding, and (ii) 7,500,000 shares of Preferred Stock, none of which are
outstanding. Except as provided on Schedule 4.1(b), the Company has no other
equity securities of any class issued, reserved for issuance or outstanding.
Except as provided to the Investor in this Agreement and the Stock Purchase
Warrant, there are (x) no outstanding options, offers, warrants, conversion
rights, Contracts, or other rights to subscribe for or to purchase from the
Company, or Contracts obligating the Company to issue, transfer, or sell
(whether formal or informal, written or oral, firm or contingent), shares of
capital stock or other securities of the Company (whether debt, equity, or a
combination thereof) or obligating the Company to grant, extend, or enter into
any such Contract and (y) no Contracts or other understandings (whether formal
or informal, written or oral, firm or contingent) which require or may require
the Company to repurchase any of its Common Shares. Except as provided to
holders of Preferred Shares under the Stockholders Agreement, there are no
preemptive or similar rights with respect to the Company's capital stock.
Except as
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provided in the Stockholders Agreement, the Company is not a party to, and
no stockholder of the Company is a party to, any voting agreements, voting
trusts, proxies or any other agreements, instruments or understandings with
respect to the voting of any shares of the capital stock of the Company, or
any agreement with respect to the transferability, purchase or redemption of
any shares of the capital stock of the Company.
(c) Stockholders of the Company. The persons set forth on Schedule 4.1(c)
hereto own of record on the date hereof the number of Shares of the Company set
forth opposite their names, and collectively constitute all the holders of
record of the capital stock of the Company.
(d) Capacity of the Company; Consents; Execution of Agreements. The
Company has all requisite power, authority, and capacity to enter into each of
the Investment Documents and to perform the transactions and obligations to be
performed by it hereunder and thereunder. Except for state and federal
securities law filings, no consent, authorization, approval, license, permit or
order of, or filing with, any Person or Governmental Authority is required in
connection with the execution and delivery of or the performance by the Company
of the transactions and obligations contemplated hereby and thereby. The
execution and delivery of each of the Investment Documents by the Company, and
the performance by the Company of the transactions and obligations contemplated
hereby and thereby, including, without limitation, the issuance and delivery of
the Preferred Shares to the Investor hereunder, have been duly authorized by all
requisite action of the Company. Each of the Investment Documents have been
duly executed and delivered by a duly authorized officer of the Company and
constitute valid and legally binding agreements of the Company, enforceable in
accordance with their respective terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws, both state and federal, affecting the enforcement of creditors' rights or
remedies in general from time to time in effect and the exercise by
courts of equity powers or their application of principles of public policy.
(e) Status of and Preferred Shares; Reservation of Common Shares.
The Preferred Shares to be issued and purchased hereunder, when issued by the
Company to the Investor pursuant to the terms of this Agreement, will (i) be
duly authorized, validly issued, fully paid and nonassessable, (ii) based on
such Investor's representations in Section 4.2, have been issued in
compliance with all federal and state securities laws, (iii) have the rights and
preferences set forth in the Amended Certificate, and (iv) be free and clear of
all liens and adverse claims caused by the Company. The Company has reserved
sufficient authorized but unissued Common Shares for issuance upon the
conversion of the Preferred Shares in accordance with the Amended Certificate.
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(f) Compliance with Laws. The Company is not in violation of, nor do any
of its operations violate in any respect, any term of the Amended Certificate,
or By-Laws or in any material respect, any term or provision of any contract,
agreement or instrument to which the Company is a party, or any statute, law, or
regulation of any Governmental Authority applicable to the Company, any of its
assets, or the conduct of its business ("Applicable Laws"), the violation of
which could have a material adverse effect upon the Company's assets,
properties, financial condition results of operations, business or prospects,
and no material expenditures are or, based on present requirements, will be
required of the Company in order for it to comply or remain in compliance with
any Applicable Laws.
(g) Litigation. There are no actions, suits, claims, investigations, or
proceedings pending at law or in equity or before or by any Governmental
Authority, or, to the best of the Company's knowledge, threatened, against the
Company or any of its assets or properties or the transactions contemplated by
this Agreement, and to the best of the Company's knowledge, there exist no facts
or circumstances which reasonably could be anticipated to result in any such
action, suit, claim, investigation, or proceeding; and no Person has asserted,
and, to the best of the Company's knowledge, no Person has a valid basis upon
which to assert, any claims against the Company or any of its affiliates that
would materially and adversely affect the transactions contemplated by the
Investment Documents, or result in or form the basis of any such action, suit,
claim, investigation or proceeding.
(h) Patents and Other Intellectual Property Rights.
(i) "Intellectual Property" shall mean (A) patents, patent
applications, patent disclosures and the ideas, inventions and improvements
thereto and all reissues, continuations, continuations-in-part, divisions and
reexaminations thereof; (B) trademarks, service marks, trade names, trade dress,
logos and registrations and applications for registrations thereof; and all
renewals and extensions thereof; (C) copyrights and maskworks, and all
registrations and applications for registration thereof; (D) computer software,
data, data bases, and user documentation and audio-visual and text materials;
(E) all trade secret and confidential information (including, but not limited
to, manufacturing processes, research and development materials, know-how,
drawings and designs, technical data, marketing financial and business plans,
and customer lists); and (F) copies and tangible embodiments of the foregoing
(in whatever form or medium).
(ii) Schedule 4.1(h) hereto sets forth a complete and correct list of
all United States and foreign patents and patent applications, trade names,
trademarks and service marks, trademark and service mark registrations,
applications for trademark and service mark registrations, copyright
registrations
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and applications for copyright registrations, that form a part of the
Intellectual Property owned by the Company or, where not owned, expressly
licensed for use by the Company in the Gryphon Business, and all licenses or
other agreements under which the Company obtained or licenses the right to
use Intellectual Property. Except as expressly set forth on Schedule 4.1(h)
hereto, the Company is the sole owner of the entire right, title, and
interest in and to all Intellectual Property used in the Gryphon Business as
currently conducted (the "Company Intellectual Property"). The Company
Intellectual Property comprises all of the patents, patent applications,
trademarks, trade names, copyrights, inventions, and discoveries, of every
type and description, presently used in the conduct of the Gryphon Business.
Except as provided on Schedule 4.1(h) the Company has not granted any express
license or other rights to the Company Intellectual Property, and is not
liable or obligated under any Contract for its use of any Company
Intellectual Property, whether for royalties or otherwise.
(iii) Except as set forth on Schedule 4.1(h), no claim by any Person
contesting the validity, enforceability, use or ownership of any of the Company
Intellectual Property has been made, is currently outstanding or is threatened,
against the Company or, to the knowledge of the Company, any other Person,
and there are no facts or circumstances which could reasonably be anticipated to
result in any such claim or which could reasonably lead the Company to conclude
that the continued operation and conduct of any aspect of the Gryphon Business
could result in any such claim. To the knowledge of the Company, there are
no facts or circumstances which would indicate a likelihood of any infringement
or misappropriation upon, or other conflict with, any Company Intellectual
Property or right of any Person. The transactions contemplated by this
Agreement will have no adverse effect on any Company Intellectual Property.
Except as set forth in Schedule 4.1(h), neither the Company nor any of the
Company's officers, employees or consultants have any agreements or arrangements
with former employers of such officers, employees or consultants relating to
confidential information or trade secrets of such employers, the assignment of
inventions of such employers, or such officer's, employee's or consultant's
engagement in activities competitive with such employers. The activities of
such officers, employees and consultants on behalf of the Company do not
violate any agreements or arrangements known to the Company which any such
officers, employees and consultants have with former employers.
(i) Consultants; No Conflicting Agreements. Except and to the extent
set forth in that certain consulting agreement dated May 1, 1994 between Dr.
Civin and Immunicon Corporation and that certain letter agreement dated June 18,
1992 between Dr. Civin and Cellco., Inc., and pursuant to the terms of the
employment of each of the Founding Stockholders with JHU, neither of the Founder
Stockholders is obligated under any contract (including licenses, covenants or
commitments of any nature) or other oral or written
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agreement, or subject to any judgment, decree or order of any court,
administrative or governmental agency, that would conflict with his
obligation to use his best efforts to promote the Company's business as
currently conducted and proposed to be conducted. The carrying on of the
Company's business as consultants by such Persons as such business is
currently conducted and proposed to be conducted, will not conflict with or
result in the breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant, agreement or instrument under which
either Founder Stockholder is now obligated. Each Founder Stockholder has
previously delivered to the Investor copies of each and every written
employment agreement, policy, covenant or commitment of any nature to which
he is a party or by which he is bound or was bound that was required to be
executed by such persons as a condition of employment at any firm, entity,
university, governmental body or other business association. The Company
acknowledges that the Founder Stockholders may continue to receive funding
from Cellco., Inc. pursuant to that certain Research Agreement dated March
23, 1994 provided that research conducted under such Research Agreement shall
not be in violation of any terms and conditions of this agreement
4.2 Representations and Warranties of the Investor. The Investor hereby
represents and warrant to the Company that:
(a) Investment Intent. The preferred Share to be purchase by the
Investor hereunder (and any Common Shares that may be issued upon conversion of
the Preferred Shares) are being purchase for its own account and not with the
view to, or for resale in connection with, any disritbution or public offering
thereof within the meaning of the 1933 Act. It understands that the
Preferred Shares (and any Common Shares that may be issued upon conversion of
the Preferred Shares) have not been registered under the 1933 Act by reason of
their issuance in transactions exempt from the registration and prospectus
delivery requirements of the 1933 Act pursuant to Section 4(2) there of and
agrees to deliver to the Company, if requested by the Company, an investment
letter in customary form. If further understands that the certificates
representing the Preferred Shares (and any Common Shares that may be issued upon
conversion of the Preferred shares) will bear the following legend and agrees
that it will hold such Shares subject thereto:
THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES THAT MAY BE
ISSUED UPON THE CONVERSION OF SUCH SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY
BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE
SAME IS REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
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DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
(b) Capacity of the Inventor; Execution of Agreement. The Investor has all
requisite power, authority, and capacity to enter into this Agreement, and to
perform the transactions and obligations to be performed by it hereunder. This
Agreement has been duly authorized, executed and delivered by it and
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws, both state and
federal, affecting the enforcement of creditors' rights or remedies in general
from time to time in effect and the exercise by courts of equity powers or their
application of principles of public policy.
(c) Accredited Investor. The Investor is an "accredited investor" as
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
(d) Suitability and Sophistication. (i) The Investor has such knowledge
and experience in financial and business matters that it is capable of
independently evaluating the risks and merits of purchasing the Preferred
Shares; (ii) it has independently evaluated the risk and merits of purchasing
the Preferred Shares and has independently determined that the Preferred Shares
are a suitable investment for it; and (iii) it has sufficient financial
resources to bear the loss of its entire investment in the Preferred Shares.
(e) Capacity of the Investor; Consents Execution of Agreements. The
Investor has all requisite power, authority, and capacity to enter into the
Investment Documents to which it is a party and to perform the transactions and
obligations to be performed by it hereunder and thereunder. Except for state
and federal securities law filings, no consent, authorization, approval,
license, permit or order of, or filing with, any Person or Governmental
Authority is required in connection with the Investor's execution and delivery
of the Investment Documents or the performance by the Investor of the
transactions and obligations contemplated hereby and thereby. The execution and
delivery of the Investment Documents by the Investor, and the performance by the
Investor of the transactions and obligations contemplated hereby and thereby,
have been duly authorized by all requisite action of the Investor. The
Investment Documents have been duly executed and delivered by a duly authorized
officer of the Investor and constitute valid and legally binding agreements of
the Investor, enforceable in accordance with their respective
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terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws, both state and federal,
affecting the enforcement of creditors' rights or remedies in general from
time to time in effect and the exercise by courts of equity powers or their
application of principles of public policy.
(f) Compliance with Laws. To the best knowledge of the Investor, the
Investor is not in violation of, nor do any of its operations violate in any
respect, any statute, law, or regulation of any Governmental Authority
applicable to the Investor, any of its assets, or the conduct of its business
("Applicable Laws"), the violation of which could have a material adverse
effect upon the Investor's assets, properties, financial condition, results of
operations orbusiness.
(g) Litigation. There are no actions, suits, claims, investigations, or
proceedings pending at law or in equity or before or by any Governmental
Authority, or, to the best of the Investor's knowledge threatened, against the
Investor or any of its assets or properties or the transactions contemplated by
this Agreement.
SECTION 5. INDEMNIFICATION
5.1 Indemnification by the Company. Notwithstanding anything in this
Agreement to the contrary, but subject to the other provisions of this Section
5, the Company shall indemnify, defend, and hold the Investor, each of the
Investor's respective directors, stockholders, officers and Affiliates, and each
of such Affiliates' officers, directors, partners, employees, representatives
and Affiliates, (collectively, the "Investor Indemnitees") harmless from and
against, and shall reimburse them for, any and all demands, claims, losses,
liabilities, damages, costs, and expenses whatsoever (including, without
limitation, any fines, penalties, reasonable fees and disbursements of counsel
incurred by the Investor Indemnities in investigating or defending any of the
foregoing, and other reasonable expenses incurred investigating or defending any
of the foregoing or enforcing this Agreement) (individually a "Loss" and
collectively "Losses") sustained or incurred by an Investor Indemnitee resulting
from or arising in connection with any breach of the representations or
warranties of the Company set forth in paragraph (g), (h) or (i) of Section
4.1 of this Agreement or the corresponding Schedules or Exhibits hereto or in
the documents relating to such paragraphs delivered to the Investor pursuant to
this Agreement (other than inaccuracies or breaches resulting from actions taken
by or on behalf of the Investor or of which the Investor had actual knowledge
as of the Closing), but only if the Company or the Gryphon Business, with
respect to the subject matter of such representations and warranties, is
materially and adversely different from the Company as represented in such
representations and warranties which have been breached, in each case whether or
not such Loss results from a third party claim.
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5.2 Indemnification by the Investor. Notwithstanding anything in this
Agreement to the contrary, but subject to the other provision of this section
5, the Investor shall indemnify, defend, and hold the Company and its officers,
directors, employees, consultants, representatives and Affiliates, and each of
the Company's Affiliates' officers, directors, employees, consultants, partners,
representatives and Affiliates (collectively, the "Company Indemnitees")
harmless from and against, and shall reimburse them for, any and all Losses
sustained or incurred by a Company Indemnitee resulting or arising from any
material inaccuracy in or breach of any of the Investor's respective
representations or warranties set forth in Section 4.2 of this Agreement, in
each case whether or not such Loss results from a third party claim.
5.3 Indemnification Notice. (a) In the event that (i) an event occurs
which gives a Person a right to indemnification hereunder or (ii) any third
party claim is asserted against a Person with respect to which such Person is
entitled to indemnification hereunder, such Person (the "indemnified party")
shall, within 60 days of the later of the occurrence of the event giving rise to
the claim or the date that the indemnified party learned of such claim
(provided, however, that if a claim arises by virtue of litigation, then in no
event less than 10 days prior to the date in which an appearance or answer is
due, whichever is earlier), notify the Person obligated to indemnify it (the
"indemnifying party") of such claim by delivery of a written notice describing
the claim and indicating the basis for indemnification hereunder. The
indemnifying party shall have the right, upon written notice to the indemnified
party within 10 days after receipt from the indemnified party of notice of such
claim, to conduct at its expense the defense against such claim in its own name,
or if necessary in the name of the indemnified party. In the event that the
indemnifying party fails to give such notice, it shall be deemed to have elected
not to conduct the defense of the subject claim, and in such event the
indemnifying led party shall have the right to conduct such defense and, only
with the prior written consent of the indemnifying party which shall not be
unreasonably withheld, to compromise and settle the claim. In the event that
the indemnifying party does elect to conduct the defense of the subject claim,
the indemnifying party shall cooperate with and make available to the
indemnifying party such assistance and materials as may be reasonably requested
by it, all at the expense of the indemnifying party and the indemnified party
shall have the right at its expense to participate in the defense, provided that
the indemnified party will have the right to compromise and settle the claim
only with the prior written consent of the indemnifying party, which consent
shall not be unreasonably withheld. Any settlement to which the indemnifying
party shall have consented in writing shall conclusively be deemed to be an
obligation with respect to which the indemnified party is entitled to
indemnification hereunder.
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SECTION 6. COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investor as follows:
6.1 Furnishing of Financial Statements and Information. The Company shall
deliver to the Investor:
(a) within five days of their completion, but in any event within 30 days
after the close of each month commencing with December 1994, unaudited
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such month, together with the related unaudited consolidated statements of
income and retained earnings for such month and for the period from the
beginning of the fiscal year to the end of such month (which shall also set
forth any budgeted figures) and cash flows, all in reasonable detail;
(b) within five days of their completion, but in any event within 150 days
after the end of each fiscal year, the audited consolidated balance sheets of
the Company and its Subsidiaries, as of the end of such fiscal year, together
with the related consolidated statements of income and retained earnings and
cash flows for such fiscal year, setting forth in comparative form figures for
the previous fiscal year, all in reasonable detail and duly certified by a firm
of independent public accountants of national or regional standing reasonably
acceptable to the Investor, which accountants shall have given the Company an
opinion, unqualified as to the scope of the audit, regarding such statements;
(c) within five days after the Company learns of the commencement or
threatened commencement of any material claim or suit, legal or equitable, or of
any material administrative, arbitration, or other similar proceeding against
the Company or any of its Subsidiaries, or any of their respective businesses,
assets, or properties, written notice of the nature and extent of such suit or
proceeding;
(d) within five days after the Company learns of any circumstance or event
which reasonably can be expected to have a material adverse effect on the
assets, properties, financial condition, result of operations, business, or
prospects of the Company, written notice of the nature and extent of such
circumstance or event;
(e) not less than 30 days following to the end of each fiscal year,
commencing with the fiscal year beginning January 1 1996, an annual budget for
the Company and each of its Subsidiaries for the next succeeding fiscal year,
prepared in good faith and submitted to the Board of Directors of the Company
(an "Annual Budget"), which Annual Budget shall include monthly capital and
operating expense budgets, cash flow statements,
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capital expenditure budgets, profit and loss projections, and employee hiring
projections;
(f) within five days after transmission thereof, copies of all financial
statements, proxy statements, reports and any other general written
communications which the Company sends to its shareholders and copies of all
registration statements and all regular, special or periodic reports which it
files with the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public
concerning material developments in the Company's businesses; and
(g) within 20 business days after the Investor makes a reasonable request
therefor, such other data relating to the business, affairs and financial
condition of the Company or any of its Subsidiaries.
6.2 Inspection. The Company shall, upon receipt of reasonable notice,
permit the Investor and any of its representatives to visit and inspect any of
the properties of the Company or any Subsidiary during normal business hours,
including, without limitation, their respective books and records (and to
make extracts therefrom and copies thereof; provided, however, that the
Investor or its representative shall advise the Company of any copies made and
shall agree that he or it will not use or disseminate such information except as
reasonably required in connection with the Investor's rights and benefits under
this Agreement and the Stockholders Agreement) and to discuss the Company's
affairs, finances and accounts with its officers, employees and independent
public accountants.
6.3 Dividends on or Redemption of Shares. Except for dividends and
redemptions required under the express terms of the Preferred Shares, the
Company shall not, directly or indirectly, declare or pay any dividend or make
any other distribution with respect to any of its capital shares, or directly or
indirectly purchase, redeem, or otherwise acquire for any consideration any
shares of its capital stock or other equity securities (including without
limitation any warrants or options) without the prior written consent of the
Investor.
6.4 Indebtedness. Except for the R&D Loan, the Company shall not, and
shall not permit any of its Subsidiaries to, without the prior written consent
of the Investor, incur, assume or suffer to exist any Indebtedness except (i)
Indebtedness to banks or other financial institutions of up to $50,000 in the
aggregate, (ii) purchase money Indebtedness representing or evidencing the
principal amount of the deferred purchase price of equipment or other personal
property used in the Company's business and (iii) Indebtedness arising from
capitalized lease obligations of up to $100,000 in the aggregate. This covenant
shall expire upon the consummation of the Second Round Financing.
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6.5 Registration Rights. The Investor shall have the rights to
registration under the 1933 Act with respect to the Common Shares it may hold
upon conversion of the Preferred Shares as set forth in the Registration Rights
Agreement.
6.6 Further Assurances. The Company shall cure promptly any defects in
the creation and issuance of the Preferred Shares, and in the execution and
delivery of any of the Investment Documents. The Company, at its expense,
shall promptly execute and deliver to the Investor upon reasonable request
all such other and further documents, agreements and instruments in compliance
with or pursuant to its covenants and agreements herein, and shall make any
recordings, file any notices, and obtain any consents as may be reasonably
necessary or appropriate in connection therewith.
6.7 Issuance of Securities. Except as otherwise set forth in the
Stockholders Agreement, the Company shall not, without the prior written consent
of the Investor, authorize or issue, or obligate itself to authorize or issue,
any shares of its capital stock which are senior to or on parity with the
Preferred Shares as to liquidation preferences, dividend rights, conversion
rights, redemption rights, preemptive rights or otherwise, or other securities
exchangeable for or convertible into any such shares, or grant any options or
other rights which are exercisable for or convertible into any such shares.
6.8 Conflicting Agreements. The Company shall not, and shall not permit
any of its Subsidiaries to, enter into or become subject to any Contract or
instrument which by its terms would (under any circumstances) restrict the
Company's right to perform any of the provisions of the Investment Documents.
6.9 Failure of Second Round Financing. (a) In the event the Second Round
Financing has not been consummated by October 1 1997, JHU shall have until
March 31, 1998 to assist the Company in consulting the Second Round Financing.
If JHU provides such assistance and the Second Round Financing is consummated by
March 31, 1998, the Investor shall assign all of its right, title and interest
in and to the Stock Purchase Warrant to JHU.
(b) In the event the Second Round Financing has not been consummated by
March 31, 1998, the Investor shall be entitled to purchase all of the assets,
properties and rights then owned or held by the Company (including rights under
any technology license agreements then in effect) for an aggregate
purchase price equal to the fair market value of such assets, properties and
rights (the "Fair Market Value"). The Company agrees that any Contracts it
enters into after the date of this Agreement shall expressly provide the Company
with the right to assign such Contract to the Investor. In the event the
Investor elects to purchase the assets, properties and rights to the Company
pursuant to this Section 6.9, the Investor agrees to notify JHU and each of the
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Founder Stockholders in writing (the "Investor Notice"). Fair Market Value
shall be determined by an appraisal conducted as follows:
(i) Each of JHU and the Founder Stockholders on the one hand, and the
Investor on the other hand, shall select an experienced independent third party
business or technology appraiser and shall notify the other party of the
identity of such appraiser on or before thirty (30) days after receipt of the
Investor Notice (the "Notice Date").
(ii) Each appraiser selected pursuant to clause(i) shall deliver its
report on Fair Market Value to all other parties and to the other appraisers
within 60 days after the Notice Date. If the lesser of the Fair Market Values
determined by the appraisers is not more than 10% less than the greater of the
Fair Market Values, then the final Fair Market Value shall be equal to the sum
of the Fair Market Values determined by the appraisers divided by two. If the
lesser of the Fair Market Values is more than 10% less than the greater of the
two Fair Market Share Values then the appraisers shall agree on an independent
appraiser within 75 days after the Notice Date.
(iii) The independent appraiser selected pursuant to clause (b)
shall determine the Fair Market Value within 100 days after the Notice Date,
provided, however, that the independent appraiser shall not designate any Fair
Market Value other than one which is not less than the lower of, or greater than
the higher of, those determined by the other appraisers, and the Fair Market
Value so designated shall be final and binding upon the Investor and JHU.
(iv) The costs of each appraisal performed pursuant to clause (ii)
shall be borne by the party who obtained such appraisal, and the cost of the
appraisal performed pursuant to clause (iii) shall be borne equally by the
Investor and JMU. The Company shall cooperate fully with each appraiser and
shall fully disclose any and all information (including, without limitation, any
business plans or forecasts) which is reasonably requested by any appraiser. In
the event the Investor, or the Founder Stockholders and JHU fails to select an
appraiser pursuant to clause (i) or otherwise prevents the procedure described
in clauses (i) through (iii) from being carried out, the Fair Market Value shall
be the amount determined by the appraisers selected by the other party pursuant
to clause (i) through (iii) and such determination shall be final and binding
on the holders.
(c) In the event the Second Round Financing has not been consummated by
March 31, 1998, and the Investor chooses to purchase The assets held by the
Company pursuant to Section 6.9(b) above, the Investor shall receive a credit
against the purchase price determined above for any unpaid principal and
accrued interest remaining on the R&D Loan.
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6.10 Other business. The Company shall not, and shall not permit any of
its Subsidiaries to, enter into the ownership, management or operation of any
business other than the Gryphon Business without the prior written consent of
the Investor.
6.11 Expiration of Covenants. Upon the date on which the Investor ceases
to own Preferred Shares, the covenants of the Company contained in this Section
6 shall expire.
SECTION 7. DEFAULT
7.1 Events of Default. The following events shall be Events of Default
for purposes of this Agreement and the Amended Certificate:
(a) any representation or warranty made by the Company in paragraph (g),
(h) or (i) of Section 4.1 of this Agreement or any of the Schedules related
thereto shall prove to have been untrue or incorrect in any material respect as
of the closing Date and the Investor shall have not had actual knowledge of same
as of the Closing (other than an untrue or incorrect representation or warranty
resulting from actions taken by or on behalf of the Investor) but only if the
Company or the Gryphon Business, with respect to the subject matter of such
representations and warranties which have been breached, is materially and
adversely different from the Company as represented in such representations and
warranties;
(b) the Company or any of its Subsidiaries shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Company or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief or debts, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or other similar official for it or for any substantial part of its
property (and, in the case of any such proceeding instituted against the Company
or any of its Subsidiaries (but not instituted by it), either such proceeding
shall remain undismissed or unstayed for a period of 30 days, or any of the
actions sought in such proceeding (including, without limitation, the entry of
an order for relief against, or the appointment of a receiver, trustee,
custodian or similar official for, it or for any substantial part of its
property shall occur), or the Company or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection; or
(c) any of the Founder Stockholders or JHU shall fail in any material
respect to perform or observe any of their respective agreement or covenants in
the Stockholders Agreement
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and such failure has a material adverse effect on the Company or the Gryphon
Business or the Company's prospects and such failure has not been cured
within 30 days after such failure first occurs.
7.2 Remedies Upon An Event of Default. Upon the occurrence of an Event of
Default then, unless such Event of Default shall have been waived in the manner
provided in Section 8.1 of this Agreement, the inventor, in addition to all
other remedies that may be available to them at law or in equity in accordance
with Section 7.4 hereof, shall be entitled to designate a majority of the Board
of Directors of the Company and/or exercise its redemption rights as provided
for in the Amended Certificate (as the same may be amended from time to time)
and the Stockholders Agreement.
7.3 Notice of Default. When any Event of Default has occurred or exists,
the Company shall give written notice to the Investor within five business days
after which the Company becomes aware of an event of Default has occurred or
begun to exist. When in the judgment of the Investor an Event of Default has
occurred, the Investor shall so notify the Company with reasonable promptness
provided, however, that any failure to give such notice shall not be a waiver by
the Investor of any or its rights hereunder.
7.4 Suits for Enforcement. The parties hereto agree that upon an event of
Default a remedy at law may not be adequate. In case any one or more Events of
Default shall have occurred and be continuing, unless such events of Default
shall have been waived in the manner provided in Section 8.1 hereof , the
Investor may proceed to protect and enforce their rights under this Section 7 by
suit in equity or action at law, including, without limitation, by suit for
specific performance or injunctive relief. It is agreed that if the Investor
prevails in any such action, the Investor shall be entitled to receive from the
Company all reasonable fees, costs, and expenses incurred by it, including,
without limitation, such reasonable fees and expenses of attorneys (whether or
not litigation is commenced) and reasonable fees, costs, and expenses of
appeals.
7.5 Remedies Cumulative. No specific right, power, or remedy conferred by
this Agreement shall be exclusive, and each such right, power, or remedy shall
be cumulative and in addition to every other right, power, or remedy, whether
conferred hereby or by any security of the Company or flow or hereafter
available, at law or in equity, by statute or otherwise.
7.6 Remedies Not Waived. No course of dealing between the Company and the
Inventor and no delay in exercising any right, power, or remedy conferred hereby
or by any security issued the Company, or now or hereafter available at law or
in equity, by statute or otherwise, shall operate as a waiver of or otherwise
prejudice any such right, power, or remedy.
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SECTION 8. MISCELLANEOUS
8.1 Waivers and Amendments. This Agreement may be amended or modified in
whole or in part only by a writing which makes reference to this Agreement
executed by the Company and the Investor. The obligations of any party
hereunder may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the party or
parties to whom the obligation is owed; provided, however, that any waiver by
any party of any violation of, breach of, or default under any provision of this
Agreement or any other agreement provided for herein shall not be construed as,
or constitute, a continuing waiver of such provision, or waiver of any other
violation of, breach of or default under any other provision of this Agreement
or any other agreement provided for herein.
8.2 Entire Agreement. The Investment Documents and the other agreements
and instruments expressly provided for herein arid therein, together set forth
the entire understanding of the parties hereto and supersede in their entirety
all prior contracts, agreements, arrangements, communications, discussions,
representations, and warranties, whether oral or written, among the parties.
8.3 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal substantive laws of the State of
Delaware without giving effect to the principles of conflicts of law thereof.
8.4 Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and be deemed to have been duly given
(a) when personally delivered or sent by facsimile transmission (the receipt of
which is confirmed in writing), (b) one business day after being sent by a
nationally recognized overnight courier service or (c) three business days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, to the parties at their respective addresses set forth below.
If to the Company: Gryphon Pharmaceuticals, Inc.
1629 Thames Street,
Suite 400
Baltimore, Maryland 21231
Attn: President
With a copy to; The Johns Hopkins University
School of Medicine
Office of Technology Licensing
2024 E. Monument Street, Suite 2-100
Baltimore, Maryland 21205
Attention: Howard W. Califano, Esq.
If to Osiris: Osiris Therapeutics, Inc.
The Wearn Building - 4th Floor
11100 Euclid Avenue
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Cleveland, Ohio 44106
Attn: James S. Burns
With a copy to: Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attn: John C. McIlwraith, Esq.
Any party by written notice to the others may change the address of the persons
to whom notices or copies thereof shall be directed.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts,each of which shall be deemed to be an original, and all of which
together will constitute one and the same instrument.
8.6 Successors and Assignees. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns except that the Company may not assign or transfer its rights
hereunder without the prior written consent of the Investor. Subject to the
provisions of the Stockholders Agreement, the Investor shall be entitled to
assign all of its rights, benefits and obligations hereunder to any Person that
acquires Preferred Shares from the Investor without the prior consent of any
party and such Person shall become an Investor and be entitled to all right and
benefits of an Investor hereunder; provided, however, the Investor shall not
assign the obligation to provide the Research Funding or the In-Kind Services to
a third party or parties without the prior written consent of JHU, which consent
shall not be unreasonably withheld or delayed. Promptly following any
assignment, the Investor shall provide the Company with written notice of such
assignment
8.7 Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person or entity
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
8.8 Schedules and Exhibits. The schedules and exhibits attached to this
Agreement are incorporated herein and shall be part of this Agreement for all
purposes.
8.9 Headings. The headings in this Agreement are solely for convenience
of reference and shall not be given any effect in the construction or
interpretation of this Agreement.
8.l0 Independent Counsel. Each of the parties hereto acknowledges and
agrees that the law firm of Jones, Day, Reavis & Pogue has acted solely as the
special counsel for the Investor in reparation of this Share Purchase Agreement
and related agreements, notwithstanding the fact that Jones, Day, Reavis &
Pogue has prepared certain corporate documentation for the benefit
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of the Company. By executing this Agreement, the Company acknowledges that
it has been advised by Jones, Day, Reavis & Pouge to engage independent
counsel to review this Agreement and related agreements, and has had the
opportunity to present this Agreement and the related agreements to
independent counsel for review and comment and hereby consents to the
representation of the Company by Jones, Day, Reavis & Pogue on specified
corporate matters concurrent with its representation of the Investor
hereunder, notwithstanding any potential conflict of interest.
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IN WITNESS WHEREOF, the parties have duly executed, or have caused their
duly authorized officer or representative to execute, this Share Purchase
Agreement as of the date first above written.
GRYPHON PHARMACEUTICALS, INC.
By: /s/ James S. Burns
--------------------------------
Title: President & CEO
----------------
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
--------------------------------
James S. Burns, President and CEO
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Exhibit 10.2
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT ("this Agreement"), dated as of December
23, 1994, is made by and among Gryphon Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), Osiris Therapeutics, Inc., a Delaware corporation
("Osiris" or the "Investor"), The Johns Hopkins University ("JHU"), Curt I.
Civin, M.D., ("Dr. Civin"), and Donald Small, M.D., Ph.D., ("Dr. Small"), and
collectively with JHU and Dr. Civin, the Common Stockholders.
RECITALS
A. The Common Stockholders are the holders of all of the issued and
outstanding shares of common stock of the Company.
B. The Company and the Investor are parties to that certain Share and
Warrant Purchase Agreement dated as of the date hereof (the "Share purchase
Agreement") , pursuant to which the Investor acquired 3,000,000 shares of
Series A Convertible preferred Stock, constituting all of the issued and
outstanding shares of Series A Convertible Preferred Stock of the Company.
C. The Company, the current Common Stockholders and the Investor desire
to provide for stability of the ownership and operation of the Company and to
promote continuity in the Company's management and policies.
D. The Company, the current Common Stockholders and the Investor have
made the execution and delivery of this Agreement a condition to the
consummation of the transactions contemplated by the Share Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter set forth, and other good and valuable
consideration had and received, the parties hereto, upon the terms and
subject to the conditions contained herein hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Definitions The following capitalized terms when used in this
Agreement shall have the following respective meanings;
"Affiliate" shall mean with respect to any Person, any (i) officer,
director, partner or holder of more than 10% of the outstanding equity
interests of such Person, (ii) any Relation of such Person or an Affiliate of
such Person, or (iii) any other Person which directly or indirectly controls,
is controlled by,
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or is under common control with such Person. A Person shall be deemed to
control another Person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
"controlled" Person, whether through ownership of voting securities, by
contract, or otherwise
"Bankruptcy" means, with respect to any Person, such Person's filing a
petition or otherwise voluntarily commencing a case or proceeding seeking
relief under any reorganization law being the voluntary or involuntary
subject of an order for relief by any court under any such law, or being
adjudicated a "bankrupt," "debtor" or "insolvent" under any such law, or
there being appointed under any such law a "trustee," "receiver" or
"custodian" to manage his business or properties.
"Bona Fide Offer" shall mean an offer to a Common Stockholder from a
financially responsible Person who is not an Affiliate of such Common
Stockholder to purchase all or any portion of the Shares owned by such Common
Stockholder for a purchase price payable in cash at closing.
"Common Shares" means shares of the Common Stock, par value $.001 of the
Company.
"Common Stockholder" shall include each of JHU, Dr. Civin and Dr. Small,
and any Person (other than the Company) who acquires Shares from any of such
Persons pursuant to a Transfer contemplated by Section 3.2 and 3.3(a)(iv).
"Fair Value" means the most recent per share purchase price paid to the
Company for its Common Shares. For purposes of this definition (a) a sale of
convertible preferred stock or other equity or debt securities which are
convertible into or exercisable for Common Shares shall be deemed to be a
sale of Common Shares and the purchase price per Common Share shall be equal
to the price paid for such equity or debt securities divided by the number of
Common Shares into which such securities are convertible an the date of
issuance; and (b) sales of Common Shares issued in connection with the
exercise of stock options held by, or restricted share awards made to,
employees of or consultants to the Company shall be disregarded.
"Person" means an individual, corporation, partnership, joint venture
trust, or unincorporated organization.
"Permitted Transferee" means, (i) with respect to a Common Stockholder
which is an entity, an Affiliate of such Common Stockholder and (ii) with
respect to a Common Stockholder who is an individual, a Relation of such
Common Stockholder, and/or a trust established for the sole benefit of such
Common stockholder or one or more Relations of such Common Stockholder, but
only if such Affiliate, Relation or trust, as the case may be has agreed to
become a Common Stockholder for purpose of
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this Agreement and shall have executed and delivered to the Company and the
Investor (a) a counterpart of this Agreement agreeing to be subject to the
restrictions and obligations of a Common Stockholder hereunder and to hold
such Share in accordance herewith and (b) a counterpart of an irrevocable
proxy and power of attorney pursuant to which the Permitted Transferee grants
to the Common Stockholder from which it received the Shares the right to vote
such Shares for all purposes.
"Preferred Shares" means shares of the Series A Convertible Preferred
Stock, par value $.00l per share, of the Company.
"Proportionate Share" shall mean, as used herein to determine the number
of Offered Shares (as defined in Section 3.2(a) hereof) which a Stockholder
is entitled to purchase, a quotient, the numerator of which is equal to the
number of shares (assuming full conversion of the Preferred Shares) then held
by such Stockholder and the denominator of which is equal to the total number
of shares (assuming full conversion of the Preferred Shares) of Common Shares
then held by all Stockholders who have elected to purchase Offered Shares or
Preferred Shares, as the case may be.
"Purchase Price" shall mean the purchase price per Stock set forth in
the applicable Bona Fide Offer.
"Relation" shall mean with respect to any Person, such Person's spouse
and the parents, grandparents, brothers and sisters, children, and
grandchildren of such Person or of such Person's spouse.
"Second Round Financing" means the receipt by the company of the proceeds
from the sales of its equity securities, whether pursuant to a venture
capital investment or a corporate collaboration or other similar transaction,
after the date of this Agreement (but not to include the amounts payable
after the date hereof pursuant to the Share Purchase Agreement) in a gross
aggregate amount equal to or greater than $5,000,000.
"Shares" means the Preferred Shares and Common Shares, collectively.
"Stock Purchase Warrant" means the Stock Purchase Warrant issued by the
Company to the Investor of even date herewith exercisable for 1,000,000
Common Shares.
"Stockholder" means the Investor, each of the Common Stockholders, and
any Person who becomes a party to this Agreement as the result of a Transfer
of Shares to such Person.
"Stockholder's Offer" shall mean an irrevocable offer to sell Shares to
the Company and the Stockholders on the terms and conditions set forth in
Section 3.2, which shall include a
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copy of the applicable Bona Fide Offer and shall set forth the terms of the
proposed sale in reasonable detail, including, without limitation, the name
and address of the prospective buyer the purchase price and other terms and
conditions of payment (or the basis for determining the purchase price and
other terms and conditions), the date on or about which such sale is to be
consummated, and the number of Shares to be sold.
"Subsidiary" means, with respect to any Person, any Person of which at
least a majority of the voting stock or voting interests of such Person are
owned, directly or indirectly, by such Person.
"Transfer" means any sale, assignment, pledge, hypothecation,
encumbrance, disposition, transfer (including, without limitation, a transfer
by will or intestate distribution) gift or attempt to create or grant a
security interest in Shares, whether voluntary, involuntary by operation of
law or otherwise.
SECTION 2 GOVERNANCE
2.1 Composition of Board The Stockholders each hereby agree to take any
and all action necessary (including, without limitation, voting their Common
Shares and Preferred Shares, executing and delivering written actions of
stockholders in lieu of a meeting, and calling special stockholders'
meetings) to cause the Board of Directors of the Company (the "Board") to be
comprised as follows:
(a) The number of Directors on the Board shall not exceed eight.
Subject to paragraph (b) of this Section 2.1, the Board shall include:
(i) so long as Osiris or an Affiliate of Osiris is a holder of
Preferred Shares, two individuals designated in writing by Osiris (one of
whom shall be James S. Burns so long as he is an officer or Director of
Osiris);
(ii) Dr. Civin, for a period of three years commencing on the date
of this Agreement, and thereafter so long as no Event of Default (as
defined in the Share Purchase Agreement) has occurred and Dr. Civin is
serving as a consultant of the Company pursuant to that certain
Consulting Agreement between the Company and Dr. Civin dated as of the
date hereof Civin (the "Civin Consulting Agreement"); provided. however,
that this clause (ii) shall no longer be applicable from and after the
date on which the Civin Consulting Agreement has been terminated by the
Company for cause (as defined in the Civin Consulting Agreement);
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(iii) Dr. Small for a period of three years commencing on the date
of this Agreement, and thereafter so long as no Event of Default has
occurred, and Dr. Small is serving as a consultant to the Company
pursuant to that certain consulting Agreement between the Company and
Dr. Small dated as of the date hereof (the "Small Consulting
Agreement"); provided however, that this clause (iii) shall no longer be
applicable from and after the date on which the Small Consulting
Agreement has been terminated by the Company for cause (as defined in
the Small Consulting Agreement);
(iv) the individual, if any, serving as the Chief Executive Officer
of the Company from time to time; and
(v) up to three individuals with experience in business, finance,
science or academic management who shall not (without the written
consent of JHU, which shall not be unreasonably withheld) be Affiliates
of Osiris and who are designated in writing from time to time by each of
the other Directors then in office. The Company shall provide JHU with
the names of any such individuals in advance of the election or
appointment of such individuals to the Board and JHU shall have the
opportunity to provide the Board with comments prior to their election
or appointment. The Investor shall notify JHU of such nomination, and
JHU shall have ten days to object in writing to such nomination. If JHU
does not object, it shall be deemed to have consented to the nomination.
(b) Any Director who is elected to the Board pursuant to a designation
under clause (i) or (v) of Section 2.1(a) may be removed from the Board only
upon the request of the Person(s) who originally designated such Director.
In the event that a Director elected pursuant to Section 2.1(a) resigns, is
removed from, or otherwise ceases to serve on, the Board1 for any reason, the
vacancy shall be filled with an individual designated in accordance with
paragraph (a) by the Person(s) who originally designated such Director in the
case of clause (i) and (v), and by a majority vote of the holders of Common
Shares and Preferred shares, voting as a single class, in the case of any
Director elected pursuant to clause (ii) or (iii) of Section 2.1 (a). The
Stockholders hereby agree to call a special stockholders' meeting and to vote
all of their Common Shares and Preferred Shares at such meeting, or to
execute a written action of stockholders in lieu of a meeting, upon the
request of such Person(s), in order to effect such removal.
2.2 Right of Investor to Designate Majority of the Board. Notwithstanding
the provisions of Section 2.l of this Agreement, from and after the
occurrence of an Event of Default (as defined in the Share Purchase
Agreement), and for so long as such Event of Default continues, if such Event
of Default is capable of being cured, the Investor shall be entitled to
5
<PAGE>
designate that number of Directors as is necessary to cause individuals
designated solely by the Investor to constitute a majority of the Directors
serving on the Board. In the event that the Investor is entitled to
designate a majority of the Board pursuant to this Section 2.2, the Investor
may, and at the request of the Investor the Stockholders shall immediately
cause the Company to call a special stockholders' meeting to be held as soon
as possible, but in any event not later than ten days after the date of the
Investor's request. At such special stockholders' meeting, the Investors
shall be entitled to remove such number of Directors elected pursuant to
Section 2.1(a) (iv) or (v) and to designate an individual or individuals to
fill the vacancy(s) created by such removal to the extent necessary to allow
the Investor to designate a majority of the Directors then serving on the
Board. Each Stockholder hereby agrees that in such event it will vote any
and all Shares or other voting securities it then holds, and take any other
actions (including, without limitation1 appointing proxies or executing
written actions), as may be necessary to effect the removal of the
individual(s) designated for removal from The Board of Directors pursuant to
this Section 2.2, and to elect as Directors the individuals designated by
Investor, and to ensure that the majority of the Directors serving on the
Board of Directors of the Company thereafter is comprised of individual(s)
designated by Investor.
2.3 Right of JHU to Designate Majority of the Board. Notwithstanding the
provisions of Section 2.1 of this Agreement, in the event the Investor fails
to provide Research Funding beyond any applicable notice and cure periods as
provided in Section 2.3 of the Share Purchase Agreement, JHU (with the
consent of Drs. Civin and Small) shall be entitled to designate that number
of Directors as is necessary to cause individuals designated solely by the
JHU to constitute a majority of the Directors serving on the Board. In the
event that JHU is entitled to designate a majority of the Board pursuant to
this Section 2.3, the Investor shall immediately cause the Company to call a
special stockholders' meeting to be held as soon as possible. At such
special stockholders' meeting, JHU shall be entitled to remove such number of
Directors elected pursuant to Section 2.1(a) (i) or (v) and to designate an
individual or individuals to fill the vacancy(s) created by such removal to
the extent necessary to allow JHU to designate a majority of the Directors
then serving an the Board. The Investor hereby agrees that in such event it
will vote any and all Shares or other voting securities it then holds, and
take any other actions (including, without limitation, appointing proxies or
executing written actions), as may be necessary to effect the removal of the
individual(s) designated for removal from the Board of Directors pursuant to
this Section 2.3, and to elect as Directors the individuals designated by
Jim, and to ensure that the majority of the Directors serving on the Board of
Directors of the company thereafter is comprised of individual(s) designated
by JHU. Notwithstanding anything in this Section 2.3 to the
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<PAGE>
contrary, the Investor shall be entitled to appoint one Director to the Board
at all times.
2.4 Board Expenses. The Company will reimburse Directors for
out-of-pocket expenses incurred in attending any meetings of the Board of
Directors or any committee thereof.
SECTION 3. RESTRICTIONS ON TRANSFERS OF SHARES
3.1 Restriction on Transfers. No Common Stockholder shall make any
Transfer of Shares except for Transfers of Shares made pursuant to a Bona
Fide Offer and in accordance with the provisions of this Section 3 and
Transfers of shares which are excepted from the restrictions on Transfer
contained in this Section 3 by operation of Section 3.5. Any Transfer of
Shares by a Common Stockholder which is not made in accordance with, or which
violates any of the provisions of this Section 3, shall be null and void and
have no effect, and the Company shall not recognize any such Transfer or
recognize the transferee as the holder of such Shares for any purpose.
3.2 Rights of First Refusal.
(a) Any Common Stockholder desiring to make a Transfer of all or
any portion of his or its Shares (including any Shares acquired after
the date hereof) pursuant to a Bona Fide Offer shall first deliver to
the Company and the other Stockholders a Stockholder's Offer in respect
of such Shares (the "Offered Shares").
(b) The Company may, within 15 days after receipt of any
Stockholder's Offer, elect, in accordance with Section 3.2(d), to
purchase any or all of the Offered Shares (i) for a purchase price equal
to the product of the per share Purchase Price for all of the Offered
Shares multiplied by the number of Offered Shares to be purchased by the
Company and (ii) on the payment terms set forth in the Bona Fide Offer.
In the event the Company elects to purchase any or all of the Offered
Shares, it shall be entitled to purchase the number of the Offered
Shares that it has elected to purchase.
(c) In the event that the Company does not elect to purchase all
of the Offered Shares within the 15-day period specified above, the
Company shall give written notice to the other Stockholders (the
"Reoffer Notice") of the number of Offered Shares available for purchase
(the "Reoffered Shares") on or before the final day of such 15-day
period. Each of the other Stockholders may, within 10 days after
receipt of the Reoffer Notice, elect to purchase all or any of the
Reoffered Shares (i) for a purchase price equal to the product of the
per share Purchase Price multiplied by the number of Reoffered Shares to
be purchased by such Stockholder and (ii) on the payment terms set forth
in the Bona Fide Offer. In the event the other
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<PAGE>
Stockholders elect to purchase Reoffered Shares, the number of Reoffered
Shares purchasable by the other Stockholders shall be determined in
accordance with the following procedures:
(i) if the Stockholder has elected to purchase a number of Reoffered
Shares equal to or less than its Proportionate Share of the Reoffered Shares,
it shall be entitled to purchase the number of the Reoffered Shares that it
has elected to purchase;
(ii) if Reoffered Shares remain to be purchased after the allocation
provided in clause (1) above, each Stockholder who has elected to purchase a
number of Reoffered Shares in excess of its Proportionate Stock shall be
entitled to purchase a number of such remaining Reoffered Shares equal to the
lesser of:
(A) the number of Reoffered Shares which such
Stockholder has elected to purchase in excess of its
Proportionate Stock, or
(B) the same proportion of the total number of such
remaining Reoffered Shares as the number of Common Shares
(assuming the full conversion of any Preferred Shares) owned
by such Stockholder bears to the total number of Common Shares
(assuming the full conversion of any Preferred Shares) owned
by the Stockholders who have elected to purchase a number of
Reoffered Shares in excess of the number of Reoffered Shares
allocated to them under clause (i) of this paragraph (c); and
(iii) any Reoffered Shares which remain to be purchased shall be
allocated in accordance with clause (ii) above until either all of the
Reoffered Shares which the Stockholders have elected to purchase have been
allocated or one Stockholder remains who has elected to purchase additional
Reoffered Shares, in which event all of the remaining Reoffered Shares which
such Stockholder had elected to purchase shall be allocated to it.
(d) Acceptance of any Stockholder's Offer or any offer of Reoffered Shares
shall be evidenced by a writing or writings signed by the company and the
Stockholder(s), as the case may be, and delivered or mailed by first-class
mail, postage prepaid, to the Stockholder within the applicable time period.
Each such acceptance shall specify the number of Shares which such Person
desires to purchase. A closing of the purchase of the Offered Shares or
Reoffered Shares, as the case may be, covered by such acceptance shall take
place at the principal office of the Company at 10:00 A.M. on the 30th
business day after the date on which the Company received the Stockholder's
Offer, unless the parties agree on a different place or time.
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The Purchase Price shall be payable by bank cashiers check (or any other
means acceptable to the selling Stockholder) at the closing, unless it is
being paid in accordance with the payment terms of the Bona Fide Offer.
(e) In the event that the Company and the other Stockholders do not
together elect to purchase all of the Offered Shares within 25 days after the
Company's receipt of such Stockholder's Offer, all of the Offered Shares may
be Transferred. by the Transferring Stockholder to the Person(s) named in the
Stockholder's Offer free of the rights of first refusal set forth in this
Section 3.2 within 15 days after the expiration of such 25 day period, on
terms no more favorable to the transferee than those described in the
Stockholder's Offer and applicable Bona Fide Offer. In the event that the
Transfer pursuant to the Bona Fide Offer is not consummated1 within such 15
day period, the Company and the other Stockholders shall have no right to
purchase the Offered Shares; provided, however, that any subsequent attempt
to Transfer such Offered Shares shall be subject to this Section 3.2.
3.3 Certain Involuntary Transfers.
(a) A Transfer of Common Shares by a Common Stockholder, even though not
permitted by Section 3.5, shall be permitted subject to the application of
Section 3.3(b), if such Transfer is by bequest, operation of law or judicial
decree upon (i) the death of a Common Stockholder (or the spouse of any such
Stockholder if such Common Shares constitute "community property" under
applicable law which grants the deceased spouse (or her legal
representatives) an interest in or power to dispose of an interest in such
Common Shares), (ii) the Bankruptcy of a Founding Stockholder (or the spouse
of a Stockholder if such Stockholder's Common Shares constitute "community
property" under applicable law), or (iii) the divorce of a Founding
Stockholder or the annulment or dissolution of a Common Stockholder's
marriage solely and to extent necessary to reflect the community interest of
such Stockholder's divorced spouse in such Common Shares to the extent such
Common Shares constitute "community property" of the Founding Stockholder and
his spouse under applicable law.
(b) Subject to paragraph (c) of this Section 3.3, any transferee who
receives Common Shares as a result of a Transfer described in Section 3.3(a)
shall have a period of 90 days after the Transfer to seek a purchaser for the
Common Shares so Transferred to such transferee and to deliver to the Company
a Stockholder's Offer as if (i) Section 3.2 were applicable to such
transferee and (ii) such transferee proposed to make a voluntary Transfer of
the Common Shares to such purchaser at the end of such 90-day period, and
Section 3.2 shall apply in all respects thereto. If any such transferee
fails to deliver a Stockholder's Offer as herein provided, then the Company
shall have an option, for a 20-day period commencing on the earlier of the
date on
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<PAGE>
which the Company received notice from such transferee of its refusal or
failure to submit a Stockholder's Offer as herein provided and the date on
which the Company first has actual knowledge that there has been such a
failure, to purchase all or any portion of such Common Shares from such
transferee for a cash. price equal to the Fair Value of such Common Shares on
the earlier of the expiration of such 90-day period or the commencement of
such 20-day period. In the event the company elects not to purchase all of
the Common Shares held by such transferee within the applicable time period,
the other Stockholders shall have the option, for a period of 15 days after
such 20-day period, to purchase such remaining Common Shares as if Section
3.2(c) were applicable. Such purchase option all be exercised by delivery of
written notice to such transferee prior to the expiration of the applicable
option period specifying the portion of the Common Shares to be acquired. The
closing of the purchase of Common Shares pursuant to an option exercised
under this paragraph (b) shall take place at the principal office of the
Company at 10:00 A.M. on the tenth business day after the expiration of the
applicable option period, unless the parties agree on a different place or
time. The payment of the purchase price for the Common Shares shall be as
provided in Section 3.2 (d) as if such option exercise were an acceptance of
a Stockholder's Offer.
(c) Any transferee who receives Shares as a result of a Transfer
described in Section 3.3(a) shall not be subject to the provisions of
Section 3.3(b) if, within 10 days transferee agrees to become a
Stockholder for purposes of this Agreement and executes and delivers to
the Company counterpart of this Agreement agreeing to be subject to the
restrictions and obligations of a Stockholder hereunder and to hold such
Shares in accordance herewith as though such transferee were the Person
from whom the Shares were transferred.
3.4 Terms of Purchase and Sale Transactions. At the consummation
of each purchase and sale made pursuant to options granted under this
Section 3, the seller shall deliver to the purchaser (a) certificates
representing the Common Shares which are being sold, duly endorsed in
blank or with stock powers duly executed in blank attached and with
signatures guaranteed and otherwise in proper form for transfer to the
purchaser and (b) written representations and warranties of the seller
to the effect that: (i) the seller is the record owner of the Common
Shares being sold, has good and marketable title thereto and the
absolute right to transfer the same to the purchaser, and the same, upon
transfer to the purchaser, will be free and clear of all claims, liens,
pledges, restrictions (other than restrictions imposed by this Agreement
and restrictions relative to transfer under federal and state securities
laws), or encumbrances of any nature whatsoever; (ii) the seller has
full power and capacity to sell such Common Shares to the purchaser; and
(iii) the sale of such Shares by the seller is not subject to the
consent or approval of any governmental authority, court or other Person
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applicable to the seller other than those which have already been obtained.
3.5 Unrestricted Transfers.
(a) Notwithstanding any other provision of this Section 3 of this
Agreement, the following Transfers of Shares shall not be subject to the
rights of first refusal contained in Section 3.2:
(i) any Transfer of Shares made in connection with an underwritten
initial public offering of Common Shares pursuant to a registration
statement which has become effective under the Securities Act of 1933,
as amended (the "Securities Act");
(ii) any Transfer of Shares to the Company;
(iii) any Transfer of Shares to or among the Stockholders; or
(iv) any Transfer of Shares by a common stockholder to a Permitted
Transferee.
3.6 Rights of First Offer.
(a) All Preferred Shares or Common Shares now or hereafter owned by the
Investor shall be subject to the terms and conditions of this Section 3.6
(the "Rights of First Offer").
(b) Mechanics. Notwithstanding any provision to the contrary herein, if
at any tine the Investor intends to sell any of its Preferred Shares (the
"First Offer Securities") to a buyer or affiliated group of buyers Who are
not Affiliates of the Investor, it shall first notify the Common
Stockholders(the "First Offer Holders") of such intent (the "First Offer
Notice") and shall allow the First Offer Holders to make an offer to purchase
any of the First Offer Securities for a purchase price payable in cash. In
the event the Investor intends to sell all or substantially all of its
Preferred Shares, the First Offer Notice shall contain all material terms,
including, without limitation, the purchase price and terms and conditions of
payment, pursuant to which the Investor would be willing to sell such
Preferred Shares. If a First Offer Holder elects to exercise its Right of
First Offer under this Section 3.6, such First Offer Holder shall deliver to
the Investor within thirty (30) days of their receipt of the First Offer
Notice1 a written irrevocable offer to purchase the First Offer Securities (a
"First Offer"), which First Offer shall (i) include the maximum purchase
price, payable in cash1 which the First Offer Holders are willing to pay for
the First Offer Securities, (ii) not be subject to any condition (including,
without limitation, any financing condition) other than
standard-representations and warranties and condition to closing, (iii) be
accompanied by
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evidence reasonably satisfactory to the Investor that the First Offer Holders
have the financial resources necessary to pay the purchase price for the
First Offer Securities in full at closing, and (iv) provide for a closing
date not later than forty-five (45) days from the date of the First Offer;
provided, however, that if more than one First Offer Holder elects to
exercise its Right of First Offer, all of the First Offer Holders desiring to
exercise such right must collectively present the Investor with a single
offer at a single price to purchase the First Offer Securities. Upon receipt
of a First Offer, the Investor will have the option of either (A) accepting
the First Offer or (B) exercising its right to sell the First Offer
Securities for a cash purchase price consisting of consideration that is
greater, on a per share basis, than the purchase price contained in the First
Offer or in the First Offer Notice, as the case may be. If the Investor
elects not to sell the First Offer securities to the First Offer Holders and
does not sell the First Offer Securities to a buyer who is not an Affiliate
of the Investor within 180 days after its receipt of the First Offer Notice,
the Investor shall be required to again comply with the provisions of this
Section 3.6 before selling its First Offer Securities to a buyer who is not
an Affiliate of the Investor.
(c) Release from Restriction. In the event that the Investor does
not receive a First Offer from the First Offer Holders complying with the
requirements of this Section 3.6 within thirty (30) days after such holders
received the First Offer Notice, subject to the rights of co-sale under
Section 4 of this Agreement, the Investor shall be free to sell the First
Offer Securities on such terms and at such time as the Investor shall, in its
sole discretion, determine, but in no event for a price or on terms more
favorable to a third party purchaser than those contained in the First Offer
Notice, if any.
3.7 Securities Law Restrictions. Notwithstanding any other provision in
this Agreement, but subject to e)express written waiver by the Company in the
exercise of its good faith and reasonable judgment, no Stockholder shall
Transfer any Shares without the registration of the Transfer of such Shares
under the Securities Act or until the Company shall have received such legal
opinions or other assurances that such Transfer is exempt from the
registration requirements under the Securities Act and applicable state
securities laws as the Company in its good faith and reasonable discretion
deems appropriate in light of the facts and circumstances relating to such
proposed Transfer, together with such representations, warranties and
indemnification's from the transferor and the transferee as the Company in
its good faith and reasonable discretion deems appropriate to confirm the
accuracy of the facts and circumstances that are the basis for any such
opinion or other assurances and to protect the Company and the other
Stockholders from any liability resulting from any such Transfer.
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3.8 Legends. All certificates representing Shares now or hereafter owned
by the Stockholders shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMMENDED, OR UNDER ANY STATE
SECURITIES LAWS. NEITHERTHE SHARES NOR ANY PORTION THEREOF OR
INTEREST THEREIN MAY BE SOLD, ASSIGNED, TRANSFERRED,PLEDGED OR
OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTEREDUNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLES AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED AT
THE EXPENSE OFTHE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION
REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG
OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
In addition, all certificates represent Shares now or hereafter owned by the
Common Stockholders shall bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER CONTAINED IN THAT CERTAIN STOCKHOLDERS AGREEMENT DATED
AS OF DECEMBER __, 1994 AS MAY BE AMENDED FROM( TIME TO TIME, TO
WHICH THE COMPANT IS A PARTY. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST
DELIVERED TO THE COMPANY.
All certificates evidencing Shares hereafter issued to a Stockholder for any
reason or purpose shall, when issued, similar legends.
SECTION 4. CO-SALE RIGHTS
4.1 Stockholder Co-Sale Rights
(a) All Common Shares and Preferred Shares now or hereafter owned
by Investor shall be subject to the terms and conditions of this Section 4
(the "Co-Sale Rights") For purposes of this Section 4, the Preferred Shares
shall be deemed to represent the number of Common Shares into which such
Preferred Shares are convertible at the time any of the Common Stockholders
exercise their Co-Sale Rights.
(b) If Investor desires to sell any of its Common Shares pursuant
to any transaction to a buyer or affiliated group of buyers who are not
Affiliates of the Investor, Investor shall notify the Common Stockholders in
writing of such intended sale at least 30 days prior to the proposed date
thereof, which notice (a "Co-Sale Notice") shall describe in reasonable
detail the terms of the sale, including, without limitation, the name and
address of the prospective buyer, the purchase price and other terms and
conditions of payment (or the basis for determining the
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purchase price and other terms and conditions), the date on or about which
such sale is to be consummated, and the number of Common Shares to be sold
(the "Investor Co-Sale Shares"). If any Common Stockholder desires to
exercise its Co-Sale Rights under this Section 4.1, such Common
Stockholder(s) (the "Co-Sale Stockholders") shall notify the Investor in
writing within 25 days after receipt of a Co-Sale Notice that it will sell to
either the buyer named in the Co-Sale Notice or to the Investor, at the
Investor's option, a number of Common Shares on the same terms and conditions
as the Investor set forth in the Co-Sale Notice. be maximum number of Common
Shares that each Co-Sale Stockholder shall be entitled to sell hereunder
(which Common Shares are sometimes hereinafter referred to as "Co-Sale Rights
Share's) shall be that number of Common Shares (rounded to the nearest whole
number, rounding .5 up) equal to the product obtained by multiplying (i) the
number of Investor Co-Sale Shares by (ii) a fraction the numerator of Which
is the total number of Common Shares owned by such Co-Sale Stockholders at
the time the sale and the denominator of which is the total number of Common
Shares owned by the Inventor and all of the Co-Sale Stockholders at the time
of the sale. At the Investor's option, (i) the Investor shall buy, under the
same terms and conditions as set forth in the Co-Sale Notice, all or any part
of the Co-Sale Rights Shares which the Co-Sale Stockholder would have been
authorized to sell to the prospective buyer of the Investor Co-Sale Shares
under the preceding provisions of this subparagraph; provided, however that
the Investor shall not be required to purchase any Common Shares from a
Co-Sale Stockholder or to assign thereto any portion of its interest in the
agreement of sale if the proposed sale fails to be consummated for any
reason; and provided, further, that upon an assignment to a Co-Sale
Stockholder of any portion of the Investor's interest in an agreement of sale
such Co-Sale Stockholder shall assume and hold the Investor harmless from,
the obligations under the agreement of sale with respect to the portion so
assigned.
4.2 Common Shares. For purposes of this Section 41 the term "Common
Shares" shall include any Common Shares that are issuable upon the conversion
of any Preferred Shares held by the Investor. If the Co-Sale Rights Shares
include any Common Shares issuable upon the conversion of Preferred Shares,
the investor shall convert such Preferred Shares into Common Shares
immediately prior to any sale of Common Shares by the investor pursuant to
the exercise of its Co-Sale Rights.
4.3 Unrestricted Transfers. The Co-Sale Rights of the Common
Stockholders set forth in this Section 4 shall not apply to any sale of
Preferred Shares by the Investor to an Affiliate of the Investor.
SECTION 5. CERTAIN ADDITIONAL COVENANTS.
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5.1 Approval of Stock Sales. Until the earlier of December 31, 1995 and
the date on which the Company has received at least $1,000,000 in proceeds
from the sale of shares of its capital stock to Persons other than the
Stockholders, the Company shall not sell any shares of its capital stock or
any securities convertible into or exercisable for shares of its capital
stock unless such action has been approved in writing by those Stockholders
holding not less than 66% of the Common Shares of the Company then
outstanding (with any Common Shares issuable upon the conversion of the
Preferred Shares deemed to be outstanding and held by the holders of such
Preferred Shares for the purposes of this calculation) (such approval is
sometimes hereinafter referred to as the "Stockholders Approval").
5.2 Certain Rights of JHU.
(a) The Company shall provide JHU with copies of any financial
statements and other informational documents provided to the Investor
pursuant to Section 6.1 of the Share Purchase Agreement when such statements
and documents are provided to the Investor. The Company shall, upon receipt
of reasonable notice, permit JHU and any of its representatives to visit and
inspect any of the properties of the Company during normal business hours,
including, without limitation, its books and records (and to make extracts
therefrom and copies thereof; provided however that the Investor or its
representative shall advise the Company of any copies made and shall agree
that he or it will not use or disseminate such information except as
reasonably required in connection with shareholder's rights and benefits
under this Agreement and the Share Purchase Agreement and to discuss the
Company's affairs, finances and accounts with its officers, employees and
independent public accountants.
(b) For so long as JHU holds at least 50% of the initial number of
shares of Common Stock issued to it (as adjusted for any stock split,
combinations, reclassification or similar event), JHU shall be entitled to
send a representative reasonably acceptable to the Board to each meeting of
the Board (or, in the case of telephonic meetings, to participate in such
meeting). Such representative shall have observation rights only, and shall
not be entitled to vote or otherwise take any action at such meeting.
Further, such representative shall execute and deliver the Company's
customary director confidentiality agreement prior to attending or
participating in a meeting.
5.3 Location of the Company. Until December 23,1997, the Company shall
not, without the Stockholders Approval, relocate its principal business
offices and research facilities outside of the Baltimore, Maryland
metropolitan area.
5.4 Transactions with Osiris.
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(a) Prior to the later of the consummation of the Second round
Financing and June 30, 1997, the Company shall not engage in any of the
following transactions unless such transaction has been approved in writing
by Drs. Civin and Small and JHU:
(i) any sale of capital stock to the Investor or any of its
Affiliates other than those sales contemplated by the Stock Purchase Warrant;
(ii) any merger or consolidation of the Company with or into,
or sale of all or substantially all of the Company's assets to, Osiris or any
Affiliate of Osiris (other than pursuant to that certain License Agreement
dated December23, 1994 between the Company and Osiris; and
(b) The Company shall not sell, license or otherwise transfer to
the Investor any right in and to any technology or license held by the
Company without first receiving approval from a majority of the disinterested
members of the Company's Board of Directors.
5.5. Research Direction. Until the earlier of June 30, 1997 and the date
on which the Second Round Financing is consummated, the research direction of
the Company will be subject to the prior written approval of Drs. Civin and
Small, which approval shall not be unreasonably withheld.
SECTION 6. SALE UPON FAILURE OF REDEMPTION.
6.1 Approved Sale. In the event that the holders of the Preferred Shares
exercise redemption rights pursuant to Section 3 of Article Fourth of the
Company's Amended Certificate and the Company is unable to redeem, is legally
prevented from redeeming or otherwise fails to redeem all of the Preferred
Shares it is obligated to redeem under such Section 31 and such failure to
redeem continues for sixty (60) days after the date on which the redemption
should have been effected, then the Investor, by written notice to the
Company and the other Stockholders (the "Sale Notice"), shall be entitled to
require the sale of all or substantially all of the assets or capital stock
of the Company whether by merger, consolidation, sale of assets or stock or
otherwise (the Approved Sale"). Each Stockholder shall vote his Shares for,
and consent to, the Approved Sale. If the Approved Sale is structured as a
merger or consolidation and the Approved Sale provides for similar
consideration for the Common Shares and the Preferred Shares (determined by
assuming, for purposes of this Section 6.1, the full conversion of the
Preferred Shares to Common Shares), each Stockholder shall waive any
dissenter's rights, appraisal rights or similar rights in connection with
such merger or consolidation. If the Approved Sale is structured as a sale
of stock, each Stockholder shall agree to sell all of his Shares and
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rights to acquire Shares on the terms and conditions approved by the Board
The Stockholders shall take any and all action necessary (including, without
limitation, voting their Shares, executing and delivering written consents of
Stockholders, calling special stockholders' meetings, and causing the Company
to engage an investment banking firm) to effectuate the consummation of the
Approved Sale as promptly as possible and The any event within six (6) months
after receipt by the Company of the Sale Notice. Subject to the liquidation
preference payable to the Investor pursuant to the Amended and Restated
Certificate of Incorporation of the Company, to the extent applicable, each
of the Stockholders shall receive the same form of consideration upon an
Approved Sale.
6.2 Purchaser Representative. If the Company or the Investor enters
into any negotiation or transaction for which Rule 506 (or any similar rule
then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), the Common Stockholders
shall, at the request of the Company or the Investor, appoint a purchaser
representative (as such term is defined in Rule 501) designated by the
Company or the Investor. The Company will pay the fees of such purchaser
representative designated by the Company or the Investors. If any Common
Stockholder declines to appoint the purchaser representative designated by
the Company or the Investor such Common Stockholder will appoint another
purchaser representative (reasonably acceptable to the Company), and such
Common Stockholder will be responsible for the fees of the purchaser
representative so appointed.
SECTION 7 PREEMPTIVE RIGHTS.
7.1 Grant of Preemptive Rights. Subject to the provisions of this
Section 7, each of the Investor and Common Stockholders shall have the
preemptive right to purchase, in the case of the proposed issuance by the
Company of, or the proposed granting by the Company of rights or options to
purchase, shares of any class of the Company's capital stock or any options
or convertible securities ("Preemptive Shares"), during a reasonable time to
be fixed by the Board (which shall not be less than 30 days), a portion of
such Preemptive Shares which bears the same relationship to the aggregate
amount of securities covered by such Preemptive Shares as the total number of
Shares owned by such Investor and Common Stockholder bears to the total
number of Shares owned by all Stockholders immediately prior to the issuance
by the Company of such Preemptive shares, at a price or prices legend to the
Investor and the Common Stockholders than the price or prices at which such
Preemptive Shares are proposed to be offered for sale to others.
7.2 Exceptions from Preemptive Rights. Notwithstanding anything to the
contrary in this Section 7,
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neither the Investor nor the Common Stockholders shall have any preemptive
right to purchase any shares of any class of the Company's capital stock or
any options or convertible securities (i) issuable upon conversion of any
Preferred Shares; (ii) issuable upon conversion of convertible securities or
the exercise of options if the Investor and the Common Stockholders were
offered the opportunity to purchase such convertible securities or options
pursuant to this Section 7 or as to which such Investor and Common
Stockholder was not given Such opportunity by reason of the application of
clause (iii) of this sentence; (iii) issued in any transaction with respect
to which holders of sixty percent (60%) of the outstanding Shares have waived
in writing their preemptive rights granted hereunder; (iv) issued to
directors, officers or employees of, or consultant to, the company or any of
its subsidiaries; provided, however issuances under this Section 7.2(iv)
shall not exceed 350,000 shares of Common Stock (as adjusted to reflect any
stock split, combination1 reclassification, or similar event); (v) issued in
connection with any option, right or warrant to purchase capital stock of the
Company granted on or before the date of this Agreement or (vi) issued to the
public pursuant to an effective registration statement filed with the
Securities and Exchange Commission under the Securities Act.
(c) Notice: Expiration of Preemptive Rights. The Board shall
cause to be given to the Investor and each Common stockholder entitled to
purchase Preemptive Shares in accordance with this Section 6 a written notice
by first class mail, postage prepaid, addressed to its last address as shown
by the records of the company setting forth the time within which (which
shall not be less than 30 days), and the terms and conditions upon which, the
Investor or Common Stockholder may purchase such Preemptive Shares. Subject
to the other terms of the Company's Amended and Restated Certificate of
Incorporation, any Preemptive Shares which are not purchased by the Investor
or the Common Stockholders pursuant to this Section 7 may be sold or granted
by the Company to any third party within 90 days after the expiration of the
period during which the Investor and the Common Stockholders shall have the
preemptive right to purchase, but the Company shall not sell or grant any
Preemptive Shares after such 90 day period without renewed compliance with
this Section 6.
SECTION 8. GENERAL PROVISIONS
8.1 Waivers and Amendment. This Agreement may be amended or modified in
whole or in part only by a writing which makes reference to this Agreement
executed by the parties to this Agreement; provided, however, that if such
amendment or modification affects all of the Common Stockholders equally,
then the affirmative vote or written consent of Common Stockholders holding
not less than fifty-one percent (5l%) of all the Common Shares then held by
the Common Stockholders shall constitute approval of and consent to an
amendment or modification by all of
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the Common Stockholders. The obligations of any party hereunder may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the party or parties to whom
such obligations are owed; provided, however, that any waiver by any party of
any violation of, breach of, or default under any provision of this Agreement
or any other agreement provided for herein shall not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
violation of, breach of or default under any other provision of this
Agreement or any other agreement provided for herein.
8.2 Successors and Assignees. This Agreement shall be binding upon and
shall inure to the benefit of the Company, its successors and permitted
assigns, and shall be binding Upon and inure to the benefit of the other
parties hereto and their respective heirs, successors and permitted assigns.
No Common Stockholder may assign any or all of his rights or delegate any or
all of his or its duties under this Agreement to any Person other than a
Permitted Transferee without the prior written consent of each of the other
parties hereto; provided, however1 JHU shall be entitled to assign its rights
hereunder to a not-for-profit Affiliate of JHU without the prior written
consent of the parties hereto. If the Investor shall sell the Preferred
Shares, or any portion thereof, to any Person, such Person shall become an
"Investor" for the purposes of this Agreement and be entitled to all rights
and benefits, and subject to all obligations, of the Investor hereunder.
8.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
8.4 Notices. All notices, elections and other communications pursuant to
this Agreement shall be made in writing and be deemed to have been duly given
if personally delivered or three days after being sent by registered or
certified mail, return receipt requested, postage prepaid, to (i) the Company
at its principal business address or (ii) to any Stockholder at his or her
address as shown from the to time on the books and records of the Company.
The company shall provide the Investor and each Common Stockholder with a
list of all such addresses promptly upon request.
8.5 Entire Agreement. This Agreement, together with the other agreements
referred to herein, embodies the entire agreement among the parties in
relation to its subject matter, and no representations, warranties,
covenants, understandings or agreements or otherwise, in relation thereto,
exist between any of the parties.
8.6 Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the
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internal substantive laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
8.7 Severability. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant and/or
provision hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, all such provisions shall be deemed
severed from this Agreement, but every other provision of this Agreement
shall remain in full force and effect, and in substitution for any such
provision held unlawful, there shall be substituted a provision of similar
import reflecting the original intent of the parties hereto t6 the extent
permissible under law.
8.8 Specific Performance. The parties hereto agree that upon a breach
of any other provisions of this Agreement a remedy at law would not be
adequate, and that the parties hereto are entitled to injunctive relief and
specific performance and any other legal or equitable remedies, as remedies
for the enforcement of this Agreement.
8.9 Termination. This Agreement shall terminate and be of no further
force or effect upon the earlier of (i) the sale of Shares, whether by the
Company or any Stockholder of the company (other than sales to Affiliates),
constituting more than 50% of the outstanding capital stock of the Company,
(ii) the sale of 60% or more of the assets of the company, and (iii) upon the
completion of an initial public offering of Common Stock of the Company
pursuant to an effective registration statement filed with the SEC under the
Securities Act
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IN WITNESS WHEREOF, the Company and the Stockholders have executed this
Stockholders Agreement as of the day and year first above written.
GRYPHON PHARMACEUTICALS,INC.
By: /s/ James S. Burns
______________________
Title: President & CEO
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
__________________
Title: President & CEO
THE JOHNS HOPKINS UNIVERSITY
By: /s/ David A. Blake
------------------
Title: Executive Vice Dean
/s/ Curt I. Civin
--------------------------
Curt I. Civin
/s/ Donald Small
--------------------------
Donald Small
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Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
December 23, 1994, by and among Osiris Therapeutics, Inc., a Delaware
corporation (the "Investor"), The Johns Hopkins University ("JHU"), Curt I.
Civin, M.D. ("Dr. Civin") and Donald Small, M.D. ("Dr. Small," and together
with Dr. Civin, the "Founder Stockholders") (the Investor, the Founder
Stockholders and JHU, collectively, the "Stockholders"), and Gryphon
Pharmaceuticals, Inc., a Delaware corporation (the "Company").
The parties to this Agreement hereby agree as follows:
1. Required Registration. Upon the receipt by the Company from the
Investor of a written request (the "Request") for the registration of Common
Shares (as defined in Section 16(h) below) owned by such Investor at any time
and from time to time after the 180th day after the date on which the Company
completes an initial public offering of its capital stock pursuant to an
effective registration statement filed with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended (the "1933
Act"), the Company shall use its best efforts to prepare and file a
registration statement under the 1933 Act covering the Common Shares which
are the subject of the Request. The Investor shall be entitled to three
registrations under this Section 1. In the event that the Investor
determines for any reason (other than at the request or recommendation of the
Company or the managing underwriters) not to proceed with a registration of
Common Shares requested pursuant to this Section 1 at any time before the
registration statement has been declared effective by the SEC, and such
registration statement, if theretofore filed with the SEC, is withdrawn with
respect to the Common Shares covered thereby, and the Investor agrees to
reimburse the Company for all fees, costs and expenses incurred by it in
connection therewith, then the Investor shall not be deemed to have exercised
one of its rights to require the Company to register Common Shares pursuant
to this Section 1. If the Investor determines not to proceed with such a
registration upon the request or recommendation of the Company or the
managing underwriters, the Investor shall not be required to reimburse the
Company for its fees, costs and expenses, and the Investor shall not be
deemed to have exercised one of its rights to require the Company to register
Common Shares pursuant to this Section 1. The Company shall not, without the
prior written consent of the Investor, effect any registration of its
securities (other than on Form S-4 or Form S-8, or a successor form thereto)
from the date the Company receives a Request pursuant to this Section 1 until
the earlier of (a) 90 days after the date on which all securities covered by
such Request have been sold or (b) 180 days after the effective date of the
registration statement covering such securities.
<PAGE>
2. Incidental Registration. Each time the Company shall determine to
proceed with the preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for money of any of
its securities, whether by the Company or any of its security holders (other
than on Forms S-4 or S-8, or any successor or similar form), the Company
shall give written notice of its determination to the Stockholders. Upon the
written request of any of the Stockholders given to the Company within 30
days after the mailing of any such notice by the Company, the Company shall,
subject to Section 5 hereof, cause all such Common Shares which such
Stockholder has requested to be registered to be included in such
registration statement.
3. Short Form Registration. In addition to the registration rights
provided in Sections 1 and 2 hereof, if the Company qualifies for the use of
Form S-3 or any similar short form registration statement then available
(other than Form S-4 or Form S-8, or any successor or similar form), the
Company shall use its best efforts to register Common Shares on such form on
behalf of the Investor at the request of the Investor. All registrations
effected under this Section 3 shall be at the expense of the Company. The
Investor shall be entitled to two (2) registrations under this Section 3. In
the event that the Investor determines for any reason (other than at the
request or recommendation of the Company or the managing underwriters) not to
proceed with a registration of Common Shares requested pursuant to this
Section 3 at any time before the registration statement has been declared
effective by the SEC, and such registration statement, if theretofore filed
with the SEC, is withdrawn with respect to the Common Shares covered thereby,
and the Investor agrees to reimburse the Company for all fees, costs and
expenses incurred by it in connection therewith, then the Investor shall not
be deemed to have exercised one of its rights to require the Company to
register Common Shares pursuant to this Section 3. If the Investor
determines not to proceed with such a registration upon the request or
recommendation of the Company or the managing underwriters, the Investor
shall not be required to reimburse the Company for its fees, costs and
expenses, and the Investor shall not be deemed to have exercised one of its
rights to require the Company to register Common Shares pursuant to this
Section 3.
4. Limitations. Notwithstanding the provisions of Sections 1 and 3
hereof: (a) the Company shall have the right to delay or suspend the
preparation and filing of a registration statement for up to 90 days if in
the reasonable judgment of a majority of the Directors on the Board of
Directors of the Company such preparation or filing would harm or hinder in
any material fashion the ability of the Company to conduct its affairs or
would have a material adverse effect on the business, properties or financial
condition of the Company; provided that the Company shall use its best
efforts to cause any such registration statement to become effective within
150 days of receipt of the request therefor and shall only be entitled to
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utilize this clause (a) once in any 12 month period; (b) if the Company has
given notice under Section 2 hereof that it intends to prepare and file a
registration statement (a "Section 2 Registration Statement"), then the
Company shall have the right to delay or suspend the filing of the
registration statement requested by the Investor; provided that the Company
shall use its best efforts to cause any such registration statement requested
by the Investor to become effective within 180 days (or, if required by the
underwriters for the Section 2 Registration Statement, within 270 days) after
the date on which all securities covered by the Section 2 Registration
Statement have been sold, and that the Company shall use its best efforts to
include any Common Shares that are the subject of a notice delivered by
Investor under Section 2 in such Section 2 Registration Statement; (c) the
Company shall not be required to prepare or file a registration statement
with respect to any Request under Section 1 if the Common Shares covered
thereby constitute less than twenty percent (20%) of the Common Shares then
held by the Investor unless the reasonably anticipated aggregate offering
price of such Common Shares exceeds $5,000,000; and (d) in the event the
Company elects to include any Company Common Shares as a primary offering in
any registration which has been initiated by the Investor pursuant to Section
1 or 3, such offering shall be deemed for all purposes of this Agreement to
be a registration pursuant to Section 2 hereof.
5. Pro Ration. If Common Shares (including any Common Shares of the
Company to be issued and sold by it) are to be included under Sections 1, 2
or 3 above in a registration statement which pertains to an underwritten
public offering and the managing underwriters advise the Company in writing
that in their opinion the number of Common Shares requested to be included
exceeds the number of Common Shares which can be sold in such offering, the
Company will include in such registration (i) first, the Common Shares which
the Company proposes to issue and sell, (ii) second, such Common Shares as to
which registration rights have been exercised by the Investor under either
Sections 1 or 3, as the case may be (the "Demand Shares"), on a pro rata
basis among the holders of Demand Shares according to the relation the number
of Common Shares owned by each such holder bears to the total number of
Common Shares owned by all such holders, (iii) third, the number of Common
Shares requested by the Investor (to the extent its request was not pursuant
to Sections 1 or 3) and other Stockholders to be included which in the
opinion of such underwriters can be sold (the "Secondary Shares"), on a pro
rata basis among holders of such Secondary Shares according to the relation
the number of Common Shares owned by each such holder bears to the total
number of Common Shares owned by all such holders (exclusive of Demand Shares
in each case), and (iv) fourth, any other Common Shares requested to be
included in such registration statement by persons other than the
Stockholders.
6. Standstill. Each Stockholder agrees in connection with any
underwritten public offering of the Company's securities
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pursuant to an effective registration statement under the 1933 Act that upon
request of the managing underwriter(s) it shall commit itself in writing not
to sell or offer to sell any Common Shares (other than such shares included
in the underwritten public offering), during the seven days prior to, and for
a period not to exceed 180 days from, the date of the final prospectus used
in such offering; provided, however, that (a) such agreement shall apply only
to the first such underwritten public offering of the Company and to any
underwritten public offering occurring within twelve months of the Company's
first underwritten public offering and (b) such Stockholder shall have no
obligation to enter into the agreement described in this Section 6 unless all
executive officers and Directors of the Company, and any holder of more than
10% of the Company's issued and outstanding Common Shares, enter into
similar agreements.
7. Registration Procedures. If and whenever the Company is required by
the provisions of Sections 1, 2 or 3 to effect the registration of Common
Shares under the 1933 Act, the Company will, as expeditiously as possible:
(a) subject to the provisions of Section 4, prepare and file with the SEC
within 60 days of the Company's receipt of the Investor's Request (or other
request therefore) a registration statement with respect to such Common
Shares, and use its best efforts to cause such registration statement to
become effective within 100 days of the Company's receipt of such request
and remain effective for such period as may be reasonably necessary to
effect the sale of such Common Shares, not to exceed 180 days (this
provision shall not be applicable to registrations pursuant to Section 2);
(b) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective until the earlier of
(i) the date on which all Common Shares covered by such registration
statement have been sold and (ii) 180 days after the effective date of
such registration statement;
(c) use its best efforts to register or qualify the Common Shares for sale
under such other securities or blue sky laws of such jurisdictions as the
selling Stockholder or, in the case of an underwritten public offering, the
managing underwriter shall reasonably request (including factors such as the
cost to the Company) and do any and all other acts and things which may be
reasonably necessary or desirable to enable the selling Stockholders to
consummate the disposition of the Common Shares in such jurisdictions;
provided, however, the Company shall not be required to qualify generally to
do business in jurisdictions where it is not otherwise so qualified or to
consent to general service of process in any such jurisdiction;
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(d) furnish to the selling Stockholders and to the underwriters of the
securities being registered a reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus, and such
other documents as each selling Stockholder or underwriters may reasonably
request in order to facilitate the public offering of such securities;
(e) notify each selling Stockholder promptly after it shall receive notice
thereof, of the time when such registration statement has become effective
or a supplement to any prospectus forming a part of such registration
statement has been filed;
(f) prepare and file with the SEC, promptly upon the request of a selling
Stockholder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such selling Stockholder
(and concurred in by counsel for the Company), is required under the 1933
Act or the rules and regulations thereunder in connection with the
distribution of the Common Shares;
(g) prepare and promptly file with the SEC, and promptly notify a selling
Stockholder of the filing of, any amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the 1933 Act, any event shall
have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statement
therein, in the light of the circumstances in which they were made, not
misleading;
(h) advise the selling Stockholder promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly
use its best efforts to prevent the issuance of any stop order or to obtain
its withdrawal if such stop order should be issued; and
(i) if the offering is underwritten at the request of a selling
Stockholder, furnish on the date or dates provided for in the underwriting
agreement: (i) an opinion of counsel for the Company addressed to the
underwriters opining as to such matters as may be reasonably agreed to
by such underwriters and the Company; and (ii) a letter or letters from the
independent certified public accountants of the Company, addressed to the
underwriters covering such matters as such underwriters request, in which
letters such accountants shall state (without limiting the generality of
5
<PAGE>
the foregoing) that they are independent certified public accountants
within the meaning of the 1933 Act and that in the opinion of such
accountants the financial statements and other financial data of the
Company included in the registration statement or any amendment or
supplement thereto comply in all material respects with the applicable
accounting requirements of the 1933 Act.
8. Expenses. With respect to the registrations requested pursuant to
Section 1 hereof, and with respect to each inclusion of Common Shares in a
registration statement pursuant to Section 2 hereof, and with respect to all
registrations requested pursuant to Section 3 hereof, the Company shall bear
the reasonable fees, costs and expenses of such registrations, including but
not limited to the following fees, costs and expenses: all registration,
filing, and stock exchange fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, fees and disbursements of other
persons or entities retained by the Company, all legal fees and disbursements
and other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the reasonable fees and disbursements of one counsel for the
Stockholders participating in such registration. The Stockholders
participating in such registration shall be responsible for, and shall pay,
their pro rata share of underwriting discounts and commissions with respect
to the Common Shares being sold by them.
9. Indemnification.
(a) By the Company. The Company shall indemnify and hold harmless each
holder of Common Shares that are included in a registration statement
pursuant to this Agreement and any underwriter (as defined in the 1933 Act)
for such holder and each person, if any, who controls such holder or such
underwriter within the meaning of the 1933 Act, from and against any and all
loss, damage, liability or claims, to which such holder or any such
underwriter or controlling person becomes subject under the 1933 Act or
otherwise, and subject to the provisions of Section 9(c) hereof to reimburse
them, from time to time upon request, for any legal or other costs or
expenses reasonably incurred by them in connection with investigating any
claims or defending any actions (as provided in Section 9(c) hereof), insofar
as such losses, damages, liabilities, claims, costs or expenses are caused
by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, damage, liability, claim, cost or expense arises out of or is
based upon
6
<PAGE>
(i) an untrue statement or alleged untrue statement or omission or
alleged omission (other than a statement or omission about the Company) made
in conformity with information furnished by the Investor in writing
specifically for use in the preparation of a registration statement or (ii)
the holders' failure to deliver a copy of the registration statement,
prospectus or any amendments or supplements thereto as required by law, unless
such failure was the result of the Company's failure to provide same to such
holder.
(b) B Holders of Common Shares. Each holder, severally and not jointly,
of Common Shares that are included in a registration pursuant to this
Agreement will indemnify and hold harmless the Company, each other holder,
any underwriter and each person, if any, who controls the Company, such other
holder or such underwriter, from and against any and all loss, damage,
liability or claim, to which the Company or such other holder or any
controlling person and/or any underwriter becomes subject under the 1933 Act
or otherwise and to reimburse them, from time to time upon request, for any
legal or other costs or expenses reasonably incurred by them in connection
with investigating any claims or defending any actions, insofar as such
losses, damages, liabilities, costs, or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by such holder specifically for
use in the preparation of such registration statement.
(c) Notice. Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 9 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provision, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party in writing of
the commencement thereof; but the omission to so notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than hereunder and shall only relieve it from any
liability which it may have to such indemnified party under this Section 9 if
and to the extent the indemnifying party is prejudiced by such omission. In
case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified
7
<PAGE>
party; provided, however, if the defendants in any action include both the
indemnified party and the indemnifying party and there is a conflict of
interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or parties shall
have the right to select separate counsel to participate in the defense of
such action on behalf of such indemnified party or parties; provided, that
the Company's obligation under Section 9(a) to reimburse any such indemnified
party or parties for legal costs and expenses shall be limited to the legal
costs and expenses of one such separate counsel. After notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel
in accordance with the proviso of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(d) Contribution. If for any reason the indemnification provided for in
paragraphs (a) and (b) is unavailable to an indemnified party or insufficient
to hold it harmless as contemplated by such paragraphs, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of
the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations; provided, however, that, in any such case,
(i) no holder of Common Shares will be required to contribute any amount in
excess of the sales price of all such Common Shares sold by such holder
pursuant to such registration statement, and (ii) no holder of Common Shares
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) will be entitled to contribution from any holder of Common
Shares who was not guilty of such fraudulent misrepresentation.
Promptly after receipt by a holder of Common Shares of notice of the
commencement of any action, suit or proceeding in connection with a public
offering of Common Shares, such holder will, if a claim for contribution in
respect thereof is able to be made against another party, notify the
contributing party of the commencement thereof. The omission so to notify the
contributing party will not relieve it from any liability which it may have
to any other party other than for contribution under the 1933 Act. In case
any such action, suit or proceeding is
8
<PAGE>
brought against any party, and such party notifies a contributing party of
the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified.
10. Transfer of Registration Rights. The registration rights and related
obligations provided herein may be assigned by a Stockholder to any person or
entity that acquires Common Shares from such Stockholder, and the term
"Stockholder" shall include the original Stockholder and any person that
acquires Common Shares from such Stockholder or any subsequent Stockholder;
provided, however, that (a) the Company shall be given written notice by the
transferor thereof at the time of such transfer stating the name and address
of the transferee and identifying the securities with regard to which such
rights are being transferred, (b) the transferee shall agree in writing to
assume the obligations of the transferor hereunder and (c) the registration
rights and related obligations may not be transferred with any Common Shares
sold in a registered offering.
11. Stockholder to Provide Information. In the event a Stockholder
requests a registration of Common Shares as provided herein, such Stockholder
shall provide all such information and materials and shall take all such
actions as may be reasonably required in order to permit the Company to
comply with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such registration statement.
Specifically, the Company may require the Stockholder to furnish the Company
with such information regarding such Stockholder and the distribution of its
securities as the Company may from time to time reasonably request in writing
and as shall be required by law or the SEC.
12. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of the
Common Shares to the public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the 1933 Act, at all times from and
after 90 days following the effective date of the first registration under
the 1933 Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and
the Securities Exchange Act of 1934, as amended (the "1934 Act"); and
(c) So long as Stockholders own any Common Shares, furnish to such
Stockholder forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of the 1933 Act and the 1934
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Stockholder may reasonably
9
<PAGE>
request in availing itself of any rule or regulation of the SEC allowing the
Stockholder to sell any such securities without registration.
13. Granting of Registration Rights. The Company shall not, without the
prior written consent of the Investor grant to any person or entity
registration rights of any kind or nature with respect to Common Shares or
other capital shares or the Company if such rights would have priority over
the rights granted to the Investor pursuant to this Agreement, whether in
terms of the number of shares which holders may include in any registration,
the timing of any registration of shares, the rights of holders to demand
registration of shares held by them at the time requested by them, or in any
other material respect; provided, however, that the prior written consent of
the Stockholders (other than the Investor) holding at least 60% of the Common
Stock (not including the Common Stock held by the Investor) shall also be
required if the Company proposes to grant to any person or entity
registration rights that would adversely affect the rights of the
Stockholders under Section 2 of this Agreement other than as a result of
increasing the number of Persons or Common Stock included in a registration
pursuant to Section 2 of this Agreement.
14. Remedies. The Company recognizes and agrees that if the Company
fails to comply with its obligations under this Agreement, the Stockholders
may not have an adequate remedy at law. Such failure will cause the
Stockholders irreparable harm for which there may be no adequate remedy at
law, and the Company hereby consents to the issuance of an injunction in
favor of the Stockholders by any court of competent jurisdiction. The right
of such Stockholders to obtain an injunction hereunder shall not be
considered a waiver of any right on the part of the Stockholders to recover
damages and to assert any other claims for remedies which the Stockholders
may have at law or in equity. The Company agrees to bear any expenses
incurred by the Stockholders, including reasonable attorneys fees, in
enforcing their rights under this Agreement except in cases in which it is
determined that the Company was not in breach of its obligation to provide
such rights.
15. Selection of Lead Underwriter. The lead managing underwriter for any
registration of Common Shares for sale by the Company shall be selected by
the Company.
16. Miscellaneous.
(a) Waivers and Amendments. This Agreement may be amended or modified in
whole or in part only by a writing which makes reference to this Agreement
and is executed by the Company and the Stockholders holding at least 60% of
the Common Shares subject to this Agreement. The obligations of any party
10
<PAGE>
hereunder may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of the
party or parties to whom the obligations are owed; provided, however, that
any waiver by any party of any violation of, breach of, or default under
any provision of this Agreement or any other agreement provided for herein
shall not be construed as, or constitute, a continuing waiver of such
provision, or waiver of any other violation of, breach of or default under any
other provision of this Agreement or any other agreement provided for herein.
(b) Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto and supersedes all prior contracts, agreements,
arrangements, communications, discussions, representations, and warranties,
whether oral or written, among the parties with respect to the subject matter
hereof.
(c) Governing Law. This Agreement shall in all respects be governed by
and construed in accordance with the internal substantive laws of the State
of Ohio without giving effect to the principles of conflicts of law thereof.
(d) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and be deemed to have been duly given
(i) when personally delivered or sent by facsimile transmission (the receipt
of which is confirmed in writing), (ii) one business day after being sent by
a nationally recognized overnight courier service, or (iii) three business
days after being sent by registered or certified mail, return receipt
requested, postage prepaid, to the parties at their respective addresses set
forth below.
If to the Company:
Gryphon Pharmaceuticals, Inc.
1629 Thames Street, Suite 400
Baltimore, Maryland 21231
Attn: President
with a copy to:
The Johns Hopkins University School of Medicine
Office of Technology Licensing
2024 E. Monument Street
Suite 2-100
Baltimore, Maryland 21205
Attn: Howard W. Califano, Esq.
If to Osiris:
Osiris Therapeutics, Inc.
The Wearn Building - 4th Floor
11100 Euclid Avenue
Cleveland, Ohio 44106
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Attn: James S. Burns
with a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attn: John C. McIlwraith, Esq.
If to Dr. Civin:
The Johns Hopkins School of Medicine
Oncology 3-109
600 N. Wolfe Street
Baltimore, MD 21287-5000
with a copy to:
Hogan & Harston L.L.P.
111 S. Calvert Street
Baltimore, MD 21202
Attn: Jordan P. Karp, Esq.
If to Dr. Small:
The Johns Hopkins School of Medicine
Oncology 3-109
600 N. Wolfe Street
Baltimore, MD 21287-5000
with a copy to:
Hogan & Harston L.L.P.
111 S. Calvert Street
Baltimore, MD 21202
Attn: Jordan P. Karp, Esq.
Any party by written notice to the others may change the address of the
persons to whom notices or copies thereof shall be directed.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which together will constitute one and the same instrument.
(f) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer
its rights hereunder without the prior written consent of the Investor. Each
of the Stockholders shall be entitled to assign all of its rights, benefits
and obligations hereunder to any person or entity that acquires Preferred
Shares or Common Shares from such Stockholder,
12
<PAGE>
without the prior consent of any party and such person or entity shall become
a Stockholder and be entitled to all rights and benefits of a Stockholder
hereunder.
(g) Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give any person or entity
other than the parties hereto any rights or remedies under or by reason of
this Agreement.
(h) Definition of Common Shares. For the purposes of this Agreement, the
term "Common Shares" shall mean the shares of Common Stock of the Company,
par value $.001 per share (the "Common Stock"), and any shares of Common
Stock into which shares of the Company's Series A Convertible Preferred Stock
(the "Preferred Shares"), may at such time be converted. For the purposes of
this Agreement, a Stockholder shall be deemed to be the holder of any shares
of Common Stock into which any Preferred Shares it holds are convertible.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed, or have caused their
duly authorized representatives to execute, this Registration Rights
Agreement as of the date first written above.
GRYPHON PHARACEUTICALS, INC.
By: /s/ James S. Burns
--------------------------
James S. Burns, President
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
--------------------------
James S. Burns, President
THE JOHNS HOPKINS UNIVERSITY
By: /s/ David A. Blake
--------------------------
David A. Blake, PhD
Title: Executive Vice Dean
-----------------------
/s/ Curt I. Civin
-----------------------------
Curt I. Civin
/s/ Donald Small
-----------------------------
Donald Small
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Exhibit 10.4
OSIRIS THERAPEUTICS, INC.
INVESTORS RIGHTS AGREEMENT
------------------
May 25, 1994
<PAGE>
TABLE OF CONTENTS
Page
-----
l. Registration Rights 1
1.1 Definitions 1
1.2 Request for Registration 2
1.3 Company Registration 4
1.4 Obligations of the Company 5
1.5 Furnish Information 6
1.6 Expenses of Demand Registration 6
1.7 Expenses of Company Registration 7
1.8 Underwriting Requirements 7
1.9 Delay of Registration 8
1.10 Indemnification 8
1.11 Reports Under Securities Exchange Act of 1934 10
1.12 Form S-3 Registration 11
1.13 Assignment of Registration Rights 12
1.14 [Reserved] 13
1.15 Termination of Registration Rights 13
2. Covenants of the Company, Confidentiality 13
2.1 Financial Statements and Other Information 13
2.2 Inspection of Property 15
2.3 Right of First Offer 15
2.4 Positive Covenants 17
2.5 Termination of Certain Covenants 18
2.6 Confidentiality 18
3. Miscellaneous 19
3.1 Successors and Assigns 19
3.2 Governing Law 19
3.3 Counterparts 19
3.4 Titles and Subtitles 20
3.5 Notices 20
3.6 Expenses 20
3.7 Amendments and Waivers 20
3.8 Severability 20
3.9 Entire Agreement 20
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INVESTORS' RIGHTS AGREEMENT
--------------------------
THIS INVESTORS' RIGHTS AGREEMENT (the "Agreement") is made as of the 25th
day of May, 1994, by and between Osiris Therapeutics, Inc., a Delaware
corporation (the "Company"), Invesco Strategic Portfolios, Inc. - Health
Sciences Portfolio ("ISP") and The Global Health Sciences Fund ("GHS") (ISP
and GHS are referred to collectively herein as the "Investors" and sometimes
individually as an "Investor").
RECITALS
--------
WHEREAS, the Company and the Investors are parties to that certain Series
C Preferred Stock Purchase Agreement of even date herewith (the "Stock
Purchase Agreement");
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Stock Purchase Agreement that the Company execute and
deliver this Agreement; and
WHEREAS, to induce the Investors to invest funds in the Company pursuant
to the Stock Purchase Agreement, the Investors and the Company hereby agree
that this Agreement shall govern the rights of the Investors to cause the
Company to register shares of Common Stock issuable to the Investors and
certain other matters as set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Common Stock" means shares of the common stock of the
Company, par value $.001 per share.
(c) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted
by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
<PAGE>
(e) The term "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(f) The term "Series C Preferred Stock" means shares of the Company's
Series C Convertible Preferred Stock, par value $.00l per share. The term
"Series Cl Preferred Stock" means shares of the Company's Series Cl
Convertible Preferred Stock, par value $.00l per share.
(g) The term "register", "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering
of effectiveness of such registration statement or document.
(h) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series C Preferred Stock, (ii) the
Common Stock issuable or issued upon conversion of the Series Cl Preferred
Stock (iii) any Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of the shares referenced in clauses (i) or (ii) above,
excluding in all cases, however, any Registrable Securities sold by a person
in a transaction in which his rights under this Section 1 are not assigned.
(i) The term "SEC" shall mean the United States Securities and
Exchange Commission.
1.2 Request for Registration.
(a) If the Company shall receive at any time after the earlier of (i)
four (4) years after the date of this Agreement or (ii) six (6) months after
the effective date of the first registration statement for a public offering
of securities of the Company (other than a registration statement relating
solely to the sale of securities to current or former employees, officers,
advisors, consultants or directors of the Company or any subsidiary of the
Company pursuant to a stock purchase plan or stock option or stock awards
approved by the Board of Directors of the Company or a registration statement
on Form S-4 or any similar successor form), a written request from the
Holders of fifty percent (50%) of the Registrable Securities then outstanding
that the Company file a registration statement under the Act covering the
registration of at least fifty percent (50%) of the Registrable Securities
then outstanding, the Company shall:
(i) within ten (10) days of the receipt thereof, give written
notice, in accordance with Section 3.5 hereof, of such request to all
Holders; and
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<PAGE>
(ii) file as soon as practicable, and in any event within sixty
(60) days of the receipt of such request, and to use its best efforts to
cause to become effective as soon as practicable, a registration statement
under the Act covering all Registrable Securities which the Holders request
to be registered, subject to the limitations of Subsection 1.2(b).
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to Subsection 1.2(a) and
the Company shall include such information in the written notice referred to
in Subsection 1.2(a). The underwriter will be selected by the Company and
shall be reasonably acceptable to a majority in interest of the Initiating
Holders. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company as provided in Subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Initiating Holders shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated among
all Holders thereof, including the Initiating Holders, in proportion (as
nearly as practicable) to the amount of Registrable Securities of the Company
owned by each Holder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting. Notwithstanding the foregoing, if the Company notifies the
Initiating Holders by a writing delivered within ten (10) days of its receipt
of the written request under Section 1.2(a) that the Company desires to sell
shares pursuant to such registration statement, then the Holders of
Registrable Securities shall not be deemed to have used one of their
registrations under this Section 1.2, and such Holders shall have the rights
provided in Section 1.3 with respect to such registration.
(c) Notwithstanding the foregoing, if the Company shall furnish to
the Initiating Holders a certificate signed by the Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company
and its stockholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration
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<PAGE>
statement, the Company shall have the right to defer taking action with
respect to such filing for a period of not more than one hundred twenty (120)
days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2, excluding any registrations effected on Form
S-3, and such registrations have been declared or ordered effective;
(ii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.12 below; or
(iii) If the Company delivers to the Initiating Holders an
opinion, in form and substance acceptable to such Initiating Holders, of
counsel satisfactory to the Initiating Holders that the Registrable
Securities requested to be registered by the Initiating Holders may be sold
or transferred pursuant to Rule 144(k) of the Act.
1.3 Company Registration. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public
offering of such securities (other than a registration relating solely to the
sale of securities to current or former employees, officers, advisors,
consultants or directors of the Company or any subsidiary of the Company
pursuant to a stock purchase plan or stock option or stock awards approved by
the Board of Directors of the Company, a registration on Form S-4 or any
similar successor form, a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities which are also being registered),
the Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within
twenty (20) days after giving of such notice by the Company in accordance
with Section 3.5, the Company shall, subject to the provisions of Section
1.8, cause to be registered under the Act all of the Registrable Securities
that each such Holder has requested to be registered.
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<PAGE>
1.4 Obligations of the Company. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration
statement effective for a period of up to ninety (90) days or until the
distribution contemplated in the Registration Statement has been completed,
whichever first occurs; provided, however, that such ninety (90) day period
shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the
Company, and provided further that in the case of any registration of
Registrable Securities on Form S-3 that are intended to be offered on a
continuous or delayed basis, such ninety (90) day period shall be extended
until the earlier of the date on which all such Registrable Securities are
sold and one hundred eighty (180) days after the effective date of such
registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as, in the opinion of counsel to the Company, may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
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(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of
such registration.
1.5 Furnish Information.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder's Registrable
Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of Subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's
obligation to initiate such registration as specified in Subsection 1.2(a) or
Subsection 1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be
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registered (in which case all participating Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities
agree to forfeit their right to one demand registration pursuant to Section
1.2 or unless such withdrawal is based upon material adverse information
relating to the Company that is different from information known to the
Holders requesting registration at the time of their request.
1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements
of one counsel for the selling Holders, but excluding underwriting discounts
and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering involving
an underwriting of shares of the Company's capital stock, the Company shall
not be required under Section 1.3 to include any of a Holder's securities in
such underwriting unless such Holder accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount
of securities, including Registrable Securities, requested by stockholders to
be included in such offering exceeds the amount of securities sold other than
by the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the Holders and the
holders of other securities entitled to be included in such underwriting
under the terms of any registration rights agreement with the Company,
according to the total amount of Registrable Securities or other such
securities entitled to be included therein owned by each Holder and other
holders or in such other proportions as shall be agreed to by a majority in
interest of the Holders and such other holders); provided, however, that in
the event that the Initiating Holders request a registration under Section
1.2 that is subsequently converted into a piggyback registration at the
election of the Company, as provided in Section 1.2(b), then the number of
Registrable Securities to be included in such a registration shall not be
reduced unless all other securities to be sold other than for the Company's
account are first entirely excluded from such registration.
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1.9 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder
participating in such registration, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, or the 1934 Act, or otherwise insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, or any rule or
regulation promulgated under the Act, or the 1934 Act, and the Company will
pay to each such Holder, underwriter or controlling person, as incurred, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Subsection 1.10(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld; and provided further, however, that the indemnity agreement
contained in this Subsection 1.10(a) shall not apply to the extent claims
made by a purchaser of Registrable Securities from a Holder are based upon
any untrue statement, or alleged untrue statement, made in or omission, or
alleged omission, from a preliminary prospectus if the Holder fails to comply
with its prospectus delivery obligations under the Act with respect to an
amendment or supplement to a prospectus, which amendment or supplement (x)
shall have been filed by the Company with the Commission, (y) shall have been
furnished to the Holder in a timely manner and in sufficient quantities, and
(z) shall not contain such statement, alleged statement, omission or alleged
omission, and if such purchaser of Registrable Securities shall not otherwise
have received a copy thereof at or prior to the written confirmation of such
sale to such person.
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(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, or the 1934 Act,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, 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 by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement
contained in this Subsection 1.10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and provided, further, however, that in no
event shall any selling Holder's liability under this Subsection 1.10(b)
exceed the proceeds received by such Holder from the offering (net of any
underwriting discounts and commissions).
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
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 the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. 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 party under this Section 1.10
except to the extent the indemnifying party was actually prejudiced by such
failure.
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(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act
and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration
or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities,
such action to be taken as soon as practicable after the end of the fiscal
year in which the first registration statement filed by the Company for
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the offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the current public information condition of
SEC Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company), the Act and the 1934
Act (at any time after it has become subject to such reporting requirements),
(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 in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive at any
time after the completion of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating solely to the sale of securities to current or former employees,
officers, advisors, consultants or directors of the Company or any subsidiary
of the Company pursuant to a stock purchase plan or stock option or
restricted stock awards approved by the Board of Directors of the Company or
a registration statement on Form S-4 or a similar successor form), a written
request from a Holder or Holders of Registrable Securities that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such
Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within twenty (20) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.12: (1) if Form S-3 is not available for such offering by the Holders; (2)
if the Holders propose to sell Registrable
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Securities at an aggregate price to the public (net of any underwriting
discounts or commissions) of less than $1,000,000; (3) if the Company shall
furnish to the Holders a certificate signed by the President of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form
S-3 registration statement for a period of not more than one hundred twenty
(120) days after receipt of the request of the Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; (4) if the Company has
already effected two (2) registrations on Form S-3, or any equivalent
successor form, for the Holders pursuant to this Section 1.12 within the
twelve months preceding such request; or (5) in any particular jurisdiction
in which the Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with
a registration requested pursuant to this Section 1.12, including, without
limitation, all registration, filing, qualification, printers' and accounting
fees and the reasonable fees and disbursements of one (1) counsel for the
selling Holder or Holders and counsel for the Company, but excluding any
underwriting discounts or commissions associated with Registrable Securities,
shall be borne by the Company. Registrations effected pursuant to this
Section 1.12 shall not be counted as registrations effected pursuant to
Sections 1.2 or 1.3.
(d) The Company shall not be obligated to effect any registration
pursuant to this Section 1.12 if the Company delivers to the Holders
requesting registration under this Section 1.12 an opinion, in form and
substance acceptable to such Holders, of counsel satisfactory to such
Holders, that the Registrable Securities so requested to be registered may be
sold or transferred pursuant to Rule 144(k) under the Act.
1.13 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related obligations) by a Holder, in the case of a Holder
that is an investment company registered under the Investment Company Act of
1940, to another such investment company (a "Related Mutual Fund") that has
the same investment advisor as the transferring investment company, without
restriction or requirement as to number of shares, or to a transferee or
assignee of such securities who, as a result of such assignment or transfer,
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acquires at least 750,000 shares of Registrable Securities (subject
to appropriate adjustment for stock splits, combinations and similar events)
(in any such case, a "Permitted Assignee"), provided: (a) the Company
is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
(b) such transferee or assignee agrees in writing to be bound by and subject
to the terms and conditions of this Agreement; and (c) such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted
under the Act.
1.14 [Reserved]
1.15 Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in this Section 1 after five (5) years
following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with a
firm commitment underwritten offering of its securities to the general public
resulting in gross proceeds to the Company of at least $7,500,000 and at a
price per share to the public of at least $3.40 (as adjusted for stock splits,
combinations and similar events) (a "Qualified Public Offering").
2. Covenants of the Company, Confidentiality.
2.1 Financial Statements and Other Information. Except as otherwise set
forth below in this Section 2.1, until the Company is subject to the
reporting requirements of the 1934 Act, the Company will deliver to each of
the Investors, for so long as such Investor holds any shares of the Company's
Series C Preferred Stock or Series C1 Preferred Stock (or Common Stock issued
upon conversion thereof):
(a) as soon as available, but in any event within forty-five (45)
days after the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of operations and consolidated cash flows
of the Company and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such quarter, and
consolidated balance sheets of the Company and its subsidiaries as of the end
of such quarterly period, setting forth in each case comparisons to the
annual budget and to the corresponding period in the preceding fiscal year,
all such statements to be prepared in accordance with generally accepted
accounting principles, consistently applied (except for the absence of notes
and subject to normal year-end adjustments);
(b) as promptly as possible (but in any event within one hundred
twenty (120) days) after the end of each fiscal year, (i) consolidated
statements of operations and a
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consolidated statement of cash flows of the Company and its subsidiaries for
such fiscal year and consolidated balance sheets and statements of
stockholders' equity of the Company and its subsidiaries as of the end of
such fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by an
unqualified opinion (except for qualifications regarding specified contingent
liabilities) of an independent accounting firm selected by the Company's
Board of Directors and (ii) to the extent not otherwise included in the
audited annual financial statements delivered pursuant to the preceding
clause (i), unaudited comparisons to budget and the preceding fiscal year;
(c) prior to the end of each fiscal year, an annual budget (approved
by the Board of Directors) prepared on a monthly, consolidated basis for the
Company and its subsidiaries for the succeeding fiscal year (displaying
detailed anticipated statements of operations and cash flows and balance
sheets), and promptly upon preparation thereof any other significant budgets
which the Company prepares and any revisions of such annual or other budgets;
(d) promptly (and in any event within thirty (30) days) after the
discovery or receipt of notice of any event or circumstance affecting the
Company or its subsidiaries that is determined in good faith by the Company
to be material to the Company and its subsidiaries, taken as a whole, a
letter from the Chief Executive Officer or Chief Financial Officer of the
Company specifying the nature and period of existence thereof and, in the
case of material litigation, what actions the Company and its subsidiaries
have taken and propose to take with respect thereto;
(e) promptly after transmission thereof, copies of all financial
statements, proxy statements, reports and any other written communications
which the Company sends to its stockholders generally and copies of all
regular, special or periodic reports which it files with the SEC or with any
securities exchange on which any of its securities are then listed, and
copies of all press releases and other statements made available generally by
the Company to the public;
(f) a notice specifying the terms of all sales of the Company's
securities, promptly following the consummation thereof (other than issuances
to officers, directors, advisors, employees or consultants approved by the
Company's Board of Directors);
(g) commencing in fiscal 1995, within fifteen (15) days after the
end of each month, an income statement for such month and a balance sheet of
the Company for and as of the end of such month, with comparisons to budget,
together with such other business and financial data as may be reasonably
requested by each Investor;
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(h) notice of the effectiveness under the Act of the registration
covering the Company's initial public offering, such notice to be provided by
telecopier immediately following the SEC's notification to the Company of
such effectiveness; and
(i) notice as to whether the Company continues to meet the active
business requirements of Section 1202 of the Internal Revenue Code, such
notice to be given (x) annually at the time of the delivery of the audited
financial statements pursuant to paragraph (a) above, (y) promptly following
the written request of an Investor and (z) at such time as facts come to the
Company's attention that lead it to reasonably believe it no longer meets
such requirements.
Each of the financial statements referred to in this Section 2.1 will
fairly present in all material respects the Company's consolidated financial
position and results of operations as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end audit adjustments (none of which would, alone
or in the aggregate, be materially adverse to the Company's financial
condition, operating results or business prospects). The Company's
obligation to provide to the Investors the materials described in Subsection
(e) above will continue after the Company is subject to the reporting
requirements of the 1934 Act until the Investors no longer hold any shares of
the Company's Series C Preferred Stock or Series C1 Preferred Stock (or
Common Stock issued upon conversion thereof).
2.2 Inspection of Property. Until the Company is subject to the
reporting requirements of the 1934 Act, the Company will permit the
Investors, or any representatives designated by either of the Investors, upon
reasonable notice and during normal business hours and such other times as
either of the Investors may reasonably request, to (i) visit and inspect any
of the properties of the Company and its subsidiaries, (ii) examine the
corporate and financial records of the Company and its subsidiaries and make
copies thereof or extracts therefrom, (iii) discuss the affairs, finances and
accounts of the Company and its subsidiaries with the directors, senior
management and independent accountants of the Company and its subsidiaries,
and (iv) consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts. The Company may, as
a condition to any inspection or visit by an Investor or its representative
pursuant to this Section 2.2, require such Investor or representative to
execute and deliver a confidentiality agreement reasonably acceptable to the
Company.
2.3 Right of First Offer. Subject to the terms and conditions specified
in this Section 2.3, the Company hereby grants to each Holder a right of
first offer with respect to future sales by the Company of its Shares (as
hereinafter defined). A Holder shall be entitled to apportion the right of
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first offer hereby granted it among itself and its affiliates and, in the
case of a Holder that is a registered investment company, among itself and
its Related Mutual Funds, in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("Shares") in a transaction the primary purpose of which (as determined
in good faith by the Board of Directors of the Corporation) is to raise
capital, the Company shall first make an offering of such Shares to each
Holder in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice")
to the Holders stating (i) its bona fide intention to offer such Shares, (ii)
the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within twenty
(20) calendar days after giving of the Notice, the Holder may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up
to that portion of such Shares which equals the proportion that the number of
shares of Common Stock issued and held, or issuable upon conversion of the
Series C Preferred Stock and Series C1 Preferred Stock then held, by such
Holder bears to the total number of shares of Common Stock of the Company
then outstanding (assuming full conversion of all convertible securities)
("Pro Rata Share") plus up to a specified number of Shares not subscribed for
by other Holders or other persons receiving the opportunity to subscribe for
the Shares. The closing of the purchase and sale of the Shares subscribed
for shall take place within thirty-five (35) days of the giving of the
Notice. To the extent a Holder does not elect to purchase or obtain the full
amount of its Pro Rata Share, the unsubscribed portion of such Holder's Pro
Rata Share may be purchased or obtained by any other Holder or Holders, on a
pro rata basis, at the price and on the terms specified in the Notice,
provided that such purchase shall be consummated within such thirty-five (35)
day period and provided further, however, that the Company shall not be
required to provide any additional notice offering the unsubscribed Shares to
the Holders.
(c) If all Shares referred to in the Notice which Holders are
entitled to purchase pursuant to Subsection 2.3(b) are not elected to be
purchased as provided in Subsection 2.3(b) hereof, the Company may, during
the one hundred (180) day period following the expiration of the period
provided in Subsection 2.3(b) hereof, offer the remaining unsubscribed
portion of such Shares to any person or persons at a price not less than, and
upon principal terms no more favorable to the offeree than those specified in
the Notice. If the Company does not enter into an agreement for the sale of
the Shares within such period, or if such agreement is not consummated within
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thirty (30) days of the execution thereof, the right provided hereunder shall
be deemed to be revived and such Shares shall not be offered unless first
reoffered to the Holders in accordance herewith.
(d) The right of first offer in this Section 2.3 shall not be
applicable to
(i) shares of Common Stock to be issued to current or former
employees, officers, advisors, consultants or directors of the Company or its
subsidiaries directly or pursuant to a stock purchase plan or stock option or
stock awards approved by the Board of Directors of the Company;
(ii) Common Stock issued or issuable upon conversion of the
Company's Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Preferred Stock or Series C1 Preferred Stock or any
other convertible securities issued in compliance with this Section 2.3; or
(iii) Common Stock issued by the Company in connection with:
(x) the issuance of senior indebtedness to financial institutions, (y)
equipment or other leases approved by the Board of Directors, (z) any
acquisition of licenses or other rights, assets or technology from third
parties or corporate partnering arrangements or acquisition of another
entity, provided that in any such case such issuance is approved by the Board
of Directors of the Company.
2.4 Positive Covenants. So long as any shares of the Preferred Stock
are outstanding, the Company agrees as follows:
(a) The Company will retain independent public accountants of
recognized national or regional standing who shall certify the Company's
financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company, are
terminated, the Company will promptly thereafter notify the Holders and will
request the firm of independent public accountants whose services are
terminated to deliver to the Holders a letter from such firm setting forth
the reasons for the termination of their services. In the event of such
termination, the Company will promptly thereafter engage another firm of
independent public accountants of recognized national or regional standing.
In its notice to the Holders the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors of the
Company or any committee thereof.
(b) The Company will cause senior management personnel and key
employees now or hereafter employed by it or any subsidiary to enter into an
agreement with respect to proprietary information and inventions.
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<PAGE>
(c) The Company's Board of Directors will meet at least once every
fiscal quarter.
(d) The Company shall, promptly following the date of this
Agreement, obtain, and thereafter maintain in full force and effect, fire,
casualty, workmen's compensation and liability insurance policies, with
extended coverage, in such amounts and with such coverage as are carried by
companies in a position similar to that of the Company.
(e) The Company shall maintain in full force and effect key-man life
insurance policies on the lives of each of Arnold Caplan and James Burns in
the amount of at least $1,000,000. The Company shall promptly obtain, and
thereafter maintain in full force and effect, a key-man life insurance policy
on the life of Stephen Haynesworth in the amount of at least $1,000,000,
provided that such insurance is available on commercially reasonable terms.
(f) The Company shall promptly take all action necessary to reduce
the number of authorized shares of its Series A Convertible Preferred Stock
from 12,300,000 shares to 8,274,500 shares.
2.5 Termination of Certain Covenants. The covenants set forth in
Section 2.4 shall terminate and be of no further force or effect upon the
consummation of a Qualified Public Offering.
2.6 Confidentiality.
(a) Each of the Investors agrees that any financial, legal, business
or technical information disclosed to it by the Company or any of its
representatives whether before or after the date hereof, shall be considered
confidential and proprietary, if it is conspicuously labeled as
"Confidential" or "Proprietary" or ,if disclosed orally, it is identified at
the outset as confidential or proprietary or is identified as such in writing
promptly after disclosure. The Investor shall not disclose such confidential
information to any third party (other than its employees, agents, auditors,
representatives and others who need to know such information and to
representatives of regulatory agencies ("Authorized Recipients")), and shall
hold such information in confidence and not use it other than for evaluating
and monitoring its investment in the Company. Such confidential and
proprietary information shall include, without limitation, marketing and
sales information, commercialization plans and information such as patent
applications, inventions, trade secrets, systems, methods, apparatus,
designs, tangible material, and products and derivatives thereof if it is
labeled or identified "confidential" as set forth above. Each Investor shall
cause its respective Authorized Recipients to comply with the confidentiality
and nonuse covenants and agreements of such
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<PAGE>
Investor and shall be responsible for any breach thereof by its Authorized
Recipients.
(b) The above obligations of confidentiality shall not be applicable
to the extent:
(i) such information is currently public knowledge or becomes
public knowledge through no fault of an Investor or its Authorized Recipients;
(ii) such information is in the possession of the Investor prior
to the disclosure to it by the Company; or
(iii) such information is rightfully acquired from a third
party with no restrictions on its disclosure or use; or
(iv) the Investor is legally compelled by an order of a court
of competent jurisdiction to disclose such information to such court, but
only after such Investor has given notice of such order; or
(v) the Investor has received the express consent from an
authorized officer of the Company to disclose or use such information.
3. Miscellaneous.
3.1 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Notwithstanding the
foregoing, the rights contained in Sections 2.1 and 2.2 may not be assigned
by an Investor to any party other than a Related Mutual Fund without the
Company's prior written consent, which shall not be unreasonably withheld.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, disregarding Delaware principles of
conflicts of laws which would otherwise provide for the application of the
substantive laws of another jurisdiction.
3.3 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.
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<PAGE>
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or five
(5) days after deposit with the United States Post Office or air courier in
the case of non-U.S. parties, by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address indicated
for such party on the signature page hereof, or at such other address as such
party may designate by ten (10) days' advance written notice to the other
parties.
3.6 Expenses. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of two-thirds of the Registrable Securities then outstanding. Any amendment
or waiver effected in accordance with this Section 3.7 shall be binding upon
each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with
its terms.
3.9 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject
matter hereof.
[The remainder of this page has been intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
-------------------------------
James S. Burns, President
Address: Wearn Building, 4th Floor
11100 Euclid Avenue
Cleveland, Ohio 44106
Attn: President
<PAGE>
INVESTORS:
INVESCO STRATEGIC PORTFOLIOS, INC. -
HEALTH SCIENCES PORTFOLIO
By: /s/ Glen A. Payne
-------------------------------
Name: Glen A. Payne
------------------------------
Title: Secretary
------------------------------
Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Director of Private Placements
THE GLOBAL HEALTH SCIENCES FUND
By: /s/ Glen A. Payne
------------------------------
Name: Glen A. Payne
------------------------------
Title: Secretary
------------------------------
Address: c/o Invesco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Director of Private Placements
<PAGE>
CO-SALE AGREEMENT
This CO-SALE AGREEMENT (the "Agreement"), is made as of the 25th day of
May, 1994, by and among Osiris Therapeutics, Inc., a Delaware corporation
(the "Company"), James S Burns, Arnold I. Caplan, Eden L. Goldberg, Harriet
J. Goldberg; Jonathan L. Goldberg, Rebecca L. Goldberg, Victor M. Goldberg
and Stephen E. Haynesworth (such persons are referred to individually herein
as a "Founder" and collectively as the "Founders") Invesco Strategic
Portfolios, Inc. - Health Sciences Portfolio ("ISP") and The Global Health
Sciences Fund ("GHS") (ISP and GHS are referred to collectively herein as the
"Investors" and sometimes individually as an "Investor").
WHEREAS, the Company has agreed to sell, and the Investors have severally
agreed to purchase, shares of the Company's Series C Convertible Preferred
Stock, par value $.001 per share (the "Series A Preferred Stock") pursuant to
a Stock Purchase Agreement dated as of the date hereof by and between the
Company and the Investors (the "Stock Purchase Agreement");
WHEREAS, the Series C Preferred Stock is convertible into shares of the
Company's Common Stock, par value $.00l per share ("Common Stock");
WHEREAS, the Founders own shares of the Company's Common Stock;
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Stock Purchase Agreement that each of the Founders and
the Company has executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and other good and valuable consideration, the receipt, adequacy
and sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
l. Certain Defined Terms. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Founder Shares" shall mean and include all shares of the
Company's capital stock now owned or hereafter acquired by the Founders,
including all other securities of the Company which may be issued to such
Founders in exchange for or in respect of such shares (whether by way of
stock split, stock dividend, combination, reclassification, reorganization,
or any other means).
<PAGE>
(b) "Investors' Shares" shall mean and include all shares of the Company's
capital stock now owned or hereafter acquired by the Investors, including all
other securities of the Company which may be issued to the Investors in
exchange for or in respect of such shares (whether by way of stock split,
stock dividend, combination, reclassification, reorganization, or any other
means).
2. Prohibited Transfers. No Founder shall sell, assign, transfer,
pledge, hypothecate, mortgage, encumber or dispose of all or any of his or
its Founder Shares except to the Company or in accordance with the terms of
this Agreement, including Section 3 hereof. Notwithstanding the foregoing:
(i) a Founder may, following notice to the Company and the Investors,
transfer all or any of his Founder Shares to another Founder (it being
acknowledged and agreed that all such Founder Shares shall remain subject to
the restrictions of this Agreement following such transfer); and (ii) a
Founder may transfer all or any of his Founder Shares by way of gift to any
member of his family or to any trust for the benefit of any such family
member or the Founder, or by will or the laws of descent and distribution;
provided that (A) the transferring Founder shall inform the Investors and the
Company of such transfer or gift prior to effecting it and (B) the transferee
or donee shall furnish the Company and the Investors with a written agreement
to be bound by and comply with all provisions of this Agreement and any other
applicable agreements to the same extent as if such transferee were the
Founder. Such transferred Founder Shares shall remain "Founder Shares"
hereunder, and such transferee or donee shall be treated as a "Founder", for
purposes of this Agreement. As used herein, the word "family" shall include
any spouse, lineal ancestor or descendant, brother or sister.
3. Right of Co-Sale Restricting Shares.
(a) Right of Co-Sale in Favor of Investors.
(1) Subject to any right of first refusal in favor of the
Company, if any Founder proposes to sell or transfer any Founder Shares
(whether or not subject to repurchase by the Company) by him in one or more
related transactions, then, with the exception of a transfer or sale pursuant
to Section 2 or Subsection 3(c)(1) hereof, such Founder shall promptly give
written notice (the "Founder Notice") to the Investors and the Company at
least twenty (20) days prior to the closing of such sale or transfer. The
Founder Notice shall describe in reasonable detail the proposed sale or
transfer including, without limitation, the number of Founder Shares to be
sold or transferred, the nature of such sale or transfer, the consideration
to be paid, and the name and address of each prospective purchaser or
transferee.
(2) Each Investor that elects to participate in a sale of Founder Shares
under this Section 3 (an "Investor
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<PAGE>
Participant") may sell all or any part of that number of Investors' Shares
equal to the product obtained by multiplying (i) the aggregate number of
Founder Shares covered by the Founder Notice by (ii) 16.8% in the case of
GHS, and 18.2% in the case of ISP.
(3) Each Investor Participant shall effect its participation in
the sale by promptly delivering to the selling Founder for transfer to the
prospective purchaser one or more certificates, properly endorsed for
transfer, which represent:
(i) at least the number of shares of Common Stock that such
Investor Participant is entitled and elects to sell; or
(ii) at least that number of shares of Series C Preferred
Stock which is at such time convertible into the number of shares of Common
Stock which such Investor Participant is entitled and elects to sell. In the
alternative, the Founder may require the Investor Participant to sell its
shares directly to the purchaser named in the Founder Notice. If the Founder
so elects, he shall so indicate in the Founder Notice and shall assign to
each Participating Investor so much of the Founder's interest in the
agreement of sale as the Participating Investor shall be entitled and shall
require the proposed purchaser to consent to such assignment, if necessary.
(4) The stock certificate or certificates to be delivered by
Investor Participant as specified in Subsection 3(a) (3) shall be transferred
to the prospective purchaser upon consummation of the sale of the Founder
Shares pursuant to the terms and conditions specified in the Founder Notice,
and the selling Founder, unless he has made the election described in the
preceding paragraph (3) shall concurrently therewith remit to such Investor
Participant that portion of the sale proceeds to which such Investor
Participant is entitled by reason of its participation in such sale. To the
extent that any prospective purchaser or purchasers prohibits such assignment
or otherwise refuses to purchase shares or other securities from an Investor
Participant, the selling Founder shall not sell to such prospective purchaser
or purchasers any Founder Shares unless and until, simultaneously with such
sale, the selling Founder shall purchase such shares or other securities from
such Investor Participant. In addition, the Founder shall not be required to
purchase any shares or remit any proceeds to a Participating Investor if the
proposed sale fails to be consummated for any reason.
(5) The Investors' exercise or non-exercise of the right to
participate in one or more sales of Founder Shares made by a Founder shall
not adversely affect their rights as to subsequent sales of Founder Shares
subject to this Section 3(a).
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<PAGE>
(6) Subject to the rights of the Investors that have elected to
participate in the sale of Founder Shares, the selling Founder may, not later
than sixty (60) days following delivery to the Company and each of the
Investors of the Founder Notice, conclude a transfer of any or all of the
Founder Shares covered by the Founder Notice on terms and conditions not
materially more favorable to the Founder different from those described in
the Founder Notice. Any proposed transfer on terms and conditions materially
more favorable to the Founder than those described in the Founder Notice, as
well as any subsequent proposed transfer of any of the Founder Shares by the
selling Founder, shall again be subject to the co-sale rights of the
Investors and shall require compliance by the Founder with the procedures
described in this Section 3(a).
(b) Termination of Right of Co-Sale. Notwithstanding anything in this
Section 3 to the contrary, the right of co-sale described in Section 3(a)
shall terminate upon the earlier of (i) the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
on Form S-l under the Act, covering the offer and sale of the Company's
Common Stock to the general public resulting in gross proceeds to the Company
of at least $7,500,000 and at a price per share to the public of at least
$3.40 (as appropriately adjusted for stock splits, stock dividends,
combinations, reclassifications and similar events) (a "Qualified Public
Offering"); or (ii) the closing of the Company's sale of all or substantially
all of its assets or the acquisition of the Company by another entity by
means of merger or consolidation resulting in the exchange of the outstanding
shares of the Company's capital stock for securities or consideration issued,
or caused to be issued, by the acquiring entity or its subsidiary.
(c) Exempt Transfers.
(1) Notwithstanding the foregoing, the provisions of Section 3
shall not apply to the sale of any Founder Shares (i) to the public pursuant
to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Act; (ii) to the Company at
cost; or (iii) in connection with the INVESTORS exercise of their co-sale
right granted pursuant to Section 3(a) hereof.
(2) This Section 3 shall in no manner limit the right of the
Company to repurchase securities from a Founder, consultants, employees or
directors pursuant to its repurchase rights set forth in applicable stock
restriction, repurchase or other agreements.
(d) Prohibited Transfers. Any attempt by a Founder to transfer
Founder Shares in violation of Section 3 hereof shall be void and the Company
agrees it will not effect
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<PAGE>
such a transfer nor will it treat any alleged transferee as the holder of
such shares.
(e) Assignabilitv of Rights. The co-sale rights granted to the
Investors herein shall be assignable only (i) to an assignee or transferee
who, as a result of such assignment, acquires at least 100,000 Investors,
Shares (subject to adjustment for stock splits, stock dividends,
combinations, reclassifications or similar events); or (ii) as to assignments
by an Investor, to another Investor or to an investment company registered
under the Investment Company Act of 1940 that has the same investment advisor
as the transferring Investor. In the event of any such assignment, the
applicable percentage specified in Section 3(a)(2)(ii) shall be allocated
ratably between the Investor and its assignee or transferee.
(f) Stock Split. All references to numbers of shares in this Section
3 shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring
after the date of this Agreement.
4. Term. This Agreement shall terminate as set forth in Section 3(b).
5. Equitable Remedies. Without limiting the rights of each party hereto
to pursue all other legal and equitable rights available to such party for
any other party's failure to perform its obligations under this Agreement,
each such party acknowledges and agrees that the remedy at law for any
failure to perform obligations hereunder would be inadequate and all such
parties shall be entitled to specific performance, injunctive relief or other
equitable remedies in the event of any such failure.
6. Legend. Each certificate evidencing any of the Shares shall bear a
legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND
MAY NOT BE SOLD, EXCHANGED, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF EXCEPT IN ACCORDANCE WITH AND SUBJECT TO
ALL THE TERMS AND CONDITIONS OF A CERTAIN
CO-SALE AGREEMENT DATED AS OF MAY 19, 1994, A
COPY OF WHICH THE CORPORATION WILL FURNISH TO
THE HOLDER OF THIS CERTIFICATE UPON REQUEST
AND WITHOUT CHARGE."
7. Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or five
(5) days after deposit with the United States Post Office or air courier in
the
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<PAGE>
case of non-U.S. parties, by registered or certified mail, postage prepaid
and addressed to the party to be notified at the address indicated for such
party on the signature page hereof, or at such other address as such party
may designate by ten (10) days advance written notice to the other parties.
8. Entire Agreement; Amendments. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the
subject matter hereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of the Company, the holders of at least two-thirds
of the Common Stock issued or issuable upon conversion of the Series C
Preferred Stock and the holders of a majority of the outstanding Founder
Shares. Any amendment or waiver effected in accordance with this Section 8
shall be binding upon each holder of any such securities at the time
outstanding (including securities into which such securities are
convertible), each future holder of such securities and the Company.
9. Governing Law; Successors and Assigns. This Agreement shall be
governed by and construed under the laws of the State of Ohio, disregarding
any Ohio principles of conflicts of laws that would otherwise provide for the
application of the substantive laws of another jurisdiction. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of Series C
Preferred Stock or any shares of Common Stock issued upon conversion
thereof). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
10. Expenses. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
11. Waivers. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a
waiver of any subsequent breach or default of the same or similar nature.
12. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as
if such provision were so excluded and shall be enforceable in accordance
with its terms.
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<PAGE>
13. Captions. Captions are for convenience only and are not deemed to be
part of this Agreement.
14. 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.
[The remainder of this page has been intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
----------------------------------
Title: President
--------------------------------
Address: Wearn Building,
4th Floor
11100 Euclid Avenue
Cleveland, Ohio 44106
Attn: President
JAMES S. BURNS
/s/ James S. Burns
---------------------------------------
Address: c/o Osiris Therapeutics
ARNOLD I. CAPLAN
/s/ Arnold I. Caplan
---------------------------------------
Address: CWRU
EDEN L. GOLDBERG
/s/ Victor M. Goldberg
---------------------------------------
Address: Pursuant to power of attorney
<PAGE>
HARRIET J. GOLDBERG
/s/ Victor M. Goldberg
---------------------------------------
Address: Pursuant to power of attorney
JONATHAN L. GOLDBERG
/s/ Victor M. Golberg
---------------------------------------
Address: Pursuant to power of attorney
REBECCA L. GOLDBERG
/s/ Victor M. Goldberg
---------------------------------------
Address: Pursuant to power of attorney
VICTOR M. GOLDBERG
/s/ Victor M. Golberg
---------------------------------------
Address:
STEPHEN E. HAYNESWORTH
/s/ Stephen E. Haynesworth
---------------------------------------
Address:
<PAGE>
INVESCO STRATEGIC PORTFOLIOS,
INC. - HEALTH SCIENCES PORTFOLIO
By: /s/ Glen A. Payne
------------------------------------
Name: Glen A. Payne
---------------------------------
Title: Secretary
---------------------------------
Address: c/o Invesco Trust Company
7800 E. Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Director of
Private Placements
THE GLOBAL HEALTH SCIENCES FUND
By: /s/ Glen A. Payne
------------------------------------
Name: Glen A. Payne
---------------------------------
Title: Secretary
---------------------------------
Address: c/o Invesco Trust Company
7800 E. Union Avenue
Suite 800
Denver, Colorado 80237
Attn: Director of
Private Placements
<PAGE>
May 25, 1994
Global Health Scientist Fund
Investco Strategic Portfolio Inc-Health Scientist
Portfolio
c/o Investco Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
Gentlemen:
As of the date hereof I have signed that certain Co-Sale Agreement among
Osiris Therapeutics Inc., each of you, and certain other parties on behalf of
my wife and my children pursuant to a Power of Attorney that I will obtain
from each of them promptly after the date hereof. Prior to signing the
Co-Sale Agreement I have discussed the Power of Attorney with my wife and
children and they are willing to sign a written Power of Attorney to evidence
my authority to sign on their behalf.
Sincerely,
/s/ Victor M. Golberg
---------------------------------
Victor M. Goldberg, M.D.
VMG/co
<PAGE>
Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made by and
between Osiris Therapeutics, Inc. (the "Company") and the undersigned
("Investor").
Recitals
A. The Investor desires to purchase from the Company, and the
Company desires to issue and sell to the Investor, units (the "Units")
consisting of shares of the Company's Series D Convertible Preferred Stock, par
value $.001 per share (the "Series D Preferred Stock"), all upon the terms set
forth in the Company's Confidential Private Placement Memorandum dated June 9,
1995, as amended or supplemented from time to time, including all attachments,
schedules and exhibits thereto (the "Memorandum"). Each share of Series D
Preferred Stock is currently convertible into one share of the Company's Common
Stock, $.001 par value (the "Common Stock").
B. To induce the Investor to purchase the Units, the Company has
undertaken to grant the Investor limited rights to cause the Company to register
under the Securities Act of 1933, as amended, and the rules and regulations
thereunder (collectively, the "Securities Act"), the Common Stock issued upon
conversion of the Series D Preferred Stock to be purchased by the Investor. This
Agreement sets forth the terms and conditions of such undertaking.
Agreements
In consideration of the foregoing and the mutual promises contained herein,
the Company and the Investor covenant and agree as follows:
l. Definitions. For purposes of this Agreement:
1.1 The terms "register, registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act and the
declaration or ordering of effectiveness of such registration statement or
document by the Securities and Exchange Commission (the "SEC"); and
1.2 The term "Registrable Securities" means collectively (i) the
Common Stock of the Company issued upon the conversion of the Series D Preferred
Stock, Series A Convertible Preferred Stock, par value $.001 per share ("Series
A Preferred Stock"), Series B Convertible Preferred Stock, par value $.001 per
share ("Series B Preferred Stock"), Series C Convertible
<PAGE>
Preferred Stock, par value $.001 per share ("Series C Preferred Stock") and
Series C1 Convertible Preferred Stock, par value $.001 per share ("Series C1
Preferred Stock") and (ii) any Common Stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of such Common Stock, excluding in all cases, however, any
Registrable Securities sold by an Investor in a transaction in which its
registration rights under this Agreement are not assigned.
2. Registration.
2.1 In the event that the Company completes an underwritten initial
public offering of its Common Stock pursuant to a registration statement
declared effective under the Securities Act (an "IPO") prior to December 22,
1996, the Company shall, upon the written request of the Investor delivered
within 30 days of such completion, use its best efforts to cause all Registrable
Securities held by the Investor to be registered under the Securities Act not
later than 180 days after the closing date of such initial public offering;
provided, however, that the Investor may inform the Company in writing that it
wishes to exclude all or a portion of its Registrable Securities from such
registration, and have no further rights to have such Registrable Securities
registered by the Company.
2.2 The holders of a majority of the Registrable Securities shall
have the right to select the managing underwriter(s), if any, for such
registration of the Registrable Securities, subject to the approval of the
Company, which shall not be unreasonably withheld.
2.3 The Company is obligated to effect only one registration pursuant
to this Agreement.
2.4 In connection with an IPO of the Company's Common Stock, the
Investor agrees that, without the prior written consent of the Company, the
Investor shall not offer, sell, contract to sell, or otherwise dispose of any
Registrable Securities for and during the period beginning on the date that the
Company executes an underwriting agreement with respect to such offering and
continuing to and including 180 days after the date of the prospectus included
in the registration statement under the Securities Act for such offering.
3. Obligations of the Company.
When required under Section 2.1 of this Agreement to effect the
registration of the Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
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3.1 prepare and file with the SEC a registration statement (the
"Registration Statement") with respect to all Registrable Securities, other than
any Registrable Securities excluded by the Investor pursuant to Section 2.1, and
use its best efforts to cause the Registration Statement to become effective not
later than 180 days after the closing date of the Company's initial public
offering of its securities, and keep the Registration Statement effective at all
times until December 22, 1996, 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, in
light of the circumstances in which they were made, not misleading;
3.2 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 until
December 22, 1996, and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Registration
Statement;
3.3 furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities Act,
and such other documents as the Investor may reasonably request in writing in
order to facilitate the public sale or other disposition of Registrable
Securities;
3.4 use its best efforts to register and quality the securities
covered by the Registration Statement under the securities or blue sky laws of
such jurisdictions as shall be reasonably requested by the Investor, and to
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements and to take such other actions as may
be necessary to maintain such registration and qualification in effect at all
times until December 22, 1996, and to take all other actions necessary or
advisable to enable the disposition of such securities in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business in any
jurisdiction where it is not now so qualified, to take any action which would
subject it to taxation as to the service of process in suits other than those
arising out of the offer or sale of the securities covered by such registration
statement in any jurisdiction where it is not now so subject, to conform the
composition of its assets at the time to the securities or blue sky laws of such
jurisdiction or to provide any undertaking or make any change in its charter
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or bylaws which its Board of Directors determines to be contrary to the best
interests of the Company and its stockholders;
3.5 in the event the holders of a majority in interest of the
Registrable Securities select the managing underwriters in accordance with
Section 2.2 of this Agreement, 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
managing underwriter of such offering. The Investor hereby agrees to enter into
and perform its customary obligations under any such agreement including,
without limitation, customary indemnification and contribution obligations;
3.6 notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to be
delivered under the Securities Act, of the happening of any event 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,
in light of the circumstances in which they were made, not misleading. The
Company shall promptly amend or supplement the Registration Statement to correct
any such untrue statement or omission;
3.7 notify the Investor of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible time;
3.8 make generally available to its security holders as soon as
practicable, but not later than 90 days after the close of the period covered
thereby, an earnings statement (in form complying with the provisions of Rule
158 under the Securities 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;
3.9 at the request of the holders of a majority in interest of the
Registrable Securities, furnish on the date that Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Agreement (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (2) a letter, dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
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to underwriters in an underwritten public offering, addressed to the
underwriters;
3.10 make available for inspection by the Investor, any underwriters
participating in the offering pursuant to the registration and the counsel,
accountants or other agents retained by the Investor or any such underwriter,
all pertinent financial and other records, corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by the Investor or any such underwriters in
connection with the registration;
3.11 if the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be listed
on such exchange. If the Common Stock is not then listed on a national
securities exchange, use its best efforts to facilitate the inclusion of the
Common Stock on the NASDAQ Stock Market.
3.12 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;
3.13 take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any legend restricting the
sale or transfer of such securities) representing the Registrable Securities to
be sold pursuant to the Registration Statement and to enable such certificates
to be in such denominations and registered in such names as the Investor or any
underwriters may reasonably request;
3.14 take all other reasonable actions necessary to expedite and
facilitate the registration of the Registrable Securities pursuant to the
Registration Statement.
4. Furnish Information.
It shall be a condition precedent to the obligations of the Company to take
any action pursuant to this Agreement with respect to the Investor that (a) the
Company shall have received an undertaking satisfactory to it from the Investor
to notify the Company of the happening of any event within the knowledge of the
Investor which causes the prospectus referred to in Section 3.3 hereof as it may
be amended or supplemented, to include an untrue statement of a material fact or
to omit to state any material fact required to be stated therein or necessary to
make the statement therein, in the light of the circumstances under which they
were made, not misleading and (b) such Investor shall furnish to the Company
such information regarding itself the Registrable Securities held by it, and the
intended method of disposition of such Registrable Securities as shall be
reasonably required to effect the
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registration of the Registrable Securities and shall execute such documents
in connection with such registration as the Company may reasonably request.
5. Expenses of Registration.
All expenses other than underwriting discounts and commissions incurred in
connection with registration, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing, filing and
qualification fees, printers and accounting fees, and the fees and disbursements
of counsel for the Company shall be borne by the Company.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify and
hold harmless the Investor, each person, if any, who controls such Investor, any
underwriter (as defined in the Securities Act) for the Investor and each person,
if any, who controls any such underwriter within the meaning of the Securities
Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
against any losses, claims, damages, expenses or liabilities (joint or several)
to which any of them may become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages, expenses or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect there of) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereof (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law, and the Company will reimburse the Investor and
each such underwriter or controlling persons, promptly as such expenses are
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that (a) the indemnity
agreement contained in this Section 6.1 shall not apply to amounts paid in
settlement of any such loss, claim, damage, expense, liability or action if such
settlement is effected without the consent of the Company, which consent
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shall not be unreasonably withheld or delayed, (b) the Company will not be
liable in any such case for any such loss, claim, damage, expense, liability
or action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with information furnished
for use in connection with such registration by the Investor, directors and
officers of the Investor or any such underwriter or controlling person, as
the case may be, or (c) the Company will not be liable to any person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other person, if any, who controls or is controlled by such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, expense or liability (or action in
respect thereto) arises out of such underwriter's failure to send or give a
copy of the final prospectus to the person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of securities to such person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Investor or any such underwriter or controlling person or
the Company and shall survive the transfer of the Registrable Securities by
the Investor.
6.2 To the extent permitted by law, the Investor will indemnify and
hold harmless the Company, each of its directors, each of its officers and
employees who sign the Registration Statement, each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act, any
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 holder or underwriter, against any losses, claims, damages or
liabilities (jointly or severally) or actions to which any of them may become
subject, under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with information furnished to the Company by such Investor for
use in connection with such registration, and such Investor will reimburse the
Company, its directors, officers and employees, each underwriter and
controlling person for any legal or other expense reasonably incurred by any of
them in connection with investigating or defending any such loss, claim, damage,
expense, liability or action; provided, however, that the indemnity agreement
contained in this Section 6.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, expense, liability or action if such settlement is
effected without the consent of the Investor, which consent shall not be
unreasonably withheld, conditioned or delayed.
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6.3 Promptly after receipt by an indemnified party under this Section
6 of notice of the commencement of any action (including any governmental
action) or proceeding, such indemnified party will, 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 that the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel selected by it and, after notice from the indemnifying party of its
election so to assume the defense thereof the indemnifying party shall not be
liable to such indemnified party under Section 6.1 for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the reasonable fees and expenses to be
paid by the indemnifying party, if in the reasonable opinion of counsel for the
indemnifying party, representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding, in which event the indemnifying
party shall not be liable for the fees and expenses of more than one counsel for
all indemnified parties. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Section 6 only to the extent prejudicial to the indemnifying
party's ability to defend such action, but the omission so to deliver written
notice to the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party otherwise than under this
Section 6. In addition, the indemnifying party shall not be required to
indemnify, reimburse or otherwise make any contribution to the amount paid or
payable by the indemnified party for any losses, claims, damages, expenses or
liabilities incurred by the indemnified party in settlement of any actions or
proceedings otherwise covered hereunder unless such settlement has been
previously approved by the indemnifying party. 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, promptly as such expense, loss,
damage, expense or liability is incurred, and upon receipt by the indemnifying
party of such documentation as it may reasonably request.
6.4 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 this Section 6 to the extent permitted by law,
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provided 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 this Section 6, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation and (ii) contribution 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.
7. Reports Under Securities Exchange Act of 1934.
With a view to making available to the Investor the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of the SEC
that may at any time permit the Investor to sell securities of the Company to
the public without registration, the Company agrees to:
7.1 timely file and keep available such information, documents and
reports as may be required or prescribed by the SEC under Section 13 or 15(d)
(whichever is applicable) of the Exchange Act as well as any other information,
reports and documents required of the Company under the Securities Act or the
Exchange Act; and
7.2 furnish to the Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request, (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company), the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), (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 information as the Investor
may reasonably request in availing itself of any rule or regulation of the SEC
allowing the Investor to sell the Registrable Securities without registration.
8. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement may be assigned by
the Investor to transferees or assignees of such securities provided the Company
is, within reasonable time after such transfers, furnished with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; provided, however,
that such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act.
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The term "Investor" as used in this Agreement shall include permitted
assignees.
9. Miscellaneous.
9.1 Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
or sent by registered mail, return receipt requested, addressed (i) if to the
Company, at Osiris Therapeutics, Inc., 2001 Aliceanna Street, Baltimore,
Maryland 21231-2001, Attention: President, and (ii) if to the Investor, at the
address set forth under his name in the Subscription Agreement, or at such other
address as each such party furnishes by notice given in accordance with this
Section 9.1.
9.2 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,
will not operate as a waiver thereof. No waiver will be effective unless and
until it is in writing and signed by the party giving the waiver.
9.3 This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Delaware, as such laws
are applied by Delaware courts to agreements entered into and to be performed
in Delaware by and between residents of Delaware. 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.
9.4 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended,
supplemented, modified or terminated with respect to all holders of
Registrable Securities by a writing executed by the Company and the holders
of a majority of the outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and the Series D Preferred Stock, acting together as a single
class.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of this ____ day of_____________ 1995.
INVESTOR
By: ____________________
Name: __________________
OSIRIS THERAPEUTICS, INC.
By: ____________________
Name: __________________
Title: _________________
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Exhibit 10.6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made by and
between Osiris Therapeutics, Inc. (the "Company") and the undersigned
("Investor").
RECITALS
A. The Investor desires to purchase from the Company, and the Company
desires to issue and sell to the Investor, units (the "Units") consisting of
shares of the Company's Series E Convertible Preferred Stock, par value $.001
per share (the "Series E Preferred Stock"), all upon the terms set forth in
the Company's Confidential Private Placement Term Summary dated September 6,
1996, attached hereto, as amended or supplemented from time to time,
including all attachments, schedules and exhibits thereto (the "Term
Summary"). Each share of Series E Preferred Stock is currently convertible
into one share of the Company's Common Stock, $.001 par value (the "Common
Stock").
B. To induce the Investor to purchase the Units, the Company has
undertaken to grant the Investor limited rights to cause the Company to
register under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively, the "Securities Act"), the Common Stock
issued upon conversion of the Series E Preferred Stock to be purchased by the
Investor. This Agreement sets forth the terms and conditions of such
undertaking.
AGREEMENTS
In consideration of the foregoing and the mutual promises contained
herein, the Company and the Investor covenant and agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
statements or similar documents in compliance with the Securities Act and
the declaration or ordering of effectiveness of such registration statement
or document by the Securities and Exchange Commission (the "SEC"); and
1.2 The term "Registrable Securities" means collectively (i) the Common
Stock of the Company issued upon the conversion of the Series E Preferred
Stock, Series A Convertible Preferred Stock, par value $.001 per share
("Series A Preferred Stock"), Series B Convertible Preferred Stock, par
value $.001 per share ("Series B Preferred Stock"), Series C Convertible
Preferred Stock, par value $.001 per share ("Series C Preferred Stock"),
Series C1 Convertible Preferred Stock, par value $.001 per share ("Series C1
Preferred Stock"), Series D Convertible Preferred Stock, par value $.001 per
share ("Series D Preferred Stock") and (ii) any Common Stock of the
Company issued as
<PAGE>
a dividend or other distribution with respect to, or in exchange for or in
replacement of such Common Stock, excluding in all cases, however, any
Registrable Securities sold by an Investor in a transaction in which its
registration rights under this Agreement are not assigned.
2. Registration.
2.1 In the event that the Company completes an underwritten initial
public offering of its Common Stock pursuant to a registration statement
declared effective under the Securities Act (an "IPO") prior to December 22,
1997, the Company shall, upon the written request of the Investor delivered
within 30 days of such completion, use its best efforts to cause all
Registrable Securities held by the Investor to be registered under the
Securities Act not later than 180 days after the closing date of such
initial public offering; provided, however, that the Investor may inform
the Company in writing that it wishes to exclude all or a portion of its
Registrable Securities from such registration, and have no further rights
to have such Registrable Securities registered by the Company.
2.2 The holders of a majority of the Registrable Securities shall have the
right to propose the managing underwriter(s), if any, for such registration
of the Registrable Securities, subject to the approval of the Company.
2.3 The Company is obligated to effect only one registration pursuant to
this Agreement.
2.4 In connection with an IPO of the Company's Common Stock, the Investor
agrees that, without the prior written consent of the Company, the Investor
shall not offer, sell, contract to sell, or otherwise dispose of any
Registrable Securities for and during the period beginning on the date that
the Company executes an underwriting agreement with respect to such offering
and continuing to and including 180 days after the date of the prospectus
included in the registration statement under the Securities Act for such
offering.
3. Obligations of the Company.
When required under Section 2.1 of this Agreement to effect the
registration of the Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
3.1 prepare and file with the SEC a registration statement (the
"Registration Statement") with respect to all Registrable Securities, other
than any Registrable Securities excluded by the Investor pursuant to Section
2.1, and use its best efforts to cause the Registration Statement to become
effective not later than 180 days after the closing date of the Company's
initial public offering of its securities, and keep the Registration
Statement effective at all times until December 22, 1997, 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
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material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading;
3.2 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 until
December 22, 1997, and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by the
Registration Statement;
3.3 furnish promptly to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities
Act, and such other documents as the Investor may reasonably request in
writing in order to facilitate the public sale or other disposition of
Registrable Securities;
3.4 use its best efforts to register and qualify the securities covered by
the Registration Statement under the securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the Investor, and to
prepare and file in those jurisdictions such amendments (including post-
effective amendments) and supplements and to take such other actions as may
be necessary to maintain such registration and qualification in effect at
all times until December 22, 1997, and to take all other actions necessary
or advisable to enable the disposition of such securities in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business in
any jurisdiction where it is not now so qualified, to take any action which
would subject it to taxation as to the service of process in suits other
than those arising out of the offer or sale of the securities covered by
such registration statement in any jurisdiction where it is not now so
subject, to conform the composition of its assets at the time to the
securities or blue sky laws of such jurisdiction or to provide any
undertaking or make any change in its charter or bylaws which its Board
of Directors determines to be contrary to the best interests of the Company
and its stockholders;
3.5 in the event the holders of a majority in interest of the
Registrable Securities select the managing underwriters in accordance with
Section 2.2 of this Agreement, 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
managing underwriter of such offering. The Investor hereby agrees to enter
into and perform its customary obligations under any such agreement
including, without limitation, customary indemnification and contribution
obligations;
3.6 notify the Investor, at any time when a prospectus relating to
Registrable Securities covered by the Registration Statement is required to
be delivered under the Securities Act, of the happening of any event 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
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statements therein, in light of the circumstances in which they were made,
not misleading. The Company shall promptly amend or supplement the
Registration Statement to correct any such untrue statement or omission;
3.7 notify the Investor of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose. The Company will make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible time;
3.8 make generally available to its security holders as soon as
practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities 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;
3.9 at the request of the holders of a majority in interest of the
Registrable Securities, furnish on the date that Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Agreement (1) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and (2) a letter, dated such date,
from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the underwriters;
3.10 make available for inspection by the Investor, any underwriters
participating in the offering pursuant to the registration and the
counsel, accountants or other agents retained by the Investor or any such
underwriter, all pertinent financial and other records, corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by the Investor or any such underwriters in connection with the
registration;
3.11 if the Common Stock is then listed on a national securities
exchange, use its best efforts to cause the Registrable Securities to be
listed on such exchange. If the Common Stock is not then listed on a
national securities exchange, use its best efforts to facilitate the
inclusion of the Common Stock on the Nasdaq Stock Market.
3.12 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;
3.13 take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any legend restricting
the sale or transfer of such securities) representing the Registrable
Securities to be sold pursuant to the Registration Statement and to enable
such certificates to be in such denominations and registered in such names
as the Investor or any underwriters may reasonably request;
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3.14 take all other reasonable actions necessary to expedite and
facilitate the registration of the Registrable Securities pursuant to the
Registration Statement.
4. Furnish Information.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement with respect to the Investor
that (a) the Company shall have received an undertaking satisfactory to
it from the Investor to notify the Company of the happening of any event
within the knowledge of the Investor which causes the prospectus referred
to in Section 3.3 hereof, as it may be amended or supplemented, to
include an untrue statement of a material fact or to omit to state any
material fact required to be stated therein or necessary to make the
statement therein, in the light of the circumstances under which they
were made, not misleading and (b) such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of such Registrable
Securities as shall be reasonably required to effect the registration of
the Registrable Securities and shall execute such documents in connection
with such registrtion as the Company may reasonably request.
5. Expenses of Registration.
All expenses other than underwriting discounts and commissions incurred
in connection with registration, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration,
listing, filing and qualification fees, printers and accounting fees, and
the fees and disbursements of counsel for the Company shall be borne by
the Company.
6. Indemnification.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will indemnify and hold
harmless the Investor, each person, if any, who controls such Investor, any
underwriter (as defined in the Securities Act) for the Investor and each
person, if any, who controls any such underwriter within the meaning of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any losses, claims, damages, expenses or liabilities
(joint or several) to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, expenses or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein,
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<PAGE>
in light of the circumstances in which they were made, not misleading
or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law, and the Company will reimburse the
Investor and each such underwriter or controlling persons, promptly as
such expenses are incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided,
however, that (a) the indemnity agreement contained in this Section
6.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, expense, liability or action if such settlement is
effected without the consent of the Company, which consent shall not
be unreasonably withheld or delayed, (b) the Company will not be
liable in any such case for any such loss, claim, damage, expense,
liability or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with
information furnished for use in connection with such registration by
the Investor, directors and officers of the Investor or any such
underwriter or controlling person, as the case may be, or (c) the
Company will not be liable to any person who participates as an
underwriter in the offering or sale of Registrable Securities or any
other person, if any, who controls or is controlled by such
underwriter within the meaning of the Securities Act, in any such case to
the extent that any such loss, claim, damage, expense or liability (or
action in respect thereto) arises out of such underwriter's failure to
send or give a copy of the final prospectus to the person asserting an
untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of
securities to such person if such statement or omission was corrected
in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Investor or any such underwriter or controlling person or the Company
and shall survive the transfer of the Registrable Securities by the
Investor.
6.2 To the extent permitted by law, the Investor will indemnify and hold
harmless the Company, each of its directors, each of its officers and
employees who sign the Registration Statement, each person, if any, who
controls the Company within the meaning of the Securities Act or the
Exchange Act, any 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 holder or underwriter, against any losses,
claims, damages or liabilities (jointly or severally) or actions to which
any of them may become subject, under the Securities Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with information
furnished to the Company by such Investor for use in connection with such
registration, and such Investor will reimburse the Company, its directors,
officers and employees, each underwriter and controlling person for any
legal or other expense reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, expense, liability
or action; provided, however, that the indemnity agreement contained in this
Section 6.2 shall not apply to amounts paid in settlement of any such loss,
claim,
6
<PAGE>
damage, expense, liability or action if such settlement is effected without
the consent of the Investor, which consent shall not be unreasonably
withheld, conditioned or delayed.
6.3 Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action (including any governmental action)
or proceeding, such indemnified party will, 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 that the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense
thereof with counsel selected by it and, after notice from the indemnifying
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under Section 6.1 for
any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel for the
indemnifying party, representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding, in which event the
indemnifying party shall not be liable for the fees and expenses of more
than one counsel for all indemnified parties. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party
of any'liability to the indemnified party under this Section 6 only to the
extent prejudicial to the indemnifying party's ability to defend such
action, but the omission so to deliver written notice to the indemnifying
party will not relieve the indemnifying party of any liability that it
may have to any indemnified party otherwise than under this Section 6.
In addition, the indemnifying party shall not be required to indemnify,
reimburse or otherwise make any contribution to the amount paid or payable
by the indemnified party for any losses, claims, damages, expenses or
liabilities incurred by the indemnified party in settlement of any actions
or proceedings otherwise covered hereunder unless such settlement has been
previously approved by the indemnifying party. 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, promptly as such expense,
loss, damage, expense or liability is incurred, and upon receipt by the
indemnifying party of such documentation as it may reasonably request.
6.4 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 this Section 6 to the extent permitted by law,
provided 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 this Section 6, (ii) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any seller of Registrable Securities who was not
7
<PAGE>
guilty of such fraudulent misrepresentation and (iii) contribution 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.
7. Reports Under Securities Exchange Act of 1934.
With a view to making available to the Investor the benefits of Rule
144 promulgated under the Securities Act and any other rule or regulation
of the SEC that may at any time permit the Investor to sell securities of
the Company to the public without registration, the Company agrees to:
7.1 timely file and keep available such information, documents and
reports as may be required or prescribed by the SEC under Section 13 or
15(d) (whichever is applicable) of the Exchange Act as well as any other
information, reports and documents required of the Company under the
Securities Act or the Exchange Act; and
7.2 furnish to the Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request, (i) a written statement
by the Company as to its compliance with the reporting requirements of
Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (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 information as the Investor may reasonably
request in availing itself of any rule or regulation of the SEC allowing
the Investor to sell the Registrable Securities without registration.
8. Assignment of Registration Rights. The rights to have the Company
register Registrable Securities pursuant to this Agreement may be
assigned by the Investor to transferees or assignees of such securities
provided the Company is, within reasonable time after such transfers,
furnished with written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration
rights are being assigned; provided, however, that such assignment shall
be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is
restricted under the Securities Act. The term "Investor" as used in this
Agreement shall include permitted assignees.
9. Miscellaneous.
9.1 Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed
(i) if to the Company, at Osiris Therapeutics, Inc., 2001 Aliceanna
Street, Baltimore, Maryland 21231-2001, Attention: President, and (ii)
if to the Investor, at the address set forth under his name in the
Subscription Agreement, or at such other address as each such party
furnishes by notice given in accordance with this Section 9.1.
8
<PAGE>
9.2 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, will not operate as a waiver thereof. No waiver will be effective
unless and until it is in writing and signed by the party giving the waiver.
9.3 This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Delaware, as such
laws are applied by Delaware courts to agreements entered into and to be
performed in Delaware by and between residents of Delaware. 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.
9.4 This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended,
supplemented, modified or terminated with respect to all holders of
Registrable Securities by a writing executed by the Company and the holders
of a majority of the outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and the Series E Preferred Stock acting together as a single class.
9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of this ____ day of _______________, 1996.
INVESTOR
By: _______________________
Name:______________________
OSIRIS THERAPEUTICS, INC.
By: _______________________
Name: _____________________
Title: ______________________
10
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Exhibit 10.12
MATERIAL TRANSFER AND RESEARCH AGREEMENT
THIS AGREEMENT is entered into this 1st day of April 1995, by and between
OSIRIS THERAPEUTICS, INC., a corporation having a place of business at 11100.
Euclid Avenue, Wearn Building, Fourth Floor, Cleveland, Ohio 44106 ("OSIRIS")
and the Fred Hutchinson Cancer Research Center Foundation, 1124 Columbia
Street, Seattle, Washington 98104 ("Recipient"). Recipient as used in this
Agreement means the Fred Hutchinson Cancer Research Center Foundation and its
successors, assignees, and subcontractors including without limitation Fred
Hutchinson Cancer Research Center ("Center").
l. Recipient agrees to send or has sent to OSIRIS canine bone marrow samples;
and OSIRIS agrees to provide or has provided to Recipient canine mesenchymal
stem cells (cMSCs") that have been transduced with the retrovirus VMS-LacZ
and then expanded ex vivo, which shall hereinafter be referred to as the
"Material(s)", together with other Materials, if any, described in Exhibit A
attached hereto.
2. Recipient agrees to use reasonable efforts to infuse the Materials back
into the respective donor canines with the purpose of studying the homing of
the Materials to the bone marrow compartment; the effect of the Materials on
bone marrow stroma reconstitution and hematopoiesis following marrow ablation
by gamma-irradiation, as further described in Exhibit B attached hereto (the
"Project"). Recipient shall make no commercial use of the Materials.
3. Recipient shall not distribute or release the Materials to any other
person or entity, unless written permission is obtained in advance from
OSIRIS.
4. THE MATERIALS SHALL NOT BE USED IN HUMANS.
5. OSIRIS agrees to pay Recipient a total of $64,557 to support the Project.
A detailed budget is attached as Exhibit C. Payments for funding the Project
shall be payable by
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
Sponsor to Recipient according to the following schedule:
(a) Four monthly payments of $13,000 due upon the first day of the month
beginning April 1, 1995; and Q)) a final payment of $12,557 due upon
completion of the Project and receipt by OSIRIS of a final report from
Recipient.
Payments will be made in United States funds to:
Fred Hutchinson Cancer Research Center Foundation
Attn: Accounts Receivable
1124 Columbia Street, LY-305
Seattle, WA 98104
Tax ID #: 91-1540426
6. During the term of this agreement, OSIRIS agrees to make Kevin Longin, one
of OSIRISs' employees (or, if Mr. Longin is no longer available, another
OSIRIS employee reasonably acceptable to the Recipient) ("Loaned Employee")
available on a full-time basis to work on the Project, as described in
Exhibit B and as otherwise requested by the Principal Investigator. OSIRIS
will pay all of the Loaned Employees salary and benefits and any taxes
arising therefrom. OSIRIS agrees to indemnify, defend, and hold the Recipient
harmless from and against any and all negligent or intentional acts or
omissions of the Loaned Employee and any salary, benefits, taxes or
geovemmental fees arising from his or her employment.
7. Recipient shall own all information, data, applications and inventions and
intellectual property rights based thereon which are conceived or made by
Recipient, or its employees or agents, in connection with or in performance
of the Project ("Recipient Inventions"). OSIRIS and recipient shall jointly
own all information, data, applications and inventions and
2
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
intellectual property rights based thereon which are conceived or made
jointly by (a) Recipient, or its employees or agents, and (b,) OSIRIS, or its
employees or agents, in connection with or in performance of the Project
("Joint Inventions"). Recipient will promptly notify OSIRIS of any Recipient
Inventions or 3oint Inventions of which it is aware. OSIRIS will promptly
notify Foundation of any Joint Invention of which it is aware. OSIRIS will
have sixty (60) days from the date it is notified of any Recipient Invention
to request that a patent application or application for other intellectual
property protection be prepared and filed. Recipient shall promptly prepare,
file, and prosecute each such domestic and foreign application in Recipient's
name. For Joint Inventions, OSIRIS shall promptly prepare, file, and
prosecute each such domestic and foreign application on which the parties
mutually agree. OSIRIS and Recipient will cooperate to ensure that each
application filed will cover all items of commercial interest and importance.
While the party responsible for preparation and filing of the application
shall have sole discretion with respect to decisions regarding the scope and
content of that application and the prosecution thereof; the other party a)
shall be given a reasonable opportunity to review and provide comments
concerning the application; b) shall be kept advised of material developments
with respect to the application and shall be supplied with copies of all
documents received and filed in connection with the prosecution of such
application in sufficient time to comment. Comments by the other party will
be taken into consideration by the party responsible for the application. The
party responsible for the application will be entitled to use reputable
patent counsel of its choice.
8. OSIRIS shall have an exclusive option to a worldwide exclusive license of
all of Recipient's interest in any Recipient Inventions or Joint Inventions,
which will terminate automatically unless it is exercised (including the
execution of a mutually acceptable license agreement) within one (1) year
from the date of notification to OSIRIS of the Recipient Invention. Such
license agreement shall be in a form acceptable to the Recipient, shall
contain provisions protecting the nonprofit tax status of the Recipient,
shall provide for
3
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
royalties, shall be subject to laws and regulations of and agreements with
the United States government, its agencies and funding organizations and to
National Institute of Health guidelines, and shall indemnify and insure the
Recipient against any liability arising directly or indirectly out of
OSIRIS's, its sublicensee's or its or their customers use or sale of products
related to any property licensed by OSIRIS from the Recipient. Any license
agreement entered into between OSIRIS and the Recipient shall include the
following terms:
8.1 Recipient will grant OSIRIS a sole and exclusive worldwide license to
any Recipient Invention or Joint Invention (the "License") to make, have
made, use and sell any products covered by the License, including the right
to grant sublicenses.
8.2 Any License arising from this Agreement shall be in full force and
effect from the Effective Date of the License and shall remain in effect
until all patents issued in all countries in accordance with the License or
Licenses have expired or until otherwise terminated by operation of law,
whichever is last to occur, or by the acts of the parties in accordance with
the terms of the License.
8.3 Recipient will retain a royalty-free right to use Recipient and Joint
Inventions for nonclinical research, testing or educational purposes. In no
event shall Recipient have any right to use Recipient or Joint Inventions for
any commercial purposes whatsoever.
8.4 As consideration for the License, OSIRIS will pay Recipient a royalty on
sales of all products covered by a License provided that such product or
process where sold is covered by a claim of a granted patent on a Recipient
or Joint Invention ("Licensed Product"), as follows:
(a) no less than two percent (2%) and no more than four percent (4%) of the
net sales of the Licensed Product; and
4
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
(b) twenty-five percent (25%) of the royalties received by OSIRIS from its
sublicensees on sales of the Licensed Product.
Net sales shall be defined as the amount received from sales of all Licensed
Products less discounts, returns, transportation costs, insurance costs and
taxes of any kind whatsoever. In the event royalties are to be paid by OSIRIS
to a party who is not an affiliate of OSIRIS for a Licensed Product ("Other
Royalties"), for which royalties will also be due to Recipient pursuant to
Section 8.4, then the royalties to be paid to Recipient shall be reduced by
fifty percent (50%) of the amount of such Other Royalties but in no event
shall any royalties due under Section 6.4 be reduced by more than fifty
percent (50%).
9. OSIRIS and Recipient have and will have certain technical, financial and
business information which is owned or controlled by each party and/or which
is received from third parties under an obligation of confidentiality
hereinafter referred to individually and collectively as "CONFIDENTIAL
INFORMATION"). CONFIDENTIAL INFORMATION will be considered to be confidential
and will be maintained in confidence by the receiving party and will not be
transferred or disclosed to any person or entity outside of the receiving
party or used by the receiving party other than for the research being
conducted under this Agreement.
CONFIDENTIAL INFORMATION specifically excluded from the obligations of
confidentiality of the Agreement include: (a) information which at the time
of disclosure is already in the public domain; (b) information which the
receiving party can demonstrate by written evidence was in the possession of
the receiving party prior to the disclosure by the disclosing party; (c)
information which subsequently becomes part of the public domain through no
fault of the receiving party; and (d) information which becomes known to the
receiving party subsequent to the disclosure by the disclosing party through
a third party who is not under any obligation of confidentiality to the
disclosing party. The fact that general
5
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
information may be in or become part of the public domain, in and of itself
does not exclude any specific information from the obligations of this
Agreement.
10. Recipient will have the right to publish and disclose the results of
research using Materials. In order to balance this right with the proprietary
interests of OSIRIS, Recipient will submit for review to OSIRIS manuscripts,
abstracts or presentations intended for publication or other public
disclosure at least sixty (60) days prior to the date of submission for
publication or the date of public disclosure. OSIRIS will use reasonable
efforts to complete its review promptly, and will complete its review within
thirty (30) days of receipt of the submitted documents. During that time,
OSIRIS shall have the right to (a) review the material for Confidential
Information provided by OSIRIS and Q)) assess the patentability of any
Recipient Invention described in the material. If OSIRIS decides that a
patent application should be filed, the publication or presentation shall be
delayed an additional thirty (30) days or until a patent application is
filed, whichever is sooner.
11. Recipient acknowledges that the Materials are provided WITHOUT WARRANTY OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY,
EXPRESS OR IMPLIED. OSIRIS MAKES NO REPRESENTATION THAT THE USE OF THE
MATERIALS WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER
PROPRIETARY RIGHT.
12. OSIRIS shall indemnify, defend, and hold harmless Recipient, and its
respective trustees, officers, professional staffs, employees, agents,
successors, heirs and assigns ("Indemnitees") from and against:
(a) All claims, debts, liabilities and obligations which arise from or are
alleged to arise from i) the acts or omissions of OSIRIS with respect to the
Project; ii) the development, production or distribution of any product,
process or service resulting from
6
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
information or materials received from or in connection with the Project,
including product liability claims in the form of tort, warranty or strict
liability; or iii) the use of the OSIRIS Material.
(b) Any damage or deficiency resulting directly or indirectly from any
misrepresentation, breach of warranty or nonfulfillment of any covenant of
OSIRIS under this Agreement;
(c) All other actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses incident to the foregoing, including actual
attorneys' fees and other out-of-pocket expenses.
This indemnification shall not apply to the extent that the claims, debts,
liabilities or obligations for which indemnity is sought are caused by the
negligent or intentional acts or omissions of the Indemnitees.
The Indenmitees will give OSIRIS reasonable notice of any claims asserted
against such Indemnitees for which indemnification is brought may be sought
under this Agreement. Failure to give such notice shall not abrogate or
diminish OSIRIS's indemnity obligation if OSIRIS has or receives knowledge of
the existence of a claim by any other means or if such failure does not
prejudice OSIRIS's ability to defend the claim.
In any litigation, administrative proceeding, negotiation or arbitration
pending to any claim for which indemnification is sought under this
Agreement, 0SIRIS shall select competent legal counsel reasonably acceptable
to the Indemnitees to represent the Indemnitees. OSIRIS shall control such
litigation, proceedings, negotiations and arbitration. The Indemnitees shall
at all times have the fight to fully participate in the defense at their own
expense. If OSIRIS shall, within a reasonable time after notice, fail to
defend, the
7
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
Indemnitees shall have the right, but not the obligation, to undertake the
defense of and to compromise or settle the claim or other matter on behalf;
for the account, and at the risk of OSIRIS. If the claim is one that cannot
by its nature be defended solely by OSIRIS, then the Indemnitees shall make
available all information and assistance OSIRIS may reasonably request at
OSIRIS's expense.
13. All communications, including payments, notices, demands or requests
required or permitted to be given hereunder, shall be given in writing and
shall be: (a) personally delivered; (b) sent by telecopier or other electronic
means of transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such payments,
notices, demands or requests are as follows:
If to OSIRIS: Osiris Therapeutics, Inc.
11100 Euclid Avenue
Wearn Building, Fourth Floor
Cleveland, OH 44106
Attention: President
Fax No.: (216) 844-1581
If to Recipient: Fred Hutchinson Cancer Research Center Foundation
1124 Columbia Street, LY-201
Seattle, WA 98104
Attention: Joann Cahill, Manager, Grant & Contract
Administration
Fax No.: (206) 667-6221
8
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Osiris Therapeutics, Inc. Material Transfer and Research Agreement
For technical matters: Fred Hutchinson Cancer Research Center
1124 Columbia Street, M318
Seattle, WA 98104
Attention: Brenda Sandmaier, M.D.
Fax No.: (206)667-6124
If personally delivered, such communication shall be deemed delivered upon
actual receipt. If electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered when transmitted. If sent by
overnight courier pursuant this paragraph, such communication shall be deemed
delivered within twenty-four hours of deposit with such courier. If sent by
U.S mail pursuant to this paragraph, such communications shall be deemed
delivered as of the date of delivery indicated on the receipt issued by the
relevant postal service, or, if the addressee fans or refuses to accept
delivery, as of the date of such failure or refusal. Any party to this
Agreement may change their address for the purposes of this Agreement by
giving notice in accordance with this Section.
14. This Agreement and any license entered into under this Agreement shall be
subject to the terms of any and all contracts and grants between Recipient
and any governmental agency, instrumentality or organization, including the
National Institutes of Health ("NIH"), which provide funding to or for the
Recipient relating to work performed under this Agreement. If there is a
conflict between the terms of this Agreement and the terms of any such
funding agreement or grant, or any regulation of the funding organization
applicable to such funding agreement or grant, then the terms of the funding
agreement or grant or the related regulation will control.
15. In the performance of all obligations hereunder, Recipient and OSIRIS
shall be deemed to be independent contractors of one another. Neither party
is authorized or
9
<PAGE>
Osiris Therapeutics, Inc. Material Transfer and Research Agreement
empowered to act as agent for the other for any purpose and
shall not on behalf of the other enter into any contract, warranty, or
representation as to any matter.
16. Recipient agrees to comply with all government and National Institutes of
Health regulation and guidelines which are applicable to the Recipient's use
of the Materials.
IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused
this Agreement to be executed by their respective duly authorized
representatives.
OSIRIS THERAPEUTICS, INC. RECIPIENT:
FRED HUTCHINSON CANCER
RESEARCH CENTER FOUNDATION
By: /s/ James S. Burns By: /s/ Randall C. Main
------------------ -------------------
James S. Burns
Randall C. Main
----------------------------------
(Typed Name)
Title: President and CEO Title: Treasurer
Investigator
By: /s/ Brenda Sandmaier
--------------------
Brenda Sandmaier, M.D.
10
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<PAGE>
AMENDMENT NO. 1
TO OSIRIS MATERIAL TRANSFER AND RESEARCH AGREEMENT
This amendment is entered into Ibis _______ day of _______________, 1995
("Effective Date") between Osiris Therapeutics, Inc. ("OSIRIS") and the Fred
Hutchinson Cancer Research Center Foundation ("Foundation"). The parties
hereby agree as follows:
l. Amendments. The Material Transfer and Research Agreement between and
Foundation dated April 1, 1995 ("Agreement") is hereby amended as follows:
a. Paragraph 5 is amended in its entirety as follows:
"5. OSIRIS agrees to pay Recipient a total of $124,217 to support the
Project. A detailed budget is attached as Exhibit C. Payments for
funding the Project shall be payable by OSIRIS to Recipient according
to the following schedule: (a) Four monthly payments of $13,000 due upon
the first day of the month beginning April 1, 1995; (b) four monthly
payments of $12,000 due upon the first day of the month beginning
October 1, 1995; and (c) a final payment of $24,217 due upon
completion of the Project and receipt by OSIRIS of a final report
from Recipient. if the Project is terminated prior to completion of
the research program as described in Exhibit B, any unused payments will
be returned to OSIRIS or the final payment will be adjusted
accordingly, as appropriate and mutually agreed upon by the parties."
b. Exhibit C is amended in its entirety. A new Exhibit C is attached.
2. Effective Date and Construction. This Amendment is effective as of the
Effective Date. Except as specifically amended by this Amendment the terms of
the Agreement will remain in fall force and effect. From and after the
Effective Date, references to the Agreement will be deemed to mean the
License Agreement as amended by this Amendment.
FRED HUTCHINSON CANCER OSIRIS THERAPEUTTCS, INC.
RESEARCH CENTER FOUNDATION
/s/ Randall C. Main 10/11/95 /s/ James S. Burns 11-15-95
- ------------------- Date ------------------ Date
Signature Signature
Randall C. Main By: James S. Burns
Treasurer Title: President & CEO
<PAGE>
Osiris Agreement Amendment No. 1
page 2
Principal Investigator
/s/ Brenda Sandmaier 10/12/95
- -------------------- Date
Signature
Brenda Sandmaier, M.D.
Principal Investigator
<PAGE>
AGREEMENT AMENDMENT NO.2
TO OSIRIS MATERIAL TRANSFER AND RESEARCH AGREEMENT
This amendment is entered into this 9th day of February, 1996
("Effective Date") between Osiris Therapeutics, Inc. ("OSIRIS") and the Fred
Hutchinson Cancer Research Center Foundation ("Foundation"). The parties
hereby agree as follows
1. Amendments. The Material Transfer and Research Agreement between OSIRIS
and Foundation dated April 1, 1995 ("Agreement") is hereby amended as follows:
a. Paragraph 5 is amended in its entirety as follows:
"5. OSIRIS agrees to pay Recipient a total of $131,977 to support the
Project. A detail budget is attached as Exhibit C. Payments for funding
the Project shall be payable by OSIRIS to Recipient according to the
following schedule: (a) Four monthly payments of $13,000 due upon the
first day of the month beginning April 1, 1995; (b) four monthly payments
of $12,000 due upon the first day of the month beginning October 1, 1995;
(c) one payment of $7,760 due upon the first day of the month beginning
February 1, 1996 and (d) a final payment of $24,217 due upon completion of
the Project and receipt by OSIRIS of a final report from Recipient if the
Project is terminated prior to completion of the research program as
described in Exhibit B, any unused payments will be returned to OSIRIS or
the final payment will be adjusted accordingly, as appropriate and mutually
agreed upon by the parties."
b. Exhibit C is amended in its entirety. A new Exhibit C is attached.
2. Effective Date and Construction. This Amendment is effective as of the
Effective Date. Except as specifically amended by this Amendment, the terms
of the Agreement will remain in full forte and effect From and after the
Effective Date, references to the Agreement will be deemed to mean the
License Agreement as amended by this Amendment
FRED RUTCHINSON CANCER OSIRIS THERAPEUTICS, INC.
RESEARCH CENTER FOUNDATION
/s/ Randall C. Main 2/8/96 /s/ Daniel R. Marshak 2/9/96
- -------------------------- -----------------------------
Signature Date Signature Date
Randall C. Main By: Daniel R. Marshak
Treasurer Title: Sr. Vice President, R & D
Principal Investigator:
/s/ Brenda Sandmaier 2/22/96
- ----------------------------
Signature Date
Brenda Sandmaier, M.D.
Principal Investigator
<PAGE>
EXHIBIT 10.14
CLINICAL STUDY SUPPORT AGREEMENT
among
UNIVERSITY HOSPITALS OF CLEVELAND
and
CASE WESTERN RESERVE UNIVERSITY
and
OSIRIS THERAPEUTICS, INC.
This Agreement is executed as of October 28, 1996 by and among University
Hospitals of Cleveland, ("UHC" or "Institution"), Case Western Reserve
University ("CWRU") and Osiris Research, Inc. ("Osiris"), a wholly owned
subsidiary of Osiris Therapeutics, Inc.
WITNESSETH
WHEREAS, UHC proposes to conduct a Study of Protocol CWRU 1194 (the
"Protocol") entitled "Phase I Trial Using Bone Marrow-Derived Mesenchymal
Stern Cells in Autologous Hematopoietic Stem Cell Transplantation for
Advanced Breast Cancer" (the "Study"), relating to the treatment of advanced
breast cancer patients by a combination of standardized medical procedures
and the infusion of autologous Mesenchymal Stern Cells (MSCs, the "Study
Therapeutic Agent"); and
WHEREAS, the Protocol is an Investigator-initiated and sponsored study; and
WHEREAS, the Study Therapeutic Agent will be isolated, culture-expanded and
provided to the Study in CWRU facilities by CWRU staff; and
WHEREAS, Osiris wishes to enable the Principal Investigator and UHC to
sponsor and conduct the Study through a grant-in-aid to be provided by
Osiris; and
WHEREAS, Osiris may provide certain equipment and advice to the Investigators
and UHC relating to certain methods that might be used in the Study; and
WHEREAS, the Principal Investigator, UHC, CWRU, and Osiris mutually agree
that the Study will be performed and controlled by UHO personnel;
NOW THEREFORE, it is agreed as follows:
ARTICLE l. SUPERVISION
Hillard Lazams, M.D., as the Principal Investigator and representative of
UHO, shall have the responsibility for supervision of the Study in accordance
with the Protocol, and generally accepted standards of good clinical
practice, all applicable local, state, and federal laws and regulations
governing the performance of clinical investigators, and the regulations of
the United States Food and Drug Administration ("FDA").. The performance site
of this Study is University Hospitals of Cleveland, Ireland Cancer Center,
11100 Euclid Avenue, Cleveland, Ohio 44106.
ARTICLE 2. SCOPE OF WORK
Osiris shall provide the equipment listed on Exhibit C (the "Equipment") and
certain standardized methods as described in the FDA-approved Protocol. UHC
shall supply the necessary personnel: any other necessary equipment, and
materials (except as otherwise may be provided herein) to complete the
protocol (the "Protocol") (see Exhibit A - APPROVED PROTOCOL). CWRU shall
provide the necessary personnel to isolate and culture-expand the stem cells.
All procedures for directing and monitoring the Study are delineated in the
Protocol. Any change in the scope of work shall require the express written
approval of
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<PAGE>
UHC, CWRU and Osiris. At the expiration or termination of the Study, the
Equipment shall become the sole property of CWRU, subject to the terms of
Article 23 herein.
ARTICLE 3. LIMITATION OF COSTS
Osiris shall provide financial support for the Study in an amount not to
exceed Three Hundred Thirty-Five Thousand Three Hundred Seventy-Six and
00/100 Dollars ($335,376.00) in accordance with the approved budget attached
hereto as Exhibit B - APPROVED BUDGET and incorporated herein by reference.
ARTICLE 4. METHOD OF PAYMENT
Osiris shall make all checks payable to University Hospitals of Cleveland and
forward them to the following address:
University Hospitals of Cleveland
Ireland Cancer Center, WRN 5065
11100 Euclid Avenue
Cleveland, Ohio 44106
Attention: Barbara Guy
Institution Tax Identification Number: 34-1 567805
For purposes of identification, each payment shall include the title of the
Study and the name of the Principal. Investigator.
Osiris shall make payments to UHC according to the payment schedule in
Exhibit B - APPROVED BUDGET referenced above.
An initial advance of twenty five percent (25%) of the total budget,
Eighty-Three Thousand Eight Hundred Forty-Four and 00/100 Dollars
($83,844.00) shall be made to UHO upon execution of this Agreement.
Subsequent quarterly payments of Eighty-Three Thousand Eight Hundred
Forty-Four and 00/100 Dollars ($83,844.00) shall be due and paid at the
beginning of each subsequent quarter (January, 1997, April, 1997, and July,
1997). The Budget is based on enrollment of twenty-five (25) patients in the
Study over the twelve (12) month period. In the event that the Study is not
completed during the designated time period, additional funding will be
provided to UHC by Osiris to cover the personnel costs associated with the
Cell Culture component of the Budget and such additional funding shall be
computed using the same percentage as the effort specified in the Budget
until the accrual goal is met.
Partial payment for Study Subject(s) who do not complete the Protocol and/or
are lost to follow up will be made in accordance with Exhibit B.
ARTICLE 5. INDEPENDENT CONTRACTOR
Osiris, CWRU, and UHC are independent contractors, and this Agreement shall
not be construed to constitute a partnership or joint venture between them or
make either party the agent or employee of the other. No party shall hold
itself out contrary to the terms of this provision, and no party shall become
liable for any representation, act or omission of any other party contrary to
the terms hereof.
ARTICLE 6. CONFIDENTIALITY
Nothing in this Agreement shall be construed to limit the freedom of
individuals participating in this Study, whether paid under this Agreement or
not, to engage in similar research independently under other grants,
contracts, or agreements with parties other than Osiris.
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<PAGE>
CWRU, UHC and Principal Investigator acknowledge that Osiris may provide,
during the course of the Study, certain information that Osiris deems
confidential. Osiris shall clearly label, in writing, all of that information
provided in writing that it considers confidential ("Confidential
Information"). CWRU, UHC and Principal Investigator agree to use reasonable
efforts to prevent disclosure or unauthorized use of Confidential Information
without Osiris's prior written consent; provided, however, that Confidential
Information shall not include that information which:
(i) is now or hereafter becomes part of the public domain through no
fault of CWRU, UHC or the Principal Investigator;
(ii) is known to CWRU, UHC or the Principal Investigator before the
effective date of this Agreement;
(iii) is obtained by CWRU, UHC or the Principal Investigator from a
third party without that party's breach of confidentiality obligations;
(iv) is independently developed by CWRU, UHC or Principal Investigator
for UHC; or.
(v) is required to be disclosed pursuant to law, regulation or court
order.
ARTICLE 7. PUBLICATION
Notwithstanding any other provision contained in this Agreement, the
Principal Investigator shall have the right, at his/her discretion, to
publish freely, in scientific journals, the clinical data generated from this
Study. The Principal Investigator shall furnish Osiris with a copy of any
proposed publication of material at least thirty (30) days in advance of the
proposed publication date.
The Principal Investigator shall respond, in good faith, to any suggested
revisions of the manuscript.
The Principal Investigator shall give Osiris the option of receiving
acknowledgment for its financial support in such publications.
ARTICLE 8. PATENTS
"Invention or Discovery" shall mean any invention or discovery conceived and
reduced to practice during and as a part of the Study performed pursuant to
this Agreement by Principal Investigator or other CWRU faculty, UHC's or CWRU
staff or employees, or CWRU's students or jointly by such an individual or
individuals with one or more employees of Osiris. Inventions or Discoveries
made solely by Institution's staff or employees shall be the sole property of
the Institution or its designated agent. New Inventions or Discoveries made
jointly by Institution's staff or employees with one or more employees of
Osiris shall be owned jointly by the Institution and Osiris. Inventions or
Discoveries made solely by Osiris shall be the sole property of Osiris.
Inventions or Discoveries made solely by CWRU's faculty, including the
Principal Investigator, employees, or students shall be the sole property of
CWRU or its designated agent. Inventions or Discoveries made jointly by
CWRU's faculty, including Principal Investigator, employees or students with
one or more employees of Osiris shall be owned jointly by CWRU and Osiris.
ARTICLE 9. DATA
UHC shall provide copies of the clinical results of the Study to Osiris and
CWRU at the same time such results are submitted to the FDA. The Institution
and CWRU shall retain all records resulting from the Study for the time
required by applicable federal regulations and allow for inspection of all
such records. Osiris shall notify the Institution of the FDA Application
filing and approval status.
3
<PAGE>
ARTICLE 10. PUBLICITY
No party shall use, nor authorize others to use, the name, symbols, and/or
marks of another party in any form of advertising or publicity material or
make any form of representation or statement in connection with the services
and/or studies which would constitute an expressed or implied endorsement by
another party of any commercial product or service. This prohibition shall
not include documents or legally required disclosure by UHC, CWRU or Osiris
that identifies the existence of the Agreement. Further, Osiris agrees that
its use of the name, symbols, and/or marks of UHC or CWRU or names of UHC's
employees or CWRU's employees, shall be limited to identification of UHC and
CWRU as a research site and research staff as participants in the research
required by law or regulation.
ARTICLE 11. HUMAN SUBJECTS
UHC agrees that this Protocol has been approved by the appropriate UHC
Institutional Review Board (x C - HUMAN SUBJECTS APPROVAL). The Principal
Investigator shall obtain from each of the participants written informed
consent in compliance with 21 CFR 50.20 through 50.27.
ARTICLE 12. INDEMNIFICATION
Osiris agrees to indemnify, defend and hold harmless UHC and CWRU and their
respective employees, agents, officers, trustees, Principal Investigator, and
University Physicians, Inc., and other qualified personnel working under
their direct supervision in the performance of the Study (collectively, the
"Indemnitees"), from and against any claims, causes of action, suits,
liability, damage, and costs that are based on assertions of personal injury
or property damages sustained as a result of the use or misuse of the
clinical results of the Study by Osiris, its employees, and agents or the
negligence or misconduct of Osiris, its employees, and agents, and Osiris
will pay any costs, expenses, and reasonable attorney's fees in connection
therewith without regard to whether such claims, causes of actions or suits
are rightfully or wrongfully brought and without regard to any determination
of liability.
UHC agrees to indemnify, defend and hold harmless CWRU, Osiris, its
employees, agents, officers, trustees, and other qualified personnel working
under their direct supervision in the performance of the Study (collectively,
the "Osiris Indemnities"), from and against any claims, causes of action,
suits, liability, damage, and costs that are based on assertions of personal
injury or property damages sustained as a result of negligence or misconduct
of UHC, its employees, and agents, and UHC will pay any costs, expenses, and
reasonable attorney's fees in connection therewith without regard to whether
such claims, causes of actions or suits are rightfully or wrongfully brought
and without regard to any determination of liability.
A party seeking indemnification shall provide the indemnifying party prompt
notice of any claim for which indemnification will be sought, will cooperate
in the investigation and defense of such claim, will permit the indemnifying
party to direct the defense of such claim, including selecting counsel, and
will not settle or compromise any such claim without the indemnifying party's
prior written approval. The indemnifying party shall reasonably consult with
the party seeking indemnification prior to settling claims. The indemnifying
party shall not, except with the consent of the party seeking
indemnification, consent to entry of any judgment or enter into any
settlement which does not include an unconditional release of the Indemnitees
or the Osiris Indemnitees, as the case may be, from all liability in respect
of such claim or litigation.
Except as otherwise provided herein, UHC agrees not to seek recovery from
either CWRU or Osiris for any cost or expense associated with providing
reasonable and necessary medical diagnosis and treatment associated with any
adverse reactions.
ARTICLE 13. INSURANCE
Osiris agrees to carry sufficient liability insurance to cover its
obligations hereunder. Evidence of coverage satisfactory to UHC and CWRU
shall be delivered to UHC and CWRU with the signature of this Agreement.
4
<PAGE>
Osiris certifies that it will not terminate, fail to renew or materially
reduce its coverage without 45 days advance written notice to UHC and CWRU.
UHC represents and warrants that it maintains self-insurance in such amounts
sufficient to cover its indemnification obligations under this Agreement.
ARTICLE 14. TERM AND TERMINATION
This Agreement shall continue from the date of signing until completion of
the approved Protocol, unless terminated earlier as provided herein. UHC
shall retain ownership of all property unless otherwise designated and
accepted in writing; provided, however, that CWRU shall retain ownership of
all the Equipment.
This Study may be terminated for any reason by UHC or Osiris, the UHC
Institutional Review Board, or the FDA, when appropriate. In the event of
early termination of this Agreement, UHC shall provide medical treatment, to
then enrolled patients as required by accepted medical practice, which
treatment may include completion of the Study if required by accepted medical
practice.
The provisions of Articles 9, 12, and 13 shall survive the termination of
this Agreement.
ARTICLE 15. MODIFICATION
Any alteration in or amendment to the Protocol or to this Agreement must be
in writing and approved by UHC, the Principal Investigator, and Osiris prior
to such alteration or amendment becoming effective.
ARTICLE 16. CONTACTS
The UHC scientific contact for this Agreement will be the Principal
Investigator
Hillard Lazarus, M.D.
University Hospitals of Cleveland
Ireland Cancer Center
11100 Euclid Avenue
Cleveland, Ohio 44106-5039
Phone: (216) 844-8629
Fax: (216) 844-5979
The UHC administrative contact for this Agreement will be:
Barbara A. Guy, Ph.D.
Associate Director
Ireland Cancer Center
University Hospitals of Cleveland
11100 Euclid Avenue
Cleveland, Ohio 44106-5065
Phone: (216) 844-7856
Fax: (216) 844-7832
The Osiris contact for this Agreement will be:
David J. Fink, Ph.D.
Director, Clinical Research Liaison
Osiris Therapeutics, Inc.
2001 Aliceanna Street
Baltimore, Maryland 21231-2001
Phone: (410) 522-5005
Fax: (410) 522-6999
5
<PAGE>
The CWRU contact for this Agreement will be:
Philip Corcoran
Assistant Director, Research Administration
Adelbert Hall, Room 4
Case Western Reserve University
School of Medicine
Cleveland, Ohio 44106-7015
All notices shall be given in writing and delivered in person or by certified
or registered U.S. mail to the respective addresses above.
ARTICLE 17. GOVERNING LAW
This agreement shall be governed by and construed in accordance with the laws
of the State of Ohio.
ARTICLE 18. ENTIRE AGREEMENT
This Agreement, together with the Protocol and referenced exhibits, contains
the entire agreement of the parties with respect to the subject matter
hereof, and supersedes all previous and contemporaneous agreements and
understanding, whether oral or written, between the parties.
ARTICLE 19. REPORTING OF DATA
Principal Investigator and UHC agree to provide Osiris periodically and in a
timely manner during the term of this Agreement with the data called for in
the Protocol on properly completed case reporting forms.
ARTICLE 20. COMPLIANCE WITH LAW AND ACCEPTED PRACTICE
Principal Investigator and Institution shall perform the Study in conformance
with generally accepted standards of good clinical practice, with the
Protocol, instructions provided by Osiris and with all applicable local,
state and federal laws and regulations governing the performance of clinical
investigations including, but not limited to, the Federal Food, Drug and
Cosmetic Act and regulations of the Food and Drug Administration.
ARTICLE 21. MONITORING OF STUDY
During the term of this Agreement, CWRU, UHC, and Principal Investigator
agree to permit representatives of Osiris and or the FDA to examine at any
reasonable time during normal business hours:
i) the facilities where the Study is being conducted;
ii) raw Study data including original patient records (subject to
legal restrictions relating to patient confidentiality); and
iii) any other relevant information necessary to confirm that the Study
is being conducted in conformance with the Protocol and in
compliance with applicable FDA and DEA laws and regulations. UHC
shall notify Osiris if FDA or DEA schedules or, without scheduling,
begins an inspection.
ARTICLE 22. WAIVER
No waiver of any term1 provision or condition of this Agreement whether by
conduct or otherwise in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such
6
<PAGE>
term, provision, or conditions, or of any other term, provision or condition
of this Agreement.
ARTICLE 23. EQUIPMENT
Osiris has provided the Equipment listed in Exhibit C for use during the
Study to culture autologous MSCs. The equipment is currently in operation in
Room W517 of the CWRU School of Medicine. Osiris intent in providing this
Equipment is to permit CWRU personnel to prepare culture-expand autologous
MSCs in an appropriate clean-room environment for the subject Study and
future studies in which autologous MSCs might be tested for treatment of the
same disease or other clinical indications. Upon termination of this
Agreement, title to all such Equipment owned by Osiris shall be transferred
to CWRU in good working order, free of all liens, as compensation for use of
the facility for the subject Study and future clinical studies requiring MSCs.
CWRU acknowledges that some or all of the equipment installed in this
facility has been leased to Osiris under a Master Lease Agreement dated as of
February 1, 1994 between Osiris and Dominion Ventures, Inc. (the "Lease
Agreement"), and that Osiris will have the option to buy such equipment at
the end of the lease term for the fair market value of the equipment, as
determined under the Lease Agreement with respect to such equipment. At the
end of the lease term, CWRU agrees to cooperate with Osiris in surrendering
such equipment and Osiris shall surrender such equipment to Dominion Ventures
unless CWRU agrees to pay Dominion Ventures the fair market value in exchange
for title to the equipment in accordance with the terms of the Lease
Agreement. A detailed list of equipment included is attached hereto as
Exhibit C.
CWRU agrees that the room containing the Equipment shall be available for
the culture of autologous MSCs for use in clinical trials, including the
subject Study and future studies that might be supported in part by Osiris.
Availability of this room for MSC culture shall be consistent with CWRU
policies and shall be for a period of three (3) years from the initiation of
the subject Study, except if Osiris at its sole discretion, shall inform CWRU
that it is no longer interested in supporting such studies. Osiris and CWRU
further agree that a plaque bearing the name of the facility (Mesenchymal
Stem Cell Culture Facility") shall be placed on the exterior wall of Room
W517 at Osiris' expense, and that the plaque shall also bear the inscription,
at the option of Osiris, "Partially supported by Osiris Therapeutics, Inc.".
[Remainder of page intentionally left blank; signatures begin on next page.]
7
<PAGE>
UNIVERSITY HOSPITALS OF CLEVELAND
/s/ M. Orry Jacobs
- ---------------------------------
M. Orry Jacobs
Executive Vice President
10/28/96
- ---------------------------------
Date
OSIRIS THERAPEUTICS, INC.
/s/ James S. Burns
- ---------------------------------
James S. Burns
President & Chief Executive Officer
11/4/96
- ---------------------------------
Date
CASE WESTERN RESERVE UNIVERSITY
/s/ Richard A Zdanis
- ---------------------------------
Signature
Richard A. Zdanis
- ---------------------------------
Printed Name
Provost
- ---------------------------------
Title
10/29/96
- ---------------------------------
Date
8
<PAGE>
Exhibit 10.16
Lease Number 10070
Page 1 of 18 pages
DOMINION VENTURES MASTER LEASE AGREEMENT
LESSOR/AGENT: LESSEE:
Dominion Ventures, Inc. Osiris Therapeutics, Inc
44 Montgomery Street, Suite 4200 11000 Cedar Avenue
San Francisco, CA 94104 Cleveland, OH 44106
Master Lease Line: Initial Term: Rent Factor:
- ------------------ ------------- ------------
$1,500,000.00 48 Months 2.54%
- ------------------------------------------------------------------------------
Advance Rental Security Deposit
- -------------- ----------------
(Rent Factor x Master Lease) (Rent Factor x Master Lease)
$38,100.00 $0.00
- ------------------------------------------------------------------------------
Effective Date: Funding Expiration Date:
- --------------- ------------------------
February 28, 1994 February 27, l995
- ------------------------------------------------------------------------------
The Master Lease Line, specified above, shall remain open until fully funded
or until the Funding Expiration Date noted above whichever occurs first. The
Term "Equipment" means the items of personal property that are listed on
the Equipment Schedule Agreements (the "Schedules") attached or from time to
time added to this Lease, together with all replacement parts, additions and
accessories incorporated thereto. Schedules, each of which shall have a
total cost of not less than ten thousand dollars ($10,000.00), may be added
to this Lease not more frequently than once per month and in any event only
with the prior approval of Lessor. Equipment is to be limited to the types
of equipment described in Exhibit A attached hereto, the original use of
which commences with Lessee not more than ninety (90) days prior to the date
of this Lease. No item of Equipment shall have a unit cost of less than one
thousand dollars ($1,000.00) or be subject to an invoice of less than five
thousand dollars ($5,000.00). Lessee acknowledges that Lessor must
specifically segregate funds for this Master Lease Line. Advance Rental paid
under this Lease is nonrefundable for any reason; but, for each item of
Equipment shall be credited to the last complete calendar month's rent for
such item, subject to the condition's of Paragraph 6.
See attached Schedules for detailed Equipment descriptions and effective
dates.
This Lease and the Schedules attached hereto are subject to the terms and
conditions set forth above and on subsequent pages which are made part hereof.
1
<PAGE>
l. TRUE LEASE. Lessor leases to Lessee, and Lessee hires and takes
from Lessor, the Equipment. It is the intent of both Lessor and Lessee that
this agreement be a true lease and not a lease intended as security or a
conditional sales agreement. Lessor and Lessee also agree to treat this
Lease as a true lease for income tax purposes.
2. EOUIPMENT AND LIABILITY. Lessee shall select the type and quantity
of each item of Equipment designated in the appropriate Schedule. Lessee
shall defer to Lessor's ability to obtain discount pricing from suppliers of
equipment, and any discounts and rebates resulting from the purchase of
Equipment shall be remitted to Lessor. Lessee shall order each item from the
respective supplier and, in reliance thereon and subject to its prior
approval, Lessor shall be deemed to have ordered and acquired such Equipment
from such supplier. At Lessor's request, Lessee shall formally assign the
purchase order for such Equipment to Lessor. LESSEE ACKNOWLEDGES THAT LESSOR
IS NOT THE MANUFACTURER, RETAILER OR DISTRIBUTOR OF THE EQUIPMENT, THAT SAID
ENTITIES ARE NOT AGENTS OF LESSOR, THAT LESSEE RENTS THE EQUIPMENT "AS IS",
AND THAT LESSOR HAS ACCEPTED NO RESPONSIBILITY FOR THE TRANSPORTATION,
INSTALLATION OR REQUIRED LICENSING NECESSARY FOR THE TRANSFER, INSTALLATION
OR USE OF THE EQUIPMENT. Lessor shall not be liable for specific performance
of this Lease nor for damages if for any reason a supplier declines, delays
or fails to fill any order. Lessee agrees to accept the Equipment and
authorizes Lessor to add the serial number of the Equipment to this Lease.
Lessor shall not be liable to Lessee for any loss, damage or expense of any
kind or nature caused directly or indirectly by the Equipment, its use or
maintenance; nor for any delay or failure to provide any of the Equipment;
nor for any interruption of service or loss of use of the Equipment; nor for
any loss of business or damages whatsoever and howsoever caused.
3. WARRANTIES. LESSEE HAS NOT RELIED UPON AND ACKNOWLEDGES THAT LESSOR
HAS MADE NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH
RESPECT TO THE EQUIPMENT, INCLUDING WITHOUT LIMITATION ITS CONDITION,
MERCHANTABILITY OR FITNESS FOR ANY PARTICUUAR PURPOSE. NO DEFECT OR
UNFITNESS OF THE EQUIPMENT NOR OTHER CLAIM REGARDING CONDITION OR USE OF THE
EQUIPMENT SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR ANY OTHER
OBLIGATION UNDER THIS LEASE. Lessor authorizes Lessee to enforce in its own
name all warranties, agreements or representations, if any, which may be made
by any supplier to Lessee or Lessor.
4. TERM. All obligations under this Lease, except regular rental
payments, shall commence immediately upon the Effective Date specified on the
first page of this Agreement (the "Effective Date") and shall continue until
full performance of every provision of this Lease and each Schedule and
Addendum (the "Lease Term"). All obligations under each Schedule shall
2
<PAGE>
commence upon Lessee's execution of Lessor's Certificate of Inspection and
Acceptance (the "Acceptance Certificate") for the Equipment specified on such
Schedule and shall terminate at the end of the Initial Term ("Noncancellable
Term"). The "Initial Term", as set forth on page 1 of this Lease, shall
begin on the first day of the calendar quarter following the date of the
Acceptance Certificate. This Lease is irrevocable for its full term and
until Lessee has performed all of its obligations hereunder.
5. RENTAL PAYMENTS.
Lessee shall pay to Lessor, as rental for Equipment during each
month of the Noncancellable Term of any Schedule, an amount equal to the Rent
Factor set forth on page one of this Lease multiplied by the total Cost (as
defined below in paragraph 7) of the Equipment to Lessor, which amount shall
be due and payable in advance on the first day of each calendar month during
the Noncancellable Term. If the date of the Acceptance Certificate of any
Schedule shall be other than the first day of the calendar quarter, Lessee
shall make rental payments ("Interim Rent") equal to one-thirtieth of the
monthly rental set forth on the Schedule for each day from and including the
date of the Acceptance Certificate for such Schedule, through and including
the last day of the calendar quarter prior to the beginning of the Initial
Term. Such Interim Rent shall be due and payable on the first day of the
calendar month following the month for which such payment is assessed. In
addition to any other remedies that Lessor may have under this Lease, if
Lessee fails to pay any rent or other amount herein provided within five (5)
business days after the same is due, Lessee shall pay to Lessor a late charge
of three percent (3%) of such amount plus interest from the due date until
the date of payment, calculated at the rate of one and five tenths percent
(l.5%) per month, or at the highest rate permitted by applicable law,
whichever is less, to compensate Lessor for additional bookkeeping and
collection expense. All rents, late charges and other amounts for which
Lessee is liable shall be paid to Lessor at its address as set forth above or
as otherwise directed by Lessor. Lessor's right to receive rental payments,
as well as all other rights of Lessor to payment hereunder, shall not be
subject to any defense, set off, counterclaim or recoupment which may arise
out of any breach on the part of Lessor, or by reason of any other liability
Lessor may owe Lessee.
6. ADVANCE RENTAL. Upon execution of this Lease, Lessee shall pay to
Lessor an Advance Rental in an amount equal to the Rent Factor multiplied by
the Master Lease Line (plus applicable taxes). A pro-rata portion of the
Advance Rental shall be credited to the last complete calendar month's rent
for each item of Equipment. Lessee grants Lessor a security interest in the
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Advance Rental to secure all of Lessee's obligations hereunder. If the Master
Lease Line has not been fully expended by the Funding Expiration Date, Lessor
shall retain the uncredited balance of the Advance Rental as compensation for
expenses. Lessor shall have the right, but not the obligation, to apply the
Advance Rental to cure any default of Lessee, in which event Lessee shall
promptly restore the Advance Rental account to its proper balance.
7. ADJUSTMENTS FOR ACTUAL COST. As used herein, "Cost" means the cost
to Lessor of purchasing the Equipment including any sales taxes and other
charges paid by Lessor and net of any discounts and rebates remitted to
Lessor such rebates and discounts to be included in the Cost reflected on the
Schedule. The Advance Rental is based upon the Master Lease Line, which is an
estimate. If at any time the actual aggregate Cost of all Equipment exceeds
the Master Lease Line, the Advance Rental shall be increased proportionately.
Lessee shall pay any additional sums for Advance Rental due under this Lease
within five (5) business days after receiving notice from Lessor. If any
Schedule of Equipment causes the actual aggregate Cost of all Equipment to
exceed the Master Lease Line by more than ten percent (l0%), Lessor may
terminate said Schedule within fifteen (15) days after receiving invoices for
such excess cost and upon request shall promptly be reimbursed by Lessee for
such excess cost. If the actual aggregate Cost of all Equipment, together
with any additional equipment proposed to be added to the Lease, would exceed
the Master Lease Line by more than ten percent (10%), Lessor may refuse to
add such equipment to this Lease, and shall so notify Lessee.
8. TITLE. All Equipment shall remain personal property, and the title
thereto shall remain exclusively in Lessor, notwithstanding the manner in
which it may be attached to realty. Lessee agrees, upon the request of Lessor
at any time during the Lease Term, to affix or permit Lessor to affix, in a
permanent place on the Equipment, labels supplied by Lessor identifying the
Equipment as property of Lessor, and shall not alter or remove any such label
from any item of Equipment. Lessee shall keep the Equipment free from any
and all liens and encumbrances except those created by Lessor. Lessee shall
give Lessor immediate notice of any judicial process or encumbrance affecting
the Equipment and shall indemnify and save Lessor harmless from any loss or
damage caused thereby, including court costs, attorney fees and expenses.
9. FILING. Lessee shall execute or cause to be executed, at Lessee's
sole expense, such supplemental instruments, financing statements and
landlord's waivers as Lessor deems necessary or advisable and shall cooperate
to defend the title of Lessor by filing or otherwise. Lessee authorizes
Lessor to record in any state, this Lease and any financing
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statements, security agreements and landlord's waivers with respect to the
Equipment or any collateral provided by Lessee to Lessor. Lessee agrees to
give Lessor thirty (30) days written notice of any change in Lessee's name or
place of business. Lessee agrees to give written notice to Lessor as soon as
Lessee has knowledge of any change of ownership of the real property upon
which or within which the Equipment is located.
10. TAXES. Except as provided below, Lessee shall pay in a timely
fashion, and shall indemnify and hold Lessor harmless against all federal,
state and 4ocal taxes, assessments, license and registration fees, and other
governmental charges of any kind, including those levied on motor vehicles or
trailers, and any interest or penalties thereon, which may be levied,
directly or indirectly, against the Equipment or with respect to its
ordering, purchasing, delivery, ownership, possession, use, leasing,
documentation, and return or other disposition thereof, regardless of whether
such taxes and fees are levied against Lessor or Lessee. Such taxes and fees
to be paid by Lessee shall include, without limitation, property, sales,
rent, franchise, gross receipts, lease, and use taxes, and any other tax
measured by gross rental payments, but shall not include net income or
franchise taxes, or any similar taxes, payable by Lessor on or with respect
to its receipt of rental payments or other payments hereunder. Personal
Property Taxes shall be reasonably estimated by Lessor and billed to Lessee
as of the date of assessment each year. Upon receipt by Lessor of the final
personal property tax assessment and invoice, Lessor shall invoice or credit
Lessee, as applicable, for any differences of such final assessment and
Lessor's original estimate. Lessor shall have the right, but not the
obligation, to pay any such taxes or fees regardless of whether levied
against Lessor or Lessee. Any and all sales taxes levied against Lessor's
purchase of Equipment which are not paid by Lessee shall be added to the
total Cost of such Equipment as specified on the Schedule under which such
equipment is added to this Lease. With the exception of taxes and fees which
are added to the total Cost of Equipment hereunder, Lessee shall reimburse
Lessor within five (5) days after receipt of invoice from Lessor specifying
the amount of, and reason for, any payment by Lessor of amounts for which
Lessee is liable under this Paragraph 10. Lessee shall timely prepare and
file all reports and returns which are required to be made with respect to
such taxes and/or fees, and all such reports shall show Lessor as owner of
the Equipment.
11. ASSIGNMENTS AND SUBLEASES Lessee shall not assign this Lease or
Lessee's rights hereunder, or sublease any Equipment, without the prior
written consent of Lessor, which consent shall not be unreasonably withheld,
but shall be subject to due diligence by Lessor. Lessor and Lessee agree
that any purchase of all or substantially all of Lessee's Assets and any
merger or consolidation of another corporation into or with
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Lessee regardless of whether Lessee is the surviving entity where immediately
following such transaction more than 50% of Lessee's voting securities are
held by persons who are not stockholders of Lessee immediately prior to such
transacti9n, or any transaction in which a person acquires from Lessee voting
securities representing more than 50% of Lessee's outstanding voting
securities shall be deemed to be an assignment. Lessor shall have the right,
in its sole discretion, to assign this Lease or any part hereof. In
particular, Lessee acknowledges that it is Lessor's intention to assign this
Lease to one or more limited partnerships with which Lessor is affiliated,
that upon any such assignment the sole liability for performance of Lessor's
obligations hereunder shall fall upon such assignee, and that the limited
partners of such assignee shall have no personal liability for the
performance or observance of this Lease. Following any assignment by Lessor,
the term "Lessor", as used herein, shall include and/or refer to Lessor's
assignee, and the Equipment covered by such assignment shall be deemed to be
used by Lessee under a lease agreement between Lessee and such assignee, the
terms and conditions of which shall be the terms and conditions of this
Lease; provided, however, that any such lease agreement shall cover only the
Equipment so assigned. Subject to the foregoing, this Lease inures to the
benefit of, and is binding upon, the heirs, legatees, representatives,
successors and assigns of Lessee and Lessor.
12. POSSESSION. Lessor covenants that, to the best of its knowledge, it
is or will be the lawful owner of the Equipment and that, conditioned upon
Lessee's performance of each of its obligations under this Lease, Lessee's
use of the Equipment shall not be interrupted by Lessor or persons action
through Lessor, except as provided in Paragraph 15.
13. USE AND INDEMNITY. Lessee shall use the Equipment in Lessee's
business. Lessee agrees not to allow the Equipment to be used by other than
its employees, consultants and agents. Lessee acknowledges that the Equipment
is leased for commercial purposes and not for personal use. Lessee agrees to
indemnify and hold Lessor, and Lessor's agents, servants, successors and
assigns, harmless against any and all claims (including, without limitation,
claims relating to environmental discharge, clean-up or compliance to
environmental laws and regulations or to the use of hazardous materials),
actions, liabilities and expenses of any nature, including court costs and
attorney fees, arising in connection with the manufacture, purchase, delivery
installation, operation, use, ownership, maintenance, storage, relocation,
and return of the Equipment, except to the extent any such claims, actions,
liabilities and expenses result from the gross negligence, willful misconduct
of Lessor. The foregoing indemnity shall continue in full force and effect
notwithstanding the termination of this Lease, whether by expiration of time,
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operation of law or otherwise.
14. LOCATION. Lessee shall keep the Equipment within the continental
United States and at its place of business as specified above or on the
Schedules. Lessee shall not permit any Equipment to be moved to a new
location without the prior written consent of Lessor, which consent shall not
be unreasonably withheld.
15. RIGHT OF INSPECTION. Lessor and its agents shall have the right, at
any time during normal business hours, to inspect and photograph the
Equipment, to review all maintenance records related to the Equipment and,
during the last ninety (90) days of the rental term of each respective
Schedule, to demonstrate the Equipment specified thereon to prospective
purchasers; provided, however, Lessor shall give five days notice to Lessee
of any such demonstration.
16. MAINTENANCE. Lessee shall exercise due and proper care in the use,
repair and servicing of the Equipment. Lessee shall, at its own expense,
make all repairs and replacements required to maintain the Equipment in good
working condition in accordance with manufacturers' specifications and
Lessor's requirements, reasonable wear and tear excepted, and shall pay all
other operating expenses relating to the Equipment. Lessee shall have the
right, upon ten (10) days prior written notice to Lessor, to make any
alterations, additions or improvements which do not render the Equipment in
such a condition that it cannot, prior to the expiration or other termination
of this Lease, be restored to its original condition, reasonable wear and
tear alone excepted; provided that no such alteration, addition or
improvement shall be made by Lessee if as a result thereof any warranties
made by the supplier of the Equipment would be canceled or terminated. If
Lessee does not exercise its option to purchase the Equipment, as specified
in Paragraph 17, or if Lessee should become in default of any of its
obligations hereunder, Lessee shall restore the Equipment to its original
condition, reasonable wear and tear alone excepted, prior to the expiration
or other termination of each respective Schedule. All replacement parts and
additions incorporated to the Equipment shall become the property of Lessor;
provided, however, that Lessor shall transfer to Lessee title to any
alterations, additions and improvements which were made by Lessee at its own
expense to (i) each item of Equipment which Lessee has restored to its
original condition as specified in this Paragraph 16, and (ii) each item of
Equipment purchased by Lessee pursuant to the provisions of Paragraph 17.
Lessee agrees to maintain and provide upon request of Lessor all internal
maintenance reports relating to the Equipment.
17. PURCHASE OPTION. Upon written notice to Lessor not less than 90
days prior to the expiration of the Noncancellable
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Term for Equipment covered by a Schedule, if Lessee has fulfilled all of its
obligations hereunder, Lessee shall have the right to purchase all, but not
less than all, of the Equipment covered by such Schedule, for Fair Market
Value (as defined below) as such term is adopted and recognized by the
American Society of Appraisers (plus applicable taxes). Should Lessor and
Lessee fail to agree upon the fair market value purchase price of such
Equipment, said price shall be determined by an independent appraiser, and
the cost of such appraisal shall be borne equally by both Lessor and Lessee.
Notwithstanding the date on which Lessee exercises this option, Lessee shall
acquire no rights of title to any Equipment, nor shall any Equipment be
transferred to Lessee, until the expiration of the Noncancellable Term for
the Schedule on which such Equipment is specified. Lessee shall remain
liable for all rental payments and other obligations until the expiration of
the Noncancellable Term. Any Equipment sold by Lessor shall be sold "as is",
"where is", and with no warranties, express or implied, including without
limitation implied warranties of merchantability and fitness for any
particular purpose, other than with respect to Lessor's clear title to such
Equipment and absolute right to convey same to Lessee subject to matters that
have arisen by acts of Lessee. "Fair Market Value" is defined as the
estimated amount at which the property would be expected to exchange between
a willing buyer and a willing seller, neither being under compulsion, each
having reasonable knowledge of all relevant facts, and with equity to both.
18. RETURN OF EOUIPMENT. Upon 90 days written notice to Lessor, in the
event Lessee has not exercised its Purchase Option as specified in Paragraph
17, after such notification and upon the expiration or termination of the
Noncancellable Term, Lessee shall, at Lessee's sole expense, properly pack
and return the Equipment, insured, unencumbered and in the same condition as
when received by Lessee, reasonable wear and tear alone excepted, by such
carriers as Lessor shall approve and to such place as designated by Lessor.
Should Lessee fail to return the Equipment as directed above, all obligations
of Lessee under this Lease, including rental payments, shall remain in full
force and effect during the holdover period.
19. FINANCIAL STATEMENTS
a. Lessee shall provide to Lessor the financial statements
specified in this subparagraph 19 (a), prepared in accordance with generally
accepted accounting principles, consistently applied (the "Financial
Statements"); provided, however, that after the effective date of the initial
registration statement covering a public offering of Lessee's securities, the
term "Financial Statements" shall be deemed to refer only to those statements
required by the Securities and Exchange Commission, to be provided no less
frequently than
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quarterly.
(i) As soon as practicable (and in any event within forty five
(45) days after the end of each quarter), a reasonably detailed balance sheet
as of the end of such month and the related statements of income or loss,
cash flow and capital structure of the Lessee during such quarter (including
the commencement of any material litigation by or against Lessee), certified
by Lessee's Chief Executive Officer or Chief Financial Officer fairly to
present the data reflected therein.
(ii) As soon as practicable (and in any event within one
hundred twenty (120) days after the end of each fiscal year, audited balance
sheets as of the end of such year (consolidated if applicable), and related
statements of income or loss, retained earnings or deficit, cash flows and
capital structure of Lessee for such year, setting forth in comparative form
the corresponding figures for the preceding fiscal year, and accompanied by
an audit report and opinion of the independent certified public accountants
of recognized national standing selected by Lessee.
b. Lessee shall promptly furnish to Lessor any additional
information (including but not limited to tax returns, income statements,
balance sheets, and names of principal creditors) as Lessor reasonably
believes necessary to evaluate Lessee's continuing financial obligations (the
"Additional Information")
c. Lessor agrees to preserve the confidentiality of all
information provided to it hereunder by Lessee regarding the Lessee and its
business which Lessee designates in writing as confidential and which is
otherwise not generally known.
20. TAX INDEMNIFICATION. Lessee acknowledges that this Lease has been
entered into on the basis that Lessor or Lessor's designee intends to claim
such depreciation, interest deductions and other tax benefits as are provided
to an owner of Equipment under the Internal Revenue Code of 1986, as amended
(the "Code") (the "Tax Benefits") . If Lessor or Lessor's designee shall not
have the right to claim or there shall be disallowed or recaptured with
respect to Lessor or Lessor's designee, all or any portion of the Tax
Benefits as a result of an act or failure to act by Lessee in contravention
with any of the terms and conditions of the Lease, Lessee shall promptly pay
to Lessor or Lessor's designee, an amount which, on an after-tax basis1 will
compensate Lessor or Lessor's designee for the value of the lost Tax
Benefits. The Tax Benefits shall be deemed to have been disallowed or
recaptured upon the earliest of (i) the adjustment by a taxing authority of
the tax return of Lessor to reflect such loss; or (ii) the payment by Lessor
to the Internal Revenue Service or state taxing authority of the tax increase
resulting
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from such lost Tax Benefits. Lessor or Lessor's designee shall be deemed not
to have the right to claim the Tax Benefits if, in the opinion of Lessor's
independent tax counsel, which counsel and form of opinion shall be
reasonably acceptable to Lessee, there is no reasonable basis for claiming
the Tax Benefits.
21. NO REPRESENTATION Lessor assumes no liability as to the treatment
by Lessee of this Lease, the Equipment or the rental payments for financial
statement or tax purposes.
22. RISK OF LOSS Lessee assumes the entire risk of loss, theft and
damage of the Equipment from any cause whatsoever, and no such event shall
relieve Lessee of any obligation under this Lease. Lessee shall notify
Lessor in writing within ten (10) days after any such event. Lessee agrees
that Lessor shall have the following remedies upon each occurrence of the
following events:
a. In the case of damage of any kind whatsoever to any item of
Equipment (unless such item is damaged beyond repair), Lessee shall, at
Lessee's sole expense and with Lessor's reasonable consent, (i) restore such
Equipment to its original condition, reasonable wear and tear alone excepted,
or (ii) replace it with like equipment of the same or later model in good
condition. Upon Lessee's replacement of any Equipment as specified in this
subparagraph 22 (a) (ii), Lessor shall transfer title to such replaced
Equipment to Lessee.
b. If any item of Equipment is determined by Lessor to be damaged
beyond repair, or if Lessor has reasonable cause to believe that any item of
Equipment is stolen or lost and such item is not returned to its proper
location within thirty (30) days after notice thereof to Lessee, Lessee
shall, with Lessor's reasonable consent, immediately pay to Lessor: (i) the
amount required to replace such item with like equipment of the same or later
model in good condition, in which case Lessor shall replace such item, and
rental payments shall continue throughout the Lease Term without any
interruption, or (ii) the aggregate unpaid rent due for the balance of the
rental term for the items of' Equipment involved, discounted to present value
at the then current Treasury Bill rate, not to exceed six percent (6%) per
annum; the then estimated fair market value of the items of Equipment
involved, calculated as of the expiration of the Lease Term (the "Residual
Value"), discounted to present value at the then current Treasury Bill rate,
not to exceed six percent (6%) per annum; any tax payments or indemnification
for which Lessee is liable under Paragraphs 10 and 20; and any other amounts
for which Lessee is liable under this Lease. Upon payment under subparagraph
22 (b) (ii), this Lease shall terminate with respect to the items paid for,
and Lessee shall become entitled to such items "as is" and "where is" without
any warranty, express or implied.
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c. Any proceeds paid to Lessor from the Personal Property Insurance
specified in subparagraph 23 (a) (i) shall be applied to Lessee's obligations
under this Paragraph 22.
23. INSURANCE.
a. Lessee shall, at its own expense, maintain the following types
of insurance, with companies with an A-5 best rating or better, acceptable to
Lessor, until such time as Lessee has returned the Equipment as specified in
Paragraph 18:
(i) Personal Property Insurance on all property owned by
Lessee (including but not limited to all of the Equipment), in an agreed
amount based upon the following:
(A) Standard All Risk Property Insurance, including
boiler and machinery insurance, earthquake insurance and flood insurance if
any Equipment is located in an identified "flood hazard area," in which flood
insurance has been made available pursuant to the National Flood Insurance
Act of 1968;
(B) The amount of such insurance shall be not less than
the greater of the fair market value or the full undepreciated replacement
value of the Equipment. The Amount of such insurance allocable to loss or
damage or personal property shall not have a deductible in excess of two
thousand dollars ($2,000.00) per occurrence.
(C) Such insurance shall contain an endorsement issued by
the insurer (as opposed to a certificate issued by an agent of the insurer)
in which Lessor is named as Loss Payee with respect to the Equipment, and
shall set aside the amount stated in subparagraph 23 (a) (i) (B) for the sole
benefit of, and payable directly to, Lessor.
(ii) Employee Dishonesty Insurance payable to. Lessor with
respect to the theft of the Equipment.
(ii) Business interruption insurance in an amount at all times
equal to the total rental payments to become due during the six months
following the date of calculation. In the event of any interruption of
Lessee's business, the amount payable to Lessor shall be equal to the actual
loss of rental payments suffered by Lessor as the result of such
interruption, and shall be payable to Lessor within thirty (30) days from the
date of loss, and on a month-to-month basis thereafter, until Lessee's
business is returned to a fully operational state, plus ninety (90) days.
(iii) Commercial General Liability Insurance covering bodily
injury (including death) and property damage, naming Lessor, its directors,
officers, agents and employees as
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an Additional Insured on all policies (evidenced by an endorsement issued by
the insurer (as opposed to a certificate issued by an agent of the insurer)),
and providing total limits in amounts as are at the time carried by entities
engaged in the same or similar business as Lessee and which are similarly
situated, but in no event less than two million dollars ($2,000,000.00) for
combined single limit occurrence. All such policies shall cover any injury
or damage occasioned by, or occurring upon, Lessee's premises, products,
operations and, at Lessor's option, explosion, collapse and underground
hazards. All such policies shall contain contractual liability coverage
including all liability assumed under this agreement, and a cross liability
clause providing that such insurance shall, except with respect to the limits
of liability, apply separately to each insured.
(iv) Workers compensation insurance.
(v) Key Person Life Insurance on James S. Burns in an amount at
all times equal to the total rental payments due and to become due under this
Lease, naming Lessor or its Assignee as Collateral Assignee. Lessee shall
obtain said insurance prior to any funding by Lessor and shall maintain said
insurance for the entire Lease Term. If, at any time during the Lease Term,
such named individual's employment with Lessee should terminate in such a
manner that Lessor is unable to collect the proceeds of said Key Person Life
Insurance, Lessee shall cancel such policy and substitute therefore a Key
Person Life Insurance Policy on an employee reasonably selected by Lessor.
If Lessee is not in default of this Lease and Lessor is in receipt of any
proceeds from said Key Person Life Insurance, said proceeds shall be applied,
in the following order, to (A) Lessee's rental and other obligations due the
last month of the Lease Term and then to each successively preceding month,
discounted to present value at the then current Treasury Bill rate, not to
exceed six percent (6%) per annum, (B) any amounts for which Lessee is
liable under Paragraphs 10 and 20 of this Lease, and (C) any other amounts
for which Lessee is liable. Any excess, after all such obligations have been
discharged, shall be paid to Lessee without interest.
b. All insurance specified in this Paragraph 23 shall be primary
over, and in no event shall, any insurance carried by Lessor be called upon
to contribute to any loss relating to or arising out of this Lease. All
insurance shall be in effect, and shall be evidenced by policies and/or
endorsements delivered to Lessor no later than twenty (20) days after the
date upon which Lessee executes this Lease. Notwithstanding anything to the
contrary contained in this Lease, Lessor shall have no obligation to purchase
any Equipment until all policies are in place. All such policies shall
provide for at least thirty (30) days' prior written notice to Lessor in the
event of any cancellation, non-renewal or material change in coverage, and
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Lessor shall receive a copy of any and all endorsements or other
documentation relating to such policies.
c. Should Lessee, at any time during the Lease Term, be without
sufficient insurance, as determined by Lessor in accordance with the
provisions of this Paragraph 23, Lessee appoints Lessor as its agent to
obtain such coverage, and promises to pay to Lessor the entire cost of such
coverage.
24. DEFAULT. Time is of the essence of this Lease and each of its
provisions. Lessee shall be in default immediately upon the occurrence of
any of the following events:
a. Nonpayment, by the due date specified herein, of any rental or
other payment required of Lessee under the terms of this Lease, and such
nonpayment shall continue for a period of five (5) business days;
b. Noncompliance with any or all of the provisions of Paragraph
23, and such noncompliance shall continue for a period of five (5) business
days after notice thereof is given to Lessee;
c. If Lessor shall determine that Lessee has made a misstatement
or false statement of, or omitted to state, a material fact in connection
with the execution, performance or nonperformance of this Lease or any
Schedule, or if any representation or warranty of Lessee in this Lease or the
Acceptance Certificate for any item of Equipment is inaccurate or false but
only if the effect of same has a material and adverse effect on the business
or financial condition of the Lessee;
d. If Lessee, without Lessor's prior written consent shall have
attempted to remove, part possession with, sell transfer, encumber, assign or
sublet the Equipment or Lessee's interest under this Lease; or if Lessee
shall have attempted to convert any interest of Lessor arising under this
Lease or any purchase order, or resulting from the purchase of Equipment;
e. If Lessee shall encumber, without Lessor's prior written
consent, other than for valid business purposes during the normal course of
business with respect to license agreements or similar agreements, sell,
transfer or assign Lessee's rights, title and interest in all patents, patent
applications, invention disclosures, copyrights, copyright applications,
trademarks (including service marks), trademark registrations, trade names,
computer software and hardware, microcode and source code, trade secrets,
know-how and processes owned by Lessee (hereinafter referred to as
"Intellectual Property");
f. If any of Lessee's credit or financial
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information submitted to Lessor prior or subsequent to execution of this
Lease (including but not limited to due diligence materials, Financial
Statements and Additional Information) contains any misstatement or false
statement of a material fact, or fails to state therein any material fact
necessary to make the statements made, in light of the circumstances under
which they were made, not misleading but only if the effect of same has a
material adverse effect on Lessee's ability to satisfy its obligations under
this Agreement;
g. If in the determination of Lessor the present fair salable
value of Lessee's assets is less than the amount that will be required to pay
the probable liability on Lessee's existing debts as they become absolute and
matured;
h. If any single judgment for payment of money damages in excess
of fifty thousand dollars ($50,000.00), or aggregate judgments for payment of
money damages in excess of one hundred fifty thousand dollars ($50,000.00),
shall be rendered against Lessee and shall remain undischarged for a period
of sixty (60) days, during which period execution shall not effectively
stayed;
i. If any substantial part of Lessee's property shall remain
subjected to any levy, seizure, involuntary assignment, attachment,
application or sale for or by any creditor or governmental agency;
j. If any single indebtedness of Lessee exceeding the sum of two
hundred fifty thousand dollars ($250,000.00), or aggregate indebtedness
exceeding the sum of five hundred thousand dollars ($500,000.00), under any
other lease or contract for the borrowing of money or on account of the
deferred purchase price of property shall be accelerated, or subject to
acceleration upon the giving of notice, passage of time or both as a result
of a default by Lessee, or the obligee with respect to such indebtedness
shall exercise any other remedy it may have as a result of such default;
k. If an order, judgment or decree shall be entered by any court
having jurisdiction for (i) relief in respect of Lessee in an involuntary
case under any applicable bankruptcy, insolvency or other similar law (as now
or hereafter in effect), (ii) appointing of receiver, liquidator, assignee,
trustee, custodian, sequestrator (or similar official) for Lessee or for any
substantial part of its property, or sequestering any substantial part of the
property of Lessee, or (iii) liquidating of Lessee's affairs, and any such
order, judgment or decree shall remain in force undismissed, unstayed or
unvacated for a period of sixty (60) days after the date of entry thereof; or
if Lessee shall seek relief of any kind under any such law or consent to any
of the foregoing; or
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l. Nonperformance of any of Lessee's obligations other than those
described in this Paragraph 24, and such nonperformance shall continue for a
period of twenty (20) days after notice thereof is given to Lessee.
25. REMEDIES. In the event of any default by Lessee, or upon
termination prior to the expiration of this Lease, Lessor or its agent shall
have the right, without demand or prior notice, in Lessor's sole discretion,
to exercise any one or more of the following remedies in addition to any
other remedies available to Lessor under applicable law:
a. To declare the entire amount of rent hereunder during the
remainder of the Lease Term immediately due and payable;
b. To enforce Lessee's performance or recover damages for Lessee's
default as specified in Paragraph 26;
c. To take possession of any or all items of Equipment and, in
Lessor's sole discretion, with or without any court order or other process of
law. This Lease shall terminate if all defaults on the part of Lessee are
not cured within five (5) days after such taking of possession; however, such
taking of possession and termination of this Lease shall not relieve Lessee
of its obligations to pay rent and other amounts due hereunder. Lessee waives
any and all damages occasioned by such taking of possession.
d. To pursue any and all remedies available at law by reason of
Lessee's default.
26. DAMAGES. Lessor's damages, in the event of default by Lessee, shall
include without limitation: (i) the unpaid balance of rent and all other
amounts due and to become due hereunder, discounted to present value at then
current Treasury Bill rate, not to exceed six percent (6%) per annum, (ii)
the Residual Value (as defined in Paragraph 22), discounted to present value
at the then current Treasury Bill rate, not to exceed six percent (6%) per
annum, (iii) indemnification for any Loss of Tax Benefits under Paragraph 20,
(iv) costs of repossession and repairs and lease or sale to a third party,
plus (v) all other expenses including court cost and attorney fees. Lessor's
obligation to mitigate said damages shall be limited as follows:
a. Lessor shall make best efforts to mitigate its damages by
re-leasing the Equipment to a third party, and any rentals received in
consideration for such third party's use of said Equipment during any period
of the Lease Term shall be applied only to that portion of Lessor's damages
resulting from loss of rentals that Lessor would have received from Lessee
15
<PAGE>
during the same period had Lessee not become in default. Amounts received
from such third party shall be applied in mitigation of Lessor's damages only
to the extent such amounts are payable in connection with such third party's
periodic rental obligations as specified in the preceding sentence; in no
event shall any other amount received from such third party, including
without limitation as a security deposit or as an advance on periodic rental
obligations, be applied in mitigation of Lessor's damages hereunder.
b. Lessor shall have no obligation to sell any of the Equipment;
however, any amounts received from a sale to a third party shall be applied
to Lessor's damages as specified in this paragraph 26.
27. CHOICE OF LAW. THIS LEASE SHALL BE DEEMED TO HAVE BEEN MADE AND
ACCEPTED AND PERFORMED IN THE COUNTY OF SAN FRANCISCO, IN THE STATE OF
CALIFORNIA, WHERE THE LESSOR'S PRINCIPAL PLACE OF BUSINESS IS LOCATED. THIS
LEASE AND ALL TRANSACTIONS HEREUNDER, AND ALL RIGHTS AND LIABILITIES OF THE
PARTIES HERETO, SHALL BE DETERMINED AND GOVERNED AS TO THE VALIDITY,
INTERPRETATION, ENEORCEMENT AND EFFECT BY THE LAWS OFTHE STATE OF CALIFORNIA.
THE LESSEE HEREBY CONSENTS, IN ALL ACTIONS AND PROCEEDINGS ARISING DIRECTLY
OR INDIRECTLY FROM THIS LEASE, TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL
DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OR ANY STATE COURT
LOCATED WITHIN SAN FRANCISCO COUNTY IN THE STATE OF CALIFORNIA. LESSEE
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS LEASE. IN ADDITION, ANY CLAIM
OR DISPUTE ARISING UNDER OR RELATING TO THIS LEASE MAY, AT LESSOR'S
DISCRETION, BE SUBMITTED TO BINDING ARBITRATION IN SAN FRANCISCO, CALIFORNIA
PURSUANT TO THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
28. MISCELLANEOUS.
a. If more than one Lessee is named in or added to this Lease, the
liability of each shall be joint and several.
b. The rent shall not abate by reason of termination of Lessee's
right of possession and/or the taking of possession by Lessor, or for any
other reason.
c. All notices related hereto shall be mailed to Lessor or Lessee
at its respective address as specified on page one of this Lease, or at such
other address as either party may designate upon ten days written notice to
the other party.
d. Paragraph titles are solely for convenience and are not an aid
in the interpretation of this Lease.
16
<PAGE>
e. A representative of Lessor shall have the right to meet with
Lessee's Chief Executive Officer and Chief Financial Officer once each
quarter throughout the lease term to review and discuss the operating
performance and financial condition of the Company. The Lessor shall further
be entitled to consult with and advise such officers on significant business
issues of the Lessee, including management's proposed annual and quarterly
operating plans, key personnel decisions, etc.
The Lessee shall invite a representative of the Lessor to attend all
meetings of the Lessee's Board of Director in a non-voting observer capacity
and shall provide such representative with the same notice of each meeting as
is provided to the members of the board of directors.
Lessee shall' provide to Lessor copies of all notices, minutes, consents
and other material that it provides to its directors at the same time they
are delivered to the directors.
29. RIGHT OF FIRST OFFER Lessee shall provide Lessor with all requests
for additional equipment lease financing prior to the time that such
requests are provided to other financing sources. Should Lessor and Lessee
fail to agree on the terms and conditions of such financing, then Lessee may
accept a funding source other than Lessor.
30. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS If Lessee shall fail
duly and promptly to perform any of its obligations under this Lease, Lessor
may, at its option and at any time, perform the same without waiving any
default on the part of Lessee, or any of Lessor's rights. Lessee shall
reimburse Lessor, within five (5) days after notice thereof is given to
Lessee, for all expenses and liabilities incurred by Lessor in the
performance of Lessee's obligations.
31. NONWAIVER. Lessor's failure at any time to require strict
performance by Lessee shall not constitute waiver of, or diminish, Lessor's
right to demand strict compliance with any provision of this Lease. Waiver
by Lessor of any default shall not constitute waiver of any other default.
Lessor's rights are cumulative and not alternative.
32. SURVIVAL OF OBLIGATIONS All agreements, covenants, representations
and warranties of Lessee contained in this Lease or in the Schedules or other
documents delivered pursuant hereto or in connection herewith shall survive
the execution and delivery, and the expiration or other termination of this
Lease.
33. SEVERABILITY If any provision or remedy herein provided is
determined invalid under applicable law, such provision shall be inapplicable
and deemed omitted; but the remaining provisions, including remaining default
remedies, shall be given effect in accordance with their manifest intent.
17
<PAGE>
34. UPGRADES, ADDITIONS AND ATTACHMENTS. Any added memory, upgrades,
additions and attachments to Equipment previously placed under this Lease
shall, upon approval by Lessor, be included on a Schedule, with a
Noncancellable Term that is co-terminus with the Equipment to which such
added memory, upgrade, addition or attachment is being attached.
35. ENTIRE AGREEMENT This instrument constitutes the entire agreement
between the parties and may not be modified except in writing executed by
Lessor and Lessee. No supplier or agent of Lessor is authorized to bind
Lessor or to waiver or modify any term of this Lease.
The undersigned representative of Lessee affirms that he or she has
read and understood this Lease and is duly authorized to execute this Lease
on behalf of Lessee and that, if Lessee is a corporation, this Lease is
entered into with consent of Lessee's Board of Directors and stockholders if
so required.
In witness whereof, the parties hereto execute this noncancellable
Lease as of the effective date.
LESSEE: LESSOR:
OSIRIS THERAPEUTICS, INC. DOMINION VENTURES, INC.
By: /s/ James S. Burns By: /s/
---------------------- --------------------
18
<PAGE>
EXHIBIT A
New and/or used furniture, test, laboratory, production, equipment all
subject to the approval of Lessor. All other equipment subject to approval
by Lessor.
19
<PAGE>
FIRST AMMENDMENT TO MASTER LEASE AGREEMENT NO 10070
This first Amendment dated March 3, 1995, to Master Lease Agreement No 10070
dated February 28, 1994 ("the Lease") is entered into by and between Osiris
Therapeutics, Inc., ("Lessee") and Dominion Ventures, Inc., ("Lessor")
WHEREAS, Lessee has requested that additional equipment purchased under the
Master Lease Line:
NOW THEREFORE, the parties hereto agree to amend the Lease as follows:
1. The Funding Expiration Date of February 27 1995 as set forth on Page
1 of the Lease shall be amended to be April 30, 1995
Except as specifically provided herein, all terms and conditions of the Lease
shall remain in full force and effect, without waiver or Modification
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed as of the date first written above.
LESSEE: OSIRIS THERAPEUTICS, INC.
By: /s/ Nancy G. Rubin
----------------------
Title: Director Finance & Administration
---------------------------------
LESSOR: DOMINION VENTURES, INC.
By: /s/
----------------------------------
Title: CFO
--------------------------------
<PAGE>
SECOND AMENDMENT TO MASTER LEASE AGREEMENT NO. 10070
This Second Amendment dated June 20, 1995, to Master Lease Agreement No.
10070 dated February 28, 1994 (the "Lease"), is entered into by and between
Osiris Therapeutics, Inc. (the "Lessee") and Dominion Ventures, Inc. (the
"Lessor").
WHEREAS, the Funding Expiration Date as set forth in the Lease has expired.
NOW THEREFORE1 the parties hereto agree to amend the Lease as follows:
l. The Master Lease Line shall be increased by $2,800,000.00 for a total
of $3,393,458.33.
2. The Funding Expiration Date of April 30, 1995 as set forth in the
First Amendment to the Lease shall be amended to March 31, 1996.
3. The Advance Rental Amount specified on page 1 of the Lease shall be
increased by $76,815.20 (plus applicable taxes) for a total of
$114,915.20, which shall be paid to Lessor upon execution of the
Second Amendment and shall be credited to the last complete calendar
month's rent for each item of Equipment, subject to the conditions set
forth in paragraph 6 of the Lease.
4. The Initial Term set forth on Page 1 of the Lease shall be amended to
48 months for lab equipment and 36 months for computers and furniture
with respect to Equipment purchased under the $2,800,000 extension.
5. The Rental Factor set forth on Page 1 of the Lease shall be amended to
3.289% for 36-month equipment and 2.607% for 48-month equipment with
respect to Equipment purchased under the $2,800,000.00 extension.
Except as specifically provided herein, all terms and conditions of
the Lease shall remain in full force and effect, without waiver or
modification.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed as of the date first written above.
LESSEE: OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
----------------------
Its: President & CEO
----------------------
LESSOR: DOMINION VENTURES, INC.
By: /s/
------------------------
Its: CFO
------------------------
2
<PAGE>
Exhibit 10.17
LEASE
BY AND BETWEEN SAGA LIMITED PARTNERSHIP,
A MARYLAND LIMITED PARTNERSHIP
AND
MARYLAND ECONOMIC DEVELOPMENT CORPORATION,
A BODY POLITIC AND CORPORATE AND CONSTITUTED AS A
PUBLIC INSTRUMENTALITY OF THE STATE OF MARYLAND
DATED JANUARY 18, 1995
<PAGE>
TABLE OF CONTENTS
Section Caption
- ------- -------
Section 1 Definitions
Section 2 Demise of Premises
Section 3 Rent
Section 4 Late Payments
Section 5 Intentionally
Section 6 Omitted
Section 7 Inspection of Books/Records
Section 8 Extension
Section 9 Utilities
Section 10 Taxes
Section 11 Additions to the Building
Section 12 Common Areas
Section 13 Tenant's Work
Section 14 Restrictions on Use
Section 15 Services, Installation, Repairs, Repairs by Landlord
Section 16 Force Majeure
Section 17 Surrender of Premises
Section 18 Vacating or Abandoning the Premises or Personal Property
Section 19 Quiet Enjoyment
Section 20 Indemnification and Waiver of Claim
Section 21 Insurance of Tenant
Section 22 Insurance of Landlord
Section 23 Effect on Insurance
Section 24 Total or Partial Destruction of Premises
Section 25 Alterations
Section 26 Mechanics' Lien
Section 27 Breach or Default
Section 28 Effect of Breach
Section 29 Access by Landlord
Section 30 Assignment and Subletting
Section 31 Condemnation
Section 32 Execution of Estoppel Certificate
Section 33 Non-Disturbance, Subordination and Attainment
Section 34 Signs and Advertising
Section 35 Rules and Regulations
Section 36 Parking Spaces
Section 37 Purchase Option/Right of First Refusal
Section 38 Expansion
Section 39 Environmental Indemnification/Representation
Section 40 Accord and Satisfaction
Section 41 No Partnership
<PAGE>
Section 42 Holding Over
Section 43 Recordation
Section 44 Waivers/Brokerage Commission
Section 45 Remedies for Landlord
Section 46 Table of Contents; Captions
Section 47 Notices
Section 48 Applicable Law
Section 49 Successors and Included Persons
Section 50 Waiver of Trial by Jury
Section 51 Rights of and Claims Against Landlord
Section 52 Calculation of Time
Section 53 Severability; Reduction of Charges
Section 54 Counterparts
Section 55 Total Agreement
Section 56 No Merger
Section 57 Time of the Essence/Good Faith and Fair Dealing
Section 58 Commercial Purpose
Section 59 Abatement of Rent Relating to Unsubleased Space
Section 60 Repayment of "Abated" Rent
Section 61 Limitation of Tenant Liability
Section 62 Vacating of Office Space by The Belt's Corporation
<PAGE>
LEASE AGREEMENT
THIS LEASE (this "Lease") is made as of the 18th day of January, 1995, by
and between SAGA LIMITED PARTNERSHIP, a Maryland limited partnership
(hereinafter referred to as "Landlord") and MARYLAND ECONOMIC DEVELOPMENT
CORPORATION, a body politic and corporate and constituted as a public
instrumentality of the State of Maryland (hereinafter referred to as
"Tenant").
RECITALS
WHEREAS, Landlord is the fee simple owner of the Property (as hereinafter
defined), and the Building (as hereinafter defined) and desires to lease
space therein; and
WHEREAS, Tenant has agreed to perform certain improvements to the
Building and to lease the Premises (as hereinafter defined) within the
Building for sublease to one or more third parties, all for the purpose of
providing affordable laboratory space and accessory office space to various
emerging business enterprises to encourage the growth of the medical research
industry in the State of Maryland; and
WHEREAS, the parties desire to enter into this Lease in order to define
and carry out their respective rights, duties, and liabilities relating to
the Property, the Building and the Premises.
NOW, THEREFORE, WITNESSETH in consideration of the mutual promises and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby covenant and agree as follows:
SECTION 1
DEFINITIONS
For the purposes of this Lease, Landlord and Tenant hereby agree that the
following terms shall have the indicated meanings:
Additional Rent: all sums of money or charges required to be paid by Tenant
under this Lease other than Annual Rent, whether or not such sums or charges
are designated "Additional Rent".
Annual Rent: The sum of $6.82 per square foot per annum multiplied by the
actual square footage of the leased Premises during the first three (3) years
of the Original Term and the amount during the remaining years of the
Original Term and any Extension Term as set forth in Section 3.
<PAGE>
Assignment: any assignment, transfer, mortgage, or encumbrance, whether
voluntarily, non-voluntarily, or by operation of law, of Tenant's interest in
this Lease, or such other events determined to be Assignments pursuant to
Section 30.
Bondholder: Whiting-Turner Contracting Company whose address is 300 E. Joppa
Road, Towson, Maryland 21204.
Building: the building located on the Property and known as 2001 Aliceanna
Street, Baltimore, Maryland 21231-2001, consisting of 184,962 square feet,
more or less, as measured in accordance with BOMA standards.
Common Areas: those portions of the Property which Landlord may from time to
time designate for Tenant's and any Subtenant's non-exclusive use, which may
include parking areas, if any, as designated in Exhibit F; and any other
areas so provided by Landlord but excluding any areas included in any other
lease or part of the Premises specifically limited for use by one or more
other designated party.
Environmental Requirements: any federal, state or local law, statute,
ordinance or regulation, or decree or administrative order or desire or other
agreement or restriction, whether public or private (including but not
limited to any condition or requirement imposed by any insurer or surety
company), now existing or hereafter created, issued or enacted and all
amendments thereto, modifications thereof and substitutions therefor, which
in any way pertains to human health, safety or welfare, Hazardous Materials,
Hazardous Materials contamination or the environment (including but not
limited to ground, air, water or noise pollution or contamination, and
underground or above ground tanks).
Extension Terms: (a) a period of six and one-half (6-1/2) years commencing
upon the expiration of the Original Term ("First Extension Term"); (b) a
period of five (5) years commencing upon the expiration of the First
Extension Term ("Second Extension Term"); and (c) a period of five (5) years
commencing upon the expiration of the Second Extension Term ("Third Extension
Term").
Hazardous Materials: Including, but is not limited to, asbestos or any
substance containing asbestos, polychiornated biphenyls, any explosives,
radioactive materials, chemicals known or suspected to cause cancer or
reproductive toxicity, pollutants, effluents, contaminants, emissions,
infectious wastes, any petroleum or petroleum-derived waste or product or
related materials and any items defined as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or other similar
designations under any Hazardous Material Law, including but not limited to,
the Resource Conservation and Recovery Act (the Solid Waste Disposal Act), 42
U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response,
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"); the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 et seq.; the Federal Water Pollution Control At,
33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Toxic Substances Control Act, 15 U.S.C.
2
<PAGE>
Section 2601 et seq.; and the Safe Drinking Water Act, 42 U.S.C. Section 300f
et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 655 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
Section 136 et seq. and any other present or future local, state, federal or
international law, treaty, statute, ordinances, rules, regulations,
advisories and guidelines relating to public health, safety, or the
environment, and any and all amendments, regulations, orders, decrees,
permits, licenses, or deed restrictions now or hereafter promulgated
thereunder (collectively referred to as the "Environmental Laws").
Landlord: SAGA Limited Partnership, a Maryland Limited Partnership.
Landlord's Address: 2001 Aliceanna Street, Baltimore, Maryland 21231-2001,
Attn: S A. "Skip" Brown, III.
Landlord's Mortgagee: the beneficiary of any mortgage or deed of trust.
Landlord's Telecopier Number: (410) 675-2399.
Lease Commencement Date: Sixty (60) days following the date this Lease is
fully executed by the parties.
MIDFA: Maryland Industrial Development Financing Authority, a _____.
Monthly Installment of Annual Rent: At lease inception, Seventeen Thousand
and FiftyDollars ($17,050.00). Being one-twelfth (1/12th) of the Annual
Rental as set forth in Section 3.
Mortgage: any mortgage, deed of trust, ground lease or security agreement
affecting the Property, or, any part thereof, at any time, including, but not
limited to, a certain Deed of Trust dated as of November 1, 1992, executed by
Landlord in favor of certain namedt rustees for the benefit of the Maryland
National Bank, recorded among the Land Records of Baltimore City, Maryland at
Liber _____, Folio _____.
Normal Business Hours: the hours from 8:30 a.m. to 5:00 p.m., Monday through
Friday, except legal holidays.
Notices: all notices, requests, demands, or other communications which may be
or are required or permitted to be served or given under this Lease.
Option Space: 50,000 square feet of space, more or less, within the Building,
which is the space that Tenant has the option to lease hereunder, and which
is outlined in Exhibit A, and such other space as Tenant has the right to
lease pursuant to any rights granted to Tenant under Section 38, infra.
3
<PAGE>
Original Term: commencing March 19, 1995 and continuing for a period of
approximately six and one-half (6-1/2) years from the Rental Commencement
Date, and ending at 5:00 p.m. on December 31, 2001.
Parking Spaces: Fifty (50) parking spaces as shown on Exhibit B shall be made
available by Landlord for Tenant's and any Subtenant's non-exclusive use.
Premises: initially consisting of 30,000 square feet, more or less, within
the Building, which is the space to be leased by Tenant hereunder and
outlined in Exhibit C (hereinafter called the "Original Space"), which may be
increased from time to time by the incorporation of the Option Space in
accordance with options/rights granted to Tenant. The actual square footage
of the Premises shall be measured in accordance with BOMA standards, and the
parties hereto agree to execute confirmatory statements (prior to lease
commencement and in the event the square footage increases due to Tenant's
exercise of any option rights contained herein) to record in writing the
actual square footage contained in the leased Premises.
Property: all that tract or parcel of land owned by Landlord situate in
Baltimore City, Maryland consisting of approximately 3.304 acres, more or
less, and more particularly described in Exhibit D.
Rent: all Annual Rent, Monthly Installments of Annual Rent, and Additional
Rent payable by Tenant to Landlord under this Lease.
Rental Commencement Date: The earlier of (a) the completion of the Osiris
Work (as defined herein) or (b) July 1, 1995.
Sublease: any sublease or agreement to sublet executed by and between the
Tenant and any third party or parties for all or a portion of the Premises,
as the same may be amended, revised or otherwise modified from time to time,
which sublease or agreement to sublet shall be substantially in the form of
Exhibit H attached hereto and incorporated herein by reference. Any material
change in the form of any sublease which affects or may affect Landlord's
rights under the sublease, shall first be approved by Landlord.
Subtenant: any Subtenant under a Sublease.
Taxes: all taxes, assessments, and governmental charges of any kind and
nature whatsoever levied or assessed against the Property, Building or
Premises.
Tenant: Maryland Economic Development Corporation, a body politic and
corporate and constituted as a public instrumentality of the State of
Maryland or any permitted assignee under Section 30.
Tenant's Address: 36 South Charles Street, Suite 1911, Baltimore, Maryland
21201, Attn: Hans F. Mayer, Executive Director.
4
<PAGE>
Tenant's Building Work: all those improvements and allocations to be
performed by Tenant to the shell, structure, building systems, roof, interior
and exterior of the Building in accordance with the plans and specifications
prepared by Gaudreau, Inc., Kibart, Inc. and Faissant Associates, Inc. dated
September 16, 1994, as more particularly described on Exhibit E.
Tenant's Telecopier Number: (410) 625-1848.
Tenant TI Work: all those improvements and renovations to the Premises to be
performed by Tenant from time to time during the Term to renovate and/or
build-out the Premises for medical laboratory and accessory office use
including but not limited to those improvements and renovations shown on the
plans and specifications prepared by Gaudreau, Inc., Kibart, Inc. and
Faissant Associates, Inc. dated September 16, 1994 as well as any other
improvements or renovations as more particularly described on Exhibit E
(hereinafter referred to as the "Osiris Work").
Tenant's Pro Rata Share: the percentage equivalent to a fraction having as
its numerator the number of net rentable square feet in the Premises and its
denominator the number of square feet of net rentable floor space in the
Building, initially being sixteen and twenty-two one hundredths percent
(16.22%).
Term: the Original Term and any Extension Term as to which Tenant exercises
an option.
Vacant: With regard to the Premises, all or any portion thereof which is not
occupied by Tenant or Subtenant. For purposes of this Lease, space shall be
deemed to be vacant even though a Subtenant is still physically occupying
such space so long as such Subtenant is not actively conducting its business
from such space and Subtenant is engaged in the process of closing down or
moving its business or operations.
When used herein, the singular shall apply to the plural, the plural to
the singular, and the use of any gender shall apply to all genders.
SECTION 2
DEMISE OF PREMISES
Landlord leases to Tenant and Tenant hereby leases from Landlord the
Premises for the Term, Rent, and upon the terms, covenants, and conditions
set forth herein. Except as specifically set forth herein, Tenant hereby
accepts the Premises in "as is" condition and as complying with all
obligations of Landlord with respect to the condition, order and repair
thereof.
5
<PAGE>
SECTION 3
RENT
Tenant shall begin paying rent on the Rental Commencement Date and shall
pay the Monthly Installments of Annual Rent in advance on the first day of
each month for the Term of this Lease; and (except as specifically set forth
herein including Section 60) without deduction, set-off, recoupment,
counterclaim, or demand, at Landlord's Address or at such other place as
shall be designated in writing by Landlord. If the rental payments shall
commence or end on a day other than the first day of a month, the Monthly
Installments of Annual Rent for any such partial month of the Term shall be
prorated on a per diem basis. Upon the execution of this Lease, Tenant shall
pay one (1) Monthly Installment of Annual Rent and, if the Original Term does
not commence on the first day of a month, Tenant shall also pay a prorated
Monthly Installment of Annual Rent for the period from the first day of the
Original Term until the last day of such month.
During the first three (3) years of this Lease from the Rent Commencement
date, the Annual Rent for the Original Space shall be the sum of $6.82 per
square foot per annum, multiplied by the actual square footage of the leased
Premises, payable in equal monthly installments. Commencing July 1, 1998, the
Annual Rent for the Original Space shall be increased by ten and nine-tenths
percent (10.9%), being $7.561 per square foot, per annum.
Commencing July 1, 1999 and every year thereafter, during the Original
Term and any Extension Term(s) of this Lease, the Annual Rent for the
Original Space shall be increased by three and one-half percent (3.5%) per
annum. Accordingly, the Annual Rent for the Original Space shall be increased
as follows:
<TABLE>
<CAPTION>
Amount
Increase Date Per Sq. Ft.
- ---------------- --------------
<S> <C>
July 1, 1998 $7.561
July 1, 1999 $7.826
July 1, 2000 $8.100
July 1, 2001 $8.384
July 1, 2002 $8.677
July 1, 2003 $8.981
</TABLE>
and so forth, increasing at three and one-half percent (3.5%) per annum.
The Annual Rent for the Option Space shall be calculated as follows:
As to any Option Space which Tenant shall have executed any option or
right, the Annual Rent for the Option Space if leased during the first three
(3) years of this Lease shall
6
<PAGE>
be the sum of $5.15 per square foot, per annum, multiplied by the actual
square footage of the leased Option Space, payable in equal monthly
installments.
Commencing July 1, 1998, the Annual Rent for the Option Space shall be
increased by ten and nine-tenths percent (10.9%), being $5.711 per square
foot, per annum.
Commencing July 1, 1999 and every year thereafter, during the Original
Term and any Extension Term(s) of this Lease, the Annual Rent for the Option
Space shall be increased by three and one-half percent (3.5%) per annum.
Accordingly, the Annual Rent for the Option Space shall be increased as
follows:
<TABLE>
<CAPTION>
Amount
Increase Date Per Sq. Ft.
- ---------------- --------------
<S> <C>
July 1, 1998 $5.711
July 1, 1999 $5.911
July 1, 2000 $6.118
July 1, 2001 $6.332
July 1, 2002 $6.554
July 1, 2003 $6.783
</TABLE>
and so forth, increasing at three and one-half percent (3.5%) per annum.
SECTION 4
LATE PAYMENTS
In the event that any Monthly Installment of Annual Rent or Additional
Rent shall be past due for more than fifteen (15) days, Tenant shall pay to
Landlord as Additional Rent a late charge equal to the greater of (a) five
percent (5%) of the unpaid Rent, or (b) the interest on the unpaid Rent from
the date when due until payment at the rate of fifteen percent (15%) per
annum, or, if less, the highest rate permitted by law. The late charge
imposed under this Section 4 is not a penalty and has been agreed to by
Landlord and Tenant as necessary to compensate Landlord for its additional
costs associated with late payment.
SECTION 5
INTENTIONALLY OMITTED
7
<PAGE>
SECTION 6
INSPECTION OF BOOKS/RECORDS
For any cost or expense incurred by Landlord or relating to the Building,
Property or Premises for which Tenant must reimburse or pay to Landlord,
Tenant shall be entitled to review, and examine any and all of Landlord's
books, records and other papers relating to such cost or expense within
fifteen (15) business days from any such request. All such payments due and
owing by Tenant shall reflect credits or discounts received by Landlord and
shall not include any fines, penalties or late charges incurred by Landlord,
unless same is caused solely by Tenant's late payment to Landlord.
SECTION 7
EXTENSION
Upon the expiration of the Original Term, and provided Tenant is not then
in default under any material term, covenant, or condition (or if so, such
default is cured prior to the expiration of any applicable grace period),
Tenant shall have three (3) separate successive options to extend this Lease,
the first for an Extension Term of six and one-half (6-1/2) years, and the
second and third for an Extension Term of five (5) years each, provided that
Tenant gives Landlord at least two (2) months' prior written notice of its
exercise of each such option. In the event that Tenant exercises its option
as to any Extension Term, all provisions of this Lease shall apply during
each Extension Term except the Annual Rent shall be as set forth in Section 3.
SECTION 8
UTILITIES
From and after the Commencement Date, Tenant shall make (or cause its
Subtenants to make) agreements with each utility company and public body to
provide, in Tenant's or Subtenant's name, as applicable, gas, electricity,
water, sewer, telephone, heat and air conditioning necessary for use of the
Premises, and Tenant, or Subtenant, as applicable, shall cause all such
utilities to be separately metered, to the extent possible. Tenant shall pay
(or cause its Subtenants to pay) directly to the companies furnishing utility
service the cost of all service connection fees and the cost of all utilities
consumed throughout the Term. If the water and/or sewer service is not
capable of being separately metered, Landlord shall pay the water and/or
sewer bills for the Building, and Tenant shall pay, or cause its Subtenants
to pay, to Landlord prior to the time when each bill becomes due, for their
actual use of the said utility as reflected on the bill. In the event that
Tenant, or Subtenant, as applicable, falls to pay in a timely manner any sum
required under this Section 8, Landlord shall have the right, but not the
obligation, to pay any such sum. Any sum so paid by Landlord shall
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be deemed to be owing by Tenant to Landlord and due and payable as Additional
Rent within five (5) days after written demand.
Tenant's obligations for payment of the costs incurred for utilities
which serve the Premises prior to the termination of this Lease shall survive
such termination.
SECTION 9
TAXES
(a) Tenant and/or any Subtenant shall be liable for Taxes levied against
personal property, trade fixtures, and the Tenant TI Work and/or improvements
placed or constructed by Tenant and/or any Subtenant in the Premises. If any
such Taxes are levied against Landlord or Landlord's property and if Landlord
elects to pay the same or if the assessed value of Landlord's property is
increased thereby and Landlord elects to pay the Taxes based on such
increase, Tenant and/or any Subtenant shall pay to Landlord within five (5)
days of written demand that part of such Taxes for which Tenant or any
Subtenant is primarily liable hereunder.
(b) Landlord shall pay all taxes assessed against the Building and the
Property. Tenant agrees to pay to Landlord as Additional Rent all (i.e. 100%)
of such taxes attributable to the Premises, Tenant's Pro Rata Share of the
taxes attributable to the Common Areas and Tenant's Pro Rata Share of the
taxes attributable to the Building (without duplication of any sum for which
Tenant is responsible for pursuant to Section 9(a) above), as based upon the
tax worksheet allocations which are commonly used by the assessors. Tenant
shall pay, or cause to be paid, such amount within thirty (30) days after
receipt of copies of the applicable tax bills and assessment notices.
(c) If Tenant should fail to pay any Taxes required to be paid by Tenant
hereunder, in addition to any other remedies provided herein, Landlord may,
if it so elects, pay such Taxes. Any sum so paid by Landlord shall be deemed
to be owing by Tenant to Landlord and due and payable as Additional Rent
within five (5) days after written demand.
(d) If at any time during the Term of this Lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments, levies, or charges levied, assessed, or imposed on real
estate and the improvements thereon, there shall be levied, assessed, or
imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax assessment, levy or charge measured
by or based, in whole or in part, upon such rents or the Building, then such
taxes, assessments, levies or charges that re in lieu of the present method
of taxation shall be deemed to be included with the term "Taxes" for the
purposes hereof.
(e) So long as Tenant is provided with prior written notice of Landlord's
decision to contest, in addition to the other payments under this Section 9,
Tenant shall pay as
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Additional Rent, within five (5) days of written demand, Tenant's Pro Rata
Share of any reasonable fees, reasonable expenses, and reasonable costs
incurred by Landlord in contesting any Tax, or any assessments, levies, or
tax rate, applicable to the Property or portions thereof, so long as Landlord
undertakes such contest and contests in good faith and in an appropriate
manner or by appropriate proceedings.
(f) Landlord agrees to promptly pay in full and discharge any and all
Taxes assessed against the Building and/or the Property and to exhibit to
Tenant, within sixty (60) days after such payment, the receipted bills for
such Taxes, all of which Taxes Landlord shall pay prior to the day upon which
the same shall become delinquent. Taxes assessed against the Building and/or
the Property shall be considered delinquent as of the first day any interest
or penalties commence to accrue thereon. If Landlord fails to pay the Taxes
described in this Section 9(f) prior to the same becoming delinquent, Tenant
may, but shall have no obligation to, pay such Taxes. Upon presentation to
Landlord of the receipted bills for such Taxes, Landlord shall reimburse
Tenant for such amount (plus interest at the rate of five percent (5%) per
annum until paid). If Landlord does not pay such amount within ten (10) days
after receipt of the receipted bills, Tenant shall have the right to set-off
such amount against that portion of next month's Applicable Rent and, if
applicable, any future month's applicable Rent.
(g) Notwithstanding anything above to the contrary, the amount of taxes
for which Tenant is liable hereunder shall not be subject to increase by
reason of increased assessments in the value of the Building or Property
resulting from (i) any improvements, alterations or additions to the Building
or Property, other than for the Premises (including any Option Space
incorporated therein) or the Common Areas, or (ii) any sale of the Building
or Property.
SECTION 10
ADDITIONS TO THE BUILDING
Landlord shall have the exclusive right to use all or any part of the
roof and exterior walls of the Building for any purpose, provided, however,
in connection with any exercise by Landlord of any rights of entry or access
to the Premises described in this Section 10 or in any other provision of
this Lease, Landlord and its contractors use reasonable efforts to avoid
interference with the use or occupancy of the Premises by Tenant or its
Subtenants, and that such use does not materially interfere with Tenant's or
any Subtenants business or activities; to make alterations to and to build
additional stories on the Building in which the Premises are located and to
build adjoining the same, provided, however, that such use does not
materially interfere with Tenant's or any Subtenants business or activities;
and to erect and maintain in connection with any construction thereof,
temporary scaffolds and other aids to construction on the exterior of the
Building, provided, however, that such use does not materially interfere with
Tenant's or any Subtenants business or activities. Upon forty-eight (48)
hours advance notice, Landlord shall have access to the Premises that may be
necessary
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or desirable to perform such work, and Tenant shall not be entitled to any
abatement of rent on account thereof unless such work materially interferes
with Tenant's or any Subtenant1s business or activities. Tenant and all
Subtenants shall have free and unobstructed access to and from their
respective demised premises at all times during which work or alterations are
being performed pursuant to this Section 10.
SECTION 11
COMMON AREAS
In addition to the use of the Premises, Tenant, any Subtenant, and its
and their employees, customers, agents and business invitees shall have the
right to use the Common Areas in common with Landlord and other tenants of
the Building, their employees, customers, agents and business visitors.
Tenant shall not obstruct, or permit any Subtenant to obstruct, the Common
Areas or use them, or permit any Subtenant to use them, for any purpose other
than their customary or intended purposes.
All Common Areas shall be subject to the exclusive control of Landlord.
Landlord shall operate, manage and maintain the Common Areas in good order,
condition and repair and shall maintain the Property in a manner consistent
with the operation of comparable office/laboratory facilities in metropolitan
Baltimore and Landlord shall have the sole right and exclusive authority to
employ and discharge all personnel with respect thereto. Tenant shall pay
Tenant's Pro Rata Share of all costs incurred by Landlord for the operation
and maintenance of the Common Areas. Common Area costs include, but are not
limited to, costs and expenses for the following: landscaping; utilities,
water and sewage charges attributable to the Common Areas (and not for any
space which is occupied or intended to be occupied); maintenance of signs
(other than tenants' signs); premiums for liability, property damage, fire
and other types of casualty insurance covering the Common Areas and worker's
compensation insurance for personnel engaged in the management or operation
of the Property (or prorated equitably for part-time personnel); all property
taxes and assessments levied on or attributable to the Common Areas; fees for
required licenses and permits; routine maintenance and repair of roof
membrane, flashings, gutters, downspouts, roof drains, skylights and
waterproofing, maintenance of paving (including sweeping, snow and ice
removal, striping, repairing, resurfacing, and repaving); general
maintenance; painting; lighting; cleaning; refuse removal; and a reasonable
allowance to Landlord for Landlord's supervision of the Common Areas (not to
exceed three percent (3%) of the gross rents of the Property for the Calendar
year). Landlord may cause any or all of such services to be provided by third
parties and the cost of such services shall be included in Common Area Costs.
Landlord agrees that the cost of maintaining the Common Areas will not
include (i) any costs incurred in connection with procuring additional
tenants or subtenants, including those costs involved in negotiating or
enforcing any leases or subleases, improving or altering any space for such
parties' occupancy or performing any structural work in connection therewith;
or (ii) any costs for which Landlord is entitled to reimbursement from other
tenants or occupants of the Property. Landlord further agrees not to set up
any
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reserves or require from Tenant contribution to any reserves for Common Area
Maintenance that has not yet occurred.
Landlord hereby expressly reserves the right but not the obligation to
maintain security for the Common Areas; to change the size, area, level,
location, and arrangement of the Common Areas, provided the Common Areas as
reconfigured is comparable to the Common Area as now existing; to close
temporarily all or any portion of the Common Areas for the purpose of making
repairs, changes, or alterations thereto or performing necessary maintenance
in connection with any emergency or for any other purpose whatsoever, whether
such purpose is similar or dissimilar to the foregoing, provided that any
such closing shall be for the shortest possible time and provided that
reasonable access to and from the Premises and a public way shall be
available at all times.
Tenant shall remove, or cause to be removed, all litter, debris, waster
and trash (which do not constitute medical waste or are not subject to any
Environmental Requirement) from the Premises. Landlord shall provide and be
responsible for the removal of litter, debris, waste and trash from the
Common Areas.
With regard to litter, debris, waste and trash which constitute medical
waste or are subject to any Environmental Requirement, Tenant shall remove,
or cause to be removed, the same from the Premises by an individual or entity
licensed to remove such items. The costs and expenses for the removal of such
items noted in this paragraph shall be borne by Tenant or the applicable
Subtenant.
SECTION 12
TENANT TI WORK
Tenant shall, at its own expense, commence to construct the Osiris Work
in accordance with the plans and specifications prepared by Gaudreau, Inc.,
Kibart, Inc., and Faissant Associates, Inc. (as more particularly described
on Exhibit F-i attached hereto and incorporated herein by reference) (the
"Building Plans and Specifications"). Tenant shall also, at Tenant's expense,
put a new roof on that part of Building which contains the Premises. By
executing this Lease, Landlord acknowledges and agrees that it has reviewed
and approved the Building Plans and Specifications and that no further
consent of Landlord is necessary or required. Tenant shall complete the
Osiris Work not later than June 30, 1995, time being of the essence.
Landlord further acknowledges and agrees that Tenant may from time to
time during the Term, improve and/or renovate the Premises (non-structural
only) by removing or altering the then-existing Osiris Work and/or adding
other Tenant TI Work, however, the plans and specifications shall be given to
and approved by Landlord before Tenant commences any such Tenant TI Work,
such approval shall not be unreasonably withheld or delayed.
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All Tenant TI Work is to be commenced, constructed and completed pursuant
to the terms of this Section 12 and shall be done in a workmanlike manner and
shall conform to all applicable laws, statutes, ordinances and codes
(including without limitation, building, health and fire codes) of all
applicable governmental authorities. Tenant shall obtain all required
permits, approvals, licenses and permissions, to enable Tenant to commence
construction of the Tenant TI Work; however, Landlord agrees to cooperate
with and assist Tenant in obtaining any of the foregoing. The Osiris Work
shall be deemed to be "substantially complete" when the Osiris Work has been
completed (except for minor punch list items) as evidenced by an executed AIA
form certification of substantial completion, provided that any and all
governmental approvals required for the occupancy of the Premises are then
issued and in full force and effect (including any occupancy permit required
by state or local law). During the course of the construction of any Tenant
TI Work, Landlord shall have the right to inspect the area or areas under
construction at least once each month, and in a timely manner, shall notify
Tenant in writing of any objection that it may have in the performance of the
Tenant TI Work and shall set forth in such written notice the repair or
replacement that Landlord desires in order to cure such objection. Landlord
shall be deemed to have waived any objection it may have to the performance
of the Tenant TI Work to the extent that (a) Landlord did not raise an
objection within one (1) month after such objectionable Tenant TI Work was
performed and (b) Landlord's failure to raise the objection within the time
would substantially and adversely effect Tenant's ability to cure such
objectionable Tenant TI Work. Tenant shall promptly undertake any reasonable
repair or replacement set forth by Landlord in order to correct such
objection.
The approval by the Landlord of the Plans and Specifications, nor any
subsequent inspections or approvals by Landlord of any Tenant TI Work during
or after construction shall not constitute a warranty or representation by
the Landlord or any of its agents as to the technical sufficiency, adequacy
or safety of any structure or any of its component parts, including, without
limitation, any fixtures, equipment or furnishings, nor shall such approvals
or inspections constitute such a warranty or representation that the said
Tenant TI Work complies or conforms to any and all applicable laws, statutes,
ordinances, and codes (including, without limitation, building, health and
fire codes), of all applicable governmental authorities. All acts, including
any failure to act, relating to the Tenant TI Work by Landlord or any agent,
representative or designee of the Landlord are performed solely for the
benefit of the Landlord to confirm that Tenant is complying with the
provisions of this Lease, and are not for the benefit of Tenant nor the
benefit of any other person or entity.
SECTION 13
RESTRICTIONS ON USE
Tenant shall not use or permit the Premises, or any part thereof, to be
used for any purpose other than laboratory space for medical research and
office use related thereto. Furthermore, no use of the Premises shall be made
or permitted to be made that shall result in: (a) waste of the Premises, or
any part thereof; (b) a public or private nuisance that may
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disturb the quiet enjoyment of Landlord or other tenants of the Property; (c)
any illegal or unlawful use; (d) any use involving the sale, storage or
preparation of food, alcoholic beverages or materials generating an odor on
the Premises; or (e) noises or vibrations that may unreasonably disturb the
Landlord or other tenants. Tenant shall comply at its own expense with all
restrictive covenants and governmental regulations, laws, ordinances and
statutes affecting the Premises either now or in the future. Landlord shall
not voluntarily enter into any restrictive covenant or similar arrangement
materially and adversely affecting Tenant's right or ability to use the
Premises for the purposes permitted by this Lease without Tenant's prior
written consent.
SECTION 14
SERVICES, INSTALLATION, REPAIRS, AND MAINTENANCE BY TENANT
After written approval by Landlord of any applicable written
non-structural plans and specifications, which approval shall not be
unreasonably withheld or delayed, Tenant and any Subtenant may install, at
its or their own expense, any additional electrical wiring, plumbing,
ventilation, security system and any other building system which may be
required in connection with Tenant's or any Subtenant's use of the Premises.
Tenant shall at all times at its own expense keep and maintain, or cause
to be kept and maintained, the Premises in good order and repair, and in a
neat, safe, clean and orderly condition, including, but not limited to,
reasonable periodic painting and making all nonstructural ordinary and
extraordinary, foreseen and unforeseen repairs and replacements to the
Premises under Landlord's supervision including, without limitation, repairs
and replacements to the plumbing and electrical and all systems and
facilities serving the Premises exclusively. Tenant shall not overload the
electrical wiring serving the Premises or within the Premises, and will
install at its own expense under Landlord's supervision, but only after
obtaining Landlord's written approval, which approval shall not be
unreasonably withheld or delayed, any electrical wiring which may be required
in connection with the Premises.
Tenant and/or any Subtenant will repair promptly at its own expense by or
under the direction of Landlord any damage (whether structural or
nonstructural) to the Premises or the Building caused by Tenant and/or any
Subtenant, their agents, servants and employees, including, but not limited
to, any construction or alterations performed by Tenant and/or any Subtenant
or by bringing into the Premises or on the Property any property for Tenant's
and/or any Subtenant's use, or by the installation or removal of such
property, regardless of fault or by whom such damage shall be caused, unless
caused solely by the negligence of Landlord or its contractors or
subcontractors or its or their agents or employees.
Tenant shall supply to the Premises and shall be solely responsible, at
its own cost and expense, for the following: trash removal; interior and
exterior window cleaning, and repair and replacement of any glass (including
windows) serving all or a part of the Premises;
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extermination services; heat and air conditioning for the Premises, and
Tenant shall maintain a reasonable minimum temperature in order to properly
maintain and protect the Premises and its components; and security to the
Premises.
Tenant shall pay to Landlord as Additional Rent its Pro Rata Share of the
Common Area expenses and maintenance, including grounds maintenance and
parking lot maintenance, snow and ice removal, and the like.
Tenant shall have no right to direct or instruct any of Landlord's
contractors, subcontractors, agents or employees, except with the prior
written agreement of Landlord.
In the event Tenant fails in the performance of any of its obligations
under this Lease, and such failure continues for a period of ten (10) days
after written notice from Landlord (except that in an emergency no notice
shall be required), Landlord, in addition to Landlord's other remedies under
this Lease, at or in equity, may but shall not be obligated to do so) cure
such default on behalf of Tenant without any liability of Landlord for damage
to Tenant's fixtures or other property or to the business of Tenant or any
assignee, subtenant, concessionaire, or licensee by reason thereof, and
Tenant shall reimburse Landlord, as Additional Rent, within five (5) days of
written demand, for any reasonable sums paid or reasonable costs incurred
during curing such default and the late charge specified under Section 4
shall accrue from the date Landlord cures such default until it is reimbursed
therefor.
Tenant understands and acknowledges that one or more of the aforesaid
services or utilities may be suspended or reduced by reason of accident,
emergency or reason specified in Section 16, or for repairs, alterations,
replacements, or improvements which in the judgment of Landlord are desirable
or necessary to be made. No such interruption or suspension of services or
utilities shall be deemed an eviction or disturbance to Tenant's use and
enjoyment of the Premises or any part thereof, nor shall any such
interruption or suspension of services or utilities render Landlord liable to
Tenant for damages, unless such interruption or suspension of services or
utilities is solely the result of the negligence of Landlord, its agents,
servants or employees.
SECTION 15
REPAIRS BY LANDLORD
Landlord shall make all structural repairs, including, but not limited
to, structural columns and floors (excluding floor coverings, such as carpet
and floor tile) of the Premises, the roof of the Building, and the exterior
walls of the Building (excluding glass) provided Tenant gives Landlord
written notice specifying the need for and nature of such repairs; provided,
however, if Landlord is required to make any repairs to such portions of the
Premises or Building by reason, in whole or in part, of the negligent act or
failure to act by Tenant or any Subtenant or its or their contractors or
subcontractors or its or their agents or
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employees, or by reason of any non-permitted use of the Premises by Tenant,
Landlord may collect the cost of such repairs, as Additional Rent, within
five (5) days of written demand. Landlord shall keep all of the components of
the Building and the Property for which it is responsible as aforesaid in
good order and repair.
Except as provided herein, unless solely due to Landlord's or its
agents', servants' or employees' negligence, Landlord shall have no liability
to Tenant or any Subtenant by reason of any inconvenience, annoyance,
interruption, or injury to business arising from the making of any repairs or
changes which Landlord is required or permitted by this Lease to make, or by
any other tenant's lease or required by law to make in or to any portion of
the Premises, Building or Common Areas.
If without Landlord's prior consent, Tenant performs or permits to be
performed any alterations, additions, improvements, changes, affixations of
chattels, or other work which affects the structural portions of the Premises
and/or the roof of the Building or which adversely affects the structural
integrity of the Building, such action by Tenant shall release and discharge
Landlord as of the commencement of such alteration, addition, improvement,
affixation, or other work of and from such repair obligation. Thereafter,
Tenant agrees to be solely responsible under Landlord's supervision for the
maintenance, repair, and replacement of any or all such structural portions
and/or roof which have been affected as aforesaid, and Tenant shall commence
promptly after demand by Landlord to make all such repairs and replacements
and proceed diligently to complete them. In the event Tenant shall fail in
the performance, to Landlord's satisfaction, of such responsibilities,
Landlord, in addition to Landlord's other remedies under this Lease, at law
or in equity, may (but shall not be obligated to do so) cure such failure on
behalf of Tenant without any liability of Landlord for damage to Tenant's
fixtures or other property or to Tenant's business by reason thereof, and
Tenant shall reimburse Landlord, as Additional Rent, within five (5) days of
written demand, for sums paid or costs incurred in curing such failure and
the late charge specified under Section 4 shall accrue from the date that
Landlord cures such default until it is reimbursed therefor. For the purpose
of the foregoing, if Tenant performs or permits to be performed any such
alterations, additions, improvements, changes, affixations, or other work in
a manner not consistent with Landlord's prior consent thereto, such work
shall be deemed to have been performed without Landlord's consent.
SECTION 16
FORCE MAJEURE
This Lease and the obligation of Tenant to pay Rent hereunder and perform
all of the other covenants and agreements hereunder on the part of Tenant to
be performed shall not be affected, impaired or excused because Landlord is
unable to fulfill any of its obligations under this Lease or is unable to
supply, or is delayed in supplying, any service to be supplied by it under
the terms of this Lease or is unable to make, or is delayed in making, any
repairs, additions, alterations, or decorations, or is unable to supply or is
delayed in
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supplying, any equipment or fixtures, if Landlord is prevented or delayed or
otherwise hindered from doing so by reason of any outside cause whatsoever,
including, without limitation, acts of God; fire; earthquake; flood;
explosion; action of the elements; declared or undeclared war; riots; civil
disturbances; inability to procure or a general shortage of labor, equipment,
energy, materials, or supplies in the open market; breakage or accident to
machinery; partial or entire failure of utilities; failure of transportation;
strikes; lockouts; action of labor unions; condemnation; injunction; court
order or decree; governmental preemption; any rule, order or regulation of
any department of subdivision of any government agency; or the conditions of
supply and demand which have been or are affected by war or other emergency.
Similarly, Landlord shall not be liable for any interference with any
services supplied to Tenant by others if such interference is caused by any
of the reasons listed in this Section. Nothing contained in this Section
shall be deemed to impose any obligation on Landlord not expressly imposed by
other provisions of this Lease.
Other than Tenant's obligation to pay Rent or any other payment to cure
default, and except as otherwise provided in this Lease, Tenant shall be
excused for the period of any delay in the performance of any obligation when
such delay is due to any cause or causes beyond Tenant's control which
include but are not limited to any labor dispute; governmental laws,
regulations or controls; fire or other casualty; inability to obtain any
material or service; or through acts of God. Tenant shall give to Landlord
notice of the existence of the force majeure within five (5) days after
commencement of the force majeure.
SECTION 17
SURRENDER OF PREMISES
(a) At the expiration or earlier termination of the Term of this Lease,
Tenant shall peaceably surrender the Premises in broom clean condition and
good order and repair and otherwise in the same condition as the Premises
were upon the commencement of this Lease, except ordinary wear and tear.
(b) If Landlord elects to require that alterations, installations,
changes, work, replacements, additions, or improvements comprised within the
Tenant TI Work and made by or on behalf of Tenant to the Premises be removed
at the termination of this Lease, Tenant hereby agrees to cause the same to
be removed at its sole cost and expense. If Tenant fails to remove the same,
Landlord may cause them to be removed at Tenant's expense, and Tenant hereby
agrees to reimburse Landlord for the cost of such removal together with all
and any damages which Landlord may suffer and sustain by reason of failure of
Tenant to remove the same. At Landlord' election, any or all of the Tenant TI
Work, alterations, installations, changes, replacements, additions to, or
improvements made by Tenant upon the Premises shall remain at the termination
of this Lease and not be removed. Tenant shall surrender to Landlord all keys
for the Premises at the place then fixed for the payment of rent and shall
notify Landlord in writing of all combinations of locks, safes, and vaults,
if any, in the Premises. Tenant's obligation to observe and perform
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the covenants set forth in this Section shall survive the expiration or
earlier termination of this Lease.
(c) At the termination of this Lease, Tenant shall immediately remove all
personal property which it owns and is permitted to remove from the Premises
under the provisions of this Lease, and failing to do so, Landlord at its
option may either (i) cause that personal property to be removed at the risk
and expense of Tenant (1)0th as to loss and damage), and Tenant hereby agrees
to pay all reasonable costs and expenses incurred thereby, including sums
paid to store the personal property elsewhere and the cost of any repairs to
the Premises caused by the removal of the property, or (ii) upon twenty (20)
days' written notice to Tenant, which the parties agree is commercially
reasonable, sell at public or private sale any or all such personal property,
whether exempt or not from sale under execution or attachment (such property
being deemed charged with a lien in favor of Landlord for all sums due
hereunder), with the proceeds to be applied as set forth in Sub-section 28
(a), or (iii) at Landlord's option, title shall pass to Landlord.
SECTION 18
VACATING OR ABANDONING THE PREMISES OR PERSONAL PROPERTY
Tenant and or any Subtenant shall have the right to vacate the Premises
for a period not exceeding six (6) months, provided that Tenant first pays to
Landlord upon demand, as Additional Rent, the cost of any additional premium
resulting from Landlord's obtaining a "vacancy permit" endorsement to
Landlord's insurance policy. Tenant shall provide at least thirty (30) days'
prior written notice of any intent to vacate the Premises, to provide
sufficient time to Landlord to obtain such an endorsement. Should Tenant not
comply with the above procedure, by Tenant to provide appropriate notice, by
failing to pay the cost of the said endorsement, and/or by vacating the
Premises for a period longer than six (6) months, the Premises shall be
considered as being abandoned by Tenant. If Tenant does abandon the Premises
or is dispossessed by process of law, any personal property belonging to
Tenant left on the Premises may, at the option of Landlord, be deemed to have
been abandoned by Tenant, and the provisions of subsection 17(c) shall apply.
SECTION 19
QUIET ENJOYMENT
Landlord warrants that Tenant shall be granted peaceable and quiet
enjoyment of the Premises free from any eviction or interference by Landlord
or any other party if Tenant pays the Annual Rent and Additional Rent
provided herein pursuant to the terms of this Lease, and otherwise fully
performs the terms, covenants, and conditions imposed herein. Landlord
represents and warrants that the Property is zoned M-3 Industrial. If
necessary from time to time during the Term, Landlord further agrees to
assist and cooperate in obtaining a use and occupancy permit to enable Tenant
or any Subtenant to use the Premises
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for medical laboratory and ancillary storage and office space in differing
proportions from those set forth above and Landlord shall keep such use and
occupancy permit in full force and effect. Tenant shall reimburse Landlord
for any costs and expenses incurred by Landlord within five (5) days of
written demand. Landlord represents and warrants that the only present
restrictive covenants affecting the Premises are set forth in Exhibit C.
SECTION 20
INDEMNIFICATION AND WAIVER OF CLAIM
Tenant will defend and will indemnify Landlord, its partners, agents,
servants and employees, and save it and them harmless from and against any
and all claims, actions, damages, liability, costs, and expense (including
but not limited to, reasonable attorneys' fees and disbursements) in
connection with the loss of life, bodily injury, or damage to property or
business arising from, related to, or in connection with the occupancy or use
by Tenant or any assignee, subtenant, concessionaire, or licensee of the
Premises or any part of Landlord's personal property or the Premises,
Property or Building or occasioned wholly or in part by any act or omission
of Tenant or any assignee, subtenant, concessionaire, or licensee or its or
their contractors, subcontractors, or its or their agents or employees or
other persons on the Premises arising from events occurring after the
Commencement Date; provided, however, that such indemnification shall not
apply to the negligence or willful acts of Landlord or its contractors,
employees, invitees or subcontractors, or its or their agents or employees.
Tenant shall also pay all costs, expenses, and reasonable attorneys' fees
that may be expended or incurred by Landlord in enforcing the covenants and
agreements of this Lease should Landlord prevail in such action(s). The
provisions of this Section shall survive the termination or earlier
expiration of this Lease.
Landlord shall not be liable for, and Tenant, in consideration of
Landlord's execution of this Lease, hereby releases all claims against
Landlord for bodily injury, death, loss or property damage that may be
occasioned by or through the acts or omissions of other tenants, their
contractors and subcontractors and their agents, or employees.
Notwithstanding anything to the contrary contained in this Lease,
Landlord and Tenant do mutually each release and discharge the other, and all
persons against whom the insurance company or companies would have a right or
claim by virtue of subrogation, of and from all suits, claims, and demands
whatsoever, for loss or damage to the property of the other, even if caused
by or occurring through or as a result of any negligent act or omission of
the party released hereby or its contractors, subcontractors, agents, or
employees, so long as and to the extent that such loss or damage is covered
by insurance benefiting the party suffering such loss or damage or was
required to be so covered under this Lease. Each party further agrees that
each at its own cost will cause its policies of insurance for fire and
extended coverage to be so written as to include a waiver of subrogation by
causing such policies to contain a clause in substantially the following form:
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It is hereby stipulated that this insurance shall not be invalidated
should the insured or any of them waive in writing prior to a loss any or
all right of recovery against any person or entity for loss occurring to
the property described herein.
The provisions of this Section 20 shall survive the termination or
earlier expiration of the Term of this Lease with respect to any loss,
damage, injury, or death occurring prior to such termination.
SECTION 21
INSURANCE OF TENANT
(a) Tenant will keep in force, or cause to be kept in force, with
companies licensed to do business in the State of Maryland and which have a
policyholder's rating of A or better and a financial size rating of X or
larger from Best's Key Rating Guide, Property Casualty Reports (or comparable
insurance rating service), at Tenant's expense at all times during the Term
of this Lease and during such other times as Tenant occupies the Premises or
any part thereof:
(i) Commercial general liability insurance written on an occurrence basis
with respect to the Premises and the business operated by Tenant and any
Subtenants, concessionaires, or licensees of Tenant in the Premises with
minimum combined single limits of Five Million Dollars ($5,000,000.00) per
occurrence and in the aggregate. Such liability insurance shall, in addition,
extend, through contractual liability insurance, to any liability of Tenant
arising out of the indemnities provided in Section 20 and shall be subject to
the waiver of subrogation specified therein. Such liability insurance shall
also include broad form endorsement coverage, including personal injury
coverage.
(ii) Fire insurance with standard broad form extended coverage
endorsement covering all of Tenant's furniture, furnishings, such equipment
as is not affixed to the Premises, and signs.
(iii) Workers' compensation insurance for all employees of the Tenant in
such amount as is required by law.
(iv) During any period of construction of the Tenant TI Work, builder's
risk insurance (non-reporting form) of the type customarily carried in the
case of similar construction for the full replacement cost of work in place
and materials stored at or upon the Premises.
(v) During any period of construction of the Tenant TI Work, Tenant shall
require any contractor of Tenant performing such work to keep in force, at
contractor's expense, comprehensive general liability insurance, including
contractor's liability coverage, contractual liability coverage, completed
operations coverage, broad form property damage
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endorsement and contractor's protective liability coverage to afford
protection with minimum combined single limits of Five Million Dollars
($5,000,000.00) per occurrence and in the aggregate. Tenant shall also
require such contractors to keep in effect workers' compensation affording
statutory coverage
(vi) A hazardous material/environmental insurance policy listing Landlord
as a named insured protecting Landlord from any and all liability both on and
off site caused by, related to, or connected with Tenant and Subtenant's
operation of the Building and Premises; from an insurance company and under
terms and conditions of coverage acceptable to Landlord, providing coverage
limits of not less than Two Million Dollars ($2,000,000.00). In the event
that Landlord sells, transfers or conveys the Property to any third party
(not related to or affiliated with Landlord) the requirements of this Section
21 (a) (vi) shall terminate and expire upon the said sale, transfer or
conveyance to the third party.
(b) On or before the Commencement Date, Tenant will deposit with Landlord
policies of insurance required by the provisions of this Section together
with satisfactory evidence of payment of the required premiums thereof.
Failure to deposit such policies shall not relieve Tenant of its obligations
to obtain and keep in force insurance coverage required by this Lease. The
insurance required hereby may be maintained by means of a policy or policies
of blanket insurance so long as the provisions of this Lease are fully
satisfied and the required amounts are specifically allocated to the Premises
without possibility of determination because of occurrences on other
properties.
(c) All policies of insurance required to be carried by Tenant by this
Section 21 shall provide that the policy shall not be subject to
cancellation, termination, or change except after thirty (30) days prior
written notice to Landlord, and all such policies shall name Landlord as an
additional insured as its interest may appear. Tenant shall promptly pay all
premiums when due on all insurance required by this Section 21 and, not less
than thirty (30) days prior to the expiration dates of each such policy,
Tenant will deliver to Landlord a renewal policy or policies marked "premium
paid" or accompanied by other evidence of payment satisfactory to Landlord
which indicates that the insurance required by this Section 21 is in full
force ad effect. Tenant will immediately give Landlord notice of any
cancellation of, or change in, any insurance policy.
(d) If Tenant shall not comply with its covenants made in this Section
21, and provided that such failure shall continue for five (5) days or longer
after written notice to Tenant, Landlord, in addition to Landlord's other
remedies hereunder, may (but shall not be obligated to) cause insurance as
aforesaid, to be issued, and in such event Tenant agrees to pay the premium
for such insurance as Additional Rent within five (5) days after Landlord's
written demand.
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SECTION 22
INSURANCE OF LANDLORD
(a) Landlord will keep in force with companies licensed to do business in
the State of Maryland, at Landlord's expense at all times during the Term of
this Lease and during such other times as Tenant occupies the Premises or any
part thereof:
(i) Commercial general liability insurance written on an occurrence basis
with respect to the Building, the Common Areas, and the Property with minimum
combined single limits of One Million Dollars ($1,000,000.00) per occurrence
and in the aggregate. Such liability insurance shall also include broad form
endorsement coverage including personal injury coverage.
(ii) All-risk casualty insurance for the replacement cost value of the
Building and improvements.
(b) On or before the Commencement Date, Landlord will deposit with Tenant
copies of policies of insurance required by the provisions of this Section 22
together with satisfactory evidence of the payment of the required premium or
premiums thereof. Each year during the Term of this Lease, Landlord shall
provide Tenant with evidence (satisfactory to Tenant) that the insurance
required by this Section 22 is in full force and effect. Failure to deposit
such policies shall not relieve Landlord of its obligations to obtain and
keep in force insurance coverage required by this Lease. The insurance
required hereby may be maintained by means of a policy or policies of blanket
insurance so long as the provisions of this Lease are fully satisfied and the
required amounts are specifically allocated to the Premises without
possibility of diminution because of occurrences or other properties.
(c) All policies of insurance required to be carried by Landlord by this
Section 22 hereof shall provide that the policy shall not be subject to
cancellation, termination, or change except after thirty (30) days' prior
written notice to Tenant, and all such policies shall name Tenant as a
certificate holder. Landlord shall promptly pay all premiums when due on all
insurance required by this Section 22 and, Landlord will deliver to Tenant a
renewal policy or policies marked "Premium paid" or accompanied by other
evidence of payment satisfactory to Tenant which indicates that the insurance
required by this Section 22 is in full force and effect. Landlord will
immediately give Tenant notice of any cancellation of, or change in, any
insurance policy.
(d) If Landlord shall not comply with its covenants made in this Section
and such failure shall continue for five (5) days or longer after written
notice from Tenant, Tenant may (but shall not be obligated to) cause
insurance as aforesaid to be issued, and in such event Landlord agrees to
reimburse Tenant for the premium for such insurance promptly upon Tenant's
demand, and if Landlord does not do so Tenant may subtract such amount from
the next monthly installment(s) of Rent due hereunder.
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(e) Tenant shall pay, or cause to be paid, as Additional Rent the
following: Landlord shall provide Tenant with a copy of the insurance premium
for the insurance referred to in Section 22(a)(ii) above each year during the
Term of this Lease and any Extension Term and Tenant shall pay the full
amount of such insurance cost to Landlord relating to Tenant's Premises and
Tenant's Pro Rata Share of any Common Areas, based upon the underwriting
breakdown of the insurance premium as provided by Landlord's insurance
carrier or agent.
SECTION 23
EFFECT ON INSURANCE
Tenant and any Subtenant will not do, omit to do, or suffer to be done or
keep or suffer to be kept anything in, upon or about the Property which will
violate the provisions of Landlord's policies insuring the Premises and the
Building against loss or damage by fire, or other hazards (including, but not
limited to, public liability), which will adversely affect Landlord's fire or
liability insurance premium rating or which will prevent Landlord from
procuring such policies in companies acceptable to Landlord. If anything
done, omitted to be done, or suffered to be done by Tenant and any Subtenant,
or kept or suffered by Tenant and any Subtenant to be kept in, upon or about
the Property shall cause the premium rate of fire or other insurance on the
Premises or the Property in companies acceptable to Landlord to be increased
beyond the established rate from time to time fixed by the appropriate
underwriters with regard to the use of the Premises for the purposes
permitted under this Lease or to the Property for the use or uses being made
thereof, Tenant will pay the amount of such increase as Additional Rent
within five (5) days of Landlord's demand in writing and will thereafter pay
the amount of such increase, as the same may vary from time to time, with
respect to every premium relating to coverage of the Premises and the
Property during a period falling within the Term of this lease until such
increase is eliminated. In addition, if applicable, Landlord may at its
option rectify the condition existing on the Property which is causing or is
a contributing cause of the increased premium rate in the event that the
Tenant should fail to do so, provided that such condition is not a permitted
use of the Premises as contemplated by this Lease, and Landlord may charge
the cost of such action to Tenant as Additional Rent, payable within five (5)
days of written demand together with the late charge specified in Section 4,
which shall accrue from the date that Landlord became obligated for the costs
of such action. In determining whether increased premiums are the result of
Tenant's use of the Premises or elsewhere on the Property, a schedule, issued
by the organization setting the insurance rate on the Premises and the
Property, showing various components of such rate, shall be conclusive
evidence of the several items and charges which make up the fire insurance on
the Premises and the Property.
If for any reason including, but not limited to, the abandonment of the
Premises, Tenant's failure to pay any insurance premium, or Tenant's failure
to occupy the Premises as herein permitted, Tenant fails to provide and keep
in force any or all of the insurance policies set forth in Section 21, then
in such event Tenant shall indemnify and hold Landlord harmless against any
loss which would have been covered by such insurance.
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SECTION 24
TOTAL OR PARTIAL DESTRUCTION OF PREMISES
(a) If the Premises are damaged by fire or other casualty but are not
thereby rendered untenantable in an amount in excess of fifty percent (50%)
of the entire Premises and such damage is, in the opinion of an independent
architect or consultant selected by Landlord, capable of being repaired using
reasonable diligence within one hundred and eighty (180) days after the loss,
Landlord, at its own expense, subject to the limitations set forth in this
Lease, shall cause such damage to be repaired, and the Annual Rent and
Additional Rent shall not be abated. If by reason of any damage or
destruction to the Premises wherein the Premises shall be rendered
untenantable in an amount in excess of fifty percent (50%) of the entire
Premises, (i) Landlord, at its own option, at its own expense, subject to the
limitations set forth in this Lease, may cause the damage to be repaired if
such damage, in the opinion of an independent architect or consultant
selected by Landlord, is capable of being repaired by using reasonable
diligence within one hundred and eighty (180) days after the loss, and the
Annual Rent and Additional Rent shall be abated proportionately as to the
portion of the Premises rendered untenantable while it is untenantable, or
(ii) Landlord shall have the right, to be exercised by notice in writing
delivered to Tenant within thirty (30) days from and after the occurrence of
such damage or destruction, to terminate this Lease, and the Annual Rent and
Additional Rent shall be adjusted as of the date of the occurrence of the
casualty giving rise to such loss. In no event shall Landlord be obligated to
expend for any repairs or reconstruction pursuant to this Section 24 an
amount in excess of the insurance proceeds, if any, recovered by it and
allocable to the damage to the Premises after deducting therefrom Landlord's
reasonable expenses in obtaining such proceeds and any amounts required to be
paid to Landlord's mortgagee.
(b) Tenant covenants and agrees that it will give written notice to
Landlord of any accident or damage, whether such accident of damage is caused
by insured or uninsured casualty, occurring in, on or about the Premises
within five (5) business days after Tenant has knowledge of the occurrence of
such accident or damage. If Tenant breaches its covenants set forth
hereunder, Landlord in addition to all other rights and remedies under this
Lease, at law or in equity shall, at its option, be relieved of any of its
obligations under this Section 24.
SECTION 25
ALTERATIONS
Except as permitted under Section 12, supra, Tenant agrees that it will
not make any alterations (whether structural or otherwise), improvements,
additions, repairs, or changes to the interior or exterior of the Premises
during the Term of this Lease without in each instance obtaining Landlord's
prior written consent. Together with each request for consent, Tenant shall
present to Landlord reasonably detailed plans and specifications for such
proposed alterations, improvements, additions, repairs or changes; provided,
however, approval of such plans and specifications by Landlord shall not
constitute any assumption of responsibility by Landlord for their accuracy of
sufficiency, and Tenant shall be solely
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responsible for such items. All alterations, improvements, additions,
repairs, or changes shall be done either by or under the direction of
Landlord, but at the expense of Tenant. All alterations, improvements,
additions, repairs, or changes made by Tenant, shall, unless Landlord gives
notice to Tenant to remove the same, remain upon the Premises at the
expiration or earlier termination of the Term of this Lease and shall become
the Property of Landlord immediately upon installation thereof. The same
shall remain the property of Landlord (without any obligation of Landlord to
pay compensation therefor) unless Landlord gives Tenant written notice to
remove any or all of the aforesaid, in which event Tenant shall remove at
Tenant's expense such of the same as may be specified in Landlord's notice to
Tenant, and Tenant shall promptly restore the Premises to the same good order
and condition as it was at the commencement of the Term of this Lease except
(i) to the extent the Premises is not required to be repaired and/or
maintained by Tenant and (ii) damage by fire or other casualty to the extent
there is actually paid to Landlord, to repair any damage to the Premises,
sufficient net proceeds for policies of insurance which Tenant is obligated
to provide and to maintain under the provisions of this Lease. Should Tenant
fail to do so, Landlord may do so, collecting, at Landlord's option, the cost
and expense thereof from Tenant, as Additional Rent, upon demand.
Notwithstanding anything above, in Section 17 or elsewhere in this Lease
to the contrary, Landlord hereby permits Tenant to remove at the end of the
lease term, and as long as Tenant is not then in default or breach of any
material provision in this Lease, any non-structural improvements, provided
that Tenant and/or any Subtenant shall in each and every instance of removal
reasonably repair and restore the Premises to its functional shell condition.
SECTION 26
MECHANICS' LIEN
Tenant shall not do or suffer to be done any act, matter or thing whereby
Landlord's or Tenant's interest in the Premises, or any part thereof, may be
encumbered by any mechanics' lien. Tenant shall discharge or stay the
enforcement by bond or otherwise, within sixty (60) days after the date of
filing, any mechanics' liens filed against Tenant's interest in the Premises,
or any part thereof, purporting to be for labor or material furnished to
Tenant. Landlord may, at its option, discharge any such mechanics' lien not
discharged by Tenant within such sixty (60) day period, and Tenant, within
five (5) days of written demand, shall reimburse Landlord for any such
reasonable expense incurred by Landlord. Any reasonable monies expended by
Landlord shall be deemed Additional Rent, collectible as such by Landlord and
the late charge specified in Section 4 shall accrue from the date Landlord
becomes obligated for such expenses. Landlord shall not be liable for any
labor or materials furnished or to be furnished to Tenant upon credit, and no
mechanics' or other lien for labor or materials shall attach to or affect the
reversionary or other estate or interest of Landlord in and to the Premises
or the Building.
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SECTION 27
BREACH OR DEFAULT
Tenant shall have breached this Lease and shall be considered in default
hereunder if (a) Tenant files a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy or insolvency law or act, or makes an
assignment for the benefit of creditors; (b) involuntary proceedings are
instituted against Tenant under any bankruptcy or insolvency law or act and
the same are not set aside within ninety (90) days; (c) Tenant fails to pay
any Annual Rent, Monthly Installment of Annual Rent, or Additional Rent
within five (5) days from written notice from Landlord; (d) Tenant fails to
perform or comply with any of the covenants or conditions of this Lease or
the rules and regulations now or hereinafter established for the Premises,
Building or Property within thirty (30) days after written notice thereof,
provided that if the failure is not capable of being cured within thirty (30)
days, Tenant shall have such additional time as reasonably required if within
such thirty (30) day period Tenant commences the cure and thereafter
diligently pursues the same to completion; and/or (e) the Premises are
abandoned by Tenant in violation of the applicable provisions of this Lease.
SECTION 28
EFFECT OF BREACH
(a) In the event of a breach of this Lease as set forth in Section 27,
Landlord shall have the option to do any of the following in addition to and
not in limitation of any other remedy permitted by law or by this lease: (i)
to re-enter the Premises, using force if necessary, to dispossess Tenant and
all other occupants from the Premises and to remove any or all of Tenant's
property at the Premises; (ii) to store Tenant's property in a public
warehouse or elsewhere at the cost, risk, and expense of Tenant, without
Landlord's being deemed guilty of trespass or becoming liable for any loss or
damage, which may occur on Tenant's property; and (iii) upon thirty (30)
days' written notice to Tenant, which the parties agree is commercially
reasonable, to sell at public or private sale any or all of said property,
whether exempt or not from sale under execution or attachment (such property
being deemed charged with a lien in favor of Landlord for all sums due
hereunder), with the proceeds of sale to be applied: first, to the costs and
expenses of retaliating, removal, storage, preparing for sale, and sale of
the property (including reasonable attorneys' fees); and second, to the
payment of any sum due hereunder to Landlord (including Rent, Additional
Rent, charges, and damages, both theretofore and thereafter accruing); and,
third, any surplus to Tenant.
(b) Further, upon the occurrence of any such breach, Landlord, in
addition to any other remedies it may have at law, in equity, by statute, or
under any other provision of this Lease, shall have the right to terminate
this Lease, as well as all right, title, and interest of Tenant hereunder, by
giving to Tenant not less than thirty (30) days' advance written notice of
Landlord's election to cancel and to terminate this Lease. Upon the
expiration of this time fixed in the notice of termination, this Lease and
the balance of the Term then remaining, as well as all of the right, title,
and interest of Tenant under this Lease, shall expire in the same manner and
with the same force and effect (except for the Tenant's liability as
hereinafter set
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forth) as if the expiration of the time fixed in the notice of termination
was the date upon which the Term would normally have expired. Tenant shall
then immediately quit and surrender the Premises and each and every part
thereof to Landlord, and Landlord may enter upon the Premises, by force,
summary proceedings, or otherwise. In any of such events, Landlord shall be
entitled to the benefit of all provisions of the ordinances and public local
laws of the city or county where the Property is located and of the Public
General Laws and tenements held over by tenants or proceedings in forcible
entry and detainer. Upon any entry or re-entry by Landlord, with or without
legal process, Landlord shall also have the right but not the obligation) to
relate all or part of the Premises, from time to time, at the risk and
expense of Tenant. No re-entry by Landlord with or without a declaration of
termination shall be deemed to be an acceptance or a surrender of this Lease
or as a release of the Tenant's liability for damages under the provisions of
this Section.
(c) Tenant further agrees (i) notwithstanding re-entry by Landlord with
or without termination pursuant to the provisions of Sub-section (a) of this
Section, or (ii) if this Lease is otherwise terminated by reason of Tenant's
default, or (iii) if Landlord retakes possession with or without process of
law and/or re-enters with or without a declaration of termination, or (iv) if
Landlord, following any of the foregoing events, elects to let or relate the
Premises (whether once or more than once during the remainder of the Term,
and upon such conditions as are satisfactory to Landlord) that Tenant shall,
nevertheless, in each instance, remain liable for the performance of any
covenant of this Lease then in default and for all Rent and all other charges
and damages which may be due or sustained before and after the date of
default, together with the cost of seizure and repossession of the Premises
and reasonable attorneys' fees incurred by Landlord as a result of the breach
of this Lease.
(d) In any of the events described in the preceding Sub-section, Tenant
agrees that it will remain liable to Landlord for liquidated damages to be
calculated and paid as follows: Tenant shall pay an amount of money equal to
the total amount of Rent and all other payments and charges which would have
become payable during the unexpired portion of the Term remaining at the time
of re-entry, repossession, or termination, less the net amount of Rent, if
any, received by Landlord during the remaining Term from others to whom the
Premises may be rented, at such times, upon such terms and conditions and at
such rentals as Landlord shall deem proper.
(e) In connection with any such relating(s), Landlord shall have the
absolute right, without such actions being or being deemed to be a surrender
of its rights or as a termination of this Lease or as a release of the
Tenant's liability hereunder for the balance of the Term or Extension Term,
to let or relet the Premises for a longer or shorter term than that remaining
after Tenant's default, to lease more or less area than that contained in the
Premises, to lease the Premises together with other premises or property
owned or controlled by Landlord, and to change the character or use of the
Premises. Landlord shall deduct from any amounts received from any such
letting or reletting (i) first, all reasonable costs and expenses incurred in
connection with Tenant's default, including, but not limited to, the cost to
repair, restore, renovate, or decorate the Premises for a new Tenant,
reasonable attorneys' fees, real estate commissions, the cost of any legal
actions brought against Tenant, and other costs reasonably incurred, and then
(ii) Landlord shall deduct all Monthly Installments of Annual Rent and
Additional Rent due hereunder. Tenant shall continue to be responsible for
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and liable for any deficit created thereby, and Landlord shall retain and
apply and surplus until all such liquidated damages shall have been paid in
full to Landlord. The liquidated damages shall be payable in monthly
installments, in advance, on the first day of each calendar month following
re-entry, with or without termination, and shall continue until the date
fixed herein as the normal expiration date of the Term of this Lease. In no
event shall Tenant be entitled to receive any portion of the amounts received
by Landlord in connection with the letting or reletting of the Premises.
(f) No entry or re-entry by Landlord, whether had or taken under summary
proceedings or otherwise, nor any letting or reletting shall absolve or
discharge Tenant from liability hereunder. Tenant's liability hereunder, even
if there be no letting or reletting, shall survive the issuance of any
dispossess warrant, order of court terminating this Lease, or any other
termination based upon Tenant's default. The words "enter", "re-enter", and
"reentry" as used in this Section and elsewhere in this Lease are not
restricted to their technical legal meanings.
(g) Suit or suits for the recovery of such deficiency or damages or for a
sum equal to any Monthly Installment or Installments of Annual Rent and
Additional Rent and other charges payable hereunder may be brought by
Landlord from time to time, at Landlord's election. Nothing herein contained
shall be deemed to require Landlord to await the date when this Lease or the
Term would have normally expired had there been no such default by Tenant or
no such termination by Landlord, nor shall Landlord be barred by any claim
involving a statute of limitations or other defense should Landlord delay in
filing suit.
(h) No payment received by Landlord from Tenant after re-entry or the
termination of this Lease in any lawful manner shall reinstate, continue or
extend the Term of this Lease or affect any notice theretofore given to
Tenant by Landlord or operate as a waiver of the right of Landlord to recover
possession of the Premises by proper suit, action, proceedings, or other
remedy.
(i) In the event Tenant fails to vacate the Premises at any time after
termination of this Lease as provided above, Tenant shall pay double Rent and
double Additional Rent for such holdover period.
(j) Nothing in this Section shall limit or prejudice the right of
Landlord to prove and to obtain, as liquidated damages by reason of a
termination arising out of the provisions of this Section, an amount equal to
the maximum allowed by any statute or rule of law in effect as of the time
when, and governing the proceedings in which such damages are to be proved,
whether or not such amount be greater, equal to, or less than the amount of
liquidated damages computed under this Section.
(k) Landlord agrees that it shall use such efforts to relet the Premises
and to mitigate damages and liability of Tenant as are required by any
applicable laws, regulations or statutes.
(l) Notwithstanding anything to the contrary contained in this Lease,
after the occurrence of a default by Tenant under the terms or conditions of
this Lease, and prior to
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termination of this Lease under Section 28(b) above, Landlord hereby agrees
that MIDFA and/or Bondholder shall have the right to cure such default of
Tenant under this Lease, and Landlord agrees that it will not exercise any of
its rights or remedies provided for in this Lease or under applicable law
arising from the breach against Tenant until the expiration of the time for
termination fixed in the notice of termination as required above.
SECTION 29
ACCESS BY LANDLORD
(a) Landlord and its contractors and subcontractors, and its or their
agents and employees may at all reasonable times and with at least
twenty-four (24) hours notice during the Term of this Lease enter to inspect
the Premises and/or may show the Premises and Property to others, provided
that such entrance is consistent with Tenant's or any Subtenant's security
obligations. In the event of notice of termination of this Lease or during
the last three (3) months of the Term, unless Tenant has thereto before
properly exercised any remaining option to extend this Lease, Landlord shall
have the right from the date of such notice to display (but not so as to
unreasonably obstruct the view thereof or access thereto) the customary "For
Rent" sign, and Landlord may show the Premises and all parts thereof to
prospective tenants during Normal Business Hours.
(b) Landlord also reserves the right after reasonable notice of intention
to so enter (except that in the event of an emergency, no notice shall be
required) to enter the Premises at any time and from time to time to make
such repairs, additions, or alterations as it may deem necessary for the
safety, improvement, or preservation thereof, or of the Property, but
Landlord assumes no obligation to do so, and the performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to
perform the same. Landlord shall in no event be liable for any inconvenience,
disturbance, loss of business, or other damage to Tenant by reason of the
performance by Landlord of any work in, upon, above, under, or outside the
Premises, unless such performance materially interferes with Tenant's or any
Subtenant's business or activities and arises solely from the negligence or
willful misconduct of Landlord or Landlord's agents, servants or employees.
If Tenant shall have vacated or abandoned the Premises, or in the event of an
emergency, or if in any other instance after Landlord has given notice of
Landlord's intention to enter, Tenant or Tenant's agents or employees shall
not be personally present to permit an entry into the Premises, then in such
event, Landlord and its contractors and subcontractors and its or their
agents and employees may enter the same by the use of force or otherwise
without rendering Landlord liable therefor, and without in any manner
affecting Tenant's obligations under this Lease.
(c) If during the last months of the Term, Tenant has vacated the
Premises and removed all or substantially all of its personal property,
Landlord may immediately enter and alter, renovate, and redecorate the
Premises. The exercise of any such reserved right by Landlord shall not be
deemed an eviction or disturbance of Tenant's use and possession of the
Premises and shall not render Landlord liable in any manner to Tenant or to
any other person, nor shall the same constitute any grounds for an abatement
of Rent hereunder.
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SECTION 30
ASSIGNMENT AND SUBLETTING
(a) Tenant shall not make or permit an Assignment of this Lease or any
interest of Tenant herein, in whole or in part, by operation of law or
otherwise, without first obtaining in each and every instance the prior
written consent of Landlord, which consent may be withheld at the sole and
absolute discretion of Landlord.
(b) Any consent by Landlord to an Assignment shall be held to apply only
to the specific transaction thereby authorized and shall not constitute a
waiver of the necessity for such consent to any subsequent Assignment,
including, but not limited to, a subsequent Assignment by any trustee,
receiver, liquidator, or personal representative of Tenant. In the event
Tenant executes an agreement to effect an Assignment, such agreement shall
provide (i) that the tenant, subtenant or other occupier of space shall take
subject to this Lease, (ii) that the occupier shall also fulfill all
obligations of Tenant under this Lease as they pertain to the portion of the
Premises set forth in the Assignment, and (iii) that with respect to such
portion of the Premises, the occupier shall be deemed to be the Tenant under
this Lease.
(c) If this Lease or any interest herein be assigned without Landlord's
prior written consent having been obtained thereto, Landlord may nevertheless
collect Rent (including Additional Rent) from the assignee, and apply the net
amount collected to the Rents herein reserved. No such Assignment or
collection shall be deemed a waiver of the covenant herein against Assignment
by others, or the acceptance of the assignee, as Tenant hereunder, or
constitute a release of Tenant from the further performance by Tenant of the
terms and provisions of this Lease.
If this Lease or any interest of Tenant herein be assigned or if the
whole or any part of the Premises be sublet or used or occupied by others,
after having obtained Landlord's prior written consent thereto, Tenant shall
nevertheless remain fully liable for the full performance of all obligations
under this Lease to be performed by Tenant, and Tenant shall not be released
therefrom in any manner, unless otherwise expressly agreed to by Landlord in
writing.
(d) If Tenant is a corporation and if at any time during the Term of this
Lease any part or all of the corporate shares of Tenant, or of a parent
corporation of which Tenant is a direct or indirect subsidiary, shall be
transferred by sale, assignment, bequest, inheritance, operation of law, or
other disposition so as to result in a change in the present effective voting
control of Tenant or of such parent corporation by the person or persons
owing or controlling a majority of the shares of Tenant or of such parent
corporation on the date of this Lease, Tenant shall promptly notify Landlord
in writing of such change, and such change in voting control shall constitute
an Assignment of this Lease for all purposes of this Section; provided,
however, that this provision shall not apply in the event that as of the date
of this Lease over fifty percent (50%) of the voting power of the Tenant
corporation or of such parent corporation is held by fifty (50) or more
unrelated shareholders or distributed to such number of unrelated
shareholders in a public distribution of securities.
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(e) If Tenant is a partnership and if at any time during the Term of this
Lease any person or entity which at the time of the execution of this Lease
owns a general partner's interest ceases to own such general partner's
interest, such cessation of ownership shall constitute an Assignment for all
purposes of this Section, and Tenant shall promptly notify Landlord in
writing of such change.
(f) Landlord hereby consents to Tenant's sublease of the Premises (or the
sub-sublease or assignment of any sublease by any Subtenant) to one or more
third parties who intend to use the Premises (or a portion thereof) for
laboratory space in connection with medical research, biomanufacturing,
biotech-related research, or office space in connection with the foregoing.
In addition, Landlord hereby consents to the sublease between Tenant and
Osiris Therapeutics, Inc. As to subleases (or sub-subleases or assignments of
subleases by any Subtenant) to third parties not in the medical research,
biotech-related research, biomanufacturing or office usage industry, Tenant
and Subtenant must first obtain in each and every instance the prior written
consent of Landlord for such sublease/assignment/sublease. As to any and all
subleases/assignments/sub-subleases entered into by Tenant or Subtenant (as
the case may be) as to all or any portion of the leased Premises, Tenant and
Subtenant shall provide in any indemnification, release from liability,
defense and/or hold harmless agreements or provisions given by the Subtenants
(or other occupant of the space) for the benefit of Tenant or Subtenant (as
the case may be), that Landlord, its partners, agents, servants and
employees, also be included as benefited, protected or released parties on
the same basis as Tenant. In addition, as to any insurance policies required
of any Subtenant (or other occupant of the space) in any and all subleases,
should Tenant require that Subtenant's policy to name Tenant as an additional
insured, Tenant shall provide in the sublease that Subtenant's insurance
policy name Landlord as an additional insured on the same basis as Tenant
(and likewise Subtenant shall require Sub-subtenant or Assignee to so name
Landlord).
SECTION 31
CONDEMNATION
If the whole of the Premises shall be taken by a public or quasi-public
authority under the power of eminent domain, condemnation, or expropriation
or in the event of a conveyance in lieu thereof, then this Lease shall
terminate as of the date on which possession of the Premises is required to
be surrendered to the condemning authority, and Tenant shall have no claim
against Landlord for the value of the unexpired Term of this Lease.
If any part of the Premises shall be so taken or conveyed, and if such
partial taking or conveyance shall render the Premises unsuitable for the
business of Tenant or any Subtenant in the reasonable opinion of Landlord,
then the Term of this Lease shall cease and Terminate as of the date on which
possession of the part of the Premises so taken or conveyed is required to be
surrendered to the condemning authority, and Tenant shall have no claim
against Landlord for the value of any unexpired Term of this Lease. In the
event such partial taking or conveyance is not extensive enough to render the
Premises unsuitable for the business of Tenant, this Lease shall continue in
full force and effect except that the Annual Rent shall be reduced in the
same proportion that the floor area of the Premises so taken or
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conveyed bears to such floor area immediately prior to such taking or
conveyance, such reduction commencing as of the date Tenant is required to
surrender possession of such part of the Premises so taken or conveyed.
Landlord shall promptly restore the Premises, to the extent of condemnation
proceeds available for such purpose, as nearly as practicable to a condition
comparable to its condition at the time of such condemnation less the part
lost in the taking or conveyance, and thereafter Tenant shall promptly make
all necessary repairs, restoration, and alterations of Tenant's fixtures,
equipment, and furnishings and shall promptly reenter the Premises. For
purposes of determining the amount of funds available for restoration of the
Premises from the condemnation awarded, said amount will be deemed to be that
part of the award which remains after payment of Landlord's reasonable
expenses incurred in recovering the condemnation award and any amounts due to
Landlord's Mortgagee, and which represents a portion of the total sum so
available (excluding any award or other compensation for land) which is
equitably allocable to the Premises.
In the event of any condemnation or taking as herein before provided,
whether whole or partial, the Tenant shall not be entitled to any part of the
award granted to Landlord as damages or otherwise for such condemnation, and
Landlord and Landlord's Mortgagee are to receive the full amount of such
award as their respective interests may appear.
Although all damages awarded to Landlord in the event of any condemnation
are to belong to the Landlord and Landlord's Mortgagee as aforesaid, whether
such damages are awarded as full compensation for diminution in value of the
leasehold or the fee of the Premises, Tenant shall have the right, to the
extent that same shall not diminish the Landlord's or such Mortgagee's award
to claim, recover from the condemning authority, but not from Landlord or
such Mortgagee, such compensation as may be separately awarded or recoverable
by Tenant under law, in Tenant's own right for or on account of, and limited
solely to, any cost to which Tenant might be put in removing Tenant's
furniture, fixtures, leasehold improvements, and equipment.
SECTION 32
EXECUTION OF ESTOPPEL CERTIFICATE
At any time, and from time to time, upon the written request of either
party hereto or any Mortgagee, Tenant, within twenty (20) days of the date of
such written request, agrees to execute and deliver to such requesting party,
without charge and in a form satisfactory to such requesting party, a written
statement: (a) ratifying this Lease; (b) confirming the commencement and
expiration dates of the Term of this Lease; (c) certifying that Tenant is in
occupancy of the Premises, and that the Lease is in full force and effect and
has not been modified, assigned, subleased, supplemented, or amended except
by such writings as shall be stated; (d) certifying that all conditions and
agreements under this Lease to be satisfied or performed by the other party
have been satisfied and performed except as stated; (e) certifying that the
other party is not in default under the Lease and there are no defenses,
setoffs, recoupments, or counterclaims against the enforcement of this Lease
by the other party, or stating the defaults, defenses, set-offs, recoupments,
and/or counterclaims, claimed by the other party; (f) reciting the amount of
advance Rent, if any, paid by Tenant and the date to which such Rent has been
paid; (g) reciting the amount of security deposited with Landlord,
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if any; and (h) containing any other information which Landlord or Tenant or
the Mortgagee shall reasonably require.
SECTION 33
NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT
(a) Tenant agrees: (i) that this Lease is, and all of Tenant's rights
hereunder are and shall always be, subject and subordinate to any Mortgage
now existing or hereafter given by Landlord and to all advances made or to be
made thereunder and to the interest thereon, and all renewals, replacements,
modifications, consolidations, or extensions thereof; and (ii) that if any
Landlord's Mortgagee or if the purchaser at any foreclosure sale or at any
sale under a power of sale or assent to decree contained in attorn to, and
recognize such Mortgagee or purchaser, as the case may be, as Landlord under
this Lease for the balance then remaining of the Term of this Lease, subject
to all terms of this Lease; and (iii) that the aforesaid provisions shall be
self-operative, and no further instrument or document shall be necessary
unless required by any such Mortgagee or purchaser.
(b) Notwithstanding anything to the contrary set forth above, any
Landlord's Mortgagee may at any time subordinate its Mortgage to this Lease,
without Tenant's consent, by execution of a written document subordinating
such Mortgage to this Lease to the extent set forth therein, and there upon
this Lease shall be deemed prior to such Mortgage to the extent set forth in
such written document without regard to their respective dates of execution,
delivery and/or recording. In that event, to the extent set forth in such
written document, such Mortgagee shall have the same rights with respect to
this Lease as though this Lease had been executed and this Lease or
memorandum thereof recorded prior to the execution, delivery, and recording
of the Mortgage. Should Landlord or any Mortgagee or purchaser desire
confirmation of either such subordination or such attornment, as the case may
be, Tenant upon written request, and from time to time, will execute and
deliver without charge and in form satisfactory to Landlord, the Mortgagee,
or the purchaser all instruments and/or documents that may be requested to
acknowledge such subordination and/or agreement to attorn, in recordable
form, within fifteen (15) days of such request.
(c) Tenant agrees that no Landlord Mortgagee, Landlord
Mortgagee-in-possession, or purchaser shall be bound by any payment of Rent
made more than thirty (30) days prior to its due date, and any such sum shall
be due and payable on the due date. Tenant further agrees that no Landlord's
Mortgagee, Landlord's Mortgagee-in-possession, or purchaser shall be
responsible for the Security Deposit or other similar funds in respect to
this Lease not actually paid to it.
(d) In the event that Tenant fails to execute and deliver the instruments
and documents as provided for in this Section within the time period set
forth herein, Tenant docs hereby make, constitute, and appoint Landlord or
such Mortgagee or purchaser, as the case may be, as Tenant's attorney-in-fact
and in its name, place and stead to do so. The aforesaid power of attorney is
given as security coupled with an interest and is irrevocable.
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(e) So long as no default as set forth in Section 27 has occurred which
has continued to exist for such period of time (after notice and cure period,
required by this Lease) as would entitle Landlord to terminate this Lease or
would cause, without any further action of Landlord, the termination of this
Lease, this Lease shall not be terminated, nor shall Tenant's use, possession
or enjoyment of the Premises be interfered with, nor shall the leasehold
estate granted by this Lease be affected in any other manner, in any
foreclosure or any action or proceeding instituted under or in connection
with the Mortgage (or any other mortgage, deed of trust, security agreement
or lien instrument of any type or nature) or, in case Mortgagee (or any
secured party or beneficiary under any of the foregoing) takes possession of
the Premises pursuant to any provision of the Mortgage. Upon the request of
Tenant, Landlord agrees to use its reasonable efforts to have any Mortgagee
execute a document to this effect.
(f) If Landlord transfers title to the Property, Tenant shall attorn to
such transferee, provided that the transferee fully assumes Landlord's
covenants and obligations under this Lease and recognizes Tenant's right
under this Lease, and Tenant shall continue to perform Tenant's obligations
under this Lease.
SECTION 34
SIGNS AND ADVERTISING
Tenant and/or any Subtenant shall not inscribe, paint, affix, or display
any sign, notice, or advertisement on any of the windows, doors, walls, or
any part of the outside of the Premises and the remainder of the Property
without the prior written consent of Landlord. Any installation of the same
shall be under the supervision of Landlord. Tenant shall have full
responsibility to maintain such signs and also to remove such signs at the
termination of this Lease and to restore the Building or the Premises to its
state before the placing of said signs, reasonable wear and tear excepted.
SECTION 35
RULES AND REGULATIONS
Landlord reserves the right from time to time to adopt and promulgate
reasonable rules and regulations applicable to the Building and the Property,
and to supplement such rules and regulations, and Tenant agrees to be bound
thereby provided the same are not inconsistent with this Lease or any
applicable law or regulation. Notice of such rules and regulations and of any
amendment and supplements thereto shall be given to Tenant, and Tenant agrees
thereupon to comply with and observe all such rules and regulations. A breach
of any of such rules and regulations, whether now existing or hereinafter
adopted, shall be deemed a breach of this Lease. Landlord shall not adopt or
promulgate any rules or regulations which materially interfere with Tenant's
or any Subtenant's use of the Premises.
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SECTION 36
PARKING SPACES
Landlord shall make available for Tenant's and any Subtenant's
non-exclusive use the Parking Spaces free of charge.
At Landlord's written request, Tenant shall provide Landlord with the
license plate number, year, make and model of the automobiles entitled to use
the Parking Spaces, and if requested by Landlord, such automobiles shall be
identified by stickers provided by Landlord, and only such designated
automobiles shall be entitled to use the Parking Spaces.
Except for its obligations to maintain the Common Areas as stated in
Section 11, supra, Landlord assumes no responsibility or liability to Tenant
or any Subtenant, their agents, servants, invitees, or employees of any kind
whatsoever from any cause with respect to the use of the Parking Spaces or
other parking spaces, adjoining streets, sidewalks, driveways, property, and
passage ways, or the use thereof of anyone entitled to use the area.
SECTION 37
PURCHASE OPTION/RIGHT OF FIRST REFUSAL
(a) At any time prior to the fourth (4th) anniversary date of the Rental
Commencement Date, Tenant and/or any Subtenant shall have the option to
purchase the Building and Property from Landlord upon written notice to
Landlord subject to the following terms and conditions:
(i) The purchase price for the Building and Property shall be as
follows:
(a) If the option is exercised on or before June 30, 1996, the sum
of Six Million and Sixty-Five Thousand Dollars ($6,065,000.00);
(b) If the option is exercised after June 30, 1996, but on or
before June 30, 1997, the sum of Six Million Three Hundred Sixty-Eight
Thousand Two Hundred and Fifty Dollars ($6,368,250.00);
(c) If the option is exercised after June 30, 1997, but on or
before June 30, 1998, the sum of Six Million Six Hundred Eighty-Six Thousand
Six Hundred and Sixty-Three Dollars ($6,686,663.00).
(ii) Settlement for the purchase and sale of the Premises shall be
held in a place designated by Tenant and/or Subtenant in Baltimore City and
at a time designated by Tenant and/or Subtenant, provided that settlement
shall be held within ninety (90) days after exercise of the option by Tenant
and/or Subtenant.
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(iii) The Rent shall cease and shall be adjusted as of the date of
settlement. Water rent, real property taxes, and all other public or
governmental charges or assessments shall be adjusted as of the date of
settlement.
(iv) At settlement, Landlord shall execute and deliver to Tenant or
Subtenant, at Tenant's or Subtenant's expense, a fee simple deed containing
covenants of special warranty and further assurances, which shall convey good
and merchantable title to the Building and Property, subject only to (a) all
building, zoning, and applicable ordinances and regulations of governmental
authorities having jurisdiction over the Property; (b) all easements,
restrictions, rights, agreements, covenants, encumbrances and conditions of
record and/or shown on any recorded Plat for the Property; (c) all liens for
real property taxes and assessments due and payable following the date of
Closing; (d) all existing utility and drainage easements and rights-of-way;
(e) all facts and matters which an accurate survey and/or inspection of the
Property would show; and (f) all existing leases (other than the present
Lease).
(v) Recordation and transfer taxes shall be paid by the Tenant and/or
Subtenant (purchaser)
(vi) Recording fees shall be paid by the Tenant and/or Subtenant
(purchaser).
The purchase option set forth above is subject to termination by Landlord
upon thirty (30) days of Landlord giving an Offer Notice (as hereinafter
defined) in the event Landlord makes or receives an Acceptable Offer (as
hereinafter defined) prior to Tenant and/or Subtenant exercising the
above-noted purchase option. Nevertheless, during such thirty (30) day period
Tenant and/or Subtenant shall have the right of first refusal to purchase the
Building and Property, or any portion thereof, as hereinafter more fully set
forth:
(b) In the event that (i) Landlord should decide to sell, convey, or
transfer the Building and Property, or any portion thereof, and (ii) Landlord
should make or receive an offer therefor that Landlord deems satisfactory to
it and is satisfactory to a third party (hereinafter referred to as an
"Acceptable Offer"), then Landlord shall send to Tenant and any Subtenant a
duplicate copy of the Acceptable Offer together with a notice stating that
Landlord intends to accept the same (hereinafter referred to as the "Offer
Notice"). Within thirty (30) business days of Landlord's giving Tenant and
any Subtenant an Offer Notice, Tenant and any Subtenant shall have the right
to advise Landlord in writing that Tenant and/or any Subtenant desires to
purchase the Building and Property, or portion thereof, in accordance with
the Acceptable Offer.
(c) If Tenant or any Subtenant advises Landlord in a timely fashion that
it desires to purchase the Building and Property, or portion thereof, in
accordance with the Acceptable Offer, Landlord and Tenant or Subtenant shall
promptly enter into a contract of sale for the Building and Property, or
portion thereof, in accordance with the provisions of the Acceptable Offer;
provided that the contract of sale shall provide that the Lease shall
terminate as of the day of settlement of the contract of sale, with all Rent
payable under this Lease to be adjusted as of such date unless Tenant or
Subtenant elects that the sale shall be
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subject to the terms, covenants, and conditions of this Lease (other than the
provisions of this Section 37).
(d) If Tenant or Subtenant advises Landlord in a timely fashion that it
does not desire to purchase the Building and Property, or portion thereof, in
accordance with the Acceptable Offer, or if Tenant or Subtenant does not
advise Landlord within thirty (30) business days of Landlord's giving Tenant
an Offer Notice that it desires to purchase the Building and Property, or
portion thereof, in accordance with the Acceptable Offer, then Landlord shall
be free to enter into a contract of sale with a third party on the terms
contained in the Acceptable Offer or on terms more favorable to Landlord;
provided that settlement thereunder occurs within six (6) months of
Landlord's sending Tenant and Subtenant notice of the Acceptable Offer.
(e) In the event that Landlord does not consummate the sale of the
Building and Property, or portion thereof, in accordance with the Acceptable
Offer (or on terms more favorable to Landlord) within six (6) months of
Landlord's giving Tenant and Subtenant notice of the Acceptable Offer,
Landlord may not sell, convey, or transfer the Building and Property, or any
portion thereof, thereafter without re-offering the same to Tenant and
Subtenant in accordance with the provisions of this Section 37.
(f) In the event that Tenant and/or Subtenant does not exercise its right
to purchase the Building and Property, or portion thereof, in accordance with
the provisions of this Section 37 and Landlord sells, conveys, or transfers
the Building and Property, or any portion thereof, to another person or
entity, such sale shall be subject to the terms, covenants, and conditions of
this Lease; provided, however, that the provisions of this Section 37 shall
terminate upon any such sale, transfer, or conveyance.
(g) Tenant's and/or Subtenant's rights contained in this Section 37 are
not assignable to any other person or entity without the prior written
consent of Landlord, which consent can be withheld in the sole and absolute
discretion of Landlord.
SECTION 38
EXPANSION
(a) Provided that this Lease is then in full force and effect, on or
before June 30, 1998, Tenant shall have the option to lease the Option Space
for the Option Space Rent on and subject to the terms and conditions
hereinafter set forth. Should Tenant desire to lease the Option Space, it
must so advise Landlord in writing on or before June 30, 1998 and the lease
of the Option Space shall commence sixty (60) days after the date such notice
is given to Landlord (or sooner by agreement of the parties). In the event
that Tenant exercises its option to lease the Option Space, as of the day on
which the lease of the Option Space commences, the Option Space shall be
included within the Premises, the term "Rent" shall include the Option Space
Rent, and all of the other terms and conditions of this Lease shall be
applicable to the Option Space. In the event that Tenant does not exercise
this expansion option in the time set forth above, Tenant shall have no
further rights of expansion to the Option Space.
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(b) Tenant shall have a right of first offer with respect to the leasing
of any space which Landlord elects to market for occupancy within the
Building not then leased by Tenant under the terms of this Lease (excluding,
however, that portion of the second (2nd) floor of the Building, consisting
of approximately forty thousand (40,000) square feet, located at the easterly
side of the Building and occupied by Belfort Instruments Company as of the
Commencement Date, which space may be surrendered to Landlord in the near
future, which, Tenant acknowledges, Landlord may market for occupancy after
any such surrender, free of any preemptive rights or options in favor of
Tenant). Such right of first offer would be superior to any rights or options
which may, at any time after the date hereof, be granted to any party by or
on behalf of Landlord, but would be subject and subordinated to any renewal
or lease extension rights. which may presently be available to any other
tenants under current leases (or any lease entered into with respect to the
space to be surrendered by Belfort Instruments Company as described above)
affecting any of the space in the Building otherwise subject to the right of
first offer described in this paragraph. In the event that Tenant should
elect to exercise such right, the space incorporated into the Premises in
consequence of such exercise would be governed by all of the terms and
conditions of this Lease; provided, however, that the base rent with regard
to such space would be those for which such space was marketed by Landlord.
In the event that Tenant waives or declines to exercise its right of first
offer as to any space in the Building to be marketed by Landlord for
occupancy, Landlord may proceed to offer the same for occupancy by others,
provided that Tenant would be entitled to revive its preemptive right to in
the event that the terms of any lease or occupancy agreement subsequently
offered to a third party in respect of a proposed lease or other offer that
Tenant had thereto fore waived or declined, should be materially more
favorable to the tenant thereunder than those which had been offered to, and
declined by, Tenant as provided above. Tenant's right to revive its
preemptive right as aforesaid shall not apply to proposed leases or occupancy
agreements covering space as to which Tenant had thereto fore declined to
exercise such right which provided for short-term or interim occupancy rights
(which for the purposes of this sentence, shall be deemed to include only
leases or other occupancy agreements which, giving effect to any renewal or
extension terms available to the proposed tenant or occupant in connection
therewith, do not provide for a term in excess of five (5) years). As to any
space leased by Landlord to a third party on a long-term lease (greater than
five (5) years) which Tenant does not exercise its right of first offer,
Tenant's rights shall terminate as to said space and Tenant shall have no
future rights of first offer as to the space.
SECTION 39
ENVIRONMENTAL INDEMNIFICATION/REPRESENTATION
Tenant shall comply with all Environmental Laws in its use of the
Premises and Property, including, without limitation, the obligation to
obtain and maintain in effect and comply with all requisite permits and
reporting and notification requirements. Tenant hereby agrees that (a) no
activity will be conducted on the Property that will produce or cause the
release of any Hazardous Materials; (b) the Property will not be used in any
manner for the storage of any Hazardous Materials; and (c) except as set
forth below, Tenant will not permit any Hazardous Materials to be brought
onto the Property, and if so brought or found located thereon, the same shall
be immediately removed, at Tenant's sole cost and expense; all
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required cleanup and disposal procedures shall be diligently undertaken in
accordance with all Environmental Laws and upon request Tenant shall provide
Landlord with evidence satisfactory to Landlord of Tenant's compliance with
all Environmental Laws. If at any time during or after the Term, the Property
is found to be contaminated with Hazardous Materials resulting from Tenant's
use thereof or Tenant's use of the Property results in a violation or alleged
violation of any Environmental Law, Tenant agrees to (and cause all
Subtenants and other occupants of the Premises to) indemnify, hold harmless,
protect and defend Landlord from all claims, demands, actions, liabilities,
costs, expenses, damages and obligations of any nature arising from or as a
result of the use of the Property by Tenant, as set forth below. This
indemnification shall survive the termination or expiration of this Lease.
In addition to the indemnification provided for in Section 20 of this
Lease, Tenant agrees to (and cause all Subtenants and other occupants of the
Premises to) indemnify, defend, and hold Landlord harmless from any claims,
losses, costs, expenses, damages, liabilities or causes of action (including
reasonable attorneys' fees) which (a) arise during or after the Term of this
Lease and are related to or connected with the use or occupancy by Tenant
and/or any Subtenant, assignee, concessionaire, or licensee of the Premises,
Building or Property, and/or (b) result or arise out of or pertain to the
failure by Tenant and/or any Subtenant to comply with all laws and
regulations concerning the use, generation, storage or disposal of Hazardous
Materials, and any and all substances, wastes, materials, or other materials
that may pose a threat to human health or to the environment at the Premises,
Building or Property; provided such indemnification shall not apply to the
negligence or willful acts of Landlord or its contractors or subcontractors,
or its or their agents or employees.
Notwithstanding anything above to the contrary, Landlord shall permit
Tenant or any Subtenant to bring into the Premises, store and use such
Hazardous Materials as are essential to the operation of such Tenant or
Subtenant's business so long as such business constitutes a permitted use of
the Premises, provided, however, that such Hazardous Materials are normally
and customarily used in similar businesses; that such Tenant or Subtenant
maintain a record of all material safety data sheets for any such material
used or located at the Premises, which would be available for inspection by
Landlord at any time during Normal Business Hours; annually, on the
anniversary of the Rent Commencement Date, Tenant shall, and shall cause each
Subtenant to, provide Landlord with copies of all such material safety data
sheets for Hazardous Materials then used or kept at the Premises; that such
Tenant or Subtenant only bring into the Premises and store such quantities of
any Hazardous Material as are absolutely necessary for the Tenant or
Subtenant's business activities and in no event more than two (2) gallons of
each such material; that such Tenant and Subtenant comply with all
requirements of Landlord's insurer(s) regarding handling and storage of such
Hazardous Materials; that Tenant and Subtenant comply with all Environmental
Laws with regard to any such Hazardous Materials; and that Tenant and
Subtenant agree never to dispose of any such Hazardous Material on the
Premises, Building and/or Property or adjacent property and that Tenant and
Subtenant agree to properly dispose of any such Hazardous Material off-site
in accordance and compliance with all Environmental Laws.
Landlord represents and warrants that, to the best of its knowledge as of
the date of this Lease, (i) there are no materials presently located at or on
the Property, the Building or the
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Premises which are subject to any Environmental Requirement; (ii) there are
no underground storage tanks ("Tanks") at the Premises, the Building or the
Property as such Tanks are defined pursuant to the Federal Underground
Storage Tank Law, as am ended (Subtitle I of the Resource Conservation and
Recovery Act, P.L. 98-616, 42 U.S.C. Chapter 6991 et seq.) and the regulations
promulgated thereunder and any successor or similar statutes, including the
Underground Storage Tank Division of the Maryland Department of the
Environment; (iii) Landlord has no knowledge of any pre-existing Tanks, if
any, or that any pre-existing Tanks have been removed; (iv) the Premises, the
Property and the Building are not in violation of or subject to any existing,
pending, or threatened investigation or inquiry by any governmental authority
pertaining to any applicable federal, state or local environmental law or
Environmental Requirement; (v) there are no friable asbestos or any material
containing asbestos deemed hazardous by federal and/or state regulations,
which have been installed in the Premises, the Property or the Building; and
(vi) there are no hazardous substances, hazardous wastes, or other materials
that may pose a threat to human health or the environment which have been
disposed of or otherwise released or discharged on or to the Premises, the
Building or the Property.
SECTION 40
ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than any
payment of Annual Rent or Additional Rent herein stipulated shall be deemed
to be other than on account of the earliest stipulated Annual Rent or
Additional Rent due and payable, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as Rent be deemed
an accord and satisfaction. Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rent or pursue
any other remedy provided in this Lease, at law or in equity.
SECTION 41
NO PARTNERSHIP
Landlord does not, in any way or for any purpose, become a partner of
Tenant in the conduct of its business, or otherwise, or joint venturer or a
member of a joint enterprise with Tenant. This Lease establishes a
relationship solely of landlord and tenant.
SECTION 42
HOLDING OVER
hould Tenant hold over in possession of the Premises after the expiration
of this Lease, Tenant shall be deemed to be occupying the Premises from month
to month, subject to such occupancy's being terminated by either party upon
at least thirty (30) day's written notice, at double the Annual Rent and
Additional Rent in effect at the expiration of this Lease, all calculated
from time to time as though this Lease had continued, and otherwise subject
to all of the other terms, covenants, and conditions of this Lease insofar as
the same may be
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applicable to a month-to-month tenancy. In addition, Tenant shall pay as
Additional Rent to Landlord for all damages sustained by reason of Tenant's
retention of possession. Nothing in this Section 42 excludes Landlord's right
of re-entry or any other right hereunder.
SECTION 43
RECORDATION
Either party may record this Lease without the consent (written or
otherwise) of the other party. Upon the request of either party, the parties
agree to execute a short form of this Lease for recording purposes. If this
Lease or a short form thereof is presented to a clerk for record, the costs
and taxes imposed upon recordation shall be borne by the party presenting
this Lease, or on whose behalf this lease is presented. If such a short form
of this Lease is recorded, upon the termination of this Lease, Tenant shall
upon written request by Landlord, execute, acknowledge, and deliver to
Landlord an instrument in writing releasing and quitclaiming to Landlord all
right, title and interest of Tenant in and to the Premises arising from this
Lease or otherwise upon the termination hereof, all without cost or expense
to Landlord.
SECTION 44
WAIVERS/BROKERAGE COMMISSION
The failure of Landlord to insist for a period of time on strict
performance of any one or more of the terms, covenants, or conditions hereof
shall not be deemed a wavier of the rights or remedies that Landlord may
have, and shall not be deemed a waiver of any subsequent breach or default in
any term, covenant, or condition hereof. No waiver by Landlord of any
provision hereof shall be deemed to have been made unless expressed in
writing and signed by Landlord.
The parties hereto agree that no person or entity is entitled to a
brokerage commission, finder's fee or other similar form of compensation in
connection with this Lease. Each party agrees to indemnify, defend and hold
the other harmless (including, without limitation reasonable attorneys' fees)
for any such claim made because of its action.
SECTION 45
REMEDIES FOR LANDLORD
Any and all remedies available to Landlord for the enforcement of the
provisions of this Lease are cumulative and not exclusive, and Landlord shall
be entitled to pursue either the rights enumerated in this Lease or remedies
authorized by law, or both. Tenant shall be liable for any costs or expenses
incurred by Landlord in enforcing any terms of this Lease,
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or in pursuing legal action for the enforcement of Landlord's rights,
including court costs and reasonable attorneys' fees, in amounts to be
affixed by court.
SECTION 46
TABLE OF CONTENTS; CAPTIONS
The Table of Contents and captions appearing in this Lease are inserted
only as a matter of convenience and do not define, limit, construe, or
describe the scope or intent of the Sections of this Lease nor in any way
affect this Lease.
SECTION 47
NOTICES
Any and all notices permitted or required to be given hereunder shall be
in writing and shall be deemed duly given three (3) days after such notice
shall be deposited into the United States mail, if delivery is by postage
paid, registered or certified, return receipted mail.
Any notice in any other manner shall be in writing and shall be deemed
given when actually received. Such notice shall be sent to the respective
party at the address given in this Lease or to any other address that the
respective party may designate by notice delivered pursuant hereto. Nothing
herein contained shall be construed to preclude personal service of any
notice in the manner prescribed for personal service of a summons or other
legal process.
Landlord agrees that whenever notice is required to be provided to Tenant
under Section 27 or Section 28, notice shall also be given by Landlord to:
(a) MIDFA, whose address is 217 E. Redwood Street, 22nd Floor,
Baltimore, Maryland 21202, Attn.: Executive Director.
(b) Baltimore Development Corporation, whose address is 36 South
Charles Street, 16th Floor, Baltimore, Maryland 21202, Attn: President.
(c) Whiting-Turner Contracting Company, whose address is 300 E. Joppa
Road, Towson, Maryland 21204, Attn: Williard Hackerman, President, with an
additional copy to Edward L. Wender, Esquire, Venable, Baetjer and Howard, 2
Hopkins Plaza, 1800 Mercantile Bank and Trust Building, Baltimore, Maryland
21201.
SECTION 48
APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, and the parties hereto agree to submit to the
jurisdiction of the Courts of the State of Maryland for the resolution of any
disputes arising hereunder.
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SECTION 49
SUCCESSORS AND INCLUDED PERSONS
All rights, obligations, and liabilities herein given to, or imposed
upon, the respective parties hereto shall extend to and bind the several
respective personal representatives, successors, and assigns of the said
parties; and if Tenant shall consist of more than one person or entity, they
shall all be bound jointly and severally by the terms, covenants, and
conditions herein. No rights, however, shall inure to the benefit of any
personal representative, successor, or assign of Tenant unless the Assignment
to such party has been approved by Landlord in writing as provided in Section
30.
In any provision of this Lease involving Landlord's being defended,
released from liability, indemnified, held harmless, or not being deemed to
be liable for any action, omission, or circumstance, the term "Landlord"
shall include Landlord and Landlord's contractors and subcontractors and its
or their present and future controlling persons, partners, directors,
officers, employees, and agents.
In any provision of this Lease involving Tenant's being defended,
released from liability, indemnified, held harmless, or not being deemed to
be liable for any action, omission, or circumstance, the term "Tenant" shall
include Tenant and Tenant's contractors and subcontractors and its or their
present and future controlling persons, partners, directors, officers,
employees, and agents.
SECTION 50
WAIVER OF TRIAL BY JURY
Landlord and Tenant hereby waive trial by jury in any action or
proceeding or counterclaim brought by either party hereto against the other
party on any and every matter, directly or indirectly, arising out of or
with' respect to this Lease.
SECTION 51
RIGHTS OF AND CLAIMS AGAINST LANDLORD
(a) Tenant waives all rights to bring any non-mandatory counterclaim in
any action brought by Landlord for the non-payment of Rent or any other
summary proceeding thereon.
(b) Except the extent specifically provided herein to the contrary,
whenever Landlord's consent or approval is required to be given under any
provisions of this Lease, such consent or approval may be withheld in the
sole discretion of Landlord, and Landlord shall not be required to respond to
any request for consent or approval within a time period determined by
Tenant. Tenant further waives the right to any claim against Landlord for
money
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damages by reason of any refusal, or delaying by Landlord of any consent,
approval, or statement of satisfaction, and in such event, Tenant's only
remedies therefor shall be an action for specific performance, injunction, or
declamatory judgment to enforce any such requirement.
(c) All obligations of Landlord hereunder shall be construed as
covenants, not conditions.
(d) Landlord may transfer all or part of its interest in the Premises and
this Lease without the consent of Tenant, at any time and from time to time.
(e) Except as specifically set forth herein, Landlord may lease any
portion of the Building to others on such terms and for such purposes as
Landlord considers appropriate and may terminate or modify leases with others
for any portion of the Building without obligation to Tenant and without
relieving Tenant of any obligation under this Lease.
(f) If Tenant obtains a money judgment against Landlord or its successors
or assigns under any provisions of' or with respect to this Lease or on
account of any matter, condition, or circumstance arising out of the
relationship of the parties under this Lease, Tenant's occupancy of the
Premises or Landlord's ownership of the Premises, Tenant shall be entitled to
have execution upon such judgment only upon Landlord's estate in the Property
and rents and other revenue generated thereby and not out of any other assets
of Landlord, any of its partners, or its successors or assigns; and Landlord
shall be entitled to have any such judgment so qualified as to constitute a
lien only on Landlord's estate, subject to any liens antedating such judgment.
(g) At any time when there is an outstanding Mortgage covering Landlord's
interest in the Premises, Tenant may not exercise any remedies for default by
Landlord hereunder unless and until the Mortgagee shall have received written
notice of such default and a reasonable time to cure such default after
Landlord's period to cure shall have elapsed.
SECTION 52
CALCULATION OF TIME
In computing any period of time prescribed or allowed by any provision of
this Lease, the day of the act, event or default from which the designated
period to time begins to run shall not be included. The last day of the
period so computed shall be included, unless it is a Saturday, Sunday or a
legal holiday, in which event the period runs until the end of the next day
which is not a Saturday, Sunday or legal holiday. Unless otherwise provided
herein, all notice and other periods expire as of 5:00 p.m. (local time in
Maryland) on the last day of the notice or other period.
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SECTION 53
SEVERABILITY; REDUCTION OF CHARGES
If the application of any term or provision of this Lease, whether in
whole or in part, be held invalid or unenforceable in general or in any
instance, the remainder of this Lease shall not be affected by such holding
and shall remain fully valid and enforceable.
In the event that any late charge, interest rate, or other payment
provided herein exceeds the maximum applicable charge legally allowed, such
late charge, interest rate, or other payment shall be reduced to the maximum
legal charge, rate, or amount.
SECTION 54
COUNTERPARTS
This Lease may be executed in multiple counterparts or in duplicate, and
when so executed by all parties shall constitute one agreement.
SECTION 55
TOTAL AGREEMENT
This Lease contains the entire agreement between the parties and cannot
be changed or modified except by a written instrument subsequently executed
by the parties hereto.
SECTION 56
NO MERGER
There shall be no merger of this Lease or of the leasehold estate hereby
created with the fee estate in the Premises or any part thereof by reason of
the fact that the same person, firm, corporation or other legal entity may
acquire or hold, directly or indirectly, this Lease or the leasehold estate
and the fee estate in the Premises or any interest in such fee estate,
without the prior written consent of Landlord's Mortgagee.
SECTION 57
TIME OF THE ESSENCE/GOOD FAITH AND FAIR DEALING
Time is of the essence in all provisions of this Lease. Landlord and
Tenant acknowledge their duties to exercise their rights and remedies, and
perform their duties in good faith and deal fairly with each other.
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SECTION 58
COMMERCIAL PURPOSE
The parties stipulate that the Premises is being leased exclusively for
business, commercial, manufacturing, mercantile, or industrial purposes
within the meaning of Section 8-110(a) of the Real Property Article of the
Annotated Code of Maryland, and that the provisions of Section 8-110(b) of
such Article (or any future statute) pertaining to the redemption of
reversionary interests under leases shall be inapplicable to this Lease;
provided, however, this Section 58 is not intended nor shall it be construed
to impair or otherwise effect the purchase option set forth in Section 37 of
this Lease.
SECTION 59
ABATEMENT OF RENT RELATING TO UNSUBLEASED SPACE
Notwithstanding anything above to the contrary, during the Original Term
only, the parties hereby agree that in the event all or any portion of the
Premises becomes vacant, i.e. not under sublease, (but only after the
expiration or termination of Tenant's initial sublease with Osiris
Therapeutics, Inc.) the following rental abatements shall apply:
(a) That Landlord will abate proportionately one (1) month's rental
payment of the Annual Rent due to Landlord for any portion of the leased
Premises that becomes vacant. By way of example, should fifty percent (50%)
of the leased Premises become vacant, Landlord shall abate fifty percent
(50%) of one (1) month's rental due from Tenant.
(b) After such space has remained vacant for longer than thirty (30)
days, Landlord shall partially abate the Monthly Installment of Annual Rent
payable by Tenant on the vacant space only to an amount equal to sixty
percent (60%) of the regular Monthly Installment of Annual Rent due to
Landlord had the space not been vacant. By way of example, should fifty
percent (50%) of the leased Premises remain vacant for longer than thirty
(30) days, Landlord shall partially abate Tenant's total Monthly Rental by
twenty percent (20%). By way of further example, should one hundred percent
(100%) of the leased Premises remain vacant for longer than thirty (30) days,
Landlord shall partially abate Tenant's total Monthly Rental by forty percent
(40%). The said proportionate partial abatement shall commence with the next
Monthly Installment of Annual Rent and continue on a month-to-month basis
until the entire leased premises become fully occupied by one or more
Subtenants of Tenant.
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SECTION 60
REPAYMENT OF "ABATED" RENT
This Lease provides for a period of "free" rent or other rent concession,
such postponed rent or "free" rent is called the "Abated Rent". Tenant shall
be credited with having paid all of the Abated Rent upon the expiration of
the Original Lease Term only if Tenant has fully, faithfully, and punctually
performed all of Tenant's material obligations hereunder, including the
payment of all Rent (other than Abated Rent) and all other monetary
obligations and the surrender of the Premises in the physical condition
required by this Lease. Tenant acknowledges that its right to receive credit
for the Abated Rent is absolutely conditioned upon Tenant's full, faithful
and punctual performance of its material obligations under this Lease. If
Tenant defaults and does not cure within any applicable grace period, the
Abated Rent shall immediately become due and payable in full and this Lease
shall be enforced as if there were no such rent abatement or other rent
concession. In such case, Abated Rent shall be calculated based on the full
rent payable under this Lease.
SECTION 61
LIMITATION OF TENANT LIABILITY
Notwithstanding anything above or in this Lease to the contrary, and/or
provided that Tenant and Subtenants comply with and maintain all obligations
and requirements as set forth in Sections 21, 22 and 23, supra, Landlord
agrees that as to any monetary liability of Tenant due to or arising from any
breach or default of this Lease, and not covered by any applicable policy of
insurance required under Sections 21 and 22, supra, Tenant's monetary
liability under this Lease shall be limited to the maximum amount of Five
Hundred Thousand Dollars ($500,000.00). In the event that Landlord's monetary
claim against Tenant exceeds the amount of Five Hundred Thousand Dollars
($500,000.00) and that because of the limitation set forth herein, Landlord
receives less than the full amount of its claim, Tenant does, to the extent
permitted by applicable law, hereby grant and convey to Landlord (and further
agrees to execute such other and further documents as are necessary in
Landlord's reasonable opinion) any rights and claims Tenant may have against
any Subtenant and/or third party which created or caused Landlord's claim
against Tenant to the effect that Landlord shall have subrogation rights to
any such claim of Tenant in the amount that Landlord's claim as afore said is
reduced by the said limitation granted to Tenant. By way of example, should
Landlord have a claim against Tenant in the amount of Six Hundred Thousand
Dollars ($600,000.00) caused by a breach of this Lease by Subtenant, and
Tenant's liability is limited to Five Hundred Thousand Dollars ($500,000.00),
Landlord would have subrogation rights from Tenant to pursue any claim Tenant
may have against Subtenant in the amount of One Hundred Thousand Dollars
($100,000.00).
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SECTION 63
VACATING OF OFFICE SPACE BY THE BELT'S CORPORATION
Notwithstanding any other provision of this Lease to the contrary, Tenant
acknowledges that possession of a portion of the Premises, consisting of
approximately 7500 square feet of office space currently occupied by The
Belt's Corporation ("Belt's"), a tenant of Landlord, will not be delivered to
Tenant until the earlier of (a) ninety days after the Lease Commencement
Date, or (b) the date on which substitute office space for Belt's (935 S Wolfe
Street and 947 Fell Street) has been completed and is ready for occupancy by
issuance of the required use and occupancy permit by Baltimore City. Neither
Belt's nor Landlord shall be responsible to Tenant or any Subtenant for the
payment of rent in respect of the space so occupied (which is referred to
herein as the "Belt's Space") during the period described in the preceding
sentence.
Landlord agrees that regardless of Belt's continuing occupancy of the
Belt's Space, Landlord shall, and shall cause Belt's to, cooperate in good
faith with Tenant, Osiris, and all contractors engaged in the performance of
Tenant's TI Work and the Osiris Work in order to minimize the effect of
Belt's continuing occupancy of the Belt's Space on the schedule for the
completion of such work. Landlord shall, and shall cause Belt's to, permit
Tenant and Osiris and their contractors and representatives to enter the
Belt's Space and to perform any and all construction work therein which may
be required for the timely completion of the Tenant's TI Work and the Osiris
Work, provided that: (i) such construction work in the Belt's Space does not
begin prior to forty-five (45) days after the Lease Commencement Date; (ii)
any such construction work occurs only on the first floor of the Belt's
Space; (iii) Tenant and Osiris shall provide Landlord with reasonable prior
notice of the timing and nature of the work proposed to be performed within
the Belt's Space; (iv) any and all work performed within the Belt's Space
shall be performed in such a way as to permit Belt's to continue to occupy
the Belt's Space for the conduct of its business without unreasonable
interference or disruption; and (v) all work to be performed within the
Belt's Space shall be performed with maximum attention to the safety and
security of Belt's employees, personnel and equipment. Tenant and Osiris
shall consult with Landlord with respect to the scope and nature of any and
all work to be performed within the Belt's Space prior to the performance
thereof. Landlord acknowledges and has advised Belt's that the nature of the
work to be performed within the Belt's Space may require some temporary
interruption of Belt's normal office routines, and may require the temporary
movement of personnel and equipment within the Belt's Space.
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IN WITNESS THEREOF, Landlord and Tenant have caused this Lease to be
executed under seal, as of the date and year first above written.
ATTEST/WITNESS: LANDLORD:
SAGA LIMITED PARTNERSHIP
/s/ Christine P. Brown By: /s/ S. A. Brown
- -------------------------------- --------------------------- (SEAL)
S. A. Brown, III, General Partner
ATTEST/WITNESS: TENANT:
MARYLAND ECONOMIC DEVELOPMENT
CORPORATION
/s/ illegible By: /s/ Hans F. Mayer
- -------------------------------- --------------------------- (SEAL)
Hans F. Mayer, Executive Director
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Exhibit 10.18
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made as of the ____ day of
February, 1995,(but effective in all respects as of January 18, 1995) by and
between MARYLAND ECONOMIC DEVELOPMENT CORPORATION1 a body politic and corporate
and constituted as a public instrumentality of the State of Maryland
("Sublandlord") and OSIRIS THERAPEUTICS, INC., a Delaware corporation
("Subtenant").
RECITALS
A. On January __, 1995, SAGA Limited Partnership, a Maryland limited
partnership (the "Landlord") and Sublandlord executed a Lease Agreement (the
"Master Lease").
B. Pursuant to the terms of the Master Lease (a copy of which is attached
hereto as Exhibit A and incorporated herein by reference) the Landlord leased to
Sublandlord certain property located in Baltimore City, Maryland all as more
particularly described in the Master Lease (the "Premises").
C. Subtenant desires to sublease all of the Premises from Sublandlord
(the "Subleased Premises") and Sublandlord desires to sublease the Subleased
Premises to the Subtenant. The Subleased Premises consist of 30,000 square
feet, more or less, within the Building (as hereinafter defined), which is
the space to be leased by Sublandlord under the Master Lease and outlined in
Exhibit A-1,which may be increased from time to time by the incorporation of the
Expansion Premises (as hereinafter defined) in accordance with options/rights
granted to Subtenant. The actual square footage of the Subleased Premises
shall be measured in accordance with BOMA standards, and the parties hereto
agree to execute confirmatory statements (prior to the Rental Commencement Date
and in the event the square footage increases due to Subtenant's exercise of any
option rights contained herein) to record in writing the actual square footage
contained in the Subleased Premises. As used in this Sublease, the term
"Building" shall mean the building known as 2001 Aliceanna Street, Baltimore,
Maryland 21231-2001, consisting of 184,962 square feet, more or less, as
measured in accordance with BOMA standards.
D. The parties desire to enter into this Sublease defining their
respective rights, duties, obligations and liabilities relating to the
Subleased Premises.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sublandlord and Subtenant hereby
covenant and agree as follows:
<PAGE>
l. Demised. Sublandlord hereby sublets to Subtenant and Subtenant hereby
-------
sublets from Sublandlord the Subleased Premises and the Parking Spaces (as
defined in the Master Lease). Except as otherwise provided herein, Subtenant
hereby assumes and agrees to perform all of the duties and
obligations imposed in respect of the Subleased Premises upon Sublandlord, as
tenant, by the Master Lease for the term of this Sublease, and it is agreed that
Sublandlord shall have all the rights and powers as Sublandlord hereunder as are
conferred upon the Landlord in the Master Lease.
2. Term. The term of this Sublease shall commence on the day upon which
----
the Master Lease commences and shall terminate on ___________ 200__ (the day
which is one (1) day less than the Original Term (as defined in the Master
Lease) (the "Initial Term").
By written notice to Sublandlord not more than six (6) months nor less than
three (3) months prior to the expiration of the Initial Term, Subtenant may
extend the Initial Term for a period of six (6) years and six (6) months (the
"Extended Term") on the same terms and conditions (excluding the Annual Rent)
which apply to the Initial Term provided that Sublandlord exercises the
necessary and corresponding extension option under the Master Lease and
Subtenant is not then in default of any material term, covenant or condition of
this Sublease (or if so, such default is cured prior to the expiration of any
applicable grace period). Notwithstanding the foregoing to the contrary,
provided that (i) Sublandlord is not in default of any of its obligations under
the Master Lease or this Sublease, (ii) Landlord is not in default of any of its
obligations under the Master Lease, and (iii) indebtedness incurred in
connection with certain bond financing for the funding of certain components of
Landlord's Work will still be outstanding on the date on which the Extended Term
would commence, Subtenant shall exercise its option to extend the terms of this
Sublease for the Extended Term.
Provided that Subtenant has exercised its option to extend the term for
the Extended Term, and provided further that Sublandlord exercises the
necessary and corresponding extension option under the Master Lease and
Subtenant is not then in default of any material term, covenant or condition
of this Sublease (or if so, such default is cured prior to the expiration of
any applicable grace period), Subtenant may, by written notice to Sublandlord
(the "First Extension Notice") not more than six (6) months nor less than
three (3) months prior to the expiration of the Extended Term, extend the
Extended Term for a period of (5) years (the "First Option Term") on the same
terms and conditions which apply to the Extended Term (excluding the Annual
Rent).
Provided that Subtenant has exercised its option to extend the term for the
First Option Term, and provided further that Sublandlord exercises the necessary
and corresponding extension
-2-
<PAGE>
option under the Master Lease and Subtenant is not then in default of any
material term, covenant or condition of this Sublease (or if so, such default is
cured prior to the expiration of any applicable grace period), by written notice
to Sublandlord not more than six (6) months nor less than three (3) months prior
to the expiration of the First Option Term, Subtenant shall have the right to
extend the First Option Term for an additional period of five (5) years (the
"Second Option Tern") on the same terms and conditions which apply to the First
Option term (excluding the Annual Rent).
Notwithstanding anything to the contrary contained in this Sublease,
Sublandlord hereby expressly covenants and agrees that it shall, so long as it
is entitled to do so under the terms of the Master Lease, exercise each
extension or renewal option to which it is entitled under the Master Lease (at
the time and in the manner provided for in the Master Lease) which may be
necessary or appropriate to permit Subtenant to exercise each option or
extension term to which it is entitled under this Sublease.
3. Rent. Commencing on the Rental Commencement Date (as defined in the
----
Master Lease), Subtenant shall, begin to pay to Sublandlord and shall continue
to pay during the remaining term of this Sublease, the Annual Rent and the
Additional Rent (as hereinafter defined). Subtenant shall pay the monthly
installments of Annual Rent in advance on the first day of each month for the
term of this Sublease without deduction, set-off, recoupment, counterclaim, or
demand, at Sublandlord's address. If the term of this Sublease shall commence on
a day other than the first day of a month, rent shall be prorated based on a per
diem basis, and Subtenant shall pay to the Sublandlord the prorated installment
of rent together with one (1) monthly installment of Annual Rent due for the
following month.
During the first three (3) years of this Sublease from the Rental
Commencement Date (each twelve month period during the term of this Sublease
commencing on the Rental Commencement Date or any anniversary of such date being
referred to as a "Lease Year"), the Annual Rent shall be the sum of $6.82 per
square foot, per annum, multiplied by the square footage of the Subleased
Premises (the "Annual Rent"), payable in equal monthly installments. The actual
square foot area of the Subleased Premises shall be calculated in accordance
with the definition of the term "Premises" as set forth in the Master Lease
prior to the Rental Commencement Date. Commencing on and as of the first day of
the fourth (4th) Lease Year, the Annual Rent shall be increased by ten and
nine-tenths percent (10.9%), being $7.561 per square foot, per annum.
Commencing on and as of the first day of the fifth Lease Year and on the
anniversary of such date each and every year thereafter, during the Initial Term
and any extension term(s) of this Sublease, the Annual Rent for the Subleased
3
<PAGE>
Premises shall be increased by three and one-half percent (3.5%) per annum.
Accordingly, the Annual Rent for the Subleased Premises shall be increased as
follows:
Amount
Increase Date Per SQ. Ft.
------------- -----------
Anniversary Date, 1998 $7.561
" " 1999 $7.826
" " 2000 $8.100
" " 2001 $8.384
" " 2002 $8.677
" " 2003 $8.981
and so forth, increasing at three and one-half percent
(3.5%) per annum.
The Annual Rent for the Expansion Premises (as hereinafter defined in
Section 23) shall be calculated as follows:
As to any Expansion Premises for which Subtenant shall have executed any
option or right, the Annual Rent for the Expansion Premises if leased during
the first three (3) years of this Sublease shall be the sum of $5.15 per
square foot, per annum, multiplied by the actual square footage of the
Expansion Premises (as determined by measurement in accordance with the
requirements of the Master Lease), payable in equal monthly installments.
Commencing at expiration of the third Lease Year of this Sublease, the
Annual Rent for the Expansion Premises shall be increased by ten and
nine-tenths percent (10.9%), being $5.711 per square foot, per annum.
Commencing at the expiration of the fourth Lease Year of this Sublease and
the anniversary of such date each and every year thereafter, during the Initial
Term and any extension term(s) of this Sublease, the Annual Rent for the
Expansion Premises shall be increased by three and one-half percent (3.5%) per
annum. Accordingly, the Annual Rent for the Expansion Premises shall be
increased as follows:
Amount
Increase Date Per SQ. Ft.
------------- -----------
Anniversary Date, 1998 $5.711
" " 1999 $5.911
" " 2000 $6.118
" " 2001 $6.332
" " 2002 $6.554
" " 2003 $6.783
4
<PAGE>
and so forth, increasing at three and one-half percent (3.5%) per annum.
In addition to the Annual Rent, Subtenant shall, during the term of this
Sublease, pay to Sublandlord the following sums as additional rent (the
"Additional Rent"):
(a) $11.16 per square foot representing the straight line
amortization of Sublandlord's Work over a period of twelve
(12) years and six (6) months;
(b) all utilities furnished to and consumed upon the Subleased
Premises;
(c) Subtenant's proportionate share (determined on the basis of the
ratio that the square footage area of the Subleased Premises
bears to the aggregate square footage area of the Building)
of the following costs and expenses:
(i) real property taxes and general assessments payable in
respect of the taxing periods during the tern of this
Sublease; and
(ii) operating expenses, including all "Common Area costs" as
such term is described (and as such costs are determined)
under Section 11 of the Master Lease.
Notwithstanding anything contained in the foregoing to the contrary,
Subtenant shall be entitled to the benefit of any and all enterprise zone or
tax abatement programs, including without limitation "economic empowerment
zone" programs, and reduction in bond financing terms, which may relate to or
include the Subleased Premises. Sublandlord shall, and shall use reasonable
efforts to cause Landlord to, apply for and maintain qualification for
inclusion in such programs.
4. Subject to Master Lease. This Sublease is subject and subordinate
-----------------------
to the Master Lease. Capitalized terms which are used but not defined in
this Sublease shall have the meaning ascribed to such terms in the Master
Lease. Sublandlord covenants and agrees to observe, perform and discharge all
of duties and obligations under and pursuant to the terms of the Master Lease
as and when required thereby, and to provide Subtenant with true and correct
copies of all notices and other written communications sent or received by
Sublandlord with respect to the Master Lease within five (5) business days of
its sending or receipt thereof.
5. Assignment and Subletting. Subtenant shall not assign, transfer,
-------------------------
mortgage, or otherwise encumber this Sublease or all or any of Subtenant's
rights hereunder or interest herein, or sublet, rent or permit anyone to occupy
the Subleased Premises or
-5-
<PAGE>
any part thereof, without obtaining the express prior written consent of
Sublandlord; provided, however, that assignment of this Sublease or sublease
of all or any portion of the Subleased Premises to any party owned or
controlled by, or under common ownership or control with, Subtenant or to any
corporation or other entity with which or into which Subtenant may be merged
or consolidated, or to any corporation or other entity which may acquire all
or substantially all of Subtenant's assets or capital stock, shall not
require the consent of Sublandlord.
Sublandlord shall not unreasonably withhold or condition its consent to
any other proposed assignment or sublease to a third party provided that (i)
such third party agrees to use the Subleased Premises only for the purposes
permitted by this Sublease and the Master Lease and executes an assumption of
Subtenant's obligations hereunder in form satisfactory to Sublandlord, and
(ii) Subtenant shall not be released from its obligations hereunder and shall
so confirm in writing to Sublandlord, (iii) such third party's tangible net
worth (without regard to goodwill or other intangible assets) shall equal or
exceed Subtenant's net worth immediately prior to such assignment or sublet,
and (iv) such assignment or sublease is in accordance with Section 30 of the
Master Lease.
6. Use. Subtenant shall use and occupy the Subleased Premises solely for
---
the purposes set forth in the Master Lease. Sublandlord acknowledges and agrees
that the business of Subtenant as a medical research entity conforms to the use
permitted by the Master Lease.
7. Taxes and Assessments. In addition to any tax obligations, if any,
---------------------
set forth in the Master Lease, Subtenant will pay all taxes and assessments
of every kind and description whatsoever levied against any personal property
or equipment owned by Subtenant and located at the Subleased Premises which,
if unpaid, could result in the imposition of a lien against the Subleased
Premises. Subtenant agrees to comply with all laws, rules and regulations
applicable to it based upon its doing business in the State of Maryland.
8. Inspection. Sublandlord and its agents shall have the right to enter
----------
the Subleased Premises, at any time, and from time to time, after at least
twenty-four (24) hours prior notice to Subtenant, to inspect the condition of
the Subleased Premises. Sublandlord shall use its best reasonable efforts not
to interrupt unreasonably or interfere with Subtenant's operations at the
Subleased Premises in connection with any such entry or inspection.
Sublandlord recognizes and agrees that the nature of Subtenant's business
requires that Sublandlord use its best reasonable efforts to keep
confidential any operations or other aspect of Subtenant's business observed
by Sublandlord in connection with any such entry or inspection.
-6-
<PAGE>
9. Surrender. (a) At the expiration or earlier termination of the
---------
term of this Sublease, Subtenant shall peaceably surrender the Subleased
Premises in broom clean condition and good order and repair and otherwise in
the same condition as the Subleased Premises were upon the commencement of this
Sublease, except ordinary wear and tear.
(b) If Sublandlord elects to require that alterations, installations,
changes, work, replacements, additions, or improvements comprised within the
Tenant TI Work and made by or on behalf of Subtenant to the Subleased Premises
be removed at the termination of this Sublease, Subtenant hereby agrees to cause
the same to be removed at its sole cost and expense. If Subtenant fails to
remove the same, Sublandlord may cause them to be removed at Subtenant's
expense, and Subtenant hereby agrees to reimburse Sublandlord for the cost of
such removal together with all and any damages which Sublandlord may suffer and
sustain by reason of failure of Subtenant to remove the same. At Sublandlord's
election, any or all of the Tenant TI Work, alterations, installations, changes,
replacements, additions to, or improvements made by Subtenant upon the Subleased
Premises shall remain at the termination of this Sublease and not be removed.
Subtenant shall surrender to Sublandlord all keys for the Subleased Premises at
the place then fixed for the payment of rent and shall notify Sublandlord in
writing of all combinations of locks, safes, and vaults, if any, in the
Subleased Premises. Subtenant's obligation to observe and perform the covenants
set forth in this Section 9 shall survive the expiration or earlier termination
of this Sublease.
(c) At the termination of this Sublease, Subtenant shall immediately
remove all personal property which it owns and is permitted to remove from the
Subleased Premises under the provisions of this Sublease, and failing to do so,
Sublandlord at its option may either (i) cause that personal
property to be removed at the risk and expense of Subtenant (both as to loss and
damage), and Subtenant hereby agrees to pay all reasonable costs and expenses
incurred thereby, including sums paid to store the personal property elsewhere
and the cost of any repairs to the Subleased Premises caused by the removal of
the property, or (ii) upon twenty (20) days' written notice to Subtenant, which
the parties agree is commercially reasonable, sell at public or private sale any
or all such personal property, whether exempt or not from sale under execution
or attachment (such property being deemed charged with a lien in favor of
Sublandlord for all sums due hereunder), with the proceeds to be applied as
Sublandlord desires, or (iii) at Sublandlord's option, title shall pass to
Sublandlord.
10. Insurance. Subtenant will indemnify and save harmless Landlord and
---------
Sublandlord and their respective successors and assigns, from any and all
claims, demands, actions, causes of action, and judgments, for bodily injury or
property damage, asserted by any person arising out of Subtenant's use and
-7-
<PAGE>
occupancy of the Subleased Premises. Subtenant shall, throughout the term of
this Sublease, keep in full force and effect, at its own expense, (a)
comprehensive general liability insurance with respect to claims for personal
injury, death and damages to property at or relating to the Subleased Premises
in the amount of $5,000,000 for personal injury or death or property damage
resulting from any one occurrence, and $5,000,000 in the aggregate, and (b)
hazardous material/environmental insurance in form required by the Master Lease
affording coverage in an amount of $2,000,000, and (c) such other insurance as
may be required by Section 21(a) of the Master Lease in such form and amounts
required thereby and (d) such other insurance as the Sublandlord may deem
reasonably necessary. All such insurance must be maintained in accordance with
all applicable laws of the State of Maryland and the Sublandlord and the
Landlord shall be named as additional insurers in all such insurance policies.
Such policies shall contain a provision for not less than thirty (30) days
notice to Sublandlord and Landlord prior to modification or cancellation of such
insurance policies as well as a waiver of subrogation provision. Subtenant will
furnish evidence of such insurance coverage to Sublandlord and Landlord at least
ten (10) days prior to the Rental Commencement Date. Sublandlord and Subtenant
will cooperate in good faith with respect to the settlement and compromise of
any claim arising under any insurance policy maintained pursuant to this Section
10, provided that Subtenant shall have the exclusive right to settle or
compromise any claims made under the insurance maintained by Subtenant
hereunder.
11. Environmental. Subtenant shall comply with all Environmental Laws (as
-------------
hereinafter defined) relating to its use of the Subleased Premises including,
without limitation, the obligation to obtain and maintain in effect and comply
with all permits and reporting and notification requirements applicable to such
use. As used in this Sublease, the term "Hazardous Materials" means, (a) any
"hazardous substance" as defined in Section 101(14) of CERCLA (42 U.S.C. Section
9601(14)) or regulations promulgated thereunder; (b) any "solid waste",
"hazardous waste", "toxic substances" or "infectious waste", as such terms are
defined in any other Environmental Law; and (c) asbestos (or any substance
containing asbestos), polychlorinated biphenyls ("PCBs"), nuclear fuel or
material, radioactive materials, explosives, chemicals known or suspected to
cause cancer or reproductive toxicity, pollutants, effluents, contaminations,
emissions, petroleum products and by-products and other toxic or hazardous
materials or substances listed or identified in, or regulated by, any
Environmental Laws. As used in this Sublease, the term "Environmental Laws"
means the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seg., as amended by the Superfund
------
Amendment and Reauthorization Act of 1986 ("SARA"), the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq, the Hazardous Materials
------
Transportation Act, 49 U.S.C. Section 1802 et seq., the Toxic Substances Control
------
Act, 15 U.S.C.
-8-
<PAGE>
Section 2601 et seq., the Federal Water Pollution Control Act, 33
------
U.S.C. Section 1251 et seq., the Clean Water Act, 33 U.S.C. Section 1321 et
------ --
seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Safe Drinking Water
- --- ------
Act, 42 U.S.C. Section 300f et seq., the Occupational Safety and Health Act, 29
------
U.S.C. Section 655, etc., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Section 136 et seq. and any other present or future local, state,
------
Federal or international law, treaty, statute, ordinance, rule, regulation,
advisory or guideline having the force of law relating to public health,
safety or the environment and any and all amendments, regulations, orders,
decrees, permits, licenses or restrictions now or hereafter promulgated
thereunder. Subtenant hereby agrees that (a) no activity will be conducted on
the Subleased Premises that will produce or cause the release of any Hazardous
Materials in violation of any Environmental Law; (b) the Subleased Premises will
not be used in any manner for the storage of any Hazardous Materials in
violation of any Environmental Law; and (c) Subtenant will not permit any
Hazardous Materials in violation of any Environmental Law to be brought onto the
Subleased Premises; and if so brought or found located thereon, the same shall
be immediately removed, at Subtenant's sole cost and expense; all required
cleanup and disposal procedures shall be diligently undertaken in accordance
with all Environmental Laws, and upon request Subtenant shall provide
Sublandlord with evidence satisfactory to Sublandlord of Subtenant's compliance
with all Environmental Laws. If at any time during or after the term of this
Sublease, the Subleased Premises are found to be contaminated with Hazardous
Materials in violation of any Environmental Law resulting from Subtenant's
use thereof or Subtenant's use of the Subleased Premises which results in a
violation or alleged violation of any Environmental Law, Subtenant agrees to
indemnify, hold harmless, protect and defend Landlord and Sublandlord from all
claims, demands, actions, liabilities, costs, expenses (including reasonable
attorneys' fees), damages and obligations of any nature arising from or as a
result of the use of the Subleased Premises by Subtenant, as set forth below.
This indemnification shall survive the termination or expiration of this
Sublease.
Subtenant agrees to indemnify, defend, and hold Sublandlord and Landlord
harmless from any claims, losses, costs, expenses, damages, liabilities or
causes of action (including reasonable attorneys' fees) which (a) arise during
or after the term of this Sublease and are related to or connected with the use
or occupancy by Subtenant and/or any assignee, subtenant, concessionaire, or
licensee of the Subleased Premises, or (b) result or arise out of or pertain to
the failure by Subtenant to comply with all Environmental Laws at the Subleased
Premises, provided such indemnification shall not apply to the negligence or
willful acts of Sublandlord or Landlord or their respective contractors or
subcontractors, or its or their agents or employees.
-9-
<PAGE>
12. Default. Should Subtenant default in the performance of any
-------
obligation or duty imposed upon it by the terms and conditions of this Sublease
(including without limitation the payment of Annual Rent or Additional Rent), or
by the terms and conditions of the Master Lease, in addition to all other rights
given it as Sublandlord by law, Sublandlord shall have the right, after written
notice to Subtenant specifically describing such default and an opportunity for
Subtenant to cure such default within five (5) days thereafter for any monetary
default and within thirty (30) days thereafter for any non-monetary default,
unless such non-monetary default is not capable of being cured within such
thirty-day period then such period shall be extended so long as Subtenant
commences such cure within such thirty-day period and diligently pursues
completion thereof, to terminate this Sublease or at its option, the right to
re-enter the Subleased Premises without terminating this Sublease and
thereafter, as agent for Subtenant, re-rent such Premises to any third party,
applying the net proceeds to such rental, after deducting all reasonable
expenses incurred in connection therewith, to the rental due Sublandlord
hereunder, and Subtenant shall remain liable to Sublandlord for any deficiency
in such rent.
13. Hold Harmless. Subtenant agrees that it will defend, indemnify and
-------------
hold Sublandlord and Landlord harmless, from and against any and all losses,
claims, damages or expenses which it may incur, suffer or expend from any
default of Subtenant or failure of the Subtenant to perform fully its
obligations under the terms and conditions of the Master Lease (in so far as the
same pertain to the Subleased Premises) and/or this Sublease, including the
payment of reasonable attorneys' fees. Such indemnification shall be with
respect only to losses, claims, damages or expenses which arise from or relate
to events, acts or circumstances occurring during the term of this Sublease.
Such indemnification shall survive the termination of this Sublease.
14. Compliance with Master Lease. Sublandlord shall pay all sums payable
----------------------------
to the Landlord under the Master Lease throughout the term of this Sublease and
shall observe, perform and discharge all of its obligations under the Master
Lease as and when required thereby, and shall not consent to anything or do
anything or fail to do anything which would or could terminate said Master Lease
or create any default under said Master Lease or waive or exercise any right it
shall have under said Master Lease without Subtenant's express prior written
consent in each instance. Sublandlord shall not, without in each case obtaining
the prior written consent of Subtenant (which consent shall not be unreasonably
withheld or delayed), modify, amend, or supplement the Master Lease, or waive
the performance of any obligations of Landlord thereunder.
15. Estoppel Certificate. Upon the request of either party, at any
--------------------
time from time to time, Sublandlord and Subtenant agree to execute and deliver
to the other, within thirty (30)
-10-
<PAGE>
days after such request, a written instrument, duly executed, (a) certifying
that this Sublease has not been modified and is in full force and effect or, if
there has been a modification of this Sublease, that this Sublease is in full
force and effect as modified, stating such modifications, (b) specifying the
date to which the Annual Rent and, if any, Additional Rent has been paid, (c)
stating whether, to the knowledge of the party executing such instrument, the
other party hereto is in default and, if such party is in default, stating the
nature of such default, and (d) stating the date of commencement of Annual Rent.
16. Fixtures. Subject to the terms of Section 9 of this Sublease, all
--------
fixtures and equipment placed on the Subleased Premises by Subtenant may be
removed by Subtenant at any time during the term of this Sublease and within two
(2) months of the expiration or termination of this Sublease. In the event of
any such removal, Subtenant shall promptly repair, at its own expense, all
damage to the Subleased Premises caused by the removal of such fixtures or
equipment.
17. Condemnation. Subtenant hereby assigns to Sublandlord all awards to
------------
which it may be or become entitled and which it must remit to the Sublandlord in
the event of any taking for any public or quasi-public use by any lawful power
or authority by exercise of the right of condemnation or of eminent domain
affecting all or any part of the Subleased Premises, which occurs during the
term of this Sublease; provided, however, that Subtenant shall, at its sole cost
and expense, be entitled to maintain an action against the condemning authority
for loss of business and damage to Subtenant's fixtures and personally. In
furtherance hereof Subtenant hereby grants Sublandlord the sole right to file
all claims and to bring such causes of action as Sublandlord shall desire for
the purpose of obtaining any such award. Subtenant hereby covenants to notify
promptly Sublandlord of all such takings of which Subtenant has knowledge or of
which Subtenant receives notice. Subtenant hereby agrees to cooperate at
Sublandlord's expense with Sublandlord to the fullest extent possible in the
bringing of such causes of action and in filing such claims for such awards.
18. Repairs. In the event a condition exists in the Subleased Premises
-------
that Landlord is obligated to repair under the Master Lease, Subtenant shall so
advise Sublandlord, and Sublandlord, in turn, shall advise Landlord thereof.
Sublandlord shall have no liability to Subtenant for Landlord's failure
to make any such repair; provided, however, that Sublandlord shall diligently
seek to enforce its rights and Landlord's obligations under the Master Lease.
Sublandlord shall keep, or cause to be kept, the structure, roof, common
areas and any shared Building systems or equipment, including without
limitation, any shared system providing heating, ventilation or air conditioning
in a constant state of good condition and repair, and shall, at no expense to
Subtenant,
-11-
<PAGE>
perform all maintenance and repair which may be or become necessary or
appropriate in connection therewith. Subtenant shall perform, or cause to be
performed, all maintenance and repair of the Subleased Premises, excluding the
structural elements of the Building and any other shared systems or facilities
serving the Subleased Premises and other space within the Building or the
property. Subtenant shall have the right at its sole cost and expense to
install and maintain a security system serving the Subleased Premises
exclusively.
19. Quiet Enjoyment. Sublandlord hereby covenants and agrees that if
---------------
Subtenant shall fully perform, comply with and observe all of the covenants and
agreements herein stipulated to be performed on Subtenant's part, Subtenant
shall at all times during the term of this Sublease have peaceable and quiet
enjoyment and possession of the Subleased Premises without hindrance from
Sublandlord or any person or persons claiming the Subleased Premises by, through
or under Sublandlord; subject, however, to (x) matters affecting title to the
Premises to which this Sublease is subordinate and (y) the terms of the Master
Lease; provided, however, that Sublandlord's covenant and obligation to observe,
perform and comply with the Master Lease shall not be limited or restricted by
this reference.
20. Nondisturbance. Sublandlord shall, or shall use reasonable efforts to
--------------
cause Landlord to, procure from any present or future holder of any mortgage,
leasehold mortgage, deed of trust, or underlying or ground lease, including,
without limitation, any refinancing, replacement, renewal, modification,
extension or consolidation thereof which is placed upon Landlord's or
Sublandlord's respective interest in the Subleased Premises from time to time by
Landlord or Sublandlord, an agreement providing in substance that so long as
Subtenant shall discharge the obligations on its part to be kept and performed
under the terms of this Sublease, Subtenant's tenancy will not be disturbed nor
this Sublease affected by any default under such mortgage, deed of trust or
underlying or ground lease.
21. Subtenant's Contingencies. All of the obligations of Subtenant
-------------------------
hereunder are subject to and conditioned upon the satisfactory completion of the
following:
l. Sublandlord shall cause the Structural Work, more specifically
described on Exhibit B attached hereto and made a part hereof by
this reference, to be performed in a good and workmanlike manner
in accordance with the approved plans and specifications therefor
and, in all material respects, with the applicable requirements
imposed by law, and to be completed in accordance with the
schedule agreed upon by the parties.
2. Sublandlord shall cause the TI Work, more specifically described
on Exhibit C attached
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<PAGE>
hereto and made a part hereof by this reference, to be
performed in a good and workmanlike manner in accordance with
the approved plans and specifications therefor and, in all
material respects, with the applicable requirements imposed by
law, and to be completed in accordance with the schedule
agreed upon by the parties. The Structural Work and TI Work
shall hereinafter be referred to collectively as the
"Sublandlord's Work".
For purposes of this Section 21, "Sublandlord's Work" shall
be deemed to be completed when (x) all certificates of occupancy
and other governmental approvals required for the lawful
occupancy of the Subleased Premises have been issued and are in
full force and effect and (y) Subtenant's architect shall have
executed an AIA form certification of substantial completion.
3. Qualified architects or engineers selected by Subtenant shall
have inspected the Subleased Premises and provided a written
report to Subtenant and Sublandlord indicating whether the
condition of the floors, ceilings, roof, walls, HVAC systems,
utilities, water, sewer, electrical and mechanical systems of the
Subleased Premises are adequate for Subtenant's intended use.
The cost of such inspections and reports shall be shared equally
by Subtenant and Sublandlord.
4. A qualified environmental consultant selected by Subtenant shall
have inspected the Subleased Premises and provided a written
report to Subtenant and Sublandlord indicating whether the
Subleased Premises are affected in any manner which could be
material and adverse to Subtenant or its occupancy of the
Subleased Premises, by any adverse environmental condition. The
cost of such inspection and report shall be shared equally by
Subtenant and Sublandlord.
The first $2,550,000 of the cost of performing Sublandlords Work shall be
made available to or as directed by Subtenant as the performance of such work
proceeds.
22. Sublandlord's Representations and Warranties. Sublandlord represents
--------------------------------------------
and warrants to Subtenant that (i) to Sublandlord's knowledge the Subleased
Premises are zoned so as to permit the use of the Subleased Premises as intended
by Subtenant, (ii) Sublandlord will neither do, nor to the extent of its right
to control the same, permit any other tenant or occupant of the Building to take
any action which would jeopardize Subtenant's right to use the Subleased
Premises for
-13-
<PAGE>
its intended purposes throughout the term of this Sublease, and (iii) to
Sublandlord's knowledge and without any independent investigation: (a)
no Hazardous Materials have been used, stored, generated, or disposed of on the
Property in connection with any activity conducted thereon, and (b) there are no
Hazardous Materials or storage tanks of any kind in, at, on or under the
property. For purposes of this Section 22, "Sublandlord's knowledge" shall mean
the knowledge of Hans F. Mayer (in his capacity as Executive Director of the
Sublandlord) who is the individual with superior knowledge of any such matter.
23. Expansion Option. Provided that Sublandlord has exercised its option
----------------
under the Master Lease for the rental of such space, (which Sublandlord agrees
to do (so long as it is entitled to do so under the terms of the Master Lease)
in the event that Subtenant elects to exercise its option on the Expansion
Premises under this Section 23), Subtenant may expand the Subleased Premises to
include all or any part of the fifty thousand (50,000) square feet located on
the first floor of the Building and adjacent to the initial Subleased Premises
(the "Expansion Premises"), on the same terms and conditions as the initial
Subleased Premises (except for the rental of such space), by providing written
notice of Subtenant's election to so expand to Sublandlord on or before the
expiration of the third full lease year of the Initial Term. Upon Subtenant's
exercise of its right to expand, Sublandlord shall (i) cause structural work
comparable to the Structural Work to be performed in the Expansion Premises to
Subtenant's reasonable satisfaction, and (ii) use its best efforts to make
available to Subtenant a tenant improvement allowance in the amount of $140.00
per square foot of the Expansion Premises. In the event that Sublandlord is
unable, despite its reasonable best efforts, to perform the foregoing
obligations, Subtenant shall have the right to terminate this Sublease;
provided, however, upon such termination Subtenant shall pay to Sublandlord an
amount equal to the unamortized principal balance, at the time of such
termination, of the tenant improvement bond financing used to fund the TI Work.
Any Expansion Premises leased by Subtenant shall be deemed to be included
within the term Subleased Premises as used herein and any annual rent and
additional rent due in connection therewith shall be deemed to be included
within the terms Annual Rent and Additional Rent as used herein; provided,
however, that Annual Rent for such space shall be as provided in Section 3 of
this Sublease. Such rent shall commence on the first day following the
completion of the Structural Work and the TI Work for the Expansion Premises.
Excluding the distinctions in rent, all terms and conditions of this Sublease
applicable to the Subleased Premises shall be applicable to any or all of the
Expansion Premises which are leased by Subtenant.
24. Right of First Offer, Purchase Option. Reference and incorporation
-------------------------------------
are hereby made to those provisions of the Master Lease (Section 37) which
provide Sublandlord, as the tenant
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<PAGE>
thereunder (as well as any subtenant), the right of first offer to lease
additional space within the Building and the right
to purchase the property upon which the Building is situate.
25. Successors and Assigns. The terms and provisions of this Sublease
----------------------
shall inure to the benefit of and be binding upon the respective successors and
assigns of Subtenant and Sublandlord. This Section 25 is not intended, nor
shall it be construed to modify, vary otherwise alter the provisions of Section
5 of this Sublease.
26. Entire Agreement. This Sublease contains the entire agreement of the
----------------
parties, with regard to the subleasing, occupancy and use of the Subleased
Premises, and no representations, inducements, promises or agreements, oral or
otherwise, not embodied herein, shall be of any force or effect.
27. Notices. In every instance in which notice is required to be given
-------
hereunder, such notice shall be in writing and personally delivered, sent by
telecopier, or sent by certified or registered mail addressed as follows:
If to Sublandlord: 36 South Charles Street
Suite 1911
Baltimore, Maryland 21201
Attn: Hans F. Mayer
Executive Director
Telecopier Number: (410) 625-1848
with a copy to: Craig A. Enck, Esquire
Miles & Stockbridge,
a Professional Corporation
10 Light Street
Baltimore, Maryland 21202
Telecopier Number: (410) 385-3700
If to Subtenant: 11100 Euclid Avenue
Wearn Building, Fourth
Cleveland, Ohio 44106
Attn: James S. Burns
President and Chief
Executive Officer
Telecopier Number:_________________
and
2001 Aliceanna Street
Baltimore, Maryland 21231
Attn: James 5 Burns
President and Chief
Executive Officer
Telecopier Number:__________________
-15-
<PAGE>
If to Landlord: 947 Fell Street
Baltimore, Maryland 21231
Attn: S.A. Brown, III
General Partner
Telecopier Number: (410) 675-2399
All notices sent by mail shall be deemed given the second day after the
same are posted. All notices sent by telecopier shall be deemed given the day
sent, but such notices shall be sent promptly by first class mail as well.
Either party may change the address or telecopier number to which notices to it
are to be sent by sending written notice of such new address or telecopier
number to the other party.
28. Partial Invalidity. In the event any provision of this Sublease (or
------------------
any part of any provision) is held by a court of competent jurisdiction to be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision (or remaining part of
the affected provision) or this Sublease, but this Sublease shall be construed
as if such invalid, illegal, or unenforceable provision (or part thereof) had
not been contained in this Sublease1 but only to the extent it is invalid,
illegal, or unenforceable.
29. Captions. The captions herein set forth are for convenience only and
--------
shall not be deemed to define, limit, or describe the scope or intent of this
Sublease.
30. Governing Law. The provisions of this Sublease shall be construed,
-------------
interpreted and enforced in accordance with the laws of the State of Maryland as
the same may be in effect from time to time.
31. Amendments. This Sublease may not be modified or amended except by an
----------
agreement in writing, signed by the party against whom enforcement of the change
is sought.
32. Counterparts. This Sublease may be executed in any number of
------------
counterparts, each of which shall be considered an original for all purposes,
but all such counterparts shall together constitute one and the same instrument.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be properly
executed under seal as of the day and year first above written.
ATTEST: SUBLANDLORD:
MARYLAND ECONOMIC DEVELOPMENT
CORPORATION
/s/ Elle S. Wigz By: /s/ Hans F. Mayer
- -------------------- -------------------------------
Hans F. Mayer
Executive Director
ATTEST: SUBTENANT:
OSIRIS THERAPEUTICS, INC.
/s/ Nancy G. Rubin By: James S. Burns
- -------------------- ------------------------------- (SEAL)
James S. Burns
President & Chief
Executive Officer
STATE OF MARYLAND, CITY/COUNTY OF BALTIMORE, TO WIT:
I HEREBY CERTIFY, that on this 28 day of February, 1995, before me, the
undersigned Notary Public of said State, personally appeared Hans F. Mayer, who
acknowledged himself to be the Executive Director of Maryland Economic
Development Corporation, a body politic and corporate and constituted as a
public instrumentality of the State of Maryland, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he executed the same for the purposes therein contained as the
duly authorized Executive Director of said entity by signing the name of the
entity by himself as Executive Director.
WITNESS my hand and Notarial Seal.
/s/ Charlotte B. Trainor
--------------------------------
Notary Public
My Commission Expires: March 1, 1999
-17-
<PAGE>
STATE OF OHIO, CITY/COUNTY OF CUYAHOGA, TO WIT:
I HEREBY CERTIFY, that on this 8th day of February, 1995, before me, the
undersigned Notary Public of said State, personally appeared James 5 Burns, who
acknowledged himself to be the President and Chief Executive Officer of Osiris
Therapeutics, Inc., a Delaware corporation, known to me (or satisfactorily
proven) to be the person whose name is subscribed to the within instrument, and
acknowledged that he executed the same for the purposes therein contained as the
duly authorized President and Chief Executive Officer of said corporation by
signing the name of the corporation by himself as President and Chief Executive
Officer.
WITNESS my hand and Notarial Seal.
/s/ Christine A. Kehoe
--------------------------------
Notary Public
My Commission Expires:
-18-
<PAGE>
FIRST AMENDMENT TO SUBLEASE AGREEMENT
THIS FIRST AMENDMENT TO SUBLEASE AGREEMENT (this "Amendment") is made as
of this 2nd day of June 1995, by and between OSIRIS THERAPEUTICS INC., a
Delaware corporation (Subtenant) and MARYLAND ECONOMIC DEVELOPMENT CORPORATION1
a body politic and corporate and constituted as a public instrumentality of the
State of Maryland ("Sublandord").
WITNESSETH:
WHERE, Sublandord and Subtenant entered into that certain Sublease
Agreement, undated but effective as of January 18, 1995 (the "Sublease") for the
sublease of premises located at 2001 Aliceanna Street, Baltimore, Maryland, as
more particularly described therein; and
WHEREAS, Sublandlord and Subtenant desire to complete certain items of the
Sublease that were incomplete and to amend certain terms of the Sublease as
provided herein.
NOW, THEREFORE, in consideration of the foregoing premises, of the mutual
covenants set forth herein and other good and valuable consideration, the
receipt and sufficient of which are hereby acknowledged, the parties hereto
agree as follows:
l. Defined Terms. Except as specifically defined herein, all capitalized
terms shall have the definitions provided in the Sublease.
2. Dates. The parties agree that the Sublease shall be dated as of
the25th day of February, but still be effective in all respects as of January
18, 1995. The parties further agree that the date in the first recital
(designated A shall be "January 18, 1995" and that the date set forth in Section
2 of the Sublease shall be "December 30,2001."
3. Exhibits. The parties agree that attached hereto as Exhibits A, A-i,
B and C are the true and correct copies of Exhibits A, A-i, B and C as
referenced in the Sublease.
4. Additional Rent The parties confirm that the cost of the Landlord's
Work: is $3,100,000. The parties also confirm that a $503,000 MICRF loan to
Sublandlords to be paid out of Additional Rent proceeds. The parties further
confirm that Subtenant is entitled to receive interest in connection with a
reserve account established in connection with the bond financing
of Sublandlord's Work. In recognition of these facts and agreements, the parties
agree that Section 3 of the Sublease shall be amended as follows:
(a) Subsection (a) of Section 3 (page 5 of the Sublease) shall be
amended to replace the amount of Additional Rental of "$11.16 per square foot"
with "$382,873.44 per annum, in equal monthly installments of $31,906.12 each."
It is understood and agreed that such amount is equal to $3,100,000, amortized
over twelve and
<PAGE>
-2-
one-half years at 7% percent per annum. Such payment shall apply through the
term for a period of twelve and one-half years.
(b) A new subsection (d) shall be added as follows: "(d) In order to
repay a $50,000 loan from MICRF to Sublandlord, the proceeds of which will be
used in connection with the financing of the Sublandlord's Work, Subtenant shall
pay $0.18 per square foot per annum, such amount being 50,000 amortized over
twelve and one-half years at 5 percent per annum, and divided by 30,000. In the
event the square footage of the Subleased Premises is adjusted by reason of
remeasurement of the Premises, then such rental amount shall also be adjusted in
accordance with the fore going calculation. In the event the Expansion Premises,
or any part thereof are added to the Subleased Premises, such amount shall not
be adjusted, nor shall such amount be due with respect to the Expansion
Premises, or any part thereof, except as may be provided in an amendment to the
Sublease executed at the time the Expansion Premises, or any part thereof are
added to the Subleased Premises. Such payment shall apply through the term for a
period of twelve and one-half years.
(c) A new subsection (e) shall be added as follows: "(e) Sublandlord,
provided Subtenant is not in default under the Sublease (subject to any
applicable notice and cure periods), shall pay to Subtenant those amounts that
Sublandlord receives as interest pursuant to Section 3.2 (d) of that certain
Financing and Construction Loan Agreement dated the date hereof between
Sublandlord, Subtenant, The Whiting-Turner Contracting Company, the Mayor and
the City of Baltimore and Signet Trust Company (the Loan Agreement"). Such
amounts shall be paid quarterly, or more or less frequently as the parties may
agree based upon Sublandlord's report to Subtenant of the interest received over
the prior three month period. The first such payment shall be made on September
1, 1955 (accounting for all interest Sublandlord receives prior to such date
regardless of the number of months actually covered) and subsequent payments
shall be made on each succeeding December 1, March 1' June 1 and September 1 of
each year during the Sublease term (as the same may be extended) and shall
continue until the "Reserve Fund" (as defined in the Loan Agreement) is fully
disbursed, at which time the last payment hereunder shall be equal to the
interest received by Sublandlord calculated from the date of computation of the
immediately preceding payment through the date of such final disbursement.
Sublandlord covenants that, subject to and except for the rights of the holder'
(as defined in the Loan Agreement) under the Loan Agreement, Sublandlords right
to such interest payments is not subject to any pledge, encumbrance or security
interest, and agrees that it shall not further pledge, encumber or grant a
security interest in its right to such interest payments. Subject to the rights
of the holder under the Loan Agreement, Sublandlord hereby pledges, assigns,
transfers and grants a security interest in such interest payments to Subtenant
as security for its obligation hereunder, and agrees, upon Subtenant's request,
to execute such further assurances and U.C.C. financing statements as Subtenant
may reasonably request to perfect such security interest."
5. Payment. In lieu of direct payment to Sublandlord Subtenant may make
the following payments of rent to the following parties:
(a) To The Whiting-Turner Contracting Company, or other
successor holder of that certain $3,100,000 Maryland Economic Development
Corporation, Taxable
<PAGE>
-3-
Economic Development Revenue Bond (Osiris Therapeutics, Inc. Facility), 1995
Issue, June 2 1995, all amounts payable as Additional Rent pursuant to
subsection (a) of Section 3 of the sublease, as and when such payments are due
under the Sublease and paid by wire transfer as required under Section 2.8 of
the loan Agreement, with simultaneous notice to Sublandlord of such payments.
(b) To SAGA Limited Partnership, or other successor landlord
under the Master Lease, all amounts payable as Annual Rent pursuant to Section 3
of the Sublease, as and when such payments are due under the Sublease, with
simultaneous notice to Sublandlord of such payments.
6. No Other Changes. Except as modified by this Amendment, the terms of
the Sublease are hereby reaffirmed and shall remain in full force and effect.
7. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successor and assigns.
8. Governing Law. This Amendment shall be interpreted and construed in
accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties have executed this Amendment under seal as
of the day and year first above written:
SUBTENANT
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
---------------------------------
Name: James S. Burns
---------------------------------
Its: President
---------------------------------
SUBLANDLORD:
MARYLAND ECONOMIC
DEVELOPMENT CORPORATION
By: /s/ Hans F. Mayer
---------------------------------
Name: Hans F. Mayer
---------------------------------
Its: Executive Director
---------------------------------
<PAGE>
Exhibit 10.19
FINANCING AND CONSTRUCTION LOAN AGREEMENT
Dated as of June 1, 1995
by and among
MARYLAND ECONOMIC DEVELOPMENT CORPORATION,
THE WHITING-TURNER CONTRACTING COMPANY,
MAYOR AND CITY COUNCIL OF BALTIMORE,
SIGNET TRUST COMPANY
and
OSIRIS THERAPEUTICS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND RULES
OF CONSTRUCTION
SECTION PAGE
1.1 Definitions - General.......................................... 2
1.2. Rules of Construction ......................................... 10
ARTICLE II
THE BOND; REDEMPTION; SECURITY FOR THE BOND
2.1. The Bond....................................................... 11
2.2. Redemption of the Bond ........................................ 11
2.3. Application Funds to Redemption's ............................. 12
2.4. Effect of Redemption of Bond .................................. 12
2.5. Negotiability, Registration and Transfer of
Bond; Mutilated, Lost or Destroyed Bond ....................... 12
2.6. Limited Liability of the Issuer ............................... 13
2.7. Security for Bond; Assignment by the Issuer
to the Lender ................................................. 14
2.8. Wire Transfer if One Holder ................................... 14
2.9. Conditions Precedent to the Issuance and Purchase of the Bond . 14
ARTICLE III
SECURITY FOR THE BOND
3.1 Security Documents ............................................ 15
3.2 Reserve Fund .................................................. 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
FINDINGS BY THE ISSUER
4.1 Representations and Warranties of the Issuer .................. 18
4.2. Findings by the Issuer ........................................ 19
4.3. MICRF Grants and MICRF Loan ................................... 19
<PAGE>
SECTION PAGE
ARTICLE V
COVENANTS OF THE ISSUER
5.1. Covenants of the Issuer ....................................... 19
ARTICLE VI
APPLICATION OF BOND PROCEEDS
6.1. Project Fund ................................................. 20
6.2 Completion of Work ........................................... 21
6.3. No Liability to Third Parties ................................ 21
6.4. Additional Funds ............................................. 21
6.5. Non-Assignability ............................................ 22
6.6. Bond Proceeds ................................................ 22
6.7. Disbursements ................................................ 22
6.8. Allocation of Funds .......................................... 25
6.9. Advances of Project Fund ..................................... 26
6.10. Improvement of the Facility .................................. 26
ARTICLE VII
REPRESENTATIONS OF FACILITY USER
7.1. Organization and Authority; Conflicting Laws and Agreements... 27
7.2. Subsidiaries ................................................. 27
7.3. Financial Statements ......................................... 28
7.4. Litigation; Tax Returns; Governmental Approvals .............. 28
7.5. Enforceability ............................................... 28
7.6. No Defaults .................................................. 28
7.7. ERISA ........................................................ 28
7.8. Bankruptcy ................................................... 29
<PAGE>
SECTION PAGE
ARTICLE VIII
COVENANTS OF FACILITY USER
8. Covenants .................................................... 29
8.1.1. Payment of Taxes and Other Claims ............................ 29
8.1.2. Corporate Existence .......................................... 29
8.1.3. Maintenance of Insurance ..................................... 29
8.1.4. Financial Information and Reports ............................ 30
8.1.5. Liens ........................................................ 30
8.1.6. Other Covenants .............................................. 30
8.1.7. Construction Covenants ....................................... 31
8.2. ERISA ........................................................ 31
8.3. Obligations of the Facility User Unconditional ............... 32
8.4. Compliance with Laws ......................................... 32
8.5. Hazardous Materials .......................................... 32
8.6. Estoppel Certificates ........................................ 33
8.7. Further Assurances ........................................... 33
8.8. Books and Records; Inspection ................................ 33
8.9. Consent to Jurisdiction; Service of Process .................. 33
ARTICLE IX
INSURANCE
9.1. Insurance Proceeds ........................................... 33
9.2. Other Insurance .............................................. 34
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
10.1. Events of Default Defined .................................... 34
10.2. Remedies on Default .......................................... 36
10.3. No Remedy Exclusive; Delays or Omissions; Waiver of Breach ... 37
10.4. Termination of Proceedings ................................... 38
10.5. Application of Moneys ........................................ 38
<PAGE>
SECTION PAGE
ARTICLE XI
DISBURSEMENT AGENT
11.1. Terms of Disbursement Agent's Acceptance ..................... 38
11.2. Trustees' Reimbursement ...................................... 39
11.3. Save Harmless Clause ......................................... 39
11.4. Reports ...................................................... 39
11.5. Discharge .................................................... 40
ARTICLE XII
DURATION OF AGREEMENT; DEFEASANCE
12.1. Duration of this Financing Agreement ......................... 40
12.2. Defeasance and Discharge of Lien of the Holder ............... 40
ARTICLE XIII
MISCELLANEOUS
13.1. Payments Due on Non-Business Days ............................ 40
13.2. Authorized Issuer Representative ............................. 40
13.3. MIDFA Insurance .............................................. 41
13.4. Further Assurances and Corrective Instruments ................ 41
13.5. Prior Agreements Canceled .................................... 42
13.6. Binding Effect ............................................... 42
13.7 Dissolution of Issuer ........................................ 42
13.8. Illegality ................................................... 42
13.9. Amendments, Changes and Modifications ........................ 43
13.10. Execution of Counterparts .................................... 43
13.11. Law Governing Construction of Agreement ...................... 43
13.12. Assignment ................................................... 43
13.13. Effective Date ............................................... 43
Exhibit 1: Description of Land
Exhibit 2: Permitted Investments
Exhibit 3: Form of Bond
Exhibit 4: Form of Requisition
Exhibit 5: Form of Completion Requisition
Exhibit 6: List of Subsidiaries of Facility User
<PAGE>
FINANCING AND CONSTRUCTION LOAN AGREEMENT
THIS FINANCING AND CONSTRUCTION LOAN AGREEMENT is entered into as of
June__, 1995, by and among MARYLAND ECONOMIC DEVELOPMENT CORPORATION, a body
politic and corporate and a public instrumentality of the State of Maryland
(the "Issuer"), THE WHITING-TURNER CONTRACTING COMPANY ("Lender") as holder
of the Bond hereinafter defined), MAYOR AND CITY COUNCIL OF BALTIMORE, a
political subdivision of the State of Maryland, or its Nominee, (the "City"),
as provider of the City Contribution (hereinafter defined), SIGNET TRUST
COMPANY, Corporate Trust Department, as the construction disbursement agent
(the "Disbursement Agent') and OSIRIS THERAPEUTICS, INC., a Delaware
corporation (the "Facility User").
RECITALS
Pursuant to and in accordance with the Act, the Issuer has determined to
issue and sell to the Lender its Taxable Economic Development Revenue Bond
(Osiris Therapeutics, Inc. Facility), 1995 Issue in the principal amount of
$3,100,000 (the "Bond") in order to finance a portion of the costs of certain
site and tenant improvements by the Issuer to a certain facility (the
"Facility"), located within the geographical boundaries and jurisdiction of
Baltimore City, Maryland, to be subleased by the Issuer to the Facility User,
all upon the terms and conditions of this Financing Agreement.
The Issuer will contribute $475,000 towards the payment of a portion of
the costs of improving the Facility from the proceeds of grants to the Issuer
from the Department (hereinafter defined) from the Maryland Industrial and
Commercial Redevelopment Fund (the "MICRF Grants"). The Department will loan
the Issuer an additional $50,000 from the Maryland Industrial and Commercial
Redevelopment Fund (the MICRF Loan") to be used to pay a portion of the cost
of improving the Facility. Another portion of the costs of the improving the
Facility are to be financed with $25,000 made available by the City. In
addition, the City has or will make available an additional sum of $250,000
to be contributed to the Reserve Fund (hereinafter defined). All fluids made
available by the City are hereinafter collectively referred to as the "City
Contribution".
The Facility User has agreed to contribute an amount equal to $821,115,
the estimated amount over and above the proceeds of the Bond, the City
Contribution, the MICRF Grants and the MICRF Loan (the "Osiris Contribution")
in order to finance the completion of the Facility in accordance with the
Plans (hereinafter defined) and such other amounts as are required to be paid
under the Construction Management Agreement (hereinafter defined) and this
Financing Agreement.
Pursuant to and in accordance with the MIDFA Act, the Maryland Industrial
Development Financing Authority (the "Authority") is providing financial
assistance (within the meaning of the MIDFA Act) by insuring, through its
Bond Insurance Fund, the principal of and interest on the Bond and the
payment of up to one year's debt service on the Bond.
<PAGE>
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the respective
representations, covenants and agreements hereinafter contained, and of the
purchase and acceptance of the Bond by those who shall hold the same from
time to time, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows provided, that in performance of the agreements of the Issuer
herein contained, any obligation the Issuer may thereby incur for the payment
of money shall not constitute an indebtedness or a charge against the general
credit or taxing powers of the State, the Department, the Issuer, the City or
of any other public instrumentality or any public body, shall not create any
pecuniary liability of the State, the Department, the Issuer or of any other
public instrumentality or any public body except against the sources herein
provided, and shall be payable solely from the sources herein provided):
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1. Definitions - General. Certain terms used in this Financing
Agreement and in certain of the other documents executed and delivered in
connection herewith are defined in this Section1.1. Such terms shall have
the meanings given to them in the Recitals hereto or in this Section 1.l,
unless specifically provided otherwise or unless the context clearly
indicates otherwise:
"Acquisition Costs" means all costs of the improvement of the
Facility and all costs of certain site improvements and common area costs
related to the Facility or to common areas of the Building in accordance with
the Plans.
"Act" means Article 83A, Title 5, Subtitle 1 of the Annotated Code of
Maryland (1991 Replacement Volume and 1994 Cumulative Supplement), as
amended, and all future laws supplemental thereto or amendatory thereof.
"Act of Bankruptcy" means the filing of a petition in bankruptcy
under the Bankruptcy Code or the commencement of a proceeding under any other
applicable law concerning insolvency, reorganization or bankruptcy by or
against the Issuer, as debtor.
"Additions" means any and all alterations, additions, accessions and
improvements to property, substitutions therefor, and renewals and
replacements thereof.
"Agent" means any official, officer, employee or agent.
"Architect" means Gaudreau, Inc., the architect for the Facility.
"Architect's Agreement" means the agreement between the Architect and
the Facility User dated August 10, 1994 and all supplements thereto.
-2-
<PAGE>
"Assignment of Leases" means the Assignment of Leases of even date
herewith between the Issuer and the Lender, pursuant to which the Issuer
assigns its interest in the Sublease and all other subleases and its interest
in the Lease Insurance Agreement together with all Supplements thereto.
"Authority" means the Maryland Industrial Development Financing
Authority, a body corporate and politic and a public instrumentality of the
State created pursuant to the MIDFA Act, its successors and assigns.
"Authorized Issuer Representative" means the Executive Director of
the Issuer, or such other person or persons as may be designated to act on
behalf of the Issuer in accordance with the provisions of Section 13.2 of
this Financing Agreement
"Bankruptcy Code" means the United States Bankruptcy Code, 1 1 U.S.C.
Section 101 et seq., and all future acts supplemental thereto or amendatory
thereof.
"Bond Insurance Agreement" means the Insurance Agreement of even date
herewith by and between the Authority and the Lender, pursuant to which the
Authority through its Bond Insurance Fund has provided financial assistance
in connection with the acquisition and improvement of the Facility by
insuring the payment of the principal and interest on the Bond and all
Supplements thereto.
"Bond Insurance Fund" means the continuing, nonlapsing, revolving
fluid of the Authority created pursuant to the MIDFA Act. The faith and
credit of the State of Maryland are not pledged to the Bond Insurance Fund.
"Bond Fund" means the Bond Fund established under Article VI hereof.
"Bond Registrar" means the Lender or such other person as may be
approved by the Issuer to maintain registration books for the registration
and transfer of the Bond.
"Building" means the approximately 185,500 square foot building at
2001 Alicenna Street, Baltimore, Maryland 21231 of which the Facility User
will initially lease approximately 30,000 square feet pursuant to the
Sublease.
"Business Day" or "business day" means a day other than a Saturday,
Sunday or legal holiday in the State, and observed as such by the Holder.
"Claim" means any liability, suit action, claim, demand, loss,
expense or cost of any kind or nature whatsoever.
"Closing Date" means the date of issue and delivery of the Bond.
"Completion Date" means the Projected Completion Date established
under the Construction Management Agreement.
-3-
<PAGE>
"Condemnation" means any taking of title, of use, or of any other
property interest under the exercise of the power of eminent domain, by any
governmental body or by any person acting under governmental authority.
"Construction Management Agreement" means the Construction Management
Agreement by and among the Authority, the Issuer, the Facility User, and the
General Contractor dated June ___ 1995, and all Supplements thereto.
"Damage" means (a) any damage, destruction or other injury (in whole
or in part) by fire or other casualty, and (b) any Condemnation. "Damaged"
means (a) damaged, destroyed or injured (in whole or in part) by fire or
other casualty, or (b) taken by Condemnation.
"Default Rate" means the rate of interest provided for in Section 8.5
hereof.
"Department" means the Department of Economic and Employment
Development of the State, a principal department of the government of the
State, or its successor.
"Disbursement Agent" means the corporate trust department of Signet
Trust Company, as agent for the purpose of administering construction
hereunder, and its successors and assigns.
"Documents" means and includes (without limitation), the Bond, this
Financing Agreement, the Assignment of Leases, the Issuer's Deed of Trust,
the Facility User's Deed of Trust, the Lease, the Sublease and any and all
other documents which the Issuer, the Facility User or any other party or
parties or their representatives, have executed and delivered, or may
hereafter execute and deliver, to evidence or secure the Issuer's
Obligations, or any part thereof, or in connection therewith, together with
all Supplements thereto.
"Encumbrance" means any mortgage, pledge, lien, security interest,
charge or other encumbrance.
"Event of Default" means (a) with respect to this Financing
Agreement, those events of default specified in Section 10.1 hereof; (1))
when used with respect to the Sublease, those events of default specified in
Section 12 thereof. and when used with respect to any of the other Documents,
any "event of default" specified therein, or if none is specified, any
failure of any party thereto to comply with any of the terms thereof.
"Facility" means the approximately 30,000 square feet in the Building
leased by the Facility User from the Issuer pursuant to the Sublease.
"Facility User" means Osiris Therapeutics, Inc., a Delaware
corporation, the lessee under the Sublease, its successors and permitted
assigns and any other sublessee of the Space and their successor and
permitted assigns.
"Facility User's Deed of Trust" means the Deed of Trust (Sublease) of
even date herewith, executed and delivered by the Facility User and all
Supplements thereto.
-4-
<PAGE>
"Financing Agreement" or "Agreement" means this Financing and
Construction Loan Agreement by and among the parties hereto, together with
all Supplements hereto.
"General Contractor" means The Whiting-Turner Contracting Company, as
construction manager under the Construction Management Agreement, its
successors and assigns.
"GMP" means the guaranteed maximum price under the Construction
Management Agreement; provided that certain designated line items in the GMP
may, by agreement between the General Contractor and the Facility User,
reflect agreed-upon allowances.
"Gross Negligence" means gross negligence or willful misconduct.
"Holder" means the Lender and any other registered owner from time to
time of any of the Bond.
"Issuance Costs" means the fees and expenses of counsel to the
Holder, the fees and expenses of counsel to the City, recording costs, filing
fees, appraisal costs, and other similar administrative costs and expenses.
"Issuer" means Maryland Economic Development Corporation, a body
politic and corporate and a public instrumentality of the State of Maryland.
"Issuer's Deed of Trust (Master Lease)" means the Deed of Trust
Master Lease) of even date herewith, executed and delivered by the Issuer and
all Supplements thereto.
"Issuer's Obligations" means the obligations of the Issuer under the
Bond, this Financing Agreement and the other Documents, to (a) pay the
principal of; premium (if any) and interest on the Bond, when and as the same
shall become due and payable (whether at the stated maturity thereof; on any
installment payment date, by acceleration of maturity, after notice of
redemption or otherwise), (b)pay all other payments (if any) required by the
Bond, this Financing Agreement and the other Documents to be paid by the
Issuer to the Holder, or to others, when and as the same shall become due and
payable, and (c) timely perform, observe and comply with all of the terms,
covenants, conditions, stipulations and agreements, express or implied, which
the Issuer is required by the Bond, this Financing Agreement or any of the
other Documents, to perform and observe; provided, however, that the Issuer's
Obligations do not include any obligation to incur any pecuniary liability or
any obligation to make any payment from any fluids other than from (i) moneys
paid to it under the Sublease, (ii) proceeds of any Security, or (iii) the
proceeds of the MICRE Grants.
"Land" means the 3.486 acre (approximately) tract of land known as
2001 Aliceanna Street, Baltimore, Md. together with adjacent parking areas,
as more particularly described in Exhibit I hereto and made a part thereof;
and by this reference a part hereof; together with any and all improvements
thereon.
"Laws" or "laws" means federal, state and local laws, rules, and
regulations, and orders of any court or other governmental authority having
jurisdiction.
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"Landlord" means Saga Limited Partnership, the owner of the Land and
the Building, its successors and assigns.
"Lease" means the Lease Agreement dated January 18, 1995, between the
Landlord and the Issuer, pursuant to which the Landlord has leased the Space
to the Issuer, together with all Supplements thereto.
"Leases" means any and all subleases and subleases which may have
been heretofore executed or which may be hereafter executed in connection
with, or for, the use and occupancy of the Space (or any part thereof),
including (without limitation) the Sublease, together with all Supplements
thereto.
"Lease Insurance Agreement" means the Insurance Agreement of even
date herewith in favor of the Issuer insuring up to $500,000 of the
obligations of the Facility User under the Sublease.
"Lender" means The Whiting-Turner Contracting Company and its
successors and assigns as holder of the Bond.
"MIDFA Act" means the Maryland Industrial Development Financing
Authority Act, and all future acts supplemental thereto or amendatory thereof.
"Net Proceeds" when used with respect to any condemnation awards or
insurance proceeds allocable to the Property, means the gross proceeds from
Condemnation or insurance received by reason of any Damage remaining after
payment of all expenses (including attorneys' fees) incurred in the
collection of such gross proceeds.
"Notice" means a written communication given by delivery or by
certified mall, postage prepaid, return receipt requested, addressed to the
person to whom such communication is to be given, at the following addresses:
Lender: c/o The Whiting Turner Contracting Company
300 E. Joppa Road, 8th Floor
Towson, Maryland 21286
Attention: Willard Hackerman
with a copy to: Edward L. Wender, Esquire
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank and Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201
Facility User: Osiris Therapeutics, Inc.
2001 Aliceanna Street
Baltimore, Maryland 21221
Attention: James Burns, President
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with a copy to: Edward A. Ryan, Esquire
Hogan & Hartson L.L.P
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Issuer: Maryland Economic Development Corporation
36 South Charles Street
Suite 1911
Baltimore, Maryland 21201
Attention: Executive Director
With a copy to: John A. Stalfort, Esquire
Miles & Stockbridge
10 Light Street
Baltimore, MD 21202
Disbursement Ms. Diane TenHoopen
Agent: Signet Trust Company
7 St. Paul Street, 2nd Floor
Baltimore, Maryland 21202
Authority: Maryland Industrial Development Financing Authority
217 E. Redwood Street
Redwood Tower, 22nd Floor
Baltimore, Maryland 21202
Attention: Executive Director
City: Baltimore Development Corporation
36 South Charles Street
Suite 1600
Baltimore, Maryland 21201
Attention: President
With a copy to: Shapiro and Olander
36 South Charles Street, 20th Floor
Baltimore, Maryland 21202
Attention: William E. Carlson, Esquire
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Holder: THE LENDER AT ITS ADDRESS SET FORTH ABOVE
OR TO SUCH OTHER HOLDER WHOSE NAME
APPEARS ON THE REGISTRATION BOOKS OF THE
BOND REGISTRAR, AT THE ADDRESS DESIGNATED
THEREIN.
A duplicate copy of each communication given hereunder by any person
listed above to another shall also be given to the Holder; provided, however,
that any failure to give a duplicate copy of any such communication shall not
invalidate any Notice given hereunder. Any of the persons listed above may,
by Notice given hereunder, designate any further or different addresses to
which subsequent notices, certificates or other communications shall be sent.
"Osiris' Required Investment" shall mean all amounts required to be
deposited by the Facility User into the Project Fund pursuant to Section 6.4
but which amount shall in no event be less than $450,000.
"Outstanding" or "outstanding" means with respect to a Bond, the
period beginning on the Closing Date and continuing until all principal of;
premium (if any) and interest on such Bond have been paid in full.
"Permitted Investments" means those investments of the kind and
nature listed on Exhibit 2 hereto.
"Person" or "person" means any natural person, firm, association,
partnership, corporation, trust, public body or other entity.
"Plans" means the Construction Drawings and Project Manual dated
February 8, 1995 as amended in Amendments 1 through 6, prepared by the
Architect and certified for the Architect and the General Contractor as the
Plans and Specifications for the proposed improvement of the Facility and all
changes thereto approved in accordance with this Agreement and the
Construction Management Agreement.
"Proceeds" or "proceeds" means, when used with respect to any of the
Security, all proceeds within the meaning of the Maryland Uniform Commercial
Code and shall include the proceeds of any and all insurance policies.
"Project Fund" means the Project Fund established under Article VI
hereunder.
"Property" means the Space, the Equipment Collateral, all other items
and property described in the granting clauses of the Documents, as
applicable, and all Additions to all of the foregoing.
"Property Taxes" means all taxes, payments in lieu of taxes, water
rents, sewer rents, ground rents, assessments and other governmental or
municipal or public or private dues, charges and levies and any liens
(including federal tax liens) which are or may be levied, imposed or assessed
upon the
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Property or any part thereof or any of the other Security, or upon any
Leases, or upon the rents, issues, income or profits thereof; whether any or
all of the aforementioned be levied directly or indirectly or as excise
taxes, as income taxes, or otherwise.
"Receipts Requiring Mandatory Redemption" means amounts received by
the Issuer, by the Holder or by any other person from any of the following
sources:
(a) all amounts received by the Issuer from the proceeds of any sale
of the Property and required by any of the Documents to be applied to the
redemption of the Bond,
(b) any Net Proceeds received as a result of any Damage to the
Property and required by any of the Documents to be applied to the redemption
of the Bond, and
(c) any other amount or amounts received from any source and
required by the Documents to be applied to the redemption of the Bond.
"Rents" means all of the rents, royalties, issues, profits, revenues,
earnings, income and other benefits of the Property, or arising from the use
or enjoyment of all or any portion thereof; or from any lease or other
agreement pertaining thereto, and including any proceeds derived from the
sale of all or any portion of the Property.
"Reserve Fund" means the Reserve Fund established in Article III
hereof.
"Reserved Rights of the Issuer" means any and all rights, remedies
and limitations of liability of the Issuer set forth in the Documents
regarding (a) the negotiability, registration and transfer of the Bond,
(b)the loss or destruction of the Bond, and (c) the limited liability of the
Issuer as provided in the Documents.
"Resolution" means the resolution adopted by the Board of Directors
of the Issuer on May 15, 1995.
"Security" means all of the security for the Issuer's Obligations
described in the Documents,together with all Proceeds thereof and Additions
thereto.
"Space" means the "Premises" as defined in the Sublease as of the
date hereof and as the same may be expanded by the exercise of options
provided for in the Sublease.
"State" means the State of Maryland.
"Sublease" means the Sublease Agreement effective as of January 18,
1995 from the Issuer, as Landlord, and the Facility User, as tenant as
amended by the First Amendment to Sublease Agreement, and all Supplements
thereto permitted hereby.
"Supplements" means any and all extensions, renewals, modifications,
amendments, supplements and substitutions.
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"Taxes" means all taxes, assessments and governmental charges or
levies imposed upon the applicable person or on its income or its properties,
including, without limitation, all Property Taxes.
"Termination Date" means the date when the principal of; premium (if
any) and interest on the Bond are paid in full and all of the Issuer's
Obligations are fully satisfied.
SECTION 1.2. Rules of Construction. Unless otherwise indicated, all terms
used in each of the other Documents shall have the meanings given them in
this Financing Agreement.
As used in each of the Documents, the words "hereof", "herein",
"hereunder", "hereto", "Agreement", and other words of similar import refer
to each Document in its entirety.
The terms "agree" and "agreements" are intended to include and mean
"covenant" and "covenants".
The headings of each Document are for convenience only and shall not
define or limit the provisions thereof.
All references made (a) in the neuter, masculine or feminine gender shall
be deemed to have been made in all such genders, and (b) in the singular or
plural number shall be deemed to have been made, respectively, in the plural
or singular number as well.
ARTICLE II
THE BOND, REDEMPTION;
SECURITY FOR THE BOND
SECTION 2.1. The Bond. Simultaneously with the execution and delivery of
this Financing Agreement, the Issuer has issued, and the Lender has
purchased, the Bond which shall be in the form of Exhibit 3 hereto. The Bond
bears interest at the rate of seven and five tenths percent (7.5%) per annum
subject to adjustment as provided therein and the principal amount thereof
shall be amortized in equal payments of principal and interest as provided in
the form of the Bond.
SECTION 2.2. Redemption of the Bond. The Bond is subject to redemption
prior to maturity as follows:
(a) Optional Redemption of Bond Prior to Maturity. The Bond is
subject to redemption at the option of the Issuer, in whole at any time or in
part, in multiples of $l00,000 on any interest payment date after May 1, 2000
at the redemption prices below expressed as a percentage of the principal
amount of the Bond to be redeemed, together with unpaid interest on the
principal of the Bond to be redeemed accrued to the date fixed for
redemption. as follows:
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Period During Which Redemption Price
Occurs (both dates inclusive) Redemption Price
June 1, 2000 through May 31, 2001 102%
June 1, 2001 through May 3l, 2002 101%
June 1, 2002 and thereafter 100%
In the event the Bond is called for redemption, in whole or in part,
pursuant to the provisions of this subsection (a), the Issuer shall give
Notice thereof to the Holder at least 30 days prior to the date fixed for
redemption, which Notice shall specify the anticipated redemption date and
the principal amount of the Bond to be redeemed. On a date no later than the
date fixed for redemption in such Notice, the Issuer shall pay to the Holder
moneys in an amount sufficient, together with other moneys (if any) held by
the Holder and available for the redemption of the Bond, to redeem the Bond
at the redemption price set forth above.
(b) Special Mandatory Redemption from Certain Receipts. The Bond is
subject to special mandatory redemption, in whole or in part, from any and
all Receipts Requiring Mandatory Redemption, at a redemption price equal to
the principal amount to be redeemed, together with all unpaid interest on the
principal of the Bond to be redeemed accrued to the date fixed for
redemption. The Holder shall apply such moneys to the redemption of the Bond
promptly upon the receipt thereof; without premium or penalty, and regardless
of amount. At least 30 days prior to any such redemption, the Issuer shall
give Notice thereof to the Holder, specifying the date fixed for such
redemption and the principal amount to be redeemed. On a date no later than
the date fixed for redemption in such Notice, the Issuer shall pay to the
Holder moneys in an amount sufficient, together with other moneys (if any)
held by the Holder and available for the redemption of the Bond, to redeem
the Bond at the redemption price set forth above.
(c) Special Mandatory Redemption upon Reduction Of Authority's
Insurance. The Bond is subject to special mandatory redemption in whole, at
such time as the amount of the Authority's insurance available under the Bond
Insurance Agreement has been reduced to an amount equal to the outstanding
principal of the Bond plus sixty days' interest on such principal amount.
After the occurrence of an Event of Default, the Holder of the Bond shall
advise the Issuer as to the outstanding principal balance of the Bond. The
redemption price shall be equal to the principal amount to be redeemed,
together with all unpaid interest on the Bond accrued to the date fixed for
redemption. At least thirty (30) days prior to any such redemption, the
Issuer shall give Notice thereof to the Holder and the Authority, specifying
the date fixed for such redemption and the principal amount to be redeemed.
On a date no later than the date fixed for redemption in such Notice, the
Issuer shall pay or cause the Authority to pay to the Holder moneys in an
amount sufficient, together with other moneys (if any) held by the Holder and
available for the redemption of the Bond, to redeem the Bond at the
redemption price set forth above.
(d) Mandatory Sinking Fund Redemption. Commencing on the
Amortization Commencement Date (as defined in the form of Bond) and on the
first day of each and every month thereafter, continuing to and including the
first day of December, 2008, the principal amount of the Bond and interest
thereon shall be paid in 15 monthly installments of principal and interest in
the amount of $31,906.12 each.
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SECTION 2.3. Application of Funds to Redemptions. Any partial redemption
made pursuant to Section 2.2 shall be applied to the principal to be redeemed
in the inverse order of the installment payment dates under the Bond. The
amount of any partial redemption, and the date on which the same is actually
made, shall be noted by the Holder on Schedule A attached to the Bond and
made a part thereof; but the failure to so note any partial redemption shall
not affect the validity of any payment actually received by a Holder.
SECTION 2.4. Effect of Redemption of Bond. In the event a Bond (or any
portion thereof) is called for redemption pursuant to Section 2.2 above, the
Bond (or portion thereof) so called for redemption, and which is actually
redeemed, shall cease to bear interest on the specified redemption date,
shall no longer be protected by this Financing Agreement, and shall not be
deemed to be outstanding under the provisions of this Financing Agreement,
and all rights of the Holder(s) with respect thereto shall cease.
SECTION 2.5. Negotiability. Registration and Transfer of Bond: Mutilated.
Lost or Destroyed Bond. The Bond shall be negotiable, subject to the
provisions for registration and transfer contained in this Financing
Agreement and in the Bond, and shall be registered as to both principal and
interest. So long as the Bond remains outstanding, the Issuer shall maintain
and keep, at the office of the Bond Registrar, registration books for the
registration (including the name and address of the registered Holder) and
transfer of the Bond. The Bond shall be transferable only upon the
registration books maintained by the Bond Registrar, which transfer shall be
similarly noted on the registration table attached to the Bond as Schedule B.
At the written request of the Holder or its attorney or officer duly
authorized in writing, and upon presentation of a Bond for transfer, together
with a written instrument of transfer satisfactory to the Bond Registrar duly
executed by such Holder or attorney or officer and duly authorized in
writing, the Bond Registrar shall cause the Bond to be transferred on the
registration books, and the Bond Registrar shall note such transfer on the
registration table attached to the Bond.
If the Bond is transferred, the person acting as Bond Registrar prior to
such transfer will continue to serve and act as Bond Registrar until a
successor Bond Registrar has been appointed by the Issuer and has accepted
the duties and responsibilities of Bond Registrar.
The Issuer may deem and treat the person in whose name the Bond is
registered upon the registration books as the absolute owner of the Bond,
whether the Bond is overdue or not, for the purpose of receiving payment of;
or on account of; the principal of and premium, if any, and interest on the
Bond and for all other purposes, and all such payments so made to any such
registered Holder or upon its order shall be valid and effectual to satisfy
and discharge the liability upon the. Bond to the extent of the sum or sums
so paid, and neither the Issuer nor any other person shall be affected by any
notice to the contrary.
In the event the Bond is mutilated, lost, stolen or destroyed, the Issuer
may execute a new Bond of like date, maturity, interest rate and denomination
as that of the Bond mutilated, lost, stolen or destroyed; provided that, in
case the Bond is mutilated, such mutilated Bond shall first be surrendered to
the Issuer, and in the case the Bond is lost, stolen or destroyed, there
shall be first finished to the Issuer evidence of such loss, theft or
destruction satisfactory to the Issuer, together with indemnity satisfactory
to the Issuer. The Issuer may charge the Holder the fees and expenses of the
Issuer, if any, in connection with the foregoing.
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SECTION 2.6. Limited Liability of the Issuer. THE PROVISIONS OF THIS
SECTION, THE BOND AND THE INTEREST ON IT ARE LIMITED OBLIGATIONS OF THE
ISSUER, THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON WHICH ARE PAYABLE
SOLELY FROM THE COLLATERAL DESCRIBED IN SECTION 2.7 HEREOF AND PROCEEDS FROM
THE BOND INSURANCE AGREEMENT OR THE MONIES DEPOSITED BY THE ISSUER HEREUNDER
OR FROM COLLATERAL PLEDGED UNDER THE DOCUMENTS. NEITHER THE BOND NOR THE
INTEREST THEREON SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A CHARGE AGAINST
THE GENERAL CREDIT OR TAXING POWERS OF THE STATE, THE DEPARTMENT, THE ISSUER,
OR ANY PUBLIC BODY OR OTHER PUBLIC INSTRUMENTALITY WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR CHARTER PROVISION OR STATUTORY LIMITATION, AND NEITHER
SHALL EVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY OF THE STATE,
THE DEPARTMENT, THE ISSUER, OR ANY PUBLIC BODY OR OTHER PUBLIC
INSTRUMENTALITY. THE BOND DOES NOT CONSTITUTE AN INDEBTEDNESS TO WHICH THE
FAITH AND CREDIT OF THE STATE, THE DEPARTMENT, THE ISSUER OR ANY PUBLIC BODY
OR OTHER PUBLIC INSTRUMENTALITY IS PLEDGED.
No covenant or agreement contained in the Bond or in any of the other
Documents shall be deemed to be the covenant or agreement of any Agent of the
Issuer in his or her individual capacity.
It is recognized that no Holder shall have a Claim against the Issuer for
damages suffered by such Holder as a result of the failure of the Issuer,
while acting in good faith, to perform any covenant, undertaking or
obligation under this Financing Agreement, the Bond or any of the other
Documents, nor as a result of the incorrectness of any representation made in
good faith by the Issuer in the Documents. Although this Financing Agreement
recognizes that the Documents shall not give rise to any pecuniary liability
of the Issuer, nothing contained in this Financing Agreement shall be
construed to preclude in any way any action or proceeding (other than that
element of any action or proceeding involving a Claim for monetary damages
against the Issuer) in any court or before any governmental body, agency or
instrumentality or otherwise against the Issuer or any of its Agents to
enforce the provisions of any of the Documents.
SECTION 2.7. Security for the Bond: Assignment by the Issuer to the
Lender. In order to secure the payment of the principal of; premium, if any,
and interest on the Bond according to their tenor and effect, the performance
and observance by the Issuer of all of the covenants expressed or implied
herein and in the Bond and the payment and performance of all other of the
Issuer's Obligations, the Issuer does hereby grant, bargain, sell, convey,
pledge and assign, without recourse, to the Lender, and grants to the Lender
and its assigns a continuing security interest in, the following:
(a) All of the Issuer's right, title and interest in and to and
remedies under all of the Documents, and any and all Security referred to in
the Documents.
(b) All right, title and interest in and to and remedies with
respect to any and all other property of every description and nature from
time to time hereafter by delivery or by writing of any kind conveyed,
pledged, assigned or transferred, as and for additional security for the
Issuer's Obligations, by the Issuer or by anyone on its behalf or with its
written consent, to the Lender, which is hereby authorized
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to receive any and all such property at any and all times and to hold and
apply the same subject to the terms hereof.
PROVIDED, HOWEVER, that there shall be excluded from the assignment set
forth above all Reserved Rights of the Issuer.
With respect to such Security and the security interest granted therein,
the Lender and any other Holder shall have all of the rights and remedies of
a secured party under the Maryland Uniform Commercial Code.
SECTION 2.8 Wire Transfer if One Holder. So long as there is one holder
of the Bond, all payments of principal, premium and/or interest on the Bond
shall be made, if the Holder of the Bond gives Notice, by wire transfer. The
parties hereto acknowledge that the initial Holder of the Bond hereby gives
Notice to make all such payments by wire transfer as follows:
Mercantile-Safe Deposit & Trust Company,
Account Number 27704-10,
ABA Number 052-000-18;
Contact: Philip Enstice, Vice-President.
SECTION 2.9 Conditions Precedent to the Issuance and Purchase of the
Bond. The obligations of the Issuer to issue the Bond and the Lender to
purchase the Bond are subject to the satisfaction of the following
conditions, in the sole discretion of the Lender.
The Lender shall receive:
(a) The fully executed and authenticated Bond,
(b) The fully executed Bond Insurance Agreement and Lease Insurance
Agreement,
(c) The fully executed Lease and an Estoppel Certificate of the
Landlord certifying as to the form of the Lease and to its
knowledge of any defaults thereunder,
(d) The fully executed Sublease,
(e) The fully executed Construction Management Agreement,
(f) The fully executed. Agreement to Complete from the General
Contractor,
(g) The filly executed counterpart of Assignment of Architect's
Contract and Agreement to Complete,
(h) A fully executed counterpart of this Financing Agreement,
(i) A fully executed Facility User's Deed of Trust,
(j) A fully executed Assignment of Leases,
(k) A fully executed Issuer's Deed of Trust,
(1) Opinions of counsel to the Issuer, Bond Counsel, the Facility
User and the Authority in form and substance acceptable to
Counsel to the Lender,
(m) Financing Statement searches with respect to the Facility User
which reflect no liens or encumbrances unacceptable to the
Lender,
(n) Financing Statements as are deemed necessary by counsel to the
Lender to perfect any security interest granted hereunder or
under the other Documents,
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(o) Written evidence satisfactory to it from the Architect as to the
availability of utilities (including adequate water, storm water,
sewer, sanitary sewer, electricity, and gas, if required by the
Plans) adequate to serve the Space,
(p) A copy of a Phase 1 environmental report with respect to the
Building reasonably satisfactory to the Lender,
(q) An estoppel certificate of the Landlord confirming the form of
the Lease and certain other matters as may reasonably be required
by the Lender, and
(r) Such other documents as the Lender may reasonably request
ARTICLE III
SECURITY FOR THE BOND
SECTION 3.1 Security Documents. The Bond shall be secured by the
following documents and interests:
(a) An Assignment of Leases pursuant to which the Issuer assigns
and transfers to the Holder of the Bond all of its right, title and interest
in and to all Leases with respect to the Space, as now in effect or as
hereafter modified, including the Sublease and any other subleases with
respect to the Space (excluding any Lease with respect to a portion of the
Building which is obtained for the benefit of any agency of the State of
Maryland) and the benefit of the Lease Insurance Agreement.
(b) The Issuer's Deed of Trust, pursuant to which the Issuer
assigns and transfers to the Holder of the Bond, as security for the Bond,
its right, title, and interest under the Lease.
(c) The Facility User's Deed of Trust pursuant to which the
Facility User assigns and transfers (a) its right, title and interest in the
Sublease and all rights of assignment thereof; and (b) all of its right,
title and interest in and to any further subleases or assignments of any
portion of the Space or any other space leased with respect to the Building,
respectively; provided, however, that the Holder of the Bond will not
unreasonably withhold its consent to the modification of the Lease or the
Sublease into separate leases or subleases so long as all leases or subleases
relating to the Space improved with the proceeds of the Bond are subject to
the Documents securing the Bond and such Space can be operated independently
of any space subject to leases or subleases which are not subject to the
Documents securing the Bond; provided further that the Holder of the Bond
shall not foreclose under the Facility User's Deed of Trust if no default
exists under the Sublease.
(d) The Bond Insurance Agreement.
SECTION 3.2. Reserve Fund.
(a) City Share of Reserve Fund. On the date hereof; either (1) the
Facility User will deposit cash, or (2) the Issuer shall deposit or cause to
be deposited by the City, in an account maintained in
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the names of the Holder of the Bond and the Issuer at a federally-insured
financial institution approved by the Issuer, the Authority and the City, the
sum of $250,000 (the "Reserve Fund").
At the option of the Facility User, the Facility User may, in lieu
of cash, deliver to the Holder of the Bond a letter of credit in form and
issued by a federally insured financial institution acceptable to the Holder
of Bond, in its sole discretion, (the "City Contribution LOC") in the amount
of $250,000 with a term of not less than six months. Upon the earlier of (a)
ten days prior to the expiration of the City Contribution LOC, (b) the date
of submission of the requisition for the final holdback due under the
Construction Management Agreement with respect to the Space, and (c) the
occurrence of an Event of Default hereunder, the Issuer or the Holder shall
draw the sum of $250,000 under the City Contribution LOC and deposit such sum
into the Reserve Fund.
The City Contribution LOC and any fluids deposited by the Facility
User in the Reserve Fund in lieu of the City Contribution will be released
and returned to the Facility User upon deposit by the Issuer of proceeds of a
$250,000 City Contribution into the Reserve Fund. The cash contributed by
Osiris shall be paid directly to the Issuer. Otherwise, the City Contribution
LOC and any deposit of the Facility User shall not be released without the
written approval of the Issuer, the Authority and the Holder of the Bond.
(b) Issuer Share of Reserve Fund. On the date hereof; the
Disbursement Agent shall draw from the proceeds of the Bond the amount of
$250,000 and deposit such proceeds into the Reserve Fund.
(c) Investment of Reserve Fund. Prior to the occurrence of an
Event of Default, the Reserve Fund shall be invested in Permitted Investments
having a maturity not in excess of six (6) months. All investments of the
Reserve Fund shall be made at the direction of the Facility User, with the
approval of the Authority, the Issuer and the City which approval shall be
deemed given if no response is received within five (5) days after a request
for approval. The Lender shall promptly cooperate with the Issuer to
facilitate such investments and agrees not to direct investment of the
Reserve Fund. After the occurrence of an Event of Default, Lender may require
all investments to be liquidated and that the Reserve Fund be invested in
Permitted Investments having a maturity of not in excess of thirty (30) days
and may direct such investments without the consent of the Authority, the
City or the Issuer.
(d) Withdrawals. So long as no Event of Default has occurred
hereunder, the Issuer shall withdraw interest earnings or other income
received on the Reserve Fund monthly (or less often as the Issuer may
determine) which amounts shall thereafter be and become the property of the
Issuer. Withdrawals from the Reserve Fund must be made by the joint signature
of the Issuer and the Holder of the Bond. The Holder shall not delay approval
of withdrawals permitted under this paragraph (d). The Holder of the Bond
shall not be responsible for any loss due to any trade or exchange of
securities in the Reserve Fund which is required to fluid payments provided
for hereunder or otherwise permitted under paragraph (c) above.
(e) Pledge of Reserve Fund The City and the Issuer, as applicable,
hereby pledge, assign, transfer and grant a security interest in the Reserve
Fund to the Holder of the Bond as security for the performance of the
Issuer's Obligations and agree, subject to the terms hereof; that the Holder
of the
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Bond shall have all the rights and remedies of a secured party with respect
to the Reserve Fund upon the occurrence of an Event of Default hereunder.
(f) Use of Reserve Fund Upon the occurrence of an Event of Default
hereunder, the Holder of the Bond may, at its discretion, upon fifteen days'
notice to the Authority, the City and the Issuer, either (i) withdraw funds
from the Reserve Fund to cure such Event of Default, in which event the
positions of the parties hereunder will be restored as if no such Event of
Default occurred, or (ii) withdraw such fluids and apply such fluids to
reduce the amount due with respect to the Bond, in a manner determined by the
Holder thereof; in its sole discretion, or (iii) retain such fluids and
disburse such fluids to pay the costs of any modifications to the Space
required to obtain a tenant for such Space on terms and conditions
satisfactory to the Authority, the Issuer and the City, which approvals shall
not be unreasonably withheld or delayed, or (iv) withdraw such fluids to make
payments of interest and principal on the Bond, when and as due and payable.
The Issuer consents to all such withdrawals and appoints the Lender as
attorney-in-fact for the purpose of consenting to such withdrawals, which
appointment is coupled with an interest and is irrevocable.
Notwithstanding the above, provided that the conditions set forth below
are and continue to be fulfilled, the Holder of the Bond will utilize the
proceeds of the Reserve Fund as provided in (f) (iii) or (f) (iv) above, as
requested by the Authority, the Issuer and the City (which approval of the
City shall not be unreasonably withheld or delayed).
(i) There are no uncured monetary defaults under the Bond and the
Documents.
(ii) The amount of insurance under the Insurance Agreements with
respect to the Bond equals or exceeds the outstanding principal and sixty
days' accrued and unpaid interest on the Bond.
(iii) No event of default has occurred under the Insurance
Agreement and the Authority has not failed to pay any claim with respect to
any other insurance obligation when and as due and payable (other than as a
result of a good faith dispute as to the liability, if any, of the Authority
with respect thereto).
(iv) To the extent that draws are being made to pay for the costs
of renovation of the Space,
(1) Such work is being performed by a contractor which is
acceptable to the Holder of the Bond, in its reasonable discretion.
(2) Sufficient funds or commitments to fund all of the costs
of such work are available in a form acceptable to the Holder of the Bond, in
its reasonable discretion.
(3) Such funds are being disbursed as work progresses under
arrangements acceptable to the Holder of the Bond, in its reasonable
discretion.
(g) Final Disbursement of Reserve Fund. Within sixty (60) days
after payment in full of the Bond, the outstanding balance of the Reserve
Fund shall be withdrawn by the Issuer and disbursed as follows:
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(i) Fifty percent of such balance shall be paid to the
Department,
(ii) Fifty percent of such balance shall be paid to the City,
or if the Facility User funded the City Contribution and such contribution
has not been refunded to the Facility User to (a) the Facility User if the
Facility User has not defaulted under the terms of the Sublease, or,
otherwise (b) to the Department.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
FINDINGS BY THE ISSUER
SECTION 4.1. Representations and Warranties of the Issuer. The Issuer
makes the following representations and warranties:
(a) Authorized Issuer. The Issuer is a body corporate and politic
and a public instrumentality of the State. Under the provisions of the Act,
the Issuer has the power to issue the Bond and to enter into this Financing
Agreement and the other Documents entered into by it and the transactions
contemplated hereunder and thereunder and to carry out its obligations
hereunder and thereunder.
(b) Necessary Actions. By proper action, the Issuer has duly
adopted the Resolution, and the Issuer has duly authorized the execution and
delivery of the Bond, this Financing Agreement and each of the other
Documents executed and delivered by it, and the Bond, this Financing
Agreement and such other Documents are valid and binding agreements of the
Issuer enforceable against the Issuer in accordance with their respective
terms, subject to laws affecting creditors' rights generally and equitable
principles.
(c) Compliance With Laws. The Issuer is not in violation of any
laws of the State which would affect its existence or its ability to issue
and sell the Bond, to enter into any of the Documents, or to perform any of
the Issuer's Obligations.
(d) No Conflicting Agreements. The execution, delivery and
performance of the Bond, this Financing Agreement and the other Documents
executed and delivered by the Issuer and the performance of the Issuer's
Obligations do not, and will not, conflict with any charter or by law
provision of the Issuer or any agreement' mortgage, covenant, law, or order
by which the Issuer is bound.
SECTION 4.2. Findings by the Issuer. The Issuer hereby confirms its
findings contained in the Resolution.
SECTION 4.3. MICRF Grants and MICRF Loan. (a) In order to obtain
additional financing for the improvement of the Facility, the Issuer has
applied for and has been granted from the Department the MICRF Grants. As a
precondition to receiving the MICRE Grants, pursuant to this Agreement and a
Regrant Agreement, the Issuer has deposited or is required to deposit upon
receipt' the proceeds of the MICRF Grants into the Project Fund.
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(b) In addition, in order to obtain additional financing for the
improvement of the Facility, the Issuer has applied for a loan in the maximum
amount of $50,000 (the "MICRF Loan") which has been approved by the
Department. As a precondition to receiving the MICRF Loan, pursuant to this
Agreement and a Loan Agreement, the Issuer has deposited the proceeds of the
MICRF Loan directly into the Project Fund. If the proceeds of the MICRF Loan
are not available as of the date hereof; and the Holder of the Bond, in its
sole discretion, consents, the Issuer, upon release of such Loan proceeds,
shall cause the Department to deposit the proceeds of the MICRF Loan directly
into the Project Fund.
ARTICLE V
COVENANTS OF THE ISSUER
SECTION 5.1. Covenants of the Issuer. The Issuer hereby covenants and
agrees as follows:
(a) Maintenance of Existence: Compliance with Laws. The Issuer
will not take any action towards dissolution unless it has assured the
assumption of its obligations under this Financing Agreement and the other
Documents by any other person succeeding to its powers; and it will comply
with all laws applicable to this Financing Agreement or any of the other
Documents.
(b) Further Instruments and Actions. The Issuer will from time to
time execute and deliver such further instruments and take such further
actions as may be reasonable and as may be required to carry out the purpose
of this Financing Agreement; provided, however, that no such instruments or
actions shall pledge the credit or taxing power of the State, the Issuer, or
any public body or other public instrumentality or require the Issuer to
incur any pecuniary obligations.
(c) Priority of Pledge. Except for the assignment to the Lender
under this Financing Agreement the Issuer will not sell, lease or otherwise
dispose of or encumber its interest in any part of the security for the Bond,
and will cooperate in causing to be discharged any Encumbrances created by it
with respect to any of the security for the Bond.
(d) Books and Documents Open to Inspection. The Issuer shall, to
the extent required and permitted by law, within a reasonable time after
request, open any and all of its books and documents in its possession
relating to the Facility, if any, during the normal business hours of the
Issuer, to such accountants or other persons as the Lender or the Authority
may from time to time designate.
(e) Lease. The Issuer shall (i) comply with all the terms of the
Lease required of it in its role as tenant, (ii) provide the Lender, the City
and the Authority with notices of events of default under the Lease, and
(iii) notify the Lender, the City and the Authority promptly upon receipt of
a Notice from the Landlord of the Landlord's intent to exercise any remedies
thereunder.
(f) Sublease. The Issuer shall (i) comply with all the terms of
the Sublease required of it in its role as Landlord, (ii) provide the Lender
and the Authority with notice of events of default under the Lease or the
Sublease, (iii) notify the Lender and the Authority promptly upon receipt of
Notice from the Facility User of the Facility User's intention to exercise
any option to lease additional space, extend the
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Sublease or purchase the Building; and (iv) not exercise any option of the
Issuer under the Lease unless the Facility User has exercised the
corresponding option under the Sublease to extend the Lease, to lease
additional space, or to purchase the Building and has satisfied all
requirements of the Sublease, to the extent applicable to the exercise of
such option.
(g) No Encumbrances. Except as contemplated hereby, the Issuer
shall not assign, pledge, assign or encumber or permit any lien or
encumbrance to be placed upon all or any part of its interest in the Space,
the Lease, the Sublease or the Reserve Fund.
ARTICLE VI
APPLICATION OF BOND PROCEEDS
SECTION 6.1 Project Fund. (a) The Issuer hereby creates a Project Fund
and a Bond Fund hereunder which shall be maintained by the Disbursement
Agent. The following amounts shall be deposited into the Project Fund:
(i) An amount equal to $25,000 of the City Contribution shall
be paid into the Project Fund. The remaining portion of the City Contribution
shall be paid directly into the Reserve Fund.
(ii) The Issuer shall deposit the proceeds of the MICRF Grants.
(iii)The Issuer shall deposit the proceeds of the MICRF Loan.
(iv) The Facility User shall deposit the Osiris Contribution.
(v) The Facility User shall deposit all other amounts
required to be deposited by it hereunder into the Project Fund.
(b) Upon receipt, the Disbursement Agent shall deposit into the
Bond Fund any Bond proceeds received from the Holder of the Bond.
SECTION 6.2 Completion of Work. The Issuer agrees that it will improve
the Space, the Building and the Land in accordance with the Plans. The Plans
have been approved by the Issuer, the Facility User, the Architect, the
General Contractor and the Landlord and authenticated by authorized
signatures of all of the above and of all governmental authorities having
jurisdiction; one copy of the Plans, so authenticated, is to be delivered to
the Lender. No changes (other than field changes which are approved by the
Architect and do not affect the GMP) shall be made in the Plans without the
prior written approval of the Facility User, the Architect, the General
Contractor, and of any governmental authorities having jurisdiction for which
approval is legally required; provided that no such change shall be effective
unless the Facility User deposits in the Project Fund fluids necessary to pay
any increase in the GMP or in the other costs of the work as a result of the
changes which shall be part of Osiris' Required Investment (hereinafter
defined). No work other than that shown in the Plans shall be authorized or
undertaken in the construction of said improvements without the prior written
consent of
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the Facility User, the Lender and the General Contractor. The cost of the
work shall include all costs of construction and all other costs both direct
and indirect.
SECTION 6.3 No Liability to Third Parties. The issuance of the Bond shall
not in any way be construed as obligating the Lender to any person for the
payment of any expense incurred with respect to the Facility. The
Disbursement Agent and Lender shall not in any event be responsible or liable
to any person other than the Issuer for the advance of or failure to advance
Bond proceeds, or any part thereof
SECTION 6.4 Additional Funds. The Facility User agrees that prior to the
first advance (and from time to time in the event of change in the GMP or if
interest during construction, Architect's fees and expenses, issuance costs
or Disbursement Agent's Fees and Expenses exceed the allocations to pay such
costs), that immediately upon demand from the Disbursement Agent or the
Lender, it will deposit into the Project Fund, the funds hereinafter
sometimes called the "Osiris Required Investment"), if any, necessary to pay
the amounts due under the Construction Management Agreement, all interest on
the Bond during construction, the Architect's fees and expenses, Issuance
Costs, Disbursement Agent Fees and Expenses and interest during construction
in excess of the amounts on deposit in the Project Fund and available from
the proceeds of the Bond. The General Contractor shall, with each requisition
notify the Disbursement Agent of the estimated amount of additional Osiris'
Required Investment (if any) which is necessary to pay the costs as provided
above. When determining the amount of the Osiris' Required Investment
hereunder, the General Contractor shall not include funds in the Reserve
Fund. The Osiris' Required Investment shall be deposited into the Project
Fund, from time to time. Upon receipt of a requisition, the Disbursement
Agent shall promptly demand payment of the additional Osiris' Required
Investment (if any), and the Facility User shall deposit said amount into the
Project Fund immediately upon demand therefor by the Disbursement Agent or
the General Contractor.
SECTION 6.5 Non-Assignability. This Agreement is executed for the sole
benefit of the Lender as additional security for the Bond, and no right to
the benefits of this Agreement or to any advances of the Bond shall be
assignable, in whole or in part, except upon written consent by the Lender.
SECTION 6.6 Bond Proceeds. Lender shall disburse proceeds of the Bond as
and when requested by the Disbursement Agent within two (2) business days
after any request therefor, so that the Disbursement Agent may make
disbursements required under Sections 6.7 and 6.9 hereunder and to fund the
Reserve Fund.
SECTION 6.7 Disbursements.
(a) The Disbursement Agent shall withdraw funds in the Project
Fund and/or request the Lender to make an additional advance of funds
representing proceeds of the Bond into the Bond Fund in the order and
priority established in Section 6.9 hereof: (i) to pay interest on the Bond
when due without further authorization or consent of the Issuer, upon receipt
of a statement as to the amount of interest due and payable with respect to
the Bond, (ii) to pay sums due under the Construction Management Agreement or
under the Architect's Agreement pursuant to a requisition therefor, (iii) to
pay for the fees and expenses of the Disbursement Agent, and issuance costs
and (iv) upon completion of the work free of mechanics' liens and the payment
of all costs, the balance of the funds remaining in the Project Fund and any
amounts remaining to be drawn under the Bond shall be applied as provided in
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Section 6.9 hereof. Upon receipt of Notice of the occurrence of an Event of
Default under this Agreement, whether or not declared to be such by the
Lender, the Disbursement Agent shall withhold all further advances, but at
the sole election of the Authority, if the Authority has agreed to cure all
such defaults, or otherwise at the direction of the Lender, in its sole and
absolute discretion, the Disbursement Agent shall advance to the General
Contractor, subcontractors, laborers, materialmen, or other persons
furnishing labor, services, or materials used or to be used on or in the
construction of the Facility (including extras approved by the Lender and the
Authority), and any balance remaining shall be advanced applied as provided
in Section 6.9(b) hereunder.
(b) Disbursements to pay interest on the Bond shall be made upon
receipt of invoices therefor from the Holder of the Bond and may be made
monthly. Disbursements to pay the fees and expenses of the Architect shall be
included in requisitions for construction costs but shall be limited to the
amount allocated to Architect's Fees and Expenses in Section 6.8 below unless
the Facility User shall deposit additional funds in the Project Fund upon a
request made hereunder. Other disbursements shall be made on monthly
requisitions in the form of Exhibit 4 signed by the General Contractor and
the Architect and accepted by the Facility User (which shall not be
unreasonably withheld or delayed), setting forth construction costs as
allocated in the Guaranteed Maximum Price in trade breakdown form, showing
percentage of completion, the amounts expended or costs incurred for work
done and necessary material delivered to the site and incorporated in the
work since the previous requisition, and in such detail as normally provided
by the General Contractor. The requisition shall provide that advances for
construction costs (exclusive of general conditions) shall not be more than
ninety percent (90%) of the amount requisitioned until the work is fifty
(50%) percent completed and thereafter may not exceed ninety five percent
(95%) of the contracted amount of the item until the work with respect
thereto has been completed and accepted by the General Contractor and the
Architect. All advances will be made to the General Contractor, the Architect
or other party entitled thereto or, if the General Contractor so directs,
directly to the subcontractors or material suppliers. The Facility User shall
not be obligated to execute a requisition for the final holdback of advances
to the General Contractor unless the requisition has attached (i) final
releases of liens by the General Contractor and all material subcontractors,
suppliers and persons or entities entitled to file a mechanic's lien as
certified by the Construction Manager, (ii) an Estoppel Certificate from the
Issuer and the Facility User accepting the Space as substantially complete
which the Issuer and the Facility User agree not to unreasonably withhold or
delay, and (iii) a Certificate of Use and Occupancy for the entire Space.
Upon receipt and approval of a Requisition by Lender, the Disbursement Agent
shall have a period of three (3) business days after receipt of funds from
the Holder of the Bond within which to pay such requisition after it is duly
submitted, and two (2) business days in which to request any necessary funds
from the Holder of the Bond. All disbursements are to be made in the City of
Baltimore, or at such place as the Disbursement Agent shall designate. Upon
payment of the Final Requisition for Construction Costs, the Holder of the
Bond shall pay all remaining Bond proceeds to the Disbursement Agent and the
Disbursement Agent shall pay all remaining fees and expenses due to the
Disbursement Agent and shall disburse the balance of the funds in the Project
Fund as provided in Section 6.9 hereunder.
(c) The following shall be a condition precedent to the first
construction disbursement (except to the extent waived by the Lender):
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The Disbursement Agent shall have received the confirmation
from the Lender that it has purchased the Bond, the amount of the Bond, and
the manner in which requests for funds are to be made, which shall be
reasonably satisfactory to the Disbursement Agent and the Lender.
(d) The following shall be conditions precedent to each
construction advance:
(1) The Facility User shall have delivered to the
Disbursement Agent with each request for an advance, a requisition in the
form attached as Exhibit 4 hereto covering the advance requested.
(2) The Disbursement Agent has not received Notice from the
Lender that any of the following conditions have not been fulfilled:
(A) All improvements made prior to and including the
date of the current requisition shall have been completed in a manner
acceptable to the Architect, which acceptance shall not be unreasonably
withheld or delayed.
(B) The Facility User shall have been furnished with
waivers of liens as to the Architect, the General Contractor and Trade
Contractors as required under the Construction Management Agreement or the
Architect's Agreement delivered through the period covered by the previous
requisition, which waivers shall have been furnished prior to the thirtieth
(30th) day after the date of advance of the preceding requisition, or shall
be filed prior to advance of the current requisition, whichever date shall
first occur.
(C) The General Contractor shall have certified that it
has no reason to believe an additional Osiris' Required Investment is
necessary. In the event General Contractor cannot make such a certification,
whether by reason of changes in the Plans, or for any reason whatsoever, the
General Contractor will certify the amount of additional Osiris' Required
Investment sufficient to enable the General Contractor to make such
certification.
(e) The following shall be a condition precedent to any advance
other than the initial advance and the Disbursement Agent shall not make any
disbursement if it receives Notice from the Lender or the Issuer that any of
the following conditions have not been fulfilled:
(1) All documents required by the Lender or the Issuer to be
recorded or filed, have been recorded or filed. Issuer and Lender agree that
they will not require the recordation of the Lease, the Sublease, the
Issuer's Deed of Trust, the Assignment of Leases, the Facility User's Deed of
Trust, or any instrument which, under Maryland law, would allow a clerk of
the Circuit Court for Baltimore City to require recordation of any of the
foregoing.
(2) All opinions and other due diligence with respect to the
security pledged hereunder and the issuance, delivery and performance of the
Documents by the parties thereto have been delivered to the Issuer, the
Lender and the other parties hereto.
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(f) Advances for Construction Costs and Architects Fees and
Expenses shall be made not more frequently than monthly.
(g) The General Contractor and the Architect agree to include
costs heretofore paid to the General Contractor by the Facility User in the
initial requisition for Construction Costs. Such amount shall be disbursed to
the Issuer.
SECTION 6.8 Allocation of Funds. The amounts in the Project Fund and the
Bond Fund shall be allocated to the following uses. Each Requisition shall
set forth the amount requisitioned and the amount paid to date from each
allocation.
Amount
Interest during $ 70,000
construction
Architect Fees and $ 85,000
Expenses
Disbursement Agent Fees $ 5,000
and Expenses
Costs of Issuance $ 100,000
Construction Costs $3,961,115
Reserve Fund $ 250,000
The funds above can be reallocated only at the written direction to the
Disbursement Agent from the Lender and the approval of the Facility User. If
any allocation is insufficient to fund a request for disbursement and the
Facility User will either obtain approval for the reallocation of amounts or
pay additional sums into the Project Fund to fund any allocation in
accordance with Section 6A. The portion of the City Contribution deposited
into the Project Fund shall be deemed to be allocated for payment of
Construction Costs.
SECTION 6.9 Disbursements of Project Fund and Bond Fund.
(a) Disbursements hereunder shall be made from the sources in the
following order of priority:
FIRST, the disbursements for the initial Three Million One
Hundred Thousand Dollars ($3,100,000) shall be made from the Bond
Fund,
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SECOND, disbursements shall be made from funds in the Project
Fund and additional deposits of Osiris' Required Investment, if
any, required to be made hereunder.
(b) Amounts remaining shall be disbursed in accordance with a
Closing Requisition in the form of Exhibit 5 hereto. The parties hereto
(other than the Disbursement Agent) agree that such funds shall be disbursed
as follows:
FIRST, to the Facility User to the extent of the Facility User's
deposits in the Project Fund exceed $450,000,
SECOND, as directed by the Lender with the approval of the
Issuer, the City, the Authority and the Department.
SECTION 6.10 Improvement of the Facility. The Issuer hereby covenants and
agrees with the Lender that:
(a) Improvement of the Facility. It will cause the improvement of
the Facility for which it is responsible pursuant to the Lease to be
prosecuted with diligence and continuity and will complete such improvement
of the Facility, free and clear of Encumbrances and free and clear of claims
in connection with materials supplied or labor or services performed in
connection with such improvement of the Facility.
(b) Building Permits. All necessary building and other
governmental permits have been obtained with respect to such improvement of
the Facility or will be obtained prior to commencing the particular work for
which they are required.
(c) Compliance With Restrictions, etc. It will comply with all
applicable building restrictions, zoning ordinances, building codes, and
other governmental regulations applicable to such improvement of the facility.
(d) Payment of Contractors. It will promptly pay all contractors
and materialmen which it contracts for such improvement of the Facility the
amounts justly due to them.
SECTION 6.11 Investment of the Project Fund
The Project Fund shall be invested in the Federated Automated
Government Money Trust or such other treasury fund available to the
Disbursement Agent. Investment earnings shall be retained therein.
ARTICLE VII
REPRESENTATIONS OF FACILITY USER
<PAGE>
The Facility User hereby represents and warrants to the Lender and the
Disbursement Agent as follows:
SECTION 7.1. Organization and Authority; Conflicting Laws and Agreements.
The Facility User is a corporation duly organized and existing and is in good
standing under the laws of the State of Delaware, has full and adequate
corporate power to own its property and to carry on its business as now
conducted, is duly licensed or qualified to do business in all jurisdictions
where in the nature of its business or the character of its properties requires
such licensing or qualification and has full right, power and authority to enter
into this Agreement and the Documents, and to perform each and all of the
matters and things provided for in this Agreement and the Documents; and this
Agreement and the Documents do not, nor will the performance or observance by
the Facility User of any of the matters or things provided for in this
Agreement, or the Documents, contravene, conflict with or in any way be
restricted by any law, rule or regulation or order of court applicable to the
Facility User, or any of its businesses, operations or properties or any
provision of any organizational document of the Facility User or any mortgage,
indenture, contract or agreement of or affecting the Facility User or any of its
respective properties.
SECTION 7.2 Subsidiaries. Each subsidiary (if any) is duly organized and
existing as a corporation and is in good standing under the laws of the
jurisdiction in which it was incorporated, has full and adequate corporate power
to carry on its business as now conducted and is duly licensed or qualified in
all jurisdictions wherein the nature of its business or the character of its
properties requires such licensing or qualification. A majority of the
outstanding capital stock of all subsidiaries has been validly issued, is fully
paid and nonassessable and is owned by the Facility User or one or more of the
subsidiaries, free and clear of all liens, security interests and encumbrances
except as noted in the financial statements. All subsidiaries of the Facility
User are listed in Exhibit 6 hereto, and neither the Facility User nor any
Subsidiary conducts business under any other name, except as may be indicated on
Exhibit 6.
SECTION 7.3 Financial Statements. The consolidated financial statements of
the Facility User and its subsidiaries prepared by Coopers & Lybrand for the
fiscal year ended December 31, 1993, which have heretofore been furnished to the
Authority and the Lender, are complete and correct and fairly present
consolidated financial condition of the Facility User and its subsidiaries as of
said date and the results of their operations for the periods covered thereby,
all in accordance with generally accepted accounting principles consistently
applied throughout. Neither the Facility User nor any of its subsidiaries has
any liabilities which are material to the Facility User and such subsidiary,
direct or indirect, fixed or contingent, other than as indicated in said
financial statements, except for those (if any) previously disclosed in writing
to the Authority and the Lender.
SECTION 7.4 Litigation: Tax Returns; Governmental Approvals. There is no
litigation or governmental proceeding pending, nor to the knowledge of the
Facility User threatened, against the Facility User or any Subsidiary which, if
adversely determined, would result in any material adverse change in the
financial condition, properties, business or operations of the Facility User or
any of its Subsidiaries or the performance by the Facility User of its
obligations hereunder or under the Documents, except as previously disclosed in
writing to the Lender and the Authority. All federal, state and local income tax
returns of the Facility User for the fiscal year ended December 31, 1994, and
for all
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fiscal years ended prior to said date, have been filed with the appropriate
taxing authorities, and all taxes shown due thereon have been timely paid. There
are no objections to or controversies in respect of any of the income tax
returns of the Facility User and its subsidiaries for any fiscal year ended
after said date pending or threatened, except for those (if any) previously
disclosed in writing to the Authority, and the Lender, the Facility User
warranting that such disclosures are true and accurate as of the date hereof. No
authorization, consent, approval, license, exemption, filing or registration
from or with any court or governmental department, agency or instrumentality, is
or will be necessary for the execution, delivery or performance by the Facility
User of this Agreement or the Documents.
SECTION 7.5 Enforceability. This Agreement is, and the Documents when
executed and delivered in accordance with the terms of this Agreement will be,
legal, valid and binding obligations of the Facility User and enforceable
against the Facility User in accordance with their respective terms, except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application relating to or affecting the
enforcement of creditor's rights and by general principles of equity.
SECTION 7.6 No Defaults. The Facility User is and will remain in full
compliance with all of the terms and conditions hereof and of the Sublease, and
no Event of Default has occurred and is continuing.
SECTION 7.7 ERISA. The Facility User and its subsidiaries are in compliance
in all material respects with the Employee Retirement Income Security Act of
1974 ("ERISA") as amended, to the extent applicable to them or to any plan,
including both single employer and multi-employer plans subject to Title IV of
ERISA and established or maintained for employees or former employees of the
Facility User, any subsidiary or any member of the "controlled group" (as
defined in ERISA) (such a plan being hereinafter referred to as a "Plan").
Neither the Facility User nor any of its subsidiaries has received any notice to
the contrary from the Pension Benefit Guaranty Corporation ("PBGC") or any other
governmental entity or agency, and no "reportable event" (as defined in ERISA)
has occurred and is continuing. Except as specifically otherwise disclosed in
any information given to the Bank, the present value of all vested benefits
(determined on PBGC-guaranteed benefits and using PBGC interest and mortality
assumptions) under all single-employer Plans maintained by the Facility User or
a commonly-controlled entity does not, as of the most recent valuation date,
exceed the value of the assets of such Plans allocable to such benefits.
SECTION 7.8 Bankruptcy. Neither the Facility User nor any subsidiary of the
Facility User is now or has ever been the subject of voluntary or involuntary
bankruptcy, insolvency or similar proceedings in any jurisdiction.
ARTICLE VIII
COVENANTS OF FACILITY USER
SECTION 8. Covenants. So long the Bond remains outstanding, the Facility
User hereby covenants and agrees with the Lender as follows:
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SECTION 8.1.1 Payment of Taxes and Other Claims. The Facility User will,
and will cause each Subsidiary to, pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, judgments,
assessments and governmental charges levied or imposed upon the Facility User or
any Subsidiary or upon the income, profits or property of the Facility User or
any Subsidiary and (b) all lawful claims for labor, materials and supplies which
if unpaid might by law become a lien upon the property of the Facility User or
any Subsidiary; provided, however, that the Facility User shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim, the amount, applicability or validity of which is being
contested diligently and in good faith by appropriate proceedings and for which
the Facility User or the Subsidiary concerned shall have set aside on its books
adequate reserves with respect thereto and the Facility User shall not be
responsible for the failure of the Construction Manager to pay any tax unless
the Facility User directs or instructs the Construction Manager to do so.
SECTION 8.1.2 Corporate Existence. The Facility User will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, organizational status and good standing in the state of its
organization and in every other jurisdiction where the character of its
properties or the nature of its business requires it to qualify to do business,
as well as the rights (charter and statutory) and franchises of the Facility
User.
SECTION 8.1.3 Maintenance of Insurance. In addition to the specific
requirements in the Documents, the Facility User will maintain, and will cause
each Subsidiary to maintain, insurance coverage as required under the Sublease
and other insurance coverage by good and responsible insurance underwriters in
such forms and amounts and against such risks as are customary for companies
engaged in similar businesses.
SECTION 8.1.4 Financial Information and Reports. The Facility User will,
and will cause each Subsidiary to, employ generally accepted accounting
principles, applied on a consistent basis, and furnish to the Lender and the
Authority:
(a) As soon as available and in any event within one hundred twenty
(120) days after the last day of each fiscal year, consolidated and
consolidating financial statements which have been examined by Coopers & Lybrand
or another firm of independent public accountants of recognized standing
selected by the Facility User covering the operations of the Facility User and
its Subsidiaries as of the end of such year and a consolidated and consolidating
statement of earnings, shareholders' equity and changes in financial position
for the Facility User and its Subsidiaries for the year then ended, each on a
comparative basis with corresponding financial statements for the preceding
fiscal year, which financial statements shall include a balance sheet of the
Facility User as of the end of such fiscal year and a statement of earnings and
surplus of the Facility User for such fiscal year and shall be accompanied by a
report of such independent public accountants stating in substance that such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout (except for changes in
application in which such accountants concur) and that the examination of
accounts in connection with such financial statements has been made in
accordance with generally accepted auditing standards and, accordingly, included
such tests of accounting records and other auditing procedures as such
accountants considered necessary or advisable under the circumstances;
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(b) Promptly upon any officer of the Facility User learning of the
same, Notice of the occurrence of any Event of Default and Notice of the
commencement of any proceeding under the Federal Bankruptcy Code or any other
federal, state bankruptcy, insolvency, receivership or similar law or rules with
respect to the Facility User, any Subsidiary, or any portion of any of their
assets.
(c) Promptly after any distribution thereof, copies of all annual or
quarterly reports prepared in connection with any publicly held securities or
debt issued by the Facility User or any subsidiary.
SECTION 8.1.5 Liens. The Facility User covenants that it will not create,
assume or suffer to exist any lien, security interest or encumbrances upon the
Sublease or any interest therein except:
(a) liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings;
(b) liens and security interests under the Documents.
SECTION 8.1.6 Other Covenants
(a) Employment Count. Upon request, but no more frequent than twice
annually, supply the employment count at the Facility User's premises to the
Authority.
(b) Equal Employment Prohibit discrimination on the basis of (i)
political or religious opinion or affiliation, marital status, race, color,
creed, or natural origin, or (ii) sex or age, except when sex and age
constitutes a bona fide occupational qualification, or (iii) the physical or
mental disability of a qualified individual with a disability. Upon the request
of the Authority or the Department, the Facility User will (to the extent not
prohibited by law) submit to it information relating to its operations, with
regard to political or religious opinion or affiliation, marital status,
physical or mental disability, race, color, creed, sex, age or national origin
on a form to be prescribed by the Department.
(c) Drug and Alcohol Free Workplace. Make a good faith effort to
eliminate illegal drug use and alcohol and drug abuse from its workplace during
the term of this agreement. Specifically, the Facility user shall:
(i) Prohibit the unlawful manufacture, distribution,
dispensation, possession, or use of drugs in its workplace;
(ii) Prohibit its employees from working under the influence of
alcohol or drugs;
(iii) Not hire or assign to work on an activity funded in whole
or part with State funds, anyone whom it knows, or in the exercise of due
diligence should know, currently abuses alcohol or drugs and is not actively
engaged in a bona fide rehabilitation program;
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(iv) Promptly inform the appropriate law enforcement agency or
every drug related crime that occurs in its workplace if it or its employee has
observed the violation or otherwise has reliable information that a violation
has occurred; and
(v) Notify employees that drug and alcohol abuse is banned in
the workplace, impose sanctions on employees who abuse drugs and alcohol in the
workplace, and institute steps to maintain a drug and alcohol free workplace.
(d) Insurance on Completion. Upon completion of construction or upon
occupancy, whichever shall first occur, the Facility User shall obtain and
deliver to the Lender and the Issuer evidence of insurance required under the
Sublease and under Section 9.2 hereof.
SECTION 8.1.7. Construction Covenants. The Facility User shall:
(a) Not unreasonably withhold or delay any consent or approval to any
Requisition or certificate required to be given or delivered hereunder,
(b) Promptly pay all amounts required to be paid by the Facility
User hereunder.
SECTION 8.2. ERISA. The Facility User will, and will cause each Subsidiary
to, promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which, if unpaid or unperformed, might result in the
imposition of a lien or charge against any of their properties or assets, and
will promptly notify the Lender of the occurrence of any reportable event (as
defined in ERISA) which might result in the termination by PBGC of any Plan or
of termination of any such Plan or appointment of a trustee therefor. The
Facility User will notify the Lender of its or any subsidiary's intention to
terminate or withdraw from any Plan and will not, and will not permit any
subsidiary to, terminate any such Plan or withdraw therefrom unless the Facility
User or such subsidiary shall be in compliance with all of the terms and
conditions of this Agreement after giving effect to any liability to PBGC or to
the Plan resulting from such termination or withdrawal.
SECTION 8.3. Obligations of the Facility User Unconditional. The payment
and performance by the Facility User of its obligations hereunder and the
Documents shall be absolute and unconditional, irrespective of any defense or
right of set-off recoupment or counterclaim it might otherwise have against the
Disbursement Agent, the Lender, the General Contractor or any other person or
entity; and the Facility User shall pay absolute net during the term thereof all
payments to be made on account of Sublease and all other payments required
hereunder and thereunder, free of all deductions and without any abatement,
diminution or set-off whatsoever; provided that payment or performance hereunder
shall not be construed as a waiver of any claims of the Facility User.
SECTION 8.4. Compliance with Laws. The Facility User will, and will cause
each Subsidiary to, comply with all applicable federal, state and local laws,
rules, ordinances, regulations where noncompliance could have a materially
adverse effect on their respective financial conditions, properties, businesses
or operations; provided, however, that the Facility User or the affected
Subsidiary,
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as the case may be, may in good faith and by appropriate proceedings contest the
applicability or validity of any such law, so long as the Facility User or such
Subsidiary is prosecuting such contest diligently and has set aside on its books
adequate reserves with respect thereto.
SECTION 8.5. Hazardous Materials. The Facility User will indemnify and
defend the Disbursement Agent and the Lender and hold the Lender and the
Disbursement Agent harmless from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims of any and every kind whatsoever
paid, incurred or suffered by, or asserted against the Lender and the
Disbursement Agent for, with respect to, or as a direct or indirect result of;
the presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission, discharging or release from the Premises of; any Hazardous Material
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law,
regardless of whether or not caused by, or within the control of; the Facility
User; provided, however, that nothing herein shall affect any liability of the
General Contractor under the Construction Management Agreement If the Facility
User receives any notice of (a) the happening of any event involving the use,
spill, discharge or clean-up of any Hazardous Material or (b) any complaint from
any person or entity, including, but not limited to, the United States
Environmental Protection Agency, the Maryland Department of Environment, the
City of Baltimore or other Federal. State or local officer or authority with
respect to any alleged violation of an Environmental Law (and "Environmental
Complaint") then the Facility User shall within ten (10) days of such receipt
give both oral and written notice of the same to the Lender and the Disbursement
Agent (if its duties remain in effect). Upon obtaining knowledge of an
Environmental Complaint from any source and by any means and in the event the
Lender and the Disbursement Agent do not have or obtain knowledge that the
Facility User is taking diligent steps to cure or correct the same, the Lender
and the Disbursement Agent (if its duties remain in effect) shall have the
right, but not the obligation, to exercise any of its rights and remedies under
this Agreement or to enter onto the Premises properties or to take such other
actions as it deems necessary or advisable to clean up, remove, resolve or
minimize the impact of; or otherwise deal with, any such Hazardous Material or
Environmental Complaint. Any and all sums expended by the Disbursement Agent or
the Lender for such purposes, together with interest thereon at the rate of nine
and five tenths percent (9.5%) per annum (the "Default Rate"), shall be
immediately reimbursed by the Facility User upon demand, and shall constitute an
obligation which is secured by the Documents.
SECTION 8.6. Estoppel Certificates. Within ten (10) days after request
from the Lender, the Facility User shall certify, in writing, an estoppel
certificate in the form reasonably requested by the Lender with respect to
the Sublease and the Documents.
SECTION 8.7. Further Assurances. The Facility User and the Lender from time
to time will execute, acknowledge, deliver and record, at the Facility User's
sole cost and expense, all further instruments, assignments, financing
statements, and assurances as in the opinion of the Facility User's or Lender's
counsel may deem be necessary (a) to facilitate the execution of this Agreement,
(b) to secure the rights and remedies under this Agreement and the other
Documents, or (c) to transfer to any new Disbursement Agent or Lender, any
funds, and powers now or hereafter held hereunder or under the other Documents.
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SECTION 8.8. Books and Records: Inspection. The Facility User shall keep
adequate records and books of account with respect to the Property, and its
business in accordance with generally accepted accounting principles; and permit
the Holder, the Authority and their agents, accountants and attorneys, to visit
and inspect the Property and the Building, to examine such records and books of
account and to discuss the affairs, finances and accounts pertaining thereto
with agents of the Facility User at its offices during normal business, upon
reasonable notice, hours and at such other reasonable times and as may be
requested by the Holder or the Authority.
SECTION 8.9. Consent to Jurisdiction: Service of Process.
(a) The Facility User hereby agrees and consents that any action or
proceeding arising out of or brought to enforce the provisions of this Agreement
may be brought in any appropriate court in the State, all at the sole election
of the Holder, and by the execution of this Agreement the Facility User
irrevocably consents to the jurisdiction of each such court.
(b) The Facility User hereby irrevocably appoints Robert Walden,
Chief Financial Officer of the Facility User or his successor, as its agent to
accept service of process for it and on its behalf in any proceeding brought
pursuant to the provisions of subsection (a) of this Section 8.9.
ARTICLE IX
INSURANCE
SECTION 9.1 Insurance Proceeds. Prior to completion of the Space and
related work, all proceeds under casualty policies with respect to the work
under the Construction Management Agreement shall be paid to the Disbursement
Agent and applied at the direction of the Lender, Issuer, and the Facility User
pursuant to requisitions; (a) if funds sufficient to restore such work are
available from such insurance proceeds (together with other funds supplied or
caused to be supplied by the Facility User and no Event of Default has occurred
and is continuing), to the restoration of the Facility; or (b) if sufficient
funds are not available to restore the Facility or an Event of Default has
occurred and is continuing, to prepayment of amounts due under the Bond, as a
mandatory redemption. All moneys not utilized for the restoration of the
Facility shall be applied as a prepayment of amounts due under the Bond, as a
mandatory redemption. If proceeds of insurance are used to restore the Facility,
such funds will be disbursed as provided in Article VI hereunder. After
completion of the improvements to the Space, such funds shall be held by the
Lender and applied as provided above, subject to disbursement under such terms
and conditions as they may determine.
SECTION 9.2 Other Insurance. After completion of construction, the Facility
User will maintain liability and indemnity insurance with respect to the Space
in such amounts and on such terms as required under the Sublease. Such policies
of insurance shall name the Lender as an additional insured thereunder and
within thirty (30) days prior to the expiration of any such policy, the Facility
User shall supply the Lender with a renewal policy marked "Premium Paid".
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
SECTION 10.1. Events of Default Defined. The following events shall be
"Events of Default" under this Financing Agreement:
(a) Any representation or warranty made by or on behalf of the Issuer
herein or any statement or representation made in any certificate, report or
opinion (including legal opinions), financial statement or other instrument
furnished in connection with this Financing Agreement, or any of the other
Documents, proves to have been incorrect in any material respect when made; or
(b) The Issuer fails to pay, within five (5) Business Days after the
date on which the same is due and payable, the principal of; premium, if any, or
interest or any other charges or sums on or under the Bond (whether upon
maturity, after acceleration, on any installment payment date, or after notice
of redemption, or otherwise) or any other payment by the Issuer required by this
Financing Agreement; or
(c) The Issuer defaults in the due and punctual performance or
observance of any covenant, condition, agreement or provision contained in the
Bond or in this Financing Agreement on the part of the Issuer to be performed or
observed (other than as specified in subsection (b) of this Section), and such
default shall continue for a period of thirty (30) days after Notice to the
Issuer specifying such default and requiring the same to be remedied; provided,
however, if such default be such that it cannot be corrected within thirty (30)
days, it shall not be an Event of Default if; in the opinion of the Holder, the
Issuer is taking appropriate corrective action to cure the default and if such
default will not impair the Security or any security for the Bond; or
(d) An Act of Bankruptcy occurs with respect to the Issuer; or
(e) An order or decree appointing a receiver of any of the payments
to be made by the Issuer pursuant to this Financing Agreement or the Bond is
entered with the consent or acquiescence of the Issuer, or such order or decree
is entered without the acquiescence or consent of the Issuer and it is not
vacated, discharged or stayed within sixty (60) days after entry; or
(f) An Event of Default occurs under any of the other Documents.
(g) Default in the observance or performance by the Facility User of
any other provision of this Agreement (other than as provided in (n) below)
which is not remedied within thirty (30) days after notice thereof to the
Facility User by the Lender; provided, however, that if such default cannot be
corrected within thirty (30) days, it shall not be an Event of Default so long
as the Facility User is diligently taking appropriate corrective action to cure
the same in the reasonable opinion of the Lender; or
(h) Any representation or warranty made by the Facility User in this
Agreement or any of the other Documents, or in any of the exhibits hereto or
thereto, or in any opinion, report,
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statement (including, without limitation, financial statements) or certificate
furnished by the Facility User pursuant to this Agreement or any of the other
Documents, proves to have been false, misleading or incomplete in any material
respect as of the date of the issuance or making thereof; or
(i) The Facility User or any subsidiary shall (i) have entered
involuntarily against it an order for relief under the Bankruptcy Code, (ii) not
pay, or admit in writing its inability to pay, its debts generally as they
become due or suspend payment of its obligations, (iii) become insolvent or make
an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, conservator,
liquidation or similar official for it or any substantial part of its property,
(v) institute any proceeding seeking an order for relief or other protection
under the Bankruptcy Code, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, marshaling of assets, adjustment or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, or
(vi) take any corporate action in furtherance of any of the foregoing purposes;
or
(j) A custodian, receiver, trustee, conservator, liquidation or
similar official shall be appointed for the Facility User or any subsidiary for
any substantial part of any of their respective properties, or a proceeding for
such purposes or the purposes described in Subsection (k) hereof shall be
instituted against the Facility User or any subsidiary and such appointment
continues undercharged or any such proceeding continues undismissed or unstayed
for a period of thirty (30) days; or
(k) Any final judgments, writs or warrants of attachment or of any
similar processes aggregating in excess of $100,000 shall be entered or filed
against the Facility User or any Subsidiary or against any of their properties
or assets and remain unpaid, unvacated, unbonded or unstayed on appeal.
(l) The Facility User fails to pay any Osiris' Required Investment or
any other amount payable by the Facility User hereunder within five (5) days of
the written demand therefor.
(m) At least Five Hundred Twenty Five Thousand Dollars ($525,000) of
the proceeds of the MICRF Grants and the MICRF Loan are not deposited in the
Project Fund on or before June30, 1995.
SECTION 10.2. Remedies on Default. Whenever any Event of Default referred
to in Section 10.1 hereof shall have occurred, the Holder of the Bond by Notice
to such effect delivered to the Issuer, may accelerate the maturity of the Bond
and declare all other of the Issuer's Obligations to be immediately due and
payable, bring suit on the Bond, and take such other actions against the Issuer
as it may deem to be appropriate (subject to the provisions of Section 2.6
hereof with respect to the limited liability of the Issuer), as permitted by
law. Upon such declaration, the Bond and all accrued and unpaid interest thereon
and all other of the Issuer's Obligations shall become immediately due and
payable, without protest, presentment, further notice or demand, all of which
are expressly waived by the Issuer, at the place of payment provided in such
Notice, anything in any of the Documents to the contrary notwithstanding. In
addition, the Holder, in its sole discretion, may take any one or more of the
following remedial steps:
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(a) Legal Action.
(i) by mandamus or other suit, action or proceeding at law or in
equity, enforce all rights of the Holder, and require the Facility User to carry
out any agreement with or for the benefit of the Issuer or the Holder, and to
perform its or their duties under the Sublease;
(ii) by action or suit in equity enjoin any acts or things which
may be unlawful or in violation of the rights of the Holder or
(iii) take whatever action at law or in equity as may appear
necessary or desirable to collect the payments and other amounts then due and
thereafter to become due, or to exercise any rights or remedies under, or
enforce performance and observance of any obligation, agreement or covenant of
the Issuer or any other party under this Financing Agreement or under any of the
other Documents.
(b) Books and Records. Have access to and inspect, examine and make
copies of the books and records and any and all accounts and similar data of the
Issuer relating to the Property.
(c) Holder to Enforce Rights of Issuer. The Lender and its successors
and assigns (including, without limitation, any other Holders), as the assignee
of all of the right, title and interest of the Issuer in and to each of the
Documents constituting a part of the security for the Bond (except for the
Reserved Rights of the Issuer), may enforce each and every right granted to the
Issuer pursuant to this Financing Agreement and the other Documents (other than
the Reserved Rights of the Issuer). In any case where action by the Holder
require simultaneous or subsequent action by the Issuer, the Issuer will
cooperate with the Holder and take any and all action necessary to effectuate
the purposes and intent of this Financing Agreement.
(d) Completion. The Lender, after an Event of Default as set forth
above may (but shall not be obliged to) (i) apply any part of the balance of the
proceeds of the Bond to the payment of all costs and expenses that may be
incurred by the Lender, under any Documents and to the payment of interest on
the Bond and (ii) proceed to finish construction of the Facility and for that
purpose may employ such contractors, agents and employees as it deems
appropriate and may advance any proceeds of the Bond and the Project Fund
remaining unadvanced. The Issuer and the Facility User hereby irrevocably
constitute and appoint the Lender, their attorney in-fact (which appointment
shall be deemed coupled with an interest) for and in their name or the name of
the Issuer or the Facility User to perform all the obligations of the Issuer or
the Facility User under the terms of this Agreement, with such amendments as the
Lender shall deem appropriate, and to exercise all the rights and powers of the
Issuer or the Facility User under the Construction Management Agreement, the
Architect's Agreement and such other contracts and agreements as the Issuer or
Facility User has executed or should have executed or intends to execute in
connection with completion of the Facility, and payment of all costs relating
thereto and each of the Issuer or the Facility User hereby grants and gives to
the Disbursement Agent full power and authority to do and perform all and every
act and thing whatsoever authorized, permitted, requisite or necessary to be
done by the Issuer or the Facility User and to complete the Facility and pay all
costs in connection therewith, to all intents and purposes the same as the
Issuer or the Facility User might do, hereby ratifying and confirming all the
said attorney shall lawfully do or choose to do or be
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done by virtue hereof, it being understood and agreed that the aforesaid
provisions impose no duty or obligation on the Lender to do or perform any act
whatsoever. Any such action by the Lender shall not relieve the Issuer or
Facility User of its responsibility to furnish any additional funds needed to
complete the Facility. Upon demand by the Lender, any or all agreements or
contracts with the General Contractor, subcontractors and suppliers shall be
assigned to the Lender by the Issuer or Facility User.
SECTION 10.3. No Remedy Exclusive; Delays or Omissions; Waiver of Breach.
No action taken pursuant to this Article X shall relieve the Issuer or any other
person from its obligations hereunder or under any of the other Documents, all
of which shall survive any such action, and the Holder (to the extent provided
above) may take whatever action at law or in equity as may appear necessary and
desirable to collect the payments and other amounts then due and thereafter to
become due or to enforce the performance and observance of any obligation,
agreement or covenant of the Issuer hereunder or of any other person under any
of the Documents.
No remedy herein conferred upon or reserved to the Holder is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Financing Agreement or under the other Documents or now or hereafter
existing at law or in equity or by statute. Should any right or remedy granted
herein be held to be unlawful, the Holder shall be entitled to every other right
and remedy provided in this Financing Agreement and by law or in equity. No
delay or omission to exercise any right or power accruing upon any default,
omission or failure of performance hereunder or under the Documents shall impair
any such right or power or be construed to be a waiver thereof, but any such
right and power may be exercised from time to time and as often as may be deemed
expedient In the event any agreement contained in this Financing Agreement
should be breached by the Issuer and is thereafter waived by the Holder or any
other party to this transaction, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach. No waiver,
amendment, release or modification of this Financing Agreement shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the Issuer or the Holder and such other party or
parties as may be agreeing to such waiver, amendment, release or modification.
In order to entitle the Holder to exercise any remedy reserved to it in this
Article, it shall not be necessary to give any notice, other than such Notice as
may be herein expressly required.
SECTION 10.4. Termination of Proceedings. In case any proceeding taken by
the Holder on account of any default shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Holder, then and
in every such case, the Holder and the Issuer and all other parties to this
transaction shall be restored to their former positions and rights hereunder,
respectively, and all rights, remedies and powers of the Holder shall continue
as though no such proceeding had been taken.
SECTION 10.5. Application of Moneys. All moneys collected pursuant to this
Article shall, after payment of the cost and expenses of the proceedings
resulting in. the collection of such moneys and of the expenses, liabilities and
advances incurred or made by the Holder, including interest thereon shall be
applied as follows:
First - To the payment of all payments of interest then due on the
Bond;
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Second - To the payment of the unpaid principal balance of the Bond;
Third - To the payment of all other of the Issuer's Obligations, in
such order and in such amounts as the Holder, in its sole discretion, may
determine; and
Fourth - Any remaining amounts shall be returned to the Issuer or
other party entitled thereto.
ARTICLE XI
DISBURSEMENT AGENT
11.1 Terms of Disbursement Agent's Acceptance. The Disbursement Agent
accepts the duties imposed by this Agreement upon the following terms and
conditions.
(a) The Disbursement Agent may exercise any of its powers through
appointment of attorneys-in-fact or agents and such other advisors as it deems
necessary in connection with its duties hereunder.
(b) The Disbursement Agent shall not be liable for any matter or
cause arising under this Agreement or in connection therewith except by reason
of its own willful misconduct or gross negligence.
(c) The Disbursement Agent may select and employ legal counsel and
shall be entitled to rely upon counsel.
11.2 Fees and Expenses. All fees and expenses of the Disbursement Agent
shall be paid from the Project Fund. The Disbursement Agent is authorized to
withdraw such fees and expenses from the Project Fund from the allocation for
Disbursement Agent Fees and Expenses and then from the allocation for
Construction Costs provided invoices are submitted to the Facility User and the
holder of the Bond promptly thereafter. After receipt of Notice of the
occurrence of an Event of Default, the Disbursement Agent shall not incur
expenses other than the ordinary expenses of administering the funds held
hereunder, without the prior consent of the Lender.
11.3 Indemnification of Disbursement Agent. (a) Except as provided in (b)
below, the Facility User hereby agrees to indemnify Disbursement Agent for, and
to hold it harmless against, any loss, liability or expense incurred without
willful misconduct or negligence on the part of Disbursement Agent arising out
of or in connection with entering into this Agreement and carrying out its
duties hereunder, including the costs and expenses of defending itself against
any such claim or liability. To secure such indemnification and to satisfy its
compensation, expenses and disbursements hereunder, Disbursement Agent is hereby
given a first lien upon and the right to reimburse itself therefor out of all
rights, titles and interests of each of the parties in all property deposited
with the Disbursement Agent hereunder.
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(b) The Lender shall indemnify and save harmless the Disbursement
Agent from and against all costs and expenses and liabilities, including
reasonable attorneys' fees, as a direct result of any action taken by the
Disbursement Agent at the direction of the Lender after the occurrence of an
Event of Default hereunder.
(c) Upon receipt of a Notice of an Event of Default, the Disbursement
Agent shall not make any disbursements (other than pay interest on the Bond and
the ordinary fees and expenses of the Disbursement Agent) hereunder without the
prior approval of the Lender.
11.4 Reports. The Disbursement Agent shall submit monthly reports to the
Facility User, the Lender and the Issuer setting forth:
(a) The balances held by the Disbursement Agent as of the first and
last day of the prior month.
(b) All receipts into the Project Fund to date and the prior month
and the interest earnings thereof.
(c) All disbursements made during such month and the payee to whom
the disbursement was made.
11.5 Discharge. Upon completion of construction of the Facility and payment
of all amounts due under Section 6.9 hereunder, the duties of the Disbursement
Agent shall terminate.
11.6 Liability of Disbursement Agent. Disbursement Agent will not be liable
for any loss of the Disbursement Agent or depreciation in the value of the
Project Fund. Disbursement Agent will incur no liability whatever in connection
with its duties hereunder except for willful misconduct or gross negligence so
long as it acts in good faith. Disbursement Agent may rely on any certificate,
statement, request, consent, agreement or other instrument which it believes to
be genuine and to have been signed or presented by a proper person or persons.
Disbursement Agent will not be bound by any modification of this Agreement
unless in writing and signed by the parties hereto. In the event that
Disbursement Agent becomes uncertain as to its duties or rights hereunder or
receives instructions from any other party hereto with respect to the Project
Fund which, in its opinion, are in conflict with any provision of this
Disbursement Agreement, it will be entitled to refrain from taking any action
other than to keep the Project Fund safe until it is directed otherwise in
writing by direction executed by the Issuer, the Holder of the Bond and the
Facility User or by an order, judgment or decree of a court of competent
jurisdiction, as to which order, judgment or decree all rights of appeal have
expired or been waived.
11.7 Resignation: Successor Disbursement Agent.
11.7.1 Resignation. The Disbursement Agent may resign and be discharged
from its duties or obligations hereunder at any time by giving no less than
fifteen days prior written notice of resignation to the other parties hereto
specifying the date when such resignation is to take effect. Disbursement Agent
will thereafter have no further obligation hereunder except to deliver the
Project Fund and any property held by it pursuant to this Agreement to a
successor Disbursement Agent designated by the
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Holder of the Bond, with approval of the Issuer and the Facility User, which
approval shall not be unreasonably withheld (a "Direction"), to hold the Project
Fund as depository pending receipt of a Direction and to render the accounting
required by Section 11.6.3 of the Bond hereof.
11.7.2 Termination. The Holder of the Bond, with the consent of the
Facility User, may terminate the appointment of Disbursement Agent hereunder by
direction to Disbursement Agent, specifying the date such termination will take
effect In the event of such termination or resignation pursuant to Section 11.7,
the Holder of the Bond will appoint a successor Disbursement Agent within
fifteen days of such notice, and Disbursement Agent will turn over and deliver
to successor Disbursement Agent all of the Project Fund and all property held by
it pursuant to this Agreement and render the accounting required by Section
11.7.2 hereof. Upon receipt of the Project Fund and any other property,
successor Disbursement Agent will thereupon be bound by the provisions hereof as
fully as if named Disbursement Agent herein.
11.7.3 Accounting. In the event of the resignation or termination of
Disbursement Agent and the final disbursement of funds under Section 6.9 hereof,
Disbursement Agent will render to the party hereto, and to successor
Disbursement Agent if any, an account in writing of the Project Fund, all other
property held by it pursuant to this Agreement and all distributions therefrom.
11.8 Fees and Expenses.
The Disbursement Agent shall be entitled to withdraw from the Project Fund
or to request additional funds from the Facility User to pay its fees and
expenses hereunder. After the Lender declares an Event of Default, the Lender to
the extent funds in the Project Fund are insufficient, shall pay the fees and
expenses of the Disbursement Agent If no funds are available from the Project
Fund, the Facility User will pay or reimburse Disbursement Agent on request for
all reasonable expenses, disbursements and advances (including without
limitation brokerage commissions and reasonable attorneys' fees, except for
attorneys' fees relating to matters for which Disbursement Agent is determined
to be liable under Section 11.3 hereof) incurred or made by it in connection
with carrying out its duties hereunder.
ARTICLE XII
DURATION OF AGREEMENT; DEFEASANCE
SECTION 12.1. Duration of this Financing Agreement. This Financing
Agreement shall become effective on the Closing Date, and shall continue in full
force and effect until the Termination Date.
SECTION 12.2. Defeasance and Discharge of Lien of the Holder. If and when
the Bond secured hereby shall become due and payable or shall be redeemed in
accordance with its terms and the whole amount of the principal, premium (if
any) and interest so due and payable thereon shall be paid, together with all
other amounts payable to the Holder hereunder and under the other Documents,
then in that ease, all covenants, agreements and other obligations in favor of
the Holder under this Financing Agreement and under the other Documents shall
thereupon cease, terminate and becomes void and be disregarded and
39
<PAGE>
satisfied. In such event, upon request of the Issuer, the Holder shall release
all security for the Bond and all other Security then held by the Holder under
this Financing Agreement and shall execute such releases and other documents as
may be reasonably required by the Issuer.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. Payments Due on Non-Business Days. In any case where a
payment is due under this Financing Agreement on a day other than a Business
Day, then such payment need not be made on such date but may be made on the next
succeeding Business Day, with the same force and effect as if made on the date
due.
SECTION 13.2. Authorized Issuer Representative. Whenever under the
provisions of this Financing Agreement or any of the other Documents the
approval of the Issuer is required, or the Issuer is required to take some
action at the request of any party to this Financing Agreement, unless
specifically provided otherwise, such approval or request shall be given on
behalf of the Issuer by the Authorized Issuer Representative, and the other
parties to this transaction are authorized to rely upon any such approval or
request and the Issuer shall not have any complaint against such other parties
as a result of such reliance. A specimen signature of the Authorized Issuer
Representative has been provided to the other parties to this transaction. In
the event that the Authorized Issuer Representative designated in Section 1.1
hereof shall become unavailable or unable to take any action or make any
certification provided for or required under this Financing Agreement, a
successor or successors shall be appointed by written certificate of the Issuer
furnished to the other parties to this transaction, executed by or on behalf of
the Issuer and containing a specimen signature of such successor or successors.
SECTION 13.3. MIDFA Insurance. Pursuant to the terms and conditions of the
Bond Insurance Agreement, the Authority has a portion of the Issuers
Obligations. Certain of the rights, duties, obligations and remedies of the
Lender under this Financing Agreement and the other Documents are subject to the
terms, conditions and limitations set forth in the Bond Insurance Agreement
and the Lease Insurance Agreement (collectively the "Insurance Agreements").
In recognition of the interests of the Authority as an insurer, the
parties to this Financing Agreement hereby agree that, in addition to the
rights and remedies of the Authority set forth in the Insurance Agreements
and in the other Documents, the Authority has certain rights and remedies in
connection with this transaction, as follows:
(a) Notices to the Authority: Consents. The Lender agrees:
(i) to provide the Authority with copies of all financial
statements, certifications, evidence of insurance coverage, and any other
information or documentation required by the Documents to be given to the Lender
and the Bank, and to give the Authority notice of any occurrences or
circumstances requiring notice to be given to the Lender or the Bank, as
provided in this Financing Agreement and in the other Documents;
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(ii) after the occurrence of an Event of Default, to obtain the
consent, approval, determination, permission, opinion or similar agreement
(other than with respect to matters relating to construction of the Facility,
the Plans or disbursement of proceeds prior to an Event of Default hereunder) of
the Authority under such circumstances and at such times as is required by the
Lender under this Financing Agreement and the other Documents;
(iii) that none of the Documents may be modified or amended
without the prior written consent of the Authority; and
(iv) that the Lender shall n6t exercise any remedies after the
occurrence of an Event of Default hereunder without obtaining the prior approval
of the Authority.
(b) No Warranties by the Authority. The Authority makes no warranty,
express or implied, and makes no assurances that the Facility will be suitable
for the needs of the Issuer or the Facility User or that the proceeds of the
Bond will be sufficient to pay for the costs of the acquisition and improvement
of the Facility.
(c) Payments by the Authority. Notwithstanding any of the provisions
of this Financing Agreement or any of the other Documents, the Authority, on
behalf of the Issuer, may, in its discretion, elect to make any payments
required to be made by the Issuer under the Documents and not paid by the Issuer
within the time provided for therein, and may.- as provided in Section 5.2A of
the Insurance Agreements, elect to cure any defaults under any of the Documents
if it so chooses. In such event, the Authority shall be entitled to
reimbursement from the Issuer for any payments made by it pursuant to this
paragraph, with interest thereon at the Default Rate.
(d) Subrogation and Reimbursement of Authority to the Extent Payments
Made. The Authority, to the extent of any payments made by it pursuant to the
Insurance Agreement or pursuant to paragraph (c) above, shall be surrogated to
(i) all rights of the Lender to receive payment of such amounts from the Issuer
or others under any of the Documents, and (ii) all rights of the Issuer to
receive payment or reimbursement of such amounts from other sources, provided
that no such payment shall be made to the Authority until the Lender has been
paid in full. In addition, the Issuer agrees to reimburse the Authority for any
payments made by the Authority under the Insurance Agreement, and such
obligation to reimburse the Authority, as well as the obligation to reimburse
the Authority pursuant to the provisions of this Financing Agreement, shall be
deemed to be part of the Issuer's Obligations secured by this Financing
Agreement and the other Documents.
(e) Authority a Third-Party Beneficiary. The Authority is a
third-party beneficiary of this Financing Agreement and the other Documents to
which the Authority is not a party.
SECTION 13.4. Further Assurances and Corrective Instruments. The parties
hereto agree that they will, from time to time, execute and deliver, or cause to
be executed and delivered, such Supplements hereto and such further instruments
as may reasonably be required for carrying out the intention of the parties to,
or facilitating the performance of, this Financing Agreement.
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SECTION 13.5. Prior Agreements Canceled. Except for (a) the other
Documents, or (b) any other document or agreement to the extent specifically
provided therein, (i) this Financing Agreement shall completely and fully
supersede all other prior agreements, both written and oral, by and between the
Lender, the City, the Facility User and the Issuer, relating to the financing of
the Facility, and (ii) none of the parties to this Financing Agreement shall
hereafter have any rights thereunder, but shall look solely to this Financing
Agreement and the other Documents for definitions and determination of all of
their respective rights, liabilities and responsibilities relating to the
Facility and the financing therefor.
SECTION 13.6. Binding Effect This Financing Agreement shall inure to the
benefit of and shall be binding upon each of the parties hereto and their
respective successors and permitted assigns. The City is executing this
Agreement in consideration of the City Contribution, so that until the City
funds the City Contribution and executes this Agreement, the Agreement shall be
in full, force and effect with respect to the other parties thereto.
SECTION 13.7. Dissolution of Issuer. In the event of the dissolution of the
Issuer, all of the covenants, stipulations, promises and agreements in this
Financing Agreement contained by or on behalf of; or for the benefit of; the
Issuer, shall bind or inure to the benefit of the successors of the Issuer from
time to time and any person to whom or to which any power or duty of the Issuer
shall be transferred.
SECTION 13.8. Illegality. If fulfillment of any provision hereof or any
transaction related hereto or to the other Documents, at the time performance of
such provisions shall be due, shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision herein
contained operates or would prospectively operate to invalidate this Financing
Agreement in whole or in part, then such clause or provision only shall be void,
as though not herein contained, and the remainder of this Financing Agreement
shall remain operative and in full force and effect.
SECTION 13.9. Amendments. Changes and Modifications. This Financing
Agreement may not be amended, changed, modified, altered or terminated except by
a written instrument executed by all of the parties hereto.
SECTION 13.10. Execution of Counterparts. This Financing Agreement may be
executed simultaneously in several counterparts, each of which shall be deemed
an original, but all of which shall together constitute one and the same
instrument.
SECTION 13.1l. Law Governing Construction of Agreement This Financing
Agreement, having been executed, sealed and delivered in the State, shall be
interpreted and construed in accordance with and governed by the laws of the
State.
SECTION 13.12. Assignment. This Financing Agreement and the other Documents
may not be assigned, in whole or in part, by the Issuer, without the prior
written consent of the Holder and the Authority.
SECTION 13.13. Effective Date. This Financing Agreement has been dated as
of the date first written above solely for the purpose of convenience of
reference and shall become effective upon its
42
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execution and delivery on the Closing Date by the parties hereto. All
representations and warranties set forth herein shall be deemed to have been
made on the Closing Date.
IN WITNESS WHEREOF, the Issuer has caused this Financing Agreement to be
executed under seal in its name and on its behalf by the Executive Director of
the Issuer, and the other parties hereto have caused this Financing Agreement to
be executed, under seal, in their name and on its behalf by its duly authorized
officers, all being done as of the day and year above first written.
WITNESS: MARYLAND ECONOMIC DEVELOPMENT CORPORATION
/s/ John A. Stalfort By: /s/ Hans F. Mayer (SEAL)
- ----------------------------- ----------------------------------
Hans F. Mayer,
Executive Director
WITNESS: THE WHITING-TURNER CONTRACTING COMPANY
/s/ ILLEGIBLE By: /s/ ILLEGIBLE (SEAL)
- ----------------------------- ----------------------------------
Name:
Title:
43
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WITNESS: OSIRIS THERAPEUTICS, INC.
/s/ Robert J. Walden By: /s/ James S. Burns (SEAL)
- ----------------------------- ----------------------------------
Name: James Burns
Title: President
WITNESS: SIGNET TRUST COMPANY, AS DISBURSEMENT AGENT
/s/ Rita M. Sreeson By: /s/ Diane E. TenHoopen (SEAL)
- ----------------------------- ----------------------------------
Name: Diane E. TenHoopen
Title: Vice President
WITNESS: MAYOR AND CITY COUNCIL OF BALTIMORE
By: /s/ ILLEGIBLE (SEAL)
- ----------------------------- ----------------------------------
Name:
Title:
44
<PAGE>
Exhibit 10.20
PLEDGE AGREEMENT
From
OSIRIS THERAPEUTICS, INC.
A Delaware Corporation
Pledgor
On Behalf Of
SIGNET BANK/MARYLAND
a Maryland banking institution
Lender
Date as of June 1, 1995
<PAGE>
Baltimore, Maryland
PLEDGE AGREEMENT
This Pledge Agreement (this "Agreement") is made this June 1, 1995, by
OSIRIS THERAPEUTICS, INC., a Delaware corporation (the "Pledgor"), in favor
of SIGNET BANK/MARYLAND, a Maryland banking institution (the "Lender").
RECITALS
R.1 The Pledgor has requested the Lender to provide a loan to the
Pledgor in the principal amount of Seven Hundred Fifty Thousand Dollars
($750,000.00) (the "Loan") as evidenced by that certain Promissory Note
executed by the Pledgor and delivered to the Lender of even date herewith
(the "Note").
R.2 To secure the full and punctual payment and performance of all of
the Obligations (as hereinafter defined), including the repayment of the
Loan, together with all accrued interest and such other amounts due thereon,
the Lender has required the Pledgor to execute and deliver this Agreement.
R.3 As additional security for the Obligations under the Loan, the
Maryland Industrial Development Financing Authority ("MIDFA") has agreed to
insure a portion of the Loan as set forth in that certain insurance agreement
issued by MIDFA for the benefit of the Lender dated as of June 1, 1995 (the
"Insurance Agreement") and MIDFA has required that the Pledgor execute this
Agreement to secure the Obligations to MIDFA should MIDFA acquire the Loan
from the Lender pursuant to the terms of the Insurance Agreement.
NOW, THEREFORE, in consideration of the premises and for other good,
valuable and legal consideration, the receipt and adequacy of which are
hereby acknowledged, the Pledgor, intending to be legally bound, hereby
agrees as follows:
l. Construction of Agreement and Definitions. Unless varied by this
Agreement, all of the terms used herein without definition which are defined
by the Maryland Uniform Commercial Code shall have the meanings assigned to
them by the Maryland Uniform Commercial Code. Whenever used herein, the words
"Pledgor", "MIDFA", "Lender" and "Obligor" shall be deemed to include their
respective heirs, legal representatives, successors and assigns. All words
used herein shall be deemed to refer to the singular, plural, masculine,
feminine or neuter as the identity of the person or entity or the context may
require.
The following terms shall have the following meanings when used herein:
"Collateral" shall mean: (a) Account No.166010504 maintained at the
Signet Trust Company (the "Account"); (b) all of the property of the Pledgor
listed on Schedule A attached
<PAGE>
hereto and made a part of this Agreement by reference which shall only
include cash or Securities (as hereinafter defined)) and all property
subsequently pledged or deposited pursuant hereto in addition to or in
substitution for any such property which shall only include cash and
Securities; (c) all proceeds (cash and non-cash) of all of the property
listed on Schedule A attached hereto and made a part of this Agreement by
reference, including any money or other property to which the Pledgor shall
become entitled for any reason whatsoever in respect of; in evidence of; as
an addition to, in substitution for, in replacement or renewal of or in
exchange for any of such property, including any cash, interest, income,
payments, dividends, distributions, subscription rights, settlements or
exchanges of any kind in respect of or applicable or incident to such
property, whether in the ordinary course of business or, if applicable, in
connection with any merger, consolidation, reorganization, redemption,
recapitalization, reclassification, stock split, liquidation or increase or
reduction of capital in respect of any issuer of any of such property; and
(d) all of the Pledgor's books and records relating to any of the foregoing
property.
"Loan Documents" shall mean this Agreement, the Note, any other note, any
loan commitment, letter agreement, line of credit agreement, commercial
financing agreement, security agreement, guaranty of payment, mortgage, deed
of trust, pledge agreement, loan agreement, loan and security agreement,
hypothecation agreement, indemnity agreement, letter of credit application
and agreement, assignment or any other document or agreement previously,
simultaneously or hereafter executed and delivered by the Pledgor and/or by
any other Obligor, singly or jointly with another person or persons, to the
Lender in connection with the Note, whether or not the Note is specifically
referred to therein, as the same may from time to time be amended
"Noninsured Amount" shall mean that amount of the outstanding principal
balance of the Loan, together with interest thereon which exceeds the amount
of principal and accrued interest insured by MIDFA under the Insurance
Agreement.
"Obligations" shall mean the full and punctual observance and performance
of all present and future duties, covenants and responsibilities due to the
Lender by the Pledgor arising under or in connection with the Note including
all past, present and future indebtedness, liabilities and obligations of the
Pledgor to the Lender under the Note, the other Loan Documents and this
Agreement for the payment of money (extending to all principal, interest,
fees, expense payments, liquidation costs, and attorney1s fees and expenses).
"Obligor" shall mean individually and collectively the Pledgor, each
person who is primarily or secondarily liable for the repayment of the Note
or any portion thereof; and each person who has granted security for the
repayment of the Note, together with such person's heirs, personal
representatives, successors and assigns. For the purposes of this Agreement,
MIDFA shall not be considered an Obligor.
"Permitted Liens" shall mean liens and security interests of the Lender.
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The term "person" shall include an individual, a corporation, an
association, a partnership, a limited liability company, a trust and an
organization. The words "hereof," "herein," "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision hereof.
"Securities" shall mean securities issued or guaranteed by the United
States of America or collateralized with U.S. Government Securities.
2. Security Interest and Collateral. In order to secure to the Lender
the prompt payment and performance of the Obligations whether or not any
agreement relating to any Obligations specifically refers to this Agreement
or the security interest created hereunder, the Pledgor hereby grants to the
Lender and agrees that the Lender shall have a perfected lien and continuing
security interest in, and pledges and assigns to the Lender, the Collateral.
The Pledgor and the Lender expressly agree that none of the Collateral shall
be applied or deemed to be applied to satisfy or reduce any of the
Obligations, except as provided herein.
The Collateral shall be maintained in the Account at the Signet Trust
Company. Pledgor acknowledges that a copy of this Pledge Agreement shall be
delivered to the Trust Company. Pledgor acknowledges and agrees that the
Trust Company shall comply with all requests regarding the Collateral made by
Secured Party and, except for acts of gross negligence and willful misconduct
by the Trust Company, Pledgor agrees to release the Trust Company from any
and all liability arising from implementing the Secured Patty's requests as
to the disposition of the Collateral.
3. Interest and Cash Dividends. Provided that no "Event of Default", as
defined below, has occurred under this Agreement, any amounts representing
interest and/or cash dividends derived from the Collateral may be withdrawn
from time to time by the Pledgor.
4. Additional Collateral Requirement If on any day that the Lender is
open for business the Lender, in its sole discretion, determines that the
aggregate "Market Value" (as defined in Section 8 below) of the Collateral is
less than one hundred five percent (105%) of the Non-Insured Amount, then,
prior to the close of business on the following business day, the Pledgor
shall deliver or deposit, or cause to be delivered or deposited, to the
Lender as security for the Obligations such additional cash as will cause the
aggregate Market Value of the Collateral to equal or exceed one hundred five
percent (105%) of the Non-Insured Amount on such date. Such additional cash
shall constitute Collateral.
5. Appointment of the Lender as Attorney in-Fact. The Pledgor hereby
irrevocably constitutes and appoints the Lender its attorney-in-fact, with
full power of substitution, and hereby irrevocably authorizes and empowers
the Lender to prepare, execute, deliver, and if appropriate, record with the
appropriate filing office or offices, in the name of the Pledgor, all such
instruments, assignments, stock or bond powers, financing statements,
amendments to or assignments of financing statements, certifications,
acknowledgments, security interest filing
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statements, and/or other documents as the Lender may request or require in
order to perfect, preserve, maintain, continue, protect and/or extend the
security interest and lien granted to the Lender under this Agreement and its
priority, such power of attorney being coupled with an interest. If the
Pledgor fails to execute any such documents within ten (10) days of being
requested to do so by the Lender, the Lender or any officer of the Lender may
exercise this power of attorney and execute such documents in Pledgor's name,
place and stead. This power of attorney may not re revoked or canceled before
all of the Obligations have been paid or otherwise satisfied.
6. Transfers of Collateral. On or prior to the date of this Agreement,
and on any date during the term hereof that additional cash is to be
delivered to the Lender pursuant to Section 4 of this Agreement, the Pledgor
shall cause all of the Collateral and any such cash to be transferred to the
Lender. Such Collateral and cash shall be placed by the Lender in the Account
at the Trust Company.
7. Possession of the Collateral. The Pledgor irrevocably constitutes
and appoints the Lender its attorney-in-fact, with full power of
substitution, and hereby irrevocably authorizes and empowers the Lender: (a)
to demand, collect, receive, receipt for, sue and recover all interest,
dividends, other sums of money due, other property due and all other proceeds
which may now or hereinafter become due under the Collateral; (1))to execute,
sign and endorse any and all instruments, receipts, checks, drafts and
warrants issued in payment for the Collateral; (c) to settle or compromise
any and all claims arising under the Collateral and in the place and stead of
the Pledgor to execute and deliver the Pledgor's release; (d) to file any
claim(s) or to take any action or institute or take part in any proceedings,
either in the Lender's own name or m the name of the Pledgor or otherwise in
connection with the Collateral; (e) to execute in the Pledgor's name any
necessary instruments or documents in connection with the Collateral; and (f)
to exercise any and all rights of conversion, exchange, subscription or any
other rights, privileges or options pertaining to the Collateral as if the
Lender were the absolute owner thereof; including the right to exchange, in
the Lender's discretion, any and all of the Collateral upon any merger,
consolidation, reorganization, recapitalization, reclassification, stock
split, liquidation or other readjustment in respect to any issuer of any of
the Collateral. Any or all of the Collateral may at any time, at the option
of the Lender, be registered in the name of the Lender or its nominee. In the
event that any of the Collateral shall mature or otherwise become payable,
the Lender may, in the place and stead of the Pledgor, cause the same to be
renewed, rolled over or reinvested in such manner and upon such terms and
conditions as the Lender may reasonably determine. Except as may be otherwise
provided herein, following the occurrence of an Event of Default and during
the continuance thereof the Lender shall have the right to receive and to
apply to any of the Obligations, as the Lender may determine in its
discretion, any money or other property payable on account of any sale,
assignment or transfer of any of the Collateral, whether pursuant to a
redemption or repurchase of the Collateral by the issuer thereof; or
otherwise.
8. Right to Withdraw Excess Collateral. Provided that no Event of
Default has occurred or will occur under this Agreement either before or
after any such withdrawal which has
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not been waived by the Lender or cured by the Pledgor, the Pledgor may, not
more frequently than quarterly, demand from the Lender the return of any
"Excess Collateral", and the Lender shall return such "Excess Collateral" to
the Pledgor. For purposes hereof; "Excess Collateral" shall mean such
Collateral as, after its return to the Pledgor will leave Collateral
remaining with an aggregate "Market Value" greater than or equal to one
hundred five percent (105%) of the Non-Insured Amount due under the Note on
the date of calculation. For purposes hereof; "Market Value" shall mean the
amount of cash and the value of any other Collateral as determined by the
Lender in accordance with market convention. The Pledgor shall not request
the Trust Company to return Excess Collateral, but shall request the Lender
to require the Trust Company to return Excess Collateral, as the Pledgor
acknowledges that the control over the withdrawal of Collateral from the
Account has been transferred by Pledgor to the Lender.
9. Duty of Care. The powers conferred on the Lender hereunder are
solely to protect its security interest in the Collateral and shall not
impose any duty upon the Lender to exercise any such powers. The Pledgor
shall be responsible for the preservation of any Collateral in the Lender's
possession. Beyond the exercise of reasonable care to assure the safe custody
of any of the Collateral while in the possession of the Lender, the Lender
shall have no duty or liability: (a) to collect any of the Collateral or any
moneys due or to become due thereunder, (b)to give any notices with respect
to the Collateral, (c) to preserve or maintain any of the Collateral not in
its possession, or (d) to preserve any rights of the Pledgor against prior
parties to the Collateral. The Lender shall be relieved of all responsibility
for the Collateral upon surrendering the same to the Pledgor. In particular,
but without limitation, the Lender shall have no responsibility for any
depreciation in value of the Collateral. The Lender shall be deemed to have
exercised reasonable care with respect to the Collateral in its possession if
the Lender takes such action as the Pledgor shall reasonably request in
writing; but no failure to comply with any such request shall be deemed a
failure to exercise reasonable care, and no failure to do any act not
requested by the Pledgor shall be deemed a failure to exercise reasonable
care.
10. Rights of the Pledgor in the Collateral. The Pledgor shall not have
any right to modify, amend or waive any terms or conditions of the Collateral,
or any rights or interests therein, without the Lender's prior written
consent. The Pledgor shall have the right to direct the investment of cash in
the Account, provided the cash is invested in Securities. The Pledgor,
however, shall not have the right to withdrawal cash or Securities from the
Account without the Lender's prior consent, except as provided in Section 3
(as to dividends and interest) herein.
11. Representations and Warranties. The Pledgor represents, warrants and
agrees that: (a) the Pledgor is and shall remain the legal and equitable
owner of all of the Collateral and has good and marketable title to the
Collateral free and clear of all liens, pledges, security interests and
encumbrances, except for Permitted Liens; (b)this Agreement and any other
Loan Documents executed by the Pledgor constitute the legally binding
obligations of the Pledgor and are fully enforceable against the Pledgor in
accordance with their terms; (c) to the Pledgor's knowledge, there are no
injunctions or similar orders outstanding against any of the Collateral and
no actions, suits or proceedings pending or threatened relating to the
Collateral; (d) the
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Pledgor's name is as specified on the signature line of this Agreement; and
(e) all information contained in any financial statement, application,
schedule, report or any other document given to the Lender by the Pledgor is
true and accurate in all material respects, and the Pledgor has not omitted
to state any fact or any fact necessary to make such information not
materially misleading.
12. Affirmative Covenants. Until all of the Obligations have been paid
in full, the Pledgor covenants and agrees that the Pledgor shall, except as
otherwise agreed to in writing by the Lender: (a) pay as and when due all
taxes, levies, license fees, assessments and other impositions levied on the
Collateral or any part thereof or for its use and operation; (b)do, file,
record, make, execute and deliver all such additional and further acts,
things, notices, deeds, assurances, instruments and documents as the Lender
may reasonably request to register in the name of the Lender and to vest in,
perfect, preserve, protect and assure to the Lender its rights hereunder or
in any of the Collateral or to give effect to the rights, powers and remedies
of the Lender hereunder, and pay to the Lender all taxes, fees and costs
(including reasonable attorney's fees) paid or incurred by the Lender in
connection with the preparation, transfer, filing or recordation thereof; (c)
defend its title to the Collateral against all persons (other than
transferees of the Lender and all persons claiming through them) and, upon
request of the Lender, furnish such further assurances of title as may be
required by the Lender; (d) execute and deliver to the Lender, whenever
requested by the Lender, any security agreements, financing statements,
amendments to or assignments of financing statements, assignments, notices,
transfer instruments, stock powers, sight drafts, withdrawal forms and such
other documents and instruments as the Lender may request, in form and
content satisfactory to the Lender, and otherwise do or cause to be done from
time to time all things requested by the Lender, in order to confirm,
preserve, protect or perfect, or to maintain the perfection of; the Lender's
security interest in any of the Collateral and/or its priority; (e) pay on
demand the cost of filing any financing, continuation, or termination
statement as well as any recordation or transfer tax required by law to be
paid in connection with the filing or recording of any such statement; and
(f) pay on demand all costs for insuring, maintaining and 'preserving the
Collateral.
13. Negative Covenants. Until all of the Obligations have been paid in
full, the Pledgor covenants and agrees that the Pledgor shall not, except as
otherwise agreed to in writing by the Lender, sell, lease, transfer, exchange
or otherwise encumber or dispose of the Collateral, or any part thereof.
14. Performance by the Lender. If the Pledgor fails to perform, observe,
or comply with any of the conditions, terms or covenants contained in this
Agreement, the Lender, without notice to or demand upon the Pledgor and
without waiving or releasing any of the Obligations or any default, may, but
shall be under no obligation to, at any time thereafter perform such
conditions, terms or covenants for the account of and at the expense of the
Pledgor. All sums paid or advanced by the Lender in connection with the
foregoing and all costs and expenses as calculated and determined by the
Lender (including, without limitation, reasonable attorneys' fees and
expenses) incurred in connection therewith (collectively, the "Expense
Payments")
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<PAGE>
together with interest thereon at a per annum rate of interest which is equal
to the then highest rate of interest charged on the principal of the Note
giving effect to any default rate therein, from the date incurred until
repaid in full, shall be paid by the Pledgor to the Lender on demand and
shall constitute and become a part of the Obligations secured hereby.
15. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Agreement:
(a) The failure of the Pledgor or any other Obligor to perform,
observe or comply with any agreement, covenant, or promise made under this
Agreement which failure remains uncured for a period of thirty (30) days
after written notice thereof by the Lender to the Pledgor;
(b) if any representation or warranty made herein or if any
information contained in any financial statement, application, schedule,
report or any other document given by the Pledgor, any Obligor or any other
person in connection with this Agreement or with any of the Loan Documents is
not in all material respects true and accurate, or if the Pledgor, such
Obligor or such other person omitted to state any fact necessary to make such
information not materially misleading; and
(c) the occurrence of an Event of Default as defined under any of
the Loan Documents or under any of the Obligations and the expiration of any
applicable grace period.
16. Rights and Remedies Upon Default. Upon the occurrence of an Event of
Default hereunder, the Lender may, at its option and without notice to the
Pledgor or any other Obligor: (a) charge, setoff and otherwise apply all or
any part of the Collateral against the Obligations; (b) exercise the rights
and remedies of a secured party under the applicable Uniform Commercial Code
and all other applicable laws (in addition to all of its rights, powers,
remedies under this Agreement); (c) take or retain control of any of the
Collateral; (d) enforce the security interest granted to the Lender hereunder
by' retaining, collecting or liquidating all or any part of the Collateral or
selling or otherwise disposing of all or any part of the Collateral, in one
or more parcels, at the same or different times, at public or private sale or
disposition; and (e) notify any or all obligors on the Collateral to make
payments thereon directly to the Lender and demand, collect, sue for and
receive any money or property at any time due, payable or receivable on
account of any or all of the Collateral.
17. Notice of Sale of the Collateral. Any written notice of the sale,
disposition or other intended action by the Lender with respect to the
Collateral which is required by applicable laws and is hand-delivered or is
sent by facsimile transmission or is sent by first class mail, postage
prepaid to the Pledgor at the Pledgor's address as specified below or such
other address of the Pledgor which may from time to time be shown on the
Lender's records shall constitute reasonable notice to the Pledgor so long
as: (a) with respect to such of the Collateral as is of a type customarily
sold on a recognized market, such notice is given contemporaneously with such
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<PAGE>
sale, disposition or other intended action; and (b) with respect to the rest
of the Collateral, such notice is given at least ten (10) days prior to such
sale, disposition or other intended action. However, this provision shall not
be construed to impose any obligation on the Lender to notify the Pledgor of
the Lender's intent to sell, dispose of; or take other action with respect to
the Collateral, except to the extent applicable law requires such notice.
18. Sale of the Collateral. All sales or other dispositions of
Collateral may be made for cash, upon credit or for future delivery. In no
event shall the Pledgor be credited with any part of the proceeds of
liquidation, sale or other disposition of any Collateral until cash payment
thereon has actually been received by the Lender, and the Lender shall have
no obligation to delay any liquidation, sale, or other disposition because
the same may result in the imposition of any forfeiture, premium or penalty,
the Pledgor hereby acknowledging that the risk of such forfeiture, premium or
penalty is inherent in granting a security interest in the Collateral to the
Lender. In connection with any liquidation, sale or other disposition of any
of the Collateral, the Lender shall have the right, in the name, place and
stead of the Pledgor, to execute all necessary endorsements, assignments or
other instruments of conveyance or transfer with respect to the Collateral.
19. Liquidation Costs. All costs and expenses, including, without
limitation, attorneys' fees and expenses, incurred by or on behalf of the
Lender in connection with the taking, holding, preparing for sale or other
disposition, selling, replacement, reinvestment, managing, collecting, or
otherwise disposing of the Collateral (collectively, the "Liquidation
Costs"), together with interest thereon at a per annum rate of interest which
is equal to the then highest rate of interest charged on the principal of the
Note giving effect to any default rate thereon, from the date of payment
until repaid in full, shall be paid by the Pledgor to the Lender on demand
and shall constitute and become a part of the Obligations secured hereby. Any
proceeds of disposition of the Collateral will be applied by the Lender in
the manner provided in the Note.
20. Certain Waivers by the Pledgor. The Lender, without notice to or
further consent of the Pledgor and without in any respect compromising,
impairing, releasing, lessening or affecting the obligations of the Pledgor
hereunder (except as may be specifically agreed in connection therewith),
may: (a) Release, surrender, waive, add, substitute, settle, exchange,
compromise, modify, extend or grant indulgences with respect to (i) the Note,
(ii) any of the Loan Documents, (iii) all or any part of the Collateral or
other security for the Note, and/or (iv) any Obligor; (b) Waive or excuse a
default or defaults hereunder, under the Note or under any of the Loan
Documents; (c) Grant extensions of time for the payment or performance of any
of the Obligations; and (d) Release in whole or in part any Obligor;
21. Indemnification. The Pledgor shall indemnify and hold the Lender
harmless from and against losses, liabilities, claims, suits, damages and
expenses (including attorneys' fees) suffered or incurred by the Lender and
relating to or arising out of this Agreement and the transactions
contemplated thereby, other than such losses, liabilities, claims, suits,
damages and
-8-
<PAGE>
expenses arising out of the gross negligence or willful misconduct of the
Lender, and any such losses and expenses shall become part of the Obligations
and be secured hereby.
22. Remedies Cumulative. Each right, power and remedy of the Lender
hereunder, under the Loan Documents or now or hereafter existing at law, in
equity, by statute or otherwise shall be cumulative and concurrent, and the
exercise or the beginning of the exercise of any one or more of them shall
not preclude the simultaneous or later exercise by the Lender of any or all
such other rights, powers or remedies. No failure or delay by the Lender to
insist upon the strict performance of any one or more provisions of this
Agreement or of the Loan Documents or to exercise any right, power or remedy
consequent upon a breach thereof or a default hereunder shall constitute a
waiver thereof; or preclude the Lender from exercising any such right, power
or remedy. By accepting full or partial payment after the due date of any of
the Obligations, the Lender shall not be deemed to have waived the right
either to require prompt payment when due of all other Obligations, or to
declare a default for failure to effect such payment of any such other
Obligations.
23. Choice of Law: Forum Selection: Consent to Jurisdiction. This
Agreement shall be governed by, construed and interpreted in accordance with
the laws of the State of Maryland (excluding the choice of law rules
thereof). The Pledgor hereby (a) agrees that all disputes and matters
whatsoever arising under, in connection with, or incident to this Agreement
shall be litigated, if at all, in and before a court located in the State of
Maryland to the exclusion of the courts of any other state or country and
(b)irrevocably submits to the non-exclusive jurisdiction of any Maryland
court or federal court sitting in the State of Maryland in any action or
proceeding arising out of or relating to this Agreement, and hereby
irrevocably waives any objection to the laying or venue of any such action or
proceeding in any such court and any claim that any such action or proceeding
has been brought in an inconvenient forum. A final judgment in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any other manner provided by law.
24. Service of Process. The Pledgor hereby consents to process being
served in any suit, action or proceeding instituted in connection with this
Agreement by the mailing of a copy thereof to the Pledgor by certified mail,
postage prepaid, return receipt requested. The Pledgor hereby irrevocably
agrees that such service shall be deemed to be service of process upon the
Pledgor in any such suit, action or proceeding. Nothing in this Agreement
shall affect the right of the Lender to serve process in any other manner
otherwise permitted by law, and nothing in this Agreement will limit the
right of the Lender otherwise to bring proceedings against the Pledgor in the
courts of any other jurisdiction or jurisdictions.
25. Commercial Purposes. The Pledgor acknowledges and warrants that (a)
the indebtedness evidenced by the Note is incurred for the purpose of
acquiring or carrying on a business or commercial enterprise and that such
indebtedness is a "commercial loan" within the meaning of Title 12 of the
Commercial Law Article of the Annotated Code of Maryland (1990 Rep. Vol.),as
amended, and (b) all proceeds arising from such indebtedness will be used
solely
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<PAGE>
in connection with such business or commercial enterprise and (c) the
proceeds of such indebtedness will not be used for the purchase of registered
equity securities within the purview of Regulation "U" issued by the Board of
Governors at the Federal Reserve System.
26. Invalidity of Any Part. If any provision or part of any provision of
this Agreement shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision (or any remaining part of any provision) of this
Agreement, and this Agreement shall be construed as if such invalid, illegal
or unenforceable provision (or part thereof) had never been contained in this
Agreement, but only to the extent of its invalidity, illegality, or
unenforceability.
27. WAIVER OF JURY TRIAL. THE PLEDGOR HEREBY (i) COVENANTS AND AGREES
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND
(ii) WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE LENDER AND
THE PLEDGOR MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY
PERTAINING TO THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS AND/OR ANY
TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR THE LACK OF
ANY OF THE FOREGOING) RELATING IN ANY WAY TO THE PLED GOR-LENDER RELATIONSHIP
BETWEEN THE PARTIES. IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES
A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS
OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT. THIS WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE PLED GOR AND THE PLED GOR HEREBY AGREES
THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL
TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THE LENDER IS HEREBY AUTHORIZED TO SUBMIT THIS AGREEMENT TO ANY COURT
HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PLED GOR SO AS TO SERVE
AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO TRIAL BY JURY. THE PLED GOR
REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS IIAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
28. Notice: Any notice, demand, request or other communication which the
Lender or the Pledgor may be required to give hereunder shall be given in the
manner provided in the Loan Agreement executed on even date herewith by and
between the Pledgor and the Lender.
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<PAGE>
29. Miscellaneous. Time is of the essence under this Agreement. The
paragraph headings of this Agreement are for convenience only, and shall not
limit or otherwise affect any of the terms hereof. This Agreement and the
Loan Documents, if any, constitute the entire agreement between the parties
with respect to their subject matter and supersede all prior letters,
representations, or agreements, oral or written, with respect thereto. The
Lender may, without notice to or consent of the Pledgor, sell, assign or
transfer the Note and this Agreement or sell, assign, transfer or grant
participations in all or any part of the Obligations to others at any time
and from time to time including, but not limited to an assignment to MIDFA
pursuant to the Insurance Agreement; in connection therewith, the Lender
shall have the right to assign all or any part of the rights in any of the
Collateral, and the Lender may divulge to any potential assignee, transferee
or participant all information, reports, financial statements and documents
obtained in connection with this Agreement and any other Loan Documents or
otherwise; provided, however, that (a)the Lender may not assign any of its
obligations to make advances under the Loan, and (1)) the Lender may not
disclose to any potential assignee, transferee or participant any information
with respect to the Pledgor or the Loan unless such person has agreed in
writing to treat such information as confidential. Any such assignee,
transferee or participant including, but not limited to MIDFA shall have the
rights of the Lender with respect to the Collateral so assigned, transferred
or participated, and the Lender shall thereafter be relieved from all duties
with respect to any such Collateral. No modification, release, or waiver of
this Agreement shall be deemed to be made by the Lender unless in writing
signed by the Lender, and each such waiver, if any, shall apply only with
respect to the specific instance involved. No course of dealing or conduct
shall be effective to modify, release or waive any provisions of this
Agreement or any of the other Loan Documents. This Agreement shall inure to
the benefit of and be enforceable by the Lender and the Lender's successors
and assigns and any other person to whom the Lender may grant an interest in
the Obligations and shall be binding upon and enforceable against the Pledgor
and the Pledgor's successors and assigns. Whenever used herein, the singular
number shall include the plural, the plural the singular, and the use of the
masculine, feminine, or neuter gender shall include all genders. This
Agreement may be executed in any number of counterparts, all of which, when
taken together shall constitute one Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Pledgor has duly executed this Agreement under
seal as of the day and year first here in above set forth.
WITNESS/ATTEST: OSIRIS THERAPEUTICS, INC.
A Delaware Corporation
/s/ Nancy G. Rubin By: /s/ James S. Burns (SEAL)
- ------------------ ---------------------------
James S. Burns
President and Chief
Executive Officer
11100 Euclid Avenue
Wearn Building, Fourth Floor
Cleveland, Ohio 44106
ACKNOWLEDGEMENT
STATE OF Ohio )
------ ) to wit:
CITY/COUNTY OF Cuyahoga )
--------
I HEREBY CERTIFY that on this 1 day of June, 1995, before me, the
---
subscriber, a Notary Public of the State of Ohio , personally appeared
------
James S. Burns, who acknowledged himself to be the Chief Executive Officer of
Osiris Therapeutics, Inc., a Delaware corporation, and that he, as the Chief
Executive Officer of Osiris Therapeutics, Inc.,
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<PAGE>
being authorized to do so, executed that Pledge Agreement for the purposes
contained in that instrument, by signing the name of the corporation by
himself as Chief Executive Officer.
IN WITNESS WHEREOF, I set my hand and official seal.
[NOTARY SEAL] Margaret M. Zdesar
-------------------------
Notary Public
Margaret M Zdesar
Notary Public, State of Ohio - Cuya, Cty.
My Commission Expires September 30,1997
-----------------------------------------
Printed Name of Notary Public
My Commission Expires: September 30, 1997
------------------
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<PAGE>
SCHEDULE A
LIST OF COLLATERAL
All cash, Securities and other property contained in Trust Account No.
16610504 at Signet Trust Company.
<PAGE>
LOAN AGREEMENT
By and Between
OSIRIS THERAPEUTICS, INC.
A Delaware corporation
Borrower
and
SIGNET BANK/MARYLAND
A Maryland banking institution
Lender
Dated as of June 1, 1995
<PAGE>
LOAN AGREEMENT
This Loan Agreement is made this 1st day of June, 1995 by and between
OSIRIS THERAPEUTICS, INC., a Delaware corporation (the "Borrower"), and
SIGNET BANK/MARYLAND, a Maryland banking institution (the "Lender").
RECITALS
R.1 The Borrower has requested the Lender to extend credit to the
Borrower up to the principal amount of Seven Hundred Fifty Thousand Dollars
($750,000.00) (the "Loan"), and the Lender is willing to extend such credit
to be evidenced by a Promissory Note of even date herewith (such Promissory
Note, as the same may be amended, extended and restated from time to time,
the "Note").
R.2 The obligations of the Borrower to the Lender are to be insured in
part by the Maryland Industrial Development Financing Authority ("MIDFA")
pursuant to that certain Insurance Agreement dated June 1, 1995 (the
"Insurance Agreement") issued for the benefit of the Lender. Under the terms
of the Insurance Agreement, MIDFA has the right, but not the obligation, to
purchase the Loan and the Loan Documents from the Lender.
R.3 The Lender has agreed to extend the Loan to the Borrower and MIDFA
has agreed to insure the Borrower's obligations in connection with the Loan,
provided the Borrower executes this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein, and other good, valuable and legal
consideration, the receipt and adequacy of which are hereby acknowledged, the
Borrower and the Lender, intending to be legally bound, do hereby agree as
follows:
l. CONSTRUCTION OF AGREEMENT AND DEFINITIONS OF TERMS.
Unless varied by this Agreement or unless the context otherwise requires,
all accounting terms used herein shall have the meanings assigned to them by
GAAP. Whenever the phrase "satisfactory to the Lender" is used in this
Agreement, such phrase shall mean "satisfactory to the Lender in its sole
discretion exercised reasonably and in good faith." Whenever used herein, the
words "Borrower", "Lender" and "Obligor" shall be deemed to include their
respective heirs, legal representatives, successors and assigns. All words
used herein shall be deemed to refer to the singular, plural, masculine,
feminine or neuter as the identity of the Person or the context may require.
The following words and terms shall have the following respective
meanings when used herein, unless the context otherwise requires:
<PAGE>
"Agreement" shall mean collectively this Agreement, any rider(s) hereto
and any exhibit(s) and attachment(s) hereto, all as amended, extended, or
modified by the parties hereto from time to time.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978,
as amended from time to time.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which the Lender is authorized or required to be closed. Any reference
in any Loan Document to the term "day", as distinct from a "Business Day"
shall mean a calendar day including Saturday, Sunday and every other day,
including any day when the Lender is authorized or required to be closed.
"Certified" shall mean that the information, statement, schedule, report
or other document required to be "Certified" shall contain a representation
of a duly authorized officer of the Borrower that such information,
statement, schedule, report or other document is true and complete.
"Closing Date" shall be the date selected by the Borrower and the Lender
as the date by which this Agreement has been executed by all parties and all
conditions precedent to an advance of finds hereunder have been satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning assigned to it in the Pledge
Agreement executed by the Borrower and delivered to the Lender on this date.
"Dollars" and the "$" sign shall mean lawful money of the United States
of America.
"GAAP" shall mean those ~ accounting principles and practices which are
recognized as such by the American Institute of Certified Public Accountants,
consistently applied and maintained throughout the period indicated and
consistent with the prior financial practices of the Borrower. In the event
of a change in GAAP, the Lender and the Borrower will thereafter negotiate in
good faith to revise any covenants of this Agreement affected thereby in
order to make such covenants consistent with GAAP then in effect.
"Governmental Authority" shall mean any nation or government, any state
or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirements" shall mean all laws, ordinances, codes,
rules, regulations, orders, writs, injunctions or decrees of any Governmental
Authority applicable to the Borrower or the Collateral.
2
<PAGE>
"Indebtedness" shall mean all items of indebtedness, obligation or
liability, whether matured or unmatured, liquidated or unliquidated, funded
or unfunded, direct or contingent, joint or several, which would properly be
included in the liability section of a balance sheet or in a footnote to a
financial statement in accordance with GAAP, and shall also include (a) all
indebtedness guaranteed, directly or indirectly, in any manner, or endorsed
(other than for collection or deposit in the ordinary course of business) or
sold with recourse, (b) all indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or otherwise, (c) all obligations
in respect of letters of credit, banker's or other acceptances or similar
obligations, and (d) all indebtedness secured by (or for which the holder of
such indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, assignment, lien, security interest or other
charge or encumbrance upon property owned or acquired subject thereto,
whether or not the liabilities secured thereby have been assumed or
guaranteed.
"Lien" shall mean any statutory or common law consensual or
non-consensual mortgage, deed of trust, pledge, security interest, right of
setoff, or encumbrance of any kind, whether perfected or unperfected,
avoidable or unavoidable, including, without limitation, any conditional sale
or other title retention agreement, any lease transaction in the nature
thereof and any secured transaction under the Uniform Commercial Code of any
jurisdiction.
"Loan Documents" shall mean this Agreement, the Pledge Agreement, the
Note, any other note, any loan commitment, letter agreement, line of credit
agreement, commercial financing agreement, security agreement, guaranty of
payment, mortgage, deed of trust, pledge agreement, loan agreement, loan and
security agreement, hypothecation agreement, indemnity agreement, letter of
credit application and agreement, assignment or any other document or
agreement previously, simultaneously or hereafter executed and delivered by
the Borrower and/or by any other Obligor, singly or jointly with another
Person, to the Lender in connection with the Loan, whether or not the Note is
specifically referred to therein, as the same may from time to time be
amended.
"Maximum Loan Amount" shall mean, at any time, Seven Hundred Fifty
Thousand Dollars ($750,000.00).
"Note" shall mean the promissory note of the Borrower of even date
herewith in the principal amount of Seven Hundred Fifty Thousand Dollars
($750,000.00), as the same may be amended, extended, renewed, supplemented or
replaced from time to time.
"Obligations" shall mean the full and punctual observance and performance
of all present and future duties, covenants and responsibilities due to the
Lender by the Borrower in connection with the Loan, including but not limited
to all past, present and future indebtedness, liabilities and obligations of
the Borrower to the Lender under the Loan Documents for the payment of money
(extending to all principal, interest, fees, expense payments, liquidation
costs, and attorney's fees and expenses).
3
<PAGE>
"Obligor" shall mean individually and collectively the Borrower, each
Person who is primarily or secondarily liable for the repayment of the Note
or any portion thereof, and each Person who has granted security for the
repayment of the Note, together with such Person's heirs, personal
representatives, successors and assigns. For the purposes of this Agreement,
Obligor shall not include MIDFA.
"Person" shall include natural persons, corporations, limited liability
companies, associations, partnerships, joint ventures, trusts, Governmental
Authorities and every other organization or entity of every kind.
2. THE LOAN
2.01 Loan Advances. The Lender agrees to make advances to the
Borrower from time to time until December 1, 1995, subject to all of the
terms and conditions of this Agreement. All requests by the Borrower for
advances shall be made in such manner and form and with such prior notice to
the Lender as the Lender may reasonably require from time to time. Each
request for an advance shall be for a minimum amount of $50,000.00. Each such
request shall contain or be accompanied by such information and documents
(which shall be Certified if required by the Lender) concerning the
Collateral, the Borrower's financial condition, use of the proceeds of such
advance and of advances previously made and/or any other matters as the
Lender may from time to time require. In no event shall the Lender be
obligated to make any advance hereunder if an Event of Default has occurred
under the Note or if such advance would cause the total principal amount of
advances made and outstanding hereunder to exceed the Maximum Loan Amount.
Even if the total principal amount of advances outstanding shall at any time
and for any reason exceed the Maximum Loan Amount, the Borrower shall
nonetheless be liable for the entire principal amount outstanding, with
interest thereon at the rate and calculated in the manner provided in the
Note, in accordance with this Agreement and the Note. If the total principal
amount of advances outstanding hereunder shall at any time exceed the Maximum
Loan Amount, the Borrower shall immediately pay to the Lender upon demand the
amount of such excess, with interest thereon at the rate and calculated in
the manner provided in the Note. The Borrower agrees that the Borrower shall
be liable for, and the Collateral shall secure, the repayment of each advance
made by the Lender to or for the Borrower hereunder, with interest at the
rate and calculated in the manner provided in the Note, whether or not such
advance was duly requested or authorized by the Borrower and whether or not
any person requesting such advance was duly authorized to make such request.
Subject to all of the terms and conditions of this Agreement and the other
Loan Documents, the Borrower may borrow hereunder until December 1, 1995.
Borrower acknowledges and agrees that on December 1, 1995, the Lender shall
advance to the Borrower the balance of the Loan, should such funds not have
been previously advanced by the Lender.
2.02 Note. The Borrower's obligation to repay the Loan with
interest shall be evidenced by, and the Loan shall be repaid with interest in
accordance with, the Note.
4
<PAGE>
2.03 Notice of Borrowing. Borrower shall give the Lender notice (the
"Notice") before 11:30 a.m. on the day which is one (I) Business Day prior to
any requested advance hereunder specifying the amount of the requested
advance. Each Notice shall be irrevocable and effective upon receipt thereof
by the Lender and the Borrower shall indemnify the Lender against any cost,
loss or expense incurred by the Lender as a result of any failure to fulfill,
on or before the date specified for any requested advance, the conditions to
such requested advance.
2.04 Borrowing Procedure.
(a) The following individuals may request advances hereunder
on behalf of Borrower:
Robert J. Walden, Vice President, Finance and
Administration, and Secretary
James S Burns, President and
Chief Executive Officer
Nancy G. Rubin, Director of Finance
The Borrower may from time to time appoint other individuals to
request advances hereunder, provided such persons are certified by the
President and Secretary of the Borrower as authorized to request advances.
Any request for an advance hereunder may be oral (including telephonic) or
written, but if oral shall be promptly confirmed in writing if so requested
by the Lender. Lender shall be protected and held harmless by Borrower in
acting upon any request for an Advance believed by it to have been genuine
and to have been given by a proper person.
(b) Lender will remit the proceeds of each advance hereunder
to Borrower's demand deposit account at the Lender.
2.05 Loan Records. The Lender will establish and maintain an account
on its books (the "Loan Account") to which (a) the principal amount of each
advance made by the Lender shall be debited on the date made, (b) each
payment made by the Borrower to the Lender for credit to the Loan Account
shall be credited on the date received, (c) all accrued interest on advances
and expenses incurred by the Lender in connection with or, in enforcing its
rights under, this Agreement (the "Enforcement Costs") shall be debited on
the date such become past due, (d) all Enforcement Costs shall be debited on
the date the same become due, and (e) all service charges and fees imposed by
the Lender in connection with the service of the Loan (if any) shall be
debited by recording thereon on the date imposed the amount of such charges
or fees. All credit entries to the Loan Account are conditional and shall be
readjusted as of the date made if final payment is not received by the Lender
in cash or solvent credits. The records
5
<PAGE>
maintained by the Lender regarding the Loan Account shall be prima facie
evidence of the advances made hereunder. The Lender shall, whenever requested
by Borrower, provide such information as Borrower may reasonably request to
determine the balance of Borrower's Loan Account, the amount of the advances
debited to the Loan Account, the amounts of payments received by the Lender
and credited to the Loan Account and the amount of funds debited from the
Loan Account that were applied to the payment of interest, principal, late
charges, or Enforcement Costs due under the Note and under this Agreement.
2.06 Yield Protection. In the event that the Lender determines in
good faith but in its sole discretion that the adoption of or change in any
law or any rule, regulation, policy, guideline, request or directive of any
central bank or governmental authority (whether or not having the force of
law), or any interpretation thereof, or the compliance of the Lender or any
corporation controlling the Lender therewith:
(a) subjects the Lender to any increase in any tax, duty, charge or
withholding on or from payments due from the Borrower (excluding
taxation of the overall net income of the Lender), or changes the
basis of taxation of payments to the Lender in respect of the Loan
or other amounts due it hereunder, or
(b) imposes or modifies or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of; deposits with or for the account of, or credit extended
by the Lender or any corporation controlling the Lender, or
(c) imposes any other condition the result of which is: (i) to
increase the cost to the Lender of making, funding or maintaining
the Loan, or (ii) to reduce any amount received or receivable by
the Lender in connection with the Loan, or (iii) to require the
Lender to make any payment calculated by reference to the amount
of the Loans held or interest received by the Lender, or
(d) does or shall have the effect of reducing the effective rate of
return on the capital of the Lender or any corporation controlling
the Lender as a consequence of the Lender's obligations hereunder
to a level below that which the Lender or such corporation would
have achieved but for such adoption, change or compliance,
then, from time to time, within thirty (30) days after notice by the Lender,
the Borrower shall pay the Lender such additional amount incurred (including
any reduction in the rate of return on
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capital to an amount below that which the Lender or any corporation
controlling the Lender could have achieved but for such change in regulation
after taking into account the Lender's policies as to capital adequacy) or
reduction in an amount received which the Lender determines in its sole but
reasonable discretion is attributable to making, funding, and maintaining the
Loan and the Lender's other obligations hereunder. A certificate of the
Lender claiming such compensation and setting forth the additional amount or
amounts to be paid to the Lender shall be conclusive in the absence of
manifest error.
2.07 The Borrower's Right to Terminate. The Borrower shall have the
right to terminate this Agreement upon written notice to the Lender;
provided, however, that no such notice of termination shall be or become
effective unless, at the time such notice is given, all Obligations shall
have been paid in full in immediately available funds and there exists no
commitment by the Lender which could give rise to any Obligations. The giving
of any such notice of termination by the Borrower, whether or not effective
under the foregoing provisions of this Subsection, shall immediately
terminate any obligation of the Lender to make advances under this Agreement
and, notwithstanding any attempt by the Borrower to revoke or withdraw any
notice of termination, no obligation of the Lender to make advances hereunder
shall rearise except to the extent and upon such terms and conditions as may
be agreed to by the Lender in writing in the Lender's sole discretion.
3. REPRESENTATIONS AND WARRANTIES
To induce the Lender, to enter into this Agreement, the Borrower makes
the representations and warranties set forth below. The Borrower acknowledges
the Lender's and MIDFA's justifiable right to rely upon these representations
and warranties.
3.01 Good Standing. The Borrower is a validly existing corporation
in good standing under the laws of the State of Delaware, and is qualified
and in good standing to conduct business in the State of Maryland, has the
power to own its property and conduct its business as now conducted and is
qualified to transact business in each state in which the character of the
properties owned by it therein or in which its transaction of business makes
such qualification necessary.
3.02 Status of Borrower. All copies of the articles of
incorporation, bylaws and corporate resolutions, as the case may be, of the
Borrower provided to the Lender are true, accurate, and complete, and no
action has been taken in diminution or abrogation thereof. The Borrower has
not changed its name or changed the location of its chief executive office
within the last year.
3.03 Authority. The Borrower has full power and authority to execute
and deliver this Agreement and any of the other Loan Documents to which it is
a party and to incur and perform the obligations provided for herein, all of
which have been duly authorized by all necessary and proper action by and on
behalf of the partners of the Borrower, and no consent or
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approval of any Person, including, without limitation, any public authority
or regulatory body, which has not been obtained is required as a condition to
the validity or enforceability hereof or of any of the other Loan Documents
or to the performance by the Borrower of its Obligations.
3.04 Binding Agreement. This Agreement and each of the other Loan
Documents to which the Borrower is a party has been duly executed and
delivered by the Borrower, constitutes the valid and legally binding
obligation of the Borrower and is fully enforceable against the Borrower in
accordance with its terms, subject only to laws affecting the rights of
creditors generally and application of general principles of equity.
3.05 No Conflicting Agreements. The execution and delivery of; and
the performance of the Obligations under, this Agreement and each of the
other Loan Documents to which the Borrower is a party will not immediately or
with the passage of time, the giving of notice, or both: (a)violate (i) any
provision of law or any order, rule or regulation of any Governmental
Authority, (ii) any award of any arbitrator or any judgment, license, order
or permit applicable to the Borrower, or (iii) the articles of incorporation
or by-laws of the Borrower or (b) be in conflict with, result in a breach of
or constitute (with due notice and/or lapse of time) a material default
under, any indenture, contract, agreement, mortgage, deed of trust or other
instrument to which the Borrower is a party, or (c) result in the creation or
imposition of any Lien upon any of the property or assets of the Borrower
except for Liens created in favor of the Lender under or pursuant to this
Agreement.
3.06 Consents. No consent or approval of, or exemption by, any
Person and no waiver of any right by any Person (except to the extent
obtained) is required to authorize or permit, or is otherwise required in
connection with, the execution, delivery and performance of this Agreement or
any of the other Loan Documents to which the Borrower is a party or in
connection with the validity and priority of any Liens granted hereunder.
3.07 Litigation. Except as heretofore disclosed to the Lender in
Schedule 3.07 attached hereto and made a part hereof: (a) there are no
judgments, injunctions or similar orders or decrees, claims, actions, suits
or proceedings pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any property of the Borrower, at law or
in equity, by or before any Governmental Authority, which could result in any
material adverse change in the business, operations, prospects, properties or
in the condition, financial or otherwise, of the Borrower; and (1)) the
Borrower is not to the Borrower's knowledge, in default in any material
respect with respect to any judgment, order, writ, injunction, decree, rule
or regulation of any Governmental Authority which could have a material
adverse effect on the Borrower.
3.08 Borrower's Name. The Borrower's name is as specified on the
signature line of this Agreement, and in the event that the Borrower has used
a different legal or trade name at any time during the past twelve years,
such different legal or trade name has been disclosed in Schedule 3.08
attached hereto and made a part hereof by reference.
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3.09 Taxes. The Borrower has filed or caused to be filed all
federal, State and local tax returns which are required to be filed by the
Borrower and has paid or caused to be paid all federal, State and local taxes
and governmental charges to the extent that such taxes and charges have
become due prior to the date on which penalties attach thereto except any
such taxes and charges that are being diligently contested in good faith by
appropriate proceedings which have been disclosed to the Lender in Schedule
3.09 attached hereto and made a part hereof and for which adequate reserves
have been set aside on the Borrower's books in accordance with GAAP.
3.10 Compliance With Governmental Requirements. The Borrower is
currently in full compliance with all applicable Governmental Requirements
unless and to the extent only that the validity or applicability thereof is
being diligently contested by the Borrower in good faith by appropriate
proceedings which have been disclosed to the Lender in writing in Schedule
3.10 attached hereto and made apart hereof. The Borrower is not under
investigation with respect to, or threatened to be charged or given notice of
a violation of; any applicable Governmental Requirement except as disclosed
in Schedule 3.10.
3.11 License and Permits. The Borrower has duly obtained and now
holds all licenses, permits, certifications, approvals and the like required
by Governmental Authorities in the jurisdiction(s) in which the Borrower
conducts business, and the Borrower also has duly obtained and now holds all
patents, copyrights, trademarks and trade names or rights thereto to conduct
the Borrower's business as now conducted, and each remains valid and in full
force and effect, free of any conflict with the rights of any other Person.
3.12 Defaults. There is no existing action, event, or condition
which would constitute an Event of Default or which, upon the giving of
notice and/or the lapse of time, could constitute an Event of Default on the
part of the Borrower.
3.13 Financial Information. All information contained in any
financial statement, application, schedule, report or any' other document
given by the Borrower, by any other Obligor, or by any other Person in
connection with the Obligations is in all respects true and accurate, and
neither the Borrower nor any other Obligor nor any other Person has omitted
to state any material fact or any fact necessary to make such information not
misleading.
3.14 Financial Condition. Any financial statements of the Borrower
heretofore delivered to the Lender or MIDFA are true, correct and complete,
fairly present the financial condition of the Borrower as at such dates and
the results of its operations for the periods then ended and were prepared in
accordance with GAAP applied on a consistent basis for prior periods. There
is no indebtedness of the Borrower as of the date of such statements which is
not reflected therein. No material adverse change in the Borrower's financial
condition, business operations or prospects has occurred since the date of
such statements, nor has the Borrower incurred any material liability, direct
or indirect, fixed or contingent, since the date of such financial
statements. The Borrower is not the subject of any Bankruptcy, insolvency,
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readjustment of debt, trusteeship, receivership, dissolution or liquidation
proceeding. The Borrower is not currently insolvent and will not be insolvent
(as defined in Section 101(32) of the United States Bankruptcy Code) after
giving effect to all borrowings contemplated in the Loan Documents.
3.15 Full Disclosure. There is no material fact that the Borrower
has not disclosed to the Lender or MIDFA which could have a material adverse
effect on the properties, business, prospects or condition (financial or
otherwise) of the Borrower. Borrower has no knowledge of any circumstance
which would prevent Borrower from delivering to the Lender, on or before June
30, 1995, its audited financial statements for fiscal year ending December
31,1994.
3.16 Environmental Compliance. The Borrower has obtained all
permits, licenses and other authorizations ("Environmental Authorizations")
which are required under any and all federal, state, local and foreign
statutes, ordinances, codes, laws, regulations and other such authorities
relating to the environment or the release of any materials into the
environment ("Environmental Laws"). The Borrower is in compliance with the
terms and conditions of all such Environmental Authorizations, and is in
compliance with all Environmental Laws and with all regulations, codes,
plans, orders, decrees, judgments, injunctions, notices, or demand letters
issued, entered, promulgated or approved thereunder. No notice, notification,
demand, request for information, citation, summons or order has been issued,
no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any Governmental
Authority: (a) with respect to any alleged failure by the Borrower to have
any Environmental Authorizations required in connection with the conduct of
the business of the Borrower;(b)with respect to any generation, treatment,
storage, recycling, transportation, disposal, or any release as defined in 42
U.S.C. Section 9601(22) ("Release") on, at, under, about or from any property
or facility now or formerly owned, leased or operated by the Borrower of any
substance regulated under any Environmental Laws ("Hazardous Material"); or
(c) with respect to any arrangement by the Borrower for disposal, treatment
or transport of any Hazardous Material. No oral or written notification of a
release of a Hazardous Material has been filed by or on behalf of the
Borrower and no property or facility now or previously owned, leased or
operated by the Borrower is listed or proposed for listing on the National
Priorities List under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or on any similar state list of sites
requiring investigation or clean-up. There are no Liens arising under or
pursuant to any Environmental Laws on any real property or properties owned
or leased by the Borrower, and no actions have been taken by any Governmental
Authority or are in process which could subject any of such properties to
such Liens. There are no Hazardous Materials present on, in, at, under or
about any real property of properties owned or leased by the Borrower in
amounts or concentrations or under circumstances that could materially
adversely affect the use or value of such real property or properties. The
Lender acknowledges and agrees, however, that in the ordinary course of its
business operations the Borrower utilizes research quantities of radioactive
and other Hazardous Materials.
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3.17 Margin Stock. None of the proceeds of the loan will be used,
directly or indirectly, by the Borrower for the purpose of purchasing or
carrying, or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry, any "margin stock" within the
meaning of Regulation G (12 CFR Part 207) or Regulation U (12 CFR Part 221)
of the Board of Governors of the Federal Reserve System, as amended, (herein
called "margin stock") or for any other purpose which might make the
transactions contemplated herein a "purpose credit" within the meaning of
said Regulation G or Regulation U, or cause this Agreement to violate or
trigger any other requirement under any other regulation of the Board of
Governors of the Federal Reserve System or the Securities Exchange Act of
1934 or the Small Business Investment Act of 1958, as amended, or any rules
or regulations promulgated under any of such statutes.
3.18 ERISA. Except as otherwise noted herein, the following
representations and covenants apply to each employee benefit plan, as defined
in Section 3 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which the Borrower or an ERISA Affiliate sponsors or
maintains, or to which it contributes. Unless the context indicates
otherwise, the provisions also apply with respect to prior or future employee
benefit plans of the Borrower or an ERISA Affiliate. The term ERISA Affiliate
means any entity that is affiliated with the Borrower, within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code").
Borrower covenants, represents, and warrants that: (a) each employee
benefit plan is maintained in all material respects in conformity with all
applicable provision of ERISA, the Internal Revenue Code, and other federal
and state statutes relating to such plans; ~) the assets of the Borrower are
not subject to any liens under ERISA or the Internal Revenue Code in respect
of any employee benefit plan; (c) with respect to each employee pension
benefit plan, as defined in Section 3(2) of BRISA: (i) no such plan has
incurred an accumulated funding deficiency under Section 412 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived); and (ii) there
have not been any reportable events as defined in Section 4043 of ERISA, with
respect to which the 30 day notice requirement has not been waived; (d) the
Borrower has not incurred and would not incur any material withdrawal
liability under ERISA upon the complete withdrawal (within the meaning of
Section 4203 of ERISA) or the partial withdrawal (within the meaning of
Section 4205 of ERISA) of Borrower or any ERISA Affiliate from any
multiemployer plan, as defined in Section 3(37) of ERISA; (e) to Borrower's
knowledge, no multiemployer plan to which the Borrower or an ERISA Affiliate
contributes or previously contributed has been terminated (within the meaning
of Section 4041A of ERISA), is insolvent (within the meaning of Section 4245
of ERISA), or is jn reorganization (within the meaning of Section 4241 of
ERISA), and neither the Borrower nor any ERISA Affiliate has received any
notice that such plan may become insolvent or be placed in reorganization;
and (f) the financial statements of the Borrower accurately reflect the
amount of any material post-retirement benefits, in accordance with the
Statement of Financial Accounting Standard No. 106, or the Borrower has
provided to the Lender and MIDFA in writing a separate disclosure of such
post-retirement benefits that conforms to FASB 106 which disclosure may be
attached as a Schedule to this Agreement.
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The Borrower further represents and warrants to the Lender and MIDFA
that, with respect to each current or future employee benefit plan, it will:
(a) maintain or cause the appropriate ERISA Affiliate to maintain such
employee benefit plan in conformity in all material respects with all
applicable provisions of ERISA, the Internal Revenue Code, and all other
federal and state statutes relating to such plans; (b) timely file or cause
the appropriate ERISA Affiliate to timely file all required governmental
returns or reports; (c) make or cause the appropriate ERISA Affiliate to
timely make all contributions required under the terms of such employee
benefit plan but, in all events, make such contributions as are sufficient to
meet the minimum funding standards set forth in ERISA (including any required
quarterly contributions) (unless a waiver of such minimum funding standards
has been granted by the Internal Revenue Service); (d) promptly furnish the
Lender and MIDFA with any information or document (including, but not limited
to, annual reports (Forms 5500), financial statements and records, and
actuarial statements and reports) requested by the Lender and MIDFA with
respect to such employee benefit plan; and (e) promptly notify the Lender and
MIDFA with respect to: (i) the occurrence of any reportable event, as defined
in Section 4043 of ERISA and the regulations thereunder; (ii) the termination
of any employee benefit plan which could result in a liability which
adversely affects the financial condition of the Borrower; (iii) receipt of
any notice, claim, or assessment with respect to an employee benefit plan
that could result in a liability which would adversely affect the financial
condition of the Borrower (including, but not limited to, any notice that a
multiemployer plan to which Borrower or an ERISA Affiliate contributes is or
may become insolvent, or is or may be placed in reorganization). Any notice
provided by Borrower shall be in the form of a certificate, signed by the
Chief Financial Officer of the Borrower, setting forth the details of such
event or occurrence. If, in the reasonable opinion of the Lender or MIDFA,
such event or occurrence could have a material adverse affect on the
financial condition of the Borrower, the Lender and MIDFA may treat such
event or occurrence as an Event of Default.
3.19 Information. Furnish to the Lender and MIDFA promptly at any
time and from time to time such information concerning the operations,
business, affairs and financial condition of the Borrower as the Lender may
request.
4. CONDITIONS OF LENDING
Unless the Lender shall otherwise agree, the Lender shall have no
obligation to advance any funds to the Borrower hereunder unless each of the
following conditions precedent shall be satisfied as provided below:
4.01 Documents. There shall have been delivered to the Lender,
appropriately completed and duly executed (when applicable), the following,
each in form and substance satisfactory to the Lender:
(a) The Note.
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(b) A certificate of the Borrower substantially in the form
attached hereto as Exhibit B unless otherwise determined by the Lender.
(c) Evidence satisfactory to the Lender and MIDFA that
Borrower maintains insurance coverages which are reasonable and prudent in
the conduct of its business including, if requested by Lender, copies of all
insurance policies.
(d) A written opinion of counsel to the Borrower, dated as of
the Closing and addressed to the Lender.
(e) Such financing statements as may be required by the Lender.
(f) Pledge Agreement substantially in the form attached hereto
as Exhibit C unless otherwise determined by the Lender.
4.02 Legal Matters. At the Closing, all legal matters in connection
therewith or incidental thereto shall be fully satisfactory to the Lender's
counsel.
4.03 MIDFA Insurance. The Lender shall have received duly executed
the Insurance Agreement issued by MIDFA, in form and content acceptable to
the Lender.
4.04 Facility Fee. The Lender shall have received a fee in the
amount of$7,500.00.
5. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with the Lender and MIDFA that,
during the term of this Agreement and until (a) all of the Obligations have
been paid in full and (b) there exists no commitment by the Lender which
could give rise to any Obligations, the Borrower will absolutely and
unconditionally do and perform each of the following acts, promises and
covenants:
5.01 Good Standing. The Borrower shall maintain its existence as a
corporation in good standing under the laws of the State of Delaware and
shall be registered and in good standing under the laws of the State of
Maryland, continue its business as now conducted and maintain its
qualification to transact business in each state in which the character of
the properties owned by it therein or in which its transaction of business
makes such qualification necessary.
5.02 Litigation. The Borrower shall promptly notify the Lender and
MIDFA in writing of any judgment, injunction or similar order or decree,
claim, action, suit or proceeding against or affecting the Borrower or any
property of the Borrower, at law or in equity, by or before any court or any
Governmental Authority, which could result in any material
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<PAGE>
adverse change in the business, operations, prospects, properties or in the
condition, financial or otherwise, of the Borrower.
5.03 Taxes. The Borrower shall file or cause to be filed all
federal, State and local tax returns which are required to be filed by the
Borrower and shall pay or cause to be paid all federal, State and local taxes
and governmental charges to the extent that such taxes and charges become due
prior to the date on which penalties attach thereto except any such taxes and
charges that are being diligently contested in good faith by appropriate
proceedings, provided, however, that (a) the Lender and MIDFA shall have been
given reasonable prior written notice of such intention to contest, (b) such
nonpayment will not, in the Lender's and MIDFA's sole discretion, materially
impair any of the Collateral or the Lender's rights or remedies with respect
thereto or the prospect for full and punctual payment of all of the
Obligations, (c) the Borrower at all times effectively stays or prevents any
official or judicial sale of or action or filing against any of the
Collateral by reason of such nonpayment and (d) the Borrower establishes
reasonable reserves on the Borrower's books in accordance with GAAP for any
liabilities being contested and for expenses arising out of such contest.
5.04 Compliance with Governmental Requirements. The Borrower shall
comply with all applicable Governmental Requirements unless and to the extent
only that the validity or applicability thereof is being diligently contested
by the Borrower in good faith by appropriate proceedings, provided, however,
that (a) the Lender and MIDFA shall have been given reasonable prior written
notice of such intention to contest, (b) such noncompliance will not, in the
Lender's and MIDFA's sole discretion, materially impair any of the Collateral
of the Lender's and MIDFA's rights or remedies with respect thereto or the
prospect for full and punctual payment of all of the Obligations, (c) the
Borrower at all times effectively stays or prevents any official or judicial
sale of or action or filing against any of the Collateral by reason of such
noncompliance and (d) the Borrower establishes reasonable reserves on the
Borrower's books in accordance with GAAP for any liabilities or expenses
which may arise out of such noncompliance and contest.
5.05 License and Permits. The Borrower shall maintain, preserve and
protect all licenses, permits, certifications, approvals and the like
required by Governmental Authorities in the jurisdiction(s) in which the
Borrower conducts business, and the Borrower also shall maintain, preserve
and protect all patents, copyrights, trademarks and trade names or rights
thereto to conduct the Borrower's business as now conducted free of any
conflict with the rights of any other Person.
5.06 Books and Records. The Borrower shall keep and maintain
accurate and current books and records pertaining to the operation, business
and financial condition of the Borrower and pertaining to the Collateral in
accordance with GAAP and permit access by the Lender and MIDFA to,
reproduction by the Lender and MIDFA of and copying by the Lender and MIDFA
from, such books and records upon reasonable prior notice during normal
business hours.
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5.07 Financial Statements. The Borrower shall furnish to the Lender
and MIDFA in writing:
(a) as soon as available but in no event more than forty-five
(45) days after the end of each quarterly accounting period of the Borrower,
a statement of income and retained earnings and a statement of cash flow of
the Borrower for such period and for the period from the beginning of the
current fiscal year of the Borrower to the end of such period, and a balance
sheet of the Borrower as at the end of such period, setting forth in each
case in comparative form figures for the corresponding periods in the
preceding fiscal year of the Borrower, all in detail and scope satisfactory
to the Lender, prepared in accordance with GAAP, Certified by the chief
financial officer of the Borrower and accompanied by a certificate of that
officer stating whether any event has occurred which constitutes an Event of
Default or which could constitute an Event of Default with the giving of
notice and/or the lapse of time and, if so, stating the facts with respect
thereto;
(b) as soon as available but in no event more than one hundred
twenty (120) days after the end of each fiscal year of the Borrower, a
statement of income, earnings and surplus and a statement of cash flow of the
Borrower for such year, and a balance sheet of the Borrower as at the end of
such year, setting forth in each case in comparative form figures for the
corresponding periods in the preceding fiscal year of the Borrower, all in
detail and scope satisfactory to the Lender, prepared in accordance with GAAP
and audited in accordance with the standards established by the American
Institute of Certified Public Accountants by Coopers & Lybrand or such other
independent certified public accountants selected by the Borrower and
satisfactory to the Lender and MIDFA accompanied by an unqualified report of
such independent certified public accounts with respect to such financial
statements, Certified by the chief financial officer of the Borrower stating
whether any event has occurred which constitutes an Event of Default or which
could constitute an Event of Default with the giving of notice and/or the
lapse of time and, if so, stating the facts with respect thereto; and
(c) promptly upon the Lender's or MIDFA's request, and
periodically if the Lender or MIDFA shall so require, such written
statements, schedules or reports (which shall be Certified if required by the
Lender or MIDFA) in such form, containing such information and accompanied by
such documents as may be satisfactory to the Lender and MIDFA from time to
time in their reasonable discretion concerning the Borrower's financial
condition or business operations or any other matter or matters.
5.08 Environmental Compliance. The Borrower shall obtain all
Environmental Authorizations which are required under any and all
Environmental Laws. The Borrower shall remain in compliance with the terms
and conditions of all such Environmental Authorizations and shall remain in
compliance with all Environmental Laws and with all regulations, codes,
plans, orders, decrees, judgments, injunctions, notices or demand letters
issued, entered, promulgated or approved thereunder. The Borrower shall: (a)
promptly notify
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the Lender and MIDFA and any other Person that it is required to notify
pursuant to any applicable Environmental Laws once it is aware of a Release
or threatened Release of Hazardous Material on, from, or near any property
that it owns or occupies; (b) promptly notify the Lender and MIDFA once the
Borrower has received notice that an environmental investigation or clean-up
proceeding has been instituted by any Person in connection with any such
property; (c) fully comply with and cooperate with any such environmental
investigation and clean-up proceeding, unless and to the extent only that the
same is being diligently contested by the Borrower in good faith by
appropriate proceedings, provided, however, that (i) the Lender and MIDFA
shall have been given reasonable prior written notice of such intention to
contest, (ii) such noncompliance will not, in the Lender's and MIDFA's sole
discretion, materially impair the prospect for full and punctual payment of
all of the Obligations, (iii) the Borrower at all times effectively stays or
prevents any official or judicial sale of or action or filing against any of
its real property by reason of such noncompliance and (iv) the Borrower
establishes reasonable reserves on the Borrower's books in accordance with
GAAP for any liabilities or expenses arising out of such noncompliance and
contest; and (d) promptly execute and complete any "Remedial Actions" (as
defined herein) within the control of the Borrower necessary to ensure that
no environmental Liens or encumbrances are levied against or exist with
respect to any such property. As used herein, "Remedial Actions" shall mean:
(a) the cleanup or removal of Hazardous Materials; (b) such actions as may be
necessary to monitor, assess, or evaluate the Release or threatened Release
of Hazardous Materials; (c) the proper disposal or removal of Hazardous
Materials; (d) the taking of such other actions as may be necessary to
prevent, minimize, or mitigate the damages caused by a Release or threatened
Release of Hazardous Materials to the public health or welfare or to the
environment; and (e) the providing of emergency assistance after a Release.
"Remedial Actions" shall include, but are hot limited to, such actions at the
location of a Release as: storage; confinement; perimeter protection using
dikes, trenches, or ditches; clay cover; neutralization; clean-up of
Hazardous Materials or contaminated materials; recycling or reuse; diversion;
destruction; segregation of reactive wastes; dredging or excavations; repair
or replacement of leaking containers; collection of leakage and runoff;
on-site treatment or incineration; providing alternative water supplies; and
any monitoring reasonably required to assure that such actions protect the
public health and welfare and the environment. The Borrower shall indemnify
and hold harmless the Lender and MIDFA from all loss, liability, damage,
cost, and expense, including without limitation, reasonable attorneys' fees,
fines, or other penalties or payments, for failure of any property that the
Borrower owns or occupies to comply in all respects with all Environmental
Laws. The provisions of this section shall survive payoff release,
foreclosure, or other disposition of this Agreement. The Borrower shall
remain liable hereunder regardless of any other provisions hereof which may
limit the Borrower's liability.
5.09 Further Assurances and Corrective Instruments. The Borrower
shall promptly execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, to the Lender from time to time such security
agreements, financing statements, amendments to or assignments of financing
statements, security interest filing statements, assignments and such other
documents as the Lender may reasonably request, in form and
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content satisfactory to the Lender and otherwise to do or cause to be done
from time to time all things requested by the Lender, in order to confirm,
preserve, protect or perfect, or to maintain the perfection of; the Lender's
security interest in any of the Collateral and/or its priority, it being the
intention of the Borrower to hereby provide a full and absolute warranty of
further assurance to the Lender. If the Borrower fails to execute any of such
documents within ten (10) days of being requested to do so by the Lender, the
Borrower hereby appoints the Lender or any officer of the Lender as the
Borrower's attorney in fact for purposes of executing such documents in the
Borrower's name, place and stead, which power of attorney shall be considered
as coupled with an interest and irrevocable.
5.10 Notice of Event of Default. Immediately notify the Lender and
MIDFA of the occurrence of any Event of Default or any event which, with the
giving of notice and/or the lapse of time, could constitute an Event of
Default and the facts with respect thereto.
5.11 Use of Proceeds. Use the proceeds of advances made hereunder
only to finance construction of the leasehold improvements to the SAGA
building in Baltimore City, Maryland and related "soft" costs, and to pay the
costs, expenses and fees payable by the Borrower under this Agreement and the
other Loan Documents.
5.12 Compliance With Laws. The Borrower shall comply in all material
respects with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities or agencies (including,
without limitation, all Environmental Laws and the Occupational Safety and
Health Act). In addition, the Borrower agrees to deliver to the Lender and
MIDFA promptly after receipt of notice of same (whether such notice is oral
or written) copies of any notices of administrative action related to
suspected or actual failures on the part of the Borrower, or any assets of
the Borrower to comply with Environmental Laws and/or the state or federal
Occupational Safety and Health Act, the Americans With Disabilities Act or
other laws or regulations related thereto.
5.13 Insurance. The Borrower shall maintain insurance with
responsible insurance companies on such of its assets and properties, in such
amounts and against such risks as is customary and prudent in the normal
course of the Borrower's business, and furnish to the Lender and MIDFA
promptly upon request certificates evidencing such insurance.
5.14 Employment Count. The Borrower shall upon request, but no more
frequent than twice annually, supply the employment count at the Borrower's
premises to the Lender and MIDFA.
5.15 Equal Employment. The Borrower shall prohibit discrimination on
the basis of (i) political or religious opinion or affiliation, marital
status, race, color, creed, or natural origin, or (ii) sex or age, except
when sex and age constitutes a bona fide occupational qualification, or (iii)
the physical or mental disability of a qualified individual with a
disability. Upon the request of the Lender, MIDFA or the Department of
Economic and Employment
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Development, the Borrower will submit to it information relating to its
operations, with regard to political or religious opinion or affiliation,
marital status, physical or mental disability, race, color, creed, sex, age
or national origin on a form to be prescribed by the Department of Economic
and Employment Development.
5.16 Drug and Alcohol Free Workplace. The Borrower shall make a good
faith effort to eliminate illegal drug use and alcohol and drug abuse from
its workplace during the term of this agreement. Specifically, the Borrower
shall:
(i) Prohibit the unlawful manufacture, distribution,
dispensation, possession, or use of drugs in its workplace;
(ii) Prohibit its employees from working under the influence of
alcohol or drugs;
(iii) Not hire or assign to work on an activity funded in whole
or in part with State funds, anyone whom it knows, or in the exercise of due
diligence should know, currently abuses alcohol or drugs and is not actively
engaged in a bona fide rehabilitation program;
(iv) Promptly inform the appropriate law enforcement agency or
every drug related crime that occurs in its workplace if it or its employee
has observed the violation or otherwise has reliable information that a
violation has occurred; and
(v) Notify employees that drug and alcohol abuse is banned in
the workplace, impose sanctions on employees who abuse drugs and alcohol in
the workplace, and institute steps to maintain a drug and alcohol free
workplace.
6. NEGATIVE COVENANTS
The Borrower covenants and agrees with the Lender and MIDFA that, during
the term of this Agreement and until (a) all of the Obligations have been
paid in full and (b) there exists no commitment by the Lender which could
give rise to any Obligations, the Borrower will not, directly or indirectly,
without the Lender's and MIDFA's prior written consent:
6.01 Merger. Sale of Assets. etc. Enter into or be a party to any
merger or consolidation; sell, assign, transfer, convey or lease any interest
in all or any substantial part of its property except in the ordinary course
of the Borrower1s business as now being conducted; purchase or otherwise
acquire all or substantially all of the assets of any other person, or any
shares of stock of; or similar interest in, any other person. The consent of
the Lender and MIDFA to any requested merger or consolidation of the Borrower
with any other person shall not be unreasonably withheld if (a) the net worth
of the entity surviving such merger or consolidation (the "Surviving Entity")
would be not less than the net worth of the Borrower
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immediately preceding such consolidation or merger, and (b) if the Surviving
Entity is not the Borrower, the Surviving Entity assumes the payment and
performance of the Obligations pursuant to such written agreements as may be
satisfactory to the Lender, and MIDFA. MIDFA may further condition its
consent to any consolidation or merger on the Surviving Entity agreeing that
while any amounts remain outstanding under the Loan it will not (x) transfer
its business operations then being conducted by the Borrower at the premises
known as 2001 Aliceanna Street, Baltimore, Maryland 21231-2001 (the
"Premises") out of the State of Maryland, or (y) materially reduce the number
of employees at the Premises. Notwithstanding the foregoing, the consent of
MIDFA to any matter described in this Section 6.01 shall not be required if
the Surviving Entity provides additional collateral for the Obligations of a
type, in an amount and pursuant to written agreements which are in form and
substance satisfactory to the Lender, and the Lender consents to the
termination of the Insurance Agreement. The Lender and MIDFA further covenant
and agree to use their best efforts in good faith to promptly respond to any
request by the Borrower for a consent required under this Section 6.01.
6.02 Investments. Make any capital contribution to any other person
or purchase or acquire a beneficial interest in any stock, securities or
evidences of Indebtedness of; or make any investment or acquire any interest
in, any other person, except for (a) investments of the Collateral as the
Lender and the Borrower shall from time to time agree, (b) investments in
federally insured certificates of deposit or direct and indirect obligations
of the United States of America maturing within one year from the date of
acquisition or (c) Moodys or Standard and Poors A or better rated
investments. The consent of the Lender and MIDFA to any action otherwise
prohibited under this Section 6.02 shall not be unreasonably withheld. The
Lender and MIDFA further covenant and agree to use their best efforts in good
faith to promptly respond to each request by the Borrower for any such
consent.
6.03 Fiscal Year. Change the Borrower's fiscal year.
6.04 Loans. Make or permit to exist any loan to any person, not
including (a) existing loans outstanding on the date hereof; (b) advances for
travel and the like made to officers and employees in the ordinary course of
business, (c) loans to employees for expenses incurred in relocating to
Maryland, and (d) loans to officers of the Borrower for the purpose of
financing the purchase of stock of the Borrower. The consent of the Lender
and MIDFA to any loan otherwise prohibited under this Section 6.04 shall not
be unreasonably withheld. The Lender and MIDFA further covenant and agree to
use their best efforts in good faith to promptly respond to each request by
the Borrower for any such consent.
6.05 Change of Name. Change the name of the Borrower.
6.06 Trade Names. Use any trade name other than the Borrower's true
name.
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6.07 Handling of Hazardous Materials. Use in its business or
operations, produce as a result or as a by-product of its business or
operations, or store or hold at any site or location at which it conducts its
business or operations, or at any other properties, Hazardous Materials which
under any Environmental Laws require special handling, collection, storage,
treatment, disposal, or transportation, unless the Borrower strictly and
fully complies with all requirements of applicable Environmental Laws which
require the special handling, collection, storage, treatment, disposal, or
transportation of such Hazardous Materials.
6.08 Releases of Hazardous Materials. Permit the Release or
threatened Release of any Hazardous Materials.
6.09 Environmental Laws. Violate any applicable Environmental Laws.
6.10 ERISA. (a) Take or permit any action with respect to an
employee benefit plan which would result in the imposition of any lien under
ERISA or the Internal Revenue Code on the assets of the Borrower; (b) engage
in or permit any violation of ERISA (including, but not limited to, any
breach of fiduciary duty, within the meaning of Title I, subtitle B, part 4
of ERISA, or prohibited transaction, within the meaning of Section 406
through 408 of ERISA or Section 4975 of the Internal Revenue Code); (c)
withdraw (complete or partial) from any multiemployer plan if such withdrawal
would result in the imposition of a material liability on the Borrower; and
(d) take any other action with respect to an employee benefit plan which
would have a material adverse affect on the financial condition of the
Borrower.
6.11 Sale and Leaseback. Directly or indirectly enter into any
arrangement hereby the Borrower shall sell or transfer all or any substantial
part of its fixed assets then owned by it and shall thereupon, or within one
year thereafter, rent or lease the assets so sold or transferred. The consent
of the Lender and MIDFA to any action otherwise prohibited under this Section
6.11 shall not be unreasonably withheld. The Lender and MIDFA further
covenant and agree to use their best efforts in good faith to promptly
respond to each request by the Borrower for any such consent.
6.12 Management. Fail to notify Lender or MIDFA of any change in the
Directors and officers of the Borrower, giving specific reasons for any such
change.
7. DEFAULT DEMAND: RIGHTS AND REMEDIES
7.01 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Agreement:
(a) The failure of the Borrower to pay any sum due under the
Note within two (2) Business Days after written notice from the Lender to the
Borrower that such sum has become due, whether by demand or otherwise;
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(b) the failure of the Borrower to perform, observe or comply
with any agreement, covenant, or promise made under the Note, under this
Agreement, or under any of the other Loan Documents (other than payment
defaults), which failure remains uncured for a period of thirty (30)days
after written notice thereof has been given by the Lender to the Borrower;
(c) if any representation or warranty made herein or in any of
the other Loan Documents or if any information contained in any financial
statement application, schedule or report or any other document given by the
Borrower, or any other Person in connection with the Loan, with any of the
Collateral, or with any of the Loan Documents is not in all respects true and
accurate, or if the Borrower or such other Person omitted to state any fact
necessary to make such information not materially misleading;
(d) the occurrence of a default under any of the other Loan
Documents which is not cured within any applicable cure period;
(e) the Borrower shall be or become insolvent (as defined in
Section 101 of the United States Bankruptcy Code) or unable to pay its debts
as they become due, or admit in writing to such insolvency or to such
inability to pay its debts as they become due;
(f) there shall be filed against the Borrower an involuntary
petition or other pleading seeking the entry of a decree or order for relief
under the United States Bankruptcy Code or any similar federal or state
insolvency or similar laws ordering: (i) the liquidation of the Borrower, or
(ii) a reorganization of the Borrower or the business and affairs of the
Borrower, or (iii) the appointment of a receiver, liquidator, assignee,
custodian, trustee, or similar official for the Borrower of the property of
the Borrower, and the failure to have such petition or other pleading denied
or dismissed within sixty (60) calendar days from the date of filing;
(g) the commencement by the Borrower of a voluntary case under
the federal Bankruptcy laws or any federal or state insolvency or similar
laws or the consent by the Borrower to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, or
similar official for the Borrower of any of the property of the Borrower, or
the making by the Borrower of an assignment for the benefit of creditors, or
the failure by the Borrower generally to pay the debts of the Borrower as the
debts become due;
(h) the dissolution, merger, consolidation or reorganization
of; or the entry of any order, judgment, or decree for the dissolution,
merger, consolidation or reorganization of; the Borrower not otherwise
permitted under Section 6.01 hereof;
(i) the entry of any judgment, order, award, or decree (a
"Judgment") against the Borrower in excess of $500,000.00 in the aggregate
which is not covered by insurance and a determination by the Lender, in good
faith but in its sole discretion, that the
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same, when aggregated with all other Judgments outstanding against the
Borrower, could have a material adverse effect on the Borrower, the
Collateral, the Lender's rights with respect to the Collateral, or the
prospect for full and punctual payment and performance of the Note, this
Agreement or the other Loan Documents, if the Judgment has not been
discharged or execution thereof stayed within sixty (60) days after its entry
or discharged within sixty (60) days after the expiration of any stay;
(j) the entry of an order by a court of competent jurisdiction
enjoining or restraining the Borrower in any manner from conducting its
business in whole or in part and a determination by the Lender, in good faith
but in its sole discretion, that such order could have a material adverse
effect on the Borrower, the Collateral, the Lender's rights with respect to
the Collateral, or the prospect for full and punctual payment and performance
of the Note, this Agreement or the other Loan Documents, if such order is not
terminated or stayed within ten (10) days after its entry or terminated
within ten (10) days after the expiration of any stay; and
(k) any assets of the Borrower (in excess of $500,000.00 in
the aggregate) shall be attached, levied upon, seized or repossessed, or come
into the possession of a trustee, receiver or other custodian.
7.02 Rights and Remedies Upon Demand. If the Borrower or any Obligor
fails to immediately pay all sums due under the Note upon demand by the
Lender, the Lender, in the Lender's sole discretion and without notice to the
Borrower or any other Obligor, may exercise any or all rights, powers, and
remedies provided for in the Loan Documents or now or hereafter existing at
law, in equity, by statute or otherwise.
8. MISCELLANEOUS
8.01 Performance for the Borrower. The Borrower agrees and hereby
authorizes that the Lender may, in the Lender's sole discretion, but the
Lender shall not be obligated to, regardless of the Maximum Loan Amount,
advance funds on behalf of the Borrower, without prior notice to the
Borrower, in order to insure Borrower's compliance with any covenant,
warranty, representation or agreement of the Borrower made in or pursuant to
this Agreement or any of the other Loan Documents, to continue or complete,
or cause to be continued or completed, performance of the Borrower's
obligations under any contracts of the Borrower, to cover overdrafts in any
checking or other accounts of the Borrower at the Lender or to preserve or
protect any right or interest of the Lender in the Collateral or under or
pursuant to this Agreement or any of the other Loan Documents, including,
without limitation, the payment of any insurance premiums or taxes and the
satisfaction or discharge of any judgment or any Lien upon the Collateral or
other property or assets of the Borrower. The Borrower shall pay to the
Lender upon demand all such advances made by the Lender with interest thereon
at the highest rate provided in the Note. All such advances shall be deemed
to be included in the Obligations and secured by the security interest
granted the Lender hereunder; provided, however, that the
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provisions of this Subsection shall survive the termination of this Agreement
and the Lender's security interest hereunder and the payment of all other
Obligations.
8.02 Expenses. Whether or not any of the transactions contemplated
hereby shall be consummated, the Borrower agrees to pay to the Lender on
demand the amount of all reasonable expenses paid or incurred by the Lender
(including the reasonable fees and expenses of its counsel) in connection
with the preparation of all written commitments of the Lender antedating this
Agreement, this Agreement and the other Loan Documents and all documents and
instruments referred to herein. The provisions of this Subsection shall
survive the termination of this Agreement and the Lender's security interest
hereunder and the payment of all other Obligations.
8.03 Waivers by the Borrower. The Borrower hereby waives, to the
extent the same may be waived under applicable law: (a) notice of acceptance
of this Agreement; (b) all claims, causes of action and rights of the
Borrower against the Lender on account of actions taken or not taken by the
Lender in the exercise of the Lender's rights or remedies hereunder, under
the other Loan Documents or under applicable law unless attributable to the
Lender's gross negligence or willful misconduct; (c) presentment, demand for
payment, protest and notice of non-payment and all exemptions; (d) any and
all other notices or demands which by applicable law must be given to or made
upon the Borrower by the Lender; and (e) settlement, compromise or release of
the obligations of any person primarily or secondarily liable upon any of the
Obligations.
8.04 Waivers by the Lender. Neither any failure nor any delay on the
part of the Lender in exercising any right, power or remedy hereunder, under
any of the other Loan Documents or under applicable Governmental Requirements
shall operate as a waiver thereof; nor shall a single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
8.05 The Lender's Right of Setoff. The Lender shall have the right,
in addition to all other rights and remedies available to it, to set off
against any Obligations due the Lender any debt owing to the Borrower by the
Lender, including, without limitation, any funds in any checking or other
account now or hereafter maintained by the Borrower at the Lender. The
Borrower hereby confirms the Lender's right to banker's lien and setoff, and
nothing in this Agreement or any of the other Loan Documents shall be deemed
a waiver or prohibition of the Lender's right of banker's lien and setoff.
8.06 Choice of Law: Forum Selection: Consent to Jurisdiction. This
Agreement shall be governed by, construed and interpreted in accordance with
the laws of the State of Maryland (excluding the choice of law rules
thereof). The Borrower hereby (a) agrees that all disputes and matters
whatsoever arising under, in connection with, or incident to this Agreement
shall be litigated, if at all, in and before a court located in the State of
Maryland to the exclusion of the courts of any other state or country and
(b)irrevocably submits to the
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non-exclusive jurisdiction of any Maryland court or federal court sitting in
the State of Maryland in any action or proceeding arising out of or relating
to this Agreement, and hereby irrevocably waives any objection to the laying
of venue of any such action or proceeding in any such court and any claim
that any such action or proceeding has been brought in an inconvenient forum.
A final judgment in any such action or proceeding shall be conclusive and may
be enforced in any other jurisdiction by suit on the judgment or in any other
manner provided by law.
8.07 Invalidity of Any Part. If any provision or part of any
provision of this Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision (or any remaining part of any provision)
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision (or part thereof) had never been contained
in this Agreement, but only to the extent of its invalidity, illegality, or
unenforceability.
8.08 WAIVER OF JURY TRIAL. THE BORROWER HEREBY (i) COVENANTS AND
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY,
AND (ii) WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE LENDER
AND THE BORROWER MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH OR IN ANY
WAY PERTAINING TO THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS AND/OR ANY
TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR THE LACK OF
ANY OF THE FOREGOING) RELATING IN ANY WAY TO THE BORROWER-LENDER RELATIONSHIP
BETWEEN THE PARTIES. IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES
A WAIVER OF TRIAL BY JURY OF ALL CLMMS AGAINST ALL PARTIES TO SUCH ACTIONS OR
PROCEEDINGS, INCLUDING CLMMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS
AGREEMENT. THIS WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY,
WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER AND THE BORROWER HEREBY AGREES
THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL
TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THE LENDER IS HEREBY AUTHORIZED TO SUBMIT THIS AGREEMENT TO ANY COURT
HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE BORROWER SO AS TO SERVE
AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO TRIAL BY JURY. THE BORROWER
REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
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8.09 Service of Process.
The Borrower hereby consents to process being served in any suit,
action or proceeding instituted in connection with this Agreement by the
mailing of a copy thereof to the Borrower by certified mail, postage prepaid,
return receipt requested. The Borrower hereby irrevocably agrees that such
service shall be deemed to be service of process upon the Borrower in any
such suit, action or proceeding. Nothing in this Agreement shall affect the
right of the Lender to serve process in any other manner otherwise permitted
by law, and nothing in this Agreement will limit the right of the Lender
otherwise to bring proceedings against the Borrower in the courts of any
other jurisdiction or jurisdictions.
8.10 Notice: Any notice, demand, request or other communication
which the Lender or the Borrower may be required to give hereunder shall be
in writing, shall be effective when sent by first class United States mail,
postage prepaid, and shall be addressed as follows, or to such other
addresses as the parties may designate by like notice:
If to the Borrower:
OSIRIS THERAPEUTICS, INC.
11100 Euclid Avenue
Wearn Building, Fourth Floor
Cleveland, Ohio 44106
Attn: Robert J Walden
with a copy to:
HOGAN & HARTSON, L.L.P.
111 South Calvert Street
16th Floor
Baltimore, Maryland 21202
Attn: Kevin G. Gralley, Esquire
If to the Lender:
SIGNET BANK/MARYLAND
P.O. Box 1077
Baltimore, Maryland 21203
Attn: Carol S Freeman, Vice President
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with a copy to:
WEINBERG & GREEN LLC
100 South Charles Street
Baltimore, Maryland 21201
Attn: Peter B. Rosenwald, II, Esquire
Notwithstanding anything to the contrary, all notices and demands for payment
from the Lender actually received in writing by the Borrower shall be
considered to be effective upon the receipt thereof by the Borrower
regardless of the procedure or method utilized to accomplish delivery thereof
to the Borrower.
8.11 Miscellaneous. Time is of the essence under this Agreement. The
paragraph headings of this Agreement are for convenience only, and shall not
limit or otherwise affect any of the terms hereof. This Agreement and the
other Loan Documents, if any, constitute the entire agreement between the
parties with respect to their subject matter and supersede all prior letters,
representations, or agreements, oral or written, with respect thereto. The
Lender may, without notice to or consent of the Borrower, sell, assign,
pledge or transfer this Agreement or sell, assign, transfer or grant
participations in all or any part of the obligations evidenced by the Note to
others at any time and from time to time, and the Lender may divulge to any
potential assignee, transferee or participant all information, reports,
financial statements and documents obtained in connection with this Agreement
and any other Loan Documents or otherwise; provided, however, that (a) the
Lender may not assign any of its obligations to make advances under the Loan,
and (b) the Lender may not disclose to any potential assignee, transferee or
participant any information with respect to the Borrower or the Loan unless
such Person has agreed in writing to treat such information as confidential.
No modification, release, or waiver of this Agreement shall be deemed to be
made by the Lender unless in writing signed by the Lender, and each such
waiver, if any, shall apply only with respect to the specific instance
involved. No course of dealing or conduct shall be effective to modify,
release or waive any provisions of this Agreement or any of the other Loan
Documents. This Agreement shall inure to the benefit of and be enforceable by
the Lender and the Lender's successors and assigns and any other person to
whom the Lender may grant an interest in the obligations evidenced by this
Agreement and shall be binding upon and enforceable against the Borrower and
the Borrower's successors and assigns. Whenever used herein, the singular
number shall include the plural, the plural the singular, and the use of the
masculine, feminine, or neuter gender shall include all genders. This
Agreement may be executed in any number of counterparts, all of which, when.
taken together shall constitute one Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement under seal as of the date first above written.
ATTEST/WITNESS: OSIRIS THERAPEUTICS, INC.
/s/ Nancy G. Rubin By: /s/ James S. Burns (SEAL)
------------------------ -------------------------
James S. Burns
President and Chief Executive Officer
BORROWER
SIGNET BANK/MARYLAND
/s/ Peter B. Rosenwald II By: /s/ Carol S. Freeman (SEAL)
------------------------- --------------------------
Carol S Freeman
Vice President
LENDER
ACKNOWLEDGEMENT
STATE OF_______________ )
) to wit
CITY/COUNTY OF________ )
I HEREBY CERTIFY that on the ________ day of June, 1995, before me, the
subscriber, a Notary Public of the State of_______________ personally
appeared James S Burns, who acknowledged himself to be the Chief Executive
Officer of Osiris Therapeutics, Inc., a Delaware corporation, and that he, as
the Chief Executive Officer of Osiris Therapeutics, Inc.,
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being authorized to do so, executed that Loan Agreement for the purposes
contained in that instrument, by signing the name of the corporation by
himself as Chief Executive Officer
IN WITNESS WHEREOF, I set my hand and official seal
[NOTARY SEAL] ________________________
Notary Public
________________________
Printed Name of Notary Public
My Commission Expires:
---------------------
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SCHEDULE 3.07
SCHEDULE 3.08
SCHEDULE 3.09
SCHEDULE 3.10
None as to each Schedule.
<PAGE>
Exhibit 10.21
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") dated as of
March 11, 1993, is made by and between Osiris Therapeutics, Inc.,
a Delaware corporation (the "Company"), and Arnold I. Caplan (the
"Consultant").
RECITALS
A. The Company desires to retain the services of
Consultant.
B. Consultant is willing to be retained by the Company on
the terms and conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Consultant agree as
follows:
l. Retention. The Company hereby retains the services of
Consultant for the term set forth in Section 2 below, with the
duties and responsibilities set forth in Section 3 below, and
upon the other terms and conditions hereinafter stated.
2. Term. The initial term of Consultant's consulting
services to the Company shall commence on the a ate of this
Agreement and shall end on December 31, 1995 unless sooner
terminated pursuant to the terms of this Agreement. Commencing
on the third anniversary of the Commencement Date (as defined
below), unless the term of Consultant's consulting services has
otherwise been terminated pursuant to Section 7, the term of
Consultant's consulting services to the Company shall be
automatically renewed for successive two year terms unless the
Company makes the election described in Section 7(a), and each
such renewal term shall be for two years unless sooner terminated
pursuant to the terms of this Agreement. The period described
above shall be the "Consulting Period," and the "Commencement
Date" shall be January 1, 1993.
3. Duties and Responsibilities.
(a) During the Consulting Period, Consultant shall be
a consultant to the Company and shall serve as the Chief
Scientific Officer of the Company, reporting and responsible only
to the President and Chief Executive Officer of the Company. The
consulting services to be provided by Consultant to the Company
are set forth on Exhibit A to this Agreement.
<PAGE>
(b) Throughout the Consulting Period, Consultant shall
devote his time and attention exclusively to the business of the
Company subject only to his duties and responsibilities to Case
Western Reserve University ("CWRU") where Consultant shall
continue to be an employee and to the exceptions set forth in
the following sentence. During the Consulting Period Consultant
shall not provide consulting services to any other corporation,
partnership, organization or other entity or person, except that
Consultant (i) shall be permitted to provide consulting services
to the persons listed on Exhibit B to this Agreement, (ii) shall
be permitted to provide consulting services to any non-profit
educational, research or clinical organization, and (iii) shall
be permitted to provide such consulting services as the Company
may approve in writing (such approval not to be unreasonably
withheld), provided that in each case such services do not (A)
interfere with the performance of his duties and responsibilities
to the Company or (B) otherwise violate Section 10 of this
Agreement.
4. Base Compensation. Commencing on the date (the
"Financing Closing Date") on which the Company has sold shares of
its capital stock (common or preferred) for an aggregate purchase
price of at least $3,000,000 (but retroactive to the Commencement
Date), and thereafter during the Consulting Period, Consultant
shall receive base compensation at an annual rate of not less
than (a) $75,000 from the Commencement Date until December 31,
1993, (b) $87,500 from January 1, 1994 until December 31, 1994,
(c) $100,000 from January 1, 1995 until December 31, 1995 and (d)
from and after December 31, 1995, an amount each calendar year
which is equal to the sum of the annual rate of base compensation
for the preceding calendar year plus ten percent of such amount.
Such base compensation shall be paid in accordance with the
Company's procedures for compensating its employees, but not less
frequently than monthly. The first payment of base compensation
made to Consultant shall include base compensation from the
Commencement Date.
5. Incentive Compensation. (a) Consultant and the
President of the Company shall agree on annual performance goals
and objectives for Consultant which shall serve as the goals and
objectives for Consultant under any merit bonus plan (the "Plan")
established by the Board of Directors for certain employees of
and consultants to the Company. Subject to the adoption of and
amount of funding provided to such Plan, Consultant may receive a
cash bonus, based on the achievement of such goals and
objectives, during each fiscal year of the Company during which
Consultant serves as the Chief Scientific Officer of the Company.
The bonus for any fiscal year shall not exceed 30% of
Consultant's base compensation in effect at the end of such
fiscal year, and shall be paid to Consultant within 60 days
following the end of such fiscal year.
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<PAGE>
(b) Consultant shall be entitled to a cash bonus of
$12,500 if the Company enters into a Corporate Partnership (as
defined below) before March 31, 1994. A Corporate Partnership
shall mean a research and development partnership or similar
arrangement with a corporation pursuant to which the Company will
receive not less than $500,000 of funding per year for research
and development projects for a minimum period of two years. Such
bonus shall be paid to Consultant within ten days after the
Company enters into the Corporate Partnership.
6. Benefits, Perquisites and Expenses. During the
Consulting Period, Consultant shall be entitled to the following
benefits and perquisites:
(a) Participation in the employee benefit plans of the
Company, as they may be modified or added to from time to
time, including, without limitation, plans providing retirement
benefits, medical insurance, life insurance, disability insurance,
and accidental death or dismemberment insurance, but only to the
extent such benefits are not available to Consultant from his then
current employer.
(b) Reimbursement for all reasonable and documented expenses incurred
by Consultant in connection with the performance of his duties
hereunder, in accordance with the Company policy with respect to such
reimbursement. In addition to the foregoing, within 30 days after
the Company has sold shares of its capital stock (common or preferred)
for an aggregate purchase price of at least $3,000,000, the Company
shall reimburse Consultant for up to $14,005.00 of reasonable and
documented expenses incurred by him in connection with his activities
on behalf of the Company and Skeletech Incorporated prior to the
Commencement Date.
(c) Within 15 days after the Company has sold shares of its capital
stock (common or preferred) for an aggregate purchase price of at
least $500,000, reimbursement of up to $2,500 of reasonable and
documented legal fees incurred by Consultant in connection with the
negotiation of this Agreement with the Company.
(d) Commencing on the Financing Closing Date, life insurance on the
life of Consultant in a face amount of $1,000,000 naming the
Consultant or his designee(s) as the beneficiary of the proceeds of
such policy. Consultant shall cooperate with the Company as may be
necessary in connection with any application for such life insurance
or any life insurance on the life of the Consultant naming the Company
or its designees as the beneficiary.
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<PAGE>
7. Termination of Consulting Period.
(a) The Company may elect not to renew the Consulting Period for
any reason, such election to be effective as of either the third
anniversary of the Commencement Date or the end of a renewal term
(as described in Section 2 hereof), upon giving Consultant written
notice at least 180 days in advance of such election.
(b) Consultant may terminate his consulting services to the Company
at any time upon giving the Company written notice 90 days in advance
of the proposed date of termination.
(c) Consultant's consulting services to the Company shall terminate
automatically upon the death of Consultant.
(d) At any time after Consultant suffers a "Disability" (as defined
below), the Company may terminate Consultant's consulting services to
the Company upon giving Consultant written notice from the Board of
Directors of the Company, accompanied by a certified copy of a
resolution to that effect duly adopted by the Board of Directors, at
least 60 days in advance of the date on which such termination is to
become effective. For the purposes of this Agreement "Disability"
shall have the same meaning as any similar term under any long term
disability insurance policy or long term disability plan maintained
by the Company from time to time. In the event the Company shall not
be maintaining any such policy or plan, Consultant shall be considered
to have a Disability if he is receiving disability income payments
under the Social Security system, or if any life insurance carrier has
agreed to waive premiums due under any life insurance policy
maintained by the Company on Consultant's life under a disability
waiver provision set forth in such policy. In addition, Consultant
shall be considered to have a Disability if the Company receives,
from a physician reasonably acceptable to it, written certification
that (i) Consultant is unable to provide services to the Company of a
quality and nature consistent with past practice because of a mental
or physical impairment, and (ii) there is no reasonable prospect that
Consultant will be able to render services of such quality and nature
within the longer of (x) six months, or (y) the period of disability
required in order for Consultant to be eligible to receive disability
income payments under any long term disability insurance policy or
long term disability plan maintained by the Company at such time, from
the date of such certificate.
(e) The Company may terminate Consultant's consulting services to the
Company without cause at any time and for any reason by giving
Consultant written notice from the Board of Directors of the Company
at least 90 days in advance of the date on which the termination is to
become
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<PAGE>
effective. Consultant's consulting services to the Company shall be
considered to have been constructively terminated without cause by the
Company if Consultant resigns because:
(i) his resignation as Chief Scientific Officer
of the Company is requested by the Board of Directors; or
(ii) the Company breaches any provision of this
Agreement and fails to remedy such breach within 30 days after
receiving written notice from Consultant requesting that the
Company remedy such breach.
(f) The Company may terminate Consultant's consulting services to
the Company at any time for cause by delivering to Consultant a
certified copy of a resolution of the Board of Directors of the
Company finding that Consultant committed an act or omission
constituting cause hereunder and specifying the particulars thereof
in detail, adopted at a meeting called and held for that purpose and
of which Consultant was provided not less than seven days' advance
written notice, including notice of the agenda of such meeting.
As used herein, the term "cause" shall mean:
(i) conviction of a felony involving the Company;
(ii) intentionally acting in a manner which is
materially detrimental or materially damaging to the
Company's reputation or business operations other
than actions which involve Consultant's bad judgment or
a decision which was taken in good faith, provided that
Consultant shall have failed to remedy such action
within 30 days after the date of the meeting at which
the Board of Directors adopts a resolution requesting
that he terminate such action after having given
written notice to Consultant of its position with
respect to such actions and of the agenda of the Board
meeting setting forth such resolution as a matter to be
acted on at such meeting and allowing Consultant
an opportunity to be heard at such meeting; or
(iii) committing any material breach of this
Agreement which results in material damage to the
Company, provided that Consultant shall have failed to
take reasonable steps to remedy such alleged breach
within 30 days after his receipt of written notice from
the Board of Directors of the Company pursuant to a
resolution duly adopted by the Board of Directors of
the Company requesting that he remedy such alleged
breach after notice to Consultant and an opportunity
for Consultant to be heard at a meeting of the Board of
Directors, or, if such breach is incapable of being
remedied within such 30 day period but is capable of
5
<PAGE>
being remedied within a reasonable period of time,
Consultant shall have failed to use his best efforts to
remedy such breach promptly after such meeting.
8. Certain Payments and Obligations.
(a) Upon any termination of Consultant's consulting
services to the Company under paragraph (b) or (f) of Section 7:
(i) the Company shall pay Consultant in a lump
sum within ten days following such termination an amount
equal to the base compensation and any incentive or bonus
compensation Consultant was entitled to receive up to the
time of termination, plus the amount of any expenses that
are reimbursable under paragraph (b) of Section 6; provided,
however, that Consultant shall not be entitled to any
severance payment under the Company's then existing severance
pay policy or plan (if any); and
(ii) Consultant shall have no further obligation
to the Company under this Agreement except that he shall
continue to be bound by the provisions of Sections 9, 10 and
11 hereof to the extent applicable to the period following
the Consulting Period.
(b) Upon any termination of Consultant's consulting
services to the Company under paragraph (c) of Section 7, the
Company shall pay Consultant's estate the same amounts as are
provided in paragraph (c) of this Section 8, except that the
period of time on which the lump sum payment under clause (ii) is
based shall be 12 months; provided, however, that in the event
that at the time of Consultant's death the Company is maintaining
life insurance on Consultant naming Consultant and/or his heirs
as beneficiaries, the amount of the insurance paid or payable to
Consultant's estate and/or heirs shall reduce, on a dollar for
dollar basis, the payment to Consultant's estate under this
paragraph (b).
(c) Upon any termination of Consultant's consulting
services to the Company under paragraph (e) of Section 7 with or
without the required notice:
(i) the Company shall pay Employee in a lump sum
within ten days following such termination an amount equal
to the base compensation and any incentive or bonus
compensation Consultant was entitled to receive up to the time
of termination, plus the amount of any expenses that are
reimbursable under paragraph (b) of Section 6; provided
however, that Consultant shall not be entitled to any severance
payment under the Company's then existing severance pay policy
or plan;
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<PAGE>
(ii) the Company shall (A) pay Consultant in a lump sum
payment within ten days following such termination an amount
equal to the present value (based on a discount rate equal to
the then prime rate of Society National Bank of Cleveland, Ohio
or its successor) of the aggregate cash compensation Consultant
would have received under this Agreement if the Consulting Period
had continued for a period of time equal to the greater of (1) the
period of time the Consulting Period would have continued but for such
termination (excluding any subsequent renewal term) and (2)
the Noncompetition Period (as defined in Section 10 hereof),
based on the rate of Consultant's annual total cash compensation
(base plus bonus and incentive compensation) for the year prior to the
year in which such termination occurs (or, if such termination occurs
during the first year of the Consulting Period, the rate of compensation
in effect during such year) and (B) continue to provide Consultant and, if
applicable, his dependents with the benefits provided under the benefit
plans (pursuant to the terms thereof) described in Section 6(a) hereof, to
the same extent that such benefits were provided to Consultant on the
date of termination of his consulting services to the Company, for a period
of time equal to the period of time used to determine the amount of the
lump sum payment to Consultant under (A) above; provided, however, that
the Company may elect to reduce the Noncompetition Period by up to 12
months and thereby reduce the period of time on which Consultant's lump
sum payment and benefits under this clause (ii) are based; and
(iii) Consultant shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by the provisions
of Sections 9, 10 and 11 hereof to the extent applicable to the period
following the Consulting Period.
(d) Upon any termination of Consultant's consulting
services to the Company under paragraph (a) or (d) of Section 7:
(i) the Company shall pay Consultant the same amounts as are provided
in paragraph (c) of this Section 8, except that the period of time on which
the lump sum payment under clause (ii)is based shall be 12 months; and
(ii) Consultant shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by the provisions
of Sections 9, 10 and 11 hereof to the extent applicable to the period
following the Consulting Period.
7
<PAGE>
9. Confidentiality.
Consultant acknowledges that by reason of his duties as
a consultant to the Company, he has or will have access to and
become informed of confidential and secret information which is a
competitive asset of the Company (collectively "Confidential
Information") including, without limitation, (a) information
concerning concepts for products and services and products and
services data, (b) corporate planning data, (c) the Company's
financial results and business condition, and (d) any other
information which constitutes a "trade secret" under the Uniform
Trade Secrets Act. Consultant agrees to keep in strict
confidence and not, either directly or indirectly, to make known,
divulge, reveal, furnish, make available or use any Confidential
Information, except for use in Consultant's regular authorized
duties on behalf of the Company. Consultant acknowledges that
all documents and other property including or reflecting
Confidential Information furnished to Consultant by the Company
or otherwise acquired or developed by the Company shall at all
times be the property of the Company. Consultant agrees that
upon termination of Consultant's consulting services to the
Company, for any reason, Consultant shall return to the Company
any such documents or other property (including copies, summaries
or analyses of the foregoing) containing Confidential Information
which are in his possession, custody or control. Consultant
further agrees that Consultant's obligations of confidentiality
hereunder shall survive any termination of Consultant's
consulting services to the Company. For the purposes of this
Section 9, Confidential Information shall not include information
which has become, through no fault of Consultant, generally known
to the public, and Consultant, if required by law to make
disclosure of Confidential Information to a court of competent
jurisdiction, may make such disclosure after providing the
Company with reasonable notice and an opportunity to contest such
requirement. The obligations of Consultant under this Section 9
are in addition to, and not in limitation of or preemption of,
all other obligations of confidentiality which he may have to
the Company under general legal and equitable principles.
10. Noncompetition.
Consultant acknowledges that his access to and
knowledge of the Confidential Information would be valuable to a
competitor of the Company. Consultant further acknowledges that
it would be inherent in the performance of his duties as a
director, officer, employee, agent, consultant, shareholder or
partner of any corporation, partnership or other entity which
competes with the Company, or which intends to or may compete
with the Company, to disclose or use such knowledge to or for the
benefit of such corporation, partnership or other entity. To
protect these vital interests of the Company, Consultant agrees
that from the date of this Agreement through the second
anniversary of the date on which his consulting services to the
Company terminate for any
8
<PAGE>
reason (the "Noncompetition Period"), he shall not, directly or indirectly,
whether as a director, officer, employee, agent or 'consultant or otherwise:
(a) invest in or become employed by or affiliated with, in any capacity, any
corporation, partnership or other entity which is engaged in a business which
is competitive with the business of the Company on the date of such
termination (except that Consultant may purchase up to two percent of the
outstanding capital stock of a company that has common stock quoted on a
national stock exchange or the over-the-counter market); (b) solicit sales
of, or sell or deliver, any product or service of the kind and character sold
or distributed by the Company; (c) solicit, attempt to solicit or seek to
divert from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations;
or (d) engage, suggest or assist in or influence the engagement of hiring by
any competitor of the Company of any employee of the Company, or otherwise
cause or encourage any person, corporation, partnership or other entity
having a business or employment relationship with the Company to sever such
relationship with or commit any act harmful to the Company. Consultant's
obligations and covenants under this Section 10 shall be limited to North
America, Europe, Japan, Taiwan, Singapore and Australia. For the purposes of
this Section 10, the business of the Company shall mean the research,
development and commercialization of products based on human mesenchymal stem
cells and other lineage cells, including without limitation the research,
development and commercialization of cellular transplants and cell-matrix
products utilizing mesenchymal stem cells and other lineage cells.
11. Inventions.
Consultant hereby assigns and agrees to assign to the
Company, its successors, assigns or nominees, all of his rights
to any discoveries, inventions and improvements, whether
patentable or not, made, conceived or suggested, either solely or
jointly with others, by Consultant while providing consulting
services to the Company, whether in the course of his providing
consulting services with the use of the Company's time, material
or facilities or that is in any way within or related to the
existing or contemplated scope of the Company's business. Any
discovery, invention or improvement relating to any subject
matter with which the Company was concerned during the Consulting
Period and made, conceived or suggested by Consultant, either
solely or jointly with others, within one year following
termination of Consultant's consulting services to the Company
shall be irrebuttably presumed to have been so made, conceived or
suggested in the course of such consulting services with the use
of the Company's time, materials or facilities. Upon request by
the Company with respect to any such discoveries, inventions or
improvements, Consultant will execute and deliver to the Company,
at any time during or after the Consulting Period, all
appropriate documents for use in applying for, obtaining and
9
<PAGE>
maintaining such domestic and foreign patents as the Company may
desire, and all proper assignments therefor, when so requested
by and at the expense of the Company, but without further or
additional consideration. Notwithstanding any other provision of
this Section 11, the Company's rights with respect to any
discoveries, inventions or improvements shall be subject to the
rights of CWRU under any license agreement between it and the
Company entered into subsequently to the date of this Agreement.
12. Issuance of Shares.
(a) In order to provide Consultant with additional
incentive to further the interests of the Company, the Company
hereby issues and sells to Consultant 1,280 shares of the
Company's common stock, par value $.01 per share (the "Common
Stock"), for a price per share of $.15. Of such 1,280 shares of
Common Stock (the "Shares"), 320 Shares are issued and sold to
Consultant without restriction other than as provided in clause
(ii) of paragraph (b) below, and 960 Shares (the "Restricted
Shares") are subject to the restrictions and risk of forfeiture
set forth in paragraphs (b) and (c) of this Section 12.
(b) Restrictions on Transfer of Shares. The Shares
subject to this Agreement may not be transferred, sold, pledged,
exchanged, assigned or otherwise encumbered or disposed of by the
Consultant, except to the Company, unless and until (i) in the
case of the Restricted Shares, such Shares have become
nonforfeitable in accordance with paragraph (c) of this Section
12, and (ii) in the case of all the Shares, the transfer of such
Shares has been made in compliance with Section 3 of the
Stockholders Agreement dated as of March 11, 1993 by and among
the Company, Consultant and the Company's other stockholders. Any
purported transfer, encumbrance or other disposition of the
Shares that is in violation of this Section 12 shall be null and
void, and the other party to any such purported transfer,
encumbrance or other disposition shall not obtain any rights to
or interest in such Shares. The certificate(s) evidencing the
Shares shall bear a legend in a form satisfactory to the Company
reflecting the restrictions described above.
(c) Vesting of Restricted Shares. Three hundred
twenty of the Restricted Shares shall become nonforfeitable upon
each of the first, second and third anniversary of the
Commencement Date if Consultant's consulting services to the
Company have not been terminated prior to such anniversary
pursuant to Section 7 of this Agreement. Notwithstanding the
foregoing, in the event of (i) a termination of Consultant's
consulting services to the Company pursuant to Section 7(e) of
this Agreement or (ii) a merger of the Company into another
corporation in which the Company is not the surviving corporation
or a sale of all or substantially all of the assets of the
Company, all of the Restricted Shares shall immediately become
nonforfeitable.
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<PAGE>
(d) Forfeiture of Restricted Shares. Any of the
Restricted Shares that have not become nonforfeitable in
accordance with paragraph (c) hereof on the date on which
Consultant's consulting services to the Company are terminated
pursuant to Section 7 of this Agreement shall be forfeited by the
Consultant. In the event of a forfeiture, the certificate(s)
representing all of the Restricted Shares that have not become
nonforfeitable in accordance with paragraph (c) hereof shall be
canceled and the Consultant shall have no further interest in or
rights with respect to such Restricted Shares.
(e) Dividend. Voting and Other Rights Consultant
shall have all of the rights of a stockholder with respect to the
Restricted Shares, including the right to vote the Restricted
Shares and receive any dividends that may be paid thereon;
provided, however, that any additional shares of Common Stock or
other securities that Consultant may become entitled to receive
pursuant to a stock split or dividend with respect to the Common
Stock or a merger or reorganization in which the Company is the
surviving corporation or any other change in the capital
structure of the Company shall be subject to the same
restrictions and risk of forfeiture as the Restricted Shares with
respect to which such additional shares of Common Stock or other
securities were received by Consultant.
(f) Retention of Stock Certificate(s) by the Company.
The certificate(s) representing the Restricted Shares covered by
this Agreement shall be held in custody by the Company, together
with a stock power with respect thereto endorsed in blank by
Consultant, until those Restricted Shares have become
nonforfeitable in accordance with paragraph (c) this Section 12.
(g) Withholding Taxes. If the Company shall be
required to withhold any federal, state, local or foreign tax in
connection with any issuance of the Shares or other securities
pursuant to this Section 12, Consultant shall pay the tax or make
provisions that are satisfactory to the Company for the payment
thereof.
(h) Other. No provision of this Section 12 shall
limit in any way whatsoever any right that the Company may
otherwise have to terminate the consulting services of Consultant
at any time. Any economic or other benefit to Consultant under
this Section 12 shall not be taken into account in determining
any benefits to which Consultant may be entitled under any
profit-sharing, retirement or other benefit or compensation plan
maintained by the Company and shall not affect the amount of any
life insurance coverage available to any beneficiary under any
life insurance plan covering employees and consultants of the
Company.
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13. Miscellaneous.
(a) All notices required to be given under this
Agreement shall be in writing and delivered personally or sent by
registered mail or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Company:
Osiris Therapeutics, Inc.
2080 Adelbert Road
Cleveland, Ohio 44106
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: John C. McIlwraith
If to Consultant:
Arnold I. Caplan
1300 Oakridge Drive
Cleveland Heights, Ohio 44121
with a copy to:
Ulmer & Berne
Bond Court Building
1300 East Ninth Street, Suite 900
Cleveland, Ohio 44114-1583
Attention: Stuart A. Laven
Notice shall be deemed delivered at the time received in the case
of personal delivery, or five business days after it is mailed in
the case of mailing.
(b) This Agreement shall be subject to and governed by
the internal laws of the State of Ohio (without regard to
conflicts of law principles).
(c) The headings or titles to sections in this
Agreement are intended solely for convenience and no provision of
this Agreement is to be construed by reference to the heading or
title of any section.
(d) No provision of this Agreement may be amended,
modified or waived unless such amendment, modification or waiver
is authorized by the Board of Directors of the Company and is
agreed to in a writing signed by Consultant and by a duly
authorized officer of the Company (other than Consultant).
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Except as otherwise specifically provided in this Agreement, no
waiver by any party hereto of any breach by any other party
hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a
subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at
any prior or subsequent time; nor shall the. receipt or
acceptance of compensation or other benefits following any
termination of Consultant's employment be deemed a waiver
of any condition or provision hereof.
(e) Consultant shall not assign, pledge or encumber
any interest in this Agreement or any part thereof without the
express written consent of the Company, this Agreement being
personal to Consultant. This Agreement shall, however, inure to
the benefit of Consultant's estate, dependents, beneficiaries and
legal representatives. This Agreement shall not be assignable by
the Company without the written consent of Consultant, but if
the Company shall merge or consolidate with or into, or transfer
all or substantially all of its assets to, another corporation or
other form of business organization, then this Agreement shall
inure to the benefit of and be binding upon the successor of the
Company resulting from such merger, consolidation or transfer. No
such merger, consolidation or transfer, however, shall relieve
the Company from liability and responsibility for the performance
of its duties and obligations hereunder.
(f) Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant and/or provision
hereof. In the event that any provision of this Agreement shall
finally be determined to be unlawful, such provision shall be
deemed severed from this Agreement, but every other provision of
this Agreement shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be
substituted a provision of similar import reflecting the original
intent of the parties hereto to the extent permissible under law.
(g) This Agreement and the agreements referred to
herein comprise the entire understanding between the Company and
Consultant as to the subject matter hereof and supersedes all
prior agreements relating thereto.
(h) In the event of a breach by Consultant of any of
the provisions of Sections 9, 10 or 11 of this Agreement, the
Company shall have the right to institute and prosecute
proceedings, at law or in equity, in any court of competent
jurisdiction, to obtain an injunction during or after the term of
this Agreement to enforce the provisions of such Sections and to
pursue any other remedy to which the Company may be entitled.
Consultant acknowledges that the Company's remedy at law for any
of Consultant's obligations under such Sections will be
inadequate, and Consultant agrees and consents that temporary and
permanent injunctive relief may be granted in any proceeding
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which may be brought to enforce any provision thereof, without
the necessity of proof of actual damage.
(i) Any controversy or claim arising under this
Agreement, except for any controversy or claim which involves a
claim by the Company for equitable or injunctive relief with
respect to Section 9, 10 and/or 11 of this Agreement, shall be
settled by arbitration in Cleveland, Ohio in accordance with the
Rules of the American Arbitration Association then in effect. The
controversy or claim shall be submitted to three arbitrators, one
of whom shall be chosen by the Company, one of whom shall be
chosen by Consultant, and the third of whom shall be chosen by
the two arbitrators so selected. The party desiring arbitration
shall give written notice to the other party of its desire to
arbitrate the particular matter in question naming the arbitrator
selected by it. If the other party shall fail, within a period
of 15 days after such notice shall have been given, to reply in
writing naming the arbitrator selected by it, then the other
party may apply to the American Arbitration Association for the
appointment of an arbitrator to serve as the arbitrator chosen by
the other party. The decision of any two of the arbitrators
shall be final and binding upon the parties hereto and shall be
delivered in writing, signed in triplicate, by the concurring
arbitrators to each of the parties hereto. Judgment upon the
award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. In addition, the prevailing party
in such an arbitration proceeding shall be entitled to recover
his or its reasonable attorney's fees and all reasonable
out-of-pocket costs and disbursements, as well as any and all
charges which may be made for the cost of the arbitration and the
fees of the arbitrators. In the event a claim or controversy
arising under this Agreement involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10
and/or 11 of this Agreement, the parties may, but shall not be
obligated to, submit all or a portion of such controversy or
claim to the foregoing arbitration proceedings.
14
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IN WITNESS WHEREOF, Consultant and the Company, by a duly
authorized officer of the Company pursuant to the authority of
its Board of Directors, have executed this Consulting Agreement
at Cleveland, Ohio, as of the day and year first written above.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
-----------------------------
Name:
Title: President
/s/ Arnold I Caplan
--------------------------------
ARNOLD I. CAPLAN
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EXHIBIT A
Arnold I. Caplan, Ph.D.
Consulting Duties and Responsibilities
l. Conceptualize, recommend and supervise the transition of
basic mesenchymal stem cell science from CWRU to the Company
in consultation with the CEO and V.P. Research &
Development. Participate in Scientific Advisory Board
meetings and assist the Scientific Advisory Board Chairman
in setting the agenda.
2. Directly manage research projects conducted in the Skeletal
Research Center which are funded by the Company and/or its
affiliates.
3. Identify, evaluate and recommend external scientific
collaborations, sponsored research and/or technology
licenses of complementary technology in the tissue
regeneration field.
4. Assist in identifying and recruiting key research and
clinical employees/advisors for the Company or
Company-sponsored research programs.
5. Participate in presenting the Company's basic and clinical
science to prospective corporate partners and major
investors.
6. Prepare patent disclosures arising from mesenchymal stem
cell technology and related research. Assist company
attorneys in the filing and prosecution of patent
applications based on disclosures submitted by the
Consultant, other scientists from CWRU and/or the Company.
<PAGE>
Exhibit 10.22
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") dated as of March 11, 1993, is
made by and between Osiris Therapeutics, Inc., a Delaware corporation (the
"Company"), and Victor N. Goldberg (the "Consultant").
RECITALS
A. The Company desires to retain the services of Consultant.
B. Consultant is willing to be retained by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Consultant agree as follows:
l. Retention. The Company hereby retains the services of Consultant
for the term set forth in Section 2 below, with the duties and
responsibilities set forth in Section 3 below, and upon the other terms and
conditions hereinafter stated.
2. Term. The initial term of Consultant's consulting services to the
Company shall commence on the date of this Agreement and shall end on
December 31, 1995 unless sooner terminated pursuant to the terms of this
Agreement. Commencing on the third anniversary of the Commencement Date (as
defined below), unless the term of Consultant's consulting services has
otherwise been terminated pursuant to Section 7, the term of Consultant's
consulting services to the Company shall be automatically renewed for
successive two year terms unless the Company makes the election described in
Section 7(a), and each such renewal term shall be for two years unless sooner
terminated pursuant to the terms of this Agreement. The period described
above shall be the "Consulting period," and the "Commencement Date" shall be
January 1, 1993.
3. Duties and Responsibilities
(a) During the Consulting Period, Consultant shall be a consultant
to the Company and shall serve as the Chairman of the Company's Scientific
Advisory Board, reporting and responsible only to the President and Chief
Executive Officer of the Company. The consulting services to be provided by
Consultant to the Company are set forth on Exhibit A to this Agreement.
<PAGE>
(b) Throughout the Consulting Period, Consultant shall devote his
time and attention exclusively to the business of the Company subject only to
his duties and responsibilities to Case Western Reserve University ("CWRU")
and University Hospitals ("UH") where Consultant shall continue to be an
employee and to the exceptions set forth in the following sentence. During
the Consulting Period, Consultant shall not provide consulting services to
any other corporation, partnership, organization or other entity or person,
except that Consultant (i) shall be permitted to provide consulting services
to the persons listed on Exhibit B to this Agreement, (ii) shall be permitted
to provide consulting services to any non-profit educational, research or
clinical organization, and (iii) shall be permitted to provide such
consulting services as the Company may approve in writing (such approval not
to be unreasonably withheld), provided that in each case such services do not
(A) interfere with the performance of his duties and responsibilities to the
Company or (B) otherwise violate Section 10 of this Agreement.
4. Base Compensation. Commencing on the date on which the Company has
sold shares of its capital stock (common or preferred) for an aggregate
purchase price of at least $3,000,000 (but retroactive to the Commencement
Date), and thereafter during the Consulting Period, Consultant shall receive
base compensation at an annual rate of not less than (a) $50,000 from the
Commencement Date until December 31, 1993, and (b) from and after December
31, 1993, an amount each calendar year which is equal to the sum of the
annual rate of base compensation for the preceding calendar year plus ten
percent of such amount. Such base compensation shall be paid in accordance
with the Company's procedures for compensating its employees, but not less
frequently than monthly. The first payment of base compensation made to
Consultant shall include base compensation from the Commencement Date.
5. Incentive Compensation. Consultant and the President of the Company
shall agree on annual performance goals and objectives for Consultant which
shall serve as the goals and objectives for Consultant under any merit bonus
plan (the "Plan") established by the Board of Directors for certain employees
of and consultants to the Company. Subject to the adoption of and amount of
funding provided to such Plan, Consultant may receive a cash bonus, based on
the achievement of such goals and objectives, during each fiscal year of the
Company during which Consultant serves as the Chairman of the Company's
Scientific Advisory Board. The bonus for any fiscal year shall not exceed
30% of Consultant's base compensation in effect at the end of such fiscal
year, and shall be paid to Consultant within 60 days following the end of
such fiscal year.
6. Benefits, Perquisites and Expenses. During the Consulting Period,
Consultant shall be entitled to the following benefits and perquisites:
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(a) Reimbursement for all reasonable and documented expenses
incurred by Consultant in connection with the performance of his duties
hereunder, in accordance with the Company policy with respect to-such
reimbursement. In addition to the foregoing, within 30 days after the
Company has sold shares of its capital stock (common or preferred) for an
aggregate purchase price of at least $3,000,000, the Company shall reimburse
Consultant for up to $7,041.75 of reasonable and documented legal expenses
incurred by him in connection with his activities on behalf of Skeletech
Incorporated prior to the Commencement Date.
(b) Within 15 days after the Company has sold shares of its capital
stock (common or preferred) for an aggregate purchase price of at least
$500,000, reimbursement of up to $2,500 of reasonable and documented legal
fees incurred by Consultant in connection with the negotiation of this
Agreement with the Company.
7. Termination of Consulting Period
(a) The Company may elect not to renew the Consulting Period for any
reason, such election to be effective as of either the third anniversary of
the Commencement Date or the end of a renewal term (as described in Section 2
hereof), upon giving Consultant written notice at least 180 days in advance
of such election.
(b) Consultant may terminate his consulting services to the Company
at any time upon giving the Company written notice90 days in advance of the
proposed date of termination.
(c) Consultant's consulting services to the Company shall terminate
automatically upon the death of Consultant.
(d) At any time after Consultant suffers a "Disability" (as defined
below), the Company may terminate Consultant's consulting services to the
Company upon giving Consultant written notice from the Board of Directors of
the Company, accompanied by a certified copy of a resolution to that effect
duly adopted by the Board of Directors, at least 60 days in advance of the
date on which such termination is to become effective. For the purposes of
this Agreement "Disability" shall have the same meaning as any similar term
under any long term disability insurance policy or long term disability plan
maintained by the Company from time to time. In the event the Company shall
not be maintaining any such policy or plan, Consultant shall be considered to
have a Disability if he is receiving disability income payments under the
Social Security system, or if any life insurance carrier has agreed to waive
premiums due under any life insurance policy maintained by the Company on
Consultant's life under a disability waiver provision set forth in such
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<PAGE>
policy. In addition, Consultant shall be considered to have a Disability if
the Company receives, from a physician reasonably acceptable to it, written
certification that (i) Consultant is unable to provide services to the
Company of a quality and nature consistent with past practice because of a
mental or physical impairment, and (ii) there is no reasonable prospect that
Consultant will be able to render services of such quality and nature within
the longer of (x) six months, or (y) the period of disability required in
order for Consultant to be eligible to receive disability income payments
under any long term disability insurance policy or long term disability plan
maintained by the Company at such time, from the date of such certificate.
(e) The Company may terminate Consultant's consulting services to
the Company without cause at any time and for any reason by giving Consultant
written notice from the Board of Directors of the Company at least 90 days in
advance of the date on which the termination is to become effective.
Consultant's consulting services to the Company shall be considered to have
been constructively terminated without cause by the Company if Consultant
resigns because:
(i) his resignation as Chairman of the Scientific Advisory
Board of the Company is requested by the Board of Directors; or
(ii) the Company breaches any provision of this Agreement and
fails to remedy such breach within 30 days after receiving written
notice from Consultant requesting that the Company remedy such
breach.
(f) The Company may terminate Consultant's consulting services to
the Company at any time for cause by delivering to Consultant a certified
copy of a resolution of the Board of Directors of the Company finding that
Consultant committed an act or omission constituting cause hereunder and
specifying the particulars thereof in detail, adopted at a meeting called and
held for that purpose and of which Consultant was provided not less than
seven days' advance written notice, including notice of the agenda of such
meeting. As used herein, the term "cause" shall mean:
(i) conviction of a felony involving the Company;
(ii) intentionally acting in a manner which is materially
detrimental or materially damaging to the Company's reputation or
business operations other than actions which involve Consultant's
bad judgment or a decision which was taken in good faith, provided
that Consultant shall have failed to remedy such action within 30
days after the date of the meeting at which the Board of Directors
adopts a resolution requesting
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<PAGE>
that he terminate such action after having given written
notice to Consultant of its position with respect to such
actions and of the agenda of the Board meeting setting forth
such resolution as a matter to be acted on at such meeting
and allowing Consultant an opportunity to be heard at
such meeting; or
(iii) committing any material breach of this Agreement which
results in material damage to the Company, provided that Consultant
shall have failed to take reasonable steps to remedy such alleged
breach within 30 days after his receipt of written notice from the
Board of Directors of the Company pursuant to a resolution duly
adopted by the Board of Directors of the Company requesting that he
remedy such alleged breach after notice to Consultant and an
opportunity for Consultant to be heard at a meeting of the Board of
Directors, or, if such breach is incapable of being remedied within
such 30 day period but is capable of being remedied within a
reasonable period of time, Consultant shall have failed to use his
best efforts to remedy such breach promptly after such meeting.
8. Certain Payments and Obligations.
(a) Upon any termination of Consultant's services consulting to the
Company under paragraph (b) or (f) of Section 7:
(i) the Company shall pay Consultant in a lump sum within ten
days following such termination an amount equal to the base
compensation and any incentive or bonus compensation Consultant was
entitled to receive up to the time of termination, plus the amount
of any expenses that are reimbursable under paragraph (a) of
Section 6; provided, however, that Consultant shall not be entitled
to any severance payment under the Company's then existing
severance pay policy or plan (if any); and
(ii) Consultant shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by
the provisions of Sections 9, 10 and 11 hereof to the extent
applicable to the period following the Consulting Period.
(b) Upon any termination of Consultant's consulting services to the
Company under paragraph (c) of Section 7, the Company shall pay Consultant's
estate the same amounts as are provided in paragraph (c) of this Section 8,
except that the period of time on which the lump sum payment under clause
(ii) is based shall be 12 months; provided, however, that in the event that
at the time of Consultant's death the Company is maintaining life insurance
on Consultant naming Consultant and/or his heirs as beneficiaries, the amount
of the insurance paid or payable to
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<PAGE>
Consultant's estate and/or heirs shall reduce, on a dollar for dollar basis,
the payment to Consultant's estate under this paragraph (b).
(c) Upon any termination of Consultant's consulting services to the
Company under paragraph (e) of Section 7 with or without the required notice:
(i) the Company shall pay Employee in a lump sum within ten
days following such termination an amount equal to the base
compensation and any incentive or bonus compensation Consultant
was entitled to receive up to the time of termination, plus the
amount of any expenses that are reimbursable under paragraph (a)
of Section 6; provided however, that Consultant shall not be
entitled to any severance payment under the Company's then existing
severance pay policy or plan;
(ii) the Company shall pay Consultant in a lump sum payment
within ten days following such termination an amount equal to the
present value (based on a discount rate equal to the then prime
rate of Society National Bank of Cleveland, Ohio or its successor)
of the aggregate cash compensation Consultant would have received
under this Agreement if the Consulting Period had continued for a
period of time equal to the greater of (A) the period of time the
Consulting Period would have continued but for such termination
(excluding any subsequent renewal term) and (B) the Noncompetition
Period (as defined in Section 10 hereof), based on the rate of
Consultant's annual total cash compensation (base plus bonus and
incentive compensation) for the year prior to the year in which
such termination occurs (or, if such termination occurs during
the first year of the Consulting Period, the rate of compensation
in effect during such year); provided, however, that the Company
may elect to reduce the Noncompetition Period by up to 12 months
and thereby reduce the period of time on which Consultant's lump
sum payment under this clause (ii) is based; and
(iii) Consultant shall have no further obligation to the
Company under this Agreement except that he shall continue to be
bound by the provisions of Sections 9, 10 and 11 hereof to the
extent applicable to the period following the Consulting Period.
(d) Upon any termination of Consultant's consulting services to the
Company under paragraph (a) or (d) of Section 7:
(i) the Company shall pay Consultant the same amounts as are
provided in paragraph (c) of this Section 8, except that the period
of time on which the lump sum payment under clause (ii) is based
shall be 12 months; and
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<PAGE>
(ii) Consultant shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by
the provisions of Sections 9, 10 and 11 hereof to the extent
applicable to the period following the Consulting Period.
9. Confidentiality.
Consultant acknowledges that by reason of his duties as a consultant to
the Company he has or will have access to and become informed of confidential
and secret information which is a competitive asset of the Company
(collectively "Confidential Information") including, without limitation, (a)
information concerning concepts for products and services and products and
services data, (b) corporate planning data, (c) the Company's financial
results and business condition, and (d) any other information which
constitutes a "trade secret" under the Uniform Trade Secrets Act. Consultant
agrees to keep in strict confidence and not, either directly or indirectly,
to make known, divulge, reveal, furnish, make available or use any
Confidential Information, except for use in Consultant's regular authorized
duties on behalf of the Company. Consultant acknowledges that all documents
and other property including or reflecting Confidential Information furnished
to Consultant by the Company or otherwise acquired or developed by the
Company shall at all times be the property of the Company. Consultant agrees
that upon termination of Consultant's consulting services to the Company, for
any reason, Consultant shall return to the Company any such documents or
other property (including copies, summaries or analyses of the foregoing)
containing Confidential Information which are in his or her possession,
custody or control. Consultant further agrees that Consultant's obligations
of confidentiality hereunder shall survive any termination of Consultant's
consulting services to the Company. For the purposes of this Section 9,
Confidential Information shall not include information which has become,
through no fault of Consultant, generally known to the public, and
Consultant, if required by law to make disclosure of Confidential Information
to a court of competent jurisdiction, may make such disclosure after
providing the Company with reasonable notice and an opportunity to contest
such requirement. The obligations of Consultant under this Section 9 are in
addition to, and not in limitation of or preemption of, all other obligations
of confidentiality which he may have to the Company under general legal and
equitable principles.
10. Noncompetition.
Consultant acknowledges that his access to and knowledge of the
Confidential Information would be valuable to a competitor of the Company.
Consultant further acknowledges that it would be inherent in the performance
of his duties as a director, officer, employee, agent, consultant,
shareholder or partner of any
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<PAGE>
corporation, partnership or other entity which competes with the Company, or
which intends to or may compete with the Company, to disclose or use such
knowledge to or for the benefit of such corporation, partnership or other
entity. To protect these vital interests of the Company, Consultant agrees
that from the date of this Agreement through the second anniversary of the
date on which his consulting services to the Company terminate for any reason
(the "Noncompetition Period"), he shall not, directly or indirectly, whether
as a director, officer, employee, agent or consultant or otherwise: (a)
invest in or become employed by or affiliated with, in any capacity, any
corporation, partnership or other entity which is engaged in a business which
is competitive with the business of the Company on the date of such
termination (except that Consultant may purchase up to two percent of the
outstanding capital stock of a company that has common stock quoted on a
national stock exchange or the over-the-counter market); (b) solicit sales
of, or sell or deliver, any product or service of the kind and character sold
or distributed by the Company; (c) solicit1 attempt to solicit or seek to
divert from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations;
or (d) engage, suggest or assist in or influence the engagement of hiring by
any competitor of the Company of any employee of the Company, or otherwise
cause or encourage any person, corporation, partnership or other entity
having a business or employment relationship with the Company to sever such
relationship with or commit any act harmful to the Company. Consultant's
obligations and covenants under this Section 10 shall be limited to North
America, Europe, Japan, Taiwan, Singapore and Australia. For the purposes of
this Section 10, the business of the Company shall mean the research,
development and commercialization of products based on human mesenchymal stem
cells and other lineage cells, including without limitation the research,
development and commercialization of cellular transplants and cell-matrix
products utilizing mesenchymal stem cells and other lineage cells.
11. Inventions.
Consultant hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made, conceived or
suggested, either solely or jointly with others, by Consultant while
providing consulting services to the Company, whether in the course of his
providing consulting services with the use of the Company's time, material or
facilities or that is in any way within or related to the existing or
contemplated scope of the Company's business. Any discovery, invention or
improvement relating to any subject matter with which the Company was
concerned during the Consulting Period and made, conceived or suggested by
Consultant, either solely or jointly with others, within one year following
termination of Consultant's consulting services to the Company
-8-
<PAGE>
shall be irrebuttably presumed to have been so made, conceived or suggested
in the course of such consulting services with the use of the Company's time,
materials or facilities. Upon request by the Company with respect to any
such discoveries, inventions or improvements, Consultant will execute and
deliver to the Company, at any time during or after the Consulting Period,
all appropriate documents for use in applying for, obtaining and maintaining
such domestic and foreign patents as the Company may desire, and all proper
assignments therefor, when so requested by and at the expense of the Company,
but without further or additional consideration. Notwithstanding any other
provision of this Section 11, the Company's rights with respect to any
discoveries, inventions or improvements shall be subject to the rights of
CWRU under any license agreement between it and the Company entered into
subsequent to the date of this Agreement.
12. Issuance of Shares.
(a) In order to provide Consultant with additional incentive to
further the interests of the Company, the Company hereby issues and sells to
Consultant 1,280 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), for a price per share of $.15. Of such 1,280
shares of Common Stock (the "Shares"), 320 Shares are issued and sold to
Consultant without restriction other than as provided in clause (ii) of
paragraph (b) below, and 960 Shares (the "Restricted Shares") are subject to
the restrictions and risk of forfeiture set forth in paragraphs (b) and (c)
of this Section 12.
(b) Restrictions on Transfer of Shares. The Shares subject to this
Agreement may not be transferred, sold, pledged, exchanged, assigned or
otherwise encumbered or disposed of by the Consultant, except to the Company,
unless and until (i) in the case of the Restricted Shares, such Shares have
become nonforfeitable in accordance with paragraph (c) of this Section 12,
and (ii) in the case of all the Shares, the transfer of such Shares has been
made in compliance with Section 3 of the Stockholders Agreement dated as of
March 11, 1993 by and among the Company, Consultant and the Company's other
stockholders. Any purported transfer, encumbrance or other disposition of the
Shares that is in violation of this Section 12 shall be null and void, and
the other party to any such purported transfer, encumbrance or other
disposition shall not obtain any rights to or interest in such Shares. The
certificate(s) evidencing the Shares shall bear a legend in a form
satisfactory to the Company reflecting the restrictions described above.
(c) Vesting of Restricted Shares. Three hundred twenty of the
Restricted Shares shall become nonforfeitable upon each of the first, second
and third anniversary of the Commencement Date if Consultant's consulting
services to the Company have not been terminated prior to such anniversary
pursuant to Section 7 of this Agreement. Notwithstanding the
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foregoing, in the event of (i) a termination of Consultant's consulting
services to the Company pursuant to Section 7(e) of this Agreement or (ii) a
merger of the Company into another corporation in which the Company is not
the surviving corporation or a sale of all or substantially all of the assets
of the Company, all of the Restricted Shares shall immediately become
nonforfeitable.
(d) Forfeiture of Restricted Shares. Any of the Restricted Shares
that have not become nonforfeitable in accordance with paragraph (c) hereof
on the date on which Consultant's consulting services to the Company are
terminated pursuant to Section 7 of this Agreement shall be forfeited by the
Consultant. In the event of a forfeiture, the certificate(s) representing all
of the Restricted Shares that have not become nonforfeitable in accordance
with paragraph (c) hereof shall be canceled and the Consultant shall have no
further interest in or rights with respect to such Restricted Shares.
(e) Dividend. Voting and Other Rights Consultant shall have all of
the rights of a stockholder with respect to the Restricted Shares, including
the right to vote the Restricted Shares and receive any dividends that may be
paid thereon; provided, however, that any additional shares of Common Stock
or other securities that Consultant may become entitled to receive pursuant
to a stock split or dividend with respect to the Common Stock or a merger or
reorganization in which the Company is the surviving corporation or any other
change in the capital structure of the Company shall be subject to the same
restrictions and risk of forfeiture as the Restricted Shares with respect to
which such additional shares of Common Stock or other securities were
received by Consultant.
(f) Retention of Stock Certificate(s) by the Company. The
certificate(s) representing the Restricted Shares covered by this Agreement
shall be held in custody by the Company, together with a stock power with
respect thereto endorsed in blank by Consultant, until those Restricted
Shares have become nonforfeitable in accordance with paragraph (c) this
Section 12.
(g) Withholding Taxes If the Company shall be required to withhold
any federal, state, local or foreign tax in connection with any issuance of
the Shares or other securities pursuant to this Section 12, Consultant shall
pay the tax or make provisions that are satisfactory to the Company for the
payment thereof.
(h) Other. No provision of this Section 12 shall limit in any way
whatsoever any right that the Company may otherwise have to terminate the
consulting services of Consultant at any time. Any economic or other benefit
to Consultant under this Section 12 shall not be taken into account in
determining any benefits to which Consultant may be entitled under any
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profit-sharing, retirement or other benefit or compensation plan maintained
by the Company and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees
and consultants of the Company.
13. Miscellaneous.
(a) All notices required to be given under this Agreement shall be
in writing and delivered personally or sent by registered mail or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to the Company:
Osiris Therapeutics, Inc.
2080 Adelbert Road
Cleveland, Ohio 44106
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: John C. McIlwraith
If to Consultant:
Victor N. Goldberg
2600 Wellington Road
Cleveland Heights, Ohio 44118
with a copy to:
Hahn, Loeser & Parks
3300 BP America Building
200 Public Square
Cleveland, Ohio 44114-2301
Attention: Wilton S. Sogg, Esq.
Notice shall be deemed delivered at the time received in the case of personal
delivery, or five business days after it is mailed in the case of mailing.
(b) This Agreement shall be subject to and governed by the internal
laws of the State of Ohio (without regard to conflicts of law principles).
(c) The headings or titles to sections in this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
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(d) No provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver is authorized by the
Board of Directors of the Company and is agreed to in a writing signed by
Consultant and by a duly authorized officer of the Company (other than
Consultant). Except as otherwise specifically provided in this Agreement, no
waiver by any party hereto of any breach by any other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar provision or condition at
the same or at any prior or subsequent time; nor shall the receipt or
acceptance of compensation or other benefits following any termination of
Consultant's employment be deemed a waiver of any condition or provision
hereof.
(e) Consultant shall not assign, pledge or encumber any interest in
this Agreement or any part thereof without the express written consent of the
Company, this Agreement being personal to Consultant. This Agreement shall,
however, inure to the benefit of Consultant's estate, dependents,
beneficiaries and legal representatives. This Agreement shall not be
assignable by the Company without the written consent of Consultant, but if
the Company shall merge or consolidate with or into, or transfer all or
substantially all of its assets to, another corporation or other form of
business organization, then this Agreement shall inure to the benefit of and
be binding upon the successor of the Company resulting from such merger,
consolidation or transfer. No such merger, consolidation or transfer,
however, shall relieve the Company from liability and responsibility for the
performance of its duties and obligations hereunder.
(f) Each provision of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. In the event that
any provision of this Agreement shall finally be determined to be unlawful,
such provision shall be deemed severed from this Agreement, but every other
provision of this Agreement shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted
a provision of similar import reflecting the original intent of the parties
hereto to the extent permissible under law.
(g) This Agreement and the agreements referred to herein comprise
the entire understanding between the Company and Consultant as to the subject
matter hereof and supersedes all prior agreements relating thereto.
(h) In the event of a breach by Consultant of any of the provisions
of Sections 9, 10 or 11 of this Agreement, the Company shall have the right
to institute and prosecute proceedings, in equity, in any court of competent
jurisdiction, to obtain an injunction during or after the term of this
Agreement to enforce the provisions of such Sections and to
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pursue any other remedy to which the Company may be entitled. Consultant
acknowledges that the Company's remedy at law for any of Consultant's
obligations under such Sections will be inadequate, and Consultant agrees and
consents that temporary and permanent injunctive relief may be granted in any
proceeding which may be brought to enforce any provision thereof, without the
necessity of proof of actual damage.
(i) Any controversy or claim arising under this Agreement, except
for any controversy or claim which involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10 and/or 11 of
this Agreement, shall be settled by arbitration in Cleveland, Ohio in
accordance with the Rules of the American Arbitration Association then in
effect. The controversy or claim shall be submitted to three arbitrators, one
of whom shall be chosen by the Company, one of whom shall be chosen by
Consultant, and the third of whom shall be chosen by the two arbitrators so
selected. The party desiring arbitration shall give written notice to the
other party of its desire to arbitrate the particular matter in question
naming the arbitrator selected by it. If the other party shall fail, within
a period of 15 days after such notice shall have been given, to reply in
writing naming the arbitrator selected by it, then the other party may apply
to the American Arbitration Association for the appointment of an arbitrator
to serve as the arbitrator chosen by the other party. The decision of any
two of the arbitrators shall be final and binding upon the parties hereto and
shall be delivered in writing signed in triplicate, by the concurring
arbitrators to each of the parties hereto. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
In addition, the prevailing party in such an arbitration proceeding shall be
entitled to recover his or its reasonable attorney's fees and all reasonable
out-of-pocket costs and disbursements, as well as any and all charges which
may be made for the cost of the arbitration and the fees of the arbitrators.
In the event a claim or controversy arising under this Agreement involves a
claim by the Company for equitable or injunctive relief with respect to
Section 9, 10 and/or 11 of this Agreement, the parties may, but shall not be
obligated to, submit all or a portion of such controversy or claim to the
foregoing arbitration proceedings.
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<PAGE>
IN WITNESS WHEREOF, Consultant and the Company, by a duly authorized
officer of the Company pursuant to the authority of its Board of Directors,
have executed this Consulting Agreement at Cleveland, Ohio, as of the day and
year first written above.
OSIRIS THERAPEUTICS, INC.
By:/s/ James S. Burns
----------------------------------
Name:
Title: Pres. & CEO
/s/ Victor M. Goldberg
----------------------------------
VICTOR M. GOLDBERG
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<PAGE>
EXHIBIT A
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Victor M. Goldberg, M.D.
Consulting Duties and Responsibilities
---------------------------------------
l. Prepare agendas and arrange for outside speakers at SAB meetings, in
consultation with the Chief Scientific Officer and the Company's Vice
President Research & Development.
2. Chair Scientific Advisory Board meetings.
3. Assist Company management in identifying and evaluating technology,
clinical procedures and/or products which contribute to the Company's
business in bio-orthopaedic products.
4. Assist in identifying and recruiting key research and clinical
employees/advisors for the Company.
5. Participate in presenting the Company's basic and clinical science to
prospective corporate partners and major investors in the Company.
6. Assist Company attorneys in the disclosure, filing and prosecution of
patent applications based on disclosures submitted by scientists from CWRU
and the Company.
<PAGE>
EXHIBIT B
Permitted Consulting Services
------------------------------
Consultant shall be permitted to provide consulting services to companies
in connection with the design and development of orthopaedic implants.
Consultant currently provides such consulting services to "Zimmer".
<PAGE>
Exhibit 10.23
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") dated as of March 11, 1993,
is made by and between Osiris Therapeutics, Inc., a Delaware corporation (the
"Company"), and Stephen E. Haynesworth (the "Consultant").
RECITALS
A. The Company desires to retain the services of Consultant.
B. Consultant is willing to be retained by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Consultant agree as follows:
1. Retention. The Company hereby retains the services of Consultant for
the term set forth in Section 2 below, with the duties and responsibilities
set forth in Section 3 below, and upon the other terms and conditions
hereinafter stated.
2. Term. The initial term of Consultant's consulting services to the
Company shall commence on the date of this Agreement and shall end on
December 31, 1995 unless sooner terminated pursuant to the terms of this
Agreement. Commencing on the third anniversary of the Commencement Date (as
defined below), unless the term of Consultant's consulting services has
otherwise been terminated pursuant to Section 7, the term of Consultant's
consulting services to the Company shall be automatically renewed for
successive two year terms unless the Company makes the election described in
Section 7(a), and each such renewal term shall be for two years unless sooner
terminated pursuant to the terms of this Agreement. The period described
above shall be the "Consulting Period," and the "Commencement Date" shall be
January 11, 1993.
3. Duties and Responsibilities.
(a) During the Consulting Period, Consultant shall be a consultant to
the Company and shall serve as the Director of Stem Cell Research for the
Company, reporting and responsible to the President and Chief Executive
Officer of the Company or his designee. The consulting services to be
provided by Consultant to the Company are set forth on Exhibit A to this
Agreement.
<PAGE>
(b) Throughout the Consulting Period, Consultant shall devote his time
and attention exclusively to the business of the Company subject only to his
duties and responsibilities to Case Western Reserve University ("CWRU") where
Consultant shall continue to be an employee and to the exceptions set forth
in the following sentence. During the Consulting Period Consultant shall not
provide consulting services to any other corporation, partnership,
organization or other entity or person, except that Consultant (i) shall be
permitted to provide consulting services to any non-profit educational,
research or clinical organization and (ii) shall be permitted to provide such
consulting services as the Company may approve in writing (such approval not
to be unreasonably withheld), provided that in each case such services do not
(A) interfere with the performance of his duties and responsibilities to the
Company or (B) otherwise violate Section 10 of this Agreement.
4. Base Compensation Commencing on the date (the "Financing Closing
Date") on which the Company has sold shares of its capital stock (common or
preferred) for an aggregate purchase price of at least $3,000,000 (but
retroactive to the Commencement Date), and thereafter during the Consulting
Period, Consultant shall receive base compensation at an annual rate of not
less than (a) $40,000 from the Commencement Date until December 31, 1993, (b)
$50,000 from January 1, 1994 until December 31, 1994, and (c) from and after
December 31, 1994, an amount each calendar year which is equal to the sum of
the annual rate of base compensation for the preceding calendar year plus ten
percent of such amount. Such base compensation shall be paid in accordance
with the Company's procedures for compensating its employees, but not less
frequently than monthly. The first payment of base compensation made to
Consultant shall include base compensation from the Commencement Date.
Consultant shall also receive a signing bonus of $10,000 within ten days
after the Financing Closing Date.
5. Incentive Compensation Consultant and the President of the Company
shall agree on annual performance goals and objectives for Consultant which
shall serve as the goals and objectives for Consultant under any merit bonus
plan (the "Plan") established by the Board of Directors for certain employees
of and consultants to the Company. Subject to the adoption of and amount of
funding provided to such Plan, Consultant may receive a cash bonus, based on
the achievement of such goals and objectives, during each fiscal year of the
Company during which Consultant serves as a consultant to the Company. The
bonus for any fiscal year shall not exceed 30% of Consultant's base
compensation in effect at the end of such fiscal year, and shall be paid to
Consultant within 60 days following the end of such fiscal year.
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6. Benefits, Perquisites and Expenses. During the Consulting Period,
Consultant shall be entitled to the following benefits and perquisites:
(a) Reimbursement for all reasonable and documented expenses incurred by
Consultant in connection with the performance of his duties hereunder, in
accordance with the Company policy with respect to such reimbursement. In
addition to the foregoing, within 30 days after the Company has sold
shares of its capital stock (common or preferred) for an aggregate
purchase price of at least $3,000,000, the Company shall reimburse
Consultant for up to $200.00 of reasonable and documented legal expenses
incurred by him in connection with his activities on behalf of Skeletech
Incorporated prior to the Commencement Date.
(b) Within 15 days after the Company has sold shares of its capital stock
(common or preferred) for an aggregate purchase price of at least
$500,000, reimbursement of up to $2,500 of reasonable and documented
legal fees incurred by Consultant in connection with the negotiation of
this Agreement with the Company.
7. Termination of Consulting Period.
(a) The Company may elect not to renew the Consulting Period for any
reason, such election to be effective as of either the third anniversary
of the Commencement Date or the end of a renewal term (as described in
Section 2 hereof), upon giving Consultant written notice at least 180
days in advance of such election.
(b) Consultant may terminate his consulting services to the Company
at any time upon giving the Company written notice 90 days in advance of
the proposed date of termination.
(c) Consultant's consulting services to the Company shall terminate
automatically upon the death of Consultant.
(d) At any time after Consultant suffers a "Disability" (as defined
below), the Company may terminate Consultant's consulting services to
the Company upon giving Consultant written notice from the Board of
Directors of the Company, accompanied by a certified copy of a resolution
to that effect duly adopted by the Board of Directors, at least 60 days
in advance of the date on which such termination is to become effective.
For the purposes of this Agreement "Disability" shall have the same
meaning as any similar term under any long term disability insurance
policy or long term disability plan maintained by the Company from time
to time. In the event the Company shall not be maintaining any such
policy or plan, Consultant shall be considered to have a Disability if he
is receiving disability income payments
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<PAGE>
under the Social Security system, or if any life insurance carrier has
agreed to waive premiums due under any life insurance policy maintained
by the Company on Consultant's life under a disability waiver provision
set forth in such policy. In addition, Consultant shall be considered
to have a Disability if the Company receives, from a physician reasonably
acceptable to it, written certification that (i) Consultant is unable to
provide services to the Company of a quality and nature consistent with
past practice because of a mental or physical impairment, and (ii) there
is no reasonable prospect that Consultant will be able to render services
of such quality and nature within the longer of (x) six months, or (y)
the period of disability required in order for Consultant to be eligible
to receive disability income payments under any long term disability
insurance policy or long term disability plan maintained by the Company
at such time, from the date of such certificate.
(e) The Company may terminate Consultant's consulting services to the
Company without cause at any time and for any reason by giving Consultant
written notice from the Board of Directors of the Company at least 90
days in advance of the date on which the termination is to become
effective. Consultant's consulting services to the Company shall be
considered to have been constructively terminated without cause by the
Company if Consultant resigns because the Company breaches any provision
of this Agreement and fails to remedy such breach within 30 days after
receiving written notice from Consultant requesting that the Company
remedy such breach.
(f) The Company may terminate Consultant's consulting services to the
Company at any time for cause by delivering to Consultant a certified
copy of a resolution of the Board of Directors of the Company finding
that Consultant committed an act or omission constituting cause hereunder
and specifying the particulars thereof in detail, adopted at a meeting
called and held for that purpose and of which Consultant was provided
not less than seven days' advance written notice, including notice of
the agenda of such meeting. As used herein, the term "cause" shall mean:
(i) conviction of a felony involving the Company;
(ii) intentionally acting in a manner which is materially
detrimental or materially damaging to the Company's reputation or
business operations other than actions which involve Consultant's
bad judgment or a decision which was taken in good faith, provided
that Consultant shall have failed to remedy such action within 30
days after the date of the meeting at which the Board of Directors
adopts a resolution requesting that he terminate such action after
having given
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<PAGE>
written notice to Consultant of its position with respect to such
actions and of the agenda of the Board meeting setting forth such
resolution as a matter to be acted on at such meeting and allowing
Consultant an opportunity to be heard at such meeting; or
(iii) committing any material breach of this Agreement which
results in material damage to the Company, provided that Consultant
shall have failed to take reasonable steps to remedy such alleged
breach within 30 days after his receipt of written notice from the
Board of Directors of the Company pursuant to a resolution duly
adopted by the Board of Directors of the Company requesting that he
remedy such alleged breach after notice to Consultant and an
opportunity for Consultant to be heard at a meeting of the Board
of Directors, or, if such breach is incapable of being remedied
within such 30 day period but is capable of being remedied within a
reasonable period of time, Consultant shall have failed to use his
best efforts to remedy such breach promptly after such meeting.
8. Certain Payments and Obligations.
(a) Upon any termination of Consultant's consulting services to the
Company under paragraph (b) or (f) of Section 7:
(i) the Company shall pay Consultant in a lump sum within ten
days following such termination an amount equal to the base compensation
and any incentive or bonus compensation Consultant was entitled to
receive up to the time of termination, plus the amount of any expenses
that are reimbursable under paragraph (a) of Section 6; provided,
however, that Consultant shall not be entitled to any severance payment
under the Company's then existing severance pay policy or plan (if any);
and
(ii) Consultant shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by the
provisions of Sections 9, 10 and 11 hereof to the extent applicable to
the period following the Consulting Period.
(b) Upon any termination of Consultant's consulting services to the
Company under paragraph (c) of Section 7, the Company shall pay Consultant's
estate the same amounts as are provided in paragraph (c) of this Section 8,
except that the period of time on which the lump sum payment under clause
(ii) is based shall be 12 months; provided, however, that in the event that
at the time of Consultant's death the Company is maintaining life insurance
on Consultant naming Consultant and/or his heirs as beneficiaries, the amount
of the insurance paid or payable to Consultant's estate and/or heirs shall
reduce, on a dollar for
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<PAGE>
dollar basis, the payment to Consultant's estate under this paragraph (b).
(c) Upon any termination of Consultant's consulting services to the
Company under paragraph (e) of Section 7 with or without the required notice:
(i) the Company shall pay Employee in a lump sum within ten days
following such termination an amount equal to the base compensation and
any incentive or bonus compensation Consultant was entitled to receive
up to the time of termination, plus the amount of any expenses that are
reimbursable under paragraph (a) of Section 6; provided however, that
Consultant shall not be entitled to any severance payment under the
Company's then existing severance pay policy or plan;
(ii) the Company shall pay Consultant in a lump sum payment within
ten days following such termination an amount equal to the present value
(based on a discount rate equal to the then prime rate of Society
National Bank of Cleveland, Ohio or its successor) of the aggregate cash
compensation Consultant would have received under this Agreement if the
Consulting Period had continued for a period of time equal to the greater
of (A) the period of time the Consulting Period would have continued but
for such termination (excluding any subsequent renewal term) and (B) the
Noncompetition Period (as defined in Section 10 hereof), based on the
rate of Consultant's annual total cash compensation (base plus bonus and
incentive compensation) for the year prior to the year in which such
termination occurs (or, if such termination occurs during the first year
of the Consulting Period, the rate of compensation in effect during such
year); provided, however, that the Company may elect to reduce the
Noncompetition Period by up to 12 months and thereby reduce the period
of time on which Consultant's lump sum payment under this clause (ii) is
based; and
(iii) Consultant shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by the
provisions of Sections 9, 10 and 11 hereof to the extent applicable to
the period following the Consulting Period.
(d) Upon any termination of Consultant's consulting services to the
Company under paragraph (a) or (d) of Section 7:
(i) the Company shall pay Consultant the same amounts as are
provided in paragraph (c) of this Section 8, except that the period of
time on which the lump sum payment under clause (ii) is based shall be
12 months; and
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(ii) Consultant shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by the
provisions of Sections 9, 10 and 11 hereof to the extent applicable to
the period following the Consulting Period.
9. Confidentiality.
Consultant acknowledges that by reason of his duties as a
consultant to the Company he has or will have access to and become informed
of confidential and secret information which is a competitive asset of the
Company (collectively "Confidential Information") including, without
limitation, (a) information concerning concepts for products and services and
products and services data, (b) corporate planning data, (c) the Company's
financial results and business condition, and (d) any other information which
constitutes a "trade secret" under the Uniform Trade Secrets Act. Consultant
agrees to keep in strict confidence and not, either directly or indirectly,
to make known, divulge, reveal, furnish, make available or use any
Confidential Information, except for use in Consultant's regular authorized
duties on behalf of the Company. Consultant acknowledges that all documents
and other property including or reflecting Confidential Information furnished
to Consultant by the Company or otherwise acquired or developed by the
Company shall at all times be the property of the Company. Consultant agrees
that upon termination of Consultant's consulting services to the Company, for
any reason, Consultant shall return to the Company any such documents or
other property (including copies, summaries or analyses of the foregoing)
containing Confidential Information which are in his or her possession,
custody or control. Consultant further agrees that Consultant's obligations
of confidentiality hereunder shall survive any termination of Consultant's
consulting services to the Company. For the purposes of this Section 9,
Confidential Information shall not include information which has become,
through no fault of Consultant, generally known to the public, and
Consultant, if required by law to make disclosure of Confidential Information
to a court of competent jurisdiction, may make such disclosure after
providing the Company with reasonable notice and an opportunity to contest
such requirement. The obligations of Consultant under this Section 9 are in
addition to, and not in limitation of or preemption of, all other obligations
of confidentiality which he may have to the Company under general legal and
equitable principles.
10. Noncompetition.
Consultant acknowledges that his access to and knowledge of the
Confidential Information would be valuable to a competitor of the Company.
Consultant further acknowledges that it would be inherent in the performance
of his duties as a director, officer, employee, agent, consultant,
shareholder or partner of any
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<PAGE>
corporation, partnership or other entity which competes with the Company, or
which intends to or may compete with the Company, to disclose or use such
knowledge to or for the benefit of such corporation, partnership or other
entity. To protect these vital interests of the Company, Consultant agrees
that from the date of this Agreement through the second anniversary of the
date on which his consulting services to the Company terminate for any reason
(the "Noncompetition Period"), he shall not, directly or indirectly, whether
as a director, officer, employee, agent or consultant or otherwise: (a)
invest in or become employed by or affiliated with, in any capacity, any
corporation, partnership or other entity which is engaged in a business which
is competitive with the business of the Company on the date of such
termination (except that Consultant may purchase up to two percent of the
outstanding capital stock of a company that has common stock quoted on a
national stock exchange or the over-the-counter market); (b) solicit sales
of, or sell or deliver, any product or service of the kind and character sold
or distributed by the Company; (c) solicit, attempt to solicit or seek to
divert from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations;
or (d) engage, suggest or assist in or influence the engagement of hiring by
any competitor of the Company of any employee of the Company, or otherwise
cause or encourage any person, corporation, partnership or other entity
having a business or employment relationship with the Company to sever such
relationship with or commit any act harmful to the Company. Consultant's
obligations and covenants under this Section 10 shall be limited to North
America, Europe, Japan, Taiwan, Singapore and Australia. For the purposes of
this Section 10, the business of the Company shall mean the research,
development and commercialization of products based on human mesenchymal stem
cells and other lineage cells, including without limitation the research,
development and commercialization of cellular transplants and cell-matrix
products utilizing mesenchymal stem cells and other lineage cells.
11. Inventions.
Consultant hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made, conceived or
suggested, either solely or jointly with others, by Consultant while
providing consulting services to the Company, whether in the course of his
providing consulting services with the use of the Company's time, material or
facilities or that is in any way within or related to the existing or
contemplated scope of the Company's business. Any discovery, invention or
improvement relating to any subject matter with which the Company was
concerned during the Consulting Period and made, conceived or suggested by
Consultant, either solely or jointly with others, within one year following
termination of Consultant's consulting services to the Company
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<PAGE>
shall be irrebuttably presumed to have been so made, conceived or suggested
in the course of such consulting services with the use of the Company's time,
materials or facilities. Upon request by the Company with respect to any such
discoveries, inventions or improvements, Consultant will execute and deliver
to the Company, at any time during or after the consulting Period, all
appropriate documents for use in applying for, obtaining and maintaining such
domestic and foreign patents as the Company may desire, and all proper
assignments therefor, when so requested by and at the expense of the Company,
but without further or additional consideration. Notwithstanding any other
provision of this Section 11, the Company's rights with respect to the rights
of CWRU under any license agreement between it and the Company entered into
subsequent to the date of this Agreement.
12. Issuance of Shares.
(a) In order to provide Consultant with additional incentive to
further the interests of the Company, the Company hereby issues and sells to
Consultant 540 shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), for a price per share of $.15. Of such 540 shares of
Common Stock (the "Shares"), 135 Shares are issued and sold to Consultant
without restriction other than as provided in clause (ii) of paragraph (b)
below, and 405 Shares (the "Restricted Shares") are subject to the
restrictions and risk of forfeiture set forth in paragraphs (b) and (c) of
this Section 12.
(b) Restrictions on Transfer of Shares. The Shares subject to this
Agreement may not be transferred, sold, pledged, exchanged, assigned or
otherwise encumbered or disposed of by the Consultant, except to the Company,
unless and until (i) in the case of the Restricted Shares, such Shares have
become nonforfeitable in accordance with paragraph (c) of this Section 12,
and (ii) in the case of all the Shares, the transfer of such Shares has been
made in compliance with Section 3 of the Stockholders Agreement dated as of
March 11, 1993 by and among the Company, Consultant and the Company's other
stockholders. Any purported transfer, encumbrance or other disposition of the
Shares that is in violation of this Section 12 shall be null and void, and
the other party to any such purported transfer, encumbrance or other
disposition shall not obtain any rights to or interest in such Shares. The
certificate(s) evidencing the Shares shall bear a legend in a form
satisfactory to the Company reflecting the restrictions described above.
(c) Vesting of Restricted Shares. One hundred thirty-five of the
Restricted Shares shall become nonforfeitable upon each of the first, second
and third anniversary of the Commencement Date if Consultant's consulting
services to the Company have not been terminated prior to such anniversary
pursuant to Section 7 of this Agreement. Notwithstanding the foregoing, in
the event of (i) a termination of Consultant's
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consulting services to the Company pursuant to Section 7(e) of this Agreement
or (ii) a merger of the Company into another corporation in which the Company
is not the surviving corporation or a sale of all or substantially all of the
assets of the Company, all of the Restricted Shares shall immediately become
nonforfeitable.
(d) Forfeiture of Restricted Shares. Any of the Restricted Shares
that have not become nonforfeitable in accordance with paragraph (c) hereof
on the date on which Consultant's consulting services to the Company are
terminated pursuant to Section 7 of this Agreement shall be forfeited by the
Consultant. In the event of a forfeiture, the certificate(s) representing
all of the Restricted Shares that have not become nonforfeitable in
accordance with paragraph (c) hereof shall be canceled and the Consultant
shall have no further interest in or rights with respect to such Restricted
Shares.
(e) Dividend, Voting and Other Rights. Consultant shall have all
of the rights of a stockholder with respect to the Restricted Shares,
including the right to vote the Restricted Shares and receive any dividends
that may be paid thereon; provided, however, that any additional shares of
Common Stock or other securities that Consultant may become entitled to
receive pursuant to a stock split or dividend with respect to the Common
Stock or a merger or reorganization in which the Company is the surviving
corporation or any other change in the capital structure of the Company shall
be subject to the same restrictions and risk of forfeiture as the Restricted
Shares with respect to which such additional shares of Common Stock or other
securities were received by Consultant.
(f) Retention of Stock Certificate(s) by the Company. The
certificate(s) representing the Restricted Shares covered by this Agreement
shall be held in custody by the Company, together with a stock power with
respect thereto endorsed in blank by Consultant, until those Restricted
Shares have become nonforfeitable in accordance with paragraph (c) this
Section 12.
(g) Withholding Taxes. If the Company shall be required to
withhold any federal, state, local or foreign tax in connection with any
issuance of the Shares or other securities pursuant to this Section 12,
Consultant shall pay the tax or make provisions that are satisfactory to the
Company for the payment thereof.
(h) Other. No provision of this Section 12 shall limit in any way
whatsoever any right that the Company may otherwise have to terminate the
consulting services of Consultant at any time. Any economic or other benefit
to Consultant under this Section 12 shall not be taken into account in
determining any benefits to which Consultant may be entitled under any
profit-sharing, retirement or other benefit or compensation plan
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maintained by the Company and shall not affect the amount of any life
insurance coverage available to any beneficiary under any life insurance plan
covering employees and consultants of the Company.
13. Miscellaneous.
(a) All notices required to be given under this Agreement shall be
in writing and delivered personally or sent by registered mail or certified
mail, postage prepaid, return receipt requested, addressed as follows:
If to the Company:
Osiris Therapeutics, Inc.
2080 Adelbert Road
Cleveland, Ohio 44106
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: John C. McIlwraith
If to Consultant:
Stephen E. Haynesworth, Ph.D.
3643 Antisdale Road
Cleveland Heights, Ohio 44118
with a copy to:
Proskauer Rose Goetz & Mendelsohn
1585 Broadway
New York, New York 10036
Attention: Eliot P. Green
Notice shall be deemed delivered at the time received in the case of personal
delivery, or five business days after it is mailed in the case of mailing.
(b) This Agreement shall be subject to and governed by the internal
laws of the State of Ohio (without regard to conflicts of law principles).
(c) The headings or titles to sections in this Agreement are
intended solely for convenience and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
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(d) No provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver is authorized by the
Board of Directors of the Company and is agreed to in a writing signed by
Consultant and by a duly authorized officer of the Company (other than
Consultant). Except as otherwise specifically provided in this Agreement, no
waiver by any party hereto of any breach by any other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar provision or condition at
the same or at any prior or subsequent time; nor shall the receipt or
acceptance of compensation or other benefits following any termination of
Consultant's employment be deemed a waiver of any condition or provision
hereof.
(e) Consultant shall not assign, pledge or encumber any interest in
this Agreement or any part thereof without the express written consent of the
Company, this Agreement being personal to Consultant. This Agreement shall,
however, inure to the benefit of Consultant's estate, dependents,
beneficiaries and legal representatives. This Agreement shall not be
assignable by the Company without the written consent of Consultant, but if
the Company shall merge or consolidate with or into, or transfer all or
substantially all of its assets to, another corporation or other form of
business organization, then this Agreement shall inure to the benefit of and
be binding upon the successor of the Company resulting from such merger,
consolidation or transfer. No such merger, consolidation or transfer,
however, shall relieve the Company from liability and responsibility for the
performance of its duties and obligations hereunder.
(f) Each provision of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. In the event that
any provision of this Agreement shall finally be determined to be unlawful,
such provision shall be deemed severed from this Agreement, but every other
provision of this Agreement shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted
a provision of similar import reflecting the original intent of the parties
hereto to the extent permissible under law.
(g) This Agreement and the agreements referred to herein comprise
the entire understanding between the Company and Consultant as to the subject
matter hereof and supersedes all prior agreements relating thereto.
(h) In the event of a breach by Consultant of any of the provisions
of Sections 9, 10 or 11 of this Agreement, the Company shall have the right
to institute and prosecute proceedings, in equity, in any court of competent
jurisdiction, to obtain an injunction during or after the term of this
Agreement to enforce the provisions of such Sections and to
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pursue any other remedy to which the Company may be entitled. Consultant
acknowledges that the Company's remedy at law for any of Consultant's
obligations under such Sections will be inadequate, and Consultant agrees and
consents that temporary and permanent injunctive relief may be granted in any
proceeding which may be brought to enforce any provision thereof, without the
necessity of proof of actual damage.
(i) Any controversy or claim arising under this Agreement, except
for any controversy or claim which involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10 and/or 11 of
this Agreement, shall be settled by arbitration in Cleveland, Ohio in
accordance with the Rules of the American Arbitration Association then in
effect. The controversy or claim shall be submitted to three arbitrators, one
of whom shall be chosen by the Company, one of whom shall be chosen by
Consultant, and the third of whom shall be chosen by the two arbitrators so
selected. The party desiring arbitration shall give written notice to the
other party of its desire to arbitrate the particular matter in question
naming the arbitrator selected by it. If the other party shall fail, within
a period of 15 days after such notice shall have been given, to reply in
writing naming the arbitrator selected by it, then the other party may apply
to the American Arbitration Association for the appointment of an arbitrator
to serve as the arbitrat6r chosen by the other party. The decision of any
two of the arbitrators shall be final and binding upon the parties hereto and
shall be delivered in writing, signed in triplicate, by the concurring
arbitrators to each of the parties hereto. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
In addition, the prevailing party in such an arbitration proceeding shall be
entitled to recover his or its reasonable attorney's fees and all reasonable
out-of-pocket costs and disbursements, as well as any and all charges which
may be made for the cost of the arbitration and the fees of the arbitrators.
In the event a claim or controversy arising under this Agreement involves a
claim by the Company for equitable or injunctive relief with respect to
Section 9, 10 and/or 11 of this Agreement, the parties may, but shall not be
obligated to, submit all or a portion of such controversy or claim to the
foregoing arbitration proceedings.
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IN WITNESS WHEREOF, Consultant and the Company, by a duly
authorized officer of the Company pursuant to the authority of its Board of
Directors, have executed this Consulting Agreement at Cleveland, Ohio, as of
the day and year first written above.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
-----------------------
Name:
Title: President
/s/ Stephen E. Haynesworth
--------------------------
STEPHEN E. HAYNESWORTH
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<PAGE>
Exhibit 10.24
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of March 11, 1993, is
made by and between Osiris Therapeutics, Inc., a Delaware corporation (the
"Company"), and James S. Burns (the "Employee").
RECITALS
A. The Company desires to employ Employee as its Chairman, President and
Chief Executive Officer.
B. Employee is willing to become employed by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Employee agree as follows:
l. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company, for the term set forth in Section 2 below,
in the position and with the duties and responsibilities set forth in Section 3
below, and upon the other terms and conditions hereinafter stated.
2. Term. Subject to the provisions of Section 3(a), the initial term of
employment shall commence on the date of this Agreement and shall end on
December 31, 1995, unless sooner terminated pursuant to the terms of this
Agreement. Commencing on the third anniversary of the Commencement Date (as
defined below), unless the term of employment has otherwise been terminated
pursuant to Section 7, the term of employment shall be automatically renewed for
successive two year terms unless the Company makes the election described in
Section 7(a), and each such renewal term shall be for two years unless sooner
terminated pursuant to the terms of this Agreement. The period described above
shall be the "term of employment," and the "Commencement Date" shall be January
1, 1993.
3. Position. Duties, Responsibilities and Authority.
(a) Subject to the other provisions of this paragraph (a), during the
term of employment, Employee shall serve as Chairman of the Board, President and
Chief Executive Officer of the Company, reporting and responsible only to the
Board of Directors of the Company. Employee shall have the duties and
responsibilities set forth on Exhibit A to this Agreement and such other duties
and responsibilities appropriate for such positions as the Board of Directors of
the Company may from time to time reasonably determine. In the event that the
Board of
<PAGE>
Directors of the Company desires to hire an individual to serve as the full-time
President and Chief Executive Officer of the Company, and such individual has
been either approved by Employee in writing (such approval not to be
unreasonably withheld) or has been approved by a vote of a majority of the
Directors of the Company at a time when at least two of the Directors of the
Company are not employees of or consultants to the Company, the Company shall be
entitled to cause Employee to relinquish his positions as President and Chief
Executive Officer of the Company. The Board of Directors shall exercise such
option by delivering written notice of such election not less than 90 days prior
to the date on which Employee shall cease to hold such positions. On the date
on which Employee relinquishes the positions of President and Chief Executive
Officer pursuant to this Section 3(a), the term of employment shall be
automatically renewed for a three year period and shall be automatically renewed
for successive two year periods after such three year period unless the Company
makes the election described in Section 7(a), and Exhibit A to this Agreement
shall be amended by the mutual agreement of the Company and Employee to reflect
Employee's duties as Chairman of the Company.
(b) Throughout the term of employment, Employee shall devote such
time and attention to the business of the Company as may be necessary to fulfill
his duties and responsibilities under Section 3(a). Nothing in this Agreement
shall preclude Employee from serving as a director, officer or employee of, or
consultant to, other corporations or organizations (and receiving compensation
therefor from any such corporation or organization) so long as (i) such services
do not substantially interfere with the performance of his duties for the
Company and (ii) such services do not otherwise violate Section 10 of this
Agreement.
(c) The Company shall provide Employee with suitable office space, a
secretary and other appropriate support at the Company's offices in Cleveland,
Ohio. Employee shall be entitled to also work out of his office in Darien,
Connecticut (or any other place where Employee's principal residence may from
time to time be located), but such office shall be maintained at Employee's own
expense.
4. Base Compensation.
(a) Commencing on the date (the "Financing Closing. Date") on which
the Company has sold shares of its capital stock (common or preferred) for an
aggregate purchase price of at least $3,000,000 (but retroactive to the
Commencement Date), and thereafter during the term of employment, Employee shall
receive base compensation at an annual rate of not less than $150,000. Such base
compensation shall be paid in accordance with the Company's normal procedure for
compensating its management employees, but not less frequently than monthly.
The first payment of base compensation made to Employee shall include base
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<PAGE>
compensation from the Commencement Date. Such base compensation shall be
increased to an annual rate of not less than $200,000 on the date on which the
Company has sold shares of its capital stock (common or preferred) for an
aggregate purchase price of at least $5,000,000 (including the purchase price of
any shares of capital stock contemplated by the first sentence of this Section
4). In addition, on each anniversary of the Commencement Date Employee's base
compensation shall be increased by an amount equal to 10% of Employee's base
compensation in effect immediately prior to such anniversary.
(b) In the event that Employee ceases to serve as President and Chief
Executive Officer of the Company in accordance with Section 3(a), his base
compensation shall be reduced to an annual rate of not less than $100,000;
provided, however, that the amount of such minimum base compensation rate to be
paid shall be increased by 10% on January 1 of each year commencing January 1,
1994.
5. Incentive Compensation. Employee and the Board of Directors of the
Company shall establish a merit bonus plan (the "Plan") setting forth such goals
and objectives for the Company as Employee and the Board of Directors shall
determine. The Plan shall provide for Employee to receive a cash bonus, based
on the Company's achievement of such goals and objectives, during each fiscal
year of the Company during which Employee serves as Chairman and/or President
and Chief Executive Officer of the Company. The bonus for any fiscal year shall
not exceed 50% of Employee's base compensation in effect at the end of such
fiscal year, and shall be paid to Employee within 60 days following the end of
such fiscal year.
6. Benefits. Perquisites and Expenses. During the term of employment,
Employee and his dependents, and his beneficiaries to the extent provided in the
applicable plan or program, shall be entitled to participate in all Company
benefit plans, programs or practices maintained by the Company from time to
time. Without limiting the generality of the foregoing, Employee shall be
entitled to the following specific benefits and perquisites:
(a) Participation in the employee benefit plans of the Company, as
they may be modified or added to from time to time, including, without
limitation, plans providing retirement benefits, medical insurance, life
insurance, disability insurance, and accidental death or dismemberment
insurance.
(b) While Employee is serving as President and Chief Executive
Officer of the Company, four weeks of paid vacation in each calendar year during
the term of employment, plus such holidays, sick leave and other time off as
are established by the policies of the Company approved by the Company's Board
of Directors. Unused days of vacation may be carried over to March 31 of the
subsequent year and shall thereafter lapse for all
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<PAGE>
time. Employee shall receive, within 30 days after his employment terminates
for any reason, a payment (based on Employee's base compensation in effect on
the date of Employee's termination) for any amount of unused vacation at the
time of such termination, which had been earned on such uniform basis during the
calendar year in which termination occurs.
(c) Reimbursement for all reasonable and documented expenses incurred
by Employee in connection with the performance of his duties hereunder, in
accordance with the Company policy with respect to such reimbursement. In
addition to the foregoing, within 30 days after the Company has sold shares of
its capital stock (common or preferred) for an aggregate purchase price of at
least $1,000,000, the Company shall reimburse Employee for all reasonable and
documented expenses incurred by him in connection with his activities on behalf
of the Company prior to the date of this Agreement.
(d) Commencing on the Financing Closing Date (as defined in Section
4(a)), reimbursement of $500 per month of the cost of leasing an automobile for
Employee's use. The Company shall also pay all insurance, maintenance,
operating costs, fuel and license and registration fees with respect to such
automobile.
(e) Reimbursement of up to $1,000 per month for all reasonable and
documented expenses incurred by Employee commuting between his home and the
Company's offices and for lodging while Employee is in Cleveland, Ohio.
(f) Within 15 days after the Company has sold shares of its capital
stock (common or preferred) for an aggregate purchase price of at least
$500,000, reimbursement of up to $2,500 of reasonable and documented legal fees
incurred by Employee in connection with the negotiation of this Agreement with
the Company.
(g) Commencing on the Financing Closing Date, life insurance on the
life of Employee in a face amount of $1,000,000 and naming the Employee or his
designees as the beneficiary.
(h) On the date on which the Company enters into a collaboration or
research agreement with a corporation, a stock option immediately exercisable
for 500 shares of the Company's common stock and with an exercise price per
share equal to the then fair market value of such common stock, as determined in
good faith by the Board of Directors of the Company. The number of shares to
be covered by such option shall be adjusted as necessary to account for any
stock splits or similar recapitalization subsequent to the date of this
Agreement.
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<PAGE>
7. Termination of Employment.
(a) The Company may elect not to renew the term of employment for any
reason, such election to be effective as of either the third anniversary of the
Commencement Date or the end of a renewal term (as described in Section 2
hereof), upon giving Employee written notice at least 180 days in advance of
such election.
(b) Employee may terminate his employment at any time upon giving the
Company written notice 90 days in advance of the proposed date of termination.
(c) Employee's employment shall terminate automatically upon the
death of Employee.
(d) At any time after Employee suffers a "Disability" (as defined
below), the Company may terminate Employee's employment upon giving Employee
written notice from the Board of Directors of the Company, accompanied by a
certified copy of a resolution to that effect duly adopted by the Board of
Directors, at least 60 days in advance of the date on which such termination is
to become effective. For the purposes of this Agreement "Disability" shall have
the same meaning as any similar term under any long term disability insurance
policy or long term disability plan maintained by the Company from time to time.
In the event the Company shall not be maintaining any such policy or plan,
Employee shall be considered to have a Disability if he is receiving disability
income payments under the Social Security system, or if any life insurance
carrier has agreed to waive premiums due under any life insurance policy
maintained by the Company on Employee's life under a disability waiver provision
set forth in such policy. In addition, Employee shall be considered to have a
Disability if the Company receives, from a physician reasonably acceptable to
it, written certification that(i) Employee is unable to provide services to the
Company of a quality and nature consistent with past practice because of a
mental or physical impairment, and (ii) there is no reasonable prospect that
Employee will be able to render services of such quality and nature within the
longer of (x) six months, or (y) the period of disability required in order for
Employee to be eligible to receive disability income payments under any long
term disability insurance policy or long term disability plan maintained by the
Company at such time, from the date of such certificate.
(e) The Company may terminate Employee's employment without cause at
any time and for any reason by giving Employee written notice from the Board of
Directors of the Company at least 90 days in advance of the date on which the
termination is to become effective. Employee's- employment shall be considered
to have been constructively terminated without cause by the Company if Employee
resigns because:
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<PAGE>
(i) his resignation is requested by the Board of Directors;
(ii) the Company breaches any provision of this Agreement and
fails to remedy such breach within 30 days after receiving written
notice from Employee requesting that the Company remedy such breach;
or
(iii) he is removed from, or not elected to, the Company's
Board of Directors at any time during the term of employment.
(f) The Company may terminate Employee's employment at any time for
cause by delivering to Employee a certified copy of a resolution of the Board of
Directors of the Company finding that Employee committed an act or omission
constituting cause hereunder and specifying the particulars thereof in detail,
adopted at a meeting called and held for that purpose and of which Employee was
provided not less than seven days' advance notice, including notice of the
agenda of such meeting. As used herein, the term "cause" shall mean:
(i) conviction of a felony involving the Company;
(ii) intentionally acting in a manner which is materially
detrimental or materially damaging to the Company's reputation or
business operations other than actions which involve Employee's bad
judgment or a decision which was taken in good faith, provided that
Employee shall have failed to remedy such action within 30 days after
the date of the meeting at which the Board of Directors adopts a
resolution requesting that he terminate such action after having given
written notice to Employee of its position with respect to such
actions and of the agenda of the Board meeting setting forth such
resolution as a matter to be acted on at such meeting and allowing
Employee an opportunity to be heard at such meeting; or
(iii) committing any material breach of this Agreement which
results in material damage to the Company, provided that Employee
shall have failed to take reasonable steps to remedy such alleged
breach within 30 days after his receipt of written notice from the
Board of Directors of the Company pursuant to a resolution duly
adopted by the Board of Directors of the Company requesting that he
remedy such alleged breach after notice to Employee and an opportunity
for Employee to be heard at a meeting of the Board of Directors or, if
such breach is incapable of being remedied within such 30 day period
but is capable of being remedied within a reasonable period of time,
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<PAGE>
Employee shall have failed to use his best efforts to remedy such
breach promptly after such meeting.
8. Certain Payments and Obligations.
(a) Upon any termination of employment under paragraph (b) or (f) of
Section 7:
(i) the Company shall pay Employee in a lump sum within ten days
following such termination an amount equal to the base compensation and any
incentive or bonus compensation Employee was entitled to receive up to the
time of termination, plus the amount of any expenses that are reimbursable
under paragraph (c) of Section 6; provided, however, that Employee shall
not be entitled to any severance payment under the Company's then existing
severance pay policy or plan (if any); and
(ii) Employee shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by the provisions
of Sections 9, 10 and 11 hereof to the extent applicable to the period
following the term of employment.
(b) Upon any termination of employment under paragraph (c) of Section
7, the Company shall pay Employee's estate the same amounts as are provided in
paragraph (c) of this Section 8, except that the period of time on which the
lump sum payment under clause (ii) is based shall be 12 months; provided,
however, that in the event that at the time of Employee's death the Company is
maintaining life insurance on Employee naming Employee and/or his heirs as
beneficiaries, the amount of the insurance paid or payable to Employee's estate
and/or heirs shall reduce, on a dollar for dollar basis, the payment to
Employee's estate under this paragraph (b).
(c) Upon any termination of employment under paragraph (e) of Section
7 with or without the required notice:
(i) the Company shall pay Employee in a lump sum within ten days
following such termination an amount equal to the base compensation
and any incentive or bonus compensation Employee was entitled to
receive up to the time of termination, plus the amount of any expenses
that are reimbursable under paragraph (c) of Section 6; provided,
however, that Employee shall not be entitled to any severance payment
under the Company's then existing severance pay policy or plan;
(ii) the Company shall (A) pay Employee in a lump sum payment
within ten days following such termination an amount equal to the
present value (based on a discount rate equal to the then prime rate
of Society National Bank of
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<PAGE>
Cleveland, Ohio or its successor) of the aggregate cash compensation
Employee would have received under this Agreement if the term of
employment had continued for a period of time equal to the greater of
(1) the period of time the term of employment would have continued but
for such termination (excluding any subsequent renewal term) and (2)
12 months, based on the rate of Employee's total annual cash
compensation (base plus bonus and incentive compensation) for the year
prior to the year in which such termination occurs (or, if such
termination occurs during the first year of the term of employment,
the rate of compensation in effect during such year), and (B)
continue to provide 'Employee and, if applicable, his dependents with
the benefits provided under the benefit plans (pursuant to the terms
thereof) described in Section 6(a) hereof, to the same extent that
such benefits were provided to Employee on the date of termination of
his employment, for a period of time equal to the period of time used
to determine the amount of the lump sum payment to Employee under (A)
above; and
(iii) Employee shall have no further obligation to the
Company under this Agreement except that he shall continue to be bound
by the provisions of Sections 9, 10 and 11 hereof to the extent
applicable to the period following the term of employment.
(d) Upon any termination of employment under paragraph or (d) of
Section 7:
(i) the Company shall pay Employee the same amounts, and shall
provide Employee with the same benefits, as are provided in paragraph
(c) of this Section 8, except that the period of time on which the
lump sum payment is based and the period during which Employee shall
be entitled to benefits under clause (ii) of such paragraph (c) shall
be 12 months; and
(ii) Employee shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by the
provisions of Sections 9, 10 and 11 hereof to the extent applicable to
the period following the term of employment.
9. Confidentiality.
Employee acknowledges that by reason of his duties as an employee of
the Company he has or will have access to and become informed of confidential
and secret information which is a competitive asset of the Company (collectively
"Confidential Information") including, without limitation, (a) information
concerning concepts for products and services and products and
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<PAGE>
services data, (b) corporate planning data, (c) the Company's financial results
and business condition, and (d) any other information which constitutes a "trade
secret" under the Uniform Trade Secrets Act. Employee agrees to keep in strict
confidence and not, either directly or indirectly, to make known, divulge,
reveal, furnish, make available or use any Confidential Information, except for
use in the Employee's regular authorized duties on behalf of the Company.
Employee acknowledges that all documents and other property including or
reflecting Confidential Information furnished to Employee by the Company or
otherwise acquired or developed by the Company shall at all times be the
property of the Company. Employee agrees that upon termination of Employee's
employment with the Company, for any reason, Employee shall return to the
Company any such documents or other property (including copies, summaries or
analyses of the foregoing) containing Confidential Information which are in his
possession, custody or control. Employee further agrees that Employee's
obligations of confidentiality hereunder shall survive any termination of
Employee's employment by the Company. For the purposes of this Section 9,
Confidential Information shall not include information which has become, through
no fault of Employee, generally known to the public, and Employee, if required
by law to make disclosure of Confidential Information to a court of competent
jurisdiction, may make such disclosure after providing the Company with
reasonable notice and an opportunity to contest such requirement. The
obligations of Employee under this Section 9 are in addition to, and not in
limitation of or pre-emption of, all other obligations of confidentiality which
he may have to the Company under general legal and equitable principles.
10. Noncompetition.
Employee acknowledges that his access to and knowledge of the
Confidential Information would be valuable to a competitor of the Company.
Employee further acknowledges that it would be inherent in the performance of
his duties as a director, officer, employee, agent, consultant, shareholder or
partner of any corporation, partnership or other entity which competes with the
Company, or which intends to or may compete with the Company, to disclose or use
such knowledge to or for the benefit of such corporation, partnership or other
entity. To protect these vital interests of the Company, Employee agrees that
from the date of this Agreement through the second anniversary of the date on
which his employment with the Company terminates for any reason (the
"Noncompetition Period"), he shall not, directly or indirectly, whether as a
director, officer, employee, agent or consultant or otherwise: (a) invest in or
become employed by or affiliated with, in any capacity, any corporation,
partnership or other entity which is engaged in a business which is competitive
with the business of the Company on the date of such termination (except that
Employee may purchase up to two percent of the outstanding capital stock of a
company that has common stock
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<PAGE>
quoted on a national stock exchange or the over-the-counter market); (b) solicit
sales of, or sell or deliver, any product or service of the kind and character
sold or distributed by the Company; (c) solicit, attempt to solicit or seek to
divert from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations; or
(d) engage, suggest or assist in or influence the engagement of hiring by any
competitor of the Company of any employee of the Company, or otherwise cause or
encourage any person, corporation, partnership or other entity having a business
or employment relationship with the Company to sever such relationship with or
commit any act harmful to the Company. Employee's obligations and covenants
under this Section 10 shall be limited to North America, Europe, Japan, Taiwan,
Singapore and Australia. For the purposes of this Section 10, the business of
the Company shall mean the research, development and commercialization of
products based on human mesenchymal stem cells and other lineage cells,
including without limitation the research, development and commercialization of
cellular transplants and cell-matrix products utilizing mesenchymal stem cells
and other lineage cells.
11. Inventions.
Employee hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made, conceived or
suggested, either solely or jointly with others, by Employee while in the
Company's employ, whether in the course of his employment with the use of the
Company's time, material or facilities or that is in any way within or related
to the existing or contemplated scope of the Company's business. Any discovery,
invention or improvement relating to any subject matter with which the Company
was concerned during Employee's employment and made, conceived or suggested by
Employee, either solely or jointly with others, within one year following
termination of Employee's employment under this Agreement shall be irrebuttably
presumed to have been so made, conceived or suggested in the course of such
employment with the use of the Company's time, materials or facilities. Upon
request by the Company with respect to any such discoveries, inventions or
improvements, Employee will execute and deliver to the Company, at any time
during or after his employment, all appropriate documents for use in applying
for, obtaining and maintaining such domestic and foreign patents as the Company
may desire, and all proper assignments therefor, when so requested by and at the
expense of the Company, but without further or additional consideration.
Notwithstanding any other provision of this Section 11, the Company's rights
with respect to any discoveries, inventions or improvements shall be subject to
the rights of Case Western Reserve University under any license agreement
between it and the Company entered into subsequent to the date of this
Agreement.
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12. Issuance of Shares.
(a) In order to provide Employee with additional incentive to further
the interests of the Company, the Company hereby issues and sells to Employee
7,000 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), for a price per share of $.15. Of such 7,000 Shares of Common
Stock (the "Shares"), 2,200 Shares are issued and sold to Employee without
restriction other than as provided in clause (ii) of paragraph (b) below, and
4,800 Shares (the "Restricted Shares") are subject to the restrictions and risk
of forfeiture set forth in paragraphs (b) and (c) of this Section 12.
(b) Restrictions on Transfer of Shares. The Shares subject to this
Agreement may not be transferred, sold, pledged, exchanged, assigned or
otherwise encumbered or disposed of by the Employee, except to the Company,
unless and until (i) in the case of the Restricted Shares, such Shares have
become nonforfeitable in accordance with paragraph (c) of this Section 12 and
(ii) in the case of all the Shares, the transfer of such Shares has been made in
compliance with Section 3 of the Stockholders Agreement dated as of March 11,
1993 by and among the Company, Employee and the Company's other stockholders.
Any purported transfer, encumbrance or other disposition of the Shares that is
in violation of this Section 12 shall be null and void, and the other party to
any such purported transfer, encumbrance or other disposition shall not obtain
any rights to or interest in such Shares. The certificate(s) evidencing the
Shares shall bear a legend in a form satisfactory to the Company reflecting the
restrictions described above.
(c) Vesting of Restricted Shares. The Restricted Shares shall become
nonforfeitable as follows: (i) 2,600 Restricted Shares shall become
nonforfeitable in the event the Company consummates sales of shares of its
capital stock (common or preferred) for an aggregate purchase price of at least
$4,000,000 (including the purchase price of any shares of its capital stock
contemplated by Section 4 of this Agreement) on or before the earlier of the
date on which Employee's employment with the Company is terminated under either
Section 7(b) or 7(f) of this Agreement and July 1, 1994; and (ii) 2,200
Restricted Shares shall become nonforfeitable if the Company shall attain a
valuation of at least twenty million dollars during such time as Employee is
serving as the Chief Executive Officer of the Company. Notwithstanding the
foregoing, in the event of (A) a termination of Employee pursuant to Section
7(a) or 7(e) of this Agreement; or (B) a merger of the Company into another
corporation in which the Company is not the surviving corporation or a sale of
all or substantially all of the assets of the Company, all of the Restricted
Shares shall become immediately nonforfeitable. For purposes of this paragraph
(c), the Company shall have attained a value of twenty million dollars at such
time as the Company shall have completed a sale of its capital
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stock at a price per share (on a Common Stock equivalent price if shares other
than shares of Common Stock are sold) which when multiplied by the number of
shares of the Company's Common Stock then outstanding on a fully diluted basis
(assuming the full conversion of any securities convertible into Common Stock
and the full exercise of any stock options or warrants without regard to vesting
requirements) equals or exceeds twenty million dollars.
(d) Forfeiture of Restricted Shares. Any of the Restricted Shares
that have not become nonforfeitable in accordance with paragraph (c) hereof
shall be forfeited by the Employee. In the event of a forfeiture, the
certificate(s) representing all of the Restricted Shares that have not become
nonforfeitable in accordance with paragraph (c) hereof shall be canceled and the
Employee shall have no further interest in or rights with respect to such
Restricted Shares.
(e) Dividend, Voting and Other Rights. Employee shall have all of
the rights of a stockholder with respect to the Restricted Shares, including the
right to vote the Restricted Shares and receive any dividends that may be paid
thereon; provided, however, that any additional shares of Common Stock or other
securities that Employee may become entitled to receive pursuant to a stock
split or dividend with respect to the Common Stock or a merger or reorganization
in which the Company is the surviving corporation or any other change in the
capital structure of the company shall be subject to the same restrictions and
risk of forfeiture as the Restricted Shares with respect to which such
additional shares of Common Stock or other securities were received by Employee.
(f) Retention of Stock Certificate(s) by the Company The
certificate(s) representing the Restricted Shares covered by this Agreement
shall be held in custody by the Company, together with a stock power with
respect thereto endorsed in blank by Employee, until those Restricted Shares
have become nonforfeitable in accordance with paragraph (c) of this Section 12.
(g) Withholding Taxes. If the Company shall be required to withhold
any federal, state, local or foreign tax in connection with any issuance of the
Shares or other securities pursuant to this Section 12, Employee shall pay the
tax or make provisions that are satisfactory to the Company for the payment
thereof.
(h) Other. No provision of this Section 12 shall limit in any way
whatsoever any right that the Company may otherwise have to terminate the
employment of Employee at any time. Any economic or other benefit to Employee
under this Section 12 shall not be taken into account in determining any
benefits to which Employee may be entitled under any profit-
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sharing, retirement or other benefit or compensation plan maintained by the
Company and shall not affect the amount of any life insurance coverage available
to any beneficiary under any life insurance plan covering employees of the
company.
13. Miscellaneous.
(a) All notices required to be given under this Agreement shall be in
writing and delivered personally or sent by registered mail or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Company:
Osiris Therapeutics, Inc.
2080 Adelbert Road
Cleveland, Ohio 44106
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: John C. McIlwraith
If to Employee:
James S. Burns
15 Red Coat Pass
Darien, Connecticut 06820
with a copy to:
Richard Berkowitz, Esq.
Berkowitz & Balbirer, P.C.
253 Post Road West
P.O. Box 808
Westport, Connecticut 06881
Notice shall be deemed delivered at the time received in the case of personal
delivery, or five business days after it is mailed in the case of mailing.
(b) This Agreement shall be subject to and governed by the internal
laws of the State of Ohio (without regard to conflicts of law principles).
(c) The headings or titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the heading or title of any section.
-13-
<PAGE>
(d) No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver is authorized by the Board of
Directors of the Company and is agreed to in a writing signed by Employee and by
a duly authorized officer of the Company (other than Employee). Except as
otherwise specifically provided in this Agreement, no waiver by any party hereto
of any breach by any other party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
subsequent breach of such condition or provision or a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time; nor shall the receipt or acceptance of compensation or other benefits
following any termination of Employee's employment be deemed a waiver of any
condition or provision hereof.
(e) Employee shall not assign, pledge or encumber any interest in
this Agreement or any part thereof without the express written consent of the
Company, this Agreement being personal to Employee. This Agreement shall,
however, inure to the benefit of Employee's estate, dependents, beneficiaries
and legal representatives. This Agreement shall not be assignable by the
Company without the written consent of Employee, but if the Company shall merge
or consolidate with or into, or transfer all or substantially all of its assets
to, another corporation or other form of business organization, then this
Agreement shall inure to the benefit of and be binding upon the successor of the
Company resulting from such merger, consolidation or transfer. No such merger,
consolidation or transfer, however, shall relieve the Company from liability and
responsibility for the performance of its duties and obligations hereunder.
(f) Each provision of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. In the event that any
provision of this Agreement shall finally be determined to be unlawful, such
provision shall be deemed severed from this Agreement, but every other provision
of this Agreement shall remain in full force and effect, and in substitution for
any such provision held unlawful, there shall be substituted a provision of
similar import reflecting the original intent of the parties hereto to the
extent permissible under law.
(g) This Agreement and the agreements referred to herein comprise the
entire understanding between the Company and Employee as to the subject matter
hereof and supersedes all prior agreements relating thereto.
(h) In the event of a breach by Employee of any of the provisions of
Sections 9, 10 or 11 of this Agreement, the Company shall have the right to
institute and prosecute proceedings, in equity, in any court of competent
jurisdiction, to obtain an injunction during or after the term of this Agreement
to enforce the provisions of such Sections and to pursue any other remedy to
-14-
<PAGE>
which the Company may be entitled. Employee acknowledges that the Company's
remedy at law for any of Employee's obligations under such Sections will be
inadequate, and Employee agrees and consents that temporary and permanent
injunctive relief may be granted in any proceeding which may be brought to
enforce any provision thereof, without the necessity of proof of actual damage.
(i) Any controversy or claim arising under this Agreement, except for any
controversy or claim which involves a claim by the Company for equitable or
injunctive relief with respect to Section 9, 10 and/or 11 of this Agreement,
shall be settled by arbitration in Cleveland, Ohio in accordance with the Rules
of the American Arbitration Association then in effect. The controversy or claim
shall be submitted to three arbitrators, one of whom shall be chosen by the
Company, one of whom shall be chosen by Employee, and the third of whom shall be
chosen by the two arbitrators so selected. The party desiring arbitration shall
give written notice to the other party of its desire to arbitrate the particular
matter in question naming the arbitrator selected by it. If the other party
shall fail, within a period of 15 days after such notice shall have been given,
to reply in writing naming the arbitrator selected by it, then the other party
may apply to the American Arbitration Association for the appointment of an
arbitrator to serve as the arbitrator chosen by the other party. The decision
of any two of the arbitrators shall be final and binding upon the parties hereto
and shall be delivered in writing, signed in triplicate, by the concurring
arbitrators to each of the parties hereto. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. In
addition, the prevailing party in such an arbitration proceeding shall be
entitled to recover his or its reasonable attorney's fees and all reasonable
out-of-pocket costs and disbursements, as well as any and all charges which may
be made for the cost of the arbitration and the fees of the arbitrators. In the
event a claim or controversy arising under this Agreement involves a claim by
the Company for equitable or injunctive relief with respect to Section 9, 10
and/or 11 of this Agreement, the parties may, but shall not be obligated to,
submit all or a portion of such controversy or claim to the foregoing
arbitration proceedings.
-15-
<PAGE>
IN WITNESS WHEREOF, Employee and the Company, by a duly authorized officer
of the Company pursuant to the authority of its Board of Directors, have
executed this Employment Agreement at Cleveland, Ohio, as of the day and
year first written above.
OSIRIS THERAPEUTICS, INC.
By: /s/ Arnold I. Caplan
-----------------------------
Name:
Title:
/s/James S. Burns
-------------------------------
JAMES S. BURNS
-16-
<PAGE>
EXHIBIT A
James S. Burns
Employment Duties and Responsibilities
President and Chief Executive Officer
l. Conduct the affairs of the Company; interpret and apply the policies of the
Board of Directors.
2. Responsible for all operational staff, technical and financial functions of
the Company. Exercise. senior executive management responsibility
necessary to achieve the business scientific and financial objectives of
the Company.
3. Provide the strategic management of the Company's assets and acquire such
assets needed to grow through internal development product and/or business
acquisition, merger or diversification. Employ the assets of the company
toward increasing shareholder value.
4. Assist the Chairman in developing long-range business and financial
strategies for the company and securing their approval from the Board of
Directors. Work with the Chairman to effectively communicate Company
strategies, policy and results to shareholders, the investment community,
the public, government and industry trade groups.
5. Be the principal executive responsible. for the transfer or creation of
technology and its development into marketable products in close
cooperation with regulatory authorities, collaborators and advisors.
Manage the acquisition of sufficient resources to carry out the Company's
business objectives.
Chairman of the Board
l. Prepares the agenda and presides at regular and special meetings or the
Board of Directors. Appoint all members of the committees of the Board of
Directors, subject to approval by the Board. Serves as chairman of the
company's Executive Committee. Serves as the Chief Strategic Officer and
Chief Public Relations Executive of the Company.
2. Review and approve strategic plans and policy decisions of the President,
to ensure long-term growth and financial viability. Works with senior
management to present such plans and policies to the Board for its approval
and or concurrence.
3. Represent and promote the Company to the investment community and
influential public and industry groups. Be the principal external
spokesperson for the company before stock analysts,
<PAGE>
James S. Burns - Continued
investors and professional industry groups to ensure that the company's
plans and results are effectively and accurately communicated.
4. Advises and provides counsel to the President and CEO or COO on strategic,
long-range and financial matters. Possesses the same powers as the CEO to
sign all certificates, contracts and other instruments of the corporation,
which are authorized by the board. Exercises all powers and discharges
all of the duties of the CEO in his absence.
5. Presides at all meetings of stockholders and is an ex-officio member of all
Board standing committees.
<PAGE>
OSIRIS THERAPEUTICS, INC.
Regenerative Tissue Therapy
OSIRIS
November 28, 1995
Mr. Peter Friedli
Friedli Corporate Finance AG
Freigutstrasse 5,
8002 Zurich
Switzerland
Dear Peter:
This letter will confirm certain aspects of my salary for 1996 and 1997
and bonus for 1995, as we discussed.
1. My salary will be capped for 1996 and 1997 as we agreed and as I have
presented to the Compensation Committee and the Board.
2. There is no guaranteed bonus in my contract. Any bonus, if granted,
will be at the discretion of the Board.
3. I will forego any bonus for 1995, as you requested.
4. My 1994 bonus will be converted into Series D Preferred Stock, as
well as salary conversion over the next two years, as we discussed,
pending approval by the Compensation Committee and/or Board.
Sincerely,
/s/ James S. Burns
..................
James S. Burns
President and
Chief Executive Officer
JSB/dr
- ------------------------------------------------------------------------------
2001 Aliceanna Street-Baltimore, Maryland 21231-2001 (410) 522-5005
(410)522-6999 FAX
<PAGE>
OSIRIS THERAPEUTICS, INC.
BioOrthopaedics for Cartilage, Bone
and Soft Tissue Regeneration
OSIRIS
July 19, 1995
Mr. Stephen B. Oresman
49 Sunswyck Road
Darien, CT 06820
Re: Amendment to James S. Burns Employment
Agreement with Osiris Therapeutics, Inc.
Dear Steve:
This letter will reiterate my agreement to the modified terms of my
Employment Agreement as outlined below.
1. During the first two-year renewal term of my Employment Agreement,
commencing January 1, 1996 and ending December 31, 1997 ("First
Renewal Term"), I will continue to serve in the capacity of President
and Chief Executive Officer.
2. I will devote full-time to my duties at Osiris Therapeutics, Inc. and
Gryphon Pharmaceuticals, Inc., except for directorships of other
companies or organizations which do not substantially interfere with
my duties to the Companies.
3. Base compensation during the First Renewal Term shall be $250,000 per
year paid semi-monthly or monthly according to customary Company
payment schedules. Annual merit increases, if any, shall be at the
sole discretion of the Osiris Board.
4. The annual performance bonus available to me of up to 50% of base
compensation shall be determined by the Board of Directors based on
my accomplishment of Board-approved milestones. The annual bonus may
be paid in cash and/or stock of the Company as mutually agreed
between the Board and Employee.
5. Employee benefits shall continue as described in my Employment
Agreement, including continuation of commutation and lodging expenses
from my residence in Connecticut to Baltimore, until such time as I
relocate my Connecticut residence to Maryland.
- -------------------------------------------------------------------------------
11000 Euclid Avenue - Wearn Building, Fourth Floor - Cleveland, Ohio 44106
(216) 844-5909 - (216) 844-1581 FAX
<PAGE>
Amendment to Employment Agreement Page 2
6. All other provisions of the Employment Agreement including
termination, confidentiality, noncompete, inventions, and stock
vesting shall remain in effect.
Steve, I hope this clarifies the issues discussed by the Compensation
Committee and the Board. In effect, my salary is capped for the next two
years and my bonus is based on the accomplishment of Board-approved
milestones. Any performance bonus will be paid in cash, Osiris stock or a
combination.
Sincerely,
/s/ James S. Burns
-------------------------------------
James S. Burns
President and Chief Executive Officer
Agreed to this 19th day of July, 1995:
/s/ James S. Burns
- -------------------------------
James S. Burns
Approved:
- --------------------------------
Stephen B. Oresman
Chairman, Compensation Committee
<PAGE>
Exhibit 10.25
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of October 1, 1994,
is made by and between Osiris Therapeutics, Inc., a Delaware corporation
(the "company"), and Daniel R. Marshak, Ph.D. (the "Employee").
RECITALS
A. The Company desires to employ Employee as its Senior Vice President and
Chief Technology Officer.
B. Employee is willing to be employed by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Employee agree as follows:
l. Employment. The Company hereby employs Employee, and Employee hereby
accepts employment with the Company, for the term set forth in Section 2
below, in the position and with the duties and responsibilities set forth in
Section 3 below, and upon the other terms and conditions hereinafter stated.
2. Term. The initial term of employment shall commence on October 1, 1994
(the "Commencement Date") and shall end on the third anniversary of the
Commencement Date unless sooner terminated pursuant to the terms of this
Agreement. Commencing on the third anniversary of the Commencement Date,
unless the term of employment has otherwise been terminated pursuant to
Section 7 below, the term of employment shall be automatically renewed for
successive two year terms unless the Company makes the election described in
Section 7(a) below, and each such renewal term shall be for two years unless
sooner terminated pursuant to the terms of this Agreement. The periods
described above are sometimes referred to as the "term of employment."
3. Position. Duties Responsibilities and Authority: Location.
(a) During the term of employment, Employee shall serve as Senior Vice
President and Chief Technology Officer. Employee shall report to the President
and Chief Executive Officer of the Company (the "CEO"), or to such other
executive officer of the Company as the Company's Board of Directors shall
designate, and shall have the duties and responsibilities set forth on
Exhibit A to this Agreement and such other duties and responsibilities
appropriate for such position as the President, the CEO, or such other executive
officer may from time to time reasonably determine.
(b) Throughout the term of employment, Employee shall devote full time
and attention during business hours to the
<PAGE>
business of the Company and his duties and responsibilities, subject only to
(i) his duties and responsibilities in connection with his faculty
appointment at The Johns Hopkins University or such other comparable academic
medical center near the Company's location, as the case may be, and (ii) the
activities described on Exhibit B to this Agreement, provided that in each
case such duties, responsibilities and/or activities do not (A) interfere
with the performance of his duties and responsibilities to the Company or (B)
otherwise violate Section 10 of this Agreement. The duties, responsibilities
and activities of Employee contemplated by clauses (i) and (ii) of this
paragraph (b) may take up to 20% of Employee's time during business hours.
(c) During the term of employment, Employee shall initially provide the
services and fulfill his duties and responsibilities to the Company under this
Agreement working out of offices and laboratories located in Cleveland,
Ohio, and, thereafter, in Baltimore, Maryland; provided, however, that
Employee shall be entitled to spend one day each week working out of the Cold
Spring Harbor laboratory during the period from the Commencement Date
through July 1, 1995. Employee acknowledges that the Company is in the
process of locating its headquarters in Baltimore, Maryland and such process
should be completed by April, 1995. Employee shall be entitled to maintain
his residence in Cold Spring Harbor, New York through July 1, 1995.
4. Base Compensation.
(a) Commencing on the Commencement Date, and thereafter during the
term of employment, Employee shall receive base compensation at an annual
rate of $150,000. Such base compensation shall be paid in accordance with the
Company's normal procedure for compensating its management employees, but not
less frequently than monthly. On each anniversary of the Commencement Date,
Employee's base compensation shall be increased by an amount equal to the
product of (i) Employee's base compensation in effect immediately prior to
such anniversary and (ii) the greater of the percentage increase in the cost
of living in the Baltimore metropolitan area, as determined by the Company's
Board of Directors, and 5%.
(b) Employee shall receive a signing bonus totaling $15,000, $5,000
of which shall be paid within five days after the Commencement Date and
$10,000 of which shall be paid within 10 days after Employee relocates in
Maryland with the Company.
5. Incentive Compensation. Employee and the President and CEO of the
Company, with the concurrence of the Board of Directors, shall establish a
merit bonus plan for Employee (the "Plan") setting forth such goals and
objectives for the Employee as Employee and the President and CEO shall
determine. The Plan shall provide for Employee to receive a cash bonus,
based on the achievement of such goals and objectives, during each fiscal
year of the Company included in the term of employment. The bonus for any
fiscal year, if any, shall not exceed 30% of Employee's base compensation in
effect at the end of such fiscal year, and shall
2
<PAGE>
be paid to Employee within 60 days following the end of such fiscal year.
6. Benefits. Perquisites and Expenses. During the term of employment,
Employee and his dependents, and his beneficiaries to the extent provided in
the applicable plan or program, shall be entitled to participate in all
Company benefit plans, programs or practices generally maintained by the
Company from time to time for its executive officers. Without limiting the
generality of the foregoing, Employee shall be entitled to the following
specific benefits and perquisites:
(a) Participation in the employee benefit plans of the Company
available to its employees generally, as they may be modified or added to or
reduced from time to time, including, without limitation, plans providing
retirement benefits, medical insurance, life insurance, disability
insurance, and accidental death or dismemberment insurance.
(b) During the term of employment, four (4) weeks of paid vacation in
each calendar year during the term of employment, plus such holidays, sick
leave and other time off as are established by the policies of the Company
and approved by the Company's Board of Directors. Unused days of vacation
may be carried over to March 31 of the subsequent year and shall thereafter
lapse for all time.
(c) Reimbursement for all reasonable and documented expenses incurred by
Employee in connection with the performance of his duties hereunder, in
accordance with the Company policy with respect to such reimbursement.
(d) Use of a portable computer and laser printer provided by the
Company for home and business travel.
(e) Up to $1,500 per calendar year of reimbursement for the cost of
membership in professional research, clinical and/or biotechnology industry
associations.
(f) An automobile allowance of up to $500 per month for the lease of an
automobile of Employee's choice.
(g) Assistance in obtaining an adjunct or visiting faculty position
at The Johns Hopkins School of Medicine.
(h) Assistance for Joan Pesek in relocating to a fundraising or
development position in the Maryland area, including the retention of a
professional recruiter, if necessary.
3
<PAGE>
7. Termination of Employment.
(a) The Company may elect not to renew the term of employment for any
reason, such election to be effective as of either the third anniversary of
the Commencement Date or the end of a renewal term (as described in Section 2
hereof), upon giving Employee written notice of such election at least six
months in advance of such third anniversary or end of renewal term.
(b) Employee may terminate his employment at any time upon giving the
Company written notice at least six months in advance of the proposed date of
termination.
(c) Employee's employment shall terminate automatically upon the
death of Employee.
(d) At any time after Employee suffers a "Disability" (as defined
below), the Company may terminate Employee's employment upon giving Employee
written notice from the Board of Directors of the Company, accompanied by a
certified copy of a resolution to that effect duly adopted by the Board of
Directors, at least 60 days in advance of the date on which such termination
is to become effective. For the purposes of this Agreement "Disability"
shall have the same meaning as any similar term under any long term
disability insurance policy or long term disability plan maintained by the
Company from time to time. In the event the Company shall not be maintaining
any such policy or plan, Employee shall be considered to have a Disability if
he is receiving disability income payments under the Social Security system,
or if any life insurance carrier has agreed to waive premiums due under any
life insurance policy maintained by the Company on Employee's life under a
disability waiver provision set forth in such policy. In addition, Employee
shall be considered to have a Disability if the Company receives, from a
physician reasonably acceptable to it, written certification that(i) Employee
is unable to provide services to the Company of a quality and nature
consistent with past practice because of a mental or physical impairment, and
(ii) there is no reasonable prospect that Employee will be able to render
services of such quality and nature within the longer of (x) six months, or
(y) if applicable, the period of disability required in order for Employee to
be eligible to receive disability income payments under any long term
disability insurance policy or long term disability plan maintained by the
Company at such time, from the date of such certificate.
(e) The Company may terminate Employee's employment without cause at any
time and for any reason by giving Employee written notice from the Chairman,
President or CEO, or the Board of Directors, at least 30 days in advance of
the date on which the termination is to become effective. Employee's
employment shall be considered to have been constructively terminated
without cause by the Company if Employee resigns because the Company
commits a material breach of its obligations under this
4
<PAGE>
Agreement and fails to remedy such breach within 30 days after receiving
written notice from Employee requesting that the Company remedy such breach.
(f) The Company may terminate Employee's employment at any time for
cause by delivering to Employee a certified copy of a resolution of the Board
of Directors of the Company finding that Employee committed an act or
omission constituting cause hereunder and specifying the particulars thereof
in detail, adopted at a meeting called and held for that purpose and of which
Employee was provided not less than seven days' advance notice, including
notice of the agenda of such meeting. As used herein, the term "cause" shall
include:
(i) Employee's conviction of a felony;
(ii) Employee acting in a manner which is materially detrimental or
materially damaging to the Company's reputation or business operations other
than actions which involve Employee's bad judgment or a decision which was
taken in good faith, provided that Employee shall have failed to remedy such
action within 10 days after receiving written notice of the Company's
position with respect to such action;
(iii) Employee committing any material breach of this Agreement,
provided that if such breach is capable of being remedied, Employee shall
have failed to take reasonable steps to remedy such breach within 10 days
after his receipt of written notice from the Company; or
(iv) the representations and warranties of Employee in Section 14(j) of
this Agreement having been inaccurate or untrue in any material respect when
made.
8. Certain Payments and Obligations
(a) Upon any termination of employment under paragraph (b) or (f) of
Section 7:
(i) the Company shall pay Employee in a lump sum within 10 days
following such termination an amount equal to the base compensation and any
incentive or bonus compensation Employee was entitled to receive up to the
time of termination, and for any period ending on that date, plus the amount
of any expenses that are reimbursable under paragraph (c) of Section 6;
provided, however, that Employee shall not be entitled to any severance
payment under the Company's then existing severance pay policy or plan
(if any); and
(ii) Employee shall have no further obligation to the Company under this
Agreement except that he shall continue to be bound by the provisions of
Sections 9, 10 and 11
5
<PAGE>
hereof to the extent applicable to the period following the term of
employment.
(b) Upon any termination of employment under paragraph(c) of Section
7, the Company shall pay Employee's estate the same amounts as are provided
in paragraph (c) of this Section 8, except that the period of time on which
the lump sum payment under clause (ii) (the "Death Benefit Payment") is based
shall be six months; provided, however, that in the event that at the time of
Employee's death the Company is maintaining life insurance on Employee naming
Employee and/or his heirs as beneficiaries, the amount of the insurance paid
or payable to Employee's estate and/or heirs shall reduce, on a dollar for
dollar basis, the Death Benefit Payment to Employee's estate under this
paragraph (b).
(c) Upon any termination of employment under paragraph (e) of Section 7:
(i) the Company shall pay Employee in a lump sum within ten (10) days
following such termination an amount equal to the base compensation and
any incentive or bonus compensation Employee was entitled to receive up to
the time of termination, and for any period ending on that date, plus the
amount of any expenses that are reimbursable under paragraph (c) of
Section 6; provided, however, that Employee shall not be entitled to any
severance payment under the Company's then existing severance pay policy
or plan (if any);
(ii) the Company shall (A) continue to pay Employee the base
compensation Employee would have received under this Agreement if the term
of employment had continued for a period of 12 months after the date of
termination, based on the rate of Employee's total annual cash compensation
(base plus bonus and incentive compensation) for the year prior to the year
in which such termination occurs (or, if such termination occurs during the
first year of the term of employment, the rate of compensation in effect
during such year), and (B) continue to provide Employee and, if applicable,
his dependents with the benefits provided under the benefit plans (pursuant
to the terms thereof) described in Section 6(a) hereof, to the same extent
that such benefits were provided to Employee on the date of termination
of his employment, for a period of time equal to the period of time
Employee is entitled to receive payments under clause (A) of this
paragraph (ii); and
(iii) Employee shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by the provisions
of Sections 9, 10 and 11 hereof to the extent applicable to the period
following the term of employment.
6
<PAGE>
(d) Upon any termination of employment under paragraph (d) of Section 7:
(i) the Company shall pay Employee the same amounts, and shall provide
Employee with the same benefits, as are provided in paragraph (c) of this
Section 8, except that the period of time during which Employee is entitled
to receive payments and benefits under clause (ii) of such paragraph (c)
shall be six months; and
(ii) Employee shall have no further obligation to the Company under this
Agreement except that he shall continue to be bound by the provisions of
Sections 9, 10 and 11 hereof to the extent applicable to the period
following the term of employment.
9. Confidentiality.
Employee acknowledges that by reason of his duties as an employee of the
Company he has or will have access to and become informed of confidential and
secret information which is a competitive asset of the Company and its
subsidiaries (collectively "Confidential Information") including, without
limitation, (a) information concerning concepts for products and services
and products and services data, (b) corporate planning data, (c) the
Company's financial results and business condition, and (d) any other
information which constitutes a "trade secret" under the Uniform Trade
Secrets Act. Employee agrees to keep in strict confidence and not, either
directly or indirectly, to make known, divulge, reveal, furnish, make
available or use any Confidential Information, except for use in the
Employee's regular authorized duties on behalf of the Company. Employee
acknowledges that all documents and other property including or reflecting
Confidential Information furnished to Employee by the Company or otherwise
acquired or developed by the Company shall at all times be the property of the
Company. Employee agrees that upon termination of Employee's employment
with the Company, for any reason, Employee shall return to the Company any
such documents or other property (including copies, summaries or analyses of
the foregoing) containing Confidential Information which are in his
possession, custody or control. Employee further agrees that Employee's
obligations of confidentiality hereunder shall survive any termination of
Employee's employment by the Company. For the purposes of this Section 9,
Confidential Information shall not include information which has become,
through no fault of Employee, generally known to the public, and Employee, if
required by law to make disclosure of Confidential Information to a court of
competent jurisdiction, may make such disclosure after providing the Company
with reasonable notice and an opportunity to contest such requirement. The
obligations of Employee under this Section 9 are in addition to, and not in
limitation of or pre-emption of, all other obligations of confidentiality
which he may have to the Company under general legal and equitable principles.
7
<PAGE>
10. Noncompetition
Employee acknowledges that his access to and knowledge of the
Confidential Information would be valuable to a competitor of the Company.
Employee further acknowledges that it would be inherent in the performance of
his duties as a director, officer, employee, agent, consultant shareholder or
partner of any corporation, partnership or other entity which competes with
the Company, or which intends to or may compete with the Company, to disclose
or use such knowledge to or for the benefit of such corporation, partnership
or other entity. To protect these vital interests of the Company, Employee
agrees that from the date of this Agreement through the second anniversary of
the date on which his employment with the Company terminates for any reason
(the "Noncompetition Period"), he shall not, directly or indirectly, whether
as a director, officer, employee, agent or consultant or otherwise: (a)
invest in or become employed by or affiliated with, in any capacity, any
corporation, partnership or other entity which is engaged in a business which
is competitive with the business of the Company on the date of such
termination (except that Employee may purchase up to two percent of the
outstanding capital stock of a company that has common stock quoted on a
national stock exchange or the over-the-counter market); (b) solicit sales
of, or sell or deliver, any product or service of the kind and character sold
or distributed by the Company; (c) solicit, attempt to solicit or seek to
divert from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations;
or (d) engage, suggest or assist in or influence the engagement of hiring by
any competitor of the Company of any employee of the Company, or otherwise
cause or encourage any person, corporation, partnership or other entity
having a business or employment relationship with the Company to sever such
relationship with or commit any act harmful to the Company. Employee's
obligations and covenants under this Section 10 shall be limited to North
America, Europe, Japan, Taiwan, Singapore and Australia. For the purposes of
this Section 10, the business of the Company shall mean (a) the research,
development and commercialization of products using mesenchymal stem cells,
hematopoietic stem cells, or the progeny cells of either, for the repair and
regeneration of tissue, bone marrow transplantation and cancer therapy; (b)
the research, development and commercialization of cellular transplants and
cell-matrix products that utilize mesenchymal stem cells and their progeny;
(c) the research, development and commercialization of products using
mesenchymal stem cells and their growth factors, their receptors and their
cross-signaling molecules to control, mediate, enhance or otherwise influence
hematopoietic stem cells and their progeny; and (d) the research, development
and commercialization of biomatrix and gene therapy products specifically
using mesenchymal stem cells, hematopoietic stem cells and/or their progeny.
Notwithstanding the foregoing, Employee shall be entitled to conduct academic
research on the activities contemplated by clauses (a) and (b).
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11. Inventions.
Employee hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made conceived or
suggested, either solely or jointly with others, by Employee while in the
Company's employ, whether in the course of his employment with the use of the
Company's time, material or facilities or that is in any way within or
related to the existing or contemplated scope of the Company's business. Any
discovery, invention or improvement relating to any subject matter with which
the Company was concerned during Employee's employment and made, conceived or
suggested by Employee, either solely or jointly with others, within one year
following termination of Employee's employment under this Agreement shall be
irrebuttably presumed to have been so made, conceived or suggested in the
course of such employment with the use of the Company's time, materials or
facilities. Upon request by the Company with respect to any such discoveries,
inventions or improvements, Employee will execute and deliver to the Company,
at any time during or after his employment, all appropriate documents for use
in applying for, obtaining and maintaining such domestic and foreign patents
as the Company may desire, and all proper assignments therefor, when so
requested by and at the expense of the Company, but without further or
additional consideration.
12. Issuance of Shares.
(a) Issuance. In order to provide Employee with additional
incentive to further the interests of the Company, the Company shall issue
and sell to Employee 800,000 shares of the Company's common stock, par value
$.001 per share (the "Common Stock"), for a price per share of $.085. Of
such 800,000 Shares of Common Stock (the "Shares"), 75,000 Shares are issued
and sold to Employee without restriction other than as provided in clause
(ii) of paragraph (b) below, and 725,000 Shares (the "Restricted Shares") are
subject to the restrictions and risk of forfeiture set forth in paragraphs
(b) and (c) of this Section 12.
(b) Restrictions on Transfer of Shares. The Shares may not be
transferred, sold, pledged, exchanged, assigned or otherwise encumbered or
disposed of by the Employee, except to the Company, unless and until (i) in
the case of the Restricted Shares, such Shares have become nonforfeitable in
accordance with paragraph (c) and (d) of this Section 12 and (ii) in the case
of all the Shares, such transfer or other disposition is registered under the
Securities Act of 1933 and any applicable state securities laws or the
Company receives evidence satisfactory to it, in its sole discretion, that
such transfer or other disposition is not required to be registered under the
Securities Act of 1933 and such state securities laws. Any purported
transfer, encumbrance or other disposition of the Shares that is in violation
of this Section 12 shall be null and void, and the
9
<PAGE>
other party to any such purported transfer, encumbrance or other disposition
shall not obtain any rights to or interest in such Shares. The
certificate(s) evidencing the Shares shall bear a legend in a form
satisfactory to the Company reflecting the restrictions described above.
(c) Vesting of Restricted Shares. The Restricted Shares shall become
nonforfeitable in the amount of (i) 75,000, 100,000, 125,000 and 125,000
Restricted Shares, respectively, on each of the first, second, third and
fourth anniversary of the Commencement Date for so long as Employee is
employed by the Company or any of its subsidiaries on such anniversary and
(ii) the remaining 300,000 Shares shall become nonforfeitable in accordance
with Exhibit C attached hereto and made a part hereof. For purposes of this
Section 12(c), leaves of absence approved by the Board of Directors shall be
regarded as employment.
(d) Forfeiture of Restricted Shares. Any of the Restricted Shares
that have not become nonforfeitable in accordance with paragraph (c) hereof
shall be forfeited by the Employee. In the event of a forfeiture, the
certificate(s) representing Restricted Shares that have not become
nonforfeitable in accordance with paragraph (c) hereof shall be canceled and
the Employee shall have no further interest in or rights with respect to such
Restricted Shares, and the Company shall pay Employee an amount equal to
$.085 per share for each Restricted Share so forfeited.
(e) Dividend, Voting and Other Rights. Employee shall have all of
the rights of a stockholder with respect to the Restricted Shares, including
the right to vote the Restricted Shares and receive any dividends that may be
paid thereon; provided, however, that any additional shares of Common Stock
or other securities that Employee may become entitled to receive pursuant to
a stock split or dividend with respect to the Common Stock or a merger or
reorganization in which the Company is the surviving corporation or any other
change in the capital structure of the Company shall be subject to the same
restrictions and risk of forfeiture as the Restricted Shares with respect to
which such additional shares of Common Stock or other securities were
received by Employee.
(f) Retention of Stock Certificate(s) by the Company. The
certificate(s) representing the Restricted Shares covered by this Agreement
shall be held in custody by the Company, together with a stock power with
respect thereto endorsed in blank by Employee, until those Restricted Shares
have become nonforfeitable in accordance with paragraph (c) of this Section
12.
(g) Withholding Taxes. If the Company shall be required to withhold
any federal, state, local or foreign tax in connection with any issuance of
the Shares or other securities pursuant to this Section 12, Employee shall
pay the tax or make
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<PAGE>
provisions that are satisfactory to the Company for the payment thereof.
(h) Other. All share numbers and the prices per share contained in
this Section 12 and in Exhibit C have not been adjusted to give effect to the
one for four reverse stock split to be effected by the Company in the near
future. Such numbers will be adjusted to reflect such split. No provision
of this Section 12 shall limit in any way whatsoever any right that the
Company may otherwise have to terminate the employment of Employee at any
time. Any economic or other benefit to Employee under this Section 12 shall
not be taken into account in determining any benefits to which Employee may
be entitled under any profit-sharing, retirement or other benefit or
compensation plan maintained by the Company and shall not affect the amount
of any life insurance coverage available to any beneficiary under any life
insurance plan covering employees and consultants of the Company.
(i) Loan. In order to facilitate Employee's purchase of the Shares,
the Company shall make a loan to Employee in the amount of $68,000 (the
"Loan"), which loan shall bear interest at a rate equal to the lowest rate
necessary to avoid the imputation of interest under the Internal Revenue Code
of 1986, as amended, and shall become due and payable in full on the earliest
to occur of (a) termination of Employee's employment for any reason6n, (b)
the first sale of all or a portion of the Shares by Employee and (c) the
fifth anniversary of the Commencement Date. In the event that Employee's
employment with the Company is terminated under Section 7(a) or Section 7(e)
of this Agreement, the Company shall, upon the written request of Employee
delivered to the Company within ten days after the effective date of such
termination, repurchase (1) up to one-half of the nonforfeitable Restricted
Shares then held by Employee, and (2) all forfeitable Restricted Shares then
held by Employee, for a purchase price of $.085 per share plus the portion of
any interest paid or payable on the Loan with respect to such Restricted
Shares. In addition, unless the Company and Employee otherwise agree, upon
the fifth anniversary of the Commencement Date, the Company shall repurchase
all forfeitable Restricted Shares then held by Employee for a purchase price
per share of $.085 per share plus the portion of any interest paid or payable
on the Loan with respect to such Restricted Shares.
13. Relocation.
(a) Relocation Expenses. Until the Company's location in Baltimore,
the Company shall reimburse Employee for temporary living expenses of up to
$2,000 per month. Such temporary living expenses may be used by Employee
either for local living expenses in Cleveland, Ohio or expenses incurred by
commuting between Cold Spring Harbor, New York and Cleveland, Ohio. In
addition, the Company shall also reimburse Employee for relocation expenses
as follows:
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<PAGE>
(i) The Company will reimburse Employee's direct costs of shipping
household goods from Cold Spring Harbor, New York to the
Baltimore, Maryland metropolitan area;
(ii) The Company will reimburse Employee for reasonable expenses
incurred during two trips from Cold Spring Harbor, New York to
the Baltimore, Maryland metropolitan area for the purpose of
locating a house; and
(iii) The Company will gross-up the amounts paid pursuant to this
paragraph (a) in order to provide Employee with the funds
necessary to pay any income taxes payable with respect to such
reimbursement.
(b) Relocation Loan. In order to assist Employee in the relocation
from Cold Spring Harbor, New York to the Baltimore, Maryland metropolitan
area and the purchase of a home in the Baltimore, Maryland metropolitan area,
the Company shall make a loan to Employee in the amount of $50,000 (the
"Relocation Loan"), which loan shall bear interest at a rate equal to the
lowest rate necessary to avoid the imputation of interest under the Internal
Revenue Code, as amended. The principal amount of the Relocation Loan shall
be forgiven at a rate of 25% on each of the first four (4) anniversary dates
of the Commencement Date so long as Employee is employed by the Company on
such date. The entire unpaid or unforgiven balance of the Relocation Loan,
together with any accrued and unpaid interest, shall become due and payable
upon the termination of Employee's employment before the fourth anniversary
of the Commencement Date; provided, however, that in the event Employee's
employment is terminated pursuant to Section 7(a) or 7(e) hereof, the final
$12,500 principal installment of the Relocation Loan shall be forgiven.
14. Miscellaneous.
(a) All notices required to be given under this Agreement shall be in
writing and delivered personally or sent by registered mail or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Company:
Osiris Therapeutics, Inc.
c/o Osiris Research, Inc.
11100 Euclid Avenue
Wearn Building, Fourth Floor
Cleveland, Ohio 44106
Attention: Chairman
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with a copy to
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland Ohio 44114
Attention: John C. McIlwraith, Esq.
If to Employee:
Daniel R. Marshak, Ph.D.
1 Bungtown Road
Cold Spring Harbor, New York 11724
Notice shall be deemed delivered at the time received in the case of personal
delivery, or five business days after it is mailed in the case of mailing.
The address of any party may be changed by written notice to the other party
given in accordance with this paragraph (a).
(b) This Agreement shall be subject to and governed by the internal laws
of the State of Ohio (without regard to conflicts of law principles).
(c) The headings or titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed
by reference to the heading or title of any section.
(d) No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver is authorized by the Board of
Directors of the Company and is agreed to in a writing signed by Employee and
by a duly authorized officer of the Company (other than Employee). Except as
otherwise specifically provided in this Agreement, no waiver by any party
hereto of any breach by any other party hereto of any condition or provision
of this Agreement to be performed by such other party shall be deemed a
waiver of a subsequent breach of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at any prior or
subsequent time; nor shall the receipt or acceptance of compensation or other
benefits following any termination of Employee's employment be deemed a
waiver of any condition or provision hereof.
(e) Employee shall not assign, pledge or encumber any interest in
this Agreement or any part thereof without the express written consent of the
Company, this Agreement being personal to Employee. This Agreement shall,
however, inure to the benefit of Employee's estate, dependents, beneficiaries
and legal representatives. This Agreement shall not be assignable by the
Company without the written consent of Employee, but if the Company shall
merge or consolidate with or into, or transfer all or substantially all of
its assets to, another corporation or
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<PAGE>
other form of business organization, then this Agreement shall be assignable
to, and inure to the benefit of and be binding upon, the successor of the
Company resulting from such merger, consolidation or transfer without
Employee's consent.
(f) Each provision of this Agreement constitutes a separate and
distinct undertaking, covenant and/or provision hereof. In the event that
any provision of this Agreement shall finally be determined to be unlawful,
such provision shall be deemed severed from this Agreement, but every other
provision of this Agreement shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted
a provision of similar import reflecting the original intent of the parties
hereto to the extent permissible under law.
(g) This Agreement and the agreements referred to herein comprise the
entire understanding between the Company and Employee as to the subject
matter hereof and supersedes all prior agreements relating thereto.
(h) Notwithstanding paragraph (i) of this Section 14, in the event of
a breach by Employee of any of the provisions of Sections 9, 10 or 11 of this
Agreement, the Company shall have the right to institute and prosecute
proceedings, in equity, in any court of competent jurisdiction, to obtain an
injunction during or after the term of this Agreement to enforce the
provisions of such Sections and to pursue any other remedy to which the
Company may be entitled. Employee acknowledges that the Company's remedy at
law for any of Employee's obligations under such Sections will be inadequate,
and Employee agrees and consents that temporary and permanent injunctive
relief may be granted in any proceeding which may be brought to enforce any
provision thereof, without the necessity of proof of actual damage.
(i) Any controversy or claim arising under this Agreement, except for
any controversy or claim which involves a claim by the Company for equitable
or injunctive relief with respect to Section 9, 10 and/or 11 of this
Agreement, shall be settled by arbitration in Baltimore, Maryland (or such
other city in which the Company's executive offices may then be located) in
accordance with the Rules of the American Arbitration Association then in
effect. The controversy or claim shall be submitted to three arbitrators,
one of whom shall be chosen by the Company, one of whom shall be chosen by
Employee, and the third of whom shall be chosen by the two arbitrators so
selected. The party desiring arbitration shall give written notice to the
other party of its desire to arbitrate the particular matter in question
naming the arbitrator selected by it. If the other party shall fail, within
a period of 15 days after such notice shall have been given, to reply in
writing naming the arbitrator selected by it, then the other party may apply
to the American Arbitration Association for the appointment of an arbitrator
to serve as the arbitrator chosen by the other party. The decision of any
two of
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<PAGE>
the arbitrators shall be final and binding upon the parties hereto and shall
be delivered in writing, signed in triplicate, by the concurring arbitrators
to each of the parties hereto. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
attorney's fees and out-of-pocket costs and disbursements, as well as any and
all charges which may be made for the cost of the arbitration and the fees of
the arbitrators, shall be paid in accordance with the decision of the
arbitrators. In the event a claim or controversy arising under this
Agreement involves a claim by the Company for equitable or injunctive relief
with respect to Section 9, 10 and/or 11 of this Agreement, the parties may,
but shall not be obligated to, submit all or a portion of such controversy or
claim to the foregoing arbitration proceedings.
(j) Employee represents and warrants to the Company that he is not a
party to or bound by any agreement or commitment with any other corporation
or entity which imposes any obligations or restrictions on him with respect
to confidentiality, noncompetition or the ownership of inventions and
discoveries.
(k) The Company and Employee agree that, effective as of the date of
this Agreement, Employee's Scientific Advisory Board Agreement dated April 1,
1993 shall terminate (except for the provisions of Sections 5 and 6 of such
Agreement, which shall survive indefinitely). Employee shall be paid the
Three Thousand Dollars ($3,000) per calendar quarter consideration he was
receiving under such Agreement through September 30, 1994, and his Restricted
Shares (as defined in that certain Share Purchase Agreement dated as of June
14, 1993 between Employee and the Company) shall continue to vest according
to the vesting schedule contained in such Share Purchase Agreement so long as
he remains an employee of the Company. Such shares are in addition to the
Restricted Shares being purchased under this Agreement.
IN WITNESS WHEREOF, Employee and the Company, by a duly authorized
officer of the Company pursuant to the authority of its Board of Directors,
have executed this Employment Agreement at Cleveland, Ohio, as of the day and
year first written above.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
----------------------
James S. Burns, President
/s/ Daniel R. Marshak
----------------------
DANIEL R. MARSHAK, Ph.D.
15
<PAGE>
EXHIBIT A
---------
DUTIES AND RESPONSIBILITIES
Senior Vice President and Chief Technology Officer
Job Description: Member of the Company's Management Committee, the Company's
principal strategic and policy forum. Chairman of the Product
Development Committee, the principal new products forum;
Member of the Government Affairs Committee. Member, Osiris
Scientific Advisory Board.
Overall management of the Company's worldwide research and
development for regenerative tissue therapy and products
resulting therefrom, including programs in growth factors,
receptor and cytoplasmic tyrosine kinases, MSC/HSC
cross-signaling molecules, gene therapy, and MSC biomatrix
products for musculoskeletal tissue regeneration, bone
marrow transplantation and cancer therapy.
Principal executive officer representing the Company with
extramural scientific collaborators, preclinical study sites
with The Johns Hopkins School of Medicine and Gryphon
Pharmaceuticals, Inc. Principal scientific executive for
extramural industry R & D collaborations of the Company.
Member of the Company's business development team comprising
the Chairman & CEO, the Senior Vice President, Medical,
Regulatory and Government Affairs and the Vice President,
Finance and Treasurer.
Specific duties include without limitation:
l. Recommending overall scientific and product development policy to the
Company's Management Committee.
2. Responsible for research study design, management, study, implementation
and monitoring.
3. Responsible for contents of regulatory agency submissions.
<PAGE>
4. Responsible for product development formulation, clinical research,
human clinical trials (scientific comment, not medical practice), and
other studies leading up to approval by the FDA or other international
regulatory agency.
<PAGE>
EXHIBIT B
Continuing Academic. Commercial and Journal Commitments
l. Academic and Journals.
- Cold Spring Harbor Laboratory--course on Protein Purification and
Characterization, and completion of course manual/textbook.
- Johns Hopkins University--teaching and graduate training.
- Journal of Biological Chemistry (JBC)--Editorial Board.
- Association of Biomolecular Resource Facilities (ABRF)--Executive
Board or President.
- Protein Society--meetings and book Editor: Techniques in Protein
Chemistry.
- NIH or other Grant Review Committees--by mutual agreement and non
conflicting with Osiris and Gryphon objectives.
- Dystonia Foundation--optional.
- Neurobiology of Aging and Methods in Enzymology-optional journal
Editorial Boards.
- Suny Stonybrook teaching and examination during October 1994.
II. Commercial Consultancies.
- Applied Biosystems (Perkin-Elmer).
- Oncogene Sciences, Inc. (limited to consulting and expert testimony on
patent opposition regarding TGFB polypeptides).
- Completion of consulting agreement with New England Biolabs, Inc.
(terminates December 31, 1994).
<PAGE>
EXHIBIT C
Number of
Shares Milestone for Vesting of Shares
- --------- -------------------------------
75,000 Upon issuance of a patent for a molecule or use of a molecule
that is directly involved in the proliferation of human
mesenchymal stem cells, such as a polypeptide growth factor,
receptor, tyrosine kinase or phosphatase, other protein
kinase, adapter molecule containing src homology domains,
poly-proline, and/or phosphotyrosine binding domains, guanyl
nucleotide binding protein or GTPase, activating or inhibitory
proteins to GTpases, cyclin or other kinase activators, ayalin
dependent kinase or other kinase inhibitors, and kinase
targeting proteins.
75,000 Upon completion of a corporate partnership agreement in the
orthopaedic, oncology or gene therapy field involving an equity
investment, license fees, milestone payments and/or multi-year
research and development contracts on the part of the corporate
partner
50,000 Upon submission of a patent application for a novel receptor
tyrosine kinase (or other comparable signaling molecule or
growth factor) which is directly involved in the in vivo
cross-signaling of MSCs and hematopoietic stem cells within
bone marrow.
50,000 Upon submission to the FDA of a PLA for the use of MSCs in
stromal reconstitution during autologous bone marrow
transplant.
50,000 Upon FDA approval of an additional IND to conduct Phase I/II
human clinical safety and efficacy trials for a cartilage or
other tissue regeneration indication.
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") dated as of November 23 ,
1994, is made by and between Osiris Therapeutics, Inc., a Delaware
corporation (the "Company"), and Max Link, Ph.D. (the ".consultant").
RECITALS
A. The Company desires to retain the services of consultant
B. Consultant is willing to be retained by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Consultant agree as follows:
l. Services to be Provided (a) The Company hereby retains the services of
Consultant for the term set forth in Section 2 below (the "Consulting
Period"), with the duties and responsibilities set forth below, and upon the
other terms and conditions hereinafter stated. During the Consulting Period,
Consultant shall be an advisor to the Company and shall serve as the Business
Advisor--Stem Cell Strategy, Industry Collaborations and Financial
Development for the Company, and as a non-employee Chairman of the Board of
Directors of the Company (the "Board"). Consultant's duties and
responsibilities shall include:
Advisory Activities:
(i) Provide guidance and counsel on the Company's strategic direction,
priorities and response to industry developments.
(ii) Identify and introduce the Company's management to new strategic
opportunities, including in the areas of corporate partnerships,
acquisitions, technology licensing and international marketing/distribution
arrangements.
(iii) Assist the Company in identifying and developing financing
alternatives.
(iv) Assist the Chief Executive Officer of the Company (the "CEO") in
presentations to key investors and financial institutions.
<PAGE>
Board Activities:
(i) When present, chair meetings of the Board of Directors.
(ii) Assist the Chief Executive Officer in setting Board policy and the
agenda of regularly scheduled Board meetings.
(iii) Attend from four to six full Board meetings per year.
(b) The Company and Consultant agree that Consultant's relationship with
the Company shall be that of independent contractor, and Consultant shall not
be an employee of the Company. Further, Consultant shall only be authorized
to act for or on behalf of the Company to the extent specifically authorized
by the Board or the CEO.
(c) During the Consulting Period, Consultant shall devote twelve days per
year to activities on behalf of the Company as follows: four to six days for
attendance at four regularly scheduled Board meetings and two optional Board
meetings and six to eight days, as appropriate, for assisting the Company in
a business advisory capacity. Consultant may devote additional days to
activities on behalf of the Company at the mutual agreement of Consultant and
the Company.
2. Term. The term of Consultant's consulting services to the Company shall
commence on December 1, 1994 (the "Commencement Date") and shall end on the
third anniversary of the Commencement Date unless sooner terminated pursuant
to the terms of this Agreement.
3. Compensation.
(a) Issuance and Sale of Shares In consideration of the services to be
provided by Consultant, the Company hereby issues and sells to Consultant
80,000 shares of the Company's Common Stock, par value $.001 per share (the
"Common Stock"), for a price per share of $.34. Of such 80,000 shares of
Common Stock (the "Shares"), 10,000 Shares are issued and sold to Consultant
without restriction other than as provided in clause (ii) of paragraph (b)
below, and 70,000 Shares (the "Restricted Shares") are subject to the
restrictions and risk of forfeiture set forth in paragraphs (b) and (c) of
this Section 3.
(b) Restrictions on Transfer of Shares. The Shares may not be
transferred, sold, pledged, exchanged, assigned or otherwise encumbered or
disposed of by Consultant, except to the Company, unless and until (i) in the
case of the Restricted Shares, such Shares have become nonforfeitable in
accordance with paragraph (c) of this Section 3 and (ii) such transfer or
other disposition is registered under the Securities Act of 1933 and any
applicable state
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<PAGE>
securities laws and will not cause the Company to be subject to the periodic
reporting requirements of the Securities Exchange Act of 1934, and the
Company receives evidence satisfactory to it, in its sole discretion, that
such transfer or other disposition is registered or is not required to be
registered under the Securities Act of 1933 and such state securities laws
and will not subject the Company to such reporting requirements. Any
purported transfer, encumbrance or other disposition of the Shares that is in
violation of this Section 3 shall be null and void, and the other party to
any such purported transfer, encumbrance or other disposition shall not
obtain any rights to or interest in such Shares. The certificate(s)
evidencing the Shares shall bear a legend in a form satisfactory to the
Company reflecting the restrictions described above.
(c) Vesting of Restricted Shares. 10,000 of the Restricted Shares shall
become nonforfeitable upon each of the first, second and third anniversary of
the Commencement Date if Consultant's services to the Company have not been
terminated prior to such anniversary pursuant to Section 5 of this Agreement.
The remaining 40,000 Restricted Shares shall become nonforfeitable in
accordance with Exhibit A attached hereto and made a part hereof.
(d) Forfeiture of Restricted Shares Any of the Restricted Shares that
have not become nonforfeitable in accordance with paragraph (c) hereof on the
date on which Consultant's consulting services to the Company are terminated
pursuant to Section 5 of this Agreement shall be forfeited by Consultant. In
the event of a forfeiture, the certificate(s) representing all of the
Restricted Shares that have not become nonforfeitable in accordance with
paragraph (c) hereof shall be canceled and Consultant shall have no further
interest in or rights with respect to such Restricted Shares, and the Company
shall repurchase such Restricted Shares for a price per share equal to that
originally paid by Consultant.
(e) Dividend, Voting and Other Rights. Consultant shall have all of the
rights of a stockholder with respect to the Restricted Shares, including the
right to vote the Restricted Shares and receive any dividends that may be
paid thereon; provided, however, that any additional shares of Common Stock
or other securities that Consultant may become entitled to receive pursuant
to a stock split or dividend with respect to the Common Stock or a merger or
reorganization in which the Company is the surviving corporation or any other
change in the capital structure of the Company shall be subject to the same
restrictions and risk of forfeiture as the Restricted Shares with respect to
which such additional shares of Common Stock or other securities were
received by Consultant.
(f) Retention of Stock Certificate(s) by the Company The certificate(s)
representing the Restricted Shares covered by this Agreement shall be held in
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<PAGE>
custody by the Company, together with a stock power with respect thereto
endorsed in blank by Consultant, until those Restricted Shares have become
nonforfeitable in accordance with paragraph (c) to this Section 3.
(g) Withholding Taxes. If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with any issuance of the
Shares or other securities pursuant to this Section 3, Consultant shall pay
the tax or make provisions that are satisfactory to the Company for the
payment thereof.
(h) Other. No provision of this Section 3 shall limit in any way
whatsoever any right that the Company may otherwise have to terminate the
consulting services of Consultant at any time.
(i) Loan. In order to facilitate Consultant's purchase of the Shares,
the Company shall, at the election of Consultant, make a loan to Consultant
in the amount of $27,200 (the "Loan"), which shall bear interest at a rate
equal to the lowest rate necessary to avoid the imputation of interest under
the Internal Revenue Code of 1986, as amended, and shall become due and
payable in full on the earliest to occur of(a) termination of Consultant's
consulting services to the Company for any reason, (b) the first sale of all
or a portion of the Shares by Consultant and (c) the fifth anniversary of the
date of this Agreement.
4. Expense Reimbursement. During the Consulting Period, Consultant shall be
entitled to reimbursement for all reasonable and documented expenses incurred
by Consultant in connection with approved business of the Company (such as
business class transportation, hotels, and meals), in accordance with the
Company policy with respect to such reimbursement.
5. Termination of Consulting Period.
(a) Consultant may terminate his consulting services to the Company at
any time upon giving the Company written notice 30 days in advance of the
proposed date of termination.
(b) Consultant's consulting services to the Company shall terminate
automatically upon the death of Consultant.
(c) The Company may terminate Consultant's consulting services to the
Company with or without cause, at any time and for any reason, by giving
Consultant written notice from the CEO or the Board at least 90 days in
advance of the date on which the termination is to become effective.
4
<PAGE>
6. Confidentiality.
Consultant acknowledges that by reason of his duties as an advisor to the
Company he has or will have access to and become informed of confidential and
secret information which is a competitive asset of the Company (collectively
"Confidential Information") including, without limitation, (a) information
concerning concepts for products and services and products and services data,
(b) research, development and corporate planning data, (c) the Company's
financial results and business condition, and (d) any other information which
constitutes a "trade secret" under the Uniform Trade Secrets Act. Consultant
agrees to keep in strict confidence and not, either directly or indirectly,
to make known, divulge, reveal, furnish, make available or use any
Confidential Information, except for use in Consultant's regular authorized
duties on behalf of the Company.
Consultant acknowledges that all documents and other property including
or reflecting Confidential Information furnished to Consultant by the Company
or otherwise acquired or developed by the Company shall at all times be the
property of the Company. Consultant agrees that upon termination of
Consultant's consulting services to the Company, for any reason, Consultant
shall return to the Company any such documents or other property (including
copies, summaries or analyses of the foregoing) containing Confidential
Information which are in his or her possession, custody or control.
Consultant further agrees that Consultant's obligations of confidentiality
hereunder shall survive any termination of Consultant's consulting services
to the Company. For the purposes of this Section 6, Confidential Information
shall not include information which has become, through no fault of
Consultant, generally known to the public, and Consultant, if required by law
to make disclosure of Confidential Information to a court of competent
jurisdiction, may make such disclosure after providing the Company with
reasonable notice and an opportunity to contest such requirement. The
obligations of Consultant under this Section 6 are in addition to, and not in
limitation of or preemption of, all other obligations of confidentiality
which he may have to the Company under general legal and equitable principles.
7. Noncompetition.
Consultant acknowledges that his access to and knowledge of the
Confidential Information would be valuable to a competitor of the Company.
Consultant further acknowledges that it would be inherent in the performance
of his duties as a director, officer, employee, agent, consultant,
shareholder or partner of any corporation, partnership or other entity which
competes with the Company, or which intends to or may compete with the
Company, to disclose or use such knowledge to or for the benefit of such
corporation, partnership or other entity.
5
<PAGE>
To protect these vital interests of the Company, Consultant agrees that
from the date of this Agreement through the second anniversary of the date on
which his consulting services to the Company terminate for any reason (the
"Noncompetition Period"), he shall not, directly or indirectly, whether as a
director, officer, employee, agent or consultant or otherwise: (a) invest in
or become employed by or affiliated with, in any capacity, any corporation,
partnership or other entity which is engaged in a business which is
competitive with the business of the Company on the date of such termination
(except that Consultant may purchase up to two percent of the outstanding
capital stock of a company that has common stock quoted on a national stock
exchange or the over-the-counter market); (b) solicit sales of, or sell or
deliver, any product or service of the kind and character sold or distributed
by the Company; (c) solicit, attempt to solicit or seek to divert from the
Company the business or patronage of any person, corporation, partnership or
other entity with whom the Company has had business relations; or (d) engage,
suggest or assist in or influence the engagement of hiring by any competitor
of the Company of any employee of the Company, or otherwise cause or
encourage any person, corporation, partnership or other entity having a
business or employment relationship with the Company to sever such
relationship with or commit any act harmful to the Company.
Consultant's obligations and covenants ;under this Section 7 shall be
limited to North America, Europe, Japan, China, Taiwan, Singapore and
Australia. For the purposes of this Section 7, the business of the Company
shall mean (a) the research, development and commercialization of products
using mesenchymal stem cells, hematopoietic stem cells, or the progeny cells
of either, for the repair and regeneration of tissue, bone marrow
transplantation and cancer therapy; (b) the research, development and
commercialization of cellular transplants and cell-matrix products that
utilize mesenchymal stem cells and their progeny; (c) the research,
development and commercialization of products using mesenchymal stem cells
and their growth factors, their receptors and their cross-signaling molecules
to control, mediate, enhance or otherwise influence hematopoietic stem cells
and their progeny; and (d) the research, development and commercialization of
biomatrix and gene therapy products specifically using mesenchymal stem
cells, hematopoietic stem cells and/or their progeny.
8. Inventions.
Consultant hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made, conceived or
suggested, either solely or jointly with others, by Consultant while
providing consulting services to the Company, whether in the course of his
providing consulting services with the use of the Company's time, material or
facilities or that is in any way within or related to the existing or
6
<PAGE>
contemplated scope of the Company's business. Any discovery, invention or
improvement relating to any subject matter with which the Company was
concerned during the Consulting Period and made, conceived or suggested by
Consultant, either solely or jointly with others, within one year following
termination of Consultant's consulting services to the Company shall be
irrebuttably presumed to have been so made, conceived or suggested in the
course of such consulting services with the use of the Company's time,
materials or facilities.
Upon request by the Company with respect to any such discoveries,
inventions or improvements, Consultant will execute and deliver to the
Company, at any time during or after the Consulting Period, all appropriate
documents for use in applying for, obtaining and maintaining such domestic
and foreign patents as the Company may desire, and all proper assignments
therefor, when so requested by and at the expense of the Company, but without
further or additional consideration.
9. Options to Purchase Stock.
(a) For each day of consulting services provided by Consultant pursuant
to Section 1(c) in excess of the twelve days of consulting services to be
provided each year, Consultant shall receive an option to purchase 1,000
shares of common stock (as adjusted to reflect any stock split, combination
or other reclassification) with an exercise per share equal to the then fair
market value of such common stock (as determined by the Board) and upon such
other terms and conditions as are contained in the Company's standard stock
option agreement.
(b) As additional consideration for the services to be provided by
Consultant pursuant to this Agreement, Consultant shall have the option to
purchase up to 100,000 shares of the series of preferred stock issued in
connection with the Company's next round of equity financing with
institutional investors, at a price per share of $3.40. Such purchase shall
be on substantially the same terms and conditions as those provided generally
to such investors. Such option shall expire and be of no further force and
effect on December 1, 1995.
10. Miscellaneous
(a) All notices required to be given under this Agreement shall be in
writing and delivered personally or sent by registered mail or certified
mail, postage prepaid, return receipt requested, addressed as follows:
7
<PAGE>
If to the Company:
Osiris Therapeutics, Inc.
The Wearn Building, Fourth Floor
11100 Euclid Avenue
Cleveland, Ohio 44106
Attention: Chief Executive Officer
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: John C. McIlwraith
If to Consultant:
Dr. Max Link
Tobelhofstrasse 30
8044 Zurich
Switzerland
Notice shall be deemed delivered at the time received in the case of personal
delivery, or five business days after it is mailed in the case of mailing.
The foregoing instructions may be changed at any time by a party by providing
written notice of such change.
(b) This Agreement shall be subject to and governed by the internal laws
of the State of Maryland (without regard to conflicts of law principles).
(c) The headings or titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed
by reference to the heading or title of any section.
(d) No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver is authorized by the Board and
is agreed to in a writing signed by Consultant and by the CEO of the Company.
Except as otherwise specifically provided in this Agreement, no waiver by
any party hereto of any breach by any other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of a subsequent breach of such condition or provision or a
waiver of a similar or dissimilar provision or condition at the same or at
any prior or subsequent time; nor shall the receipt or acceptance of
compensation or other benefits following any termination of Consultant's
employment be deemed a waiver of any condition or provision hereof.
8
<PAGE>
(e) Consultant shall not assign, pledge or encumber any interest in this
Agreement or any part thereof without the express written consent of the
Company this Agreement being personal to Consultant. This Agreement shall,
however, inure to the benefit of Consultant's estate, dependents,
beneficiaries and legal representatives. This Agreement shall not be
assignable by the Company without the written consent of Consultant, but if
the Company shall merge or consolidate with or into, or transfer all or
substantially all of its assets to, another corporation or other form of
business organization, then this Agreement shall inure to the benefit of and
be binding upon the successor of the Company resulting from such merger,
consolidation or transfer. No such merger, consolidation or transfer,
however, shall relieve the Company from liability and responsibility for the
performance of its duties and obligations hereunder.
(f) Each provision of this Agreement constitutes a separate and distinct
undertaking, covenant and/or provision hereof. In the event that any
provision of this Agreement shall finally be determined to be unlawful, such
provision shall be deemed severed from this Agreement, but every other
provision of this Agreement shall remain in full force and effect, and in
substitution for any such provision held unlawful, there shall be substituted
a provision of similar import reflecting the original intent of the parties
hereto to the extent permissible under law.
(g) This Agreement and the agreements referred to herein comprise the
entire understanding between the Company and Consultant as to the subject
matter hereof and supersedes all prior agreements relating thereto.
(h) In the event of a breach by Consultant of any of the provisions of
Sections 6, 7, or 8 of this Agreement, the Company shall have the right to
institute and prosecute proceedings, in equity, in any court of competent
jurisdiction, to obtain an injunction during or after the term of this
Agreement to enforce the provisions of such Sections and to pursue any other
remedy to which the Company may be entitled. Consultant acknowledges that the
Company's remedy at law for any of Consultant's obligations under such
Sections will be inadequate, and Consultant agrees and consents that
temporary and permanent injunctive relief may be granted in any proceeding
which may be brought to enforce any provision thereof, without the necessity
of proof of actual damage.
9
<PAGE>
IN WITNESS WHEREOF, Consultant and the Company, by a duly authorized
officer of the Company pursuant to the authority of its Board of Directors,
have executed this Consulting Agreement as of the day and year first written
above.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
---------------------------------
James S. Burns, President and CEO
/s/ Max Link
---------------------------------
MAX LINK
10
<PAGE>
Exhibit A
OSIRIS THERAPEUTICS, INC.
Incentive Equity Compensation
for
Max Link, Ph.D.
1. Total Shares: 40,000 shares of Osiris Common Stock at a purchase price
of $0.34 per share.
2. Incentive Features: Milestone vesting schedule based on achievement of
corporate partnership and/or financing milestones3 based on the introduction
or arrangement by Dr. Link.
3. Vesting Schedule:
10,000 Upon issuance of $2.5 million of Osiris Preferred
Stock to qualified individuals and/or financial
institutions introduced by Dr. Link (i.e., 10,000
shares for each $2.5 million1 up to 40,000 shares).
- or -
40,000 Upon completion of a corporate partner-ship
agreement in the pharmaceutical, stem cell and/or
other cell/drug therapy field involving equity
investment, license fees1 milestone payments and
multi-year R&D contracts on the part of the
corporate partner, in exchange for product and/or
geographic rights and, in an aggregate amount which
exceeds $50 million over a period of five years
- or -
20,000 Upon completion of a license or purchase agreement
for proprietary technology acquired by Osiris which
is the subject of a patent application and which was
introduced by Dr. Link
- or -
40,000 Upon completion of a minority equity investment in
Osiris by a health care company in an amount
exceeding $20 million at a price per share in excess
of $8 per share.
<PAGE>
Incentive Equity Compensation
Exhibit A contd.
Page Two
40,000 Upon approval by Osiris shareholders of a definitive
or more agreement to purchase a majority equity interest in
Osiris at a price of at least $20 per share3 based on
the Company's capitalization as of December1,1994.
Preferred Stock investments over $10 million or
substantial corporate investments by investors and/or
companies introduced by Dr. Link will be negotiated
separately.
<PAGE>
Promissory Note
$27,200.00 January 2, 1995
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, Max Link, whose address is
Tobelhofstrasse 30, 8044 Zurich, Switzerland (the "Maker"), promises to pay,
in lawful money of the United State of America, to the order of Osiris
Therapeutics, Inc., a Delaware corporation with an address of 11100 Euclid
Avenue, Wearn Building, Fourth Floor, Cleveland, Ohio 44106 (the "Payee"),
the sum of Twenty Seven Thousand Two Hundred Dollars ($27,200.00) (the
"Principal Sum") as hereinafter set forth.
In accordance with that certain Consulting Agreement dated as of November
23, 1994 ("Consulting Agreement") by and between Maker and Payee, this
Promissory Note is given to Payee and represents payment of the purchase
price for the Shares (as defined in the Consulting Agreement)
Payment of the Principal Sum. Payment of the Principal Sum, together
with interest at seven and one-half percent (71/2%) per annum, shall be due
and payable on the earlier of (i) the date on which a demand for payment of
the Principal Sum is made upon Maker by Payee, (ii) the date on which the
Maker sells all or any portion of the Shares, and (iii) December 31, 2003.
Prepayment. The unpaid and outstanding balance of the Principal Sum may
be prepaid, in whole or in part, without any premium or penalty.
Default. It shall be an event of default hereunder ("Event of Default")
if (a) Maker fails to make any payment due hereunder when due or within ten
(10) days thereafter; (b) by the order or decree of a court of competent
jurisdiction an adjudication is made that the Maker is bankrupt or insolvent,
or a substantial part of the property of the Maker shall have been
sequestered, and such decree shall have continued unreversed or unstayed for
a period of thirty (30) days after the entry thereof; or (c) the Maker shall
make a general assignment for the benefit of the creditors.
/s/ Max Link
------------
Max Link
"Maker"
This Note has not been registered under the Securities Act of 1933 or
applicable state securities laws, if any, and neither the Note nor any
interest therein may be sold, transferred, pledged or otherwise disposed of
in the absence of (i) the opinion of counsel or other evidence satisfactory
to the issuer hereof that such disposition may lawfully be made without such
registration or (ii) such registration.
<PAGE>
Exhibit 10.27
OSIRIS THERAPEUTICS, INC.
AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
<PAGE>
OSIRIS THERAPEUTICS, INC.
AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
Table of Contents
PAGE
-------
1. Purpose................................................. 1
2. Definitions............................................. 1
3. Shares Available under the Plan......................... 2
4. Option Rights........................................... 3
5. Restricted Stock........................................ 4
6. Transferability......................................... 6
7. Adjustments............................................. 6
8. Fractional Shares....................................... 7
9. Withholding Taxes....................................... 7
10. Participation by Employees of or Consultants
to Less-Than-80-Percent Subsidiary...................... 7
11. Certain Terminations of Employment or Consulting
Services, Hardship and Approved Leaves of Absence...... 8
12. Foreign Participants.................................... 8
13. Administration of the Plan.............................. 8
14. Amendments and Other Matters............................ 9
15. Termination of the Plan................................. 10
<PAGE>
OSIRIS THERAPEUTICS, INC.
AMENDED AND RESTATED 1994 STOCK INCENTIVE PLAN
l. Purpose. The purpose of this Plan is to attract, compensate and retain
directors and officers and other key employees of and consultants to Osiris
Therapeutics, Inc., a Delaware corporation (the "Corporation"), and its
Subsidiaries and to provide such persons with incentives and rewards for
superior performance.
2. Definitions. As used in this Plan,
"Board" means the Board of Directors of the Corporation
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee described in Section 13(a) of this Plan.
"Common Stock" means (i) shares of the common stock, par value $.00l per
share, of the Corporation and (ii) any security into which shares of Common
Stock may be converted by reason of any transaction or event of the type
referred to in Section 7 of this Plan.
"Date of Grant" means the date specified by the Committee on which a grant
of Option Rights shall become effective, which shall not be earlier than the
date on which the Committee takes action with respect thereto.
"Incentive Stock Option" means an Option Right that is intended to qualify
as an "incentive stock option" under Section 422 of the Code or any successor
provision.
"IPO" means the initial public offering of Common Stock pursuant to a
registration statement that shall have become effective under the Securities
Act of 1933.
"Less-Than-80-Percent Subsidiary" means a Subsidiary with respect to which
the Corporation directly or indirectly owns or controls less than 80 percent
of the total combined voting or other decision-making power.
"Management Objectives" means the achievement or performance objectives
that may be established by the Board pursuant to this Plan for Participants
who have received grants of Restricted Stock.
<PAGE>
"Market Value per Share" means the fair market value of a share of Common
Stock as determined by the Board from time to time.
"Nonqualified Option" means an Option Right that is not intended to qualify
as a Tax-Qualified Option.
"Optionee" means the person so designated in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable upon the exercise of an
Option Right.
"Option Right" means the right to purchase shares of Common Stock from the
Corporation upon the exercise of a Nonqualified Option or a Tax-Qualified
Option granted pursuant to Section 4 of this Plan.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and (i) is at that time an officer, including
without limitation an officer who may also be a member of the Board, or other
key employee of or a consultant to the Corporation or any Subsidiary or (ii)
has agreed to commence serving in any such capacity.
"Restricted Stock" means Common Stock granted or sold pursuant to Section 5
of this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 5 hereof have expired.
"Rule l6b-3" means Rule 16b-3 under the Securities Exchange Act of 1934 or
any successor rule to the same effect.
"Subsidiary" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a
direct or indirect ownership or other equity interest; provided, however, for
purposes of determining whether any person may be a Participant for purposes
of any grant of Incentive Stock Options, "Subsidiary" means any corporation
in which the Corporation owns or controls directly or indirectly more than 50
percent of the total combined voting power represented by all classes of
stock issued by such corporation at the time of the grant.
"Tax-Qualified Option" means an Option Right that is intended to qualify
under particular provisions of the Code, including without limitation an
Incentive Stock Option.
3. Shares Available under the Plan. Subject to adjustment as provided in
Section 7 of this Plan, the number shares of Common Stock issued or
transferred and covered by outstanding awards granted under this Plan shall
not in the aggregate exceed 2,100,000 shares, which may be shares of original
issuance or shares held in treasury or a combination thereof. For the
purposes of this Section 3:
<PAGE>
(a) Shares of Common Stock covered by an Option Right granted under
this Plan shall be deemed to have been issued or transferred, and shall
cease to be available for issuance or transfer in respect of any other
award granted hereunder, at the earlier of the time when they are
actually issued or transferred or the time when dividend equivalents are
paid thereon.
(b) Shares of Common Stock covered by a Restricted Stock award
granted under this Plan shall be deemed to have been issued or
transferred, and shall cease to be available for issuance or transfer in
respect of any other award granted hereunder, at the earlier of the time
when they cease to be subject to a substantial risk of forfeiture or the
time when dividends are paid there on.
4. Option Rights. The Board may from time to time authorize grants to
Participants of options to purchase shares of Common Stock upon such terms
and conditions as the Board may determine in accordance with the following
provisions:
(a) Each grant shall specify the number of shares of Common Stock to
which it pertains.
(b) Each grant shall specify an Option Price per share of Common
Stock, which may be less than, equal to or greater than the Market Value
per Share on the Date of Grant, except that the Option Price per Common
Share of an Incentive Stock Option shall be equal to or greater than the
Market Value per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or
check or other cash equivalent acceptable to the Corporation, (ii)
nonforfeitable, nonrestricted shares of Common Stock, which are already
owned by the Optionee and have a value at the time of exercise that is
equal to the Option Price, (iii) any other legal consideration that the
Board may deem appropriate, including without limitation any form of
consideration authorized under Section 4(d) below, on such basis as the
Board may determine in accordance with this Plan and (iv) any
combination of the foregoing.
(d) On or after the Date of Grant of any Nonqualified Option, the
Board may determine that payment of the Option Price may also be made in
whole or in part in the form of shares of Restricted Stock or other
shares of Common Stock that are subject to risk of forfeiture or
restrictions on transfer. Unless otherwise determined by the Board on
or after the Date of Grant, whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in
this Section 4(d), the shares of Common Stock received by the Optionee
upon the exercise of
<PAGE>
the Nonqualified Option shall be subject to the same risks of forfeiture
or restrictions on transfer as those that applied to the consideration
surrendered by the Optionee; provided, however, that such risks of
forfeiture and restrictions on transfer shall apply only to the same
number of shares of Common Stock received by the Optionee as applied to
the forfeitable shares of Common Stock or Restricted Stock surrendered
by the Optionee.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a broker of some or all of the shares
of Common Stock to which the exercise relates.
(f) Successive grants may be made to the same Participant regardless
of whether any Option Rights previously granted to the Participant
remain unexercised.
(g) Each grant shall specify the period or periods of continuous
employment, or continuous engagement of the consulting services, of the
Optionee by the Corporation or any Subsidiary that are necessary before
the Option Rights or installments thereof shall become exercisable, and
any grant may provide for the earlier exercise of the Option Rights in
the event of a change in control of the Corporation or other similar
transaction or event.
(h) Option Rights granted pursuant to this Section 4 may be
Nonqualified Options or Tax-Qualified Options or combinations thereof.
(i) On or after the Date of Grant of any Nonqualified Option, the
Board may provide for the payment to the Optionee of dividend
equivalents thereon in cash or shares of Common Stock on a current,
deferred or contingent basis, or the Board may provide that any dividend
equivalents shall be credited against the Option Price.
(j) No Option Right granted pursuant to this Section 4 may be
exercised more than 10 years from the Date of Grant.
(k) Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Optionee and shall contain such terms
and provisions as the Board may determine consistent with this Plan.
5. Restricted Stock. The Board may also authorize grants or sales to
Participants of shares of Restricted Stock upon such terms and conditions as
the Board may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of the
ownership of shares of Common Stock to the Participant in consideration
of the performance of services,
<PAGE>
entitling such Participant to dividend, voting and other ownership
rights, subject to the substantial risk of forfeiture and restrictions
on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional consideration
from the Participant or in consideration of a payment by the Participant
that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the shares of Restricted
Stock covered thereby shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to
be determined by the Committee on the Date of Grant, and any grant or
sale may provide for the earlier termination of such period in the event
of a change in control of the Corporation or other similar transaction
or event.
(d) Each grant or sale shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the
transferability of the shares of Restricted Stock shall be prohibited
or restricted in the manner and to the extent prescribed by the Board on
the Date of Grant. Such restrictions may include without limitation
rights of repurchase or first refusal in the Corporation or provisions
subjecting the shares of Restricted Stock to a continuing substantial
risk of forfeiture in the hands of any transferee.
(e) Any grant or sale may require that any or all dividends or other
distributions paid on the shares of Restricted Stock during the period
of such restrictions be automatically sequestered and reinvested on an
immediate or deferred basis in additional shares of Common Stock, which
may be subject to the same restrictions as the underlying award or such
other restrictions as the Committee may determine.
(f) Each grant may specify one or more Management Objectives that
are to be achieved by the Participant, which may be described in terms
of Corporation-wide objectives or objectives that are related to the
performance of the individual Participant or the Subsidiary, division,
department or function within the Corporation or Subsidiary in which the
Participant is employed or with respect to which the Participant
provides consulting services, and to the extent that any grant so
specifies one or more Management Objectives:
(i) it shall also specify a minimum level of acceptable
achievement, below which all of the shares of Restricted Stock
covered by the award shall be forfeited, and shall set forth a
formula for determining the number of shares of Restricted Stock to
<PAGE>
be retained by the Participant if performance is at or above the
minimum level of acceptable achievement but falls short of full
achievement of the specified Management Objectives; and
(ii) the Board may adjust the specified Management Objectives
and the related minimum level of acceptable achievement if, in the
sole judgment of the Committee, events or transactions have occurred
after the Date of Grant that are unrelated to the performance of the
Participant and result in distortion of the specified Management
Objectives or the related minimum level of acceptable achievement.
(g) Each grant or sale shall be evidenced by an agreement, which
shall be executed on behalf of the Corporation by any officer thereof
and delivered to and accepted by the Participant and shall contain such
terms and provisions as the Board may determine consistent with this
Plan. Unless otherwise directed by the Board, all certificates
representing shares of Restricted Stock, together with a stock power
that shall be endorsed in blank by the Participant with respect to the
shares of Restricted Stock, shall be held in custody by the Corporation
until all restrictions thereon lapse.
6. Transferability. (a) No Option Right or other "derivative security"
(as that term is used in Rule 16b-3) granted under this Plan may be
transferred by a Participant except by will or the laws of descent and
distribution. Option Rights may not be exercised during a Participant's
lifetime except by the Participant or, in the event of the Participant's legal
incapacity, by his guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law and court supervision.
(b) Any grant of Option Rights made under this Plan may provide that all or
any part of the shares of Common Stock that are to be issued or transferred by
the Corporation upon the exercise thereof shall be subject to further
restrictions upon transfer.
7. Adjustments. The Board may make or provide for such adjustments in the
number of shares of Common Stock covered by outstanding Option Rights, the
Option Prices per share of Common Stock applicable to any such Option Rights,
and the kind of shares (including shares of another issuer) covered thereby,
as the Board may in good faith determine to be equitably required in order to
prevent dilution or expansion of the rights of Participants that otherwise
would result from (i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation
or (ii) any merger, consolidation, spin-off, spin-out, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of
assets, issuance of warrants or other
<PAGE>
rights to purchase securities or (iii) any other corporate transaction or
event having an effect similar to any of the foregoing. In the event of any
such transaction or event, the Board may provide in substitution for any or
all outstanding awards under this Plan such alternative consideration as it
may in good faith determine to be equitable under the circumstances and may
require in connection therewith the surrender of all awards so replaced.
Moreover, the Board may on or after the Date of Grant provide in the
agreement evidencing any award under this Plan that the holder of the award
may elect to receive an equivalent award in respect of securities of the
surviving entity of, any merger, consolidation or other transaction or event
having a similar effect, or the Board may provide that the holder will
automatically be entitled to receive such an equivalent award. The Board may
also make or provide for such adjustments in the maximum number of shares of
Common Stock specified in Section 3 of this Plan, the maximum number of
shares of Common Stock specified in Section 4(a) of this Plan, as the Board
may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 7.
8. Fractional Shares. The Corporation shall not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Board may
provide for the elimination of fractions or for the settlement thereof in
cash.
9. withholding Taxes. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or
the realization of any such benefit that the Participant or such other person
make arrangements satisfactory to the Corporation for payment of the balance
of any taxes required to be withheld. At the discretion of the Board, any
such arrangements may include relinquishment of a portion of any such payment
or benefit. The Corporation and any Participant or such other person may
also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
10. Participation by Employees of or Consultants to a Less-Than-80-Percent
Subsidiary. As a condition to the effectiveness of any grant or award to be
made hereunder to a Participant who is an employee of or a consultant to a
Less-Than-80-Percent Subsidiary, regardless of whether the Participant is
also employed by or engaged as a consultant to the Corporation or another
Subsidiary, the Board may require the Less-Than-80-Percent Subsidiary to
agree to transfer to the Participant (as, if and when provided for under this
Plan and any applicable agreement entered into between the Participant and
the Less-Than-80-Percent Subsidiary pursuant to this Plan) the shares of
Common Stock that would otherwise be delivered by the Corporation upon
receipt by the Less-Than-80-Percent Subsidiary
<PAGE>
of any consideration then otherwise payable by the Participant to the
Corporation. Any such grant or award may be evidenced by an agreement
between the Participant and the Less-Than-80-Percent Subsidiary, in lieu of
the Corporation, on terms consistent with this Plan and approved by the Board
and the Less-Than-80-Percent Subsidiary. All shares of Common Stock so
delivered by or to a Less-Than-80-Percent Subsidiary will be treated as if
they had been delivered by or to the Corporation for purposes of Section 3 of
this Plan, and all references to the Corporation in this Plan shall be deemed
to refer to the Less-Than-80-Percent Subsidiary except with respect to the
definitions of the Board and the Committee and in other cases where the
context otherwise requires.
11. Certain Terminations of Employment or Consulting Services, Hardship and
Approved Leaves of Absence. Notwithstanding any other provision of this Plan
to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement
with the consent of the Corporation, termination of employment or consulting
services to enter public service with the consent of the Corporation or leave
of absence approved by the Corporation, or in the event of hardship or other
special circumstances, of a Participant who holds an Option Right that is not
immediately and fully exercisable, any shares of Restricted Stock as to which
the substantial risk of forfeiture or the prohibition or restriction on
transfer has not lapsed, or any shares of Common Stock that are subject to
any transfer restriction pursuant to Section 6(b) of this Plan, the Board may
take any action that it deems to be equitable under the circumstances or in
the best interests of the Corporation, including without limitation waiving
or modifying any limitation or requirement with respect to any award under
this Plan.
12. Foreign Participants. In order to facilitate the making of any award
or combination of awards under this Plan, the Board may provide for such
special terms for awards to Participants who are foreign nationals, or who
are employed by or engaged as consultants to the Corporation or any
Subsidiary outside of the United States of America, as the Board may consider
necessary or appropriate to accommodate differences in local law, tax policy
or custom. The Board may also approve such supplements to, or amendments,
restatements or alternative versions of, this Plan as it may consider
necessary or appropriate for such purposes without thereby affecting the
terms of this Plan as in effect for any other purpose; provided, however,
that no such supplements, amendments, restatements or alternative versions
shall include any provisions that are inconsistent with the terms of this
Plan, as then in effect, unless this Plan could have been amended to
eliminate the inconsistency without further approval by the stockholders of
the Corporation.
13. Administration of the Plan. (a) This Plan shall be administered by the
Board until consummation of an IPO. Upon
<PAGE>
the consummation of an IPO, the authority of the Board shall be delegated to
a committee composed of not less than three members of the Board, each of
whom shall be a "disinterested person" within the meaning of Rule 16b-3, and
the Plan shall thereafter be administered by the Committee. A majority of
the members of the Board or the committee, as the case may be, shall
constitute a quorum, and the acts of the members of the Board or the
Committee who are present at any meeting thereof at which a quorum is
present, or acts unanimously approved in writing by the members of the Board
or the Committee, shall be the acts of the Board or the Committee.
(b) The interpretation and construction by the Board or the Committee of
any provision of this Plan or any agreement, notification or document
evidencing a grant of Option Rights or shares of Restricted Stock, and any
determination by the Board or the Committee pursuant to any provision of this
Plan or any such agreement, notification or document, shall be final and
conclusive. No member of the Board or the Committee shall be liable for any
such action taken or determination made in good faith.
14. Amendments and Other Matters. (a) This Plan may be amended from time
to time by the Board; Provided, however, except as expressly authorized by
this Plan, no such amendment shall increase the number of shares of Common
Stock specified in Section 3 of this Plan, or otherwise cause this Plan to
cease to satisfy any applicable condition of Rule 16b-3 following the
consummation of an IPO, without the further approval of the stockholders of
the Corporation. The Board may grant under this Plan any award or
combination of awards authorized under this Plan in exchange for the
cancellation of an award that was not granted under this Plan.
(b) With the concurrence of the affected Optionee, the Board may cancel any
agreement evidencing Option Rights granted under this Plan. In the event of
any such cancellation, the Board may authorize the granting of new Option
Rights hereunder, which may or may not cover the same number shares of Common
Stock as had been covered by the cancelled Option Rights, at such Option
Price, in such manner and subject to such other terms, conditions and
discretion as would have been permitted under this Plan had the cancelled
Option Rights not been granted.
(c) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Corporation or any
Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.
(d) (i) To the extent that any provision of this Plan would prevent
any Option Right that was intended to qualify as a Tax-Qualified Option
from so qualifying, any such provision shall be null and void with
respect to any such
<PAGE>
Option Right; provided, however, that any such provision shall remain in
effect with respect to other Option Rights, and there shall be no
further effect on any provision of this Plan.
(ii) Any award that may be made pursuant to an amendment to this
Plan that shall have been adopted without the approval of the
stockholders of the Corporation shall be null and void if it is
subsequently determined that such approval was required in order for
this Plan to continue to satisfy the applicable conditions of Rule 16b-3
following the consummation of an IPO.
15. Termination of the Plan. No further awards shall be granted under this
Plan after the passage of 10 years from the date on which this Plan is first
approved by the stockholders of the Corporation.
<PAGE>
Exhibit 10.28
OSIRIS THERAPEUTICS, INC.
Consulting Agreement
November, 1995
Gentlemen:
This letter confirms our agreement between Osiris Therapeutics, Inc.
("the Company") and Friedli Corporate Finance AG ("Friedli") in connection
with the investments by Friedli in the Company and to provide financial
consulting services pursuant to the following procedures, terms and conditions:
1. Term
----
The Company hereby retains Friedli, and Friedli hereby accepts such
engagement, for a term commencing on November 1, 1995 and terminating
on November 1, 2002, or such earlier date upon which this Agreement or
specific duties under this Agreement shall terminate.
2. The Company's Obligation
------------------------
(a) At Friedli's request, the Company will furnish written quarterly
status reports to Friedli describing both, positive and negative
events, until such time as the Company becomes public.
(b) At Friedli's request, the Company at its own expenses will make
presentations to investors in Switzerland and Luxembourg.
3. First Right of Refusal
----------------------
The Company grants Friedli the first right of refusal of any new equity or
debt financing with thirty (30) days written notice to Friedli.
4. Proxy and other Shareholder Material
------------------------------------
The Company agrees to mail proxy and any other shareholder material for
any ordinary or extraordinary shareholder meeting to the Friedli investors
at least thirty (30) days in advance.
5. IPO Allocation
--------------
The Company agrees to provide a preemptive right to Friedli to allocate
10% of the offering in case of an IPO.
6. Expenditure Veto Right
----------------------
The Company agrees, that Friedli has the veto right on any single capital
expenditure or single contact of US$500,000 or more until a new equity
investment of $5,000,000 or more is completed after the closing of the
Series D Preferred Stock financing.
<PAGE>
7. Duties and Representations of Friedli
-------------------------------------
(a) Friedli shall provide services to the Company in the form of
consultation, advice and assistance upon the reasonable request of
the Company and at such times as are convenient to Friedli in its
reasonable discretion. Such services may include, but are not limited
to, (i) providing general business, financial and investment advice
to the Company during the term of this Agreement, and (ii) serving as
a liaison between Friedli clients/investors and the Company by
disseminating information, including proxy and other shareholder
material, to such investors on behalf of the Company.
(b) Friedli agrees to use its best efforts in performing the foregoing
services.
8. Compensation
------------
(a) In consideration of the services to be provided by Friedli hereunder,
the Company shall pay Friedli US$4,000 per month upon the instructions
of Peter Friedli.
(b) The Company will also pay Friedli upon request up to US$ 15,000 per
year for expenses such as traveling, etc.
9. Status of Consultant
--------------------
Friedli agrees to render services to the Company as an independent
contractor to, and not as an employee, of the Company. Friedli
acknowledges and agrees, that it will be an independent contractor
for all purposes including, but not limited to, payroll and tax purposes,
and that Friedli shall not represent itself to be an employee or officer
of the Company.
10. Termination
-----------
This agreement may be terminated by the Company or Friedli upon thirty
(30) days prior written notice to the other party. If terminated by the
Company, the full balance through November 1, 2002 of the consulting
fee will be immediately due.
11. Confidentiality
---------------
Except as the Company may otherwise consent for Company's benefit, Friedli
agrees to keep confidential and not to disclose or make any use of at any
time either during or subsequent to the term of this Agreement, any
inventions, trade secrets, confidential information, knowledge, data
or other information of the Company relating to products, processes,
know-how, designs, formulas, test data, customer lists, business plans,
marketing plans and strategies, pricing strategies, or other information
pertaining to the Company or any of its affiliates.
12. Assignment
----------
The terms of this Agreement shall inure to the benefit of the respective
successors and permitted assigns of the parties hereto, and the
obligations and liabilities assumed in this Agreement by the parties
hereto shall be binding upon their respective successors and permitted
assigns. This Agreement may not be assigned by the Company or Friedli
without the prior written consent of the other part hereto.
13. Governing Law
-------------
This Agreement shall be governed by the laws of the State of Maryland
without giving effect to principles of conflicts of law.
<PAGE>
14. Counterparts
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
be deemed to be the same agreement.
If the foregoing is in accord with your understanding of our agreement, please
sign in the space provided below and return a signed copy of this letter to
the Company.
Sincerely,
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
-------------------------------
James S. Burns, President & CEO
Accepted and agreed:
FRIEDLI CORPORATE FINANCE AG
By: /s/ Peter Friedli
-----------------------
Peter Friedli
<PAGE>
Exhibit 10.29
OSIRIS THERAPEUTICS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as November 1, 1996,
is made by and between Osiris Therapeutics, Inc., a Delaware corporation
("Osiris" or the "Company"), and Michael J. Demchuk, Jr. (the "Employee").
RECITALS
A. The Company desires to employ Employee as its Vice President & Chief
Financial Officer, Secretary and Assistant Treasurer.
B. Employee is willing to become employed by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Employee agree as follows:
1. Employment.
The Company hereby employs Employee, and Employee hereby accepts
employment with the Company, for the term set forth in Section 2 below, in
the position and with the duties and responsibilities set forth in Section 3
below, and upon the other terms and conditions hereinafter stated.
2. Term.
The initial term of employment shall commence on November 1, 1996 (the
"Commencement Date") and shall end on the third anniversary of the
Commencement Date unless sooner terminated pursuant to the terms of this
Agreement. Commencing on the third anniversary of the Commencement Date,
unless the term of employment has otherwise been terminated pursuant to
Section 7, the term of employment shall be automatically renewed for up to
two successive one year terms unless the Company makes the election described
in Section 7(a), and each such renewal term shall be for one year unless
sooner terminated pursuant to the terms of this Agreement. The period
described above shall be the "term of employment."
3. Position, Duties, Responsibilities and Authority; Location.
(a) During the term of employment, Employee shall serve as Vice
President & Chief Financial Officer, Secretary and Assistant
Treasurer of the Company. Except as may otherwise be determined by
the Board of Directors, Employee shall report to the President and
CEO, and shall have the duties and responsibilities set forth on
Exhibit A to this
<PAGE>
Agreement and such other duties and responsibilities appropriate for
such position as the President may from time to time reasonably
determine.
(b) Throughout the term of employment, Employee shall devote full time
and attention during business hours to the business of the Company
and his duties and responsibilities as an officer of the Company.
(c) During the term of employment, Employee shall provide the services
and fulfill his duties and responsibilities to the Company under
this Agreement, and shall work out of the Company offices and
laboratories located in Baltimore, Maryland.
4. Base Compensation.
Commencing on the Commencement Date, and thereafter during the term of
employment, Employee shall receive base compensation at an annual rate of not
less than $132,000. Such base compensation shall be paid semi-monthly, but
not less frequently than monthly, less all applicable taxes and withholding
required to be deducted therefrom. On each anniversary of the Commencement
Date, Employee's base compensation may be increased by the Company consistent
with payment policies and Employee's performance, as determined by the
Compensation Committee of the Board.
5. Incentive Compensation.
Employee and the President of the Company shall agree on a merit bonus
plan for Employee (the "Plan") setting forth such goals and objectives for
the Employee as Employee and the President shall determine. The Plan shall
provide for Employee to receive a cash and/or stock option bonus, as
determined solely by the Company's Board of Directors, based on the
achievement of Plan goals and objectives, during each fiscal year of the
Company included in the term of employment. The bonus for any fiscal year,
if any, shall be for an amount up to 20% of Employee's base compensation in
effect at the end of such fiscal year, and shall be paid to Employee within
sixty (60) days following the end of the first quarter after such fiscal
year, less all applicable taxes and withholding required to be deducted
therefrom. The Company shall pay to Employee a cash bonus of at least
$10,000, less all applicable taxes and withholding required to be deducted
therefrom, within 30 days of the first anniversary of this Agreement so long
as Employee is still employed by the Company on such bonus payment date.
6. Benefits, Perquisites and Expenses.
During the term of employment, Employee and his dependents, and his
beneficiaries to the extent provided in the Company's applicable benefit plan
or program, shall be entitled to the following benefits and perquisites:
(a) Participation in the employee benefit plans of the Company available
to its employees generally, as they may be modified from time to
time, including, without limitation, plans providing medical
insurance, life insurance, disability insurance, and accidental
death or
2
<PAGE>
dismemberment insurance. An accurate and complete listing of all
such plans in effect as of the date hereof is attached hereto
as Schedule 1.
(b) During the term of employment commencing three (3) months following
the Commencement Date, three (3) weeks of paid vacation in each
calendar year during the term of employment accrued from the
commencement date, plus such holidays, sick leave and other time
off as are established by the policies of the Company. Unused days
of vacation may be carried over to March 31 of the subsequent year
and shall thereafter lapse for all time.
(c) Reimbursement for all reasonable and documented expenses incurred
by Employee in connection with the performance of his duties
hereunder, in accordance with the Company policy with respect to
such reimbursement.
(d) Participation in the employee 401(k) program, incentive stock option
program and other such savings or incentive programs as may be
offered to employees of a comparable position during the term of
employment.
7. Termination of Employment.
(a) The Company may elect not to renew the term of employment for any
reason, such election to be effective as of either the third
anniversary of the Commencement Date or the end of a renewal term
(as described in Section 2 hereof), upon giving Employee written
notice at least three (3) months in advance of such third
anniversary or end of renewal term.
(b) Employee may terminate his employment at any time upon giving the
Company written notice at least six (6) weeks in advance of the
proposed date of termination.
(c) Employee's employment shall terminate automatically upon the death of
Employee.
(d) At any time after Employee suffers a "Disability" (as defined below),
the Company may terminate Employee's employment upon giving Employee
written notice from the Board of Directors of the Company,
accompanied by a certified copy of a resolution to that effect duly
adopted by the Board of Directors, at least sixty (60) days in
advance of the date on which such termination is to become
effective. For the purposes of this Agreement "Disability" shall
have the same meaning as any similar term under any long term
disability insurance policy or long term disability plan maintained
by the Company from time to time. In the event the Company shall
not be maintaining any such policy or plan, Employee shall be
considered to have a Disability if he is receiving disability income
payments under the Social Security system, or if any life insurance
carrier has agreed to waive premiums due under any life insurance
policy maintained by the Company on Employee's life under a
disability waiver provision set forth in such policy. In addition,
Employee shall be considered to have a Disability if the Company
receives, from a physician reasonably acceptable to it, written
certification that (i) Employee is
3
<PAGE>
unable to provide services to the Company of a quality and nature
consistent with past practice because of a mental or physical
impairment, and (ii) there is no reasonable prospect that Employee
will be able to render services of such quality and nature within the
longer of (x) six months, or (y) the period of disability required in
order for Employee to be eligible to receive disability income
payments under any long term disability insurance policy or long term
disability plan maintained by the Company at such time, from the date
of such certificate.
(e) The Company may terminate Employee's employment without cause at any
time and for any reason by giving Employee written notice at least
thirty (30) days in advance of the date on which the termination is
to become effective.
(f) The Company may terminate Employee's employment at any time for
cause by delivering to Employee a certified copy of a resolution of
the Board of Directors of the Company finding that Employee
committed an act or omission constituting cause hereunder and
specifying the particulars thereof in detail, adopted at a meeting
called and held for that purpose and of which Employee was provided
not less than three (3) days' advance notice, including notice of
the agenda of such meeting. As used herein, the term "cause" shall
mean:
(i) conviction of a felony involving the Company;
(ii) acting in a manner which is materially detrimental or
materially damaging to the Company's reputation or business
operations other than actions which involve Employee's bad
judgment or a decision which was taken in good faith,
provided that Employee shall have failed to remedy such
action within ten (10) days after receiving written notice of
the Company's position with respect to such action; or
(iii) committing any material breach of this Agreement, including
abuse of a controlled drug substance or alcohol or failure of
a diagnostic test for such controlled substance as required
by the Company, provided that, if such breach is capable of
being remedied, Employee shall have failed to remedy such
breach within ten (10) days after his receipt or written
notice requesting that he remedy such breach.
8. Certain Payments and Obligations.
(a) Upon any termination of employment under paragraph (b) or (f) of
Section 7:
(i) The Company shall pay Employee in a lump sum within ten (10)
days following such termination an amount equal to the base
compensation and any incentive or bonus compensation
Employee was entitled to receive up to the time of
termination, plus the amount of any expenses that are
reimbursable under paragraph (c) of Section 6; provided,
however, that Employee shall not be entitled to any severance
payment under the Company's then existing severance pay
policy or plan (if any); and
4
<PAGE>
(ii) Employee shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by
the provisions of Sections 9, 10, and 11 hereof to the extent
applicable to the period following the term of employment.
(b) Upon any termination of employment under paragraph (c) of Section 7,
the Company shall pay Employee's estate the same amounts as are
provided in clauses (i) and (ii) of paragraph (c) of this Section 8;
provided, however, that in the event that at the time of Employee's
death the Company is maintaining life insurance on Employee naming
Employee and/or his heirs as beneficiaries, the amount of the
insurance paid or payable to Employee's estate and/or heirs shall
reduce, on a dollar for dollar basis, the payment to Employee's
estate under this paragraph (b).
(c) Upon any termination of employment under paragraph (e) of Section 7
with or without the required noticed:
(i) The Company shall pay Employee in a lump sum within ten (10)
days following such termination an amount equal to the base
compensation and any incentive or bonus compensation Employee
was entitled to receive up to the time of termination, plus
the amount of any expenses that are reimbursable under
paragraph (c) of Section 6, with the amount of any incentive
or bonus compensation, if any as determined in the sole
discretion of the Company's Board of Directors, to be a pro
rata portion of the incentive or bonus compensation Employee
would have received for the year in which he was terminated
based on the period of Employee's employment during such year,
and be paid pro rata over the period during which Employee is
entitled to receive payments under clause (i) or clause
(ii), as the case may be, of this paragraph (c); provided,
however, that Employee shall not be entitled to any severance
payment under the Company's then existing severance pay policy
or plan;
(ii) If Employee is terminated under paragraph (e) of Section 7
during the term of employment, the Company shall (A) continue
to pay Employee the base compensation he would have received
if the term of employment had continued for a period of six
(6) months after the date of termination, based on the rate
of Employee's total annual base compensation for the year
prior to the year in which such termination occurs (or, if
such termination occurs during the first year of the term of
employment, the rate of compensation in effect during such
year), which amount shall be paid in accordance with the
Company's normal payroll practices and subject to
withholdings, and (b) continue to provide Employee and, if
applicable, his dependents with the benefits provided under
the benefit plans (pursuant to the terms thereof) described
in Section 6(a) hereof, to the same extent that such benefits
were provided to Employee on the date of termination of his
employment, for a period of six (6) months after the date of
termination; and
(iii) Employee shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by
the provisions of Sections 9, 10, and 11 hereof to the extent
applicable to the period following the term of employment.
5
<PAGE>
(d) Upon any termination of employment under paragraph (d) of Section 7:
(i) The Company shall pay Employee the same amounts, and shall
provide Employee with the same benefits, as are provided in
clauses (i) and (ii) of paragraph (c) of this Section 8; and
(ii) Employee shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by
the provisions of Section 9, 10 and 11 hereof to the extent
applicable to the period following the term of employment.
(e) Upon a change of control event in which the Company is merged into an
unrelated third party or sells all or substantially all of its assets
to an unrelated third party, the result of which is a substantial
diminution of Employee's responsibilities or Employee's position is
eliminated, then Employee shall receive twelve (12) months severance
and such other provisions as described in paragraph 8(c) above.
(f) Severance provisions described in paragraphs 8(c) and 8(e) above
shall take effect following Employee's completion of ninety (90)
days employment.
9. Confidentiality.
Employee acknowledges that by reason of his duties as an employee of the
Company he has or will have access to and become informed of confidential and
secret information which is a competitive asset of the Company (collectively
"Confidential Information") including, without limitation, (a) information
concerning concepts for products and services and products and services data,
(b) corporate planning data, (c) the Company's financial results and business
condition, and (d) any other information which constitutes a "trade secret"
under the Uniform Trade Secrets Act. Employee agrees to keep in strict
confidence and not, either directly or indirectly, to make known, divulge,
reveal, furnish, make available or use any Confidential information,
except for use in the Employee's regular authorized duties on behalf of
the Company. Employee acknowledges that all documents and other property
including or reflecting Confidential Information furnished to Employee by the
Company or otherwise acquired or developed by the Company shall at all times
be the property of the Company. Employee agrees that upon termination of
Employee's employment with the Company, for any reason, Employee shall
return to the Company any such documents or other property (including copies,
summaries or analyses of the foregoing) containing Confidential information
which are in his possession, custody or control. Employee further agrees that
Employee's obligations of confidentiality hereunder shall survive any
termination of Employee's employment by the Company. For the purposes of
this Section 9, Confidential Information shall not include information which
has become, through no fault of Employee, generally known to the public, and
Employee, if required by law to make disclosure of Confidential Information
to a court of competent jurisdiction, may
6
<PAGE>
make such disclosure after providing the Company with reasonable notice and an
opportunity to contest such requirement. The obligations of Employee under
this Section 9 are in addition to, and not in limitation of or pre-emption of,
all other obligations of confidentiality which he may have to the Company under
general legal and equitable principles.
10. Noncompetition.
Employee acknowledges that his access to and knowledge of the Confidential
Information would be valuable to a competitor of the Company. Employee
further acknowledges that it would be inherent in the performance of his
duties as a director, officer, employee, agent, consultant, shareholder or
partner of any corporation, partnership or other entity which competes with
the Company, or which intends to or may compete with the Company, to
disclose or use such knowledge to or for the benefit of such corporation,
partnership or other entity. To protect these vital interests of the Company,
Employee agrees that from the date of this Agreement through the second
anniversary of the date on which his employment with the Company terminates
for any reason (the "Noncompetition Period"), he shall not, directly or
indirectly, whether as a director, officer, employee, agent or consultant or
otherwise; (a) invest in or become employed by or affiliated with, in any
capacity, any corporation, partnership or other entity which is engaged in a
business which is competitive with the business of the Company on the date of
such termination (except that Employee may purchase up to two percent of the
outstanding capital stock of a company that has common stock quoted on a
national stock exchange or the over-the-counter market); (b) solicit sales
of, or sell or deliver, any product or service of the kind and character sold
or distributed by Company; (c) solicit, attempt to solicit or work to divert
from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations;
or (d) engage, suggest or assist in or influence the engagement of hiring by
any competitor of the Company of any employee of the Company, or
otherwise cause or encourage any person, corporation, partnership or
other entity having a business or employment relationship with the
Company to sever such relationship with or commit any act harmful to the
Company. Employee's obligations and covenants under this Section 10 shall
be limited to North America, Europe, Japan, China, Taiwan, Singapore and
Australia. For the purposes of this Section 10, the business of the Company
shall mean the research, development and commercialization of products based
on human or animal mesenchymal stem cells (MSCs) and other lineage cells,
including without limitation any research, development and commercialization
of cellular transplants and cell-matrix products or other products utilizing
mesenchymal stem cells, their lineage cells, or other products resulting from
MSCs.
11. Inventions.
Employee hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made, conceived or
suggested, either solely or jointly with others, by Employee while in the
Company's employ, whether in the course of his employment with the use of the
Company's time, material or facilities or that is in any way within or
related to the existing or contemplated scope of the Company's business. Any
discovery, invention or improvement relating to any
7
<PAGE>
subject matter with which the Company was concerned during Employee's
employment and made, conceived or suggested by Employee, either solely or
jointly with others, within one year following termination of Employee's
employment under this Agreement shall be irrebuttably presumed to have been
so made, conceived or suggested in the course of such employment with the use
of the Company's time, materials or facilities. Upon request by the Company
with respect to any such discoveries, inventions or improvements, Employee
will execute and deliver to the Company, at any time during or after his
employment, all appropriate documents for use in applying for, obtaining and
maintaining such domestic and foreign patents as the Company may desire, and
all proper assignments therefore, when so requested by and at the expense of
the Company, but without further or additional consideration.
12. Grant of Options
(a) In order to provide Employee with additional incentive to further the
interests of the Company, the Company shall grant to Employee,
simultaneously with the execution of this Agreement and pursuant to
the terms of the Company's 1994 Stock Option Plan (the "1994 Plan"),
an option (the "Option") to purchase from the Company 110,000 shares
of the Company's Common Stock, par value $.001 per share (the "Common
Stock"), for an exercise price of $1.50 per share. The Option for
50,000 shares of such Common Stock shall vest according to length of
employment ("Equity Compensation Options"), while the remaining 60,000
shares shall vest based on the performance of certain performance
milestones ("Equity Performance Options"). Such Option shall be
evidenced by a Nonqualified Stock Option Agreement substantially in
the form of Exhibit B hereto.
(b) Restrictions on Transfer of Shares. The shares of Common Stock
issuable upon exercise of the Option (the "Shares") may not be
transferred, sold, pledged, exchanged, assigned or otherwise
encumbered or disposed of by Employee, except Company, unless and
until such transfer or other disposition is registered under the
Securities Act of 1993 and any applicable state securities laws or
the Company receives evidence satisfactory to it, in its sole
discretion, that such transfer or other disposition is not required
to be registered under the Securities Act of 1933 and such state
securities law. Any purported transfer, encumbrance or other
disposition of the Shares that is in violation of this Section 12
shall be null and void, and the other party to any such purported
transfer, encumbrance or other disposition shall not obtain any
rights to or interest in such Shares. The certificate(s) evidencing
the Shares shall hear a legend in a form satisfactory to the Company
reflecting the restrictions described below.
(c) Vesting of Option Shares. 12,500 of the Equity Compensation Option
Shares shall vest upon each of the first, second, third and fourth
anniversary of the Commencement Date if Employee's employment with
the Company has not been terminated prior to such anniversary
pursuant to Section 7 of this Agreement. No such shares shall vest
on a pro rata basis between anniversaries. The Equity Performance
Option Shares shall vest upon meeting certain cost control,
budgeting, financial management, equity fund raising, IPO, asset
management and investor relations' milestones, such milestones to be
determined
8
<PAGE>
by the President, in consultation with the Executive Committee of
the Board, within ninety (90) days following the Commencement Date.
Notwithstanding the foregoing:
(i) in the event of a termination of Employee's employment with
the Company pursuant to Section 7(e) of this Agreement, all
of the Shares that would have been vested had Employee's
employment continued through the period with respect to which
he receives payments under Section 8(c), as the case may be,
shall become forfeited as of the date of termination; and
(ii) in the event the Company elects not to renew the term of
employment at the end of the initial three (3) year term, the
final unvested Shares subject to annual vesting or performance
vesting shall be forfeited as of the date of such election.
(d) Other. No provision of this Section 12 shall limit in any way
whatsoever any right that the Company may otherwise have to terminate
the employment of Employee at any time. Any economic or other
benefit to Employee under this Section 12 shall not be taken into
account in determining any benefits to which Employee may be entitled
under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Company and shall not affect the amount of any
life insurance coverage available to any beneficiary under any life
insurance plan covering employees and consultants of the Company.
13. Miscellaneous.
(a) All notices required to be given under this Agreement shall be in
writing and delivered personally or sent by registered mail or
certified mail, postage prepaid, return receipt requested, addressed
as follows:
If to the Company:
Osiris Therapeutics, Inc.
2001 Aliceanna Street
Baltimore, Maryland 21231-2001
Attention: President
(410) 522-5005
with a copy to:
Hogan & Hartson
Columbia Center
Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Alan L. Dye, Esquire
(202) 637-5737
9
<PAGE>
If to Employee:
Michael J. Demchuk, Jr.
10 Blueleaf Court
Hunt Valley, Maryland 21030
(410) 771-9239
Notice shall be deemed delivered at the time received in the case of personal
delivery to the address indicated, or five (5) business days after it is
mailed in the case of mailing.
(b) This Agreement shall be subject to and governed by the internal law
of the State of Maryland (without regard to conflicts of law
principles).
(c) The headings or titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
(d) No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver is authorized by the
Board of Directors of the Company and is agreed to in a writing
signed by Employee and by a duly authorized officer of the Company
(other than Employee). Except as otherwise specifically provided in
this Agreement, no waiver by any party hereto of any breach by any
other party hereto of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of a
subsequent breath of such condition or provision or a waiver of a
similar or dissimilar provision or condition at the same or at any
prior to subsequent time; nor shall the receipt or acceptance of
compensation or other benefits following any termination of
Employee's employment be deemed a waiver of any condition or
provision hereof.
(e) Employee shall not assign, pledge or encumber any interest in this
Agreement or any part thereof without the express written consent of
the Company, this Agreement being personal to Employee. This
Agreement shall, however, inure to the benefit of Employee's estate,
dependents, beneficiaries and legal representatives. This Agreement
shall not be assignable by the Company without the written consent of
Employee, but if the Company shall merge or consolidate with or into,
or sell or otherwise transfer all or substantially all of its assets
to, another corporation or other form of business organization, then
this Agreement shall inure to the benefit of and be binding upon the
successor of the Company resulting from such merger, consolidation,
sale or transfer.
(f) Each provision of this Agreement constitutes a separate and distinct
undertaking, covenant and/or provision hereof. In the event that any
provision of this Agreement shall finally be determined to be
unlawful, such provision of this Agreement shall remain in full force
and effect, and in substitution a provision of similar import
reflecting the original intent of the parties hereto to the extent
permissible under law.
10
<PAGE>
(g) This Agreement and the agreements referred to herein comprise the
entire understanding between the Company and Employee as to the
subject matter hereof and supersedes all prior agreements relating
thereto.
(h) In the event of a breach by Employee of any of the provisions of
Sections 9, 10 or 11 of this Agreement, the Company shall have the
right to institute and prosecute proceedings, in equity, in any court
or competent jurisdiction, to obtain an injunction during or after
the term of this Agreement to enforce the provisions of such Sections
and to pursue any other remedy to which the Company may be entitled.
Employee acknowledges that the Company's remedy at law for any of
Employee's obligations under such Sections will be inadequate, and
Employee agrees and consents that temporary and permanent injunctive
relief may be granted in any proceeding which may be brought to
enforce any provision thereof, without the necessity of proof of
actual damage.
(i) Any controversy or claim arising under this Agreement, except for any
controversy or claim which involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10 and/or
11 of this Agreement, shall be settled by arbitration in Baltimore,
Maryland in accordance with the Rules of the American Arbitration
Association then in effect. The controversy or claim shall be
submitted to three arbitrators, one of whom shall be chosen by the
Company, one of whom shall be chosen by Employee, and the third of
whom shall be chosen by the two arbitrators so selected. The party
desiring arbitration shall given written notice to the other party of
its desire to arbitrate the particular matter in question naming the
arbitrator selected by it. If the other party shall fail, within a
period of fifteen (15) days after such notice shall have been given,
to reply in writing naming the arbitrator selected by it, then the
other party may apply to the American Arbitration Association for the
appointment of an arbitrator to serve as the arbitrator chosen by the
other party. The decision of any two of the arbitrators shall be in
final and binding upon the parties hereto and shall be delivered in
writing, signed in triplicate, by the concurring arbitrators to each
of the parties hereto. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
In addition, the prevailing party in such an arbitration proceeding
shall be entitled to recover his or its reasonable attorney's fees
and all reasonable out-of-pocket costs and disbursements, as well as
any and all charges which may be made for the cost of the arbitration
and the fees of the arbitrators. In the event a claim or controversy
arising under this Agreement involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10 and/or
11 of this Agreement, the parties may, but shall not be obligated to,
submit all or a portion of such controversy or claim to the foregoing
arbitration proceedings.
11
<PAGE>
IN WITNESS WHEREOF, Employee and the Company, by a duly authorized officer
of the Company pursuant to the authority of its Board of Directors, have
executed this Employment Agreement at Baltimore, Maryland, as of the day and
year first written above.
OSIRIS THERAPEUTICS, INC.
By: /s/ James S. Burns
-------------------------
James S. Burns, President
By: /s/ Michael J. Demchuk
-----------------------
Michael J. Demchuk, Jr.
12
<PAGE>
EXHIBIT A
DUTIES AND RESPONSIBILITIES
Vice President & Chief Financial Officer, Secretary
and Assistant Treasurer
Job Description: Vice President & Chief Financial Officer,
Secretary and Assistant Treasurer
Specific Duties Include Without Limitation:
Member of Osiris Senior Management Committee, comprising senior corporate
and functional officers who set strategic direction, financing
goals/programs, take action and assign responsibilities for key Company
programs. Chairman of the Finance and Investment Committee, responsible
for integrating Osiris capital formation and strategic objectives with
budgets and milestones.
Overall management responsibility for the Company's financial planning,
accounting, facilities' management, banking and relationships, financial
statements, facilities, budgeting, purchasing, human resources, benefits
and other administrative functions.
Senior executive officer responsible for financial management and planning,
control/other accounting functions, budgeting, commercial banking, cash and
risk management, personnel, auditor relations, MIS, SEC and other filings,
employee benefits, stock option plans, quarterly and annual reports, annual
meeting and acquisitions.
Principal executive officer representing the Company with investment banks,
accounting firms and their audit staffs, as well as the Company's principal
banks and their account/cash management groups. Responsible for
negotiating purchase, health, insurance, equipment, supply/maintenance
contracts and benefit agreements.
Responsible for recommending overall benefit, accounting and personnel
policies to the Management Committee; responsible for cash management,
profit sharing, stock option and compensation implementation; responsible
for contents of SEC and regulatory submissions.
<PAGE>
OSIRIS THERAPEUTICS, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as June 1, 1997, is
made by and between Osiris Therapeutics, Inc., a Delaware corporation
("Osiris" or the "Company"), and David J. Fink, Ph.D. (the "Employee").
RECITALS
A. The Company desires to employ Employee as its Vice President-International
Technology Development.
B. Employee is willing to become employed by the Company on the terms and
conditions set forth in this Agreement.
AGREEMENTS
NOW, THEREFORE, the Company and the Employee agree as follows:
1. Employment.
----------
The Company hereby employs Employee, and Employee hereby accepts employment
with the Company, for the term set forth in Section 2 below, in the position
and with the duties and responsibilities set forth in Section 3 below, and
upon the other terms and conditions hereinafter stated.
2. Term.
----
The initial term of employment shall commence on June 1, 1997 (the
"Commencement Date") and shall end on the third anniversary of the
Commencement Date unless sooner terminated pursuant to the terms of this
Agreement. Commencing on the third anniversary of the Commencement Date,
unless the term of employment has otherwise been terminated pursuant to
Section 7, the term of employment shall be automatically renewed for up to
two successive one year terms unless the Company makes the election
described in Section 7(a), and each such renewal term shall be for one year
unless sooner terminated pursuant to the terms of this Agreement. The period
described above shall be the "term of employment."
3. Position, Duties, Responsibilities and Authority; Location.
----------------------------------------------------------
(a) During the term of employment, Employee shall serve as Vice President-
International Technology Development of the Company. Except as may otherwise
be determined by the Chief Executive Officer or Board of Directors, Employee
shall report to the President and CEO, and shall have the duties and
responsibilities set forth on Exhibit A to this
<PAGE>
(b) Agreement and such other duties and responsibilities appropriate for
such position as the President may from time to time reasonably determine.
(b) Throughout the term of employment, Employee shall devote full time and
attention during business hours to the business of the Company and his
duties and responsibilities as an officer of the Company.
(c) During the term of employment, Employee shall provide the services and
fulfill his duties and responsibilities to the Company under this
Agreement, and shall work out of the Company offices and laboratories
located in Baltimore, Maryland.
4. Base Compensation.
-----------------
Commencing on the Commencement Date, and thereafter during the term of
employment, Employee shall receive base compensation at an annual rate of not
less than $140,000. Such base compensation shall be paid semi-monthly, but
not less frequently than monthly, less all applicable taxes and withholding
required to be deducted therefrom. On each anniversary of the Commencement
Date, Employee's base compensation may be increased by the Company consistent
with merit increase policies and Employee's performance, as determined by the
CEO and the Compensation Committee of the Board.
5. Incentive Compensation.
----------------------
Employee and the President of the Company shall agree on a merit bonus plan
for Employee (the "Plan") setting forth such goals and objectives for the
Employee as Employee and the President shall determine. The Plan shall
provide for Employee to receive a cash and/or stock option bonus, as
determined solely by the Company's Board of Directors, based on the
achievement of Plan goals and objectives, during each fiscal year of the
Company included in the term of employment. The bonus for any fiscal year, if
any, shall be paid to Employee within sixty (60) days following the end of the
first quarter after such fiscal year, less all applicable taxes and
withholding required to be deducted therefrom.
6. Benefits, Perquisites and Expenses.
----------------------------------
During the term of employment, Employee and his dependents, and his
beneficiaries to the extent provided in the Company's applicable benefit plan
or program, shall be entitled to the following benefits and perquisites:
(a) Participation in the employee benefit plans of the Company
available to its employees generally, as they may be modified from time to
time, including, without limitation, plans providing medical insurance, life
insurance, disability insurance, and accidental death or dismemberment
insurance. An accurate and complete listing of all such plans in effect as
of the date hereof is attached hereto as Schedule 1.
2
<PAGE>
(b) During the term of employment commencing three (3) months following the
Commencement Date, three (3) weeks of paid vacation in each calendar year
during the term of employment accrued from the commencement date, plus such
holidays, sick leave and other time off as are established by the policies
of the Company. Unused days of vacation may be carried over to March 31 of
the subsequent year and shall thereafter lapse for all time.
(c) Reimbursement for all reasonable and documented expenses incurred by
Employee in connection with the performance of his duties hereunder, in
accordance with the Company policy with respect to such reimbursement.
(d) Participation in the employee 401(k) program, incentive stock option
program and other such savings or incentive programs as may be offered to
employees of a comparable position during the term of employment.
(e) Employee will be reimbursed for expenses associated with the relocation
of household goods from Shaker Heights, Ohio to the Baltimore area and up
to $3,000 for temporary housing in the Baltimore area prior to the
permanent relocation. In the event that Employee relocates to Europe at
the request of the Company, then the Company will reimburse the cost of
such relocation.
7. Termination of Employment.
-------------------------
(a) The Company may elect not to renew the term of employment for any
reason, such election to be effective as of either the third
anniversary of the Commencement Date or the end of a renewal term
(as described in Section 2 hereof), upon giving Employee written
notice at least six (6) months in advance of such third anniversary
or end of renewal term.
(b) Employee may terminate his employment at any time upon giving the
Company written notice at least six (6) weeks in advance of the proposed
date of termination.
(c) Employee's employment shall terminate automatically upon the death
of Employee.
(d) At any time after Employee suffers a "Disability" (as defined
below), the Company may terminate Employee's employment upon giving
Employee written notice from the Board of Directors of the Company,
accompanied by a certified copy of a resolution to that effect duly adopted
by the Board of Directors, at least sixty (60) days in advance of the date
on which such termination is to become effective. For the purposes of this
Agreement "Disability" shall have the same meaning as any similar term
under any long term disability insurance policy or long term disability plan
maintained by the Company from time to time. In the event the Company shall
not be maintaining any such policy or plan, Employee shall be considered to
have a Disability if he is receiving disability income payments under the
Social Security system, or if any life insurance carrier has agreed to waive
premiums due under any life insurance policy maintained by the
3
<PAGE>
Company on Employee's life under a disability waiver provision set forth in
such policy. In addition, Employee shall be considered to have a Disability
if the Company receives, from a physician reasonably acceptable to it,
written certification that (i) Employee is unable to provide services to
the Company of a quality and nature consistent with past practice because of
a mental or physical impairment, and (ii) there is no reasonable prospect
that Employee will be able to render services of such quality and nature
within the longer of (x) six months, or (y) the period of disability
required in order for Employee to be eligible to receive disability income
payments under any long term disability insurance policy or long term
disability plan maintained by the Company at such time, from the date of
such certificate.
(e) The Company may terminate Employee's employment without cause at any
time and for any reason by giving Employee written notice at least thirty
(30) days in advance of the date on which the termination is to become
effective.
(f) The Company may terminate Employee's employment at any time for
cause by delivering to Employee a certified copy of a resolution of the
Board of Directors of the Company finding that Employee committed an act
or omission constituting cause hereunder and specifying the particulars
thereof in detail, adopted at a meeting called and held for that purpose
and of which Employee was provided not less than three (3) days' advance
notice, including notice of the agenda of such meeting. As used herein,
the term "cause" shall mean:
(i) conviction of a felony involving the Company;
(ii) acting in a manner which is materially detrimental or materially
damaging to the Company's reputation or business operations other
than actions which involve Employee's bad judgment or a decision
which was taken in good faith, provided that Employee shall have
failed to remedy such action within ten (10) days after receiving
written notice of the Company's position with respect to such action;
or
(iii) committing any material breach of this Agreement, including
abuse of a controlled drug substance or alcohol or failure of a
diagnostic test for such controlled substance as required by the
Company, provided that, if such breach is capable of being remedied,
Employee shall have failed to remedy such breach within ten (10) days
after his receipt or written notice requesting that he remedy such
breach.
8. Certain Payments and Obligations.
--------------------------------
(a) Upon any termination of employment under paragraph (b) or (f) of
Section 7:
(i) The Company shall pay Employee in a lump sum within ten (10)
days following such termination an amount equal to the base
compensation and any incentive or bonus compensation Employee
was entitled to receive up to the time of termination, plus the
amount of any expenses that are reimbursable under paragraph (c)
of Section 6;
4
<PAGE>
provided, however, that Employee shall not be entitled to any
severance payment under the Company's then existing severance
pay policy or plan (if any); and
(ii) Employee shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound by
the provisions of Sections 9, 10, and 11 hereof to the extent
applicable to the period following the term of employment.
(b) Upon any termination of employment under paragraph (c) of Section 7,
the Company shall pay Employee's estate the same amounts as are
provided in clauses (i) and (ii) of paragraph (c) of this Section 8;
provided, however, that in the event that at the time of Employee's
death the Company is maintaining life insurance on Employee naming
Employee and/or his heirs as beneficiaries, the amount of the
insurance paid or payable to Employee's estate and/or heirs shall
reduce, on a dollar for dollar basis, the payment to Employee's estate
under this paragraph (b).
(c) Upon any termination of employment under paragraph (e) of Section 7
with or without the required noticed:
(i) The Company shall pay Employee in a lump sum within ten (10)
days following such termination an amount equal to the base
compensation and any incentive or bonus compensation Employee
was entitled to receive up to the time of termination, plus the
amount of any expenses that are reimbursable under paragraph (c)
of Section 6, with the amount of any incentive or bonus
compensation, if any as determined in the sole discretion of the
Company's Board of Directors, to be a pro rata portion of the
incentive or bonus compensation Employee would have received for
the year in which he was terminated based on the period of
Employee's employment during such year, and be paid pro rata over
the period during which Employee is entitled to receive payments
under clause (i) or clause (ii), as the case may be, of this
paragraph (c); provided, however, that Employee shall not be
entitled to any severance payment under the Company's then
existing severance pay policy or plan;
(ii) If Employee is terminated under paragraph (e) of Section 7 during
the term of employment, the Company shall (A) continue to pay
Employee the base compensation he would have received if the term
of employment had continued for a period of six (6) months after
the date of termination, based on the rate of Employee's total
annual base compensation for the year prior to the year in which
such termination occurs (or, if such termination occurs during
the first year of the term of employment, the rate of compensation
in effect during such year), which amount shall be paid in
accordance with the Company's normal payroll practices and
subject to withholdings, and (b) continue to provide Employee and,
if applicable, his dependents with the benefits provided under
the benefit plans (pursuant to the terms thereof) described in
Section 6(a) hereof, to the same extent that such benefits were
provided to Employee on the date of termination of his employment,
for a period of six (6) months after the date of termination; and
5
<PAGE>
(iii) Employee shall have no further obligation to the Company
under this Agreement except that he shall continue to be bound
by the provisions of Sections 9, 10, and 11 hereof to the extent
applicable to the period following the term of employment.
(d) Upon any termination of employment under paragraph (d) of Section 7:
(i) The Company shall pay Employee the same amounts, and shall
provide Employee with the same benefits, as are provided in
clauses (i) and (ii) of paragraph (c) of this Section 8; and
(ii) Employee shall have no further obligation to the Company under
this Agreement except that he shall continue to be bound by the
provisions of Section 9, 10 and 11 hereof to the extent applicable
to the period following the term of employment.
(e) Upon a change of control event in which the Company is merged into an
unrelated third party or sells all or substantially all of its assets
to an unrelated third party, the result of which is a substantial
diminution of Employee's responsibilities or Employee's position is
eliminated, then Employee shall receive the same benefits as other
Company officers of similar rank and such other provisions as
described in paragraph 8(c) above.
(f) Severance provisions described in paragraphs 8(c) and 8(e) above
shall take effect following Employee's completion of ninety (90) days
employment.
9. Confidentiality.
---------------
Employee acknowledges that by reason of his duties as an employee of the
Company he has or will have access to and become informed of confidential and
secret information which is a competitive asset of the Company (collectively
"Confidential Information") including, without limitation, (a) information
concerning concepts for products and services and products and services data,
(b) corporate planning data, (c) the Company's financial results and business
condition, and (d) any other information which constitutes a "trade secret"
under the Uniform Trade Secrets Act. Employee agrees to keep in strict
confidence and not, either directly or indirectly, to make known, divulge,
reveal, furnish, make available or use any Confidential information, except
for use in the Employee's regular authorized duties on behalf of the
Company. Employee acknowledges that all documents and other property
including or reflecting Confidential Information furnished to Employee by the
Company or otherwise acquired or developed by the Company shall at all times
be the property of the Company. Employee agrees that upon termination of
Employee's employment with the Company, for any reason, Employee shall
return to the Company any such documents or other property (including copies,
summaries or analyses of the foregoing) containing Confidential information
which are in his possession, custody or control. Employee further agrees that
Employee's obligations of confidentiality hereunder shall survive any
termination of Employee's employment by the Company. For the purposes of
this Section 9, Confidential Information shall not include information which
has become, through no fault of Employee, generally known to the public,
and Employee, if required
6
<PAGE>
by law to make disclosure of Confidential Information to a court of
competent jurisdiction, may make such disclosure after providing the Company
with reasonable notice and an opportunity to contest such requirement. The
obligations of Employee under this Section 9 are in addition to, and not in
limitation of or pre-emption of, all other obligations of confidentiality
which he may have to the Company under general legal and equitable principles.
10. Noncompetition.
--------------
Employee acknowledges that his access to and knowledge of the
Confidential Information would be valuable to a competitor of the Company.
Employee further acknowledges that it would be inherent in the performance of
his duties as a director, officer, employee, agent, consultant, shareholder or
partner of any corporation, partnership or other entity which competes with
the Company, or which intends to or may compete with the Company, to
disclose or use such knowledge to or for the benefit of such corporation,
partnership or other entity. To protect these vital interests of the Company,
Employee agrees that from the date of this Agreement through the second
anniversary of the date on which his employment with the Company terminates
for any reason (the "Noncompetition Period"), he shall not, directly or
indirectly, whether as a director, officer, employee, agent or consultant or
otherwise; (a) invest in or become employed by or affiliated with, in any
capacity, any corporation, partnership or other entity which is engaged in a
business which is competitive with the business of the Company on the date of
such termination (except that Employee may purchase up to two percent of the
outstanding capital stock of a company that has common stock quoted on a
national stock exchange or the over-the-counter market); (b) solicit sales
of, or sell or deliver, any product or service of the kind and character sold
or distributed by Company; (c) solicit, attempt to solicit or work to divert
from the Company the business or patronage of any person, corporation,
partnership or other entity with whom the Company has had business relations;
or (d) engage, suggest or assist in or influence the engagement of hiring by
any competitor of the Company of any employee of the Company, or otherwise
cause or encourage any person, corporation, partnership or other entity having
a business or employment relationship with the Company to sever such
relationship with or commit any act harmful to the Company. Employee's
obligations and covenants under this Section 10 shall be limited to North
America, Europe, Japan, China, Taiwan, Singapore and Australia. For the
purposes of this Section 10, the business of the Company shall mean the
research, development and commercializtion of products based on human or
animal mesenchymal stem cells (MSCs) and other lineage cells, including
without limitation any research, development and commercialization of
cellular transplants and cell-matrix products or other products utilizing
mesenchymal stem cells, their lineage cells, or other products resulting from
MSCs.
11. Inventions.
----------
Employee hereby assigns and agrees to assign to the Company, its
successors, assigns or nominees, all of his rights to any discoveries,
inventions and improvements, whether patentable or not, made, conceived or
suggested, either solely or jointly with others, by Employee while in the
Company's employ, whether in the course of his employment with the use of the
Company's time, material or facilities or that is in any way within or related
to the existing or contemplated
7
<PAGE>
scope of the Company's business. Any discovery, invention or improvement
relating to any subject matter with which the Company was concerned during
Employee's employment and made, conceived or suggested by Employee, either
solely or jointly with others, within one year following termination of
Employee's employment under this Agreement shall be irrebuttably presumed to
have been so made, conceived or suggested in the course of such employment
with the use of the Company's time, materials or facilities. Upon request by
the Company with respect to any such discoveries, inventions or improvements,
Employee will execute and deliver to the Company, at any time during or after
his employment, all appropriate documents for use in applying for, obtaining
and maintaining such domestic and foreign patents as the Company may desire,
and all proper assignments therefore, when so requested by and at the expense
of the Company, but without further or additional consideration.
12. Grant of Options
----------------
(a) In order to provide Employee with additional incentive to further
the interests of the Company, the Company shall grant to Employee,
simultaneously with the execution of this Agreement and pursuant to
the terms of the Company's 1994 Stock Option Plan (the "1994 Plan"),
an option (the "Option") to purchase from the Company 25,000 shares
of the Company's Common Stock, par value $.001 per share (the
"Common Stock"), for an exercise price of $4.00 per share. The Option
for 25,000 shares of such Common Stock shall vest based on the
achievement of certain performance milestones ("Equity Performance
Options"). Such Option shall be evidenced by a Nonqualified Stock
Option Agreement substantially in the form of Exhibit B hereto.
(b) Restrictions on Transfer of Shares. The shares of Common Stock
----------------------------------
issuable upon exercise of the Option (the "Shares") may not be
transferred, sold, pledged, exchanged, assigned or otherwise
encumbered or disposed of by Employee, except Company, unless and
until such transfer or other disposition is registered under the
Securities Act of 1993 and any applicable state securities laws or
the Company receives evidence satisfactory to it, in its sole
discretion, that such transfer or other disposition is not required
to be registered under the Securities Act of 1933 and such state
securities law. Any purported transfer, encumbrance or other
disposition of the Shares that is in violation of this Section 12
shall be null and void, and the other party to any such purported
transfer, encumbrance or other disposition shall not obtain any
rights to or interest in such Shares. The certificate(s) evidencing
the Shares shall hear a legend in a form satisfactory to the Company
reflecting the restrictions described below.
(c) Vesting of Option Shares. The Equity Performance Option Shares
------------------------
shall vest upon meeting certain collaboration, international
development, intellectual property and new technology milestones,
such milestones to be determined by the President, in consultation
if required with the Executive Committee or Compensation Committee
of the Board, within ninety (90) days following the Commencement
Date. Notwithstanding the foregoing:
8
<PAGE>
(i) in the event of a termination of Employee's employment with the Company
pursuant to Section 7(e) of this Agreement, all of the Shares that
would have been vested had Employee's employment continued through the
period with respect to which he receives payments under Section 8(c),
as the case may be, shall become forfeited as of the date of
termination; and
(ii) in the event the Company elects not to renew the term of employment at
the end of the initial three (3) year term, the final unvested Shares
subject to performance vesting shall be forfeited as of the date of
such election.
(d) Other. No provision of this Section 12 shall limit in any way
-----
whatsoever any right that the Company may otherwise have to terminate
the employment of Employee at any time. Any economic or other
benefit to Employee under this Section 12 shall not be taken into
account in determining any benefits to which Employee may be entitled
under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Company and shall not affect the amount of any
life insurance coverage available to any beneficiary under any life
insurance plan covering employees and consultants of the Company.
13. Miscellaneous.
-------------
(a) All notices required to be given under this Agreement shall be in
writing and delivered personally or sent by registered mail or
certified mail, postage prepaid, return receipt requested, addressed
as follows:
If to the Company:
------------------
Osiris Therapeutics, Inc.
2001 Aliceanna Street
Baltimore, Maryland 21231-2001
Attention: President
(410) 522-5005
with a copy to:
---------------
Hogan & Hartson
Columbia Center
Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Alan L. Dye, Esquire
(202) 637-5737
9
<PAGE>
If to Employee:
---------------
David J. Fink, Ph.D.
303 Wendover Road
Baltimore, MD 21218
Notice shall be deemed delivered at the time received in the case of personal
delivery, facsimile or electronic transmission to the address indicated, or
five (5) business days after it is mailed in the case of mailing.
(b) This Agreement shall be subject to and governed by the internal
law of the State of Maryland (without regard to conflicts of
law principles).
(c) The headings or titles to sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
(d) No provision of this Agreement may be amended, modified or waived
unless such amendment, modification or waiver is agreed to in a
writing signed by Employee and by a duly authorized officer of the
Company (other than Employee). Except as otherwise specifically
provided in this Agreement, no waiver by any party hereto of any
breach by any other party hereto of any condition or provision of
this Agreement to be performed by such other party shall be deemed
a waiver of a subsequent breath of such condition or provision or a
waiver of a similar or dissimilar provision or condition at the same
or at any prior to subsequent time; nor shall the receipt or
acceptance of compensation or other benefits following any termination
of Employee's employment be deemed a waiver of any condition or
provision hereof.
(e) Employee shall not assign, pledge or encumber any interest in this
Agreement or any part thereof without the express written consent of
the Company, this Agreement being personal to Employee. This
Agreement shall, however, inure to the benefit of Employee's estate,
dependents, beneficiaries and legal representatives. This Agreement
shall not be assignable by the Company without the written consent of
Employee, but if the Company shall merge or consolidate with or into,
or sell or otherwise transfer all or substantially all of its assets
to, another corporation or other form of business organization, then
this Agreement shall inure to the benefit of and be binding upon the
successor of the Company resulting from such merger, consolidation,
sale or transfer.
(f) Each provision of this Agreement constitutes a separate and distinct
undertaking, covenant and/or provision hereof. In the event that any
provision of this Agreement shall finally be determined to be
unlawful, such provision of this Agreement shall remain in full force
and effect, and in substitution a provision of similar import
reflecting the original intent of the parties hereto to the extent
permissible under law.
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<PAGE>
(g) This Agreement and the agreements referred to herein comprise the
entire understanding between the Company and Employee as to the
subject matter hereof and supersedes all prior agreements relating
thereto, except as to continuing obligations relating to
confidentiality and inventions from the 1993 Employment Agreement
between the Company and Employee.
(h) In the event of a breach by Employee of any of the provisions of
Sections 9, 10 or 11 of this Agreement, the Company shall have the
right to institute and prosecute proceedings, in equity, in any court
or competent jurisdiction, to obtain an injunction during or after
the term of this Agreement to enforce the provisions of such Sections
and to pursue any other remedy to which the Company may be entitled.
Employee acknowledges that the Company's remedy at law for any of
Employee's obligations under such Sections will be inadequate, and
Employee agrees and consents that temporary and permanent injunctive
relief may be granted in any proceeding which may be brought to
enforce any provision thereof, without the necessity of proof of
actual damage.
(i) Any controversy or claim arising under this Agreement, except for
any controversy or claim which involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10 and/or
11 of this Agreement, shall be settled by arbitration in Baltimore,
Maryland in accordance with the Rules of the American Arbitration
Association then in effect. The controversy or claim shall be
submitted to three arbitrators, one of whom shall be chosen by the
Company, one of whom shall be chosen by Employee, and the third of
whom shall be chosen by the two arbitrators so selected. The party
desiring arbitration shall given written notice to the other party of
its desire to arbitrate the particular matter in question naming the
arbitrator selected by it. If the other party shall fail, within
a period of fifteen (15) days after such notice shall have been given,
to reply in writing naming the arbitrator selected by it, then the
other party may apply to the American Arbitration Association for the
appointment of an arbitrator to serve as the arbitrator chosen by the
other party. The decision of any two of the arbitrators shall be in
final and binding upon the parties hereto and shall be delivered in
writing, signed in triplicate, by the concurring arbitrators to each
of the parties hereto. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
In addition, the prevailing party in such an arbitration proceeding
shall be entitled to recover his or its reasonable attorney's fees
and all reasonable out-of-pocket costs and disbursements, as well as
any and all charges which may be made for the cost of the arbitration
and the fees of the arbitrators. In the event a claim or controversy
arising under this Agreement involves a claim by the Company for
equitable or injunctive relief with respect to Section 9, 10 and/or 11
of this Agreement, the parties may, but shall not be obligated to,
submit all or a portion of such controversy or claim to the foregoing
arbitration proceedings.
11
<PAGE>
IN WITNESS WHEREOF, Employee and the Company, by a duly authorized
officer of the Company pursuant to the authority of its Board of Directors,
have executed this Employment Agreement at Baltimore, Maryland, as of the day
and year first written above.
OSIRIS THERAPEUTICS, INC.
By:
----------------------
James S. Burns, President
----------------------
David J. Fink, Ph.D.
12
<PAGE>
Exhibit 10.31
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, dated as of___________ (this
"Agreement"), is made and entered into by and between Osiris Therapeutics,
Inc., a Delaware corporation (the "Company"), and _____________________
("Indemnitee").
WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director and/or officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
companies in today's environment;
WHEREAS, the Company's Restated Certificate of Incorporation (the
"Certificate") and By-Laws (the "By-Laws") provide that the Company will
indemnify its directors and officers to the fullest extent permitted by law
and will advance expenses in connection therewith, and Indemnitee's
willingness to serve as a director and/or officer of the Company is based in
part on Indemnitee's reliance on such provisions; and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service
to the Company in an effective manner, and Indemnitee's reliance on the
aforesaid provisions of the Certificate and By-Laws, and in part to provide
Indemnitee with specific contractual assurance that the protection promised
by such provisions will be available to Indemnitee regardless of; among other
things, any amendment to or revocation of such provisions or any change in
the composition of the Company's Board of Directors or any acquisition or
business combination transaction relating to the Company, the Company wishes
to provide in this Agreement for the indemnification of and the advancement
of expenses to Indemnitee as set forth in this Agreement.
NOW, THEREFORE, in consideration of he mutual agreements herein set
forth, the parties hereto hereby agree as follows:
l. Certain Definitions.
1.1. Claim. The term "Claim" shall mean any threatened, pending or
completed action, suit or proceeding, or any inquiry or investigation that
Indemnitee in good faith believes might lead to the institution of any such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or other.
1.2 Indemnifiable Event. The term "Indemnifiable Event" shall mean any
actual or asserted event or occurrence related to the fact that Indemnitee is
or was a director, officer, employee, agent, or fiduciary of the Company, or
is or was serving at the
<PAGE>
request of the Company as a director, officer, employee, trustee, agent, or
fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust, or other entity, or anything done or not done by
Indemnitee in any such capacity.
2. Basic Indemnification Arrangement. (a) In the event Indemnitee was,
is or becomes a party to or other participant in, or is threatened to be made
a party to or other participant in, a Claim by reason of (or arising in whole
or in part out of) an Indemnifiable Event, the Company shall indemnify
Indemnitee to the fullest extent permitted by law against any and all costs,
charges and expenses, including, without limitation, attorneys' fees and
other fees and expenses, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of any such attorneys' fees and other fees and
expenses, judgments, fines or amounts paid in settlement) actually and
reasonably incurred by Indemnitee in connection with such Claim or any appeal
therefrom, if Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the
Company, and, with respect to any criminal action, proceeding or
investigation, had no reasonable cause to believe his or her conduct was
unlawful.
(b) In the event Indemnitee was, is or becomes a party to or other
participant in, or is threatened to be made a party to or other participant
in, a Claim by or in the right of the Company to procure a judgement in its
favor by reason of (or arising in whole or in part out of) an Indemnifiable
Event, the Company will indemnify Indemnitee to the fullest extent permitted
by law against costs, charges and expenses, including, without limitation,
attorneys' fees and other fees and expenses, actually and reasonably incurred
by Indemnitee in connection with such Claim or any appeal therefrom, if
Indemnitee acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company, except that no
indemnification shall be made in respect of any such Claim as to which
Indemnitee shall have been adjudged to be liable to the Company unless and
only to the extent that the Court of Chancery or the court in which such
action, suit or proceeding was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
(c) To the extent that the Indemnitee has been successful on the merits
or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any Claim referred to in Sections 2(a) OR 2
(b) hereof; Indemnitee shall be indemnified against costs, charges and
expenses (including attorneys' fees and other fees and expenses) actually and
reasonably incurred by him in connection therewith.
(d) Subject to the Section 3(a), any indemnification under Sections 2(a)
or 2(b), unless ordered by a court, shall be made by the Company only as
authorized in the specific case upon a determination that indemnification of
the Indemnitee is proper in the circumstances because Indemnitee has
satisfied the applicable standard set forth in Section 2(a) or 2(b), as the
case may be. Subject to Section 4(a), such determination shall
2
<PAGE>
be made (i) by the Board of Directors of the Company (the "Board"), by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, (ii) if such a quorum of disinterested
directors is not available or if such disinterested directors so direct, by
independent legal counsel (designated in the manner provided below in this
subsection (d)) in a written opinion or (iii) by the stockholders of the
Company (the "Stockholders") by a majority vote of Stockholders present at a
meeting at which a quorum is present Independent legal counsel shall be
designated by vote of a majority of the disinterested directors; provided,
however, that if the Board is unable or fails to so designate, such
designation shall be made by the Indemnitee subject to the approval of the
Company which approval shall not be unreasonably withheld. Independent legal
counsel shall not be any person or firm who, under the applicable standards
of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or the Indemnitee in an action to determine
the Indemnitee's rights under this Agreement. The Company agrees to pay the
reasonable fees and expenses of such independent legal counsel and to
indemnify fully such counsel against costs, charges and expenses, including,
without limitation, attorneys' fees and other fees and expenses, actually and
reasonably incurred by such counsel in connection with this Agreement or the
opinion of such counsel pursuant hereto.
(e) All expenses, including, without limitation, attorneys' fees and
other fees and expenses, incurred by Indemnitee in his capacity as a director
or officer of the Company in connection with a Claim shall be paid by the
Company in advance of the final disposition of such Claim in the manner
prescribed by Section 3(b) hereof
3. Certain Procedures Relative to Indemnification and Advancement of
Expenses. (a) Except as otherwise permitted or required by the Delaware
General Corporation Law (the "DGCL"), for purposes of pursuing any rights to
indemnification under Sections 2(a), 2(b) or 4(a) hereof, as the case may be,
Indemnitee may, but shall not be required to, (i) submit to the entity
mailing the determination whether the Indemnitee is entitled to
indemnification (the "Determining Entity") a written statement of request for
indemnification stating that he or she is entitled to indemnification
hereunder and the basis for asserting such a claim for indemnification; and
(ii) present to the Company reasonable evidence of all expenses for which
payment is requested. Submission of such a written statement to the
Determining Entity shall create a presumption that the Indemnitee is entitled
to indemnification under Sections 2(a), 2(b) or 4(a) hereof, as the case may
be, and the Determining Entity shall be deemed to have determined that
Indemnitee is entitled to such indemnification unless within 30 calendar days
after receipt of such written statement the Determining Entity shall
determine (i) in the case of a determination made by the Board, by a vote of
a majority of the directors who are not parties to such suit, action or
proceeding at a meeting at which a quorum is present, (ii) in the case of a
determination made by independent legal counsel, in its judgment, or (iii) in
the case of a determination made by the Stockholders, by a vote of a majority
of the Stockholders present at a meeting of Stockholders entitled to vote
thereon at a meeting at which a quorum is present, in each case based upon
clear and convincing evidence (sufficient to rebut the foregoing presumption)
that Indemnitee is not entitled to
3
<PAGE>
indemnification and Indemnitee shall have received notice within such 30
calendar day period in writing of such determination that Indemnitee is not
so entitled to indemnification. The notice to the Indemnitee specified in the
preceding sentence shall disclose with particularity the evidence in support
of the Determining Entity's determination. The provisions of this Section
3(a) are intended to be procedural only and shall not affect the right of
Indemnitee to indemnification under this Agreement and any determination by
the Determining Entity that the Indemnitee is not entitled to indemnification
and any failure to make the payments requested in the written statement for
indemnification shall be subject to judicial review as provided in Section 7
hereof.
(b) For purposes of determining whether to authorize advancement of
expenses pursuant to Section 2(e) hereof; Indemnitee shall submit to the
Board a sworn statement of request for advancement of expenses substantially
in the form of Exhibit 1 attached hereto and made apart hereof (the
'Undertaking"), averring that (i) he or she has reasonably incurred or will
reasonably incur actual expenses in connection with a Claim and (ii) he or
she undertakes to repay such amount if it shall ultimately be determined that
he or she is not entitled to be indemnified by the Company under this
Agreement or otherwise. For purposes of requesting advancement of expenses
pursuant to Section 4(b) hereof; Indemnitee shall submit an Undertaking or
such other form of request as he or she determines to be appropriate (an
"Expense Request"). Upon receipt of an Undertaking or Expense Request, as the
case may be, the Board shall within 10 calendar days authorize immediate
payment of the expenses stated in the Undertaking or Expense Request, as the
case may be, whereupon such payments shall immediately be made by the
Company. No security shall be required in connection with any Undertaking or
Expense Request and any Undertaking or Expense Request shall be accepted
without reference to the Indemnitee's ability to make repayment.
4. Indemnification for Additional Expenses. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which Indemnitee may have
pursuant to Section 2 hereof; the Certificate, the By-Laws, the DGCL, any
policy of insurance or otherwise, but subject to the limitations on the
maximum permissible indemnity which may exist under applicable law at the
time of any request for indemnity hereunder determined as contemplated by
this Section 4(a), the Company shall indemnify Indemnitee against any amount
which he or she is or becomes legally obligated to pay relating to or an sing
out of any Claim because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, misstatement or misleading
statement, by reason of an Indemnifiable Event. The payments which the
Company is obligated to make pursuant to this Section 4(a) shall include,
without limitation, damages, judgments, settlements and charges, costs,
expenses, expenses of investigation and expenses of defense of legal actions,
suits, proceedings or claims, including attorneys' fees, and appeals
therefrom, and expenses of appeal, attachment or similar bonds, including
attorneys' fees; provided, however, that the Company shall not be obligated
under this Section 4(a) to make any payment in connection with any claim
against Indemnitee:
4
<PAGE>
(i) to the extent of any fine or similar governmental imposition
which the Company is prohibited by applicable law from paying which results
in a final, nonappealable order; or
(ii) to the extent based upon or attributable to Indemnitee gaining
in fact a personal profit to which he or she was not legally entitled,
including, without limitation, profits made from the purchase and sale by
Indemnitee of equity securities of the Company which are recoverable by the
Company pursuant to Section 16(b) of the Securities Exchange Act of 1934,
and profits arising from transactions in publicly traded securities of the
Company which were effected by Indemnitee in violation of Section 10(b) of the
Securities Exchange Act of 1934, including Rule 10b-5 promulgated thereunder.
The procedures set forth in Section 3(a) shall be available to the
Indemnitee for purposes on indemnification under this Section 4(a).
(b) Expenses, including without limitation, attorneys' fees and other
fees and expenses, incurred by Indemnitee in defending any actual or
threatened civil or criminal action, suit, proceeding or claim shall be paid
by the Company in advance of the final disposition thereof as authorized in
accordance with Section 3(b) hereof.
5. Partial Indemnity. Etc. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
the expenses, judgments, fines and amounts paid in settlement of a Claim but
not, however, for all of the total amount thereof; the Company will
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee
is entitled. Moreover, notwithstanding any other provision of this Agreement,
to the extent that Indemnitee has been successful on the merits or otherwise
in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including,
without limitation, dismissal without prejudice, Indemnitee will be
indemnified against all costs, charges and expenses, including, without
limitation, attorneys' fees and other fees and expenses, incurred in
connection therewith.
6. No Presumption. For purposes of this Agreement, the termination of any
Claim by judgment, order, settlement (whether with or without court
approval), or conviction, or upon a plea of nolo contendere or its
equivalent, will not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court
has determined that indemnification is not permitted by applicable law.
7. Enforcement. (a) If a claim for indemnification made to the Company is
not paid in full by the Company within 30 calendar days after a written claim
has been received by the Company, the Indemnitee may at any time thereafter
bring suit against the Company to recover the unpaid amount of the claim.
5
<PAGE>
(b) In any action brought under Section 7(a) hereof; it shall be a
defense to a claim for indemnification pursuant to Sections 2(a) or 2(b)
hereof (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
Undertaking, if any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it permissible
under the DGCL for the Company to indemnify the Indemnitee for the amount
claimed, but the burden of proving such defense shall be on the Company.
Neither the failure of the Stockholders, to have made a determination prior
to commencement of such action that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the DGCL, nor an actual determination by the Company,
including the Board, independent legal counsel or the Stockholders, that the
Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct.
(c) It is intent of the Company that the Indemnitee not be required to
incur the expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action because the cost and expense
thereof would substantially detract from the benefits intended to be extended
to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person
takes any action to declare this Agreement void or unenforceable, or
institutes any action, suit or proceeding designed (or having the effect of
being designed) to deny, or to recover from the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to tune to retain counsel of his choice,
at the expense of the company as hereinafter provided, to represent the
Indemnitee in connection with the initiation or defense of any litigation or
other legal action, whether by or against the company or any director,
officer, stockholder or other person affiliated with the Company, in any
jurisdiction. Regardless of the outcome thereof; the Company shall pay and be
solely responsible for any and all costs, charges and expenses, including,
without limitation, attorneys' and other fees and expenses, reasonably
incurred by the Indemnitee (i) as a result of the Company's failure to
perform this Agreement or any provision thereof or (ii) as a result of the
Company or any person contesting the validity or enforceability of this
Agreement or any provision thereof as aforesaid.
8. Non-Exclusivity and Severability. (a) The rights of Indemnitee
hereunder will be in addition to any other rights Indemnitee may have under
the Certificate, the By-Laws or the DGCL or otherwise; provided, however.
that to the extent that Indemnitee otherwise would have any greater right to
indemnification under any provision of the Certificate or By-Laws as in
effect on the date hereof; Indemnitee will be deemed to have such greater
right hereunder; and, provided further that to the extent that any change is
made to the DGCL (whether by legislative action or judicial decision), the
Certificate and/or the By-Laws which permits any greater right to
indemnification than
6
<PAGE>
that provided under this Agreement as of the date hereof; Indemnitee will be
deemed to have such greater right hereunder. The Company will not adopt any
amendment to the Certificate or the By-Laws the effect of which would be to
deny, diminish or encumber Indemnitee's right to indemnification under the
Certificate, the By-Laws, the DGCL, or otherwise as applied to any act or
failure to act occurring in whole or in part prior to the date upon which the
amendment was approved by the Company's Board of Directors and/or its
Stockholders, as the case may be.
(b) If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstance will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will
be reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
9. Liability Insurance. To the extent the company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee will be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any
Company director or officer.
10. Allowance for Compliance with Commission Requirements. Indemnitee
acknowledges that the Securities and Exchange Commission (the "Commission")
has expressed the opinion that indemnification of directors and officers from
liabilities under the Securities Act of 1933 ("Act") is against public policy
as expressed in the Act and is, therefore, unenforceable. Indemnitee hereby
acknowledges and agrees that it will not be a breach of this Agreement for
the Company to undertake with the Commission in connection with the
registration for sale of any shares or other securities of the Company from
time to time that, in the event of a claim for indemnification against such
liabilities (other than the payment by the company of expenses incurred or
paid by a director or officer of the company in the successful defense of any
action, suit or proceeding) is asserted in connection with such shares or
other securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of competent jurisdiction the question of whether or not such
indemnification by the Company is against public policy as expressed in the
Act and the Company will be governed by the final adjudication of such issue.
Indemnitee further agrees that such submission to a court of competent
jurisdiction shall not be a breach of this Agreement.
11. Subrogation. In the event of a payment under this Agreement, the
Company will be subrogated to the extent of such payment to all of the
related rights of recovery of Indemnitee against other persons or entities.
Indemnitee will execute all papers reasonably required and will do everything
that may be reasonably necessary to secure such rights and enable the Company
effectively to bring suit to enforce such rights, including all of
Indemnitee's reasonable costs and expenses, including attorneys'
7
<PAGE>
fees and disbursements, to be reimbursed by, or at the option of Indemnitee
advanced by, the Company.
12. No Duplication of Payments. The Company will not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Certificate, the By-Laws or otherwise) of
the amounts otherwise indemnifiable hereunder.
13. Successors and Binding Agreement. (a) The Company will use reasonable
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation, reorganization or otherwise) to all or substantially
all of the business or assets of the Company, by agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and
any successor to the Company, including, without limitation, any person
acquiring directly or indirectly all or substantially all of the business or
assets of the Company whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed the
"Company" for purposes of this Agreement), but this Agreement will not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
Indemnitee's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto may, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 12(a) and 12(b). Without limiting the generality or
effect of the foregoing, Indemnitee's right to receive payments hereunder
will not be assignable, transferable or delegable, whether by pledge,
creation of a security interest, or otherwise, other than by a transfer by
Indemnitee's will or by the laws of descent and distribution and, in the
event of any attempted assignment or transfer contrary to this Section 12(c),
the company will have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
14. Notices. For all purposes of this Agreement, all communications,
including, without limitation, notices, consents, requests or approvals,
required or permitted to be given hereunder will be in writing and will be
deemed to have duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five
calendar days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or one business
day after having been sent for next-day delivery by a nationally recognized
overnight courier service such as Federal Express, UPS or Purolator,
addressed to the company, to the
8
<PAGE>
attention of the President of the company, at its principal executive office
and to Indemnitee or Indemnitee's principal residence as shown in the
Company's most current records, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except
that notices of changes of address will be effective only upon receipt.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principle of conflict of laws of such State.
16. Miscellaneous. No provision of this Agreement may be waived, modified
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Indemnitee and the company. No waiver by either party
hereto at any tune of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, expressed or implied with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
OSIRIS THERAPEUTICS, INC.
By:-----------------------------------------
Name: James S. Burns
Title: President and CEO
INDEMNITEE:
--------------------------------------------
9
<PAGE>
Exhibit
UNDERTAKING
STATE OF ____________ )
) SS
COUNTY OF__________ )
I,_____________ being first duly sworn do depose and say as follows:
l. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of February 2, 1994, between Osiris Therapeutics, Inc.
(the "Company"), a Delaware corporation and the undersigned.
2. I am requesting advancement of certain costs, charges and expenses
which I have incurred or will incur in defending an actual or pending civil
or criminal action, suit, proceeding or claim.
3. I hereby undertake to repay this advancement of expenses if it shall
ultimately be determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
4. The costs, charges and expenses for which advancement is requested
are, in general, all expenses related to ____________________.
__________________________
Subscribed and sworn to before me, a Notary Public in and for said County
and State, this ______ day of________________ 19__.
[Seal]
My commission expires the _______ day of_____________, 19__.
10
<PAGE>
Exhibit 11.1
Osiris Therapeutics, Inc.
Computation of Pro Forma Earnings per Share
(Unaudited)
Year ended Three months ended
December 31, March 31,
1996 1997
------------ ------------------
Net loss ($8,212,354) ($2,119,274)
------------ ------------
------------ ------------
Weighted average common
shares outstanding 4,298,305 4,302,866
Weighted average effect of
convertible preferred
stock 7,682,300 8,240,262
Common shares issued within one
year of initial filing 600,688 600,688
Common share equivalents issued
within one year of filing 471,775 471,775
----------- -----------
13,053,068 13,615,591
----------- -----------
----------- -----------
Pro forma net loss per common
share and common
share equivalents ($0.63) ($0.16)
----------- -----------
----------- -----------
Page 1
<PAGE>
Exhibit 21.1
SUBSIDIARIES
NAME STATE OF INCORPORATION
Osiris Research, Inc. Ohio
Gryphon Pharmaceuticals, Inc. Delaware
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated January 31, 1997, on our audits of the consolidated
financial statements Osiris Therapeutics, Inc. and its subsidiaries as of
December 31, 1995 and 1996 and for each of the three years in the period
ended December 31, 1996 and the period December 23, 1992 (date of inception)
to December 31, 1996. We also consent to the reference to our firm under the
caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Rockville, Maryland
July 15, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 3,267 1,639
<SECURITIES> 6,345 5,452
<RECEIVABLES> 348 500
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,204 7,819
<PP&E> 10,009 10,370
<DEPRECIATION> 1,682 2,039
<TOTAL-ASSETS> 18,778 16,395
<CURRENT-LIABILITIES> 2,231 2,250
<BONDS> 701 685
0 0
28,460 28,460
<COMMON> 4 4
<OTHER-SE> (18,577) (20,696)
<TOTAL-LIABILITY-AND-EQUITY> 18,778 16,395
<SALES> 0 0
<TOTAL-REVENUES> 1,589 615
<CGS> 0 0
<TOTAL-COSTS> 9,225 2,569
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 576 165
<INCOME-PRETAX> (8,212) (2,119)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,212) (2,119)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,212) (2,119)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
