<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CELL PATHWAYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 2834 86-0719923
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
(215) 706-3800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
ROBERT J. TOWARNICKI
CHIEF EXECUTIVE OFFICER
CELL PATHWAYS, INC.
702 ELECTRONIC DRIVE
HORSHAM, PENNSYLVANIA 19044
(215) 706-3800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
JAMES C. T. LINFIELD, ESQ. ALLAN G. SPERLING, ESQ.
REX R. O'NEAL, ESQ. CLEARY, GOTTLIEB, STEEN & HAMILTON
COOLEY GODWARD LLP ONE LIBERTY PLAZA
2595 CANYON BOULEVARD, SUITE 250 NEW YORK, NEW YORK 10006
BOULDER, COLORADO 80302-6737 (212) 225-2000
(303) 546-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
--------------
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 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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 PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................. 2,875,000 $13.00 $37,375,000 $11,326
</TABLE>
===============================================================================
(1) Includes 375,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
OCTOBER 9, 1997
PROSPECTUS
2,500,000 SHARES
[LOGO OF CELL PATHWAYS, INC.
CELL PATHWAYS, INC. APPEARS HERE]
COMMON STOCK
($.01 PAR VALUE)
All of the 2,500,000 shares of Common Stock, $.01 par value (the "Common
Stock") being offered hereby (the "Shares") are being issued and sold by Cell
Pathways, Inc. ("CPI" or the "Company"). Prior to this offering, there has been
no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price.
Application has been made to have the Common Stock approved for listing on the
Nasdaq National Market under the trading symbol "CLPA."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total (2)..................................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses of this offering payable by the Company estimated
at $550,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate 375,000 additional shares of Common Stock at the Price to
Public, less the Underwriting Discount, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $ ,
and $ , respectively. See "Underwriting."
The Shares are offered subject to receipt and acceptance by the Underwriters,
to prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1997.
SALOMON BROTHERS INC
BANCAMERICA ROBERTSON STEPHENS
COWEN & COMPANY
The date of this Prospectus is , 1997.
<PAGE>
Cell Pathways' technology focuses on the selective induction of apoptosis in
cells that manifest abnormal growth (neoplastic cells), such as precancerous
and cancerous cells. Apoptosis is a naturally occurring physiological process
in which a number of components inside the cell "program" the cell to die
without causing harm to surrounding cells.
[ARTIST'S DEPICTION OF COLON CELLS APPEARS HERE]
The cells of the colon are typically columnar.
[ARTIST'S DEPICTION OF COLON CANCER CELLS APPEARS HERE]
When neoplasia develops, the affected cells are abnormal in shape and have
larger nuclei. The neoplastic cells eventually grow beyond the normal shape of
the tissues.
Apoptosis is visible as the development of clumps of material in the nucleus,
followed by the dismantling of the cell into apoptotic vesicles, which are
naturally cleared by the body.
[ARTIST'S DEPICTION OF THE EFFECT OF CONVENTIONAL CHEMOTHERAPY ON NORMAL AND
CANCEROUS CELLS]
EXISTING CHEMOTHERAPEUTIC AGENTS as well as radiation induce apoptosis in
rapidly proliferating cells without differentiating between neoplastic and
normal cells. The death of normal cells gives rise to many of the adverse
effects of conventional cancer therapy.
[ARTIST'S DEPICTION OF THE EFFECT OF FGN-1 ON NEOPLASTIC LESIONS]
CPI'S COMPOUND, FGN-1, has been shown in a Phase I/II trial in APC to induce
apoptosis in neoplastic lesions without altering the rate of cell death in
neighboring normal tissues.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MAY PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET (INCLUDING
THE NASDAQ NATIONAL MARKET) OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements including the Notes thereto contained
elsewhere in this Prospectus. Investors should carefully consider the
information set forth under the heading "Risk Factors." In this Prospectus, the
term "Company" or "CPI" refers to Cell Pathways, Inc. Unless otherwise
indicated, the information in this Prospectus (i) assumes the conversion of all
of the outstanding shares of the Company's convertible preferred stock (the
"Convertible Preferred Stock") into Common Stock upon consummation of this
offering; (ii) assumes no exercise of the Underwriters' over-allotment option;
(iii) excludes the issuance of up to 82,612 shares of Common Stock upon
redemption of the Company's 61,250 outstanding shares of Redeemable Preferred
Stock; and (iv) reflects a 1-for-1.8157 reverse split of the Company's
outstanding Common Stock.
THE COMPANY
CPI is a pharmaceutical company focused on the development and
commercialization of products to prevent and treat cancer. The Company is
currently planning clinical trials of its lead compound FGN-1 in six
indications and is conducting an ongoing pivotal Phase III trial for
Adenomatous Polyposis Coli ("APC"), a disease characterized by numerous
precancerous polyps of the colon. The Company plans to initiate Phase II/III
trials of FGN-1 for sporadic adenomatous colonic polyps, prostate cancer, lung
cancer and breast cancer in the fourth quarter of 1997, and to commence
clinical trials of FGN-1 for Barrett's Esophagus and cervical dysplasia in
1998. The Company's technology is based upon its discovery of a novel mechanism
which the Company believes, based on its research, can be targeted to induce
selective apoptosis, or programmed cell death, in precancerous and cancerous
cells without affecting normal cells. Utilizing this proprietary knowledge, the
Company has created over 400 new chemical compounds, over 200 of which display
significantly greater apoptotic potency than FGN-1.
CPI's objectives are to be a leader in cancer chemoprevention and to build an
integrated pharmaceutical company focused on the oncology market. To meet these
objectives, the Company intends to: (i) pursue accelerated clinical development
of FGN-1; (ii) leverage the Company's technology to develop additional agents
for cancer therapy and chemoprevention; (iii) commercialize products directly
to focused physician groups; and (iv) develop strategic collaborations for
selected indications and markets.
The Company's clinical trial strategy for its targeted indications is to
identify subsets of larger patient populations in which clinical endpoints
occur in high frequency and in a relatively short time frame. The Company plans
to utilize data obtained in its completed clinical trials in its initial
indications to provide a basis for commencing more advanced clinical trials in
other indications. The Company believes that this strategy may allow the
Company to reduce the size and duration of clinical trials, thereby generating
statistically significant clinical results more quickly and cost-effectively.
Adenomatous Polyposis Coli. Consistent with its clinical trial strategy, the
Company has chosen APC as its initial indication and has obtained Orphan Drug
status for FGN-1 in the treatment of APC. In a Phase I/II study completed in
January 1997, 18 APC patients were treated with FGN-1 for six months. At the
end of the study, all patients elected to continue in an open label extension
of the study, and several patients have exceeded 24 months on the drug. In this
study and its extension, nearly all patients have been observed to experience a
dose-related reduction in the number and size of exophytic (i.e., raised over
the surface) precancerous rectal polyps that were six millimeters or less in
diameter at the beginning of the study. In the extended study, no progressive
increase in polyp size or
3
<PAGE>
volume was observed in 13 of the 14 patients who have remained in the study and
have been maintained on the optimal dose. There have been no withdrawals from
the study or its extension attributable to serious adverse events. After
reviewing the results of the Phase I/II trial with the FDA, CPI initiated a
pivotal Phase III study in the second quarter of 1997, which will include 150
patients at approximately 12 centers worldwide. The Company is initiating a
concurrent Phase III study in patients with high rates of polyp formation who
otherwise would be excluded from the first Phase III study. There can be no
assurance that the results of the Phase I/II study will be indicative of
results in the Phase III studies or that the Phase III studies will show that
FGN-1 is sufficiently safe and effective for marketing approval by the FDA or
other regulatory authorities.
Sporadic Adenomatous Colonic Polyps. Sporadic adenomatous colonic polyps
occur in more than 30% of people in the U.S. over the age of 50 and are
histologically and genetically indistinguishable from the polyps of APC. In
September 1997, CPI completed a Phase IB study in 18 patients with a history of
sporadic adenomatous colonic polyps and/or cervical dysplasia. CPI plans to
initiate a multi-center, pivotal Phase II/III trial in the fourth quarter of
1997 to evaluate the safety and efficacy of different doses of FGN-1 in the
treatment of existing sporadic adenomatous colonic polyps.
Other Precancer Indications. The Company plans to commence clinical trials of
FGN-1 for other precancerous indications, including Barrett's Esophagus and
cervical dysplasia. Barrett's Esophagus is a precancerous condition of the
lower esophagus. An estimated 2,000,000 people in the U.S. have Barrett's
Esophagus, but only one half have symptoms that could lead to diagnosis.
Cervical dysplasia, a precancerous lesion of the cervix, is diagnosed in
approximately 5% of the fifty million Pap smears performed each year in the
U.S. A small portion of these cases progress to cervical cancer. CPI plans to
initiate Phase II studies in 1998 to evaluate the safety and efficacy of
different doses of FGN-1 for the treatment of Barrett's Esophagus and cervical
dysplasia.
Cancer Indications. In addition, CPI plans to test FGN-1 for certain cancers,
including prostate, lung and breast cancer. It is estimated that in 1997 there
will be approximately 209,000 new cases of prostate cancer and approximately
185,000 new cases of breast cancer in the U.S. The Company plans to initiate
Phase II/III clinical studies in the fourth quarter of 1997 to evaluate the
safety and efficacy of different doses of FGN-1 in preventing the recurrence of
prostate and breast cancer. It is estimated that in 1997 there will be
approximately 177,000 new cases of lung cancer in the U.S. In the fourth
quarter of 1997, the Company plans to conduct a pilot study of the safety and
efficacy of FGN-1 in patients with advanced lung cancer.
The Company has to date retained all rights to FGN-1 and its other compounds,
and plans to establish its own sales force to promote FGN-1 for indications
treated by relatively small, well-defined groups of clinical specialists. To
reach larger physician groups, such as gynecologists, the Company may enter
into marketing agreements with pharmaceutical or biotechnology companies. The
Company also plans to seek partners for international development and
commercialization of its products in all indications.
The business of the Company began operating in partnership form in 1990. The
Company was incorporated in Delaware in November 1992, and served as the
general partner of the partnership until September 1993 when it acquired the
partnership's assets. The Company's executive offices are located at 702
Electronic Drive, Horsham, PA 19044 and its telephone number is (215) 706-3800.
4
<PAGE>
THE OFFERING
Common Stock offered............................ 2,500,000 shares
Common Stock outstanding after the offering..... 10,160,184 shares(1)
Use of proceeds................................. For research and development
activities, including clinical
development of FGN-1; working
capital and general corporate
purposes, including capital
expenditures. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.......... CLPA
RISK FACTORS
See "Risk Factors," commencing on page 6 for a discussion of certain factors
that should be considered by prospective purchasers of the Shares.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
------- ------- ------- ------- ------- -------- --------
Operating expenses:
Research and
development.......... 814 1,623 2,429 2,575 4,163 1,738 3,224
General and
administrative....... 596 698 705 644 663 337 342
------- ------- ------- ------- ------- -------- --------
Total operating
expenses............. 1,410 2,321 3,134 3,219 4,826 2,075 3,566
------- ------- ------- ------- ------- -------- --------
Loss from operations... (1,410) (2,321) (3,134) (3,219) (4,826) (2,075) (3,566)
Interest income........ 19 52 24 28 91 57 123
------- ------- ------- ------- ------- -------- --------
Net loss............... $(1,391) $(2,269) $(3,110) $(3,191) $(4,735) $ (2,018) $ (3,443)
======= ======= ======= ======= ======= ======== ========
Pro forma net loss per
share(2).............. $ (0.62) $ (0.45)
======= ========
Shares used in
computing pro forma
net loss per
share(2).............. 7,639 7,691
======= ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 13,290 $ 40,094
Working capital....................................... 12,783 39,587
Total assets.......................................... 13,988 40,792
Notes payable......................................... 87 87
Accumulated deficit................................... (19,131) (20,222)
Total stockholders' equity............................ 12,979 39,784
</TABLE>
- --------
(1) Excludes 308,971 shares of Common Stock issuable upon the exercise of
outstanding stock options and 185,511 shares of Common Stock issuable upon
the exercise of outstanding warrants, 30,649 shares of Common Stock
reserved for future issuance under the Company's 1993 Stock Option Plan and
up to 82,612 shares of Common Stock that may be issued upon the redemption
of the Redeemable Preferred Stock. See "Management--Employee Benefit
Plans," "Description of Capital Stock" and "Shares Eligible for Future
Sale."
(2) See Note 2 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
(3) As adjusted to give effect to the sale of the Shares by the Company
pursuant to this offering (assuming an initial public offering price of
$12.00 per share), after deducting Underwriting Discount and estimated
offering expenses payable by the Company and the use of the estimated net
proceeds therefrom. The redemption of $1.1 million of the Redeemable
Preferred Stock assumes the issuance of 45,500 shares of Common Stock and
the payment of $546,000 in cash. See "Use of Proceeds" and
"Capitalization."
5
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," including statements regarding the anticipated
development and expansion of the Company's business, the products which the
Company expects to offer, anticipated research and development expenditures
and regulatory reform, the intent, belief or current expectations of the
Company, its directors or its officers, primarily with respect to the future
operating performance of the Company, and other statements contained herein
regarding matters that are not historical facts are "forward-looking"
statements (as such term is defined in the Private Securities Litigation
Reform Act of 1995). Because such statements include risks and uncertainties,
actual results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to, the factors set forth in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
RISK FACTORS
The shares offered hereby involve a high degree of risk. In addition to the
other information in this Prospectus, the following risk factors should be
considered carefully before purchasing the Common Stock offered hereby.
EARLY STAGE OF DEVELOPMENT; ABSENCE OF DEVELOPED PRODUCTS; UNCERTAINTY OF
CLINICAL TRIALS
The Company is at an early stage of development and must be evaluated in
light of the uncertainties and complications present in a development stage
company. The Company has no products approved for sale and does not expect to
have any products available to be marketed in the near future. CPI has only
one product candidate in clinical trials, FGN-1. The Company has not completed
tests for the safety and efficacy of FGN-1 and has not commenced such tests
for any other compounds.
Before obtaining regulatory approval for the commercial sale of any of its
product candidates, the Company must demonstrate through preclinical and
clinical trials that the product is safe and effective for use in each target
indication. The results from preclinical and early clinical trials may not be
predictive of results that will be obtained in large-scale clinical trials.
There can be no assurance that clinical trials of the Company's product
candidates will demonstrate sufficient safety and efficacy to obtain the
requisite regulatory approvals or will result in marketable products. Clinical
trials are often conducted with patients who are critically ill. During the
course of treatment these patients may die or suffer other adverse medical
events for reasons that may not be related to the pharmaceutical agent being
tested, but which can nevertheless affect clinical trial results. A number of
companies in the pharmaceutical and biotechnology industries have suffered
significant setbacks in advanced clinical trials, even after achieving
promising results in earlier trials.
The completion of clinical trials of the Company's product candidates could
be delayed by many factors and there can be no assurance that such delays or
terminations will not occur. One such factor is the rate of enrollment of
patients, which generally varies throughout the course of a clinical trial and
which depends on the size of the patient population, the number of clinical
trial sites, the proximity of the patients to clinical trial sites, the
eligibility criteria for the clinical trial and the existence of competitive
clinical trials. The Company cannot control the rate at which patients present
themselves for enrollment, and there can be no assurance that the rate of
patient enrollment will be consistent with the Company's expectations or be
sufficient to enable clinical trials of the Company's product candidates to be
completed in a timely manner. The Company is planning to commence at least
four clinical trials before the end of 1997. The Company has limited
experience managing clinical trials and any delays or terminations of such
trials would have a material adverse effect on the Company's business,
financial condition and results of operations.
6
<PAGE>
Although FGN-1 is in Phase III clinical trials for the treatment of APC,
trials to date have involved only a limited number of patients. No assurance
can be given as to the ability of the Company to submit a New Drug Application
("NDA") to the U.S. Food and Drug Administration ("FDA") or the foreign
equivalent with respect to FGN-1 on a timely basis, if at all. In addition,
results obtained in clinical trials for the treatment of APC may not be
predictive of results of clinical trials for other indications. If the
Company's product candidates are not shown to be safe and effective in
clinical trials, including the current Phase III clinical trial for FGN-1,
there would be a material adverse effect on the Company's business, financial
condition and results of operations.
No assurance can be given that the Company will be able to submit an
Investigational New Drug Application ("IND") or foreign equivalents with
respect to any follow-on compounds, that the Company will be permitted to
undertake human clinical testing of such additional compounds, or, if
permitted, that such compounds will be demonstrated to be safe and effective.
The Company's compounds may prove to have undesirable and unintended side
effects or other characteristics that may prevent or limit their commercial
use. Products, if any, resulting from the Company's research and development
programs are not expected to be commercially available for a number of years
even if they are successfully developed and proven to be safe and effective.
Thus, there can be no assurance that any of the Company's product development
efforts will be successfully completed, that regulatory approvals will be
obtained or will be as broad as sought, that the Company's products will be
capable of being produced in commercial quantities at a reasonable cost or
that any products, if introduced, will achieve market acceptance. The failure
of the Company to complete clinical trials, obtain regulatory approval or
successfully market its products, if approved, would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Products in Development" and "--Government
Regulation."
DEPENDENCE ON FGN-1
The Company has one compound, FGN-1, in clinical trials, and does not expect
to have additional compounds in clinical trials in the near future. FGN-1 has
not been approved for marketing by the FDA for any indication and trials to
date have involved only a limited number of patients. There can be no
assurance that marketing approval for FGN-1 will be obtained. FGN-1 is
currently in Phase III clinical trials for the prevention of precancerous
polyps in patients with APC. If approved for marketing, there can be no
assurance that FGN-1 will gain market acceptance or of the extent of the
marketing efforts necessary to gain any such acceptance. In addition,
competition to FGN-1 may develop from other new or existing products. The
failure of FGN-1 to be approved for marketing or to gain market acceptance
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The number of APC patients in the U.S. is limited and may be as few as
25,000. In order to increase the potential applications for which FGN-1 may be
used, the Company must successfully complete lengthy clinical trials and
thereafter receive marketing clearance from the FDA for each additional
indication. There can be no assurance that the Company will successfully
complete these clinical trials and receive appropriate regulatory clearance on
a timely basis, if at all. The inability to do so would have a material
adverse effect on the Company's business, financial condition and results of
operations. Although the Company has obtained Orphan Drug status for FGN-1 for
the treatment of APC, there can be no assurance that this will provide any
meaningful competitive advantage to the Company. See "Business--Government
Regulation."
TECHNOLOGICAL UNCERTAINTY
To date, the FDA has not approved any drug for the prevention of
precancerous lesions or cancer, and there can be no assurance that CPI will be
able to develop successfully such a chemoprevention
7
<PAGE>
drug, that such drug could be developed within the Company's proposed timeline
or that such drug will be commercially viable or will achieve market
acceptance. The Company's area of focus, oncology in general and
chemoprevention in particular, is not thoroughly understood and there can be
no assurance that the products the Company is seeking to develop will prove to
be safe and effective in preventing or treating precancerous lesions or
cancer.
The Company believes that FGN-1 and its other compounds selectively induce
apoptosis through a novel mechanism. Additional research by the Company or
others may cause the Company to revise or abandon this approach, adversely
affecting the Company's ability to develop products on a timely basis, if at
all. There can be no assurance that the use of the Company's technology will
lead to the development and approval of commercial pharmaceutical products
that are safe and efficacious. There can be no assurance that the Company's
competitors will not develop safer and more effective products, obtain patent
protection or intellectual property rights that limit the Company's ability to
commercialize products that may be developed or commercialize products earlier
than the Company. See "Business--CPI Technology."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
Development of the Company's initial product candidate, FGN-1, and
additional compounds will require substantial additional funds to conduct
research, development and clinical trials necessary to bring such products to
market and to establish manufacturing, marketing and distribution
capabilities. The Company's future capital requirements will depend on many
factors, including, among others: scientific progress in its research and
development programs; progress with preclinical and clinical trials; progress
in obtaining regulatory approvals; the costs involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims; competing technological
efforts and market developments; changes in the Company's existing research
relationships; the ability of the Company to establish sales and marketing
capabilities; the extent of competition; and the ability of the Company to
establish collaborative arrangements to the extent necessary. Based on current
projections, the Company estimates that its existing capital resources, the
net proceeds from this offering and interest thereon, together with facility
and equipment financing, will be sufficient to fund the Company's capital
requirements through approximately the end of 1999, although there can be no
assurance that the Company will not require additional financing earlier.
There is a risk of delay or failure at any stage of developing a product
candidate, and the time required and costs involved in successfully
accomplishing the Company's objectives cannot be predicted. Actual drug
research and development costs could substantially exceed budgeted amounts,
which could have a material adverse effect on the Company's business,
financial condition and results of operations.
There can be no assurance that the Company's revenue and expense forecasts
will prove to be accurate. To the extent necessary, the Company intends to
seek additional funding through public or private equity or debt financings,
collaborative relationships, capital lease transactions or other available
financing transactions. However, there can be no assurance that additional
financing will be available on acceptable terms, if at all, and such
financings could be dilutive to existing stockholders. Moreover, in the event
that additional funds are obtained through arrangements with collaborative
partners, such arrangements may require the Company to relinquish rights to
certain of its technologies, product candidates or products that the Company
would otherwise seek to develop or commercialize itself. 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 or development programs. The failure of
the Company to obtain adequate financing when needed and on acceptable terms
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; EXPECTED FUTURE LOSSES
The Company and its predecessor have experienced significant operating
losses since inception in 1990. As of June 30, 1997, the Company had an
accumulated deficit of approximately $19.1 million. The Company expects to
incur additional operating losses over the next several years and expects
cumulative losses to increase substantially as the Company's research and
development efforts and preclinical and clinical testing expand. The Company's
ability to achieve profitability is dependent on its ability, alone or with
others, to complete the development of its proposed products successfully,
obtain the required regulatory approvals, manufacture and market its proposed
products successfully or have such products manufactured and marketed by
others and gain market acceptance for such products. There can be no assurance
if or when the Company will achieve profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
CPI's success will depend, in part, on its ability to obtain patents,
operate without infringing the proprietary rights of others and maintain trade
secrets, both in the U.S. and other countries. Patent matters in the
pharmaceutical industry can be highly uncertain and involve complex legal and
factual questions. Accordingly, the validity, breadth, and enforceability of
CPI's patents and the existence of potentially blocking patent rights of
others cannot be predicted, either in the U.S. or in other countries.
As of September 25, 1997, CPI held title or exclusive licenses to two issued
U.S. patents, one allowed U.S. patent application and one pending U.S. patent
application relating to the therapeutic use of FGN-1 in the treatment of
neoplasia and/or precancerous lesions. The Company has no composition of
matter patent on FGN-1 because FGN-1, which is a sulfone derivative of the
non-steroidal anti-inflammatory drug ("NSAID") sulindac, was described in an
expired 1972 patent, U.S. 3,654,349, and in various scientific journal
articles published in the 1970s. CPI has also been issued or holds exclusive
licenses to 11 foreign patents, (including patents in various European
countries and in Australia and an allowed Japanese patent application), as
well as two other pending foreign patent applications relating to the use of
FGN-1 in pharmaceutical compositions for the treatment of neoplasia and/or
precancerous lesions. In Europe, CPI's patent rights relating to FGN-1 are
directed to the use of FGN-1 in the manufacture of pharmaceutical compositions
for the treatment of precancerous lesions. CPI also holds title or exclusive
licenses to four U.S. patent applications which have been allowed, 18 other
pending U.S. patent applications, five issued foreign patents and 18 pending
foreign applications on other compounds, or therapeutic methods involving such
compounds, for the treatment of colonic polyps, precancerous lesions, and/or
neoplasia. CPI also has filed a U.S. patent application on methods for
screening compounds for their usefulness in selectively inducing apoptosis
involving an apoptosis regulatory element ("ARE"). CPI intends to file
additional applications, as appropriate, for patents on new compounds,
products, or processes discovered or developed through application of the
Company's technology.
Beyond the patents granted to date, there can be no assurance that CPI will
discover or develop patentable products or processes, that patents will issue
from any of the currently pending patent applications, or that claims granted
on issued patents will be sufficient to protect the Company's technology.
Potential competitors or other researchers in the field may have filed patent
applications, been issued patents, published articles or otherwise created
prior art that could restrict or block the Company's efforts to obtain
additional patents. There also can be no assurance that the Company's issued
patents or pending patent applications, if issued, will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
proprietary protection or competitive advantages to the Company. CPI's patent
rights also depend on its compliance with technology and patent licenses upon
which its patent rights are based and upon the validity of assignments of
patent rights from consultants and other inventors that were, or are, not
employed by CPI.
In addition, competitors may manufacture and sell CPI's potential products
in those foreign countries where CPI has not filed for patent protection or
where patent protection may be unavailable,
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not obtainable or ultimately not enforceable. The ability of such competitors
to sell such products in the U.S. or in foreign countries where CPI has
obtained patents is usually governed by the patent laws of the countries in
which the product is sold. In addition, to the extent that clinical uses of
FGN-1 are discovered beyond those set forth in CPI's patent claims, CPI may
not be able to enforce its patent rights against companies marketing FGN-1 for
such other clinical uses.
The success of the Company also will depend, in part, on CPI not infringing
patents issued to others. Pharmaceutical companies, biotechnology companies,
universities, research institutions, and others may have filed patent
applications or have received, or may obtain, issued patents in the U.S. or
elsewhere relating to aspects of the Company's technology. It is uncertain
whether the issuance of any third-party patents will require the Company to
alter its products or processes, obtain licenses, or cease certain activities.
Some third-party applications or patents may conflict with the Company's
issued patents or pending applications. Such conflict could result in a
significant reduction of the coverage of the Company's issued or licensed
patents. In addition, if patents are issued to other companies which contain
blocking, dominating or conflicting claims and such claims are ultimately
determined to be valid, the Company may be required to obtain licenses to
these patents or to develop or obtain alternative technology. If any licenses
are required, there can be no assurance that the Company will be able to
obtain any such licenses on commercially favorable terms, if at all, and if
these licenses are not obtained, the Company might be prevented from pursuing
the development of certain of its potential products. The Company's failure to
obtain a license to any technology that it may require to commercialize its
products may have a material adverse impact on the Company's business,
financial condition and results of operations.
Litigation, which could result in substantial costs to the Company, may also
be necessary to enforce any patents issued or licensed to the Company or to
determine the scope and validity of the proprietary rights of others. In this
connection, under the Abbreviated New Drug Application provisions of U.S. law,
after four years from the date marketing approval is granted to the Company by
the FDA for a patented drug, a generic drug company may submit an Abbreviated
New Drug Application to the FDA to obtain approval to market in the U.S. a
generic version of the drug patented by the Company. If approval is given to
the generic drug company, the Company would be required to promptly initiate
patent litigation to prevent the marketing of such a generic version prior to
the normal expiration of the patent. There can be no assurance that the
Company's issued or licensed patents would be held valid by a court of
competent jurisdiction. In addition, if competitors of the Company file patent
applications in the U.S. that claim technology also claimed by the Company,
the Company may have to participate in interference proceedings to determine
priority of invention. These proceedings, if initiated by the U.S. Patent and
Trademark Office, could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome with respect
to a third party claim or in an interference proceeding could subject the
Company to significant liabilities, require disputed rights to be licensed
from third parties, or require the Company to cease using such technology, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations.
CPI also relies on trade secrets to protect technology, especially where
patent protection is not believed to be appropriate or obtainable or where
patents have not issued. CPI attempts to protect its proprietary technology
and processes, in part, by confidentiality agreements and assignment of
invention agreements with its employees and confidentiality agreements with
its consultants and certain contractors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known or be independently discovered by competitors. Such trade secrets or
other intellectual property of the Company, should they become known to its
competitors, could result in a material adverse effect on the Company's
business, financial condition and results of operations. To
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the extent that the Company or its consultants or research collaborators use
intellectual property owned by others in their work for the Company, disputes
may also arise as to the rights to related or resulting know-how and
inventions.
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
The industry in which the Company competes is characterized by extensive
research and development efforts and rapid technological progress. New
developments occur and are expected to continue to occur at a rapid pace, and
there can be no assurance that discoveries or commercial developments by the
Company's competitors will not render some or all of the Company's potential
products obsolete or non-competitive, which would have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company's competitive position also depends on its ability to
attract and retain qualified scientific and other personnel, develop effective
proprietary products, implement development and marketing plans, obtain patent
protection and secure adequate capital resources.
In the fields of cancer therapy and the prevention of precancerous and
cancerous lesions, other products are being developed that may compete
directly with the products that the Company is seeking to develop and market.
The Company is aware of clinical trials in which a number of pharmaceutical
and nutritional agents are being examined for their potential usefulness in
the treatment of precancerous lesions and cancer. These include studies of
NSAID-like compounds, cyclooxygenase inhibitors, difluoromethylornithine
("DFMO") and natural nutrients in the treatment of APC and sporadic colonic
polyps, studies of retinoids and DFMO in the treatment of cervical dysplasia
and studies of tamoxifen for the prevention of breast cancer. Additional
compounds being tested in various epithelial lesions include compounds related
to aspirin, various vitamins and nutritional supplements, oltipraz, N-acetyl
cysteine and compounds that interfere with hormone activities. The studies are
being conducted by pharmaceutical and biotechnology companies, major academic
institutions and government agencies. There are other agents, including
certain prescription drugs, that have been observed to have an effect on the
ARE. Although the Company is not aware that any third party has demonstrated
the preclinical utility of these compounds in the treatment of precancerous or
cancerous lesions, there can be no assurance that such existing or new agents
will not ultimately be found to be useful, and therefore competitive with any
future products of the Company.
Near-term competition from fully integrated and more established
pharmaceutical and biotechnology companies is expected. Most of these
companies have substantially greater financial, research and development,
manufacturing and marketing experience and resources than the Company and
represent substantial long-term competition for the Company. Such companies
may succeed in discovering and developing pharmaceutical products more rapidly
than the Company or pharmaceutical products that are safer, more effective or
less costly than any that may be developed by the Company. Such companies also
may be more successful than the Company in production and marketing. Smaller
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large pharmaceutical and established
biotechnology companies. Academic institutions, governmental agencies and
other public and private research organizations also conduct clinical trials,
seek patent protection and establish collaborative arrangements for the
development of oncology products.
CPI will face competition based on product efficacy and safety, the timing
and scope of regulatory approvals, availability of supply, marketing and sales
capabilities, reimbursement coverage, price and patent position. There can be
no assurance that the Company's competitors will not develop more safe and
effective products or obtain patent protection or intellectual property rights
that limit the Company's ability to commercialize products that may be
developed or commercialize products earlier than the Company. There can be no
assurance that the Company's issued patents or pending patent applications, if
issued, will not be challenged, invalidated or circumvented or that the rights
granted thereunder will provide proprietary protection or competitive
advantage to the Company.
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DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company's development and clinical testing efforts are dependent on
third party contractors, such as contractors for animal toxicology studies and
contract research organizations. The loss of any material third party
contractor or the failure of such contractor to perform its duties as
contracted could delay the Company's development efforts and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company has entered into a Clinical Trials Agreement (the "Agreement")
with the National Cancer Institute ("NCI"), pursuant to which the NCI has
agreed to sponsor clinical trials of FGN-1 for the prevention of precancerous
colonic polyps and for at least one other cancer prevention indication. Under
the Agreement, the NCI contracts directly with third parties to conduct such
trials. The NCI has the right to conduct clinical trials with FGN-1 in any
cancer prevention treatment indication it would like and the Company is
obligated to provide FGN-1 for such trials. In the event that CPI elects to
have the NCI conduct trials needed for regulatory approval, there can be no
assurance that the NCI procedures or changes in policy will not cause such
trials or regulatory filings to be completed on a slower schedule than if CPI
were directly conducting such trials. See "Business--National Cancer Institute
and Other Collaborative Arrangements."
The Company's strategy for commercialization of its proposed products for
certain indications and markets includes collaborating with corporate partners
and others, and, to the extent that such corporate partnerships may be entered
into, is dependent upon the subsequent success of these outside parties in
performing their responsibilities. CPI currently does not have any
collaborations for the commercialization of products. There can be no
assurance that the Company will be able to negotiate any collaborative
arrangements in the future on acceptable terms, if at all, or that such
collaborative arrangements will be maintained or be successful. To the extent
that such arrangements are negotiated, the amount and timing of resources to
be devoted to these activities are not within the complete control of the
Company. There can be no assurance that such partners will perform their
obligations as expected or that the Company will derive any revenue from such
arrangements. There can be no assurance that the Company's future
collaborators will not pursue their existing or alternative technologies or
product candidates in preference to those being developed in collaboration
with the Company. In addition, there can be no assurance that the Company's
future collaborators will pay license fees to the Company, that they will
develop and market any products under the agreements or that they will commit
to fund product development costs. To the extent that the Company chooses not
to enter into collaborative relationships, or is unable to establish such
arrangements, the Company would be required to continue to undertake research,
development and marketing of its proposed products at its own expense. In
addition, the Company may encounter significant delays in introducing its
proposed products into certain markets or find that the development,
manufacture or sale of its proposed products in such markets is adversely
affected by the absence of such collaborative agreements. See "Business--
Products in Development," "--Manufacturing" and "--Marketing and Sales."
EXTENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF NECESSARY FDA AND OTHER
REGULATORY APPROVALS
The research, design, testing, manufacturing, labeling, marketing,
distribution and advertising of pharmaceutical products such as the Company's
proposed products are subject to extensive regulation by governmental
regulatory authorities in the U.S. and other countries. The drug development
and approval process is generally lengthy, expensive and subject to
unanticipated delays. Data obtained from preclinical and clinical testing are
subject to varying interpretations that could delay, limit or prevent FDA
approval. In addition, delays or rejections may be encountered based upon
changes in FDA policy for drug approval during the period of development and
FDA regulatory review of each submitted NDA. Satisfaction of such regulatory
requirements, which includes demonstrating to the
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satisfaction of the FDA that the relevant product is both safe and effective,
typically takes several years or more depending upon the type, complexity and
novelty of the product and requires the expenditure of substantial resources.
There can be no assurance that the Company will not encounter problems in
clinical trials which would cause the Company or the FDA to delay or suspend
clinical trials. Any such delay or suspension could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Products in Development" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company has not completed testing any of its products for safety or
efficacy in humans. The pivotal Phase III studies of FGN-1 for APC and the
Phase II and III studies of FGN-1 for other indications, if and when
initiated, will seek efficacy data as well as additional safety data and will
require substantial time and significant funding. There can be no assurance
that clinical studies for any of the Company's compounds currently under
development will be completed successfully within any specified time period,
if at all. Further, there can also be no assurance that such testing will show
FGN-1 or any other product to be safe or effective. There can be no assurance
that the Company will not encounter problems in clinical trials that will
cause the Company to delay or suspend clinical trials. See "Business--Products
in Development."
The Company's current clinical trial strategy for the development of drugs
for the prevention of precancerous lesions assumes that the FDA will accept
reduction in the formation of precancerous lesions as an endpoint for
precancer trials. To date, the FDA has not approved any chemoprevention
compounds and there can be no assurance that the FDA will approve such
compounds in the future. Should the FDA require CPI to demonstrate the
efficacy of FGN-1 in the reduction of certain cancers or in overall mortality
rates resulting from certain cancers, the Company's clinical trial strategy
would be materially and adversely affected, as significant additional time and
funding would be required to demonstrate such efficacy. There can be no
assurance that CPI will be able to successfully develop a safe and effective
chemoprevention product or that such product will be commercially viable or
will achieve market acceptance.
There can be no assurance even after such time has been expended and
expenses incurred that regulatory approval will be obtained for any
therapeutic products being developed by the Company. Further, even if such
regulatory approval is obtained, the Company, its products, its contract
manufacturers and its commercial collaborators are subject to continual
regulatory review in both the U.S. and other countries, and later discovery of
previously unknown problems with regard to such a product, distributor or
manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market and disqualification or
decertification of the distributor or manufacturer.
CPI cannot predict when, if ever, it might submit for regulatory review
additional compounds currently under development. Once the Company submits its
potential products for review, there can be no assurance that FDA or other
regulatory approvals for any pharmaceutical products developed by CPI will be
granted on a timely basis, if at all. The FDA and comparable agencies in
foreign countries impose substantial requirements on the introduction of new
pharmaceutical products through lengthy and detailed preclinical and clinical
testing procedures, sampling activities and other costly and time-consuming
compliance procedures. Clinical trials are vigorously regulated and must meet
requirements for FDA review and oversight and requirements under Good Clinical
Practice ("GCP") guidelines. A new drug may not be marketed in the U.S. until
it has been approved by the FDA. There can be no assurance that the Company
will not encounter delays or rejections or that the FDA will not make policy
changes during the period of product development and FDA regulatory review of
each submitted NDA. A delay in obtaining or failure to obtain such approvals
would have a material adverse effect on the Company's business, financial
condition and results of operations. Even if regulatory approval is obtained,
it would be limited as to the indicated uses for which the product may be
promoted or marketed. A marketed product, its manufacturer and the facilities
in which it is manufactured are subject to continual review and periodic
inspections. If marketing approval is
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granted, the Company would be required to comply with FDA requirements for
manufacturing, labeling, advertising, record keeping and reporting of adverse
experiences and other information. In addition, the Company would be required
to comply with federal and state anti-kickback and other health care fraud and
abuse laws that pertain to the marketing of pharmaceuticals. Failure to comply
with regulatory requirements and other factors could subject CPI to regulatory
or judicial enforcement actions, including but not limited to product recalls
or seizures, injunctions, withdrawal of the product from the market, civil
penalties, criminal prosecution, refusals to approve new products and
withdrawals of existing approvals, as well as enhanced product liability
exposure, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Sales of the Company's
products outside the U.S. will be subject to foreign regulatory requirements
governing clinical trials, marketing approval, manufacturing and pricing. Non-
compliance with these requirements could result in enforcement actions or
penalties or could delay introduction of the Company's products in certain
countries. See "Business--Manufacturing" and "--Marketing and Sales."
The Company has obtained Orphan Drug status for FGN-1 for the treatment of
APC. Although Orphan Drug status may provide an applicant exclusive marketing
rights in the U.S. for a designated indication for seven years following
marketing approval, in order to obtain such benefits, the applicant must be the
sponsor of the first NDA approved for that drug and indication. Moreover,
amendment of the Orphan Drug Act by the U.S. Congress and reinterpretation by
the FDA are frequently discussed. Therefore, there can be no assurance as to
the precise scope of protection that may be afforded by Orphan Drug status in
the future, or that the current level of exclusivity will remain in effect.
POTENTIAL LIMITATIONS ON THIRD-PARTY REIMBURSEMENT AND HEALTH CARE REFORM
In both U.S. and foreign markets, sales of the Company's proposed products
will depend in part on the availability of reimbursement from third-party
payors such as government health administration authorities, private health
insurers and other organizations. The levels of revenues and profitability of
pharmaceutical companies may be affected by the continuing efforts of
governmental and third-party payors to contain or reduce the costs of health
care. The Company cannot predict the effect that private sector or governmental
health care reforms may have on its business, and there can be no assurance
that any such reforms will not have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, in both
the U.S. and elsewhere, sales of prescription drugs are dependent in part on
the availability of reimbursement to the consumer from third-party payors, such
as government and private insurance plans. Third-party payors are increasingly
challenging the price and cost-effectiveness of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products. There can be no assurance that the Company's proposed
products will be considered cost-effective or that adequate third-party
reimbursement will be available to enable the Company to maintain price levels
sufficient to realize an appropriate return on its investment in product
development. Legislation and regulations affecting the pricing of
pharmaceuticals may change before any of the Company's proposed products are
approved for marketing. Adoption of such legislation could further limit
reimbursement for medical products and services. As a result, the Company may
elect not to market future products in certain markets.
LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON CONTRACT MANUFACTURERS AND
SUPPLIERS
The Company does not have facilities to manufacture and produce its compounds
for preclinical, clinical or commercial purposes. The Company's product
candidates have never been manufactured for commercial purposes and there can
be no assurance that such products can be manufactured at a cost or in
quantities necessary to make them commercially viable. If the Company is unable
to manufacture or contract for a sufficient supply of its compounds on
acceptable terms, or if it should
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encounter delays or difficulties in its relationships with manufacturers, the
Company's preclinical and human clinical testing schedule would be delayed,
resulting in delay of the submission of products for regulatory approval or
delay of the market introduction and subsequent sales of such products, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, CPI or contract
manufacturers must supply all necessary documentation in support of the
Company's NDA on a timely basis and must adhere to Good Laboratory Practice
("GLP") and current Good Manufacturing Practice ("cGMP") regulations enforced
by the FDA through its facilities inspection program. If these facilities
cannot pass a pre-approval plant inspection, the FDA approval of the products
will not be granted.
FGN-1 is manufactured in bulk form for the Company by Zambon Group
("Zambon"), a large pharmaceutical contract manufacturer located in Milan,
Italy. The Company also works with a single U.S.-based manufacturer, Ohm
Laboratories Inc. ("Ohm"), which manufactures FGN-1 in its final dosage form.
Although the Company is negotiating with these suppliers regarding long-term
supply agreements, the Company currently does not have such agreements with
Zambon or Ohm. There can be no assurance that such suppliers will continue to
make available to the Company the required quantities of FGN-1 on reasonable
terms, if at all. If either Zambon or Ohm is unable or unwilling to make FGN-1
available to the Company in required quantities, there can be no assurance
that the Company will be able to identify and contract with alternative
contract manufacturers. The Company would incur significant costs and delays
to qualify an alternative manufacturer, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The availability and price of FGN-1 may be subject to curtailment
or change due to limitations that may be imposed under governmental
regulations, suppliers' allocations to meet the demand of other purchasers,
interruptions in production by suppliers and market and other events and
conditions, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Manufacturing."
ABSENCE OF SALES AND MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
The Company has no experience in sales, marketing or distribution. Depending
upon the marketing strategy ultimately adopted with respect to each relevant
market, the Company intends either to market its products, if developed and
approved, on its own or through relationships with pharmaceutical companies
that have established distribution systems and direct sales forces. To market
any of its products directly, the Company must develop a marketing and sales
force with technical expertise and with supporting distribution capabilities.
There can be no assurance that the Company will be able to establish in-house
sales, marketing and distribution capabilities or relationships with third
parties, or that it will be successful in gaining market acceptance for its
products. To the extent that the Company enters into co-promotion or other
licensing arrangements, any revenues received by the Company will depend upon
the efforts of third parties, and there can be no assurance that such efforts
will be successful. See "Business--Marketing and Sales."
NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS
Because of the specialized scientific nature of the Company's business, the
Company's success is highly dependent upon its ability to attract and retain
qualified scientific and technical personnel. The Company is highly dependent
on the principal members of its scientific and management staff, particularly
Dr. Rifat Pamukcu, and the loss of any of their services might significantly
delay or prevent the achievement of research, development, or business
objectives. The Company does not maintain key-man life insurance with respect
to any of its employees, nor does it intend to secure such insurance. The
Company also relies on consultants and advisors, including the members of its
Scientific Advisory Board, to assist the Company in formulating its research
and development strategy. Retaining and attracting qualified personnel,
consultants and advisors is critical to the Company's success. In order to
pursue its product development and marketing and sales plans, the Company will
be required to hire additional qualified scientific personnel to perform
research and development, as
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well as personnel with expertise in clinical testing, government regulation,
manufacturing, and marketing and sales. The Company faces competition for
qualified individuals from numerous pharmaceutical and biotechnology
companies, universities and other research institutions. There can be no
assurance that the Company will be able to attract and retain such individuals
on acceptable terms, if at all, and the failure to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.
POTENTIAL PRODUCT LIABILITY; POSSIBLE INSUFFICIENCY OF INSURANCE
The Company's business will expose it to potential product liability risks
that are inherent in the testing, manufacturing and marketing of human
therapeutic products. Clinical research involves the testing of new drugs on
human volunteers pursuant to a research plan, and such testing involves a risk
of liability for personal injury or death to patients due to, among other
reasons, possible unforeseen adverse side effects or improper administration
of the new drug. Many of these patients are already seriously ill and are at
risk of further illness or death. The Company currently has clinical trial
liability insurance but there can be no assurance that it will be able to
maintain such insurance. CPI could be materially and adversely affected if it
were required to pay damages or incur defense costs: (i) in connection with a
claim outside the scope of indemnity or insurance coverage; (ii) if the
indemnity, although applicable, is not performed in accordance with the terms
of the relevant contract; or (iii) if the Company's liability exceeds the
amount of applicable insurance. In addition, there can be no assurance that
insurance will continue to be available on terms acceptable to the Company, if
at all, or that, if obtained, the insurance coverage will be sufficient to
cover any potential claims or liabilities. Similar risks would exist upon the
commercialization or marketing of any products by the Company or its partners.
HANDLING AND DISPOSAL OF HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident,
the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company. The Company may incur
substantial costs to comply with environmental regulations if the Company
develops manufacturing capacity.
ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE; NO
DIVIDENDS
Prior to this offering, there has been no public market for the Company's
Common Stock. There can be no assurance that an active trading market will
develop or, if one develops, that it will be maintained. The public offering
price of the Common Stock, which will be established by negotiation between
the Company and the representatives of the Underwriters, may not be indicative
of prices that will prevail in the market after this offering. See
"Underwriters" for factors to be considered in determining the offering price.
The market price of the shares of Common Stock, like that of the common stock
of many other early-stage pharmaceutical companies, is likely to be highly
volatile. Factors such as the fluctuation in the Company's operating results,
comments by research analysts, announcements of technological innovations or
new commercial products by the Company or its competitors, progress with
clinical trials, governmental regulation, changes in reimbursement policies,
developments in patent or other proprietary rights of the Company or its
competitors, including litigation, developments in the Company's relationships
with collaborative partners, if any, public concern as to the safety and
efficacy of drugs developed by the Company and its competitors and general
market conditions may have a significant effect on the market price of the
Common Stock. The Company has never paid any cash dividends and does not
anticipate paying cash dividends in the foreseeable future. See "Dividend
Policy."
16
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of shares of Common Stock (including shares issued upon the exercise
of outstanding options and warrants) in the public market after this offering
could adversely affect the market price of the Common Stock. In addition to
the 2,500,000 shares of Common Stock offered hereby, as of the date of this
Prospectus, there will be 7,660,184 shares of Common Stock outstanding
(assuming no exercise of the Underwriters' over-allotment option and no
exercise of outstanding stock options and warrants), all of which are
"restricted securities" (the "Restricted Shares") under the Securities Act of
1933, as amended (the "Securities Act"). Beginning 90 days after the date of
this Prospectus, approximately 5,368 Restricted Shares will become eligible
for sale in the public market pursuant to Rule 144 and Rule 701 under the
Securities Act. Certain officers, directors and stockholders of the Company,
who together hold 5,844,290 of the Restricted Shares, have agreed not to sell
their shares for a period of 180 days from the date of this Prospectus.
Following completion of the 180-day period, 2,837,393 shares will be eligible
for sale pursuant to Rule 144(k) and 3,006,897 shares held by certain
affiliates of the Company will be eligible for sale subject to the volume
limitations of Rule 144. Upon completion of this offering, holders of
3,006,897 shares of the Company's Common Stock will be entitled to certain
rights with respect to registration of such shares for offer or sale to the
public. In addition, the Company intends to register 1,294,266 shares of
Common Stock reserved for issuance under its 1993 Stock Option Plan following
the date of the Prospectus. See "Management--Employee Benefit Plans," "Shares
Eligible for Future Sale" and "Description of Capital Stock--Registration
Rights."
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Upon the closing of the offering, the Company's directors and executive
officers will, in the aggregate, beneficially own approximately 29.72% of
CPI's outstanding shares of Common Stock (approximately 28.67% if the
Underwriters' over-allotment option is exercised in full). See "Principal
Stockholders." Accordingly, these stockholders, acting together, will be able
to control many matters requiring approval by the stockholders of the Company,
including the election of directors. Moreover, the Company's Certificate of
Incorporation does not provide for cumulative voting with respect to the
election of directors. Consequently, the present directors and executive
officers will be able to exercise substantial influence over the election of
the members of the Board of Directors. Such concentration of ownership could
have an adverse effect on the price of the Common Stock or have the effect of
delaying or preventing a change in control of the Company. In addition,
certain provisions of Delaware law and the Company's Certificate of
Incorporation could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of CPI. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Company's Common
Stock. These provisions of Delaware law and the Company's Certificate of
Incorporation may also have the effect of discouraging or preventing certain
types of transactions involving an actual or threatened change of control of
the Company (including unsolicited takeover attempts), even though such a
transaction may offer the Company's stockholders the opportunity to sell their
stock at a price above the prevailing market price. Certain of these
provisions allow the Company to issue preferred stock without any vote or
further action by the stockholders and prevent or eliminate cumulative voting
in the election of directors. These provisions may make it more difficult for
stockholders to take certain corporate actions and could have the effect of
delaying or preventing a change in control of the Company. See "Business,"
"Management," "Principal Stockholders," and "Description of Capital Stock--
Convertible Preferred Stock" and "--Delaware Anti-Takeover Law and Certain
Charter Provisions."
DILUTION
The initial public offering price will be substantially higher than the book
value per share of Common Stock. Investors purchasing shares of Common Stock
in this offering will therefore incur immediate and substantial dilution of
$8.03 per share of Common Stock, assuming an initial public offering price of
$12.00 per share. See "Dilution."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$27,350,000 ($31,535,000 if the Underwriters' over-allotment option is
exercised in full), based on an assumed initial public offering price of
$12.00 per share and after deducting the Underwriting Discount and the
estimated expenses of this offering payable by the Company. Upon completion of
this offering, the Company must redeem the outstanding $1.1 million of
Redeemable Preferred Stock in cash, registered Common Stock or a combination
thereof.
The Company expects to use the net proceeds of this offering primarily to
fund its research and development activities, including the clinical
development of FGN-1. The balance will be used for working capital and general
corporate purposes. The Company has an option exercisable until March 31, 1998
to purchase its Horsham, Pennsylvania facility for $3.4 million and is
evaluating financing alternatives. The Company expects to spend up to $3.1
million to install and equip laboratories and offices at the Horsham facility
within approximately the next six months. The Company may from time to time
evaluate opportunities to acquire complementary technologies or businesses,
but currently has no understandings or agreements related to such
acquisitions.
Pending any such uses, the Company intends to invest the net proceeds from
this offering in U.S. government securities and investment grade, interest-
bearing instruments. The Company expects to continue to be able to avoid the
registration requirements of the Investment Company Act of 1940 (the "1940
Act"). Application of the provisions of the 1940 Act would have a material
adverse effect on the Company's business, financial condition and results of
operations. The amount and timing of the net proceeds actually allocated to
specific research and development activities will depend upon numerous
factors, such as favorable and unfavorable developments in the clinical trial
program of FGN-1 and the preclinical development of other compounds, the
timing and amount of clinical trial and other development work, if any,
undertaken by the NCI, the receipt of necessary regulatory approvals, the cost
of preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims and other intellectual property rights, the status of competitive
products and technologies and the timing and availability of alternative
methods of financing for the Company, including any future strategic alliances
and joint ventures with third parties. The Company's research and development
expenditures will vary as product candidates, if any, are added or abandoned.
Funds actually expended for each use may vary significantly depending upon a
number of factors. The Company has not determined the amount it plans to spend
for each purpose or the timing of such expenditures.
The Company believes that the net proceeds of this offering, together with
the Company's available cash reserves, should be adequate to satisfy its
capital requirements through approximately the end of 1999, although there can
be no assurance that the Company will not require additional funds prior to
such date. The Company's future capital needs will be dependent upon many
factors, including progress in its research and development activities, the
magnitude and scope of these activities, progress with preclinical and
clinical trials, the cost of preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, the establishment of
collaborative arrangements, and the cost of any additional manufacturing
scale-up and establishment of a sales organization and related marketing
activities, if undertaken by the Company.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its capital stock
and currently intends to retain any future earnings to finance the growth and
development of its business. Therefore, the Company does not intend to pay any
cash dividends in the foreseeable future.
18
<PAGE>
CAPITALIZATION
The following table sets forth the actual and as adjusted capitalization of
the Company as of June 30, 1997. The as adjusted capitalization of the Company
gives effect to the sale of the 2,500,000 shares of Common Stock being offered
by the Company hereby, at an assumed initial public offering price of $12.00
per share (after deducting the Underwriting Discount and estimated offering
expenses payable by the Company) and the application of the estimated net
proceeds therefrom. The financial data presented below should be read in
conjunction with the Company's Financial Statements and the Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" herein and the other financial data included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997(1)
------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term notes payable.............................. $ 51 $ 51
======== ========
Long-term notes payable, net of current portion....... 36 36
-------- --------
Redeemable Preferred Stock, $.01 par value, 61,250
shares authorized and outstanding actual; none
outstanding as adjusted.............................. 1 --
-------- --------
Stockholders' equity:
Convertible Preferred Stock, $.01 par value,
13,000,000 shares authorized and 5,965,643 shares
outstanding actual; 1,000,000 shares authorized and
none outstanding as adjusted....................... 31,736 --
Common Stock, $.01 par value; 17,000,000 shares
authorized, actual and as adjusted; 1,497,408
shares outstanding actual, and 10,008,551 shares
outstanding as adjusted(3)......................... 15 100
Additional paid-in capital.......................... 359 59,906
Accumulated deficit................................. (19,131) (20,222)
-------- --------
Total stockholders' equity......................... $ 12,979 $39,784
-------- --------
Total capitalization.............................. $ 13,016 $39,820
======== ========
</TABLE>
- --------
(1) Gives effect to the 1-for-1.8157 reverse stock split of each outstanding
share of Common Stock effected in October, 1997.
(2) Gives effect to the conversion of all outstanding shares of Convertible
Preferred Stock into Common Stock and as adjusted to give effect to the
sale of the shares by the Company pursuant to this offering. The
redemption of the Redeemable Preferred Stock assumes the issuance of
45,500 shares of Common Stock and the payment of $546,000 in cash.
(3) Excludes 308,971 shares of Common Stock issuable upon the exercise of
outstanding stock options, 30,649 shares of Common Stock reserved for
future issuance under the Company's 1993 Stock Option Plan and 185,511
shares of Common Stock issuable upon the exercise of outstanding warrants.
The actual shares outstanding excludes up to 82,612 shares of Common Stock
that may be issued upon redemption of the Redeemable Preferred Stock, and
the shares outstanding as adjusted includes the issuance of 45,500 shares
of Common Stock upon the redemption of the Redeemable Preferred Stock. See
"Management--Employee Benefit Plans," "Description of Capital Stock," and
"Shares Eligible for Future Sale."
19
<PAGE>
DILUTION
The net tangible book value of the Company as of June 30, 1997 was
approximately $12,979,000, or $1.74 per share of outstanding Common Stock, and
assumes the conversion of all outstanding shares of Convertible Preferred
Stock at the closing of this offering and the 1-for-1.8157 reverse split of
the outstanding Common Stock. Net tangible book value per share is determined
by dividing the amount of the Company's total tangible assets less total
liabilities by the number of outstanding shares of Common Stock, which
includes the conversion of all outstanding Preferred Stock at the closing of
this offering. After giving effect to the sale by the Company of 2,500,000
shares of Common Stock offered hereby (at an assumed initial public offering
price of $12.00 per share), and the application of the net proceeds therefrom,
and the redemption of the Redeemable Preferred Stock assuming the issuance of
45,500 shares of Common Stock and payment of $546,000 in cash, the pro forma
net tangible book value of the Company at June 30, 1997 would have been
approximately $39,784,000, or $3.97 per share. This represents an immediate
increase in such net tangible book value of $2.23 per share to existing
stockholders and an immediate dilution of $8.03 per share to new stockholders
purchasing shares in this offering. The following table illustrates this
dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $12.00
------
Net tangible book value per share before offering................ $1.74
Increase per share attributable to new investors 2.23
-----
Net tangible book value per share after offering................... 3.97
------
Dilution per share to new investors................................ $ 8.03
======
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997,
the differences between the existing stockholders and the new investors with
respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 7,463,051 75% $32,110,000 52% $4.30
New investors................... 2,500,000 25 30,000,000 48 12.00
--------- --- ----------- ---
Total......................... 9,963,051 100% 62,110,000 100%
========= === =========== ===
</TABLE>
The foregoing tables and calculations are based on the number of shares
outstanding as of June 30, 1997, after giving effect to the conversion of all
of the outstanding shares of Preferred Stock into Common Stock and excludes
308,971 shares issuable pursuant to stock options granted under the 1993 Stock
Option Plan at an average exercise price of $0.87, 30,649 shares of Common
Stock reserved for future issuance under the Company's 1993 Stock Option Plan,
185,511 shares issuable upon the exercise of outstanding warrants at an
average exercise price of $6.08 and up to approximately 82,612 shares of
Common Stock that may be issued upon the redemption of the Company's
Redeemable Preferred Stock. To the extent that such options and warrants are
exercised and such Redeemable Preferred Stock is redeemed for Common Stock in
the future, there will be further dilution to new investors. See "Management--
Employee Benefit Plans."
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data with respect to the Company's balance
sheet data at December 31, 1995 and 1996 and with respect to the Company's
statement of operations data for each of the three years in the period ended
December 31, 1996 have been derived from the Company's Financial Statements,
which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere herein. The
balance sheet data as of December 31, 1992, 1993 and 1994 and the statement of
operations data for the years ended December 31, 1992 and 1993 have been
derived from audited Financial Statements not included herein. The selected
financial data at June 30, 1997 and for each of the six month periods ended
June 30, 1996 and 1997 have been derived from unaudited Financial Statements
that have been prepared on the same basis as the audited Financial Statements
and, in the opinion of management, contain all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
financial position at such dates and the operating results and cash flows for
such periods. The results of operation for the six months ended June 30, 1997
are not necessarily indicative of results to be expected for the full year of
any future period. The selected financial data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations", and the Company's Financial Statements
and Notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 814 1,623 2,429 2,575 4,163 1,738 3,224
General and
administrative....... 596 698 705 644 663 337 342
------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 1,410 2,321 3,134 3,219 4,826 2,075 3,566
------- ------- ------- ------- ------- ------- -------
Loss from operations... (1,410) (2,321) (3,134) (3,219) (4,826) (2,075) (3,566)
Interest income........ 19 52 24 28 91 57 123
------- ------- ------- ------- ------- ------- -------
Net loss............... $(1,391) $(2,269) $(3,110) $(3,191) $(4,735) $(2,018) $(3,443)
======= ======= ======= ======= ======= ======= =======
Pro forma net loss per
share(1).............. $ (0.62) $ (0.45)
======= =======
Shares used in
computing pro forma
net loss per
share(1).............. 7,639 7,691
======= =======
<CAPTION>
DECEMBER 31,
------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 2,732 $ 1,335 $ 605 $ 2,203 $ 645 $13,290
Working capital
(deficiency).......... 2,531 613 (294) 834 (313) 12,783
Total assets........... 2,759 1,396 704 2,330 1,106 13,988
Notes payable.......... -- -- -- -- 111 87
Accumulated deficit.... (2,383) (4,652) (7,762) (10,953) (15,688) (19,131)
Total stockholders'
equity(2)............. 2,545 660 (242) 901 (180) 12,979
</TABLE>
- --------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share.
(2) Partner's equity for 1992. See "Results of Operations--Management
Discussion and Analysis of Financial Condition and Results of Operations."
Based on the number of shares outstanding as of June 30, 1997, after
giving effect to the conversion of all of the outstanding shares of
Preferred Stock into Common Stock. Excludes 308,971 shares of Common Stock
issuable upon the exercise of outstanding stock options, 30,649 shares of
Common Stock reserved for future issuance under the Company's 1993 Stock
Option Plan, 185,511 shares of Common Stock issuable upon the exercise of
outstanding warrants and up to approximately 82,612 shares of Common Stock
that may be issued upon the redemption of the Redeemable Preferred Stock.
See "Management - Employee Benefit Plans," "Description of Capital Stock"
and "Shares Eligible for Future Sale."
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is engaged in the research and development of pharmaceutical
compounds intended primarily for the treatment of precancerous lesions and
cancer. From the inception of the Company's business in partnership form in
1990, the Company's operating activities have related primarily to conducting
research and development activities, raising capital and recruiting personnel.
The business converted from partnership to corporate form in September 1993.
Historically, the Company has conducted its business with few direct employees
and many consultants. In the four years leading to filing the IND with the FDA
in December 1993 to permit the commencement of human clinical trials of the
Company's first product candidate FGN-1, the Company spent a total of $4.6
million. Annual expenses increased to $3.1 million, $3.2 million and $4.8
million in 1994, 1995 and 1996, respectively. Phase I clinical trials for FGN-
1 began in February 1994; Phase I/II clinical trials began in August 1995; and
Phase III clinical trials commenced in the second quarter of 1997. Several
additional clinical trials of FGN-1 are expected to commence in the fourth
quarter of 1997 and in 1998, contributing to significantly higher expenses.
The Company has not received any revenue from the sale of products, and no
product candidate of the Company has been approved or will be approved for
marketing in the near future, if ever. Accordingly, the Company's revenue has
been limited to small amounts of interest income, and its primary source of
capital has been the sale of equity securities. As of June 30, 1997, the
Company's accumulated deficit was $19.1 million and its cash on hand was $13.3
million. The Company anticipates that it will continue to incur additional
operating losses for the next several years. There can be no assurance that
the Company's products will be approved for marketing, that the Company will
attain profitability or, if profitability is achieved, that the Company will
remain profitable on a quarterly or annual basis in the future.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
Research and development expenses increased 86%, from $1.7 million during
the first six months of 1996 to $3.2 million in the first six months of 1997,
largely due to increased levels of activity with respect to the development of
FGN-1 and cell biology research related to the Company's technology. General
and administrative expense increased from $337,000 in the first six months of
1996 to $342,000 in the first six months of 1997. The net loss increased from
$2.0 million in the first six months of 1996 to $3.4 million in the first six
months of 1997.
Interest income increased from $57,000 in the first six months of 1996, to
$123,000 in the first six months of 1997, reflecting the Series F Convertible
Preferred Stock financing which resulted in proceeds of $17.5 million, which
commenced in December 1996 and concluded in June 1997.
Fiscal Years Ended December 31, 1996 and 1995
Research and development expenses increased 62% from $2.6 million in 1995 to
$4.2 million in 1996. This increase was due primarily to increased activity
and costs associated with the pharmaceutical and clinical development of FGN-
1, including the Phase I/II trial of FGN-1 in APC which commenced in August
1995 and, with extensions and adjustments, continued throughout 1996; and
increases in the staffing and supply of the Company's research laboratory and
funding of third party research. Certain costs associated with the Phase I/II
clinical trial of FGN-1 were paid by the NCI directly to the clinical site and
are not reflected in the Company's financial statements. General and
administrative expense increased 3% from $644,000 in 1995 to $663,000 in 1996.
The net loss increased from $3.2 million in 1995 to $4.7 million in 1996.
22
<PAGE>
Interest income increased from $28,000 in 1995 to $91,000 in 1996, due to
the higher cash balances resulting from the sale of the Series E Convertible
Preferred Stock which commenced in June 1995 and resulted in net proceeds of
$6.8 million during the period ending May 1996.
Fiscal Years Ended December 31, 1995 and 1994
Research and development expenses increased 6% from $2.4 million in 1994 to
$2.6 million in 1995, primarily due to the continuing development costs of
FGN-1. General and administrative expense decreased 9%, from $705,000 in 1994
to $644,000 in 1995. The net loss for 1995 increased to $3.2 million from a
net loss of $3.1 million in 1994.
Interest income increased from $24,000 in 1994, to $28,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily with the
net proceeds received from private placements of equity securities. These
placements aggregated a total of $32.0 million from inception through June 30,
1997. Net cash generated by financing activities was $2.2 million, $4.3
million and $3.5 million in 1994, 1995 and 1996, respectively, and $16.5
million during the six months ended June 30, 1997, primarily reflecting the
sale of equity securities. The most recent Series F Convertible Preferred
Stock private placement which commenced in December of 1996 and concluded in
June 1997 raised $17.5 million.
Net cash used in the operating activities described above was $2.9 million,
$2.7 million and $4.9 million in 1994, 1995 and 1996, respectively. Net cash
used for equipment and deposits in 1994, 1995 and 1996 was $17,000, $26,000
and $161,000, respectively. Net cash used in operating activities during the
first six months of 1997 was $3.8 million, with an additional $62,000 incurred
for equipment purchases, compared to $2.1 million and $112,000 during the
first six months of 1996, respectively.
Cash on hand (including restricted cash of approximately $200,000) at June
30, 1997 totaled $13.5 million, compared with $2.7 million as of June 30,
1996. Cash on hand (including restricted cash of $194,000 in 1996) at December
31, 1994, 1995 and 1996 was $605,000, $2.2 million and $839,000, respectively.
In March 1996, the Company borrowed $150,000 from a bank for the primary
purpose of equipping its laboratory facilities. The note bears interest at a
rate of 7.79% and is payable in equal monthly installments through March 1999.
At all times the Company keeps approximately $200,000 in a restricted account
pledged to the bank to secure the loan, letters of credit, and other short-
term indebtedness which may arise from time to time.
The Company anticipates that annual expenditures for preclinical studies,
clinical trials, product development, research and general and administrative
expense will increase significantly in future years. In anticipation of the
possible FDA approval for the marketing of FGN-1, the Company expects to begin
preparing for the commercialization of the Company's first product during 1998
and to accelerate such preparation in 1999, adding substantial additional
expense. However, there can be no assurance that the Company will be able to
successfully complete the clinical development of FGN-1 for APC or any other
indication, that the FDA will grant approval within the time frame expected,
if at all, that the other developments or expansions in the Company's programs
of research, development and commercialization will not require additional
funding or encounter delays or that, in light of these or other circumstances,
the Company will be able to achieve the planned levels of revenue, expense and
cash flow.
In June 1997, the Company executed a lease for a 40,000 square foot building
in Horsham, Pennsylvania for a ten-year period with rents rising to
approximately $405,000 in 1998 and $470,000
23
<PAGE>
in 2003. The Company is currently in the process of consolidating its
operations in this building and expects to spend up to $3.1 million during the
next six months to install and equip laboratories and offices. Under this
lease, the Company has the option, exercisable until March 31, 1998, to
purchase the building for $3.4 million. The Company is exploring potential
financing alternatives to furnish and equip the building and potentially to
exercise its option to purchase the building.
The Company expects to finance its continued growth and development largely
through equity financings. Assuming that the Company raises a net amount of
$27.4 million in the current offering, the Company anticipates that such
proceeds, together with current balances and the interest on combined cash
balances, will provide the Company with sufficient working capital to sustain
operations through approximately the end of 1999, although there can be no
assurance that the Company will not require additional funding prior to that
time. The Company anticipates that, if there are delays in its current
programs or if its current programs of research and development yield
expansion opportunities, the Company would seek additional financing, whether
through public or private equity or debt financings, corporate alliances or
through combinations thereof.
There can be no assurance that additional equity or debt capital will, if
needed, be available on terms acceptable to the Company, if at all. Any
additional equity financing would be dilutive to stockholders. Debt financing,
if available, may include restrictive covenants. If additional funds should be
needed but are not available, the Company may be required to curtail its
operations significantly or to obtain funds by entering into collaborative
arrangements or other arrangements on unfavorable terms. The failure by the
Company to raise capital on acceptable terms if and when needed would have a
material adverse effect on the Company's business, financial condition and
results of operations.
INFLATION
The Company does not believe that inflation has had any significant impact
on the Company's business to date.
INCOME TAXES
As of December 31, 1996, the Company had approximately $11.5 million of net
operating loss carryforwards ("NOLs") for income tax purposes available to
offset future federal income tax, subject to limitations for alternative
minimum tax. The NOLs are subject to examination by the federal and state tax
authorities and expire between 2008 and 2011.
Prior to its conversion into corporate form, the business had accumulated
losses totaling approximately $3.9 million. For tax purposes, these losses
were distributed to the partners in accordance with the provisions of the
partnership agreement of the Company's predecessor partnership. Thus, these
losses, while included in the financial statements of the Company, are not
available to offset future taxable income, if any, of the Company.
The Tax Reform Act of 1986 contains provisions that may limit the NOLs
available to be used in any given year upon the occurrence of certain events,
including significant changes in ownership interest. A change in ownership of
a company of greater than 50% within a three-year period results in an annual
limitation on the Company's ability to utilize its NOLs from tax periods prior
to the ownership change. The Company expects that upon closing of this
offering, such a limitation will be triggered. However, the Company does not
expect such limitation to have a significant impact on its operations.
24
<PAGE>
ACCOUNTING MATTERS
The Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123) effective January 1, 1996.
SFAS 123 defines a fair value based method of accounting for employee stock
compensation, including stock options. However, companies may continue to
account for stock compensation using the intrinsic-value-based method as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and provide pro forma disclosures of net income and
earnings per share assuming the fair-value-based method had been applied. The
Company has elected to account for stock compensation using the intrinsic-
value-based method, and thus, SFAS 123 will not have any material impact on
reported operating results.
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. SFAS
128 is effective for fiscal years ending after December 15, 1997; early
adoption is not permitted. SFAS 128 replaces primary and fully diluted EPS
with basic and diluted earnings per share, respectively. The Company does not
expect SFAS 128 to have a material impact on its reported pro forma net loss
per share amounts.
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BUSINESS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the more detailed information, including "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," appearing elsewhere in this Prospectus.
SUMMARY
CPI is a pharmaceutical company focused on the development and
commercialization of products to prevent and treat cancer. The Company is
currently planning clinical trials of its lead compound FGN-1 in six
indications and is conducting an ongoing pivotal Phase III trial for
Adenomatous Polyposis Coli ("APC"), a disease characterized by numerous
precancerous polyps of the colon. The Company plans to initiate Phase II/III
trials of FGN-1 for sporadic adenomatous colonic polyps, prostate cancer, lung
cancer and breast cancer in the fourth quarter of 1997, and to commence
clinical trials of FGN-1 for Barrett's Esophagus and cervical dysplasia in
1998. The Company's technology is based upon its discovery of a novel
mechanism which the Company believes, based on its research, can be targeted
to induce selective apoptosis, or programmed cell death, in precancerous and
cancerous cells without affecting normal cells. Utilizing this proprietary
knowledge, the Company has created over 400 new chemical compounds, over 200
of which display significantly greater apoptotic potency than FGN-1.
BUSINESS STRATEGY
CPI's objectives are to be a leader in cancer chemoprevention and to build
an integrated pharmaceutical company focused on the oncology market. To meet
these objectives the Company intends to:
. Pursue accelerated clinical development of FGN-1. CPI's development
program for FGN-1 is initially focused on indications where small
clinical trials with clear endpoints are expected to yield statistically
significant results. CPI is currently conducting Phase III clinical
trials of FGN-1 for APC, and plans to initiate clinical trials in six
additional indications in 1997 and 1998. By focusing initially on APC, an
indication for which there is a clear need for improved therapies and the
potential to demonstrate efficacy relatively quickly, the Company seeks
to accelerate the market introduction of FGN-1.
. Leverage the Company's technology to develop additional agents for cancer
therapy and chemoprevention. Based on its proprietary technology and its
planned application of high-throughput screening techniques, CPI intends
to expand its library of compounds with the objective of developing
agents for the treatment of certain cancers and precancerous lesions.
. Commercialize products directly to focused physician groups. The Company
intends to establish its own focused sales force to promote products in
the U.S. targeted at diseases that are treated by relatively small, well-
defined groups of physicians. These diseases include APC, sporadic
adenomatous colonic polyps, Barrett's Esophagus, prostate cancer and
bladder cancer.
. Develop strategic collaborations for selected indications and
markets. The Company will seek to establish strategic relationships for
the development and commercialization of potential products for
indications, such as cervical dysplasia, that would require significant
marketing and sales resources. The Company is seeking partners for
international development and commercialization of potential products.
CARCINOGENESIS
Cancer results from a sequence of changes involving the genes of cells which
eventually leads to abnormal and uncontrolled cell proliferation. This multi-
stage process is known as carcinogenesis and generally results from a
combination of factors which occur over a period of years. Certain factors,
such as inherited genetic defects, are present at birth. Other factors that
may contribute to carcinogenesis include environmental exposures and the aging
process. Carcinogenesis is first
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<PAGE>
recognized clinically when abnormal cells become visible to a screening
procedure or reach a size or location sufficient to create clinical signs and
symptoms. The clinical emergence may occur many years following the events
which first initiated carcinogenesis. Generally, cells characterized by
abnormal growth that may lead to cancer but have not yet invaded surrounding
tissue are termed precancerous.
PRECANCEROUS LESIONS. Many cancers are preceded by precancerous lesions,
which are accumulations of abnormal cells. Because precancerous lesions are
usually asymptomatic, the ability to identify and monitor them and to
intervene clinically before the possible development of cancer is dependent
upon diagnostic screening tests. Recent years have seen broader applications
of screening tests, including the Pap smear, flexible sigmoidoscopy and the
Prostate Specific Antigen ("PSA") test. In addition, there have been recent
advances in genetic screening, such as the BRCA1 and BRCA2 tests to detect
individuals with a higher risk of developing breast cancer in the future.
Precancerous lesions are most often diagnosed in epithelial tissues, such as
the skin or the inside surface of organs, including the intestine, cervix,
bladder and prostate. The following table lists examples of epithelial
precancerous lesions, the types of cancer to which such lesions can progress
and the diagnostic screening tests currently in use to detect such lesions.
EXAMPLES OF EPITHELIAL PRECANCEROUS LESIONS
<TABLE>
<CAPTION>
TYPE OF LESION RELATED CANCER CONVENTIONAL METHOD OF DIAGNOSIS
- -------------- -------------- --------------------------------
<S> <C> <C>
Actinic Keratosis Skin Visual examination
Adenomatous Colonic Polyp Colorectal Endoscopy (sigmoidoscopy or colonoscopy)
Barrett's Esophagus Esophageal Endoscopy (esophagogastroscopy)
Bronchial or Lung Dysplasia Lung Sputum cytology
Cervical Intraepithelial Neoplasia Cervical Papanicolau (Pap) smear
Prostatic Intraepithelial Neoplasia Prostate Prostate Specific Antigen (PSA) and
digital rectal examination
Transitional Cell Carcinoma in situ Bladder Cystoscopy
(earliest stage)
</TABLE>
Patients with precancerous lesions are advised to follow a program of
regular monitoring and removal of lesions where appropriate. However,
existing techniques for treating precancerous lesions are often expensive,
have undesirable side effects or are of limited effectiveness. Endoscopic or
surgical removal can be effective for single lesions, but risks and costs
increase significantly if lesions recur, if there are numerous lesions or if
lesions occur in less accessible tissues. Because of their significant side
effects, systemic administration of most existing chemotherapeutic drugs is
not appropriate for treating precancerous lesions. Reduction of environmental
risks or change in diet are generally more effective in preventing the early
stages of carcinogenesis than in arresting or reversing the changes that occur
in the later stages of carcinogenesis. As a result of the inadequacy of
current treatments, there is a significant need for the development of new
therapeutics to treat precancerous lesions. If left untreated and not reversed
by natural processes, precancerous lesions may progress to cancer.
CANCER. The American Cancer Society estimates that over 1.4 million new
cases of cancer will be diagnosed and approximately 560,000 cancer deaths will
occur in the U.S. in 1997. Cancer is the second leading cause of death in the
U.S., and over 7.4 million people living in the U.S. have had cancer. Due in
part to the development of new diagnostic procedures, the highest number of
new cancer diagnoses are currently occurring in the prostate, breast, lung and
colon/rectum, representing approximately 60% of all new cancer cases.
Cancer is generally treated by attempting to remove the cancerous cells,
either by surgery or by chemical or radiation therapies. Currently available
chemotherapies and radiation therapies target all
27
<PAGE>
rapidly dividing cells, both cancerous and healthy, and therefore result in
serious side effects. The limited efficacy and harmful side effects of
existing cancer treatments and the costs associated with managing these side
effects continue to drive the search for new therapies.
CPI TECHNOLOGY
To address the need for new therapies, the Company's technology focuses on
the selective induction of apoptosis in cells that manifest abnormal growth
(neoplastic cells), such as precancerous and cancerous cells. Apoptosis is a
naturally occurring physiological process in which a number of components
inside the cell "program" the cell to die without causing harm to surrounding
cells. Apoptosis occurs in tissues that are continually renewing themselves,
such as the lining of the digestive system, or as a natural defense mechanism
that prevents the replication of cells that have undergone DNA damage. The
Company's technology is based upon its discovery of a novel mechanism which
the Company believes, based on its research, can be targeted to induce
selective apoptosis in neoplastic cells without affecting normal cells.
Many existing chemotherapeutic agents as well as radiation induce apoptosis
in rapidly proliferating cells without differentiating between neoplastic
cells and normal cells. This can result in toxicity, including suppression of
the immune system, hair loss and gastrointestinal disturbances. As a result of
this toxicity, most existing chemotherapeutic agents and radiation therapy are
not appropriate for treating precancerous lesions in otherwise healthy
individuals for whom safety and tolerability are essential for chronic or
extended therapeutic use.
CONVENTIONAL INDUCTION OF APOPTOSIS IN CANCER THERAPY. Radiation therapy and
many existing chemotherapeutic agents act on proliferating cells by disrupting
cellular DNA synthesis to induce apoptosis. As depicted below, once
significant damage occurs to the DNA (1), a process is initiated that is
controlled by the gatekeeper protein p53 (2), and modulated by various
proteins such as bax and bcl-2 (3). This process results in the activation of
the Interleukin Converting Enzyme-like ("ICE-like") proteases (4), which
trigger a cascade of events resulting in apoptosis (5). The end result of
apoptosis is the dismantling of the cell into apoptotic vesicles (6), which
are naturally cleared by the body. The apoptotic mechanism identified by CPI
does not appear to involve p53, or the modulator proteins, such as bax or bcl-
2.
[ART OF CONVENTIONAL OF APOPTOSIS IN THE CELL APPEARS HERE]
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DISCOVERY OF NOVEL APOPTOTIC MECHANISM. The Company believes it has
discovered a previously undefined mechanism for regulating apoptosis. Research
suggests that two key elements of this mechanism are an apoptosis inducing
element ("AIE"), which is activated by naturally-occurring triggers, and an
apoptosis regulatory element, an enzyme which plays a key role in controlling
levels of activated AIE. CPI has determined in colon cancer that the
neoplastic tissue has a higher level of ARE activity than neighboring normal
tissue, which may prevent neoplastic cells from responding to normal signals
that trigger apoptosis. When ARE activity increases, as in neoplastic cells,
AIE activity is reduced and activation of a critical downstream protein is
interrupted, subsequently preventing the activation of the ICE-like proteases
and apoptosis.
SELECTIVE INDUCTION OF APOPTOSIS BY CPI COMPOUNDS. Research suggests that
the Company's compounds, including FGN-1, are targeted at inhibiting ARE
activity in neoplastic cells. As shown in the diagram below, CPI compounds (1)
reduce ARE activity (2), thereby preventing ARE from deactivating the active
AIE (3). Research suggests that the active AIE (4) is then available to
trigger a critical downstream protein (5), which leads to the activation of
the ICE-like proteases (6). As in the case of conventional cancer treatment,
the ICE-like proteases then trigger a cascade of events leading to apoptosis
(7) and the resulting apoptotic vesicles (8).
[ART OF SELECTIVE INDUCTION OF APOPTOSIS BY CPI COMPOUNDS APPEARS HERE]
RESEARCH AND DEVELOPMENT ACTIVITIES. The Company's Biological Discovery
Group consists of its research employees, members of its Scientific Advisory
Board, contract researchers and consultants. The Biological Discovery Group
has identified the specific intracellular protein targeted by FGN-1 and has
made significant progress in sequencing the target protein's gene. The Company
has developed polymerase chain reaction ("PCR")-based probes that may be used
to identify additional indications to be targeted and to develop diagnostic
tools. The Company continues to identify additional elements involved in
regulating the newly identified apoptotic mechanism. CPI plans to investigate
the potential applicability of its novel apoptotic mechanism to other
hyperproliferative diseases, such as benign prostatic hyperplasia, coronary
restenosis, psoriasis and polycystic renal disease. There can be no assurance
that the Company's investigation will be successful.
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Utilizing its understanding of chemical structure and biological activity,
the Company has created over 400 new chemical compounds in five chemical
families and over 27 chemical classes, over 200 of which display significantly
greater apoptotic potency than FGN-1. The Company's new compounds are tested
for inhibitory effects on the growth of cancer cells in vitro, for the
induction of apoptosis and for activity against the intracellular target ARE.
A number of CPI compounds have shown activity against in vitro cultures of
transplantable human cancers of the breast, colon, lung and prostate.
Preliminary results of studies with the Company's compounds in primary
cultures of human cancers have shown activity against breast cancer. The
Company is conducting tests on other compounds and tissues. Significant
additional preclinical and clinical trials are necessary to determine the
activity of FGN-1 and other CPI compounds in these cancer indications. See
"Risk Factors--Early Stage of Development; Absence of Developed Products;
Uncertainty of Clinical Trials," and "--Technological Uncertainty."
The Company plans to leverage its understanding of the structure-activity
relationship of CPI's compounds by using combinatorial chemistry techniques
and high-throughput screening systems to expand its proprietary chemical
library. The Company intends to contract with outside firms to create targeted
chemical libraries including thousands of diverse chemical classes. CPI will
then screen these compounds in order to identify potential additional lead
compounds.
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PRODUCTS IN DEVELOPMENT
CPI is developing a family of products targeted at the treatment and
management of precancerous lesions and cancer. The Company's lead compound,
FGN-1, is a sulfone derivative of the NSAID, sulindac. CPI has shown that FGN-
1 exhibits strong anti-neoplastic effects but lacks the anti-cyclooxygenase
activity that is associated with the serious gastrointestinal and renal side
effects observed in NSAIDs. Although FGN-1 is currently in Phase III clinical
trials for the treatment of APC, there can be no assurance that the Company
will obtain marketing approval for FGN-1. Clinical testing of FGN-1 has
involved only a limited number of patients to date and results obtained in
these trials for FGN-1 in the treatment of APC are not necessarily predictive
of the results of future clinical trials for APC or of clinical results for
any other therapeutic indication. See "Risk Factors --Early Stage of
Development; Absence of Developed Products; Uncertainty of Clinical Trials,"
and "--Dependence on FGN-1." The following table lists the potential
indications for, and current clinical development status of, FGN-1:
FGN-1 DEVELOPMENT PROGRAM
<TABLE>
<CAPTION>
INDICATION CLINICAL DEVELOPMENT STATUS(1)
- ---------- ------------------------------
<S> <C>
Precancer
Adenomatous Polyposis
Coli Pivotal Phase III trial initiated in 2Q 1997
Phase I/II trial completed in 1Q 1997
Orphan Drug status obtained 1Q 1994
Sporadic Adenomatous Pivotal Phase II/III trial expected to commence 4Q 1997
Colonic Polyps Phase IB trial completed in 3Q 1997
Barrett's Esophagus Phase II trial expected to commence in 1998
Cervical Dysplasia Phase II trial expected to commence in 1998
Phase IB trial completed in 3Q 1997
Cancer
Prostate Cancer Phase II/III trial expected to commence 4Q 1997
Lung Cancer Pilot study expected to commence 4Q 1997
Breast Cancer Pivotal Phase II/III trial expected to commence 4Q 1997
</TABLE>
- --------
(1) A "Pivotal" study is a clinical trial used as primary evidence of safety
and efficacy.
Clinical trials are conducted in three phases, which may overlap:
"Phase I" trials involve the initial introduction of an investigational new
drug into humans and are designed to test for tolerance and side effects
and to determine the metabolic and pharmocologic actions of the drug in
humans. Phase IB denotes a later stage Phase I study.
"Phase II" involves clinical studies conducted in a limited number of
patients to evaluate preliminarily the effectiveness of the drug for a
particular indication and to determine the optimal dosage and the common
short-term side effects and risks.
"Phase III" involves expanded studies to evaluate the safety and
effectiveness of the drug.
The Company's clinical trial strategy seeks to identify subsets of patient
populations for the various targeted indications where the endpoints of
clinical trials occur in high frequency or in a relatively short time frame.
Because the Company is studying FGN-1 for multiple indications, the Company
plans to utilize safety and pharmacokinetic data obtained in clinical trials
completed to date to provide a basis for commencing more advanced clinical
trials in other indications. The Company believes that this strategy of
designing clinical trials around selected populations and utilizing existing
safety data may allow the Company to reduce the duration of clinical trials
and the number of test subjects enrolled in its clinical trials, thereby
generating statistically significant clinical results more quickly and cost-
effectively.
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CLINICAL DEVELOPMENT OF FGN-1 FOR PRECANCEROUS LESIONS
Based on FGN-1's safety profile, the Company believes that the compound may
be useful in treating patients with precancerous lesions for whom a drug's
long-term safety profile is important. The initial indication for FGN-1 is
APC, and the Company is also pursuing clinical development of FGN-1 for three
other types of epithelial lesions: sporadic adenomatous colonic polyps,
Barrett's Esophagus and cervical dysplasia. These indications have been
selected based upon several factors, including encouraging preclinical results
and clinical need.
Adenomatous Polyposis Coli. FGN-1 is currently in Phase III clinical trials
for APC, which is an inherited disease characterized by the development of
hundreds to thousands of adenomatous polyps in the colon and the progression
to colon cancer if left untreated. This disease can be confirmed within a
family by genetic testing. Most APC patients must be endoscopically screened
beginning in their teenage years and must have a substantial portion of their
large intestine removed by age 20. Even with this treatment, these patients
continue to develop polyps in the remaining rectal tissue and are typically
monitored by endoscopy 2 to 4 times each year. At each examination, polyps are
removed. CPI's clinical program is testing FGN-1 in patients who previously
have had most of their large intestine removed, leaving the rectum intact
(sub-total colectomy).
It is estimated that there are between 25,000 and 40,000 APC patients in the
U.S. Because of the large number of lesions that occur in these patients and
the continuous development of new lesions with no spontaneous remission, the
Company believes that clinical trials in APC can be conducted in, and
statistically significant results obtained from, a relatively small number of
patients.
In a Phase I/II study conducted with the support of the NCI at the Cleveland
Clinic Foundation, 18 APC patients were treated with FGN-1 for six months. The
study was completed in January 1997 and was designed to observe the safety and
pharmacokinetics of increasing doses of FGN-1. No serious adverse events
attributable to FGN-1 were reported at the clinically effective doses of 400-
600 mg total daily dose. At the 800 mg total daily dose level, four out of six
patients displayed asymptomatic reversible elevations of liver enzymes; all of
such patients continued in the trial at lower dose levels. At the end of the
study, all patients elected to continue in an open label extension of the
study, and several patients have exceeded 24 months on the drug. There have
been no withdrawals from the study or its extension attributable to serious
adverse events.
In the Phase I/II study and its extension, nearly all patients were observed
to experience a marked reduction in the number and size of exophytic (i.e.,
raised over the surface), precancerous rectal polyps that were six millimeters
or less in diameter at the beginning of the study. The effect was observed to
be correlated to dosage, with 600 mg per day having a significantly more
pronounced effect than 400 mg per day. In the extended study, no progressive
increase in polyp size or volume was observed in 13 of the 14 patients who
have remained in the study and have been maintained on the optimal dose.
Following treatment with FGN-1, examination of certain regressing polyps
showed substantial increases in the rate of apoptosis compared with untreated
polyps, while the rate of apoptosis in nearby normal tissue was unchanged. The
Company interprets the different apoptotic rates observed as evidence that
FGN-1 selectively induces apoptosis in neoplastic cells without affecting
normal cells.
Although the Phase I/II study of 18 patients generated preliminary evidence
of effectiveness, additional clinical evidence is necessary before the safety
and efficacy of FGN-1 for APC can be established. Accordingly, CPI initiated a
pivotal Phase III study in the second quarter of 1997. This study will include
150 patients in a double-blind, placebo-controlled trial of FGN-1 at
approximately 12 centers in the U.S., Sweden, United Kingdom and Israel. The
primary endpoint of the study is reduction in the formation of new polyps. The
design and endpoints of the study have been reviewed with the FDA. The Company
expects to complete enrollment in the study by the end of 1997 and to follow
the
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patients for 12 months. In addition, the Company plans to enroll patients with
high rates of recurrence of polyps, who otherwise would be excluded from the
pivotal Phase III study, in a second, concurrent efficacy study that may, if
the FDA requires, include a dose response component. The Company intends to
seek marketing approval for FGN-1 for the prevention of precancerous
adenomatous polyps in APC patients. There can be no assurance that the results
of the Phase I/II study will be indicative of results in the Phase III study
or that the Phase III study will show that FGN-1 is sufficiently safe and
effective for marketing approval by the FDA or other regulatory authorities.
Patients with APC are usually managed by gastroenterologists and colorectal
surgeons. There are approximately 9,500 gastroenterologists and 1,000
colorectal surgeons in the U.S. The Company believes that a subset of these
physicians treats a significant number of APC patients and the Company intends
to focus its marketing efforts on these physicians.
Sporadic Adenomatous Colonic Polyps. Sporadic adenomatous colonic polyps are
relatively common precancerous lesions occurring in the large intestine. These
polyps are histologically, microscopically and genetically indistinguishable
from the polyps of APC.
More than 30% of people in the U.S. over the age of 50 have sporadic
adenomatous colonic polyps. Most of these people will develop only one or two
polyps and once the polyps are removed will not require significant ongoing
medical attention. There are, however, subgroups of people at higher than
usual risk of developing colorectal cancer who should be monitored frequently.
These patients include people with close relatives that have had colorectal
cancer, people over age 60 and people with multiple polyps or polyps which are
large, severely dysplastic or which recur frequently. CPI is targeting these
patients for clinical studies and chemopreventive therapy.
The American Cancer Society, American College of Gastroenterology, American
Gastroenterological Association and other expert organizations recommend that
all people over the age of 50 be screened for precancerous colonic polyps and
colon cancer. This recommendation is not followed universally and, as a
result, a large number of people whose polyps have not been detected are at
risk of develping colon cancer. The procedure for screening for sporadic
adenomatous colonic polyps is an endoscopic examination of the lower part of
the large intestine. This procedure, a sigmoidoscopy, is performed by
gastroenterologists, internists and other physicians. For more extensive and
invasive examination of patients who have had polyps detected by sigmoidoscopy
and for the treatment of sporadic adenomatous colonic polyps, a colonoscopy is
performed, usually by a gastroenterologist.
In September 1997, CPI completed a two-month Phase IB safety and
pharmacokinetic study in 18 patients who had a history of either sporadic
adenomatous colonic polyps and/or cervical dysplasia. The Company plans to
initiate multi-center, pivotal Phase II/III studies in these indications. The
first study, scheduled to commence in the fourth quarter of 1997, is to be a
double-blind, placebo-controlled study to evaluate the safety and efficacy of
different doses of FGN-1 in the treatment of existing sporadic adenomatous
colonic polyps. The Company may need to conduct further concurrent studies of
safety and pharmacokinetics.
Gastroenterologists and colorectal surgeons are primarily responsible for
performing colonoscopies and managing treatment of individuals who have
sporadic adenomatous colonic polyps. There are approximately 10,500 of these
physicians in the U.S. This target audience of physicians builds on and
overlaps with the group of physicians who treat APC and is a logical extension
of the Company's planned marketing and sales efforts.
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<PAGE>
Barrett's Esophagus. Barrett's Esophagus is a precancerous condition of the
lower esophagus characterized by progressive and readily identifiable changes
in the appearance of the lining of the esophagus or esophageal epithelium.
Some patients experience reflux of stomach acid into the esophagus,
exacerbating the condition. Patients with Barrett's Esophagus have 30 to 40
times greater risk of developing esophageal cancer than the average person.
Treatment with anti-acid therapy or other anti-reflux measures is usually not
effective. Approximately 1% of the U.S. population, or an estimated 2,000,000
people, have Barrett's Esophagus, but only one half of this group experiences
symptoms that could lead to diagnosis.
CPI plans to initiate a 12-month Phase II study in patients with Barrett's
Esophagus to evaluate the safety and efficacy of FGN-1. The Company's proposed
clinical endpoints are reduction in the area affected or in the degree of
dysplasia found in the affected tissues.
Barrett's Esophagus is diagnosed by upper gastrointestinal endoscopy, a
procedure usually performed by gastroenterologists. Treatment is usually
managed by gastroenterologists or by thoracic surgeons, of whom there are
approximately 2,000 in the U.S. Because of the significant overlap between the
physician groups who treat Barrett's Esophagus with those who treat APC and
sporadic adenomatous colonic polyps, the Company does not anticipate that any
significant increase in the sales and marketing organization will be required
to promote products for Barrett's Esophagus.
Cervical Dysplasia. Cervical dysplasia is a relatively common precancerous
lesion of the cervix that is easily diagnosed by Pap smears. Fifty million Pap
smears are performed each year in the U.S., of which approximately 5% reveal
some form of cervical dysplasia. Although very few cases of cervical dysplasia
progress to cancer, it is estimated that in 1997 there will be approximately
15,000 new cases of cervical cancer in the U.S.
In September 1997, CPI completed a two-month Phase IB safety and
pharmacokinetic study in 18 patients who had a history of sporadic adenomatous
colonic polyps and/or cervical dysplasia. CPI plans to initiate in 1998 a six-
month Phase II study to evaluate the safety and efficacy of different doses of
FGN-1 in reducing the size of the area affected by and degree of dysplasia.
Based on the results of that study, further studies may be initiated.
Treatment of cervical dysplasia, especially those cases with more severe
dysplasia or recurrence, is usually performed by gynecologists, of whom there
are approximately 36,000 in the U.S. The Company anticipates seeking a
marketing partner for sales to this large physician market.
CLINICAL DEVELOPMENT OF FGN-1 FOR CANCEROUS LESIONS
Laboratory studies have demonstrated that FGN-1 arrests or slows the
progression of certain cancerous lesions. Based on the safety profile of FGN-1
and its novel mechanism of activity, the Company believes that FGN-1 may be
clinically useful in augmenting radiation and conventional chemotherapy in the
treatment of cancers and the prevention of recurrence. The Company believes
that cancer cells that are resistant to radiation or conventional chemotherapy
may be killed by FGN-1 due to its effect on an apoptotic mechanism that is
different from that targeted by conventional therapies.
The Company is planning additional clinical studies in specific cancer
indications, using the safety and pharmacokinetic data from its APC and
sporadic colonic adenomatous polyp/cervical dysplasia studies to support the
initiation of Phase II or Phase II/III studies. The Company plans to expand
the trials covered under its existing IND for FGN-1 to cover these additional
indications. Results of earlier clinical trials of FGN-1 in the treatment of
APC are not predictive of the results that may be obtained from trials of FGN-
1 in the treatment of cancer.
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<PAGE>
Prostate Cancer. It is estimated that in 1997 there will be approximately
209,000 new cases of prostate cancer in the U.S. In in vitro and in vivo
studies, the Company has observed that FGN-1 inhibits growth of prostate
cancer, including one such cancer that is resistant to conventional
chemotherapeutic drugs. The Company plans to initiate a Phase II/III clinical
study for prostate cancer in 1997. This study will include men who have had a
prostatectomy and have rising PSA levels, which is often a sign of recurrent
prostate cancer that is not detectable by current imaging or diagnostic
methods. The endpoint of this study is the arrest or delay in the elevation of
PSA. Depending on the results of this study, the Company anticipates
additional clinical studies to confirm the efficacy of the compound.
Prostate cancer is commonly diagnosed and treated by urologists, of whom
there are approximately 10,000 in the U.S. Oncologists, of whom there are
5,500 in the U.S., manage the chemotherapeutic treatment of prostate cancer.
If the Company develops products to treat prostate cancer, the Company
anticipates marketing these products directly to urologists and oncologists.
Lung Cancer. It is estimated that in 1997 there will be approximately
177,000 new cases of lung cancer in the U.S. FGN-1 has shown positive results
in the prevention of chemically-induced lung cancer in rodents. The Company
plans to conduct a pilot study of the safety and efficacy of FGN-1 in patients
with advanced lung cancer. The results of this exploratory study will
determine the Company's plans for further studies.
Lung cancer may be diagnosed by general practitioners or internists.
Oncologists manage the chemotherapeutic treatment of lung cancer. If the
Company develops products to treat lung cancer, the Company anticipates
marketing these products directly to oncologists.
Breast cancer. It is estimated that in 1997 there will be approximately
185,000 new cases of breast cancer in the U.S. The Company has observed that
FGN-1 and other CPI compounds show dose-related inhibitory effects in several
in vitro breast cancer cell systems, in in vivo chemically-induced cancer
models and in in vitro studies with primary breast cancer tissues removed from
patients. The Company plans to initiate a Phase II/III study to evaluate the
safety and efficacy of FGN-1 in the prevention of recurrence of breast cancer
in women who have not responded to traditional recurrence prevention, such as
tamoxifen, and who are in remission after having been treated with
conventional chemotherapeutic agents.
Gynecologists usually diagnose breast cancer, while oncologists manage the
chemotherapeutic treatment. If the Company develops any products to treat
breast cancer, the Company anticipates marketing these products to
oncologists.
NATIONAL CANCER INSTITUTE AND OTHER COLLABORATIVE ARRANGEMENTS
Pursuant to a Clinical Trials Agreement entered into in 1994, the NCI agreed
to sponsor human clinical efficacy trials of FGN-1 for at least two precancer
indications. The first indication is colonic adenomas, including APC. The NCI
sponsored a portion of the Phase I/II clinical study for APC that the Company
concluded in January 1997. The second indication for which the NCI will
sponsor clinical trials is under discussion. The NCI has the right to conduct
as many additional clinical trials as it would like and the Company is
obligated to provide FGN-1 for such studies. The Company has retained all
commercial rights to FGN-1, and the agreement with the NCI contains no
provisions for royalties or restrictions on CPI's ability to commercialize
FGN-1.
The Company has also entered into an amendment of the Clinical Trials
Agreement with the NCI to permit the NCI to conduct preclinical testing and,
if agreed with the Company, clinical testing of three additional CPI
compounds. The Company believes that continued collaboration with the NCI will
advance the progress of both the Company and the NCI in developing therapies
to treat precancerous lesions in a variety of tissues.
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In June 1991, the Company entered into a Research and License Agreement with
the University of Arizona. Under the agreement, the Company agreed to attempt
to commercialize at least one product and the University has agreed to conduct
a research program in support of the Company's efforts. The University of
Arizona has granted a license to the Company for all patents based on
inventions developed by the University's employees in conjunction with the
Company. The Company has agreed to pay to the University a royalty based on
sales of products based on each such patent.
CPI maintains collaborative relationships with a number of university-based
researchers and commercial vendors throughout the U.S., Europe and Israel who
furnish additional cell biology studies, in vivo pharmacological studies, in
vivo drug candidate screening and animal toxicological studies and scale-up
and synthesis of promising new compounds. CPI retains all exclusive rights to
commercialize the inventions and discoveries that result from these
collaborations.
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SCIENTIFIC ADVISORY BOARD
The Company is assisted in its research and development activities by its
Scientific Advisory Board ("SAB") composed of physicians and scientists who
review the Company's research and development, participate in the design of
clinical trials, discuss technological advances relevant to the Company and
its business and otherwise assist the Company. The members of the SAB are
appointed by the Company's management. The SAB meets at least four times
annually and certain members meet in smaller groups or with the Company
individually as needed. Dr. Rifat Pamukcu, the Company's Chief Scientific
Officer and Senior Vice President, Research and Development, served as co-
chair of the Company's SAB prior to joining the Company in 1993, and continues
to participate in all SAB meetings. SAB members are compensated in cash and
stock options for their services to the Company. The Company also reimburses
each member for expenses incurred when traveling to and attending meetings.
All SAB members have commitments or consulting contracts with other
organizations and companies, some of which are competitors or potential
competitors of the Company, that may limit their availability to the Company.
None of these individuals is expected to devote more than a small portion of
his time to the Company. The members of the SAB are listed below by area of
specialization.
SCIENTIFIC ADVISORY BOARD
<TABLE>
<CAPTION>
NAME PROFESSIONAL AFFILIATION
---- ------------------------
<C> <S>
CELLULAR & ANIMAL RESEARCH
Dennis Ahnen, M.D. Professor of Medicine, University of Colorado
School of Medicine; Director of Cancer
Prevention and Control, University of
Colorado Cancer Center
David M. Livingston, M.D. Emil Frei Professor of Medicine, Harvard
Medical School; Chief of the Division of
Neoplastic Disease Mechanisms and Chairman of
the Executive Committee for Research, Dana-
Farber Cancer Institute
Alan C. Sartorelli, Ph.D. Alfred Gilman Professor of Pharmacology and
Epidemiology, Yale University School of
Medicine; formerly Director of Yale
Comprehensive Cancer Center
CLINICAL & DRUG DEVELOPMENT
David S. Alberts, M.D. Associate Dean of Research, Director of
Cancer Prevention and Control Program, and
Professor of Medicine and Pharmacology,
Arizona Cancer Center, University of Arizona
Randall W. Burt, M.D. (Chairman) Professor of Internal Medicine and Chief of
Gastroenterology, University of Utah School
of Medicine; formerly Chief of Medical
Services, Veterans Administration Medical
Center, Salt Lake City, Utah
Daniel D. Von Hoff, M.D. Director of the Institute for Drug
Development, Cancer Therapy and Research
Center at the University of Texas Health
Science Center
INDUSTRY RESEARCH & DEVELOPMENT
Ira Ringler, Ph.D. Pharmaceutical industry consultant; formerly
President Takeda-Abbott Pharmaceuticals, and
Vice President, Pharmaceutical Research and
Development, Abbott Laboratories
</TABLE>
37
<PAGE>
PATENTS AND PROPRIETARY TECHNOLOGY
CPI's success will depend, in part, on its ability to obtain patents,
operate without infringing the proprietary rights of others and maintain trade
secrets, both in the U.S. and other countries. Patent matters in the
pharmaceutical industry can be highly uncertain and involve complex legal and
factual questions. Accordingly, the validity, breadth, and enforceability of
CPI's patents and the existence of potentially blocking patent rights of
others cannot be predicted, either in the U.S. or in other countries.
As of September 25, 1997, CPI held title or exclusive licenses to two issued
U.S. patents, one allowed U.S. patent application and one pending U.S. patent
application relating to the therapeutic use of FGN-1 in the treatment of
neoplasia and/or precancerous lesions. The Company has no composition of
matter patent on FGN-1 because FGN-1, which is a sulfone derivative of the
NSAID sulindac, was described in an expired 1972 patent, U.S. 3,654,349, and
in various scientific journal articles published in the 1970s. CPI has also
been issued or holds exclusive licenses to 11 foreign patents (including
patents in various European countries and in Australia and an allowed Japanese
patent application) as well as two other pending foreign patent applications
relating to the use of FGN-1 in pharmaceutical compositions for the treatment
of neoplasia and/or precancerous lesions. In Europe, CPI's patent rights
relating to FGN-1 are directed to the use of FGN-1 in the manufacture of
pharmaceutical compositions for the treatment of precancerous lesions. CPI
also holds title or exclusive licenses to four U.S. patent applications which
have been allowed, 18 other pending U.S. patent applications, five issued
foreign patents and 18 pending foreign applications on other compounds, or
therapeutic methods involving such compounds, for the treatment of colonic
polyps, precancerous lesions, and/or neoplasia. CPI also has filed a U.S.
patent application on methods for screening compounds for their usefulness in
selectively inducing apoptosis involving an ARE. CPI intends to file
additional applications, as appropriate, for patents on new compounds,
products, or processes discovered or developed through application of the
Company's technology.
Beyond the patents granted to date, there can be no assurance that CPI will
discover or develop patentable products or processes, that patents will issue
from any of the currently pending patent applications, or that claims granted
on issued patents will be sufficient to protect the Company's technology.
Potential competitors or other researchers in the field may have filed patent
applications, been issued patents, published articles or otherwise created
prior art that could restrict or block the Company's efforts to obtain
additional patents. There also can be no assurance that the Company's issued
patents or pending patent applications, if issued, will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
proprietary protection or competitive advantages to the Company. CPI's patent
rights also depend on its compliance with technology and patent licenses upon
which its patent rights are based and upon the validity of assignments of
patent rights from consultants and other inventors that were, or are, not
employed by CPI.
In addition, competitors may manufacture and sell CPI's potential products
in those foreign countries where CPI has not filed for patent protection or
where patent protection may be unavailable, not obtainable or ultimately not
enforceable. The ability of such competitors to sell such products in the U.S.
or in foreign countries where CPI has obtained patents is usually governed by
the patent laws of the countries in which the product is sold. In addition, to
the extent that clinical uses of FGN-1 are discovered beyond those set forth
in CPI's patent claims, CPI may not be able to enforce its patent rights
against companies marketing FGN-1 for such other clinical uses.
The success of the Company also will depend, in part, on CPI not infringing
patents issued to others. Pharmaceutical companies, biotechnology companies,
universities, research institutions, and others may have filed patent
applications or have received, or may obtain, issued patents in the U.S. or
elsewhere relating to aspects of the Company's technology. It is uncertain
whether the issuance of
38
<PAGE>
any third-party patents will require the Company to alter its products or
processes, obtain licenses, or cease certain activities. Some third-party
applications or patents may conflict with the Company's issued patents or
pending applications. Such conflict could result in a significant reduction of
the coverage of the Company's issued or licensed patents. In addition, if
patents are issued to other companies which contain blocking, dominating or
conflicting claims and such claims are ultimately determined to be valid, the
Company may be required to obtain licenses to these patents or to develop or
obtain alternative technology. If any licenses are required, there can be no
assurance that the Company will be able to obtain any such licenses on
commercially favorable terms, if at all, and if these licenses are not
obtained, the Company might be prevented from pursuing the development of
certain of its potential products. The Company's failure to obtain a license
to any technology that it may require to commercialize its products may have a
material adverse impact on the Company's business, financial condition and
results of operations.
Litigation, which could result in substantial costs to the Company, may also
be necessary to enforce any patents issued or licensed to the Company or to
determine the scope and validity of the proprietary rights of others. In this
connection, under the Abbreviated New Drug Application provisions of U.S. law,
after four years from the date marketing approval is granted to the Company by
the FDA for a patented drug, a generic drug company may submit an Abbreviated
New Drug Application to the FDA to obtain approval to market in the U.S. a
generic version of the drug patented by the Company. If approval is given to
the generic drug company, the Company would be required to promptly initiate
patent litigation to prevent the marketing of such a generic version prior to
the normal expiration of the patent. There can be no assurance that the
Company's issued or licensed patents would be held valid by a court of
competent jurisdiction. In addition, if competitors of the Company file patent
applications in the U.S. that claim technology also claimed by the Company,
the Company may have to participate in interference proceedings to determine
priority of invention. These proceedings, if initiated by the U.S. Patent and
Trademark Office, could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome with respect
to a third party claim or in an interference proceeding could subject the
Company to significant liabilities, require disputed rights to be licensed
from third parties, or require the Company to cease using such technology, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations.
CPI also relies on trade secrets to protect technology, especially where
patent protection is not believed to be appropriate or obtainable or where
patents have not issued. CPI attempts to protect its proprietary technology
and processes, in part, by confidentiality agreements and assignment of
invention agreements with its employees and confidentiality agreements with
its consultants and certain contractors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known or be independently discovered by competitors. Such trade secrets or
other intellectual property of the Company, should they become known to its
competitors, could result in a material adverse effect on the Company's
business, financial condition and results of operations. To the extent that
the Company or its consultants or research collaborators use intellectual
property owned by others in their work for the Company, disputes may also
arise as to the rights to related or resulting know-how and inventions.
COMPETITION
The industry in which the Company competes is characterized by extensive
research and development efforts and rapid technological progress. New
developments occur and are expected to continue to occur at a rapid pace, and
there can be no assurance that discoveries or commercial developments by the
Company's competitors will not render some or all of the Company's potential
products obsolete or non-competitive, which would have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company's competitive position also
39
<PAGE>
depends on its ability to attract and retain qualified scientific and other
personnel, develop effective proprietary products, implement development and
marketing plans, obtain patent protection and secure adequate capital
resources.
In the fields of cancer therapy and the prevention of precancerous and
cancerous lesions, other products are being developed that may compete
directly with the products that the Company is seeking to develop and market.
The Company is aware of clinical trials in which a number of pharmaceutical
and nutritional agents are being examined for their potential usefulness in
the treatment of precancerous lesions and cancer. These include studies of
NSAID-like compounds, cyclooxygenase inhibitors, difluoromethylornithine
("DFMO") and natural nutrients in the treatment of APC and sporadic colonic
polyps, studies of retinoids and DFMO in the treatment of cervical dysplasia
and studies of tamoxifen for the prevention of breast cancer. Additional
compounds being tested in various epithelial lesions include compounds related
to aspirin, various vitamins and nutritional supplements, oltipraz, N-acetyl
cysteine and compounds that interfere with hormone activities. The studies are
being conducted by pharmaceutical and biotechnology companies, major academic
institutions and government agencies. There are other agents, including
certain prescription drugs, that have been observed to have an effect on ARE.
Although the Company is not aware that any third party has demonstrated the
preclinical utility of these compounds in the treatment of precancerous or
cancerous lesions, there can be no assurance that such existing or new agents
will not ultimately be found to be useful, and therefore competitive with any
future products of the Company.
Near-term competition from fully integrated and more established
pharmaceutical and biotechnology companies is expected. Most of these
companies have substantially greater financial, research and development,
manufacturing and marketing experience and resources than the Company and
represent substantial long-term competition for the Company. Such companies
may succeed in discovering and developing pharmaceutical products more rapidly
than the Company or pharmaceutical products that are safer, more effective or
less costly than any that may be developed by the Company. Such companies also
may be more successful than the Company in production and marketing. Smaller
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large pharmaceutical and established
biotechnology companies. Academic institutions, governmental agencies and
other public and private research organizations also conduct clinical trials,
seek patent protection and establish collaborative arrangements for the
development of oncology products.
CPI will face competition based on product efficacy and safety, the timing
and scope of regulatory approvals, availability of supply, marketing and sales
capability, reimbursement coverage, price and patent position. There can be no
assurance that the Company's competitors will not develop more safe and
effective products or obtain patent protection or intellectual property rights
that limit the Company's ability to commercialize products that may be
developed or commercialize products earlier than the Company. There can be no
assurance that the Company's issued patents or pending patent applications, if
issued, will not be challenged, invalidated or circumvented or that the rights
granted thereunder will provide proprietary protection or competitive
advantage to the Company.
GOVERNMENT REGULATION
The research, design, testing, manufacturing, labeling, marketing,
distribution and advertising of products such as the Company's proposed
products are subject to extensive regulation by governmental regulatory
authorities in the U.S. and other countries. The drug development and approval
process is generally lengthy, expensive and subject to unanticipated delays.
The FDA and comparable agencies in foreign countries impose substantial
requirements on the introduction of new pharmaceutical products through
lengthy and detailed preclinical and clinical testing procedures, sampling
activities and other costly and time-consuming compliance procedures. A new
drug may not
40
<PAGE>
be marketed in the U.S. until it has undergone rigorous testing and has been
approved by the FDA. The drug may then be marketed only for the specific
indications, uses, formulation, dosage forms and strengths approved by the
FDA. Similar requirements are imposed by foreign regulators upon the marketing
of a new drug in their respective countries. Satisfaction of such regulatory
requirements, which includes demonstrating to the satisfaction of the FDA that
the relevant product is both safe and effective, typically takes several years
or more depending upon the type, complexity and novelty of the product and
requires the expenditure of substantial resources. Preclinical studies must be
conducted in conformance with the FDA's cGLP regulations. The Company's
compounds require extensive clinical trials and FDA review as new drugs.
Clinical trials are vigorously regulated and must meet requirements for FDA
review and oversight and requirements under cGCP guidelines. There can be no
assurance that the Company will not encounter problems in clinical trials
which would cause the Company or the FDA to delay or suspend clinical trials.
Any such delay or suspension could have a material adverse effect on the
Company's business, financial condition and results of operations.
The steps required before a drug may be marketed in the U.S. include: (i)
preclinical laboratory and animal tests; (ii) submission to the FDA of an
application for an IND exemption, which must become effective before human
clinical trials may commence; (iii) human clinical trials to establish the
safety and efficacy of the drug; (iv) submission of a detailed NDA to the FDA;
and (v) FDA approval of the NDA. In addition to obtaining FDA approval for
each product, each domestic establishment where the drug is to be manufactured
must be registered with the FDA. Domestic manufacturing establishments must
comply with cGMP regulations and are subject to periodic inspections by the
FDA. Foreign manufacturing establishments manufacturing drugs intended for
sale in the U.S. also must comply with cGMP regulations and are subject to
periodic inspection by the FDA or by local authorities under agreement with
the FDA.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to assess the metabolic and pharmacologic activity and
potential safety and efficacy of the product. Preclinical tests must be
conducted by laboratories that comply with FDA regulations regarding cGLP. The
results of preclinical tests are submitted to the FDA as part of an IND, which
must become effective before the sponsor may conduct clinical trials in human
subjects. Unless the FDA objects to an IND, the IND becomes effective 30 days
following its receipt by the FDA. There is no certainty that submission of an
IND will result in FDA authorization of the commencement of clinical trials.
Clinical trials involve the administration of the investigational drug to
patients. Every clinical trial must be conducted under the review and
oversight of an institutional review board ("IRB") at each institution
participating in the trial. The IRB evaluates, among other things, ethical
factors, the safety of human subjects and the possible liability of the
institution. Clinical trials typically are conducted in three phases, which
generally are conducted sequentially, but which may overlap. Clinical trials
test for efficacy and safety, side effects, dosage, tolerance, metabolism and
clinical pharmacology. Phase I tests involve the initial introduction of the
drug to a small group of subjects to test for safety, dosage tolerance,
pharmacology and metabolism. Phase II trials involve a larger but still
limited patient population to determine the efficacy of the drug for specific
indications, to determine optimal dosage and to identify possible side effects
and safety risks. If a drug appears to be efficacious in Phase II evaluations,
larger-scale Phase III trials are undertaken to evaluate the safety and
effectiveness of the drug, usually, though not necessarily, in comparison with
a placebo or an existing treatment. There can be no assurance, however, that
Phase I, Phase II or Phase III testing will be completed successfully within
any specified time period, if at all. Furthermore, the FDA may suspend
clinical trials at any time if it decides that patients are being exposed to a
significant health risk.
The results of the preclinical studies and clinical trials are submitted to
the FDA as part of an NDA for approval of the marketing of the drug. The NDA
also includes information pertaining to the chemistry, formulation and
manufacture of the drug and each component of the final product, as well
41
<PAGE>
as details relating to the sponsoring company. The NDA review process takes
from one to two years on average to complete, although reviews of treatments
for cancer and other life-threatening diseases may be accelerated. However,
the process may take substantially longer if the FDA has questions or concerns
about a product. In general, the FDA requires at least two adequate and well-
controlled clinical studies demonstrating efficacy in order to approve an NDA.
The FDA may, however, request additional information, such as long-term
toxicity studies or other studies relating to product safety. Notwithstanding
the submission of such data, the FDA ultimately may decide that the
application does not satisfy its regulatory criteria for approval. Finally,
the FDA may require additional clinical tests following NDA approval.
There can be no assurance that the drugs the Company is seeking to develop
will prove to be safe and effective in treating or preventing cancer. The
development of such drugs will require the commitment of substantial resources
to conduct the preclinical development and clinical trials necessary to bring
such compounds to market. Drug research and development by its nature is
uncertain. There is a risk of delay or failure at any stage, and the time
required and cost involved in successfully accomplishing the Company's
objectives cannot be predicted. Actual drug research and development costs
could exceed budgeted amounts, which could have a material adverse effect on
the Company's business, financial condition and results of operations.
CPI cannot predict when, if ever, it might submit for regulatory review
additional compounds currently under development. Once the Company submits its
potential products for review, there can be no assurance that the FDA or other
regulatory approvals for any pharmaceutical products developed by CPI will be
granted on a timely basis, if at all. The FDA and comparable agencies in
foreign countries impose substantial requirements on the introduction of new
pharmaceutical products through lengthy and detailed preclinical and clinical
testing procedures, sampling activities and other costly and time-consuming
compliance procedures. Clinical trials are vigorously regulated and must meet
requirements for FDA review and oversight and requirements under cGCP
guidelines. A new drug may not be marketed in the U.S. until it has been
approved by the FDA. There also can be no assurance that the Company will not
encounter delays or rejections that the FDA will not make policy changes
during the period of product development and FDA regulatory review of each
submitted NDA. A delay in obtaining or failure to obtain such approvals would
have a material adverse effect on the Company's business, financial condition
and results of operations. Even if regulatory approval is obtained, it would
be limited as to the indicated uses for which the product may be promoted or
marketed. A marketed product, its manufacturer and the facilities in which it
is manufactured are subject to continual review and periodic inspections. If
marketing approval is granted, the Company would be required to comply with
FDA requirements for manufacturing, labeling, advertising, record keeping and
reporting of adverse experiences and other information. In addition, the
Company would be required to comply with federal and state anti-kickback and
other health care fraud and abuse laws that pertain to the marketing of
pharmaceuticals. Failure to comply with regulatory requirements and other
factors could subject CPI to regulatory or judicial enforcement actions,
including, but not limited to, product recalls or seizures, injunctions,
withdrawal of the product from the market, civil penalties, criminal
prosecution, refusals to approve new products and withdrawal of existing
approvals, as well as enhanced product liability exposure, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Sales of the Company's products outside the U.S.
will be subject to foreign regulatory requirements governing clinical trials,
marketing approval, manufacturing and pricing. Non-compliance with these
requirements could result in enforcement actions and penalties or could delay
introduction of the Company's products in certain countries.
The Company's current clinical trial strategy for the development of drugs
for the prevention of precancerous lesions assumes that the FDA will accept
reduction in the formation of precancerous lesions as an endpoint for
precancer trials. To date, the FDA has not approved any chemoprevention
42
<PAGE>
compounds and there can be no assurance that the FDA will approve such
compounds in the future. Should the FDA require CPI to demonstrate the
efficacy of FGN-1 in the reduction of certain cancers or in overall mortality
rates resulting from certain cancers, the Company's clinical trial strategy
would be materially and adversely affected, as significant additional time and
funding would be required to demonstrate such efficacy. There can be no
assurance that CPI will be able to successfully develop a safe and efficacious
chemoprevention product or that such product will be commercially viable or
will achieve market acceptance.
In 1988 and again in 1992, the FDA issued regulations intended to expedite
the development, evaluation and marketing of new therapeutic products to treat
life-threatening and severely debilitating illnesses for which no satisfactory
alternative therapies exist. One program under these regulations provides for
early consultation between the sponsor and the FDA in the design of both
preclinical studies and clinical trials. Another program provides for
accelerated approval based on a surrogate endpoint. There can be no assurance,
however, that any future products the Company may develop will be eligible for
evaluation by the FDA under these regulations. In addition, there can be no
assurance that FGN-1 or any future products the Company may develop, if
eligible for these programs, will be approved for marketing sooner than would
be traditionally expected. Regulatory approval granted under these regulations
may be restricted by the FDA as necessary to ensure the safe use of the drug.
In addition, post-marketing clinical studies may be required. If FGN-1 or any
future products of the Company do not perform satisfactorily in such post-
marketing clinical studies, they would likely be required to be withdrawn from
the market.
The Company has obtained Orphan Drug status for FGN-1 for the treatment of
APC. Although Orphan Drug status may provide an applicant exclusive marketing
rights in the U.S. for a designated indication for seven years following
marketing approval, in order to obtain such benefits, the applicant must be
the sponsor of the first NDA approved for that drug and indication. Moreover,
amendment of the Orphan Drug Act by the U.S. Congress and reinterpretation by
the FDA are frequently discussed. Therefore, there can be no assurance as to
the precise scope of protection that may be afforded by Orphan Drug status in
the future, or that the current level of exclusivity will remain in effect.
In most cases, pharmaceutical companies rely on patents to provide market
exclusivity for the periods covered by the patents. See "Business--Patents and
Proprietary Technology." In the U.S., the Drug Price Competition and Patent
Term Restoration Act of 1984 (the "Hatch-Waxman Act") permits an extension of
patents in certain cases to compensate for patent time expended during
clinical development and FDA review of a drug. In addition, the Hatch-Waxman
Act establishes a period of market exclusivity, independent of any patents,
during which the FDA may not accept or approve abbreviated applications for
generic versions of the drug from other sponsors, although the FDA may accept
and approve subsequent long-form applications for the drug. The applicable
period of market exclusivity for a drug containing an active ingredient not
previously approved is five years. There is no assurance that all or any of
the Company's products, if approved, will receive market exclusivity under the
Hatch-Waxman Act. Failure to receive such exclusivity could have an adverse
effect on the Company's business, financial condition and results of
operations.
Among the requirements for product approval is the requirement that
prospective manufacturers conform to the FDA's cGMP standards, which also must
be observed at all times following approval. Accordingly, manufacturers must
continue to expend time, money and effort in production, record keeping and
quality control to ensure compliance with cGMP standards. Failure to so comply
subjects the manufacturer to possible FDA action, such as the suspension of
manufacturing or seizure of the product. The FDA may also request a voluntary
recall of a product.
Health care reform legislation, if enacted, could result in significant
change in the financing and regulation of the health care business. In
addition, legislation affecting coverage and reimbursement under Medicare,
Medicaid and other government medical assistance programs has been enacted
from
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time to time. The Company is unable to predict whether such legislation will
be enacted in the future or, if enacted, the effect of such legislation on the
future operation of the Company's business. Changes adversely affecting drug
pricing, drug reimbursement, and prescription benefits, among other changes,
could have a materially adverse effect on the Company's business, financial
condition and results of operations.
MANUFACTURING
The Company currently has no manufacturing facilities for clinical or
commercial production of any of its compounds under development. The Company
is currently relying on third-party manufacturers to produce its compounds for
research and clinical purposes. Therefore, CPI will need to develop its own
facilities or contract with third-parties for the manufacture of products, if
any, that it may develop for its own account or in connection with
collaborative arrangements in which it has retained manufacturing rights.
The Company is working with Zambon, an Italian manufacturer of
pharmaceutical chemicals, for the supply of FGN-1 in bulk form. In its most
recent FDA inspection, this manufacturer was found to adhere to cGMP
regulations. Zambon is one of the largest manufacturers of generic sulindac.
Several batches of FGN-1 drug substance, the manufacturing process of which is
similar to that of sulindac, have been delivered by the manufacturer to CPI at
a scale suitable for commercial use and are currently being used in the
Company's pivotal Phase III APC study. Zambon has the capacity to supply the
Company's current and foreseeable future requirements for FGN-1 and is
currently in discussions with CPI to provide for the long-term supply of FGN-
1.
The Company is also working with Ohm, a U.S.-based contract manufacturer, to
manufacture FGN-1 in its final pharmaceutical dosage form. Manufacturing
methods have been transferred to and developed with this contractor. Capsules
used in the current pivotal Phase III APC study are made by this manufacturer
at a scale suitable for commercialization, substantially reducing the need for
further bioequivalency studies. At this time, the Company is negotiating a
formal, commercial supply agreement with this manufacturer.
MARKETING AND SALES
The Company has to date retained all rights to FGN-1 and its other compounds
and plans to establish its own sales, marketing and distribution organization.
The Company plans to promote FGN-1, if approved for sale, primarily to the
gastroenterologists and other physicians who manage patients with APC,
sporadic adenomatous colonic polyps and Barrett's Esophagus. These initial
markets are treated by approximately 10,500 physicians, a relatively small
target audience. If the Company receives additional FDA approvals for FGN-1,
CPI may expand its sales and marketing team to reach other targeted groups of
physicians. Target groups would include the approximately 10,000 urologists
who manage most prostate cancer patients and the approximately 5,500
oncologists who manage cancer therapy patients.
Certain indications, based on their treatment by a large number of
physicians, require an extensive sales force to sufficiently reach the
appropriate physician groups. Cervical dysplasia, for example, is treated by
approximately 36,000 gynecologists. To reach these more extensive physician
groups, the Company may, if appropriate, enter into co-marketing agreements
with pharmaceutical or biotechnology companies.
The Company anticipates marketing its products in Europe by entering into
strategic alliance agreements with established sales organizations located in
such markets, and the Company is currently in preliminary discussions with
several such parties. In Japan and other Pacific Rim countries the Company is
seeking marketing partners to assist in local clinical trials, regulatory
filings, and marketing, sales and distribution. See "Risk Factors--Absence of
Sales and Marketing Experience, Dependence on Third Parties."
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EMPLOYEES
As of September 15, 1997, the Company employed 27 persons full-time. CPI
places an emphasis on obtaining the highest available quality of staff. None of
the Company's employees is covered by collective bargaining arrangements and
management considers relations with its employees to be good.
FACILITIES
The Company leases approximately 40,000 square feet of space in Horsham,
Pennsylvania. This lease expires in 2007. The Company has an option exercisable
until March 31, 1998 to purchase this facility for $3.4 million and is
evaluating financing alternatives in order to determine whether to exercise
this option. The Company is currently occupying approximately 15,000 square
feet of existing office space while renovating the remaining 25,000 square feet
to include approximately 10,000 square feet of laboratory space and 15,000
square feet of office, warehouse and mechanical space. The Company also leases
approximately 7,900 square feet in Aurora, Colorado, half of which is
laboratory space and half of which is office space. This lease expires in March
1999. Upon completion of renovations in Horsham, Pennsylvania, the Company will
discontinue all operations in the Aurora facility and consolidate into the
Horsham site.
LEGAL PROCEEDINGS
CPI is not a party to any legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company are as
follows:
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Towarnicki.............. 46 Director; Chief Executive Officer
Christopher J. Blaxland........... 56 Director; President
Rifat Pamukcu, M.D. .............. 40 Chief Scientific Officer; Senior Vice President--Research
and Development
Richard H. Troy................... 60 Director; Vice President--Finance, Law and Administration;
Corporate Secretary
William A. Boeger(1)(2)........... 48 Chairman of the Board of Directors
Thomas M. Gibson(2)............... 70 Director
Roger J. Quy, Ph.D.(1) ........... 46 Director
Peter G. Schiff(1)................ 45 Director
Randall M. Toig, M.D. ............ 46 Director
Kerstin B. Menander, M.D., Ph.D .. 60 Vice President, Medical Affairs
Gary A. Piazza, Ph.D. ............ 38 Senior Director of Biology
</TABLE>
- --------
(1) Member of the Compensation and Stock Option Committee.
(2) Member of the Audit Committee.
EXECUTIVE OFFICERS AND DIRECTORS
ROBERT J. TOWARNICKI has served as Chief Executive Officer and a Director of
the Company since October 1996. Prior to joining the Company, from 1992 to
1996 he served as President, Chief Operating Officer, a Director and most
recently as Executive Vice President of Integra LifeSciences Corporation,
which is the publicly held parent firm for a group of biotechnology and
medical device companies including Collatech, Inc., ABS LifeSciences Inc.,
Telios Pharmaceuticals, Inc. and Vitaphore Corporation. In addition, from 1991
to 1992, he served as Founder, President and Chief Executive Officer of
MediRel, Inc. From 1989 to 1991 he was General Manager of Focus/MRL, Inc. from
1985 to 1989 he was Vice President of Development and Operations for Collagen
Corporation and from 1974 to 1985 he held a variety of operations management
positions at Pfizer, Inc. and Merck & Co., Inc. Mr. Towarnicki was a Ph.D.
candidate in Pharmaceutical Chemistry at Temple University School of Pharmacy
and received his M.S. and B.S. degrees from Villanova University.
CHRISTOPHER J. BLAXLAND has served as President and a Director of the Company
since September 1993. Prior to joining the Company, from 1992 to 1993 he
headed the Pharmaceutical Group of Greenwich Pharmaceuticals, Inc., where he
was responsible for establishing and leading that company's commercial
activities, including Phase III development, regulatory affairs, medical
affairs, sales and marketing, manufacturing and quality control. Prior to 1992
he held executive positions with SmithKline Beecham plc for 21 years, serving
in regulatory, commercial development, sales marketing and general management
positions in Australia, Korea, The Netherlands and the U.S. Mr. Blaxland
graduated from the Veterinary School at the University of Sydney, Australia.
RIFAT PAMUKCU, M.D. is the Company's Chief Scientific Officer and Senior Vice
President, Research and Development. Dr. Pamukcu is a co-founder of the
Company. Prior to joining the Company, from 1989 to March 1993, he was
Assistant Professor of Medicine at the University of Cincinnati and co-chair
of the Company's SAB. He continued as an Adjunct Assistant Professor of
Medicine at the University of Cincinnati from 1993 to 1995. He was a
postdoctoral fellow from 1986 to 1989 in the
46
<PAGE>
Division of Gastroenterology at the University of Chicago. Dr. Pamukcu
received a B.A. in Biology from Johns Hopkins University in 1979 and an M.D.
degree from the University of Wisconsin School of Medicine in 1983.
RICHARD H. TROY has served as Vice President of Finance, Law and
Administration, Corporate Secretary and a Director of the Company since
January 1993. He has been an advisor to the Company since its inception, and
he is a director and President of FGN, Inc., the predecessor partnership's
first general partner and a principal stockholder of the Company. Prior to
joining the Company, from 1990 to 1992, he served as Vice President and
Associate General Counsel of UST, Inc. Prior to that, from 1973 to 1990, he
worked at Combustion Engineering, Inc., most recently as Vice President and
Deputy General Counsel, and from 1964 to 1973, he practiced law with the firm
of Shearman & Sterling in New York City. Mr. Troy received a B.A. in
Philosophy from Georgetown University in 1959, studied at the Ludwig-
Maximilians-Universitat in Munich in 1959-60, and received a LL.B. degree from
Harvard Law School in 1963.
WILLIAM A. BOEGER has served as Chairman of the Board of Directors of the
Company since September 1996 and has served as a Director since December 1992.
Since 1993 he also has been Chairman of the Board of Calypte Biomedical
Corporation; he also served as President and Chief Executive Officer of
Calypte Biomedical Corporation from 1993 to 1995. In addition, Mr. Boeger is
Chief Executive Officer of Pepgen Corporation. Since 1986 he has been Managing
General Partner of Quest Ventures II, a venture capital company that he
founded. From 1981 to 1986 Mr. Boeger was employed by Continental Capital
Ventures, a publicly-traded venture capital fund, where he attained the
position of General Partner. Mr. Boeger received a B.S., with an emphasis in
Psychobiology, from Williams College in 1972 and an M.B.A. from the Harvard
Business School.
THOMAS M. GIBSON has served as a Director of the Company since August 1996. He
is also President of Jupiter Electric Company, Inc. and President of
Integrated Technologies Development Corporation. Prior to joining the
Company's Board of Directors, from 1965 to 1990 he was associated with Gibson
Electric Company, Inc., where he attained the position of Chief Executive
Officer. In addition, in the early 1980s he co-founded Gibson Information
Systems, a data service bureau. Mr. Gibson attended Culver Military Academy,
the University of Arizona and University of Illinois.
ROGER J. QUY, PH.D. has served as a Director of the Company since December
1992. He has been with Technology Partners, a venture capital company, since
1989. From 1982 to 1989, Dr. Quy held various management positions with the
Hewlett-Packard Company. Dr. Quy received his undergraduate degree with a
major in Psychology and Law and a Doctorate in Neuroscience from the
University of Keele, England, and an M.B.A. from the Haas School of Business,
University of California, Berkeley.
PETER G. SCHIFF has served as a Director of the Company since December 1992.
He is the President and founder of Northwood Ventures LLC, a firm specializing
in venture capital and leveraged buyouts, President of Northwood Capital
Partners LLC, and Managing General Partner of Rabbit Hollow Partners. Prior to
founding Northwood Ventures LLC in 1983, Mr. Schiff worked for E.M. Warburg,
Pincus & Co., Inc. from 1980 to 1983, and at Chemical Bank from 1976 to 1980.
Mr. Schiff received a B.A. from Lake Forest College in 1974 and an M.B.A. from
the University of Chicago's Graduate School of Business in 1976.
RANDALL M. TOIG, M.D. has served as a Director of the Company since November
1994. He is Associate of Clinical Obstetrics and Gynecology in the Department
of Obstetrics and Gynecology at both the Northwestern University Hospital and
the Northwestern University Medical School. He is also in private medical
practice in Chicago, Illinois and is a Fellow at the American College of
Obstetrics and Gynecology. Dr. Toig received a B.S. in Zoology and
Anthropology from the University of Michigan in 1972 and an M.D. from the
University of Pittsburgh School of Medicine in 1977.
47
<PAGE>
KEY EMPLOYEES
KERSTIN B. MENANDER, M.D., PH.D. has served as Vice President of Medical
Affairs at the Company since January 1997. Prior to joining the Company, she
held senior positions at large pharmaceutical companies such as Syntex
Corporation and Abbott Laboratories as well as at smaller companies. She has
conducted basic research within the area of histopathology and held a position
as Associate Professor in the Department of Histology at the University of
Lund, Sweden. Dr. Menander received her M.D. and Ph.D. degrees from the
University of Lund, Sweden, in 1972 and 1969, respectively.
GARY A. PIAZZA, PH.D. has been the Company's Senior Director of Biology,
responsible for preclinical efficacy testing of new compounds since January
1994. Prior to joining the Company, from 1989 to 1993 he was a Staff Scientist
for The Procter & Gamble Company. From 1987 to 1989, he was a Research
Assistant Oncologist at Brown University/Rhode Island Hospital in the
departments of Pathology and Medical Oncology. From 1985 to 1987, he was a
Research Fellow in the Department of Pharmacology at The Fox Chase Cancer
Center in Philadelphia where he received specialized training in cancer cell
biology. Dr. Piazza received his Ph.D. in Pharmacology from the University of
Alabama at Birmingham in 1985.
COMMITTEES
The Compensation and Stock Option Committee (the "Compensation Committee")
consists of Messrs. Boeger, Quy and Schiff. The Compensation Committee
administers the Company's 1993 Stock Option Plan and 1995 Stock Award Plan and
makes awards thereunder. The Compensation Committee also determines the
compensation of the elected officers of the Company.
The Audit Committee consists of Messrs. Boeger and Gibson. The Audit
Committee makes recommendations to the Board of Directors regarding the
engagement of the Company's independent certified public accountants and the
review of the scope and effect of the audit engagement.
DIRECTORS' COMPENSATION
The Company's Directors do not currently receive any compensation for
service on the Board of Directors or any committee thereof. See "Management--
Employee Benefit Plans." Directors are reimbursed for certain expenses in
connection with attendance at Board and committee meetings.
EMPLOYMENT AGREEMENTS
In October 1996, the Company entered into an employment agreement with
Robert J. Towarnicki providing for annual compensation of $175,000 and up to
$35,000 as an annual bonus, an option to purchase up to 96,381 shares of
Common Stock at $0.91 per share subject to a four-year vesting schedule,
certain relocation expenses and a severance payment equal to six months of
salary and vesting of at least 48,190 options in the event of termination
without cause. On July 23, 1997, the Company's Board of Directors increased
Mr. Towarnicki's annual salary to $195,000, effective as of January 1, 1998.
In September 1993, the Company entered into an employment agreement with
Christopher J. Blaxland providing for annual compensation of $150,000, to
increase by $25,000 upon the Company's completion of a $5 million financing,
and up to 25% of base compensation in annual bonus, an option to purchase up
to 59,949 shares of Common Stock subject to a four-year vesting schedule,
certain relocation expenses, a severance payment equal to twelve months of
salary and group insurance programs in the event of termination by the Company
without cause or termination by Mr. Blaxland for
48
<PAGE>
good reason. As of 1997, the Company had increased Mr. Blaxland's annual
compensation to $165,000, and on July 23, 1997, the Company's Board of
Directors increased Mr. Blaxland's annual salary to $175,000, effective as of
January 1, 1998.
In February 1993, the Company entered into an employment agreement with Rifat
Pamukcu providing for annual compensation of $110,000 and up to $30,000 as an
annual bonus, certain relocation expenses and a severance payment equal to nine
months of salary in the event of involuntary termination or termination by Dr.
Pamukcu for good reason. As of 1997, the Company had increased Dr. Pamukcu's
annual compensation to $145,000, and on July 23, 1997, the Company's Board of
Directors increased Dr. Pamukcu's annual salary to $175,000, effective as of
January 1, 1998.
In January 1993, the Company entered into a memorandum of employment with
Richard H. Troy providing for annual compensation of $110,000, to increase by
$50,000 upon the Company's initial public offering, up to $30,000 as an annual
bonus, and a severance payment equal to six months of salary and benefits in
the event of termination without cause or termination by Mr. Troy for good
reason. As of 1997, the Company had increased Mr. Troy's annual compensation to
$140,000, and on July 23, 1997, the Company's Board of Directors increased Mr.
Troy's annual salary to $160,000, effective as of January 1, 1998.
49
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the three other highly compensated executive
officers whose total annual salary and bonus exceeded $100,000 for services
rendered to the Company during the fiscal year ended December 31, 1996
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- -------------------------
SECURITIES
STOCK UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS AWARDS OPTIONS
- --------------------------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Robert J. Towarnicki(1)... $ 32,532(1) $ -- $ -- 96,381
Chief Executive Officer
Floyd G. Nichols(1)....... 79,519(1) 25,000(2) 12,800(3) --
Chief Executive Officer
Christopher J. Blaxland... 165,000 25,000(2) 12,800(3) 33,045
President
Rifat Pamukcu, M.D. ...... 145,000 25,000(2) 12,800(3) 33,045
Chief Scientific Officer;
Senior Vice President,
Research and Development
Richard H. Troy........... 140,000 25,000(2) 12,800(3) 27,537
Vice President, Finance,
Law and Administration;
Corporate Secretary
</TABLE>
- --------
(1) Floyd G. Nichols served as Chief Executive Officer of the Company until
his death in May 1996. Robert J. Towarnicki began serving as Chief
Executive Officer of the Company in October 1996.
(2) In February 1996, the Compensation Committee awarded bonuses of $25,000 in
cash to each of Floyd G. Nichols, Christopher J. Blaxland, Rifat Pamukcu
and Richard H. Troy with respect to services rendered during the 1993-1995
period.
(3) In February 1996, the Compensation Committee, pursuant to the 1995 Stock
Award Plan, awarded 22,030 shares of the Company's Common Stock with
determined fair market value of $0.58 per share to each of Floyd G.
Nichols, Christopher J. Blaxland, Rifat Pamukcu and Richard H. Troy with
respect to services rendered during the 1993-1995 period.
EMPLOYEE BENEFIT PLANS
By actions of September 13, 1993, October 1, 1993 and March 9, 1994, the
Board of Directors of the Company adopted and amended a stock option plan (the
"1993 Stock Option Plan"), which was approved by vote of the stockholders at
the annual meeting of stockholders held on April 6, 1994. The 1993 Stock
Option Plan authorizes the Company to grant to eligible employees, directors
and consultants of the Company, as determined by the Company's Compensation
Committee, options to purchase shares of the Company's Common Stock. On July
23, 1997, the Board of Directors amended the 1993 Stock Option Plan to
increase from 468,139 to 1,294,266 the number of shares of the Company's
Common Stock authorized for issuance under the 1993 Stock Option Plan. As of
September 30, 1997, the Company had granted, pursuant to its 1993 Stock Option
Plan, options for a total of 576,248 shares of Common Stock, of which 260,831
have been exercised and 33,867 have been forfeited. The 1993 Stock Option Plan
provides for options that qualify as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended, as well as non-statutory
stock options. The exercise price for any option granted pursuant to the 1993
Stock Option Plan may not be less than 100% of the fair market value of the
Common Stock on the date of the grant of such option. The 1993 Stock Option
Plan provides that in the event of a merger, consolidation or disposition of
substantially all assets, or the acquisition of 20% or more of the Company's
voting stock by any person under certain circumstances, or a change in a
majority of the Company's directors under certain
50
<PAGE>
circumstances in any two year period, then all unexercised options shall
become exercisable and the Compensation Committee shall make provision for the
cancellation of unexercised options in exchange for a cash payment of not less
than the excess of the fair market value of the Company's Common Stock over
the exercise price of such option.
In November 1995, the Board of Directors of the Company adopted a stock
award plan (the "1995 Stock Award Plan"). The 1995 Stock Award Plan allows the
Company to award Common Stock to certain employees, directors and consultants,
as determined by the Company's Compensation Committee, in consideration for
their performing services for the Company. As of September 1997, the Company
had made awards of an aggregate of 101,888 shares of stock pursuant to the
1995 Stock Award Plan to Christopher J. Blaxland, Floyd G. Nichols, Rifat
Pamukcu, Richard H. Troy and certain other employees.
The following table sets forth each grant of stock options made during the
year ended December 31, 1996 to each of the Named Executive Officers:
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL OPTIONS EXERCISE PRICE APPRECIATION FOR
NUMBER OF GRANTED TO OR BASE OPTION TERMS(2)
OPTIONS EMPLOYEES IN PRICE ----------------------
NAME GRANTED FISCAL YEAR ($/SHARE) EXPIRATION DATE(1) 5% 10%
---- --------- ------------- --------- ------------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert Towarnicki(3).... 96,381(4) 33.5% $0.91 October 24, 2006 $ 55,025 $ 139,450
Floyd G. Nichols........ -- -- -- -- -- --
Christopher
Blaxland(3)............ 33,045(5) 11.5 0.58 May 2, 2006 12,075 30,600
Rifat Pamukcu(3)........ 33,045(5) 11.5 0.58 May 2, 2006 12,075 30,600
Richard H. Troy(3)...... 27,537(5) 9.6 0.58 May 2, 2006 10,000 25,500
</TABLE>
- --------
(1) The standard options granted pursuant to the 1993 Stock Option Plan expire
ten years after date of grant.
(2) The potential realizable value is calculated assuming that the fair market
value of Common Stock on the date of the grant as determined by the Board
appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and the Common
Stock received therefor is sold on the last day of the term of the option
for the appreciated price. The 5% and 10% rates of appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future increases in the
price of its Common Stock.
(3) In July 1997, the Company granted options to purchase 55,075 shares of
Common Stock to Robert J. Towarnicki, options to purchase 5,507 shares of
Common Stock to Christopher J. Blaxland, options to purchase 13,768 shares
of Common Stock to Rifat Pamukcu and options to purchase 5,507 shares of
Common Stock to Richard H. Troy. All of the above options to purchase
Common Stock are exercisable at a price of $6.72 per share.
(4) 24,095 shares vest upon first anniversary of grant; 2,008 vest monthly
between November 30, 1997 and September 30, 2000; and 2,004 vest on
October 31, 2000.
(5) Twenty-five percent of the total options granted vest upon each
anniversary of grant over four years.
51
<PAGE>
The following table sets forth information with respect to (i) the exercise
of stock options by the Named Executive Officers during the fiscal year ended
December 31, 1996, (ii) the number of unexercised options held by the Named
Executive Officers as of December 31, 1996 and (iii) the value of unexercised
in-the-money options as of December 31, 1996:
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS
DEC. 31, 1996 AT DEC. 31, 1996
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
---- --------------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Robert J. Towarnicki.... -- -- 96,381/-- --/--
Floyd G. Nichols........ -- -- --/-- --/--
Christopher J.
Blaxland............... 59,949(3) -- (4) 33,045/-- $10,800/--
Rifat Pamukcu........... -- -- 33,045/-- 10,800/--
Richard H. Troy......... 27,537(5) -- (6) --/-- --/--
</TABLE>
- --------
(1) All options are subject to vesting; however, early exercise is possible
with portions thereof remaining subject to a repurchase option of the
Company.
(2) To date, all options have been granted at exercise prices equal to the
then-current estimated fair market value; the estimated fair market value
at December 31, 1996 was $0.91.
(3) Includes 15,145 shares that were subject to a repurchase option on behalf
of the Company as of December 31, 1996.
(4) Granted on September 13, 1993, with an exercise price of $0.58 per share;
exercised on April 6, 1996, a time during which the Company's Board of
Directors determined the fair market value to be $0.58 per share.
(5) All 27,537 shares were subject to a repurchase option of the Company as of
December 31, 1996.
(6) Granted and exercised on May 3, 1996, with an exercise price of $0.58 per
share at estimated fair market value.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors,
officers, employees and agents to the fullest extent permitted by Delaware
law. In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's directors will not
be liable for monetary damages for breach of the directors' fiduciary duty to
the Company and its stockholders. This provision of the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of non-
monetary relief would remain available under Delaware law. Each director will
continue to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for any transaction
from which the director derived an improper personal benefit, for improper
transactions between the director and the Company, for improper distributions
to stockholders and for improper loans to directors and officers. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The indemnification provisions in the Company's Bylaws permit
indemnification for certain liabilities arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company 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.
There is no pending litigation or proceeding involving a director or officer
of the Company as to which indemnification is being sought, nor is the Company
aware of any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
52
<PAGE>
CERTAIN TRANSACTIONS
FIRST ROUND OF SERIES E PREFERRED
Between April 1994 and July 1994, the Company sold to institutional
investors and accredited investors a total of 298,925 shares of Series E
Convertible Preferred Stock ("Series E Preferred") at a price of $7.44 per
share and warrants to purchase an additional 10,335 shares of Series E
Preferred at $7.44 per share in a first round of financing of Series E
Preferred. In August 1995, in connection with repricing the Series E Preferred
to $5.72 per share, the Company's Board of Directors authorized the issuance
of additional Series E Preferred. In conjunction with this new price, the
Company issued 90,158 shares of Series E Preferred and 3,113 warrants to
purchase Series E Preferred to the previous holders of Series E Preferred.
Certain directors, executive officers and five percent stockholders purchased
Series E Preferred and warrants to purchase Series E Preferred in the first
round of financing of Series E Preferred, as follows: FGN, Inc., which is a
holder of more than five percent of the Company's voting stock and a Director
and the President of which is Richard H. Troy, a Director, the Vice President,
Law, Finance and Administration and Corporate Secretary of the Company,
purchased 7,168 shares of Series E Preferred; the Thomas M. Gibson Trust
established by Thomas M. Gibson, a Director of the Company, purchased a total
of 524 shares of Series E Preferred; Quest Ventures II and Quest Ventures
International, entities in which William A. Boeger, a Director of the Company,
is a general manager, purchased a total of 27,519 shares of Series E Preferred
and warrants to purchase Series E Preferred; Randall M. Toig, a Director of
the Company, purchased 3,584 shares of Series E Preferred; Richard H. Troy, a
Director, the Vice President, Law, Finance and Administration and the
Corporate Secretary of the Company, purchased 2,581 shares of Series E
Preferred and warrants to purchase Series E Preferred; Technology Partners,
which is a holder of more than five percent of the Company's voting stock and
a general manager of which is Roger J. Quy, a Director of the Company,
purchased 92,597 shares of Series E Preferred and warrants to purchase Series
E Preferred; Rabbit Hollow Partners, the Managing General Partner of which is
Peter G. Schiff, a Director of the Company, purchased 18,121 shares of Series
E Preferred; and Northwood Ventures LLC, which is a holder of more than five
percent of the Company's voting stock and the President of which is Peter G.
Schiff, a Director of the Company, purchased 73,993 shares of Series E
Preferred and warrants to purchase Series E Preferred.
BRIDGE LOAN AND SECOND ROUND OF SERIES E PREFERRED
The Company commenced the second round of Series E Preferred financing
between June and August 1995, when the Company received a bridge loan of
$791,000 from certain of its stockholders and issued convertible promissory
notes with an annual interest rate of 9% to such stockholders. Certain
directors, executive officers and five percent stockholders participated in
the bridge loan, as follows: Floyd G. Nichols, who was a Director and the
Company's Chief Executive Officer, purchased a $50,000 convertible promissory
note; Northwood Ventures LLC, the President of which is Peter G. Schiff, a
Director of the Company, purchased a $200,000 convertible promissory note;
Quest Ventures II, a general manager of which is William A. Boeger, a Director
of the Company, purchased a $50,000 convertible promissory note; and
Technology Partners West Fund IV, a general manager of which is Roger J. Quy,
a Director of the Company, purchased a $90,000 convertible promissory note.
The Company converted the bridge loan's principal and interest into 139,688
shares of Series E Preferred and warrants to purchase an additional 69,146
shares of Series E Preferred in August 1995.
Between August 1995 and May 1996, the Company issued 1,243,296 shares of
Series E Preferred and warrants to purchase an additional 116,147 shares of
Series E Preferred at $5.72 per share, which includes those issued in
converting the bridge loan. Certain directors, executive officers and five
percent stockholders purchased Series E Preferred in the conversion of the
bridge loan and the second round of financing of Series E Preferred, as
follows: Floyd G. Nichols, who was a Director and the Company's Chief
Executive Officer, purchased 9,691 shares of Series E Preferred and
53
<PAGE>
warrants to purchase Series E Preferred; Northwood Ventures LLC, the President
of which is Peter G. Schiff, a Director of the Company, purchased 81,065
shares of Series E Preferred and warrants to purchase Series E Preferred;
Northwood Capital Partners LLC, the President of which is Peter G. Schiff, a
Director of the Company, purchased 45,461 shares of Series E Preferred;
Technology Partners West Fund IV, a general manager of which is Roger J. Quy,
a Director of the Company, purchased 83,206 shares of Series E Preferred and
warrants to purchase Series E Preferred; and Thomas M. Gibson, a Director of
the Company, and the Thomas M. Gibson Trust purchased a total of 17,484 shares
of Series E Preferred.
SERIES F PREFERRED
Between December 1996 and June 1997, the Company sold a total of 2,648,535
shares of Series F Convertible Preferred Stock ("Series F Preferred") and
warrants to purchase 69,308 shares of Series F Preferred to institutional
investors and accredited investors. Certain directors, executive officers and
five percent stockholders of the Company participated in the private offering,
as follows: Technology Partners, which is a holder of more than five percent
of the Company's voting stock and a general partner of which is Roger J. Quy,
a Director of the Company, purchased 55,654 shares of Series F Preferred;
Northwood Ventures LLC, which is a holder of more than five percent of the
Company's voting stock and a President of which is Peter G. Schiff, a Director
of the Company, purchased 61,133 shares of Series F Preferred and warrants to
purchase Series F Preferred; Northwood Capital Partners LLC, the President of
which is Peter G. Schiff, a Director of the Company, purchased 15,283 shares
of Series F Preferred and warrants to purchase Series F Preferred; The Goldman
Sachs Group, L.P., which is a holder of more than five percent of the
Company's voting stock, purchased 390,737 shares of Series F Preferred and
warrants to purchase Series F Preferred; and Grosvenor G. Nichols, the
brother-in-law of Richard H. Troy, a Director, the Vice President of Finance,
Law and Administration and the Corporate Secretary of the Company, purchased
14,181 shares of Series F Preferred and warrants to purchase Series F
Preferred.
AWARDS OF COMMON STOCK
On March 26, 1996, the Company awarded 22,030 shares of Common Stock,
pursuant to its 1995 Stock Award Plan, to each of the following: Christopher
J. Blaxland, a Director and the President of the Company; Floyd G. Nichols,
who was a Director and the Company's Chief Executive Officer; Rifat Pamukcu,
the Company's Senior Vice President, Research and Development, and Chief
Scientific Officer; and Richard H. Troy, a Director, the Vice President,
Finance, Law and Administration and the Corporate Secretary of the Company.
GRANTS OF BONUSES AND STOCK OPTIONS
On July 23, 1997, the Company's Compensation Committee authorized the grant
of stock options at an exercise price of $6.72 per share under the Company's
1993 Stock Option Plan and the payment of cash bonuses as follows:
<TABLE>
<CAPTION>
OPTIONS CASH
------- -------
<S> <C> <C>
Robert J. Towarnicki..................................... 55,075 $40,000
Christopher J. Blaxland.................................. 5,507 25,000
Rifat Pamukcu............................................ 13,768 25,000
Richard H. Troy.......................................... 5,507 25,000
</TABLE>
MANDATORY REDEMPTION OF COMPANY'S REDEEMABLE PREFERRED STOCK
Upon the closing of the offering, the Company must redeem, in cash and/or
registered Common Stock at the option of the Company, in an aggregate value of
$1,092,070, the outstanding shares of Redeemable Preferred Stock, all of which
are held by FGN, Inc., a holder of more than five percent of
54
<PAGE>
the Company's voting stock and a director, the President and a major
stockholder of which is Richard H. Troy, a Director, the Vice President,
Finance, Law and Administration and the Corporate Secretary of the Company.
Pursuant to arrangements FGN, Inc. entered into in 1990 with certain persons
who participated in the founding of the Company, FGN, Inc. will immediately
pay out all but $75,000 of the proceeds of such redemption of the Redeemable
Preferred Stock to or on behalf of such persons, including the payment of cash
and/or registered Common Stock in an aggregate value of $150,000 to be paid to
Rifat Pamukcu, the Company's Chief Scientific Officer and Senior Vice
President, Research and Development, and the payment of cash and/or stock in
an aggregate value of $100,000 to be paid to Richard H. Troy, a Director, the
Vice President, Law, Finance and Administration and Corporate Secretary of the
Company.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1997, as adjusted
to give effect to the sale by the Company of the shares offered hereby
(assuming no exercise of the Underwriters' over-allotment option) by (i) each
principal stockholder, including those known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
Named Executive Officer, (iii) each director of the Company, and (iv) all
current directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER BENEFICIALLY OWNED(1)
OF SHARES BENEFICIALLY --------------------------------
BENEFICIAL OWNER OWNED PRIOR TO OFFERING PRIOR TO OFFERING AFTER OFFERING
---------------- ----------------------- ----------------- --------------
<S> <C> <C> <C>
PRINCIPAL STOCKHOLDERS:
FGN, Inc.(2)................ 1,007,827 13.16% 9.92%
1300 S. Potomac St.,
Suite 110
Aurora, CO 80012
Northwood Ventures
LLC(3)..................... 580,205 7.55% 5.70%
485 Underhill Blvd.,
Suite 205
Syossett, NY 11791
Technology Partners.......... 529,414 6.91% 5.21%
West Fund IV, L.P.
150 Tiburon Blvd.,
Suite A
Belvedere, CA 94920
The Goldman Sachs Group,
L.P.(4)..................... 390,737 5.09% 3.84%
85 Broad Street
New York, NY 10004
New York Life Insurance
Company..................... 372,129 4.86% 3.66%
51 Madison Avenue
New York, NY 10010
Vulcan Ventures,
Inc.(5)..................... 332,435 4.34% 3.27%
110-110 Avenue N.E.,
Suite 550
Bellevue, WA 98004
DIRECTORS AND EXECUTIVE
OFFICERS:**
Christopher J. Blaxland(6).. 120,531 1.57% 1.19%
William A. Boeger(7)........ 181,660 2.37% 1.79%
Thomas M. Gibson(8)......... 39,218 * *
Rifat Pamukcu, M.D.(9)...... 204,107 2.65% 2.00%
Roger J. Quy, Ph.D.(10)..... 529,414 6.91% 5.21%
Peter G. Schiff(11)......... 580,205 7.55% 5.70%
Randall M. Toig, M.D.(12)... 75,461 * *
Robert J. Towarnicki(13).... 159,274 2.06% 1.56%
Richard H. Troy(14)......... 1,169,570 15.26% 11.50%
All executive officers
and directors as a
group (9 persons)(15)...... 3,059,440 39.25% 29.72%
</TABLE>
- --------
* Indicates beneficial ownership of less than one percent.
**The address of the directors and executive officers is 702 Electronic
Drive, Horsham, PA 19044.
56
<PAGE>
(1) This table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, the
Company believes that each of the stockholders named in this table has
sole voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages are based on 7,660,184 shares
of Common Stock outstanding as of September 30, 1997 and 10,160,184
shares of Common Stock outstanding after completion of this offering,
adjusted as required by rules promulgated by the Securities and Exchange
Commission.
(2) Until the closing of this offering, FGN, Inc. has the authority to vote
430,920 additional shares of Common Stock of which it is not the
beneficial owner but that it holds in trust for eleven (11) persons,
including 135,264 shares for Rifat Pamukcu and 88,119 shares for Richard
H. Troy, Mr. Troy's wife and daughter. Excludes up to approximately
82,612 shares of Common Stock that might be received upon redemption of
the Company's Redeemable Preferred Stock, less than 10% of which, if so
redeemed, would remain with FGN, Inc.
(3) Includes 60,331 shares and warrants to purchase 413 shares beneficially
owned by Northwood Capital Partners LLC, 53,919 shares and warrants to
purchase 413 shares beneficially owned by Rabbit Hollow Partners and
14,870 shares beneficially owned by the Edward T. Schiff et. al. Trust,
entities that may be deemed affiliates of Northwood Ventures LLC.
(4) Includes 18,606 shares issuable upon exercise of outstanding warrants.
(5) Includes 7,442 shares issuable upon exercise of outstanding warrants.
(6) Includes 5,507 shares subject to stock options exercisable immediately
pursuant to the terms of an early exercise agreement, although unvested
shares remain subject to a repurchase option by the Company.
(7) Includes 7,367 shares owned of record by Mr. Boeger, 103,530 shares owned
of record by Quest Ventures II and 70,763 shares owned of record by Quest
Ventures International. Mr. Boeger is a managing general partner of Quest
Ventures II and Quest Ventures International, and may be deemed to share
voting and investment power with respect to such shares. Mr. Boeger
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(8) Includes 14,292 shares in the Thomas M. Gibson Trust established by
Thomas M. Gibson.
(9) Includes 135,264 shares beneficially owned by Dr. Pamukcu but held in
trust by FGN, Inc. and 46,813 shares subject to stock options exercisable
immediately pursuant to an early exercise agreement, although unvested
shares remain subject to a repurchase option by the Company.
(10) Includes 529,414 shares owned of record by Technology Partners. Dr. Quy
is a general partner of Technology Partners, and may be deemed to share
voting and investment power with respect to such shares. Dr. Quy
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(11) Includes 450,259 shares and warrants owned of record by Northwood
Ventures LLC, 60,744 shares and warrants owned of record by Northwood
Capital Partners LLC, 54,332 shares and warrants owned of record by
Rabbit Hollow Partners and 14,870 shares owned of record by the Edward T.
Schiff et. al. Trust. Mr. Schiff is the President of Northwood Ventures
LLC, the President of Northwood Capital Partners LLC, the Managing
General Partner of Rabbit Hollow Partners and the Trustee of the Edward
T. Schiff et. al. Trust; he may be deemed to share voting and investment
power with respect to such shares. Mr. Schiff disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein.
(12) Includes 372 shares issuable upon exercise of outstanding warrants.
(13) Includes 372 shares issuable upon exercise of outstanding warrants and
55,075 shares subject to stock options exercisable immediately pursuant
to the terms of an early exercise agreement, although unvested shares
remain subject to a repurchase option by the Company.
(14) Includes 71,597 shares beneficially owned by Mr. Troy but held in trust
by FGN, Inc., warrants to purchase 82 shares, and 5,507 shares subject to
stock options exercisable immediately pursuant to the terms of an early
exercise agreement, although unvested shares remain subject to a
repurchase option by the Company. Also includes 15,007 shares
beneficially owned by Mr. Troy's spouse, Elizabeth N. Troy, and 8,866
shares beneficially owned by Mr. Troy's daughter, Elizabeth D. Troy, as
well as 1,007,827 shares owned of record by FGN, Inc., of which Mr. Troy
is a director and the President. Mr. Troy may be deemed to share voting
and investment power with respect to such 23,873 shares beneficially
owned by his spouse and daughter and to such 1,007,827 shares
beneficially owned by FGN, Inc.; however, Mr. Troy disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein.
(15) Includes shares held by directors and executive officers of the Company
and entities affiliated with such persons. See Notes 6 through 14 above.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a
summary and is qualified in its entirety by the provisions of the Certificate
of Incorporation and Bylaws, which have been filed as exhibits to the
Company's Registration Statement, of which this Prospectus is a part.
As of September 30, 1997, the Company's authorized capital stock consisted
of 17,000,000 shares of Common Stock, $0.01 par value, 61,250 shares of
Redeemable Preferred Stock, $0.01 par value per share and 13,000,000 shares of
Convertible Preferred Stock, $0.01 par value. As of such date, there were
1,646,499 shares of Common Stock outstanding held of record by 178
stockholders, 61,250 shares of Redeemable Preferred Stock outstanding and
6,013,685 shares of Convertible Preferred Stock outstanding. Assuming the
conversion of all outstanding Convertible Preferred Stock into Common Stock
and the effectiveness of a 1-for-1.8157 reverse split of the outstanding
shares of Common Stock there were 7,660,184 shares of Common Stock
outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of Directors, and as a consequence, minority stockholders will not be
able to elect Directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the
liquidation preference of any then outstanding Preferred Stock. Holders of
Common Stock have no preemptive rights. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.
REDEEMABLE PREFERRED STOCK
The Redeemable Preferred Stock is non-voting, not convertible and not
eligible to receive any dividend. Upon the closing of this offering, the
Company must redeem in cash and/or registered Common Stock, at the option of
the Company, all outstanding shares of Redeemable Preferred Stock. FGN, Inc.
holds all shares of Redeemable Preferred Stock. Pursuant to arrangements FGN,
Inc. entered into in 1990 with certain persons who participated in the
founding of the Company and who have served as employees of or consultants to
the Company, FGN, Inc. will immediately pay out all but $75,000 of the
proceeds of such redemption to or on behalf of such persons. As a result of
forfeitures, the Company's redemption obligation has been reduced to
$1,092,070. The Company expects to record a compensation charge to reflect the
redemption.
CONVERTIBLE PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Convertible
Preferred Stock will be converted into 6,013,685 shares of Common Stock.
The Company will adopt an Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws which will provide that, effective upon the
closing of this offering the Board of Directors has the authority, without
further action by the stockholders, to issue up to 1,000,000 shares
58
<PAGE>
of Convertible 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, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by stockholders.
The issuance of Preferred Stock could adversely affect the voting power of
holders of Common Stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of the Company. The
Company has no present plan to issue any shares of Preferred Stock.
WARRANTS
In connection with the Company's Series E Preferred financings, the Company
issued warrants to purchase 129,568 shares of Series E Preferred at $5.72 per
share, of which warrants to purchase 64,798 shares of Series E Preferred have
been exercised. The outstanding warrants to purchase 64,770 shares may be
exercised in whole at any time or in part from time to time prior to their
expiration on the earlier of June 5, 1999 or a firm commitment underwritten
public offering.
The Company issued warrants to purchase 69,308 shares of Series F Preferred
at $6.72 per share in connection with its Series F financing. Such warrants may
be exercised in whole at any time or in part from time to time prior to their
expiration on July 20, 1999.
The exercise price for the warrants and the number of shares issuable upon
exercise of the warrants are subject to adjustment upon a stock split, stock
dividend or subdivision. Additionally, an adjustment will be made upon a sale
of all or substantially all of the assets of the Company or in the case of a
reorganization, reclassification, consolidation or merger of the Company, in
order to enable holders of warrants to purchase the number of shares of stock
receivable in such event by a holder of the number of shares of Preferred Stock
that might otherwise have been purchased upon exercise of the warrants. The
warrants do not confer upon the holder any voting or any other rights of a
stockholder of the Company.
REGISTRATION RIGHTS
The Company and the holders of the Company's Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock, have entered into
a stockholders agreement, as amended (the "Stockholders Agreement"), whereby
certain stockholders may request that the Company use its best efforts to
effect the registration (a "Demand Registration Right") of certain securities
under the Securities Act of 1933 (the "Securities Act") and certain
stockholders must receive notice of the Company's intent to register Common
Stock under the Securities Act and may request that the Company use its best
efforts to cause certain securities of the stockholders to be registered (a
"Piggyback Registration Right"). The Stockholders Agreement provides, however,
that if the representatives of the underwriters advise the Company in writing
that marketing factors require a limitation on the number of shares to be
underwritten, the number of shares that the stockholders may cause to be
registered pursuant to a Piggyback Registration Right may be reduced or
eliminated altogether. The representatives of the underwriters have so advised
the Company in writing that marketing factors require a limitation on the
number of shares to be underwritten to the number of shares offered by the
Company; thus, the stockholders may not exercise any registration rights in
this offering. The Stockholder Agreement provides that all registration rights
terminate for each holder of Common Stock after the closing of this offering if
all shares held by such holder may be sold under Rule 144(k) during any 90-day
period.
59
<PAGE>
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three
years prior, did own) 15% or more of the corporation's voting stock.
The Company's Certificate of Incorporation requires that any action required
or permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing unless the Board is provided with at least
10-day prior written notice. Special meetings of the stockholders of the
Company may be called only by the Board of Directors, the Chairman of the
Board, the Chief Executive Officer or holders of 20% of the Company's stock.
The Company's Bylaws provide that the authorized number of Directors may be
changed only by resolution of the Board of Directors. The Company's
Stockholders Agreement provides that Directors can only be removed for cause
by a majority vote of the stockholders or by the entity that, pursuant to the
Stockholders Agreement, appointed such Director. These provisions may have the
effect of delaying, deterring or preventing a change in control of the
Company, depressing the market price of Common Stock or discouraging hostile
takeover bids in which stockholders of the Company could receive a premium for
their shares of Common Stock.
LISTING
Application has been made to have the Common Stock approved for listing on
the Nasdaq National Market under the trading symbol "CLPA."
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A. is the transfer agent and registrar for the Company's
Common Stock.
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after this offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.
Upon completion of this offering, the Company will have an aggregate of
10,160,184 shares of Common Stock outstanding (assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options and
warrants). Of these shares, the 2,500,000 shares of Common Stock sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, unless such shares are purchased by "affiliates" of
the Company as that term is defined in Rule 144 under the Securities Act
("Affiliates"). The remaining 7,660,184 shares of Common Stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 under the Securities Act (the "Restricted Shares"). Restricted Shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or 701 promulgated under the
Securities Act, which rules are summarized below. As a result of the
contractual restrictions described below and the provisions of Rules 144 and
701, additional shares will be available for sale in the public market as
follows:
<TABLE>
<CAPTION>
DAYS AFTER SHARES
DATE OF ELIGIBLE FOR
THIS PROSPECTUS FUTURE SALE COMMENT
--------------- ------------ -------
<S> <C> <C>
Upon Effectiveness...... 2,500,000 Freely tradable, shares sold in offering.
90 Days................. 5,368 Rule 144 and Rule 701 (outstanding shares not subject to
180-day lockup).
180 Days................ 5,844,290 Lockup released. Outstanding shares salable under Rule 144,
Rule 144(k) and Rule 701 (3,006,897 of which are held by
Affiliates and that will be subject to the volume limitations of
Rule 144 and Rule 701 described below).
</TABLE>
Following completion of the 180-day lock-up period, holders of the 3,006,897
shares that will be subject to the volume limitations of Rule 144 and Rule 701
will be entitled to certain rights with respect to the registration of such
shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by
Affiliates) immediately upon the effectiveness of such registration. See
"Description of Capital Stock--Registration Rights."
The Company's officers, directors and certain stockholders will agree that
they will not, without the prior written consent of Salomon Brothers Inc,
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or announce an offering of, any shares of Common Stock beneficially owned by
such person or any securities convertible into or exercisable or exchangeable
for Common Stock during the 180-day period commencing on the date the
Securities and Exchange Commission declares this registration effective (the
"Effective Date") other than stock disposed of as bona fide gifts.
Additionally, certain stockholders are subject to the Stockholders Agreement
which provides that such holders will not sell, contract to sell or otherwise
dispose of any shares of Common Stock held by such holders during the 180-day
period commencing on the Effective Date. The Company has agreed that it will
not, without the prior written consent of Salomon Brothers Inc, directly or
indirectly offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for shares of Common Stock during such 180-day period except for the sale of
the shares of Common Stock in this offering, the issuance of options and
shares of
61
<PAGE>
Common Stock pursuant to employee benefit plans in effect at the date of the
Prospectus, and the issuance of shares of Common Stock upon the exercise of
warrants outstanding on the date of this Prospectus. Salomon Brothers Inc in
its sole discretion may release any of the shares subject to the lock-up at
any time without notice.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Effective Date, an Affiliate of the Company, or person (or persons whose
shares are aggregated) who has beneficially owned Restricted Shares for at
least one year will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Company's Common Stock or (ii) the average weekly
trading volume of the Company's Common Stock in the Nasdaq National Market
during the four calendar weeks immediately preceding the date on which notice
of the sale is filed with the Securities and Exchange Commission. Sales
pursuant to Rule 144 are subject to certain requirements relating to manner of
sale, notice, and the availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not deemed
to have been an Affiliate of the Company at any time during the 90 days
immediately preceding the sale and who has beneficially owned Restricted
Shares for at least two years is entitled to sell such shares under Rule
144(k) without regard to the limitations described below.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with
Rule 144's holding period restrictions, in each case commencing 90 days after
the date of this Prospectus. In addition, non-Affiliates may sell Rule 701
shares without complying with the public information, volume and notice
provisions of Rule 144.
62
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below (the "Underwriters"), for whom Salomon Brothers Inc, BancAmerica
Robertson Stephens and Cowen & Company are acting as representatives (the
"Representatives"), and each of such Underwriters has severally agreed to
purchase from the Company the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Salomon Brothers Inc...............................................
BancAmerica Robertson Stephens.....................................
Cowen & Company....................................................
---------
Total.......................................................... 2,500,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the shares
of Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any such shares of Common Stock are purchased. In
the event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.
The Company has been advised by the Representatives that the several
Underwriters propose initially to offer such shares of Common Stock at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to other dealers. After the initial offering,
the public offering price and such concessions may be changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock, at the public offering price less the
Underwriting Discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option only to cover over-allotments in the
sale of the shares of Common Stock that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase a number of option shares proportionate to such Underwriter's initial
commitment.
The Representatives have informed the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the Underwriters by selling more Common Stock in connection with the Offering
than they are committed to purchase from the Company, and in such case may
purchase Common Stock in the open market following completion of the Offering
to cover all or a portion of such short position. The Underwriters may also
cover all or a portion of such short position, up to 375,000 shares of Common
Stock, by exercising the Underwriters' over-allotment option referred to
above. In addition, Salomon Brothers Inc, on behalf of the Underwriters, may
impose "penalty bids" under
63
<PAGE>
contractual arrangements with the Underwriters whereby it may reclaim from an
Underwriter (or dealer participating in the Offering) for the account of the
other Underwriters, the selling concession with respect to Common Stock that
is distributed in the Offering but subsequently purchased for the account of
the Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
The Company's officers and directors and certain stockholders have agreed
that they will not, without the prior written consent of Salomon Brothers Inc,
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or announce an offering of, any shares of Common Stock beneficially owned by
such person or any securities convertible into, or exercisable or exchangeable
for, shares of Common Stock during the 180-day period commencing on the
Effective Date, other than shares of Common Stock disposed of as bona fide
gifts. The Company has agreed that it will not, without the prior written
consent of Salomon Brothers Inc, offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, or announce an offer of any shares of
Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock during such 180-day period commencing
on the Effective Date, except for the sale of the shares of Common Stock in
this offering, the issuance of options and shares of Common Stock pursuant to
any employee stock option plan in effect at the date of this Prospectus and
the issuance of shares of Common Stock upon the exercise of warrants
outstanding on the date of this Prospectus. Salomon Brothers Inc in its sole
discretion may release any of the shares subject to the lock-up at any time
without notice.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof. In the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
Prior to this offering, there has been no public market for the Common
Stock. The price to the public for the shares has been determined through
negotiations between the Company and the Representatives and was based on,
among other things, the Company's financial and operating history and
condition, the prospects of the Company and its industry in general, the
management of the Company and the market prices of securities of companies
engaged in businesses similar to those of the Company. There can, however, be
no assurance that the prices at which the shares will sell in the public
market after this offering will not be lower than the price at which it is
sold by the Underwriters.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP, Boulder, Colorado. Certain legal
matters will be passed upon for the Underwriters by Cleary, Gottlieb, Steen &
Hamilton, New York, New York. Certain legal matters pertaining to the
Company's patents will be passed upon for the Company by Brinks Hofer Gilson &
Lione, Chicago, Illinois. Certain legal matters pertaining to the Company's
regulatory matters will be passed upon for the Company by Hyman, Phelps &
McNamara, P.C., Washington, D.C.
EXPERTS
The financial statements of the Company included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included in reliance upon the authority of said firm as
experts in giving said reports.
64
<PAGE>
The statements in this Prospectus as set forth under the captions "Risk
Factors--Uncertainty of Protection of Patents and Proprietary Rights" and
"Business--Patents and Proprietary Technology" have been reviewed and approved
by Brinks Hofer Gilson & Lione, Chicago, Illinois, patent counsel to the
Company, as experts on such matters, and are included herein in reliance upon
such review and approval.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC"), Washington, D.C., a Registration Statement on Form S-1 under the Act,
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and such Common Stock, reference is made to the Registration Statement
and the exhibits and schedules filed as part thereof. Statements contained in
this Prospectus as to the contents of any contract or document filed as an
exhibit to the Registration Statement is qualified by reference to such
exhibit as filed. A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the SEC in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048, and copies of all or any part of the Registration may be obtained from
such offices upon the payment of the fees prescribed by the SEC. The SEC
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the SEC. The address of the SEC's World Wide Web site is
http://www.sec.gov.
65
<PAGE>
CELL PATHWAYS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CELL PATHWAYS, INC.
Report of Independent Public Accountants................................ F-2
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997
(unaudited) and on a pro forma basis as of June 30, 1997 (unaudited)... F-3
Statements of Operations for the years ended December 31, 1994, 1995,
1996, the period from inception (August 10, 1990) through December 31,
1996 and for the six months ended June 30, 1996 and 1997 and the period
from inception (August 10, 1990) to June 30, 1997 (unaudited).......... F-4
Statements of Stockholders' Equity for the period from inception (August
10, 1990) to June 30, 1997 (unaudited)................................. F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995,
1996, the period from inception (August 10, 1990) through December 31,
1996 and for the six months ended June 30, 1996 and 1997 and the period
from inception (August 10, 1990) to June 30, 1997 (unaudited).......... F-7
Notes to Financial Statements........................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Cell Pathways, Inc.:
We have audited the accompanying balance sheets of Cell Pathways, Inc. (a
Delaware corporation in the development stage), as of December 31, 1995 and
1996, and the related statements of operations, stockholders' equity (deficit)
and partners' investment, and cash flows for the three years ended December
31, 1994, 1995 and 1996 and for the period from inception (August 10, 1990) 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 financial position of Cell Pathways, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for the three years ended December 31, 1994, 1995 and 1996 and for the
period from inception (August 10, 1990) to December 31, 1996, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying
financial statements, the Company is a development-stage enterprise with no
significant operating results to date. The factors discussed in Note 1 to the
financial statements raise substantial doubt about the ability of the Company
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 31, 1997
F-2
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ JUNE 30, JUNE 30,
1995 1996 1997 1997
-------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 2,203 $ 645 $ 13,290 $ 13,290
Restricted cash (Note 2)............. -- 194 198 198
Stock subscription receivable
(collected subsequent to June 30,
1997)............................... -- -- 37 37
Advances to employees................ 5 4 1 1
Prepaid expenses..................... 54 67 229 229
-------- -------- -------- --------
Total current assets............... 2,262 910 13,755 13,755
-------- -------- -------- --------
PROPERTY AND EQUIPMENT................. 95 256 318 318
Less: Accumulated depreciation....... (38) (71) (96) (96)
-------- -------- -------- --------
57 185 222 222
-------- -------- -------- --------
DEPOSITS............................... 11 11 11 11
-------- -------- -------- --------
Total assets....................... $ 2,330 $ 1,106 $ 13,988 $ 13,988
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable..................... $ 206 $ 159 $ 298 $ 298
Accrued liabilities.................. 1,222 1,015 623 623
Note payable (Note 7)................ -- 49 51 51
-------- -------- -------- --------
Total current liabilities.......... 1,428 1,223 972 972
-------- -------- -------- --------
LONG-TERM LIABILITIES:
Note payable, net of current
portion............................. -- 62 36 36
COMMITMENTS AND CONTINGENCIES
(Notes 3, 5 and 9)
REDEEMABLE PREFERRED STOCK, $.01 par
value, 61,250 shares authorized,
issued and outstanding, redeemable for
a total of $1,092..................... 1 1 1 1
-------- -------- -------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $.01 par
value, 13,000,000 shares authorized,
2,819,336, 3,457,180 and 5,965,643
shares outstanding, with an
aggregate liquidation preference of
$12,023, $15,819 and $32,662,
respectively........................ 11,639 15,137 31,736 --
Common stock $.01 par value,
17,000,000 shares authorized,
1,264,635, 1,497,408 and 1,497,408
shares issued and outstanding....... 13 15 15 75
Additional paid-in capital........... 226 359 359 32,035
Stock subscription receivable from
issuance of preferred stock......... (24) (3) -- --
Deficit accumulated during the
development stage................... (10,953) (15,688) (19,131) (19,131)
-------- -------- -------- --------
Total stockholders' equity
(deficit)......................... 901 (180) 12,979 12,979
-------- -------- -------- --------
Total liabilities and stockholders'
equity (deficit).................. $ 2,330 $ 1,106 $ 13,988 $ 13,988
======== ======== ======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-3
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FROM INCEPTION FROM INCEPTION
FOR THE YEARS ENDED (AUGUST 10, (AUGUST 10,
DECEMBER 31, 1990) TO FOR THE SIX MONTHS ENDED 1990) TO
--------------------------- DECEMBER 31, --------------------------- JUNE 30,
1994 1995 1996 1996 JUNE 30, 1996 JUNE 30, 1997 1997
------- ------- --------- -------------- ------------- ------------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
EXPENSES:
Research and
development (Note 2) $(2,429) $(2,575) $ (4,163) $(12,321) $(1,738) $ (3,224) $(15,545)
General and
administrative....... (705) (644) (663) (3,605) (337) (342) (3,947)
------- ------- --------- -------- ------- --------- --------
Total expenses...... (3,134) (3,219) (4,826) (15,926) (2,075) (3,566) (19,492)
Interest income....... 24 28 91 238 57 123 361
------- ------- --------- -------- ------- --------- --------
NET LOSS................ $(3,110) $(3,191) $ (4,735) $(15,688) $(2,018) $ (3,443) $(19,131)
======= ======= ========= ======== ======= ========= ========
Pro forma net loss per
share (unaudited).... $ (0.62) $ (0.45)
========= =========
Share used to compute
pro forma net loss
per share
(unaudited).......... 7,638,645 7,690,772
========= =========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-4
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND PARTNERS' INVESTMENT
FOR THE PERIOD FROM INCEPTION (AUGUST 10, 1990) TO JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
STOCK
SUBSCRIPTION
RECEIVABLE
FROM DEFICIT
ISSUANCE ACCUMULATED
REDEEMABLE CONVERTIBLE OF DURING
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL CONVERTIBLE THE
PARTNERS' ---------------- ---------------- ---------------- PAID-IN PREFERRED DEVELOPMENT
INVESTMENT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK STAGE
---------- -------- ------- -------- ------- --------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, inception
(August 10, 1990).... $ -- -- $ -- -- $ -- -- $-- $-- $-- $ --
Partner cash
contributions in
September 1990 for
Class A Partnership
units............... 406 -- -- -- -- -- -- -- -- --
Partner contribution
of interest in
research grant in
September 1990 for
Class A Partnership
units, at historical
cost................ 49 -- -- -- -- -- -- -- -- --
Net loss............. -- -- -- -- -- -- -- -- -- (253)
------ -------- ------ -------- ------ --------- ---- ---- ---- -------
BALANCES, December 31,
1990................. 455 -- -- -- -- -- -- -- -- (253)
Partner cash
contributions in
March 1991 for Class
A Partnership
units............... 406 -- -- -- -- -- -- -- -- --
Partner cash
contributions in
December 1991 for
Class B Partnership
units............... 897 -- -- -- -- -- -- -- -- --
Net loss............. -- -- -- -- -- -- -- -- -- (739)
------ -------- ------ -------- ------ --------- ---- ---- ---- -------
BALANCES, December 31,
1991................. 1,758 -- -- -- -- -- -- -- -- (992)
Partner cash
contributions in
January and April
1992 for Class B
Partnership units... 21 -- -- -- -- -- -- -- -- --
Partner cash
contributions in
December 1992 for
Class B Partnership
units............... 134 -- -- -- -- -- -- -- -- --
Partner cash
contributions in
December 1992 for
Class C Partnership
units............... 1,540 -- -- -- -- -- -- -- -- --
Partner cash
contributions in
December 1992 for
Class D Partnership
units............... 1,475 -- -- -- -- -- -- -- --
Net loss............. -- -- -- -- -- -- -- -- -- (1,391)
------ -------- ------ -------- ------ --------- ---- ---- ---- -------
BALANCES, December 31,
1992................. 4,928 -- -- -- -- -- -- -- -- (2,383)
Partner cash
contributions in
January 1993 to
March 1993 for Class
D Partnership
units............... 385 -- -- -- -- -- -- -- -- --
Exchange of interests
in the Partnership
in September 1993
for 480,459 shares
of Series A
convertible
preferred stock..... (812) -- -- 480,459 812 -- -- -- -- --
Exchange of interests
in the Partnership
in September 1993
for 467,078 shares
of Series B
convertible
preferred stock..... (868) -- -- 467,078 868 -- -- -- -- --
Exchange of interests
in the Partnership
in September 1993
for 385,525 shares
of Series C
convertible
preferred stock..... (1,540) -- -- 385,525 1,540 -- -- -- -- --
Exchange of interests
in the Partnership
in September 1993
for 339,696 shares
of Series D
convertible
preferred stock..... (1,860) -- -- 339,696 1,860 -- -- -- -- --
Exchange of interests
in the Partnership
in September 1993
for 33,734 shares of
redeemable preferred
stock............... (1) 33,734 1 -- -- -- -- -- -- --
Exchange of interests
in the Partnership
in September 1993
for 1,255,438 shares
of common stock..... (232) -- -- -- -- 1,255,438 13 219 -- --
Net loss............. -- -- -- -- -- -- -- -- -- (2,269)
------ -------- ------ -------- ------ --------- ---- ---- ---- -------
</TABLE>
F-5
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND PARTNERS' INVESTMENT--
(CONTINUED)
FOR THE PERIOD FROM INCEPTION (AUGUST 10, 1990) TO JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
STOCK
SUBSCRIPTION
RECEIVABLE
FROM DEFICIT
ISSUANCE ACCUMULATED
REDEEMABLE CONVERTIBLE OF DURING
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL CONVERTIBLE THE
PARTNERS' ----------------- ----------------- ---------------- PAID-IN PREFERRED DEVELOPMENT
INVESTMENT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK STAGE
---------- --------- ------- --------- ------- --------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December
31, 1993............ $-- 33,734 $ 1 1,672,758 $ 5,080 1,255,438 $13 $219 $-- $ (4,652)
====
Issuance of common
stock for services
valued at $.41 per
share.............. -- -- -- -- 9,179 -- 7 -- --
Issuance of 298,927
shares of Series E
convertible
preferred stock for
cash at $7.44 per
share.............. -- -- 298,927 2,225 -- -- -- (24) --
Net loss............ -- -- -- -- -- -- -- -- (3,110)
--------- ------ --------- ------- --------- --- ---- ---- --------
BALANCES, December
31, 1994............ 33,734 1 1,971,685 7,305 1,264,617 13 226 (24) (7,762)
Issuance of 617,833
shares of Series E
convertible
preferred stock for
cash at $5.72 per
share.............. -- -- 617,833 3,534 -- -- -- -- --
Issuance of 90,159
shares of Series E
convertible
preferred stock to
effect the price
change from $7.44
to $5.72 (Note 4).. -- -- 90,159 -- -- -- -- -- --
Conversion of bridge
notes payable plus
interest to 139,689
shares of Series E
convertible
preferred stock at
a price of $5.72
per share (Note
4)................. -- -- 139,689 800 -- -- -- -- --
Net loss............ -- -- -- -- -- -- -- -- (3,191)
--------- ------ --------- ------- --------- --- ---- ---- --------
BALANCES, December
31, 1995............ 33,734 1 2,819,336 11,639 1,264,617 13 226 (24) (10,953)
Issuance of 488,962
shares of Series E
convertible
preferred stock for
cash at $5.72 per
share, net of
offering costs of
$299............... -- -- 488,962 2,498 -- -- -- -- --
Collection of Series
E convertible stock
subscription
receivable......... -- -- -- -- -- -- -- 21 --
Issuance of 148,852
shares of Series F
convertible
preferred stock for
cash at $6.72 per
share.............. -- -- 148,852 1,000 -- -- -- -- --
Issuance of 101,889
shares of common
stock in February
1996 as bonuses to
officers and
employees valued at
$0.58 per share.... -- -- -- -- 101,889 1 58 -- --
Issuance of 8,167
shares of common
stock in May 1996
for consulting
services, valued at
$0.58 per share.... -- -- -- -- 8,167 -- 5 -- --
Exercise of options
to purchase common
stock at $0.58 per
share.............. -- -- -- -- 122,735 1 70 -- --
Net loss............ -- -- -- -- -- -- -- -- (4,735)
--------- ------ --------- ------- --------- --- ---- ---- --------
BALANCES, December
31, 1996............ 33,734 1 3,457,180 15,137 1,497,408 15 359 (3) (15,688)
Issuance of
2,499,683 shares of
Series F
convertible
preferred stock for
cash at $6.72 per
share, net of
offering costs of
$245 (unaudited)... -- -- 2,499,683 16,548 -- -- -- -- --
Exercise of warrants
to purchase 8,780
shares of Series E
convertible
preferred stock at
$5.72 per share
(unaudited)........ -- -- 8,780 51 -- -- -- -- --
Reclassification of
stock subscription
receivable
collected after
period end......... -- -- -- -- -- -- -- 3 --
Net loss
(unaudited)........ -- -- -- -- -- -- -- -- (3,443)
--------- ------ --------- ------- --------- --- ---- ---- --------
BALANCES, June 30,
1997 (unaudited).... 33,734 $ 1 5,965,643 $31,736 1,497,408 $15 $359 $-- $(19,131)
========= ====== ========= ======= ========= === ==== ==== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FOR THE YEARS FROM INCEPTION FROM INCEPTION
ENDED DECEMBER 31, (AUGUST 10, FOR THE SIX MONTHS ENDED (AUGUST 10,
------------------------- 1990) TO --------------------------- 1990) TO
1994 1995 1996 DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1997 JUNE 30, 1997
------- ------- ------- ----------------- ------------- ------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $(3,110) $(3,191) $(4,735) $(15,688) $(2,018) $(3,443) $(19,131)
Adjustments to
reconcile net loss to
net cash from
operating
activities--
Depreciation expense
and other............. 10 12 33 71 8 25 96
Issuance of common
stock for services.... 7 -- 5 12 -- -- 12
Other.................. -- 9 -- 11 -- 3 14
Decrease (increase) in
advances to employees. (3) 2 1 (4) (4) 3 (1)
Increase in prepaid
expenses.............. (29) (16) (13) (67) (10) (162) (229)
Increase (decrease) in
accounts payable and
accrued liabilities... 210 483 (195) 1,174 (122) (253) 921
------- ------- ------- -------- ------- ------- --------
Net cash flows from
operating
activities.......... (2,915) (2,701) (4,904) (14,491) (2,146) (3,827) (18,318)
------- ------- ------- -------- ------- ------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of
equipment............. (19) (23) (161) (256) (112) (62) (318)
Cash (paid for)
received from
deposits.............. 2 (3) -- (11) -- -- (11)
------- ------- ------- -------- ------- ------- --------
Net cash flows from
investing
activities........... (17) (26) (161) (267) (112) (62) (329)
------- ------- ------- -------- ------- ------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of convertible
preferred stock, net
of related offering
costs................. 2,202 3,534 3,498 9,291 2,496 16,511 25,802
Proceeds from exercise
of warrants to
purchase Series E
convertible preferred
stock................. -- -- -- -- -- 51 51
Collection of
shareholder
receivable............ -- -- 21 21 21 -- 21
Cash received for
common stock options
exercised............. -- -- 71 71 71 -- 71
Proceeds from bridge
loan (Note 4)......... -- 791 -- 791 -- -- 791
Partner cash contribu-
tions................. -- -- -- 5,312 -- -- 5,312
Increase in restricted
cash.................. -- -- (194) (194) -- (4) (198)
Borrowings............. -- -- 150 150 137 -- 150
Repayment of
borrowings............ -- -- (39) (39) -- (24) (63)
------- ------- ------- -------- ------- ------- --------
Net cash flows from
financing
activities........... 2,202 4,325 3,507 15,403 2,725 16,534 31,937
------- ------- ------- -------- ------- ------- --------
Net increase (decrease)
in cash and cash
equivalents............ (730) 1,598 (1,558) 645 467 12,645 13,290
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 1,335 605 2,203 -- 2,203 645 --
------- ------- ------- -------- ------- ------- --------
CASH AND CASH
EQUIVALENTS, end of
period................. $ 605 $ 2,203 $ 645 $ 645 $ 2,670 $13,290 $ 13,290
======= ======= ======= ======== ======= ======= ========
SUPPLEMENTAL
DISCLOSURES OF NONCASH
FINANCING ACTIVITIES:
Conversion of
partners' investment
to preferred stock.... $ -- $ -- $ -- $ 4,927 $ -- $ -- $ 4,927
======= ======= ======= ======== ======= ======= ========
Conversion of bridge
loan to preferred
stock................. $ -- $ 800 $ -- $ 800 $ -- $ -- $ 800
======= ======= ======= ======== ======= ======= ========
Issuance of preferred
stock to investment
advisors.............. $ -- $ -- $ 146 $ 146 $ -- $ 115 $ 261
======= ======= ======= ======== ======= ======= ========
Issuance of common
stock as payment of
management bonus ..... $ -- $ -- $ 59 $ 59 $ -- $ -- $ 59
======= ======= ======= ======== ======= ======= ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
Cell Pathways, Inc. (the "Company") is a pharmaceutical company focused on
the development and commercialization of products to prevent and treat cancer.
The intended product line is a portfolio of pharmaceuticals to treat
precancerous dysplasias which are known to predispose to cancer.
The Company is in the development stage and has yet to generate revenues.
There is no assurance of any future revenues. The Company's products are
subject to long development cycles and there is no assurance the Company will
be able to successfully develop, manufacture, obtain regulatory approval for
or market its products. During the period required to develop its products,
the Company plans to continue to finance operations through debt and equity
financings (see Notes 4 and 6). There is no assurance, however, that such
additional funding will be available to the Company when required. The Company
will continue to be considered in the development stage until such time as it
generates significant revenues from its principal operations. As of December
31, 1996, the Company had a deficit accumulated during the development stage
of $15,688,000.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying
financial statements, the Company is a development-stage enterprise with no
significant operating results to date. The factors discussed above raise
substantial doubt about the ability of the Company to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The Company is a Delaware corporation and is the successor to Cell Pathways
Limited Partnership (the "Partnership"). The Partnership was formed on August
10, 1990 pursuant to the laws of the State of Illinois under the name of FGN
Pharmaceutical Research Limited Partnership. The Partnership Agreement was
amended on December 9, 1992 to provide for additional financing, admission of
a new general partner (the Company) and new limited partners, change in the
name of the Partnership and eventual conversion of the Partnership to
corporate form. On September 29, 1993, the assets and liabilities of the
Partnership were acquired by the Company in exchange for the preferred and
common stock of the Company, thereby converting the business from partnership
to corporate form. The accompanying financial statements include the accounts
of the Partnership from inception (August 10, 1990) through September 29,
1993, and the accounts of the successor Delaware corporation thereafter.
In October 1997, the Company effected a 1-for-1.8157 reverse stock split.
All share and per share amounts have been restated in the aggregate to reflect
this event. Such amounts may be adjusted upon determination of fractional
shares.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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.
F-8
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash, Cash Equivalents and Restricted Cash
For purposes of the statements of cash flows, the Company considers all
highly liquid instruments with an original maturity of three months or less to
be cash equivalents. As of December 31, 1996 and June 30, 1997, approximately
$194,000 and $198,000 (unaudited) of cash and cash equivalents was restricted
to secure letters of credit and other indebtedness of the Company (See Note
7).
Equipment
Depreciation of equipment is provided on the straight-line method over
estimated useful lives of five to seven years.
Research and Development
Costs incurred in connection with research and development activities are
expensed as incurred. These costs consist of direct and indirect costs
associated with specific projects, as well as fees paid to various entities
that perform certain research on behalf of the Company.
Stock Compensation
The Company accounts for stock option grants in accordance with Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the Company's stock option plan, options may be granted at
not less than the fair market value on the date of the grant and therefore no
compensation expense is recognized for stock options granted to employees. In
1996, the Company adopted the disclosure provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation."
Unaudited Pro Forma Net Loss Per Share
The Company's historical capital structure is not indicative of its
prospective structure due to the automatic conversion of all shares of
convertible preferred stock into common stock concurrent with the closing of
the Company's anticipated initial public offering ("IPO"). Accordingly,
historical net loss per common share is not considered meaningful as it would
differ materially from the pro forma net loss per common share and common
stock equivalent shares given the contemplated changes in the capital
structure of the Company.
Pro forma net loss per common share is computed using the weighted average
number of common shares outstanding during the period. Common equivalent
shares from stock options and warrants are excluded from the computation as
their effect is anti-dilutive, except as required by the SEC. Pursuant to
Securities and Exchange Commissions Staff Accounting Bulletin No. 83, common
stock and common stock equivalent shares issued by the Company during the 12
months immediately preceding the filing of the IPO, plus shares which became
issuable during the same period as a result of the granting of options to
purchase common stock, have been included in the calculation of weighted
average number of shares of common stock as if they were outstanding for all
periods presented (using the treasury stock method). Accordingly, those common
stock and common stock equivalent shares issued during the 12 months
immediately preceding the filing of the IPO have been included in the
computation of pro forma net loss per common share. In addition, the Company
has assumed the conversion of convertible preferred stock issued into common
stock for all periods presented.
F-9
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. SFAS
128 is effective for fiscal years ending after December 15, 1997; early
adoption is not permitted. SFAS 128 replaces primary and fully diluted
earnings per share with basic and diluted earnings per share, respectively.
The Company does not expect that SFAS 128 will have a material effect on its
reported pro forma net loss per share.
Unaudited Pro Forma Information
Upon closing of the Company's IPO, all of the outstanding shares of Series
A, B, C, D, E, and F convertible preferred stock will be automatically
converted into shares of common stock on a share for share basis. The
unaudited pro forma balance sheet as of June 30, 1997 reflects the conversion
of 5,965,688 shares of preferred stock into 5,965,688 shares of common stock.
Interim Financial Statements
The financial statements as of June 30, 1997 and for the six months ended
June 30, 1996 and 1997 are unaudited and include all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for such interim periods. The
results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire year.
(3) RESEARCH AND DEVELOPMENT CONTRACTS
The Company enters into clinical trial, consulting, research and other
agreements for goods and services. Under such agreements, the Company may pay
for services on an annual, monthly or project basis. Under an agreement with
the University of Arizona, the Company will pay a royalty to the University of
Arizona with regard to the sale of future products, if developed, based on
certain patents.
In 1994, the Company entered into a Clinical Trials Agreement with the
National Cancer Institute ("NCI"), pursuant to which the NCI may sponsor
certain clinical trials.
F-10
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) STOCKHOLDERS' EQUITY AND PARTNERS' INVESTMENT
The Company is authorized to issue a total of 30,061,250 shares of stock,
consisting of 13,000,000 shares of $0.01 par value convertible preferred
stock, 61,250 shares of $0.01 par value redeemable preferred stock and
17,000,000 shares of $0.01 par value common stock. Convertible preferred stock
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Series A, 480,459 shares authorized and
outstanding, entitled to a preference in
liquidation of $1,012,000............... $ 812,000 $ 812,000 $ 812,000
Series B, 467,078 shares authorized and
outstanding, entitled to a preference in
liquidation of $1,052,000............... 868,000 868,000 868,000
Series C, 385,525 shares authorized and
outstanding, entitled to a preference in
liquidation of $1,540,000............... 1,540,000 1,540,000 1,540,000
Series D, 371,950 shares authorized,
339,696 shares issued and outstanding,
entitled to a preference in liquidation
of $1,860,000........................... 1,860,000 1,860,000 1,860,000
Series E, 1,765,085 shares authorized,
1,146,607, 1,635,569 and 1,644,350
shares issued and outstanding,
respectively, entitled to a preference
in liquidation of $6,558,000, $9,354,000
and $9,405,000, respectively............ 6,559,000 9,057,000 9,108,000
Series F, 2,863,909 authorized, none,
148,852 and 2,648,535 issued and
outstanding, entitled to a preference in
liquidation of zero, $1,000,000 and
$17,793,000, respectively............... -- 1,000,000 17,548,000
----------- ----------- -----------
$11,639,000 $15,137,000 $31,736,000
=========== =========== ===========
</TABLE>
Each share of Series A, B, C, D, E and F convertible preferred stock is
convertible into one share of common stock at any time at the option of the
holder and is entitled to vote as if converted into common stock. Each share
of each such series of the convertible preferred stock is mandatorily
convertible into one share of common stock upon the earlier of: (i) the
affirmative vote or consent of at least 67% of the holders of such shares;
(ii) the resolution of the board of directors to such effect at a time when
fewer than 25% of the originally issued convertible preferred shares are
outstanding; or (iii) the closing of a firm commitment underwritten public
offering at a public offering price equal to or exceeding $11.98 per share of
common stock (as adjusted) resulting in aggregate proceeds to the Company
and/or the selling stockholders (before underwriter discounts and other
offering expenses) of $10 million or more.
Series A, B, C, D, E and F convertible preferred shares have per share
liquidation preferences of $2.11, $2.25, $3.99, $5.48, $5.72 and $6.72,
respectively. Series A, B, C and D correspond to similarly designated classes
of limited partnership units issued by the Partnership pursuant to financings
arranged in 1990 (Class A), 1991 (Class B) and 1992 (Classes C and D). The
ranking of
F-11
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
liquidation preferences is Series F, Series E, Series C, Series D, Series B,
Series A and then the redeemable preferred stock. In March of 1994, the
Company issued 9,179 shares of common stock to Lehman Brothers, Inc. as
partial payment for financial advisory services.
In April 1994, the Company commenced an offering of Series E convertible
preferred stock at a price of $7.44 per share. The Company issued 298,927
Series E convertible preferred shares, and warrants to purchase an additional
10,335 shares of Series E convertible preferred stock at $7.44 resulting in
proceeds to the Company of $2,225,000. In conjunction with the Company's 1995
financing (see below), the Series E convertible preferred stock was repriced
to $5.72 per share, the same price as the 1995 financing. Accordingly, the
Company issued an additional 90,159 shares, and warrants to purchase
additional 3,114 shares of Series E convertible preferred stock at $5.72 per
share.
In June through August 1995, as the first step in offering additional Series
E convertible preferred stock, the Company borrowed $791,000 from certain of
its stockholders. In August 1995, this bridge loan, together with interest at
9%, was converted into 139,689 shares of Series E convertible preferred stock
at $5.72 per share. In connection with the bridge loan, warrants to purchase
an additional 69,147 shares of Series E convertible preferred stock at $5.72
per share were issued, which are exercisable until the earlier of June 5,
1999, or the closing of an initial public offering of securities by the
Company or the sale of all or substantially all of the assets of the Company.
In August 1995, the Board of Directors authorized the issuance and sale of up
to $7 million of Series E convertible preferred stock at $5.72 per share,
including conversion of the bridge loan. During the year ended December 31,
1995, the Company issued 617,833 additional shares of Series E convertible
preferred stock and warrants to purchase an additional 47,001 shares of Series
E convertible preferred stock at $5.72 per share, resulting in proceeds to the
Company of $3,534,000; and in January through May of 1996, the Company issued
an additional 463,351 shares of Series E convertible preferred stock at $5.72
per share, resulting in proceeds to the Company of $2,650,000. This offering,
including conversion of the bridge loan, resulted in the issuance of 1,220,956
shares of Series E convertible preferred stock and warrants to purchase
116,147 shares of Series E convertible preferred stock, resulting in net
proceeds of $6,832,000. In May of 1996, the Company issued 25,528 shares of
Series E convertible preferred stock and $154,000 cash as payment for
financial advisory services.
During 1996 the Company issued 101,889 shares of common stock as bonuses to
officers and employees, and 8,167 shares of common stock were issued for
consulting services.
In December 1996, the Company commenced a private offering of Series F
convertible preferred stock and related warrants at $6.72 per share. As of
December 31, 1996, the Company had issued 148,852 shares of Series F
convertible preferred stock and warrants to purchase 7,443 additional shares
of Series F convertible preferred stock, resulting in proceeds to the Company
of $1,000,000. Subsequent to year end, the Company had issued 2,482,565
additional shares of Series F convertible preferred stock and warrants to
purchase an additional 61,865 shares of Series F convertible preferred stock,
resulting in net proceeds to the Company of $16,548,000. The warrants are
exercisable until the earlier of July 20, 1999, or the sale of all or
substantially all of the assets of the Company. In addition, the Company
issued 17,118 shares of Series F convertible preferred stock as compensation
for services rendered in connection with the offering of the Series F
convertible preferred stock.
The certificate of incorporation and a stockholders' agreement entered into
among the Company, the founder and certain venture capital investors in
conjunction with the December 1992 financing provide for class voting or
combined class voting under certain circumstances. The stockholders'
F-12
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
agreement provides for an agreed upon process for the election of directors
which has the effect that the signatories thereof, through the size of their
holdings, can determine which individuals become directors of the Company. The
stockholders' agreement also provides for registration rights and the priority
thereof, and for certain rights of first refusal and of co-sale with respect
to securities of the Company.
(5) REDEEMABLE PREFERRED STOCK
The redeemable preferred stock carries no vote and no dividend and is not
convertible into common stock. The redeemable preferred stock is mandatorily
redeemable in an aggregate amount of $1,092,000, upon the closing of any firm
commitment underwritten public offering of common stock. Such redemption may
be made either in cash, registered common stock, or a combination of the two,
at the Company's option.
The redeemable preferred stock is held by FGN, Inc. (the former general
partner). It is anticipated that all but $75,000 of the proceeds received by
FGN, Inc. from the redemption of the preferred stock will be paid by FGN, Inc.
to certain of the founding and continuing participants in the business.
Accordingly, upon determination that redemption is probable, the Company
expects to record the amount paid for redemption as compensation expense.
Company preparations during the third quarter of 1997 for a possible initial
public offering of common stock later in 1997 make it probable that the
Company will record such expense in the amount of $1,017,000 in the third
quarter of 1997.
(6) STOCK OPTIONS AND WARRANTS
In 1993, the Company adopted a stock option plan, pursuant to which the
Company is authorized to grant options with respect to 1,294,266 shares of
common stock for issuance to eligible employees, directors and consultants. As
of September 30, 1997, options with respect to 576,279 shares have been
issued, 260,836 have been exercised and 281,572 shares were outstanding. The
stock options granted may be either incentive stock options ("ISO") or
nonstatutory stock options ("NSO"). Such options may be granted only at an
exercise price not less than the fair market value of the shares at the date
of grant. The board of directors may set the rate at which the options become
exercisable and determine when the options expire, subject to the limitations
described below. The options granted may be exercised up to ten years
following the date of grant. All options will generally become exercisable in
the event the Company is sold or has other significant changes in ownership.
Generally, the options vest ratably over a four-year period.
The Company accounts for stock options granted to employees under the 1993
Stock Option Plan in accordance with the intrinsic value method provided for
under APB Opinion No. 25. Under the 1993 Stock Option Plan, options may be
granted at not less than the fair market value on the date of the grant and
therefore no compensation expense is, or has been, recognized in respect of
stock options awarded to employees. The option pricing models recommended by
SFAS No. 123 for recognition of, or disclosure of pro forma, compensation cost
in respect of employee stock options are option pricing models which have been
developed for fully transferable, traded options having no vesting
requirements and which require the input of subjective assumptions including
expected stock price volatility. Because the Company's employee stock options
have characteristics significantly different from those of traded options, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its stock options. Had
compensation cost for the 1993 Stock Option Plan been recognized in the income
statements under SFAS No. 123, the Company's net loss would have increased to
the following pro forma amounts:
F-13
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net loss:
As reported..................................... $(3,191,000) $(4,735,000)
=========== ===========
Pro forma (unaudited)........................... $(3,192,000) $(4,767,000)
=========== ===========
Pro forma net loss per share:
As reported (unaudited)......................... $ (0.62)
===========
Pro forma (unaudited)........................... $ (0.62)
===========
</TABLE>
The pro forma disclosures made above do not reflect options granted prior to
January 1, 1995. This pro forma compensation cost may also not be
representative of the effects which SFAS No. 123 may have on the disclosure of
pro forma compensation cost and resulting pro forma net loss in future years.
A summary of the status of the 1993 Stock Option Plan at December 31, 1996
and 1995 and changes during the years then ended is presented in the table and
narrative below.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
1994 1995 1996 JUNE 30, 1997
---------------- ----------------- ------------------- -----------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
FIXED PRICE OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------------------- ------ --------- ------- --------- -------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 82,392 $0.58 89,964 $0.60 102,907 $0.60 262,157 $0.71
Granted............... 7,572 0.74 12,943 0.58 287,768 0.69 46,814 1.82
Exercised............. -- -- -- -- (122,735) 0.58 -- --
Forfeited............. -- -- -- -- (5,783) 0.58 -- --
Expired............... -- -- -- -- -- -- -- --
------ ------- -------- -------
Outstanding at end of
year................... 89,964 $0.60 102,907 $0.60 262,157 $0.71 308,971 $0.87
====== ======= ======== =======
Vested and exercisable
at end of year......... 53,106 $0.58 16,132 $0.69
======= ========
Weighted average fair
value of options
granted during the year
per SFAS 123........... $0.07 $0.11
===== =====
</TABLE>
F-14
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes information about employee stock options
outstanding and exercisable at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -----------------------
NUMBER OF WEIGHTED
OPTIONS AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1996 LIFE IN YEARS PRICE 1996 PRICE
-------- -------------- ------------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.58 158,203 9.35 $0.58 11,084 $0.58
$0.74 7,572 7.75 0.74 5,048 0.74
$0.91 96,382 9.80 0.91 -- --
------- ------
262,157 16,132
======= ======
</TABLE>
Subsequent to June 30, 1997 the Company granted options to purchase 138,789
shares of common stock at $6.72 per share and options to purchase 138,101
shares of common stock were exercised, and options to purchase 28,088 shares
of common stock were cancelled. As of September 30, 1997, there were options
outstanding to purchase 281,572 shares (unaudited) of common stock outstanding
with exercise prices ranging from $0.58 to $6.72 per share. The Company is
authorized to grant options with respect to 751,859 additional shares of
common stock under the 1993 Stock Option Plan.
Options to purchase 96,382 of common stock issued during October 1996 at
$0.91 were granted to the Company's current Chief Executive Officer.
Generally, the options vest ratably over a four-year period. Pursuant to the
terms of his employment agreement, a minimum of 48,191 of these options will
vest if his employment is terminated without cause.
All options issued under the 1993 Stock Option Plan are immediately
exercisable but any unvested shares exercised are held by the Company and are
subject to reacquisition by the Company should employment terminate prior to
completion of applicable vesting periods.
For purposes of the pro forma disclosure set forth above, the fair value of
each option grant is estimated on the date of grant as provided by SFAS No.
123 and using the following additional assumptions: risk-free interest rate--
6.15%; expected dividends--0%; volatility--80% and expected life of option--6
years.
In 1995, the Company adopted the 1995 Cell Pathways, Inc. Stock Award Plan
pursuant to which the Company may award shares of common stock to employees,
directors and consultants as part or all of their compensation, whether
salary, bonus or fee and whether for past services or as incentive for current
and future services. The only awards which have been made under this plan were
made during 1996 by way of bonus compensation to officers and employees of the
Company for the years 1993, 1994 and 1995. In accordance with APB Opinion No.
25, a compensation charge of $59,000 associated with the issuance of 101,889
shares of common stock having a fair market value of $0.58 per share at the
date of grant, was recognized in the year ended 1995.
In December 1992, the Company issued a warrant to purchase 6,664 shares of
Class D convertible preferred stock at an exercise price of approximately
$5.48 per share. The warrant expired on December 31, 1996 in accordance with
its terms.
F-15
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In connection with the offerings of Series E convertible preferred stock in
1994 and 1995, the Company issued warrants to purchase an aggregate of 129,597
additional shares of Series E convertible preferred stock, exercisable at
$5.72 per share until the earlier of: (i) the closing of an initial public
offering of securities by the Company; (ii) the sale of all or substantially
all of the assets of the Company; and (iii) August 31, 1997 (in the case of
60,450 shares all of which have been exercised) or June 5, 1999 (in the case
of 69,147 shares). During 1996, warrants were exercised to purchase 82 shares
of Series E convertible preferred stock. During the six months ended June 30,
1997, warrants to purchase 8,780 shares of Series E convertible preferred
stock were exercised for cash at $5.72 per share. Subsequent to June 30, 1997,
warrants to purchase 84,950 shares of Series E convertible preferred stock
were exercised at $5.72 per share. Further, holders of warrants to purchase
9,173 shares of Series E convertible preferred stock tendered their warrants
in a cashless exercise in exchange for 1,364 shares of Series E convertible
preferred stock at $6.72 per share. As of September 30, 1997, warrants to
purchase 64,776 shares of Series E convertible preferred stock were
outstanding.
In connection with the offerings of Series F convertible preferred stock,
commencing in December of 1996, the Company issued in December of 1996
warrants to purchase 7,443 shares of Series F convertible preferred stock, and
subsequent to year end, warrants to purchase 61,865 shares of Series F
convertible preferred stock, at an exercise price of $6.72 per share, all
exercisable until the earlier of: (i) July 20, 1999; or (ii) the sale of all
or substantially all of the assets of the Company.
(7) DEBT
In March 1996, the Company borrowed $150,000 from a bank. The note bears
interest at a rate of 7.79% and is payable in equal monthly installments
through March 1999. As of December 31, 1996, the principal amount outstanding
was $112,000.
(8) INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." As of December 31, 1996, the Company had approximately $11,520,000 of
net operating loss carryforwards ("NOLs") for income tax purposes available to
offset future federal income tax, subject to limitations for alternative
minimum tax. The NOLs are subject to examination by the tax authorities and
expire between 2008 and 2011.
Prior to its conversion into corporate form, the business had accumulated
losses totaling approximately $3,900,000. For tax purposes these losses were
distributed to the partners in accordance with the provisions of the
Partnership Agreement. Thus, these losses, while included in the financial
statements of the Company, are not available to offset future taxable income,
if any, of the Company.
The Tax Reform Act of 1986 contains provisions that may limit the NOLs
available to be used in any given year upon the occurrence of certain events,
including significant changes in ownership interest. A change in ownership of
a company of greater than 50% within a three-year period results in an annual
limitation on the Company's ability to utilize its NOLs from tax periods prior
to the ownership change.
F-16
<PAGE>
CELL PATHWAYS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred income tax asset at December 31, 1994,
1995 and 1996, were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net operating loss
carryforwards.......... $ 1,400,000 $ 2,550,000 $ 4,310,000
Less--valuation
allowance.............. (1,400,000) (2,550,000) (4,310,000)
----------- ----------- -----------
$ -- $ -- $ --
=========== =========== ===========
</TABLE>
The Company has not yet achieved profitable operations. Accordingly,
management believes the tax assets as of December 31, 1996 do not satisfy the
realization criteria set forth in SFAS No. 109 and has recorded a valuation
allowance for the entire net tax asset.
(9) COMMITMENTS AND CONTINGENCIES
In August 1993, the Company entered into a lease for laboratory facilities
located in Aurora, Colorado. The lease is for a term of five and one-half
years beginning in January 1994 and provides for a renewal option of an
additional five years at the end of the initial term. In July 1997, the
Company signed a lease for office and laboratory space in Horsham,
Pennsylvania. This lease is for a period of 10 years. The Company has an
option to purchase the Horsham facility by March 31, 1998 for $3.4 million.
Aggregate minimum rental payments under the Aurora and Horsham leases are as
follows:
<TABLE>
<S> <C>
1997.............................. $ 124,000
1998.............................. 457,000
1999.............................. 440,000
2000.............................. 440,000
2001.............................. 440,000
Thereafter........................ 2,599,000
----------
Total........................... $4,500,000
==========
</TABLE>
Rental expenses under this lease and other month-to-month leases entered
into by the Company totaled $55,000, $57,000 and $95,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
In 1995, the Company entered into a contractual agreement with one of its
vendors to perform testing. Pursuant to the agreement, the Company is
committed to pay the following amounts for continuing testing activities:
$410,000 and $670,000 in 1997 and 1998, respectively.
F-17
<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 OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 26
Management............................................................... 46
Certain Transactions..................................................... 53
Principal Stockholders................................................... 56
Description of Capital Stock............................................. 58
Shares Eligible for Future Sale.......................................... 61
Underwriting............................................................. 63
Legal Matters............................................................ 64
Experts.................................................................. 64
Additional Information................................................... 65
Index to Financial Statements............................................ F-1
</TABLE>
---------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
CELL PATHWAYS, INC.
COMMON STOCK
($.01 PAR VALUE)
SALOMON BROTHERS INC
BANCAMERICA ROBERTSON STEPHENS
COWEN & COMPANY
PROSPECTUS
DATED , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discount and commissions, payable by the registrant in connection with the
sale of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee................................................... $ 11,326
NASD filing fee.................................................... 4,238
Nasdaq application fee............................................. 1,000
Blue sky qualification fee and expenses............................ 7,500
Printing and engraving expenses.................................... 150,000
Legal fees and expenses............................................ 250,000
Accounting fees and expenses....................................... 85,000
Transfer agent and registrar fees.................................. 3,000
Miscellaneous...................................................... 37,936
--------
Total............................................................ $550,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Company has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act
of 1933, as amended (the "Securities Act").
The Company's Restated Certificate of Incorporation provides for the
elimination of liability for monetary damages for breach of the Directors'
fiduciary duty of care to the Company and its stockholders. These provisions
do not eliminate the Directors' duty of care and, in appropriate
circumstances, equitable remedies such an injunctive or other forms of
nonmonetary relief will remain available under Delaware law. In addition, each
Director will continue to be subject to liability for breach of the Director's
duty of loyalty to the Company, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the Director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision does not affect a Director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its officers and Directors for certain liabilities arising under the
Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 1, 1994, the Company has sold and issued the following
unregistered securities:
(1) During the period, the Company granted stock options to employees,
consultants, directors, officers and affiliates of the Company as provided
below. From September 1, 1994 to December 31, 1994, the Company granted
stock options under the 1993 Stock Option Plan covering an aggregate of
7,572 shares of Common Stock at an exercise price of $0.74 per share. In
1995, the Company granted stock options under the 1993 Stock Option Plan
covering an aggregate of 12,942 shares of Common Stock at an exercise price
of $0.58 per share. In 1996, the Company granted stock options under the
1993 Stock Option Plan covering an aggregate of 287,767 shares of Common
Stock at an average exercise price of $0.69 per share. Since January
II-1
<PAGE>
1, 1997, the Company has granted stock options under its 1993 Stock Option
Plan covering an aggregate of 191,110 shares of Common Stock at an average
exercise price of $5.52 per share. Each of these options vests over a
period of time following its respective date of grant.
(2) On March 26, 1996, the Company awarded an aggregate of 101,888 shares
of restricted stock, pursuant to its 1995 Stock Award Plan, to Christopher
J. Blaxland, Claire M. Ganz, Floyd G. Nichols, Rifat Pamukcu, Gary A.
Piazza and Richard H. Troy.
(3) In April 1994, the Company commenced a private offering of Series E
Convertible Preferred Stock ("Series E Preferred") at a price of $7.44 per
share. Between April 1994 and July 1994, the Company sold to institutional
investors and accredited investors a total of 298,926 shares of Series E
Preferred and warrants to purchase an additional 10,335 shares of Series E
Preferred at $7.44 per share. In August 1995, in connection with repricing
the Series E Preferred to $5.72 per share, the Company's Board of Directors
authorized the issuance of additional Series E Preferred. In conjunction
with this new price, the Company issued 90,158 shares of Series E Preferred
and 3,113 warrants to purchase Series E Preferred to the previous holders
of Series E Preferred.
(4) Between August 1995 and May 1996, the Company issued to certain
stockholders 1,220,872 shares of Series E Preferred and warrants to
purchase an additional 116,147 shares of Series E Preferred at $5.72 per
share, which include 139,688 shares of Series E Preferred and warrants to
purchase an additional 69,146 shares of Series E Preferred issued in August
1995, when the Company converted a bridge loan of $791,000 evidenced by
convertible promissory notes with a 9% annual interest rate. In May 1996,
the Company issued 25,528 shares of Series E Preferred to Lehman Brothers,
Inc. and Lunn Partners, LLC as partial payment for financial advisory
services.
(5) In December 1996, the Company commenced a private offering of Series
F Convertible Preferred Stock ("Series F Preferred") at a price of $6.72
per share. Between mid-December 1996 and June 1997, the Company issued to
institutional investors and accredited investors an aggregate of 2,631,374
shares of Series F Preferred and warrants to purchase an additional 69,308
shares of Series F Preferred at $6.72 per share. In addition, the Company
issued 17,117 shares of Series F Preferred as compensation for services
rendered in connection with the offering of the Series F Preferred.
The sales and issuance of securities in the transactions described in
paragraphs (1) and (2) above were deemed to be exempt from registration under
the Securities Act by virtue of Rule 701 promulgated thereunder in that they
were offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by Rule
701.
The sales and issuances of securities in the transactions described in
paragraphs (3), (4) and (5) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) thereof and/or Regulation D
promulgated under the Securities Act. The purchasers in each case represented
their intention to acquire the securities for investment only and not with a
view to the distribution thereof. Appropriate legends are affixed to the stock
certificates issued in such transactions. All recipients either received
adequate information about the Company or had access, through employment or
other relationships, to such information.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Underwriting Agreement.
3.1 Fifth Amended and Restated Certificate of Incorporation of the
Company.
3.2 Certificate of Amendment to Fifth Amended and Restated Certificate of
Incorporation of the Company.
3.3* Form of Sixth Amended and Restated Certificate of Incorporation to be
effective upon the closing of the offering.
3.4 Bylaws of the Company.
3.5* Form of Amended and Restated Bylaws of the Company to be effective
upon the closing of the offering.
4.1 Reference is made to Exhibits 3.1 through 3.5
4.2* Specimen stock certificate representing shares of Common Stock of the
Company.
5.1* Opinion of Cooley Godward LLP regarding the legality of the securities
being registered.
10.1 Third Amended and Restated Stockholders' Agreement, dated as of
December 31, 1996 among the Company and the stockholders listed on
the signature pages thereto.
10.2 1993 Stock Option Plan, as amended.
10.3 Form of Incentive Stock Option Agreement.
10.4 Form of Non-Qualified Stock Option Agreement.
10.5 Form of Early Exercise Stock Purchase Agreement.
10.6 1995 Stock Award Plan.
10.7 Form of Series E Preferred Stock Subscription Agreement.
10.8 Form of Series E Preferred Stock Purchase Warrant.
10.9 Note, Preferred Stock and Warrant Purchase Agreement, dated December
13, 1996, between the Company and The Goldman Sachs Group, L.P.
10.10 Stock Purchase Agreement, dated May 23, 1997, between the Company and
New York Life Insurance Company.
10.11 Form of Series F Preferred Stock Subscription Agreement.
10.12 Form of Series F Preferred Stock Purchase Warrant.
10.13 Employment Agreement, dated October 12, 1996, between the Company and
Robert J. Towarnicki.
10.14* Form of Employment Agreement between the Company and Robert J.
Towarnicki to be effective upon the closing of the offering.
10.15 Employment Agreement, dated September 1, 1993, between the Company and
Christopher J. Blaxland.
10.16* Form of Employment Agreement between the Company and Christopher J.
Blaxland to be effective upon the closing of the offering.
10.17 Employment Agreement, dated February 1, 1993, between the Company and
Rifat Pamukcu.
10.18* Form of Employment Agreement between the Company and Rifat Pamukcu to
be effective upon the closing of the offering.
10.19 Memorandum of Employment, dated January 1, 1993, between the Company
and Richard H. Troy.
10.20* Form of Employment Agreement between the Company and Richard H. Troy
to be effective upon the closing of the offering.
10.21 Agreement, dated June 30, 1994, between the Company and the Division
of Cancer Prevention and Control, National Cancer Institute.
10.22 Amendment to Agreement between the Company and the Division of Cancer
Prevention and Control, National Cancer Institute, dated September 4,
1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.23** Research and License Agreement, dated June 26, 1991, between the
Company and the University of Arizona, as amended.
10.24 Lease, dated August 9, 1993, between the Company and WRC Properties,
Inc.
10.25 Lease, dated June 20, 1997, between the Company and Marave Associates,
L.P.
11.1 Statement re Computation of Per Share Earnings.
23.1* Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Brinks Hofer Gilson & Lione.
24.1 Power of Attorney (included on page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** The Company is applying for confidential treatment with respect to
portions of this Exhibit.
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
</TABLE>
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the consolidated financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of
the Company pursuant to the provisions described in Item 14 or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Company 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 Act
and will be governed by the final adjudication of such issue.
The undersigned Company undertakes that: (1) for purposes of determining any
liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Company
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, 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-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Horsham, State of Pennsylvania, on the 9th day of October, 1997.
Cell Pathways, Inc.
/s/ Richard H. Troy
By: __________________________________
RICHARD H. TROY
VICE PRESIDENT, FINANCE, LAW AND
ADMINISTRATION AND CORPORATE
SECRETARY
The undersigned Directors and/or officers of the Company, by virtue of their
signatures to this Registration Statement appearing below, hereby constitute
and appoint Robert J. Towarnicki and Richard H. Troy, or either of them, with
full power of substitution, as attorney-in-fact in their names, places and
steads to execute any and all amendments to this Registration Statement in the
capacities set forth opposite their names and hereby ratify all that said
attorneys-in-fact may do by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT NO. 333- HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Robert J. Towarnicki Chief Executive October 9, 1997
- ------------------------------------ Officer; Director
ROBERT J. TOWARNICKI (Principal
Executive Officer)
/s/ Richard H. Troy Vice President, October 9, 1997
- ------------------------------------ Finance, Law and
RICHARD H. TROY Administration;
Corporate Secretary;
Director (Principal
Financial and
Accounting Officer)
/s/ Christopher J. Blaxland President; Director October 9, 1997
- ------------------------------------
CHRISTOPHER J. BLAXLAND
/s/ William A. Boeger Chairman of the October 9, 1997
- ------------------------------------ Board of Directors
WILLIAM A. BOEGER
/s/ Thomas M. Gibson Director October 9, 1997
- ------------------------------------
THOMAS M. GIBSON
/s/ Robert J. Quy, Ph.D. Director October 9, 1997
- ------------------------------------
ROBERT J. QUY, PH.D.
/s/ Peter G. Schiff Director October 9, 1997
- ------------------------------------
PETER G. SCHIFF
/s/ Randall M. Toig, M.D. Director October 9, 1997
- ------------------------------------
RANDALL M. TOIG, M.D.
II-5
<PAGE>
EXHIBIT 3.1
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CELL PATHWAYS, INC.
Cell Pathways, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation and the name under which the Corporation
was originally incorporated is Cell Pathways, Inc. The date of filing of its
original Certificate of Incorporation with the Secretary of State is November
24, 1992.
2. This Fifth Amended and Restated Certificate of Incorporation amends and
restates the Certificate of Incorporation of the Corporation as heretofore
amended or supplemented.
3. This Fifth Amended and Restated Certificate of Incorporation was duly
proposed by the Board of Directors of the Corporation and adopted by the
stockholders of the Corporation in accordance with Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware, and written notice of such
adoption by the stockholders without a meeting by less than unanimous written
consent has been given to those stockholders from whom such consent was not
received.
4. The text of the Certificate of Incorporation as amended or supplemented
prior hereto is hereby amended and restated to read as herein set forth in full:
FIRST: The name of the Corporation is Cell Pathways, Inc.
1.
<PAGE>
SECOND: The registered office of the Corporation is to be located at 1013
Centre Road, City of Wilmington, County of New Castle, in the State of Delaware.
The name of its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware, as amended.
FOURTH: The classes of stock that the Corporation is authorized to issue,
and the powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, are as follows:
A. Authorized Stock. The Corporation is authorized to issue three
classes of stock designated, respectively, "Preferred Stock", "Redeemable
Preferred Stock" and "Common Stock." The total number of shares of all classes
of stock that the Corporation is authorized to issue is 30,061,250 shares,
consisting of 13,000,000 shares of Preferred Stock, $.01 par value, 61,250
shares of Redeemable Preferred Stock, $.01 par value and 17,000,000 shares of
Common Stock, $.01 par value.
B. Common Stock. Subject to the rights of any Preferred Stock or
Redeemable Preferred Stock then outstanding, each issued and outstanding share
of Common Stock shall entitle the Holder thereof to receive such dividends as
may be declared from time to time by the Board of Directors of the Corporation
out of funds legally available therefor, and shall entitle the Holder thereof to
share ratably with other Holders of Common Stock in all assets available for
distribution in the event of any liquidation, dissolution or winding up of the
Corporation. Each issued and outstanding share of Common Stock shall be
identical to all other shares of that class, and shall entitle the Holder
thereof to cast one vote on each matter submitted
2.
<PAGE>
to a vote of the Corporation's stockholders. No Holder of Common Stock shall be
entitled to any cumulative voting rights or to any preemptive rights upon the
issuance or sale of any Securities.
C. Redeemable Preferred Stock. Each share of Redeemable Preferred
Stock shall be identical to all other shares of that class, and shall have such
powers, preferences and relative rights, and the qualifications, limitations and
restrictions as are set forth in Section E of this Article FOURTH.
D. Preferred Stock. The Preferred Stock shall be divided into
series. Each share of Preferred Stock of any series shall be identical with all
other shares of that series. The first six series of Preferred Stock (the
"Designated Preferred Stock") are set forth in the following table, with each
such series to have the designation listed below and to consist of the number of
authorized shares of Preferred Stock set forth opposite such series designation:
<TABLE>
<CAPTION>
Series Designation Number of Shares
<S> <C>
Series A Convertible Preferred Stock 872,400
Series B Convertible Preferred Stock 848,100
Series C Convertible Preferred Stock 700,000
Series D Convertible Preferred Stock 675,350
Series E Convertible Preferred Stock 3,204,865
Series F Convertible Preferred Stock 4,500,000
Total 10,800,715
==========
</TABLE>
The Board of Directors is expressly authorized to provide for the
issuance from time to time of all or any of the undesignated shares of Preferred
Stock in one or more additional series, and to fix the number of shares of each
such series and to determine or alter for each such series such voting powers,
full or limited, or no voting powers and such designations, powers,
3.
<PAGE>
preferences and relative, participating, conversion or optional or other rights,
and such qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such shares and as may be permitted by the
Delaware General Corporation Law, as amended. The Board of Directors is also
expressly authorized to increase or decrease (but not below the number of shares
of such series then outstanding) the number of shares of Preferred Stock
comprising any series thereof so authorized subsequent to the issuance of shares
of that series. In the event that the number of shares of any such series shall
be so decreased, the shares constituting such decrease shall assume the status
of authorized but unissued shares of Preferred Stock without designation as to
series. Authorized shares of Series F Convertible Preferred Stock that have not
been issued, and for which unexercised warrants are not outstanding, as of June
30, 1997 shall assume the status of authorized but unissued shares of Preferred
Stock without designation as to series on such date, and the total number of
authorized shares of such series shall be reduced by such amount effective on
such date.
E. Rights of Preferred Stock and Redeemable Preferred Stock. The powers,
preferences and relative rights, and the qualifications, limitations and
restrictions, of each series of the Designated Preferred Stock and of the
Redeemable Preferred Stock are as follows:
1. Voting and Preemptive Rights. Each Holder of Designated Preferred
Stock shall be entitled to cast the number of votes per share thereof on each
matter submitted to the Corporation's stockholders for voting as is equal to the
number of full shares of Common Stock into which such share is then convertible
pursuant to Section E.5 of this Article FOURTH. Such votes shall be cast
together with those cast by the Holders of Common Stock as one class except as
otherwise provided in this Certificate of Incorporation or by law. Holders of
Designated Preferred Stock shall be entitled to notice of any stockholders'
meetings in accordance with the Bylaws of the Corporation. Except as provided in
this Certificate of Incorporation or by law, the Holders of Redeemable Preferred
Stock shall not have any right to vote on matters submitted to the Corporation's
stockholders for voting. No Holder of Designated
4.
<PAGE>
Preferred Stock or Redeemable Preferred Stock shall be entitled to any
cumulative voting rights or to any preemptive rights upon the issuance or sale
of any Securities.
2. Dividend Rights.
(a) Dividends. No dividends (other than those payable solely in
Common Stock and/or rights to acquire Common Stock) shall be declared, paid or
set apart for payment on the Common Stock unless a dividend is concurrently
declared, paid or set apart for payment, as the case may be, on all outstanding
shares of Designated Preferred Stock in an amount for each share of Designated
Preferred Stock equal to the amount the Holder thereof would have received had
such share of Designated Preferred Stock been converted into Common Stock
pursuant to Section E.5 of this Article FOURTH immediately prior to the record
date of such dividend.
(b) Other Distributions. In the event that the Corporation shall
declare a distribution on the Common Stock other than (i) cash dividends, (ii)
Common Stock dividends or (iii) any distribution described in Section E.3 of
this Article FOURTH, then in each such case each Holder of the Designated
Preferred Stock shall be entitled to receive a proportionate share of any such
distribution determined as the amount thereof such Holder would have received
had his shares of Designated Preferred Stock been converted into Common Stock
pursuant to Section E.5 of this Article FOURTH immediately prior to the record
date of such distribution.
(c) No Other Rights. Except as provided in this Section E.2, no
dividend or distribution in cash or other property (other than for a liquidating
distribution or a redemption made pursuant to Section E.3 or Section E.4 of this
Article FOURTH, respectively) shall be declared, paid or set apart for payment
by the Corporation on the Designated Preferred Stock. No dividend or
distribution in cash or other property (other than for a liquidating
distribution or a redemption made pursuant to Section E.3 or Section E.4 of this
Article FOURTH, respectively) shall be declared, paid or set apart for payment
by the Corporation on the Redeemable Preferred Stock.
3. Liquidation Rights.
(a) Preferences. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, then the Holders of the
Designated Preferred Stock and Redeemable Preferred Stock shall be entitled to
receive in accordance with Subsection E.3(c) of this Article FOURTH, for each
share of such Stock held by them, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the Holders of Common
Stock by reason of their ownership thereof, the respective per share amounts set
forth for such Stock in the following table together with all declared but
unpaid dividends thereon:
5.
<PAGE>
<TABLE>
<CAPTION>
Liquidation
Class/Series of Stock Preference
<S> <C>
Series A Convertible Preferred Stock $1.16
Series B Convertible Preferred Stock $1.24
Series C Convertible Preferred Stock $2.20
Series D Convertible Preferred Stock $3.0156
Series E Convertible Preferred Stock $3.15
Series F Convertible Preferred Stock $3.70
Redeemable Preferred Stock $20.00
</TABLE>
The foregoing per share liquidation preference amounts shall be appropriately
adjusted for any stock dividends, combinations or splits with respect to such
shares.
(b) Insufficient Assets. If upon the occurrence of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Corporation's property legally available for distribution among the Holders
of any class or series of Stock shall be insufficient to permit the payment to
such Holders of the full amount of their respective liquidation preferences,
then the entire property of the Corporation legally available for distribution
shall be distributed ratably among the Holders of such class or series, as the
case may be, in proportion to the aggregate preferential amounts that each such
Holder is otherwise entitled to receive.
(c) Ranking. All of the preferential amounts to be paid to the
Holders of the Series F Convertible Preferred Stock pursuant to this Section E.3
shall be paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any Corporation property to,
the Holders of the other Designated Preferred Stock, the Redeemable Preferred
Stock or the Common Stock pursuant to this Section E.3. All of the preferential
amounts to be paid to the Holders of the Series E Convertible Preferred Stock
pursuant to this Section E.3 shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the distribution of
any Corporation property to, the Holders of the Series A, B, C or D Convertible
Preferred Stock, the Redeemable Preferred Stock or the Common Stock pursuant to
this Section E.3. All of the preferential amounts to be paid to the Holders of
the Series C Convertible Preferred Stock pursuant to this Section E.3 shall be
paid or set apart for payment before the payment or setting apart for payment of
any amount for, or the distribution of any Corporation property to, the Holders
of the Series A, B, or D Convertible Preferred Stock, Redeemable Preferred
Stock, or the Common Stock pursuant to this Section E.3. All of the
preferential amounts to be paid to the Holders of the Series D Convertible
Preferred Stock pursuant to this Section E.3 shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any Corporation property to, the Holders of the Series A or
B Convertible Preferred Stock, the Redeemable Preferred Stock or the Common
Stock pursuant to this Section E.3. All of the preferential amounts to be paid
to the Holders of the Series B Convertible Preferred Stock pursuant to this
Section E.3 shall be paid or set apart for payment before the payment or setting
apart for payment of any amount for, or the distribution of any Corporation
property to, the Holders of the Series A Convertible Preferred Stock, the
Redeemable Preferred Stock or the Common Stock pursuant to this Section E.3.
All of the preferential amounts to be paid to the Holders of the Series A
Convertible Preferred
6.
<PAGE>
Stock pursuant to this Section E.3 shall be paid or set apart for payment before
the payment or setting apart for payment of any amount for, or the distribution
of any Corporation property to, the Holders of the Redeemable Preferred Stock or
the Common Stock pursuant to this Section E.3. Finally, all of the preferential
amounts to be paid to the Holders of the Redeemable Preferred Stock pursuant to
this Section E.3 shall be paid or set apart for payment before the payment or
setting apart for payment of any amount for, or the distribution of any
Corporation property to, the Holders of the Common Stock pursuant to this
Section E.3.
(d) Participation. After payment to the Holders of the Designated
Preferred Stock and the Redeemable Preferred Stock of the liquidation preference
amounts provided for above in this Section E.3, and the payment of all
liquidation preference amounts to all other series of Preferred Stock then
outstanding, then each Holder of Designated Preferred Stock shall be entitled to
receive such portion of the entire remaining property of the Corporation legally
available for distribution, if any, as (i) the number of shares of Common Stock
into which such Holder's Designated Preferred Stock is then convertible pursuant
to Section E.5 of this Article FOURTH bears to (ii) the number of shares of
Common Stock outstanding immediately prior to such liquidation, dissolution or
winding up assuming the exercise of all outstanding Options and the conversion
or exchange of all outstanding Convertible Securities (including, without
limitation, the conversion of all outstanding shares of Designated Preferred
Stock). Holders of Redeemable Preferred Stock shall have no right of
participation pursuant to this Subsection E.3(d).
(e) Certain Transactions. For purposes of this Section E.3, (i) any
acquisition of the Corporation by means of a merger, consolidation or other form
of corporate reorganization in which all of the outstanding shares of Stock of
the Corporation are exchanged for securities or other consideration issued, or
caused to be issued, by the acquiring corporation or its subsidiary (other than
solely a reincorporation transaction) or (ii) any sale of all or substantially
all of the assets of the Corporation, shall be deemed a liquidation, dissolution
or winding up of the Corporation. Upon the occurrence of any such event, the
Holders of Designated Preferred Stock and Redeemable Preferred Stock shall be
entitled to receive at the closing of such transaction in cash, securities or
other property (valued as provided in Subsection E.3(f) of this Article FOURTH)
the liquidation preferences as, and in the order, provided for in this Section
E.3, together with any participating distributions from the Corporation to which
they may thereafter be entitled pursuant to Subsection E.3(d) of this Article
FOURTH. Except as set forth in this Subsection E.3(e), neither the
consolidation or merger of the Corporation with or into any other corporation or
corporations, nor any reduction of the authorized or issued shares of any class
or series of Stock, whether now or hereafter authorized, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
any of the provisions of this Section E.3.
(f) Valuation. Whenever any distribution provided for in this Section
E.3 shall be payable in securities or property other than cash, the value of
such distribution shall be
7.
<PAGE>
the fair market value of such securities or property as determined in good faith
by the Board of Directors.
4. Redemption.
(a) Offer of Redemption. Subject to Subsections E.6(b) and E.6(d) of
this Article FOURTH, the Corporation may, at its option, offer to redeem, and
thereafter redeem from accepting Holders out of funds of the Corporation legally
available therefor, some or all of the outstanding shares of any class or series
of Stock on such terms as the Corporation shall determine; provided, that if
such an offer is made to the Holders of any class or series of Stock such offer
shall be made to all Holders of such class or series (as the case may be), for
such Holders to have their shares of Stock redeemed on identical terms, and any
Holders of any such class may refuse any such offer in their discretion.
Notwithstanding the foregoing, and subject to Subsection E.6(b), the Corporation
may redeem the shares of Stock of any Holder, either in whole or part, pursuant
to any employment, consulting or other agreements between the Corporation, on
the one hand, and employees, officers or directors of the Corporation,
consultants to the Corporation or other Persons performing services for the
Corporation, on the other hand, pursuant to which the Corporation has the option
or obligation to purchase such shares upon the occurrence of certain events,
such as the termination of employment.
(b) Mandatory Redemption. Immediately upon the closing of any sale of
Common Stock in a firm commitment, underwritten public offering registered under
the Securities Act, the Corporation shall redeem all, but not less than all, of
the Redeemable Preferred Stock for the sum of $20.00 per share, such sum to be
appropriately adjusted for any stock dividends, combinations or splits with
respect to the Redeemable Preferred Stock (such sum as so adjusted constituting
the "Redemption Price"). At the option of the Board of Directors of the
Corporation, the Corporation may make payment of the aggregate Redemption Price
to each Holder of Redeemable Preferred Stock as a result of any such public
offering either (i) in cash, (ii) in shares of freely transferable Common Stock
registered under the Securities Act having an aggregate offering price equal to
the aggregate Redemption Price to which such Holder is entitled, or (iii) partly
in cash and partly in such shares of Common Stock so long as each Holder of
Redeemable Preferred Stock receives the same proportion of cash and Common
Stock.
(c) Optional Redemption. Subject to Section E.6 (including Subsection
E.6(b)) of this Article FOURTH, the Corporation shall have the right, upon
notice given to all Holders of Redeemable Preferred Stock in accordance with
Subsection E.4(d) of this Article FOURTH, to redeem all (but not less than all)
of the shares of Redeemable Preferred Stock then outstanding for the then
Redemption Price.
(d) Redemption Date and Notice. At least 15 but no more than 60 days
prior to the closing of a public offering described in Subsection E.4(b) of this
Article FOURTH, or the date of any redemption to be made pursuant to Subsection
E.4(a) or Subsection E.4(c) of this Article FOURTH, the Corporation shall mail
written notice (the "Redemption Notice"), first class postage prepaid, to each
Holder (as at the close of business on the business day next
8.
<PAGE>
preceding the day on which such notice is given) of Stock to be redeemed
("Redemption Stock"), at the address last shown on the records of the
Corporation for such Holder, notifying such Holder of the prospective
redemption. The Redemption Notice shall contain the date for redemption of the
Redemption Stock (the "Redemption Date"), the Redemption Price, and the place at
which payment may be obtained, and shall call upon each Holder of Redemption
Stock to surrender to the Corporation, in the manner and at the place designated
in the Redemption Notice, such Holder's certificate or certificates representing
the Redemption Stock to be redeemed. Except as provided in Subsection E.4(e)
below, on or after the Redemption Date each Holder of Redemption Stock shall
surrender to the Corporation the certificate or certificates representing such
Holder's shares of such Stock in the manner and at the place designated in the
Redemption Notice. The Redemption Price of such shares shall thereupon be
payable to the order of the Person whose name appears on such certificate or
certificates of Redemption Stock as the owner thereof or, in the case where the
Redemption Price is to be paid in shares of Common Stock, such Common Stock
shall be issued in the name of such Person. Each share of Preferred Stock or
Redeemable Preferred Stock so redeemed shall be retired and canceled and shall
be restored to the status of an authorized but unissued share of Preferred Stock
without designation as to series, and may thereafter be reissued as a share of
Preferred Stock of any series other than a series of Designated Preferred Stock.
Each share of Common Stock so redeemed shall be retired and canceled and shall
be returned to the status of an authorized but unissued share of Common Stock.
Any Holder of Designated Preferred Stock that has received a Redemption Notice
may convert the securities which are the subject of the Redemption Notice
pursuant to Section 5 at any time prior to the Redemption Date set forth in the
Redemption Notice.
(e) Rights Following Redemption. On or prior to the Redemption Date
the Corporation shall deposit with a bank or trust company selected by the Board
of Directors, as a trust fund for the benefit of Holders of Redemption Stock,
the aggregate Redemption Price required to redeem all outstanding shares of
Redemption Stock. The Corporation shall give to such bank or trust company
irrevocable instructions and authority to pay to each Holder of Redemption Stock
the Redemption Price for such Holder's shares thereof on or after the Redemption
Date upon receipt of notification from the Corporation that such Holder has
surrendered his share certificate or certificates to the Corporation in
accordance with the Redemption Notice. As of the Redemption Date the deposit
shall constitute full payment for the shares of Redemption Stock to the Holders
thereof, and from and after the Redemption Date the shares so called for
redemption shall be redeemed and shall be deemed to be no longer outstanding,
and the Holders thereof shall cease to be stockholders of the Corporation with
respect to such shares and shall have no rights with respect thereto except the
right to receive from the bank or trust company payment of the Redemption Price
for the shares, without interest, upon surrender of their certificates therefor.
If any certificate for Redemption Stock shall be lost, mutilated or destroyed,
then the Holder thereof may tender to the Corporation an affidavit to such
effect together with an indemnity undertaking satisfactory to the Corporation,
which tender shall be deemed a tender of the certificate so lost, mutilated or
destroyed for all purposes of this Section E.4. The balance of any moneys or
shares of Common Stock deposited by the Corporation pursuant to this Subsection
E.4(e) remaining unclaimed at the expiration of 60 days following the Redemption
Date shall be returned to the Corporation upon its request expressed in
9.
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a resolution of the Board of Directors, and any claims for payment of the
Redemption Price of any shares of Redemption Stock shall thereafter be submitted
directly to the Corporation. Any interest earned on any funds so deposited by
the Corporation with any bank or trust company shall be the property of, and
shall be payable to, the Corporation.
(f) Insufficient Redemption Funds. Where the Redemption Price is to
be paid other than in shares of Common Stock and where funds of the Corporation
legally available for payment of the Redemption Price on the Redemption Date are
insufficient to redeem the total number of shares of Redemption Stock required
to be redeemed, then those funds that are legally available for payment of the
Redemption Price shall be used to redeem the maximum possible number of shares
of such Redemption Stock that may be legally redeemed. Any such redemption shall
be made from the Holders of such Redemption Stock ratably based on the number of
shares of such Redemption Stock held by each. The shares of such Redemption
Stock not so redeemed shall remain outstanding and shall be entitled to all of
the rights and preferences provided to such shares in this Certificate of
Incorporation. At any time thereafter when additional funds of the Corporation
(or any corporation surviving any merger or consolidation involving the
Corporation) are legally available for the redemption of shares of such
Redemption Stock, such funds shall immediately be used to redeem the balance of
the shares of such Redemption Stock then outstanding from the Holders thereof
ratably based on the number of shares of such Redemption Stock held by each.
5. Conversion. The Holders of the Designated Preferred Stock
shall have the following conversion rights:
(a) Right To Convert. Each share of Designated Preferred Stock of any
series shall be convertible, at the option of the Holder thereof at any time
after the issuance of such share, at the principal office of the Corporation or
any transfer agent for such Stock, into such number of fully paid and
nonassessable shares of Common Stock determined by dividing the Initial Value
for such series by the Conversion Price then in effect for such series pursuant
to this Section E.5. The "Initial Values" and initial "Conversion Prices" for
the various series of Designated Preferred Stock are set forth in the following
table:
<TABLE>
<CAPTION>
Series of Preferred Stock Initial Conversion
Values Prices
<S> <C> <C>
Series A Convertible Preferred Stock $1.16 $1.16
Series B Convertible Preferred Stock $1.24 $1.24
Series C Convertible Preferred Stock $2.20 $2.20
Series D Convertible Preferred Stock $3.0156 $3.0156
Series E Convertible Preferred Stock $3.15 $3.15
Series F Convertible Preferred Stock $3.70 $3.70
</TABLE>
Each Holder of Designated Preferred Stock may convert such Stock either in whole
or in part. The Conversion Prices for the various series of Designated Preferred
Stock shall be adjusted from time to time as provided in this Section E.5.
10.
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(b) Mandatory Conversion. Each share of Designated Preferred Stock of
a particular series shall be automatically converted into fully paid and
nonassessable shares of Common Stock at the Conversion Price then in effect for
such series, without any action on the part of either the Corporation or the
Holder of such Stock, upon the earliest to occur of the following: (i) the date
specified by vote or written consent or agreement of the Holders of at least 67%
of the shares of such series then outstanding, (ii) the date specified by
resolution of the Board of Directors at such time as there are outstanding less
than 25% of the number of originally authorized shares of such series (as
adjusted for any stock dividends, combinations or splits with respect to such
series) and (iii) immediately upon the closing of the sale of Common Stock in a
firm commitment, underwritten public offering registered under the Securities
Act (other than a registration relating solely to either a transaction under
Rule 145 under the Securities Act (or any successor to such rule) or to any
employee benefit plan of the Corporation) at a public offering price (prior to
deduction of underwriter's discounts and expenses) equal to or exceeding $6.60
per share of Common Stock (as adjusted for any stock dividends, combinations or
splits with respect to such shares) and resulting in aggregate proceeds to the
Corporation and/or selling stockholders (prior to deduction of underwriter's
discounts and expenses and other expenses of the offering) of not less than
$10,000,000.
(c) Method of Conversion.
(i) Optional Conversion. In order to convert shares of Designated
Preferred Stock into shares of Common Stock, the Holder of Designated Preferred
Stock shall surrender the certificates therefor, duly endorsed, at the principal
office of the Corporation or of any transfer agent for such Stock, and shall
give written notice to the Corporation at such office that such Holder elects to
convert the same and shall state therein the name or names in which such Holder
wishes the certificate or certificates for shares of Common Stock to be issued.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such Holder of Designated Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which such Holder shall
be entitled by reason of such conversion. Such conversion shall be deemed to
have been effected immediately prior to the close of business on the date of
surrender of the shares of Designated 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 Holder or Holders of
such shares of Common Stock on such date.
(ii) Mandatory Conversion. If shares of Designated Preferred
Stock shall be automatically converted to Common Stock pursuant to Subsection
E.5(b) of this Article FOURTH, the Corporation shall promptly mail written
notice of such fact by first class mail, postage prepaid, to each Holder of such
shares at the address of such Holder as shown on the books of the Corporation.
Such notice shall specify the date on which the automatic conversion occurred
and shall call upon such Holder to surrender to the Corporation, in the manner
and at the place designated in such notice, the certificate or certificates
representing the shares of Designated Preferred Stock so converted. The
automatic conversion shall be deemed to have been effected at the opening of
business on the date specified therefor in Subsection E.5(b) of this Article
FOURTH.
11.
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(iii) Unavailable Certificates. If any certificate for Designated
Preferred Stock shall be lost, mutilated or destroyed, then the Holder thereof
may tender to the Corporation an affidavit to such effect together with an
indemnity undertaking satisfactory to the Corporation, which tender shall be
deemed a tender of the certificate so lost, mutilated or destroyed for all
purposes of this Section E.5.
(d) Conversion Price Adjustment: Subdivision or Combination of
Shares. If the Corporation at any time or from time to time shall subdivide its
Common Stock into a greater number of shares of Common Stock, whether by stock
split, reclassification or otherwise, then the Conversion Price of each
outstanding series of Designated Preferred Stock shall be proportionately
reduced as of the effective date of such subdivision, or if the Corporation
shall take a record of Holders of its Common Stock for the purpose of effecting
such a subdivision, as of such record date, whichever is earlier. If the
Corporation at any time or from time to time shall combine its Common Stock into
a lesser number of shares of Common Stock, whether by consolidation,
reclassification or otherwise, then the Conversion Price of each outstanding
series of Designated Preferred Stock shall be proportionately increased as of
the effective date of such combination or, if the Corporation shall take a
record of Holders of its Common Stock for the purpose of effecting such a
combination, as of such record date, whichever is earlier.
(e) Conversion Price Adjustment: Stock Dividends. If the Corporation
at any time or from time to time shall declare or pay, without consideration,
any dividend on the Common Stock payable in Common Stock, then the Conversion
Price of each outstanding series of Designated Preferred Stock shall be
proportionately decreased. If the Corporation shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Corporation shall be deemed to have
made a dividend payable in Common Stock (without consideration) in an amount of
shares thereof equal to the maximum number of shares issuable upon exercise of
such rights to acquire Common Stock.
(f) Conversion Price Adjustment: Reclassifications and
Reorganizations. If the Common Stock issuable upon conversion of the Designated
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of Stock, Securities, the securities of any other
Person or any other property, whether by capital reorganization,
reclassification or otherwise (other than by a subdivision or combination of
shares provided for in Subsection E.5(d) of this Article FOURTH, or a merger or
other reorganization described in Subsection E.3(e) of this Article FOURTH),
then the terms of each outstanding share of Designated Preferred Stock shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Holder thereof shall receive upon
conversion thereof, in lieu of each share of Common Stock that such Holder would
otherwise have received, such number of shares of such other class or classes of
Stock, Securities, or other securities or property receivable upon such
reorganization or reclassification by the Holder of one share of Common Stock
issuable upon such conversion had conversion occurred immediately prior to such
reorganization or reclassification.
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(g) Conversion Price Adjustment: Additional Shares of Common Stock.
(i) Issue of Additional Shares of Common Stock. If the
Corporation shall at any time or from time to time issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Subsection E.5(g)(iii) of this Article FOURTH) without consideration
or for a consideration per share less than the Conversion Price with respect to
any series of Designated Preferred Stock in effect immediately prior to such
issuance, then and in such event the Conversion Price for such series of
Designated Preferred Stock shall be reduced, concurrently with such issuance, to
a price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock into which all of the shares of Designated
Preferred Stock outstanding immediately prior to such issuance are then
convertible plus the number of shares of Common Stock that the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Conversion Price in
effect immediately prior to such issuance, and the denominator of which shall be
the sum of the number of shares of Common Stock into which all of the shares of
Designated Preferred Stock outstanding immediately prior to such issuance are
then convertible plus the number of such Additional Shares of Common Stock so
issued.
(ii) Excluded Issuances. For purposes of the foregoing
calculation, Additional Shares of Common Stock shall not include any additional
shares of Common Stock issuable with respect to Convertible Securities or
Options solely as a result of the adjustment to the respective Conversion Prices
(or other conversion ratios) thereof resulting from the issuance of the
Additional Shares of Common Stock causing such adjustment.
(iii) Deemed Issue of Additional Shares of Common Stock. In the
event that the Corporation at any time or from time to time shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of Holders of any class of Securities then entitled to receive any
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein designed to protect against dilution) of Common Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be shares of Common Stock issued as of the time of such issue
or, in case such a record date shall have been fixed, as of the close of
business on such record date. In any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price of any
series of Designated Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common Stock
13.
<PAGE>
issuable by the Corporation, upon the exercise, conversion or exchange thereof,
then the Conversion Price of any series of Designated Preferred Stock adjusted
upon the original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments to any such Conversion Price
based thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the Conversion Price
of any series of Designated Preferred Stock shall affect Common Stock previously
issued upon conversion of the shares of any series of Designated Preferred
Stock);
(3) upon the expiration of any such Options or any rights of
conversion or exchange under any such Convertible Securities that shall not have
been exercised, the Conversion Price of any series of Designated Preferred Stock
adjusted upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments to any such
Conversion Price based thereon, shall, upon such expiration, be recomputed as
if:
(A) in the case of Convertible Securities or Options the
only Additional Shares of Common Stock issued were the shares of Common Stock,
if any, actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, and the consideration received therefor
was the consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the additional consideration, if
any, actually received by the Corporation upon such exercise, or for the issue
of all such Convertible Securities that were actually converted or exchanged,
plus the additional consideration, if any, actually received by the Corporation
upon such conversion or exchange; and
(B) in the case of Options for Convertible Securities
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Subsection E.5(g)(iv) of this Article FOURTH) upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;
(4) no readjustment pursuant to clause (2) or (3) above
shall have the effect of increasing the Conversion Price of any series of
Designated Preferred Stock to an amount that exceeds the lower of (a) the
Conversion Price of such series of Designated Preferred Stock on the original
adjustment date, and (b) the Conversion Price of such series of Designated
Preferred Stock that would have resulted from any issuance of Additional Shares
of Common Stock between the original adjustment date and such readjustment date;
and
(5) in the case of any Options that expire by their terms
not more than 30 days after the date of issue thereof, no adjustment of the
Conversion Price of any
14.
<PAGE>
series of Designated Preferred Stock shall be made until the expiration or
exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (3) above.
(iv) Determination of Consideration. For purposes of this
Subsection E.5(g), the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be computed as the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed as the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other Securities or other assets of the Corporation for
consideration that covers both, be the proportion of such consideration so
received for the issue of Additional Shares of Common Stock, determined as
provided in clauses (A) and (B) above in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Subsection E.5(g)(iii) of this Article
FOURTH (relating to Options and Convertible Securities) shall be determined by
dividing:
(A) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities.
(v) No Adjustment of Conversion Price. Any provision herein to
the contrary notwithstanding, no adjustment in the Conversion Price for any
series of Designated Preferred Stock shall be made as a result of the issuance
of Additional Shares of Common Stock
15.
<PAGE>
unless the consideration per share (determined pursuant to Subsection E.5(g)(iv)
of this Article FOURTH) for the Additional Shares of Common Stock issued or
deemed to be issued by the Corporation is less than the Conversion Price for
such series of Designated Preferred Stock in effect on the date of, and
immediately prior to, such issuance.
(h) Certificates As To Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of any series of Designated
Preferred Stock pursuant to this Section E.5, 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 such series of Designated
Preferred Stock a certificate executed by the Corporation's President or Chief
Financial Officer 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 the Holders of not
less than 20 percent of the outstanding shares of any series of Designated
Preferred Stock, furnish or cause to be furnished to such Holders a like
certificate setting forth (i) the adjustments and readjustments to the
Conversion Price of such series of Designated Preferred Stock, (ii) the
Conversion Price for such series of Designated Preferred Stock at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property that at the time would be received upon the conversion of
shares of such series of Designated Preferred Stock.
(i) Issue Taxes. The Corporation shall pay any and all issue and
other similar taxes that may be payable in respect of any issue or delivery of
shares of Common Stock upon conversion of Designated Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer of Stock requested by any Holder
in connection with any such conversion, nor any income or similar taxes as a
result of any such conversion or transfer.
(j) 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 Designated Preferred Stock then outstanding, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all then outstanding shares of Designated Preferred Stock at
the then effective Conversion Prices thereof. 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 Designated Preferred Stock, the
Corporation shall 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 purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Certificate of
Incorporation.
(k) Fractional Shares. No fractional shares of Common Stock
shall be issued upon the conversion of any share or shares of Designated
Preferred Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Designated Preferred Stock by
a Holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issue of any fractional share of Common Stock.
If,
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after the aforementioned aggregation, the conversion would result in the issue
of a fractional share of Common Stock, then the Corporation shall, in lieu of
issuing such fractional share, pay to the Holder otherwise entitled to receive
such fractional share a sum in cash equal to such fraction multiplied by the
Conversion Price then in effect for such Holder's shares of Designated Preferred
Stock then being converted.
(l) Notices. Any notice required by the provisions of this
Section E.5 to be given to any Holder of Designated Preferred Stock shall be
deemed given if deposited in the United States mail, first class postage
prepaid, and addressed to such Holder at such Holder's address appearing on the
books of the Corporation.
(m) No Reissuance of Designated Preferred Stock. Shares of
Designated Preferred Stock that have been converted into Common Stock shall not
be reissued by the Corporation as Designated Preferred Stock but shall rather be
retired and canceled; provided, however, that each such share, after being
retired and canceled, shall be restored to the status of an authorized but
unissued share of Preferred Stock without designation as to series and may
thereafter be reissued as a share of Preferred Stock of any series other than a
series of Designated Preferred Stock.
6. Restrictions and Limitations.
(a) General. The Corporation shall not, without the approval by vote
or written consent of each of (i) the Holders of more than 50% of the shares of
Common Stock then outstanding, (ii) the Holders of more than 50% of the shares
of the Senior Preferred Stock then outstanding, voting as one class, and (iii)
the Holders of more than 50% of the shares of the Junior Preferred Stock then
outstanding, voting as one class:
(A) sell, exchange, mortgage or pledge all or
substantially all of the assets of the Corporation, whether in one transaction
or in a series of related transactions;
(B) merge or consolidate with any other Person; or
(C) make any assignment for the benefit of the
Corporation's creditors.
(b) Without Board Approval. Unless the Board of Directors shall have
given its unanimous approval thereto (with all members voting except for any
members whose compensation as a Corporation officer is directly affected by such
vote), the Corporation shall not, without the approval by vote or written
consent of each of (i) the Holders of more than 50% of the shares of Common
Stock then outstanding, (ii) the Holders of more than 50% of the shares of the
Senior Preferred Stock then outstanding, voting as one class, and (iii) the
Holders of more than 50% of the shares of the Junior Preferred Stock then
outstanding, voting as one class:
(A) incur any indebtedness for borrowed money in excess
of $100,000 in any 12-month period, except for (i) any indebtedness incurred
within the limits of
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any budget approved by the Board of Directors and then in effect and (ii) short-
term bank borrowings for working capital;
(B) guarantee the indebtedness or other liabilities or
obligations of any other Person, except for any guaranty resulting from the
endorsement for collection or deposit of any instrument in the ordinary course
of business;
(C) form or participate in any limited or general
partnership or joint venture;
(D) make any acquisition of, or equity investment in,
another Person in excess of $100,000;
(E) permit any Subsidiary to issue or sell, or obligate
itself to issue or sell, any stock of such Subsidiary to any Person other than
the Corporation;
(F) enter into or adopt any salary, bonus or other
compensation plans or programs for executive officers of the Corporation,
including, without limitation, the grant of any stock options;
(G) enter into any agreement or transaction with any
officer or director of the Corporation out of the ordinary course of the
Corporation's business;
(H) enter into any business that does not involve the
research and development of pharmaceutical drugs;
(I) amend or repeal any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or Bylaws;
(J) redeem, purchase or otherwise acquire for value any
shares of Stock other than (i) pursuant to Section 4(b), (ii) pursuant to the
terms of any agreement unanimously approved by the Corporation's Directors
providing for the redemption of Corporation Stock in whole or in part from the
Holders thereof for an amount not in excess of the amount of the liquidation
preference or original purchase price thereof, whichever is greater, or (iii)
pursuant to employment, consulting or other agreements between the Corporation,
on the one hand, and employees, officers or directors of the Corporation,
consultants to the Corporation or other Persons performing services for the
Corporation, on the other hand, pursuant to which the Corporation has the option
or obligation to purchase such shares upon the occurrence of certain events,
such as the termination of employment; or
(K) issue any shares of Preferred Stock other than
shares of Series A, B, C, D, E or F Convertible Preferred Stock.
(c) Lapse of Right. The rights of approval set forth in Sections
6(a) and 6(b) of this Article FOURTH shall lapse and expire as to the Holders of
the Senior Preferred Stock at such time as there shall be outstanding less than
4,000,000 shares of Senior Preferred Stock (as
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adjusted for any stock dividends, combinations or splits with respect to any
series of Designated Preferred Stock included in the Senior Preferred Stock),
and shall lapse and expire as to the Holders of the Junior Preferred Stock at
such time after September 30, 1993 as there shall be outstanding less than
860,250 shares of Junior Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to any series of Designated Preferred Stock
included in the Junior Preferred Stock).
(d) Class Voting. Without the approval by vote or written
consent of the Holders of more than 50% of the shares of a given series of
Designated Preferred Stock, the Corporation shall not amend or repeal any
provision of, or add any provision to, this Certificate of Incorporation (other
than in connection with the adoption by the Board of Directors of a resolution
described in Section D of this Article FOURTH and the filing with the Delaware
Secretary of State of a certificate of designations with respect thereto) if
such action would change any of the express powers, preferences or special
rights provided for such series in this Certificate of Incorporation so as to
affect such series adversely under the Delaware General Corporation Law.
7. Definitions. As used in this Certificate of Incorporation
(including, without limitation, this Article FOURTH), the following terms shall
have the following meanings:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued (or deemed issued pursuant to Subsection E.5(g)(iii) of this
Article FOURTH) by the Corporation after the date of filing of this Fifth
Amended and Restated Certificate of Incorporation with the Delaware Secretary of
State, except shares thereof issued (or deemed issued):
(A) upon conversion of any shares of Preferred Stock;
(B) to officers, directors or employees of, or
consultants to, the Corporation pursuant to the Stock Pool or pursuant to stock
option or stock purchase plans or other similar agreements on terms approved by
the Board of Directors;
(C) as a dividend or distribution on Preferred Stock;
(D) in any transaction as a result of which an
adjustment to the Conversion Price of any series of Preferred Stock may be made
other than pursuant to Subsection E.5(g) of this Article FOURTH; or
(E) pursuant to a warrant originally issued to Mr.
Thomas M. Gibson to purchase shares of the Corporation's Series D Convertible
Preferred Stock; or
(F) pursuant to any warrant issued to a purchaser of
Series E Convertible Preferred Stock or a purchaser of Series F Convertible
Preferred Stock in connection with such Person's purchase of such stock.
19.
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"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Common Stock" shall mean the Corporation's Common Stock, $.01 par
value, and any Stock into which such Common Stock may hereafter be changed.
"Convertible Securities" shall mean any evidences of indebtedness,
shares of Stock (other than the Common Stock) or other Securities that are or
may be at any time convertible into or exchangeable for Common Stock.
"Designated Preferred Stock" shall mean any of the Series A, B, C, D,
E or F Convertible Preferred Stock.
"Holder" shall mean, as to any Security at any time, the Person who
shall own of record such Security at such time.
"Junior Preferred Stock" shall mean the Series A and B Convertible
Preferred Stock, treated as one class.
"Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
"Person" shall mean an individual, a corporation, a partnership, a
trust, a limited liability company, an unincorporated organization or a
government organization or an agency or political subdivision thereof.
"Preferred Stock" shall mean the Corporation's Preferred Stock, $.01
par value, and any Stock into which such Preferred Stock may hereafter be
changed other than by exercise of the conversion right of such Stock.
"Redeemable Preferred Stock" shall mean the Corporation's Redeemable
Preferred Stock, $.01 par value, and any stock into which such Redeemable
Preferred Stock may hereafter be changed.
"Security" shall mean any debt or equity security of the Corporation,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable or exercisable for one or more debt or equity securities of the
Corporation.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Preferred Stock" shall mean the Series C, D, E and F
Convertible Preferred Stock, treated as one class.
"Series A Convertible Preferred Stock" shall mean the Corporation's
Series A Convertible Preferred Stock, $.01 par value, and any Stock into which
such Series A Convertible Preferred Stock may hereafter be changed other than by
exercise of the conversion right of such Stock.
20.
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"Series B Convertible Preferred Stock" shall mean the Corporation's
Series B Convertible Preferred Stock, $.01 par value, and any Stock into which
such Series B Convertible Preferred Stock may hereafter be changed other than by
exercise of the conversion right of such Stock.
"Series C Convertible Preferred Stock" shall mean the Corporation's
Series C Convertible Preferred Stock, $.01 par value, and any Stock into which
such Series C Convertible Preferred Stock may hereafter be changed other than by
exercise of the conversion right of such Stock.
"Series D Convertible Preferred Stock" shall mean the Corporation's
Series D Convertible Preferred Stock, $.01 par value, and any Stock into which
such Series D Convertible Preferred Stock may hereafter be changed other than by
exercise of the conversion right of such Stock.
"Series E Convertible Preferred Stock" shall mean the Corporation's
Series E Convertible Preferred Stock, $.01 par value, and any Stock into which
such Series E Convertible Preferred Stock may hereafter be changed other than by
exercise of the conversion right of such Stock.
"Series F Convertible Preferred Stock" shall mean the Corporation's
Series F Convertible Preferred Stock, $.01 par value, and any Stock into which
such Series F Convertible Preferred Stock may hereafter be changed other than by
exercise of the conversion right of such Stock.
"Stock" shall include any and all shares of capital stock of the
Corporation, however designated.
"Stock Pool" shall mean up to 850,000 shares of Common Stock (as
adjusted for stock splits and combinations) issued or issuable to officers,
directors or employees of, or consultants to, the Corporation pursuant to the
Corporation's 1993 Stock Option Plan.
"Subsidiary" shall mean any corporation more than 50% of the
outstanding voting Stock of which shall at the time be owned directly or
indirectly by the Corporation, by one or more Subsidiaries or by the Corporation
and one or more Subsidiaries.
FIFTH: The Corporation shall have such number of directors as shall from
time to time be fixed by, or in the manner provided in, the Bylaws. Directors
need not be elected by ballot unless the Bylaws so provide.
SIXTH: Unless the Board of Directors shall have approved the action to be
taken, no action taken by the stockholders without a meeting shall be effective
unless written notice thereof
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(which shall include a copy of the action to be taken) shall be delivered to the
Corporation's Chairman of the Board of Directors and Secretary at the principal
executive offices of the Corporation not less than 10 days prior to the taking
of such action.
SEVENTH: To the fullest extent that the General Corporation Law of the
State of Delaware, as it exists on the date hereof or as it may hereafter be
amended, permits the limitation or elimination of the liability of directors, no
Director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a Director.
No amendment to or repeal of this Article SEVENTH shall apply to or have any
effect on the liability or alleged liability of any Director of the Corporation
for or with respect to any acts or omissions of such Director occurring prior to
such amendment or repeal.
EIGHTH: Except as otherwise set forth in this Certificate of
Incorporation, the Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend or repeal the Bylaws of the
Corporation.
In Witness Whereof, the Corporation has caused this Fourth Amended and
Restated Certificate of Incorporation to be signed by Richard H. Troy, its Vice
President - Finance, Law and Administration and Secretary, this 26th day of
December, 1996.
Cell Pathways, Inc.
By:/s/ Richard H. Troy
------------------------------
Richard H. Troy
Vice President - Finance, Law and
Administration and Secretary
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EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
TO
FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CELL PATHWAYS, INC.
Cell Pathways, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
1. The name of the corporation is Cell Pathways, Inc. (hereinafter
referred to as the "Corporation").
2. The date on which the original Certificate of Incorporation was
filed with the Secretary of State of Delaware is November 24, 1992.
3. Article FOURTH, Section D of the Fifth Amended and Restated
Certificate of Incorporation is hereby amended by deleting the line of the Table
thereof that states "Series F Convertible Preferred Stock 4,500,000" and
replacing it with "Series F Convertible Preferred Stock 5,200,000."
4. The amendment set forth above was duly adopted in accordance with
the provisions of Sections 242 and 228 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned, being a Vice President of the
Corporation, for the purpose of amending the Fifth Amended and Restated
Certificate of Incorporation of the Corporation pursuant to Section 242 of the
General Corporation Law of the State of Delaware, do make and file this
Certificate, hereby declaring and certifying that the facts herein stated are
true, and accordingly have hereunto set my hand this 26th day of June, 1997.
/s/ Richard H. Troy
---------------------
Richard H. Troy
Vice President - Finance, Law and
Administration
<PAGE>
EXHIBIT 3.4
BY LAWS
OF
CELL PATHWAYS, INC.
Article I
Offices
Section 1. Registered Office. The registered office of the Corporation
shall be established and maintained at the office of The Prentice-Hall
Corporation System, Inc. in the City of Dover, in the County of Kent, in the
State of Delaware. The registered agent of the Corporation at such address
shall be The Prentice-Hall Corporation System, Inc.
Section 2. Other Offices. The Corporation may also have offices at such
other place or places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
Article II
Stockholders
Section 1. Annual Meetings. The annual meeting of Stockholders shall be
held on such date and at such time and place, either within or without the State
of Delaware, as shall be designated by the Board of Directors from time to time
and stated in the notice of the meeting. If this date shall fall upon a legal
holiday, then the meeting shall be held on the next succeeding business day. If
any annual meeting for the election of Directors shall not be held on the date
designated therefor, the Board of Directors shall cause the meeting to be held
as soon thereafter as is convenient. At each annual meeting the Stockholders
entitled to vote shall elect Directors to succeed those whose terms then expire
and may transact such other business as shall have been properly brought before
the meeting. Any previously scheduled meeting of the Stockholders may be
postponed by resolution of the Board of Directors upon public notice or other
notice given to the Stockholders prior to the date previously scheduled for such
meeting of Stockholders.
Section 2. Special Meetings. Special meetings of the Stockholders for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by the Chairman of the
Board of Directors or by the President and shall be called by the Chairman of
the Board of Directors, the President or the Secretary at the request in writing
of a majority of the Board of Directors, or at the request to the Secretary in
writing of Stockholders owning not less than 20 percent of the votes of the
entire capital stock of the Corporation issued and outstanding which are
entitled to vote for the election of Directors. Such request shall state the
purpose or purposes of the proposed meeting. Any special meeting of
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Stockholders shall be held on such date and at such time and place, either
within or without the State of Delaware, as shall be designated by the Board of
Directors and stated in the notice of the meeting. If this date shall fall upon
a legal holiday, then the meeting shall be held on the next succeeding business
day.
Section 3. Meeting Notices. Written notice of Stockholder meetings,
whether annual or special, stating the place, date and hour of the meeting shall
be given to each Stockholder entitled to vote at such meeting not less than 10
days or more than 60 days before the date of the meeting. Written notice of any
annual or special meeting shall state the purpose or purposes for which the
meeting is called, and the business transacted at such meeting shall be confined
to such purpose or purposes. If pursuant to any stockholders' agreement to
which the Company is a party any one or more persons shall be entitled to
designate one or more individuals for election to the Board of Directors, then
the written notice of such meeting shall contain the date, if any, by which such
designation must be received by the Corporation to be effective. Except as
otherwise required by law, notice of any meeting of Stockholders following an
adjournment thereof shall not be required to be given if the time and place
thereof are announced at the meeting which is adjourned.
Section 4. Voting Lists. The officer who has charge of the stock ledger
of the Corporation shall prepare and make or cause to be prepared and made, at
least ten days before every meeting of stockholders, a complete list of the
Stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each Stockholder and the number of shares registered
in the name of each Stockholder. Such list shall be open to the examination of
any Stockholder for any purpose germane to the meeting during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
Stockholder who is present.
Section 5. Quorum. At all meetings of Stockholders, except as otherwise
required by the Delaware General Corporation Law, the Certificate of
Incorporation or these Bylaws, shares entitling the holders thereof to cast a
majority of the votes of all issued and outstanding Corporation stock, present
in person or represented by proxy, shall constitute a quorum for the transaction
of business. If, however, such quorum shall not be present or represented at
any meeting of the Stockholders, then the chairman of the meeting or
Stockholders holding shares of Corporation stock entitling them to cast a
majority of the votes thereat, present in person or represented by proxy, shall
have the 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. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each Stockholder of
record entitled to vote at the meeting. In the case of a vote of any class or
series of Corporation stock, shares entitling the holders thereof to cast a
majority of the votes of all issued
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and outstanding shares of such class or series, present in person or represented
by proxy, shall constitute a quorum for the transaction of business by such
class or series.
Section 6. Voting of Shares. Unless otherwise specifically provided by
the Delaware General Corporation Law, the Certificate of Incorporation or these
Bylaws, each Stockholder shall at every meeting of the Stockholders be entitled
to one vote for each share of Corporation stock having voting power held by such
Stockholder. All elections for Directors shall be decided by a plurality of the
votes of the shares present at the meeting at which a quorum is present, in
person or by proxy, and entitled to vote on the election of Directors. All other
questions at any meeting of Stockholders shall be decided by majority vote of
the shares entitled to vote on the subject matter present, in person or by
proxy, at the meeting at which a quorum is present, except as otherwise provided
by the Certificate of Incorporation or the Delaware General Corporation Law.
Where a separate vote by class or series of any Corporation stock is required,
the matter shall be decided by a majority vote of all of the issued and
outstanding shares of each class or series entitled to vote on the matter.
Section 7. Proxies. Each Stockholder entitled to vote at a meeting of
Stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
Section 8. Nominations and Stockholder Business.
(A) Annual Meetings. At any annual meeting of the Stockholders,
nominations of persons for election to the Board of Directors and the proposal
of business to be considered by the Stockholders may be made (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any Stockholder of the Corporation who was a Stockholder
of record at the time of the giving of notice provided for in this Section 8(A),
who is entitled to vote at the meeting and who has complied with the notice
procedures set forth in this Section 8(A). For nominations or other business to
be properly brought before an annual meeting by a Stockholder pursuant to clause
(iii) of the foregoing sentence, such business, as determined by the chairman of
the meeting, must be a proper subject for Stockholder consideration under the
Delaware General Corporation Law, and the Stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
Stockholder's notice must be delivered to the Secretary at the principal
executive offices of the Corporation not later than 5:00 p.m. E.S.T. on the
fifth business day preceding the date of the Stockholders' meeting. Such
Stockholder's notice shall set forth as to each person whom the Stockholder
proposes to nominate for election or reelection as a Director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended. As to any
other business that the Stockholder proposes to bring before the meeting, the
notice shall contain a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting. All notices shall contain (i) the name and record address of
the Stockholder making the nomination or proposing such business, (ii) the class
and number of shares of capital stock of the Corporation which are
3.
<PAGE>
beneficially owned by such Stockholder, and (iii) any material interest of such
Stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 8; provided, however, that nothing in this Section 8 shall
be deemed to preclude discussion by any Stockholder of any business properly
brought before the annual meeting in accordance with such procedures.
(B) Special Meetings. Only such business shall be conducted at a
special meeting of Stockholders as shall have been brought before the meeting of
Stockholders pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of Stockholders at which Directors are to be elected pursuant to the
Corporation's notice of meeting either by or at the direction of the Board of
Directors or by any Stockholder of the Corporation who is a Stockholder of
record at the time of the giving of the notice of special meeting, who shall be
entitled to vote at the meeting and who complies with the notice procedures set
forth in Section 8(A) hereof.
(C) General. Only such persons who are nominated in accordance with
the procedures set forth in this Section 8 shall be eligible to serve as
Directors and only such business shall be conducted at a meeting of Stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 8. The chairman of any meeting of Stockholders shall
have the power and duty to determine whether any nomination of a person for
election as a Director or the proposal of any business to be brought before the
meeting was made in accordance with the procedures set forth in this Section 8
and, if any proposed nomination or business is not brought before the meeting in
accordance with such procedures, to so declare to the meeting, whereupon such
nomination shall be disregarded and such business shall not be transacted.
Section 9. Written Action by Stockholders Without a Meeting. Except as
otherwise provided in the Certificate of Incorporation, any action either
required by the Delaware General Corporation Law to be taken at an annual or
special meeting of Stockholders, or which may be taken at any annual or special
meeting of Stockholders, may be taken without a meeting and without a vote if a
consent or consents in writing setting forth the action so taken shall be signed
by the holders of outstanding Corporation stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its Secretary at its
principal executive offices.
Section 10. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the Stockholders entitled to examine the stock
ledger, the Stockholder list required by Section 4 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.
Section 11. Conduct of Meeting. Unless otherwise provided by the Board of
Directors, the Chairman of the Board of Directors, or in his absence the Chief
Executive officer,
4.
<PAGE>
shall act as chairman of the meeting; and the Secretary, or in his absence an
Assistant Secretary, shall act as secretary of the meeting. The order of
business shall be determined by the chairman of the meeting.
Article III
Directors
Section 1. Number, Tenure and Qualifications. The number of Directors
which shall constitute the whole Board of Directors shall be as prescribed from
time to time by a resolution adopted by Directors constituting a majority of the
prescribed number of Directors; provided, however, that the total prescribed
number of initial Directors shall be one. The Directors shall be elected at the
annual meeting of the Stockholders, except as provided in Section 2 of this
Article, and each Director elected shall hold office until his or her successor
is elected and qualified, or until his or her earlier resignation or removal.
Directors need not be Stockholders.
Section 2. Vacancies. Until such time as there shall be an effective
voting agreement among the Stockholders for the election of Directors, vacancies
on the Board of Directors may be filled by a majority of the Directors then in
office, although less than a quorum, or by the sole Director if there shall be
only one Director. Except as otherwise provided by the Delaware General
Corporation Law, following such time as there shall be an effective voting
agreement among the Stockholders for the election of Directors, any vacancy on
the Board of Directors (whether because of death, resignation, removal, an
increase in the number of Directors, or any other cause) may be filled only
pursuant to a written consent of Stockholders or a meeting of Stockholders duly
called, and any Director so chosen shall hold office until the next election of
Directors and until his or her successor is duly elected and shall qualify, or
until his or her earlier resignation or removal. If there are no Directors in
office, then an election of Directors may be held in the manner provided by the
Delaware General Corporation Law.
Section 3. General Powers. The business 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 the Delaware General Corporation Law, the Certificate of Incorporation or
these Bylaws reserved to the Stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. First Meeting. The newly-elected Board of Directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the annual meeting of
Stockholders, or the time and place of such Board of Directors meeting may be
fixed by consent in writing of all of the Directors. In the event of the
failure of the Directors to fix the time or place of such first meeting of the
newly-elected Board of Directors, or in the event such meeting is not held at
the time and place so fixed by the Directors, the meeting may be held at such
time and place as shall be specified in a notice of
5.
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meeting given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
Directors.
Section 6. Regular Meetings. The time and place of regular meetings of
the Board of Directors shall be determined by a resolution of the Board of
Directors adopted at the first meeting of the newly-elected Board of Directors
or at such other meeting of the Board of Directors of which proper notice was
given, and such meetings shall be deemed properly called and may be held without
further notice other than such resolution.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by either the Chairman of the Board of Directors or the President
on ten days' notice to each Director, and shall be called by the President or
the Secretary in a like manner and on like notice on the written request of
three Directors. Any meeting of the Board of Directors shall be a legal meeting
without any notice thereof having been given if all the Directors shall be
present thereat or if notice thereof shall be waived either before or after such
meeting in writing by all absentees therefrom provided a quorum be present
thereat. Notice of any adjourned meeting need not be given.
Section 8. Quorum. At all meetings of the Board of Directors a majority
of the prescribed number of Directors 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, except as may be otherwise specifically provided by the Delaware
General Corporation Law, the Certificate of Incorporation or these Bylaws. 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, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Organization. At each meeting of the Board of Directors the
Chairman of the Board of Directors, or, in his or her absence, the President of
the Corporation, or, in his or her absence, a Vice Chairman of the Board of
Directors, or, in the absence of all of said officers, a person chosen by a
majority of the Directors present, shall preside as chairman of the meeting.
The Secretary of the Corporation, or, in his or her absence, an Assistant
Secretary, if any, or, in the absence of the Secretary and Assistant
Secretaries, any person whom the chairman of the meeting shall appoint, shall
act as secretary of the meeting.
Section 10. Written Action by Directors Without a Meeting. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws, 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 to such action in
writing, and the consent or consents are filed with the minutes of proceedings
of the Board or such committee.
Section 11. Participation by Conference Telephone. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors, or any committee designated by the Board, may participate in
a meeting of the Board or such committee by means of conference telephone or
similar communications equipment by means of which all
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persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting.
Section 12. Committees. The Board of Directors may, by resolution passed
by a majority of the total prescribed number of Directors, designate one or more
committees, each committee to consist of one or more of the Directors of the
Corporation. 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. 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, but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the Stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the Stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution expressly so provides, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
Such committee or committees shall have such name or names as may be determined
from time to time by a resolution adopted by the Board of Directors. A majority
of the total prescribed number of committee members shall constitute a quorum
for the transaction of business at any meeting of such committee. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.
Section 13. Compensation. The Directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors or any committee of
Directors, and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or any such committee and/or a stated fee as Director. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
Article IV
Notices
Section 1. Written Notice. Whenever, under the provisions of the Delaware
General Corporation Law, of the Certificate of Incorporation or of these Bylaws,
notice is required to be given to any Director or Stockholder, such notice shall
be in writing and shall be given to such Director or Stockholder in person, by
first class United States mail or by telegram, telex or facsimile transmission.
If mailed, such notice shall be addressed to such Director or Stockholder at his
or her address as it appears on the records of the Corporation, with postage
thereon prepaid, and, if notice of more than 20 days is being given, shall be
deemed to be given at the time when the same shall be deposited in the United
States mail.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of the Delaware General Corporation Law, the Certificate of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to said notice,
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whether before or after the time stated therein, shall be deemed equivalent
thereto. Attendance of a person at any meeting shall constitute a waiver of
notice of such meeting, except when the person attends such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Stockholders, Directors or any committee of
Directors need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or these Bylaws.
Article V
Officers
Section 1. Number. The Corporation shall have such officers with such
titles and duties as shall be stated in these Bylaws or in a resolution of the
Board of Directors which is not inconsistent with these Bylaws. The officers of
the Corporation shall be appointed by the Board of Directors and shall include a
President, a Vice-President, a Treasurer and a Secretary. The Board of
Directors, in its discretion, may also choose a Chairman of the Board of
Directors and one or more Vice-Chairmen of the Board of Directors from among
their members, and additional Vice-Presidents, and one or more Assistant
Treasurers and Assistant Secretaries. The Board of Directors may appoint such
other officers and agents as it shall deem desirable who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors. Any number of
offices may be held by the same person, unless the Certificate of Incorporation
or these Bylaws otherwise provide. The officers of the Corporation need not be
Stockholders of the Corporation.
Section 2. Election and Term of Office. The Board of Directors at its
first meeting after each annual meeting of Stockholders shall appoint the
officers of the Corporation. Each officer of the Corporation shall hold office
until his or her successor is appointed and qualified, or until his or her
earlier resignation or removal.
Section 3. Removal. Any officer elected or appointed by the Board of
Directors may be removed, with or without cause, at any time by the affirmative
vote of a majority of the Board of Directors or by any committee of the Board of
Directors or superior officer upon whom such power of removal may be conferred
by the Board of Directors.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
Section 5. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside, if present, at all meetings of the Board of
Directors. Except where by the Delaware General Corporation Law the signature
of the President is required, the Chairman of the Board of Directors shall
possess the same power as the President to sign all documents of the Corporation
which the President may be authorized to sign by these Bylaws or by the Board of
Directors. The Chairman of the Board of Directors shall see that all orders and
resolutions of the Board of Directors are carried into effect and shall from
time to time report to the Board of Directors on all matters within his or her
knowledge which the interests of the Corporation may
8.
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require to be brought to their notice. During the absence or disability of the
President, the Chairman of the Board of Directors shall exercise all the powers
and discharge all the duties of the President unless the Board of Directors
shall designate another officer to exercise such powers and discharge such
duties. The Chairman of the Board of Directors shall be an officer of the
Corporation and, as such, shall perform such other duties and may exercise such
other powers as from time to time may be prescribed by these Bylaws or by the
Board of Directors.
Section 6. Vice Chairman of the Board of Directors. The Vice Chairman of
the Board of Directors, if any, shall perform such duties and may exercise such
powers as from time to time may be prescribed by the Board of Directors.
Section 7. President. The President shall be the Chief Executive Officer
of the Corporation unless the Board of Directors shall designate another officer
as Chief Executive Officer, and shall have the power of general and active
management of the business, subject to the control of the Board of Directors.
The President shall vote all shares of stock of any other corporation standing
in the name of the Corporation except where the voting thereof shall be
expressly delegated by the Board of Directors or to some other officer or agent
of the Corporation. The President shall also perform all duties incident to the
office of the President and such other duties as may be prescribed by these
Bylaws or by the Board of Directors from time to time.
Section 8. Vice-Presidents. Each Vice-President shall perform such duties
and have such powers as the Board of Directors or Chief Executive Officer may
from time to time prescribe. At the request of the Board of Directors, the
Vice-President (or in the event there be more than one Vice-President, the Vice-
Presidents in the order designated, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President.
Section 9. Treasurer. If required by the Board of Directors, the
Treasurer shall give bond for the faithful discharge of his or her duties in
such sum and with such surety or sureties as the Board of Directors shall
determine. The Treasurer (or if there is none, the chief financial officer)
shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever; and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of these
Bylaws; (b) sign (unless the Secretary or other proper officer thereunto duly
authorized by the Board of Directors shall sign), with the Chairman of the Board
of Directors, or President, or a Vice-President, certificates for shares of the
capital stock of the Corporation, the issue of which shall have been authorized
by resolution of the Board of Directors, provided that the signatures of the
officers of the Corporation thereon may be by facsimile as provided in these
Bylaws; and (c) in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the Board of Directors or, to the extent not inconsistent with any
direction of the Board of Directors, by the President.
9.
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Section 10. Secretary. The Secretary shall: (a) keep the minutes of the
Stockholders' and of the Board of Directors' meetings in one or more books
provided for that purpose, and at the request of the Board of Directors shall
also perform like duties for the standing committees thereof when required; (b)
see that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the corporate records; (d)
keep a register of the post office address of each Stockholder which shall be
furnished to the Secretary by such Stockholder; (e) have general charge of the
stock transfer books of the Corporation; (f) sign (unless the Treasurer or other
proper officer thereunto duly authorized by the Board of Directors shall sign),
with the Chairman of the Board of Directors, President or a Vice-President,
certificates for shares of the capital stock of the Corporation, the issue of
which shall have been authorized by resolution of the Board of Directors,
provided that the signatures of the officers of the Corporation thereon may be
by facsimile as provided in these Bylaws; and (g) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him or her by the Board of Directors or, to the extent not
inconsistent with any direction of the Board of Directors, by the President.
Section 11. Assistant Treasurers and Assistant Secretaries. Any Assistant
Treasurers shall, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Treasurers and Assistant
Secretaries, in general, shall perform such duties as shall be assigned to them
by the Board of Directors or, to the extent not inconsistent with any direction
of the Board of Directors, by the Treasurer or the Secretary, respectively, or
by the President. In the event of the absence, inability or refusal to act of
the Treasurer or the Secretary, the Assistant Treasurers or Assistant
Secretaries (in the order designated, or in the absence of any designation, then
in the order of their election) shall perform the duties of the Treasurer or the
Secretary, respectively.
Section 12. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors or, to the extent not
inconsistent with any direction of the Board of Directors, by the President.
The Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
Section 13. Other Positions. The Board of Directors may authorize the use
of titles, including the titles of chairman, president and vice-president, by
individuals who hold management positions with the business groups, divisions or
other operational units of the Corporation, but who are not and shall not be
deemed officers of the Corporation. Individuals in such positions shall hold
such titles at the discretion of the Board of Directors, and shall have such
powers and perform such duties as such appointing officer may from time to time
determine.
Section 14. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors, or by one or more committees or officers
to the extent so authorized from
10.
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time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he or she is also a Director of
the Corporation.
Article VI
Interested Transactions
Section 1. Generally. No contract or transaction between the Corporation
and one or more of its Directors or officers, or between the Corporation and any
other corporation, partnership, association or other organization in which one
or more of its Directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the Director or officer is present at or participates in the meeting of
the Board of Directors or a committee thereof which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if:
(a) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the Board
of Directors or such committee, and the Board of Directors or such
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested Directors, even though
the disinterested Directors be less than a quorum;
(b) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the
Stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the Stockholders; or
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the Stockholders.
The interested Directors may be counted in determining the presence of a
quorum at any meeting of the Board of Directors or of any committee thereof
which authorizes the contract or transaction.
Article VII
Indemnification and Insurance
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in or called as a
witness in any Proceeding (as hereinafter defined) because he or she is an
Indemnified Person (as hereinafter defined) shall be indemnified and held
harmless by the Corporation to the fullest extent permitted under the Delaware
General Corporation Law, as the same now exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than the
Delaware General Corporation Law permitted the Corporation to provide prior to
such amendment). Such indemnification shall cover all
11.
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expenses incurred by an Indemnified Person (including, but not limited to,
attorneys' fees and other expenses of litigation) and all liabilities and losses
(including, but not limited to, judgments, fines, ERISA or other excise taxes or
penalties and amounts paid or to be paid in settlement) incurred by such person
in connection therewith.
Notwithstanding the foregoing, except with respect to indemnification
specified in Section 3 of this Article, the Corporation shall indemnify an
Indemnified Person in connection with a Proceeding (or part thereof) initiated
by such person only if such Proceeding (or part thereof) was authorized by the
Board of Directors.
For purposes of this Article:
(i) a "Proceeding" is any investigation, action, suit or
proceeding, whether civil, criminal, administrative or investigative, and
any appeal therefrom;
(ii) an "Indemnified Person" is any person who is, was, or had
agreed to become a Director, an officer, an employee or a Delegate (as
defined herein) of the Corporation or the legal representative of any of
the foregoing; and
(iii) a "Delegate" is any person serving at the request of the
Corporation or a subsidiary of the Corporation as a director, trustee,
fiduciary or officer of such subsidiary or of another corporation,
partnership, joint venture, trust or other enterprise.
Section 2. Expenses. Expenses, including attorneys' fees, incurred by a
person indemnified pursuant to Section 1 of this Article in defending or
otherwise being involved in a Proceeding shall be paid by the Corporation in
advance of the final disposition of such Proceeding, including any appeal
therefrom, upon receipt of an undertaking (the "Undertaking") by or on behalf of
such person to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the Corporation; provided, that in
connection with a Proceeding (or part thereof) initiated by such person, except
a Proceeding authorized by Section 3 of this Article, the Corporation shall pay
such expenses in advance of final disposition only if such Proceeding (or part
thereof) was authorized by the Board of Directors. A person to whom expenses
are advanced pursuant hereto shall not be obligated to repay such advances
pursuant to the Undertaking until the final determination of any pending
Proceeding in a court of competent jurisdiction concerning the right of such
person to be indemnified or the obligation of such person to repay pursuant to
the Undertaking.
Section 3. Protection of Rights. If a claim under Section 1 of this
Article is not promptly paid in full by the Corporation after a written claim
has been received by the Secretary of the Corporation, or if expenses pursuant
to Section 2 of this Article have not been promptly advanced after a written
request for such advancement accompanied by the Undertaking has been received by
the Secretary of the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim or the
advancement of expenses. If successful, in whole or in part, in such suit, such
claimant shall also be entitled to be paid the reasonable expenses thereof
(including, without limitation, reasonable attorneys' fees).
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It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any Proceeding in advance of
its final disposition where the required Undertaking has been tendered to the
Corporation) that indemnification of the claimant is prohibited by law, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel
or its Stockholders) to have made a determination, if required, prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its Stockholders) that
indemnification of the claimant is prohibited, shall be a defense to the action
or create a presumption that indemnification of the claimant is prohibited.
Section 4. Miscellaneous.
(i) Non-Exclusivity of Rights. The rights conferred on any
person by this Article shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, agreement, vote of Stockholders or
disinterested Directors or otherwise. The Board of Directors shall have
the authority, by resolution, to provide for such indemnification of
employees or agents of the Corporation or others and for such other
indemnification of Directors, officers or Delegates as it shall deem
appropriate.
(ii) Insurance, Contracts and Funding. The Corporation may
maintain insurance, at its expense, to protect itself and any Director,
officer, employee, or agent of, or person serving in any other capacity
with, the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expenses, liabilities or losses,
whether or not the Corporation would have the power to indemnify such
person against such expenses, liabilities or losses under the Delaware
General Corporation Law. The Corporation may enter into contracts with any
Director, officer or Delegate of the Corporation in furtherance of the
provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
the advancing of expenses and indemnification as provided in this Article.
(iii) Contractual Nature. The provisions of this Article shall
be applicable to all Proceedings commenced or continuing after its
adoption, whether such arise out of events, acts or omissions which
occurred prior or subsequent to such adoption, and shall continue as to a
person who has ceased to be a Director, officer or Delegate and shall inure
to the benefit of the heirs, executors and administrators of such person.
This Article shall be deemed to be a contract between the Corporation and
each person who, at any time that this Article is in effect, serves or
agrees to serve in any capacity which entitles him to indemnification
hereunder, and any repeal or other modification of this Article or any
repeal or modification of the Delaware General Corporation Law or any other
applicable law shall not limit any Indemnified Person's entitlement to the
advancement of expenses or indemnification under this Article for
Proceedings then existing or later arising out of events, acts or omissions
occurring prior
13.
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to such repeal or modification, including, without limitation, the right to
indemnification for Proceedings commenced after such repeal or modification
to enforce this Article with regard to Proceedings arising out of acts,
omissions or events occurring prior to such repeal or modification.
(iv) Cooperation. Each Indemnified Person shall cooperate with
the person, persons or entity making the determination with respect to such
Indemnified Person's entitlement to indemnification under this Article,
including providing to such person, persons or entity upon reasonable
advance request any documentation or other information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to such Indemnified Person and reasonably necessary to
determination. Any costs or expenses (including attorneys' fees and
disbursements) incurred by such Indemnified Person in so cooperating with
the person, persons or entity making such determination shall be borne by
the Corporation (irrespective of the determination as to such Indemnified
Person's entitlement to indemnification) and the Corporation hereby
indemnifies and agrees to hold such Indemnified Person harmless therefrom.
(v) Subrogation. In the event that any payment is made to an
Indemnified Person pursuant to this Article, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery
of such Indemnified Person, who shall execute all papers required and take
all action necessary to secure such rights, including, without limitation,
execution of such documents as are necessary to enable the Corporation to
bring suit to enforce such rights.
(vi) Severability. If this Article or any portion hereof shall
be invalidated or held to be unenforceable on any ground by any court of
competent jurisdiction, the decision of which shall not have been reversed
on appeal, such invalidity or unenforceability shall not affect the other
provisions hereof, and this Article shall be construed in all respects as
if such invalid or unenforceable provisions had been omitted herefrom.
Article VIII
Stock Certificates
Section 1. Certificates of Stock. Every holder of stock in the
Corporation shall be entitled to have a certificate, in such form as the Board
of Directors shall prescribe, signed in the name of the Corporation by (i) the
Chairman of the Board of Directors, the President or a Vice-President and (ii)
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, certifying the number and class of shares owned by
him or her in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
14.
<PAGE>
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if he or she were such officer, transfer agent or registrar
at the date of issue.
Section 2. Records of Certificates. A record shall be kept of the name of
the person, firm or corporation of record holding the Corporation stock
represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation thereof, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 3 of this
Article VIII.
Section 3. Lost Certificates. A new certificate of stock may be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to indemnify the Corporation
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed, and give the
Corporation a bond in such sum as the Board of Directors may direct so as to
secure such indemnity obligation.
Section 4. Transfers of Stock. The shares of stock of the Corporation
shall be transferable upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives by the surrender to the
Corporation or the transfer agent of the Corporation of a certificate for such
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, whereupon the Corporation shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5. Fixing Record Date. 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, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or 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, in
advance, a record date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any other
action. A determination of 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.
Section 6. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares of Corporation stock to receive dividends and to vote as such owner,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not
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it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
Article IX
General Provisions
Section 1. Execution of Documents. The President, or any other officer,
employee or agent of the Corporation designated by the Board of Directors or
designated in accordance with corporate policy approved by the Board of
Directors, shall have the power to execute and deliver proxies, stock powers,
deeds, leases, contracts, mortgages, bonds, debentures, notes, checks, drafts
and other orders for payment of money and other documents for and in the name of
the Corporation, and such power may be delegated (including the power to
redelegate) by the President or to the extent provided in such corporate policy
by written instrument to other officers, employees or agents of the Corporation.
Section 2. Dividends. Subject to provisions contained in the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when the Board of Directors deems expedient.
Dividends may be paid in cash, in property, or in shares of the capital stock of
the Corporation, subject to the provisions contained in the Certificate of
Incorporation. In the case of a dividend paid in shares of theretofore unissued
capital stock of the Corporation, the Board of Directors shall direct that there
be designated as capital in respect of such shares an amount not less than the
aggregate par value of such shares and, in the case of shares without par value,
such amount as shall be fixed by the Board of Directors. Before declaring any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for such other purpose as the Board of Directors shall think
conducive to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve.
Section 3. Fiscal Year. The fiscal year of the Corporation shall begin on
the first day of January in each year and shall end on the last day of December
in such year.
Section 4. Indebtedness. All checks, drafts or other orders for the
payment of money, and all notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, or agent
or agents of the Corporation and in such manner as shall be determined from time
to time by the Board of Directors.
Article X
Amendments
Section 1. Generally. Subject to provisions contained in the Certificate
of Incorporation, these Bylaws may be altered, amended or repealed, in whole or
in part, or new Bylaws may be adopted by the Stockholders or the Board of
Directors; provided, however, that
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notice of such alteration, amendment, repeal or adoption of new Bylaws must be
contained in the notice of any meeting of Stockholders or of the Board of
Directors, as the case may be, at which it is to be proposed that such
alteration, amendment, repeal or adoption be effected. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the total prescribed number of
Directors.
Date: December 4, 1992
17.
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EXHIBIT 10.1
================================================================================
THIRD AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
Cell Pathways, Inc.
Dated as of December 31, 1996
================================================================================
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<C> <S> <C>
Section 1. Definitions.............................................. 1
Section 2. Voting Agreement......................................... 5
2.1 Charter Documents...................................... 5
2.2 Board Size; Voting Agreement........................... 6
2.3 Director Designation Rights............................ 6
2.3.1 Technology Partners............................. 6
2.3.2 Quest II........................................ 6
2.3.3 Northwood Ventures.............................. 6
2.3.4 FGN............................................. 6
2.4 Termination of Designation Rights...................... 7
2.4.1 FGN............................................. 7
2.4.2 Technology Partners............................. 7
2.4.3 Quest II........................................ 7
2.4.4 Northwood Ventures.............................. 7
2.5 Failure to Designate................................... 7
2.6 Record of Vote......................................... 8
2.7 Removal and Resignation................................ 8
2.7.1 Right of Designation............................ 8
2.7.2 Removal......................................... 8
2.8 Best Efforts........................................... 9
2.9 FGN Preferred Stock Voting............................. 9
2.10 Observer............................................... 9
2.11 Termination and Amendment of Voting Agreement.......... 9
Section 3. Registration Rights...................................... 10
3.1 Requested Registrations................................ 10
3.1.1 Requests for Registration....................... 10
3.1.2 Notice of Registration.......................... 10
3.1.3 Refusal of Request.............................. 10
3.1.4 Deferral of Registration........................ 11
3.1.5 Underwriting.................................... 12
3.1.6 Registration Procedures......................... 12
3.1.7 Marketing Restrictions.......................... 13
3.2 Incidental Registration................................ 13
3.2.1 Notice of Registration.......................... 13
3.2.2 No Registration Rights.......................... 13
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<C> <S> <C>
3.2.3 Underwriting.......................................... 14
3.2.4 Marketing Restrictions................................ 14
3.3 Registration Procedures...................................... 14
3.3.1 Registration Statement................................ 14
3.3.2 Amendments............................................ 14
3.3.3 Copies................................................ 15
3.3.4 State Registration.................................... 15
3.3.5 Listing............................................... 15
3.3.6 Transfer Agent/Registrar.............................. 15
3.3.7 Underwriting.......................................... 15
3.4 Expenses of Registration..................................... 15
3.5 Registration on Form S 3..................................... 16
3.5.1 Requested Registrations............................... 16
3.5.2 Incorporation by Reference............................ 16
3.6 Indemnification.............................................. 16
3.6.1 Company Indemnification............................... 16
3.6.2 Eligible Holder Indemnification....................... 17
3.6.3 Procedures............................................ 17
3.6.4 Contribution.......................................... 18
3.6.5 Conflicting Provisions................................ 18
3.6.6 Survival.............................................. 19
3.7 Eligible Holder Information.................................. 19
3.8 Other Agreements............................................. 19
3.9 Rule 144..................................................... 19
3.10 Market Stand-Off Agreement................................... 19
3.11 Allocation of Registration Opportunities..................... 20
3.11.1 Requested Registrations.............................. 20
3.11.2 Incidental Registrations............................. 20
3.12 Delay of Registration........................................ 21
3.13 Sales to Underwriter......................................... 21
3.14 Transfer of Registration Rights.............................. 21
3.15 Termination of Registration Rights........................... 21
Section 4. Right of First Refusal......................................... 22
4.1 Grant of Right............................................... 22
4.2 New Securities Defined....................................... 22
4.3 Exercise of Right............................................ 22
</TABLE>
ii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<C> <S> <C>
4.4 Refusal of Offer........................................... 23
4.5 Failure to Exercise........................................ 23
4.6 Expiration................................................. 23
4.7 Transfer of Right.......................................... 24
Section 5. Right of Co-Sale............................................. 24
5.1 Sales by FGN............................................... 24
5.2 Right of Co-Sale........................................... 24
5.3 Delivery of Certificates................................... 24
5.4 Future Rights.............................................. 25
5.5 Exempt Transfers........................................... 25
5.6 Prohibited Transfers....................................... 25
5.7 Termination of Co-Sale Rights.............................. 26
Section 6. Company Covenants............................................ 26
6.1 Financial Statements and Information....................... 26
6.1.1 Annual Reports...................................... 26
6.1.2 Quarterly Reports................................... 27
6.1.3 Commission Reports.................................. 27
6.1.4 Additional Information.............................. 27
6.1.5 Inspection Rights................................... 27
6.1.6 Confidentiality..................................... 27
6.2 Key Man Insurance.......................................... 27
6.3 Underwriting Public Offering............................... 27
Section 7. Transfer of Securities....................................... 28
7.1 Restrictions on Transfer................................... 28
7.2 Restrictive Legends........................................ 28
7.3 Notice of Proposed Transfer................................ 29
7.4 Termination of Restrictions................................ 29
7.4.1 Securities Law Restrictions......................... 29
7.4.2 Co-Sale Restrictions................................ 29
7.5 Elimination of Legend...................................... 30
Section 8. Miscellaneous................................................ 30
8.1 Severability............................................... 30
8.2 Descriptive Headings....................................... 30
8.3 Notices.................................................... 30
8.4 Counterparts............................................... 31
</TABLE>
iii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<C> <S> <C>
8.5 Entire Agreement............................................ 31
8.6 Amendments.................................................. 31
8.7 Governing Law............................................... 31
8.8 Intended Beneficiaries...................................... 31
8.9 GS Group Assignment......................................... 31
8.10 No Inconsistent Agreements.................................. 31
</TABLE>
iv.
<PAGE>
THIRD AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
Third Amended And Restated Stockholders' Agreement dated as of December 31,
1996 (the "Agreement") by and among Cell Pathways, Inc., a Delaware corporation
(the "Company"), FGN, Inc., an Illinois corporation ("FGN") that is a Holder of
the Company's Common Stock, and Series A, Series B and Series E Convertible
Preferred Stock, Northwood Ventures, a New York limited partnership ("Northwood
Ventures") that is a Holder of the Company's Series A, Series B and Series E
Convertible Preferred Stock, Technology Partners West Fund IV, L.P., a
California limited partnership ("Technology Partners") that is a Holder of the
Company's Series B, Series C and Series E Convertible Preferred Stock, Quest
Ventures II, a California limited partnership ("Quest II") that is a Holder of
the Company's Series B, Series C and Series E Convertible Preferred Stock, Quest
Ventures International, also a California limited partnership ("Quest
International") that is a Holder of the Company's Series B, Series C and Series
E Convertible Preferred Stock, and The Goldman Sachs Group, L.P., a Delaware
limited partnership ("GS Group") that is a Holder of Series F Convertible
Preferred Stock.
W I T N E S S E T H:
Whereas, the parties hereto entered into a Stockholders' Agreement dated as
of December 10, 1992 pursuant to which the parties entered into a voting
agreement, and for the benefit of themselves and the other Company stockholders
entered into agreements regarding registration rights, rights of first refusal,
rights of co-sale, Company covenants and transfers of Company securities; and
Whereas, in connection with the issuance by the Company of its Series F
Convertible Preferred Stock the parties hereto desire to amend and restate the
Stockholders' Agreement in the form of this Agreement;
Now, Therefore, in consideration of the mutual covenants and agreements
contained herein, the parties hereto hereby agree as follows:
Section 1. Definitions.
1.1 "Board of Directors" shall mean the Board of Directors of the Company.
1.2 "Cause" shall mean, with respect to any Director, any of the
following: (i) the commission by such Director of any felony, (ii) the inability
of such Director to perform his or her duties due to abuse of alcohol or drugs,
(iii) serious misconduct by such Director in the
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course of performing such Director's duties involving fraud or dishonesty, or
(iv) habitual neglect by such of his or her duties.
1.3 "Commission" shall mean the United States Securities and Exchange
Commission or any successor to the functions of such agency.
1.4 "Common Stock" shall mean the Company's Common Stock, $.01 par value.
1.5 "Company" shall mean Cell Pathways, Inc., a Delaware corporation, and
all successor corporations thereto.
1.6 "Co-Sale Notice" shall have the meaning given such term in Subsection
5.1 hereof.
1.7 "Designated Preferred Stock" shall mean the Series A, B, C, D, E and F
Convertible Preferred Stock.
1.8 "Designating Holder" shall mean, at any time, any Person who shall
have the right at such time pursuant to Section 2.3 hereof to designate one or
more individuals for election to the Board of Directors.
1.9 "Designees" shall mean any individual designated for election to the
Board of Directors pursuant to Section 2 of this Agreement.
1.10 "Eligible Holder" shall mean, at any time, any Original Holder who is
then a Holder of Registrable Securities and any Holder of Registrable Securities
to whom the registration rights conferred by Section 3 of this Agreement have
been transferred in compliance with Subsection 3.14 hereof.
1.11 "Founding Holder" shall mean each of FGN, Northwood Ventures,
Technology Partners and Quest II and Quest International.
1.12 "Holder" shall mean, at any time, any Person who then owns of record
any Securities.
1.13 "Initiating Holders" shall mean any Eligible Holder(s) who hold, in
the aggregate, not less than 40% of either (i) the Common Stock issued and
issuable upon conversion of the Series C, Series D, Series E and Series F
Convertible Preferred Stock, or (ii) the Common Stock issued and issuable upon
conversion of the Series A and Series B Convertible Preferred Stock.
1.14 "Junior Preferred Stock" shall mean the Series A and B Convertible
Preferred Stock, treated as one class.
1.15 "New Securities" shall have the meaning given such term in Subsection
4.2 hereof.
2.
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1.16 "Original Holder" shall mean each Holder on the date of this Agreement
of Stock and each original Holder of any Series F Convertible Preferred Stock
issued by the Company in the course of the Company's offering of such Stock
during the period December 14, 1996 to June 30, 1997.
1.17 "Other Shares" shall mean (i) all issued Common Stock, (ii) all Common
Stock issuable pursuant to options, rights, warrants, convertible securities or
other instruments or agreements, and (iii) all Common Stock issued as a dividend
or other distribution with respect to or in exchange for or in replacement of
the Securities referenced in clauses (i) and (ii) above, but in each case
excluding Registrable Securities held by Eligible Holders. For purposes of
Section 3 of this Agreement, shares of Common Stock issuable pursuant to the
conversion, exercise or exchange of Securities other than Registrable Securities
shall be deemed outstanding Other Shares.
1.18 "Other Stockholders" shall mean Persons other than Eligible Holders
who, by virtue of agreements with the Company, are entitled to include their
Securities in certain registrations hereunder.
1.19 "Original Preferred Holder" shall have the meaning given such term in
Subsection 5.1 hereof.
1.20 "Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a governmental organization or any
agency or political subdivision thereof.
1.21 "Preferred Stock" shall mean the Company's Preferred Stock, $.01 par
value.
1.22 "Public Offering" shall mean an offering of Securities registered
under the Securities Act.
1.23 The terms "register", "registered" and "registration" shall refer to a
registration of Securities effected by preparing and filing a Registration
Statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such Registration Statement.
1.24 "Registrable Securities" shall mean (i) Common Stock outstanding on
the date hereof, (ii) Common Stock issued pursuant to the conversion of
Designated Preferred Stock, (iii) Common Stock issuable pursuant to the
conversion of Designated Preferred Stock (including any Designated Preferred
Stock issued upon exercise of warrants) or the exercise of warrants, (iv) other
securities issued or issuable with respect to the Common Stock in connection
with a reclassification, recapitalization, merger, consolidation or other
reorganization, and (v) any Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement of the
Securities referenced in clauses (i), (ii), (iii) and (iv) above; provided,
however, that Registrable Securities shall not include any shares of Common
Stock after such shares have been sold pursuant to (a) a Registration Statement
declared effective under the Securities Act, (b) Rule 144, or (c) any other
exemption from registration to a Person who is free
3.
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to resell such shares without registration or restriction under the Securities
Act; and provided, further, that at any time subsequent to the completion of the
first Public Offering, Registrable Securities shall not include any Securities
which are eligible to be sold without registration under the Securities Act in
compliance with Subsection (k) of Rule 144. No Registrable Securities shall be
deemed to exist from and after such time as there are outstanding less than
15,000 Registrable Securities (as appropriately adjusted for any stock
dividends, combinations or splits with respect to the Common Stock). For
purposes of Section 3 of this Agreement, shares of Common Stock issuable upon
the conversion, exercise or exchange of Registrable Securities shall be deemed
outstanding Registrable Securities.
1.25 "Registration Expenses" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include (i) Selling Expenses, (ii) fees and
disbursements of counsel for any Eligible Holder(s) or (iii) the compensation of
regular employees of the Company (which shall be paid in any event by the
Company).
1.26 "Registration Statement" shall mean any registration statement filed
with the Commission in accordance with the Securities Act, together with all
amendments or supplements thereto.
1.27 "Rule 144" shall mean Rule 144 promulgated by the Commission under the
Securities Act, as such rule may be amended from time to time, or any similar
successor rule that may be promulgated by the Commission.
1.28 "Rule 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
1.29 "Securities" shall mean any debt or equity securities of the Company,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable or exercisable for one or more debt or equity securities of the
Company.
1.30 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any federal statute or statutes which shall be enacted to take the place of such
Act, together with all rules and regulations promulgated thereunder.
1.31 "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any federal statute or statutes which shall be enacted to
take the place of such Act, together with all rules and regulations promulgated
thereunder.
1.32 "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Securities and all fees and disbursements
of counsel for any Holder in connection with such sale (other than the fees and
disbursements of any such counsel to be paid by the Company pursuant to
Subsection 3.4 hereof).
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1.33 "Senior Preferred Stock" shall mean the Series C, D, E and F
Convertible Preferred Stock, treated as one class.
1.34 "Series A Convertible Preferred Stock" shall mean the Company's Series
A Convertible Preferred Stock, $.01 par value, and any Stock into which such
Stock may hereafter be changed, other than by exercise of the conversion right
of such Stock.
1.35 "Series B Convertible Preferred Stock" shall mean the Company's Series
B Convertible Preferred Stock, $.01 par value, and any Stock into which such
Stock may hereafter be changed, other than by exercise of the conversion right
of such Stock.
1.36 "Series C Convertible Preferred Stock" shall mean the Company's Series
C Convertible Preferred Stock, $.01 par value, and any Stock into which such
Stock may hereafter be changed, other than by exercise of the conversion right
of such Stock.
1.37 "Series D Convertible Preferred Stock" shall mean the Company's Series
D Convertible Preferred Stock, $.01 par value, and any Stock into which such
Stock may hereafter be changed, other than by exercise of the conversion right
of such Stock.
1.38 "Series E Convertible Preferred Stock" shall mean the Company's Series
E Convertible Preferred Stock, $.01 par value, and any Stock into which such
Stock may hereafter be changed, other than by exercise of the conversion right
of such Stock.
1.39 "Series F Convertible Preferred Stock" shall mean the Company's Series
F Convertible Preferred Stock, $.01 par value, and any Stock into which such
Stock may hereafter be changed, other than by exercise of the conversion right
of such Stock.
1.40 "Stock" shall include any and all shares of capital stock of the
Company, however designated.
1.41 "Stockholders" shall mean the Holders of Company Stock.
1.42 "Voting Stock" shall mean Stock the Holders of which are entitled, in
the absence of contingencies, to participate generally in the election of the
members of the Board of Directors.
Section 2. Voting Agreement.
2.1 Charter Documents. The Company has previously furnished to the
Founding Holders copies of its Certificate of Incorporation and Bylaws, in each
case as in effect on the date of this Agreement (the "Charter Documents"). From
and after the date of this Agreement each Founding Holder shall vote all shares
of Voting Stock now or hereafter owned or controlled by such Founding Holder
(including shares of Voting Stock hereafter acquired by such Founding Holder
pursuant to exercise of the Conversion Option or otherwise) at any regular or
special meeting of Stockholders, or, to the extent permitted by the Charter
Documents, in any written
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consent executed in lieu of such a meeting, and shall take all action necessary,
to ensure that the Charter Documents do not, at any time, conflict with the
provisions of this Agreement.
2.2 Board Size; Voting Agreement. The Board of Directors of the Company
shall consist of eight Directors. At any regular or special meeting of
Stockholders called for the purpose of electing members to serve on the Board of
Directors, or, to the extent permitted by the Charter Documents, in any written
consent electing members to serve on the Board of Directors executed in lieu of
such a meeting, the Founding Holders shall vote their shares of Voting Stock
(including any shares of Voting Stock hereafter acquired), and shall take all
action necessary, to ensure that the Board of Directors of the Company consists
of the Designees.
2.3 Director Designation Rights. The following Holders shall have the
following rights to designate individuals as Designees to serve as members of
the Company's Board of Directors:
2.3.1 Technology Partners. Technology Partners shall have the right
so long as it is the Holder of not less than 291,000 shares of Series C
Convertible Preferred Stock (as adjusted for any stock dividends, combinations
or splits with respect to such Stock after the date hereof), to designate in
writing to the Secretary of the Company one individual for election to the Board
of Directors; provided, however, in the case of a classified Board of Directors,
that if the term of office of such Designee does not expire at such meeting then
Technology Partners may not designate any such individual.
2.3.2 Quest II. Quest II shall have the right so long as Quest II and
Quest International are the Holders of not less than 164,000 shares of Series C
Convertible Preferred Stock (as adjusted for any stock dividends, combinations
or splits with respect to such Stock after the date hereof), to designate in
writing to the Secretary of the Company one individual for election to the Board
of Directors; provided, however, in the case of a classified Board of Directors,
that if the term of office of such Designee does not expire at such meeting then
Quest II may not designate any such individual.
2.3.3 Northwood Ventures. Northwood Ventures shall have the right so
long as it is the Holder of not less than 276,250 shares of Series A Convertible
Preferred Stock and/or Series B Convertible Preferred Stock (as adjusted for any
stock dividends, combinations or splits with respect to such Stock after the
date hereof), to designate in writing to the Secretary of the Company one
individual for election to the Board of Directors; provided, however, in the
case of a classified Board of Directors, that if the term of office of such
Designee does not expire at such meeting then Northwood Ventures may not
designate any such individual.
2.3.4 FGN. FGN shall have the right so long as it is the Holder
(including as trustee) of not less than 1,464,150 shares of Common Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
Stock after the date hereof):
(i) to designate in writing to the Secretary of the Company
two individuals for election to the Board of Directors; provided, however, in
the case of a classified Board of Directors, that if the term of office of
either such Designee does not expire at such
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meeting, then FGN shall have the right to designate only one such individual for
election to the Board of Directors pursuant to this clause (i); and provided,
further, that if the term of office of neither such Designee expires at such
meeting, then FGN may not designate any such individual pursuant to this clause
(i); and
(ii) to designate in writing to the Secretary of the
Company two individuals for election to the Board of Directors, with the
approval in writing of the Holders of not less than 50% of the outstanding
shares of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock, voting as one class, and of the Holders of not less than 50% of
the outstanding shares of Series C, Series D, Series E and Series F Convertible
Preferred Stock, voting as one class; provided, however, in the case of a
classified Board of Directors, that if the term of office of either such
Designee does not expire at such meeting, then FGN shall have the right to
designate only one individual for election to the Board of Directors pursuant to
this clause (ii); and provided, further, that if the term of office of neither
such Designee expires at such meeting, then FGN may not designate any such
individual pursuant to this clause (ii).
2.4 Termination of Designation Rights. The right of certain Holders to
designate individuals for election to the Board of Directors pursuant to
Subsection 2.3 hereof shall be subject to termination as follows:
2.4.1 FGN. At any time as FGN shall be a Holder (including as
trustee) of less than 1,464,150 shares of Common Stock (as adjusted for any
stock dividends, combinations or splits with respect to such Stock), then the
right of FGN to designate individuals for election to the Board of Directors
shall immediately cease.
2.4.2 Technology Partners. At any time as Technology Partners shall
be a Holder of less than 291,000 shares of Series C Convertible Preferred Stock
(as adjusted for any stock dividends, combinations or splits with respect to
such Stock), then the right of Technology Partners to designate an individual
for election to the Board of Directors shall immediately cease.
2.4.3 Quest II. At any time as Quest II and Quest International shall
be Holders of less than 164,000 shares of Series C Convertible Preferred Stock
(as adjusted for any stock dividends, combinations or splits with respect to
such Stock), then the right of Quest II to designate an individual for election
to the Board of Directors shall immediately cease.
2.4.4 Northwood Ventures. At any time as Northwood Ventures shall be
a Holder of less than 276,250 shares of Series A and/or Series B Convertible
Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such Stock), then the right of Northwood Ventures to designate
an individual for election to the Board of Directors shall immediately cease.
2.5 Failure to Designate. Any Designating Holder having the right to make
any designation pursuant to this Section 2 in connection with any annual or
special meeting of Stockholders at which Directors are to be elected, or in
connection with a Stockholders' written consent to elect Directors, and who
shall fail to deliver such designation in writing to the Secretary of the
Company by 5:00 p.m. E.S.T. on the fifth business day preceding the date of the
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Stockholders' meeting, shall be deemed to have designated the individual
previously designated by such Designating Holder for election to such position
on the Board of Directors. If the number of Directors to be elected at any
annual or special meeting, or pursuant to any written consent, of Stockholders
exceeds the number of Designees designated in connection with such meeting or
written consent, then such excess number of Directors shall be elected by the
Holders of all Voting Stock voting as a single class.
2.6 Record of Vote. To effectuate the provisions of this Section 2, the
Secretary of the Company, or if there be no Secretary such other officer of the
Company as the Board of Directors may appoint to fulfill the duties of
Secretary, shall not record any vote or consent (to the extent action by consent
is permitted by the Charter Documents) contrary to the terms of this Section 2,
and each Founding Holder hereby agrees that any vote or consent given in
connection with an election of Directors contrary to the agreement of such
Founding Holder in this Section 2 shall be null and void and of no force or
effect.
2.7 Removal and Resignation.
2.7.1 Right of Designation. If, prior to his or her election to the
Board of Directors pursuant to this Section 2, any Designee shall be unable or
unwilling to serve, or is removed, as a Director of the Company, then the
Holder(s) who designated such Designee shall be entitled to designate a
replacement who shall then be a Designee (and who shall serve in the Director
class (if any) in which such removed Director served) for purposes of this
Section 2. If, following election to the Board of Directors pursuant to this
Section 2, any Designee shall resign or be removed or be unable to serve for any
reason prior to the expiration of his or her term as a Director, then the
Holder(s) who designated such Designee shall within 30 days of such event notify
the Board of Directors in writing of a replacement Designee, and the Founding
Holders shall vote their shares of Voting Stock (including shares of Voting
Stock acquired), at any annual or special meeting called for the purpose of
filling positions on the Board of Directors or, to the extent permitted by the
Charter Documents, in any written consent executed in lieu of such a meeting,
and shall take all action necessary, to ensure the election to the Board of
Directors of such replacement Designee to fill the unexpired term of the
Designee whom such replacement Designee is replacing. If a Holder or Holders
shall fail to so notify the Board of Directors, the Board of Directors, in its
discretion, may nominate any other individual to fill the vacancy, and the
Founding Holders shall vote their shares of Voting Stock (including shares of
Voting Stock hereafter acquired) for such individual as provided in this
Subsection 2.7.1.
2.7.2 Removal. Each Founding Holder agrees to use such Founding
Holder's best efforts to call, or cause the appropriate officers and Directors
of the Company to call, a special or annual meeting of Stockholders and to vote
all of the shares of Voting Stock (including shares of Voting Stock hereafter
acquired) held by such Founding Holder for, or, to the extent permitted by the
Charter Documents, to take all actions by written consent in lieu of any such
meeting necessary to cause, the removal of:
(i) any Director designated pursuant to this Section 2 if
the designation rights of the Holder who designated such Director shall have
lapsed;
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(ii) any Director if the Holder who designated such
Director requests such Director's removal for any reason; or
(iii) any Director where a majority of the remaining
Directors determine that such Director should be removed for Cause.
Each Founding Holder agrees that no Director shall be removed without
Cause except as set forth in clauses (i) and (ii) of this Subsection 2.7.2.
Notwithstanding the foregoing, any Director may be removed for Cause if the
Holders of Voting Stock entitling them to cast a majority of the votes at an
election of Directors consent to such removal in a writing specifying the Cause
for which such removal is being made.
2.8 Best Efforts. In order to effectuate the provisions of this
Agreement, each Founding Holder agrees that when any action or vote is required
to be taken by such Founding Holder pursuant to this Agreement, such Founding
Holder shall use such Founding Holder's best efforts to call, or to cause the
appropriate Company officers and Directors to call, a special or annual meeting
of Stockholders, as the case may be, or, to the extent permitted by the Charter
Documents, to execute or cause to be executed a consent in writing in lieu of
any such meeting, in order to effectuate such Stockholder action.
2.9 FGN Preferred Stock Voting. In connection with any vote of
Stockholders, FGN hereby agrees that, at its election, it will either (i) vote
all of the shares of Designated Preferred Stock of any Series held by it on the
date hereof at the direction of the Holders of a majority of the outstanding
shares of such series, or (ii) abstain from voting shares of Stock of such
Series in connection with such vote of Stockholders.
2.10 Observer. The parties hereto agree that GS Group shall have the right
to designate a representative (the "Representative") to attend and observe each
meeting of the Board of the Directors of the Company (the "Board") (or, if a
meeting is held by telephone conference, to participate therein for the purpose
of listening thereto), who shall be entitled to fully participate (other than
the right to vote) in such meeting as if he were a member of the Board. The
Company shall provide the Representative the same notice of the time and place
of any proposed meeting (or action by written consent) of the Board as is
provided to the other members of the Board. Such notice shall include true and
complete copies of all documents furnished to any director in connection with
such meeting or consent. The observer status provided in this Section 2.10
shall also apply with respect to any matter material (or which is reasonably
likely to be material) to the Company that is dealt with by a committee of the
Board of Directors. The provisions of this Section 2.10 shall terminate upon
the earliest to occur of (i) the events set forth in clauses (i) and (iii) of
Section 2.11 or (ii) the written consent of GS Group. Before participating in
his first Board meeting, the Representative shall sign the form of
confidentiality and proprietary information agreement, required by the Company
of its directors.
2.11 Termination and Amendment of Voting Agreement. The provisions of this
Section 2 shall terminate upon the earliest to occur of (i) the 10th anniversary
of the date of this Agreement, (ii) the written consent of all of the
Designating Holders (except with respect to Section 2.10), or (iii) the sale of
Common Stock in a firm commitment, underwritten Public
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Offering at a public offering price (prior to deduction of underwriter's
discounts and expenses) equal to or exceeding $6.60 per share of Common Stock
(as adjusted for any stock dividends, combinations or splits with respect to
such shares) and resulting in aggregate proceeds to the Company and/or selling
Stockholders (prior to deduction of underwriter's discounts and expenses and
other expenses of the offering) of not less than $10,000,000. Notwithstanding
any other provision of this Agreement, the provisions of this Section 2) may be
amended, modified or supplemented by, and only by, a written instrument executed
by each of the Designating Holders, except that Section 2.10 may be amended,
modified or supplemented only if the GS Group gives its written consent.
Section 3. Registration Rights.
3.1 Requested Registrations.
3.1.1 Requests for Registration. If the Company shall receive from
Initiating Holders at any time or times a written request that the Company
effect any registration under the Securities Act with respect to all or any part
of the Registrable Securities having an offering price to the public, net of
underwriting discounts and expenses, equal to or exceeding $6.60 per share of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such Stock) and the aggregate proceeds of which (after deduction for
underwriter's discounts and expenses related to the issuance) exceed
$10,000,000, then the Company will, subject to the limitations set forth in this
Section 3, use its best efforts to effect the registration of Registrable
Securities under the Securities Act and the registration or qualification
thereof under all applicable state securities laws. To be effective, any
request pursuant to this Subsection 3.1 shall state to the reasonable
satisfaction of the Company the intended method of disposition of the
Registrable Securities sought to be registered under the Securities Act.
3.1.2 Notice of Registration. Whenever the Company shall, pursuant to
this Subsection 3.1, be requested by Initiating Holders to effect the
registration of any Registrable Securities under the Securities Act, the Company
shall promptly give written notice of such proposed registration (the
"Registration Notice") to each other Eligible Holder stating that such Eligible
Holders have the right to request that any or all of the Registrable Securities
held by them be included in such registration. To be effective, any Eligible
Holder's request for inclusion in the registration must be received by the
Company in writing not later than 20 days following the date of mailing, first
class postage prepaid, of the Company's Registration Notice. Subject to the
limitations contained in Subsections 3.1.3, 3.1.4 and 3.11 hereof, the Company
shall, as soon as reasonably practicable, use its best efforts to effect the
registration under the Securities Act and applicable state securities laws of
all Registrable Securities with respect to which the Company has received timely
written requests pursuant to the preceding sentence from the Eligible Holders
thereof for inclusion therein so as to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof described in the requests of such Eligible Holders.
3.1.3 Refusal of Request. The Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Subsection 3.1:
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(A) Before the earlier of (i) December 10, 1995 or (ii) one year
after the effective date of the first Registration Statement filed by the
Company covering a firm commitment underwritten offering of any of its
Securities to the general public;
(B) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, unless the Company is already subject to service of process in
such jurisdiction and except as may be required by the Securities Act;
(C) For Initiating Holders holding Common Stock issued or issuable
upon conversion of the Series C, Series D, Series E and Series F Convertible
Preferred Stock after the Company has initiated one such registration for such
Initiating Holders pursuant to this Subsection 3.1 (counting for this purpose
only Registration Statements which have been declared or ordered effective and
pursuant to which Securities have been sold, and Registration Statements which
have been withdrawn by the requesting Eligible Holders as to which such Eligible
Holders have not elected to bear the Registration Expenses pursuant to
Subsection 3.4 hereof);
(D) For Initiating Holders holding Common Stock issued or issuable
upon conversion of the Series A and Series B Convertible Preferred Stock after
the Company has initiated one such registration for such Initiating Holders
pursuant to this Subsection 3.1 (counting for this purpose only Registration
Statements which have been declared or ordered effective and pursuant to which
Securities have been sold, and Registration Statements which have been withdrawn
by the requesting Eligible Holders as to which such Eligible Holders have not
elected to bear the Registration Expenses pursuant to Subsection 3.4 hereof);
(E) During the period starting with the date 60 days prior to the
Company's good faith estimate of the date of filing of, and ending on a date 180
days after the effective date of, a Company initiated registration, provided
that the Company is actively employing in good faith all reasonable efforts to
cause such Registration Statement to become effective;
(F) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered on Form S 3 pursuant
to a request made under Subsection 3.5 hereof;
(G) If the Initiating Holders do not request that such offering be
firmly underwritten by underwriters selected by the Initiating Holders and
reasonably acceptable to the Company, subject to the right of the Company
pursuant to Subsection 3.1.5 hereof to select such underwriters; or
(H) If the Company and the Initiating Holders are unable to obtain
the commitment of the underwriter described in clause (G) above to firmly
underwrite the offering.
3.1.4 Deferral of Registration. If in the good faith judgment of the
Board of Directors any registration would be seriously detrimental to the
Company and the Board of
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Directors concludes, as a result, that it is essential at such time to defer the
filing of any Registration Statement, and if the Company shall furnish to the
Initiating 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 for such Registration Statement to
be filed in the near future and that it is, therefore, essential to defer the
filing of such Registration Statement, then the Company shall have the right to
defer such filing for the period during which the disclosure required by such
registration would be seriously detrimental, provided that (except as provided
in Subsection 3.1.3(E) above) the Company may not defer the filing for a period
of more than 180 days after receipt of the request of the Initiating Holders,
and provided, further, that the Company shall not defer its obligation in this
manner more than once in any twelve month period.
The Registration Statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of this Subsection 3.1.4 and
Subsection 3.11 hereof, include other Securities with respect to which
registration rights have been granted, and may include Securities being sold for
the account of the Company.
3.1.5 Underwriting. The registration rights of any Eligible Holder
pursuant to Subsection 3.1 shall be conditioned upon such Eligible Holder's
participation in such underwriting and the inclusion of such Eligible Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
such Eligible Holder and Initiating Holders holding a majority of the
Registrable Securities requested by all Initiating Holders to be included in
such registration with respect to such participation and inclusion) to the
extent provided herein. An Eligible Holder may elect to include in such
underwriting all or a part of the Registrable Securities held by such Eligible
Holder. Subject to Section 6.3, the Holders of at least 51% of the Registrable
Securities included in any Registration Statement filed pursuant to this
Subsection 3.1 shall have the right to select the underwriter or underwriters
who shall serve as the manager and/or co-managers for the offering of
Registrable Securities covered by the Registration Statement, except that if the
requested registration is the initial registration under the Securities Act by
the Company of an underwritten public offering of Common Stock, then the Company
shall have the right to select such underwriter or underwriters, but only with
the consent of the Eligible Holders of not less than a majority of the
Registrable Securities requested to be included therein.
3.1.6 Registration Procedures. If the Company shall request
inclusion in any registration pursuant to Subsection 3.1 of Securities being
sold for its own account, or if other Persons shall request inclusion in any
registration pursuant to Subsection 3.1, then the Initiating Holders shall, on
behalf of all Eligible Holders, offer to include such Securities in the
underwriting and may condition such offer to such other Persons on their
acceptance of the further applicable provisions of this Section 3 (including
Subsection 3.10). Subject to Section 6.3, the Company shall (together with all
Eligible Holders and other Persons proposing to distribute their Securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by Initiating Holders holding a majority of the Registrable
Securities held by all
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Initiating Holders (subject to the right of the Company under Subsection 3.1.5
to select such underwriter(s)), which underwriters shall be reasonably
acceptable to the Company.
3.3.7 Marketing Restrictions. Notwithstanding any other provision
of this Subsection 3.1, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
registration shall be allocated as set forth in Subsection 3.11 hereof. If a
Person who has requested inclusion in such registration as provided above does
not agree to the terms of any such underwriting, such Person shall be excluded
therefrom by written notice from the Company, the underwriter or Initiating
Holders holding a majority of the Registrable Securities requested by all
Initiating Holders to be included in such registration. The Securities
(including any Registrable Securities) so excluded shall also be withdrawn from
registration. If shares are so withdrawn from the registration and if the number
of shares to be included in such registration was previously reduced as a result
of marketing factors pursuant to Subsection 3.11, then the Company shall offer
to all Holders (including Eligible Holders) who have retained rights to include
Securities in the registration the right to include additional Securities in
such registration in an aggregate amount equal to the number of shares so
withdrawn, with such shares to be allocated among such Holders requesting
additional inclusion in accordance with Subsection 3.11.
3.2 Incidental Registration.
3.2.1 Notice of Registration. If the Company shall determine at any
time to register any of its Common Stock under the Securities Act and any
applicable state securities laws, either for its own account or for the account
of any Holder or Holders exercising his or their respective registration rights
(other than pursuant to Subsections 3.1 or 3.5 hereof), on a form which permits
inclusion of Registrable Securities, then the Company shall each such time give
written notice to all Eligible Holders of its intention to effect such a
registration. Upon the written request of any Eligible Holder or Holders given
within 20 days after receipt of any such notice, the Company shall, subject to
the limitations contained in Subsections 3.2.2 and 3.11 hereof, use its best
efforts to cause all Registrable Securities which Eligible Holders shall have
requested be registered, to be registered under the Securities Act and any
applicable state securities laws, all to the extent requisite to permit the sale
or other disposition by such Eligible Holders of the Registrable Securities so
registered. No registrations of Registrable Securities under this Subsection
3.2 shall relieve the Company of its obligation to effect registrations under
Subsection 3.1 hereof, or shall constitute a registration request by any
Eligible Holder thereunder. Subject to Section 6.3, the Company shall have the
right to select the underwriter or underwriters who shall serve as the manager
and/or co-managers for all registrations of Securities under this Subsection
3.2.
3.2.2 No Registration Rights. Eligible Holders shall have no right
to participate in any registration initiated by the Company, whether for its own
account or for the account of any other Holders, where such registration:
(A) relates solely to a Rule 145 transaction;
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(B) relates solely to employee benefit plans; or
(C) is on any registration form that does not permit secondary sales.
3.2.3 Underwriting. If the registration of which the Company has
given notice pursuant to Subsection 3.2.1 is for a Public Offering involving an
underwriting, the Company shall so advise the Eligible Holders as a part of the
written notice given pursuant to Subsection 3.2.1. In such event, the right of
any Eligible Holder to registration pursuant to this Subsection 3.2 shall be
conditioned upon such Eligible Holder's participation in such underwriting and
the inclusion of such Eligible Holder's Registrable Securities in the
underwriting to the extent provided herein. All Eligible Holders proposing to
distribute their Securities through such underwriting shall (together with the
Company and the other Holders with registration rights to participate therein
distributing their Securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company. If any Holder does not
agree to the terms of any such underwriting, such Holder shall be excluded
therefrom by written notice from the Company or the underwriter. Any Registrable
Securities or other Securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
3.3.4 Marketing Restrictions. Notwithstanding any other provision of
this Subsection 3.2, if the representative of the underwriters advises the
Company in writing that marketing factors require a limitation on the number of
shares to be underwritten, the number of shares to be included in the
registration shall be allocated as set forth in Subsection 3.11 hereof. If
shares are withdrawn from the registration pursuant to Subsection 3.2.3 hereof
and if the number of shares of Registrable Securities to be included in such
registration was previously reduced as a result of marketing factors, the
Company shall then offer to all Holders who have retained the right to include
Securities in the registration the right to include additional Securities in the
registration in an aggregate amount equal to the number of shares so withdrawn,
with such shares to be allocated among the Holders requesting additional
inclusion in accordance with Subsection 3.11 hereof.
3.3 Registration Procedures. Whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Securities, the Company will use its best efforts to, as
expeditiously as possible:
3.3.1 Registration Statement. Prepare and file with the Commission a
Registration Statement with respect to such Registrable Securities and use its
best efforts to cause such Registration Statement to become and remain
effective; provided, however, that before so filing a Registration Statement or
any amendments or supplements thereto, the Company will furnish to one counsel
selected by the Holders of not less than a majority of the Securities included
in such Registration Statement copies of all such documents proposed to be
filed, which documents shall be subject to the review of such counsel;
3.3.2 Amendments. Prepare and file with the Commission such
amendments and supplements to such Registration Statement as may be necessary to
keep such Registration Statement effective for a period of not less than one
year and to comply with the provisions of
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the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such Registration Statement during such period
in accordance with the intended method or methods of disposition by the Eligible
Holders thereof set forth in such Registration Statement;
3.3.3 Copies. Furnish to each Eligible Holder of Registrable
Securities included in the Registration Statement such number of copies of such
Registration Statement, each amendment and supplement thereto, the prospectus
included therein (including each preliminary prospectus), and such other
documents, as such Eligible Holder may reasonably request in order to facilitate
the public sale or other disposition of the Securities owned by such Eligible
Holder and included in such Registration Statement;
3.3.4 State Registration. Use every reasonable effort to register or
qualify all the Registrable Securities covered by such Registration Statement
under the securities laws of such jurisdictions as each Eligible Holder
including Registrable Securities therein shall reasonably request, and do any
and all other acts and things which may be necessary under such securities laws
to enable each such Eligible Holder to consummate the public sale or other
disposition in such jurisdiction of the Registrable Securities owned by such
Eligible Holder and included in such Registration Statement; provided, however,
that the Company shall not be required to (i) qualify to do business as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for this subsection, (ii) subject itself to taxation in
any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;
3.3.5 Listing. Cause all Registrable Securities covered by such
Registration Statement to be listed on each securities exchange on which the
Common Stock is then listed;
3.3.6 Transfer Agent/Registrar. Provide a transfer agent and
registrar for the Common Stock not later than the effective date of such
Registration Statement; and
3.3.7. Underwriting. In connection with any underwritten public
offering pursuant to a Registration Statement filed pursuant to Subsection 3.1
or 3.2 hereof, enter into an underwriting agreement reasonably necessary to
effect the offer and sale of Registrable Securities, provided such underwriting
agreement contains customary underwriting provisions and, if the underwriter so
requests, contains customary contribution provisions.
3.4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Subsections 3.1 and 3.2 hereof, and the reasonable fees of one counsel for the
selling Stockholders in the case of registrations pursuant to Subsection 3.1
hereof, shall be borne by the Company. All Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the Holders of Securities included therein pro rata on the basis of the
number of such Securities held by each. Notwithstanding the foregoing, the
Eligible Holders participating in any registration may elect to bear the
Registration Expenses for any registration proceeding begun pursuant to
Subsection 3.1 hereof and subsequently withdrawn by the Eligible Holders
registering shares therein, in which case such registration proceeding shall not
be counted as a request for registration pursuant to Subsection 3.1 hereof. All
Registration Expenses incurred in connection with any registration,
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qualification or compliance pursuant to Subsection 3.5 hereof and all Selling
Expenses relating to any such registration, qualification or compliance shall be
borne by the Holders of Securities included therein pro rata on the basis of the
number of such Securities held by each.
3.5 Registration on Form S 3.
3.5.1 Requested Registrations. Following its initial Public Offering
on a firm commitment, underwritten basis, the Company shall use its best efforts
to qualify for registration on Form S 3 promulgated under the Securities Act or
any comparable or successor form or forms. After the Company has qualified for
the use of Form S 3, in addition to the rights contained in the foregoing
provisions of this Section 3, the Eligible Holders of Registrable Securities
shall have the right to request registrations on Form S 3 (such requests to be
in writing and to state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Eligible Holder or Holders); provided, however, that the Company shall not be
obligated to effect any such registration (i) if the Eligible Holders, together
with the Holders of any other Securities entitled to inclusion in such
registration, propose to sell Registrable Securities and such other Securities
(if any) on Form S 3 at an aggregate price to the public of less than
$10,000,000, (ii) in the event that the Company shall furnish the certification
described in Subsection 3.1.4 hereof (but subject to the limitations set forth
therein), (iii) if the Company has effected a registration of its Securities
within 12 months immediately preceding such registration, (iv) with respect to
any Securities that may be sold by the Holder thereof under Rule 144, or (v) if
it is to be effected more than five (5) years after the Company's initial Public
Offering.
3.5.2 Incorporation by Reference. If a request complying with the
requirements of Subsection 3.5.1 hereof is delivered to the Company, the
provisions of Subsections 3.1.1 through 3.1.4 hereof shall apply to such
registration to the extent not inconsistent with this Subsection 3.5. If the
registration is for an underwritten offering, the provisions of Subsections
3.1.5 through 3.1.7 hereof shall also apply to such registration.
3.6 Indemnification.
3.6.1 Company Indemnification. The Company shall indemnify each
Eligible Holder participating in a registration, each of such Eligible Holder's
officers, directors and partners, its legal counsel and accountants and each
Person controlling such Eligible Holder within the meaning of Section 15 of the
Securities Act, with respect to whom registration, qualification, or compliance
has been effected pursuant to this Section 3, and each underwriter, if any, and
each Person who controls within the meaning of Section 15 of the Securities Act
any underwriter, against all expenses, claims, losses, damages and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any Registration Statement, prospectus, offering circular, or other
document incident to any such registration, qualification, or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or of any rule
or regulation promulgated thereunder applicable to
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the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Eligible Holder, each of such Eligible Holder's officers,
directors, partners, legal counsel and accountants, and each Person so
controlling such Eligible Holder, as well as each such underwriter, and each
Person who so controls any such underwriter, for any legal and any other
expenses reasonably incurred by them in connection with investigating and
defending or settling any such claim, loss, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such claim, loss, damage, liability or action arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by or on behalf of such Eligible Holder or underwriter
and stated to be specifically for use therein. Notwithstanding the foregoing,
the Company's obligations under this Subsection 3.6.1 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).
3.6.2 Eligible Holder Indemnification. Each Eligible Holder
including Registrable Securities in any registration, qualification, or
compliance effected pursuant to this Section 3 shall, severally and not jointly,
indemnify the Company, each of the Company's directors, officers, partners,
legal counsel, and accountants and each underwriter, if any, of the Securities
covered by such a registration statement, each Person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act, each
other Eligible Holder and each Other Stockholder including Securities in such
registration, and each of their respective officers, directors and partners, and
each Person controlling such other Eligible Holder or Other Stockholder, against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any Registration Statement, prospectus, offering
circular, or other document incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such other Eligible
Holders, Other Stockholders, directors, officers, partners, legal counsel, and
accountants, underwriters, and control Persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration Statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by such Eligible
Holder and stated to be specifically for use therein. Notwithstanding the
foregoing, the obligation of any Eligible Holder under this Subsection 3.6.2
shall not apply to amounts paid in settlement of any such claims, losses,
damages, or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of such Eligible Holder (which consent shall not be
unreasonably withheld).
3.6.3 Procedures. Each party entitled to indemnification under this
Subsection 3.6 (the "Indemnified Party") shall give written notice to the party
required to provide indemnification hereunder (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the
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Indemnifying Party to assume the defense of such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party
who shall conduct the defense of such claim or any litigation resulting
therefrom shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld); and provided however, that (i) if the Indemnifying
Party fails to take reasonable steps necessary to defend diligently the action
or proceeding within 20 days after receiving notice from such Indemnified Party
that the Indemnified Party believes it has failed to do so; or (ii) if such
Indemnified Party who is a defendant in any action or proceeding which is also
brought against the Indemnifying Party reasonably shall have concluded that
there may be one or more legal defenses available to such Indemnified Party
which are not available to the Indemnifying Party; or (iii) if representation of
both parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, then, in any such case, the Indemnified Party
shall have the right to assume or continue its own defense as set forth above
(but with no more than one firm of counsel for all indemnified parties in each
jurisdiction who shall be approved by the majority of the Eligible Holders of
the registration in respect of which such indemnification is sought), and the
Indemnifying Party shall be liable for any expenses therefor; and provided
further, that the Indemnified Party may participate in such defense at such
Indemnified Party's expense. The failure of any Indemnified Party to give
written notice as provided herein shall not relieve any Indemnifying Party of
its obligations under this Subsection 3.6 to the extent such failure is not
materially prejudicial. No Indemnifying Party in the defense of any such claim
or litigation shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to each
Indemnified Party in connection therewith of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as any Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and any litigation resulting
therefrom.
3.6.4 Contribution. If the indemnification provided for in this
Subsection 3.6 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 herein, 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 material fact or the omission
to state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party, as well as the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
3.6.5 Conflicting Provisions. Notwithstanding the foregoing, to the
extent that the provisions on indemnification and contribution contained in any
underwriting agreement
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entered into in connection with an underwritten public offering of Securities
are in conflict with the foregoing provisions, the provisions contained in such
underwriting agreement shall control.
3.6.6 Survival. The obligations of the parties set forth in this
Subsection 3.6 for the benefit of any Indemnified Party shall not be waived or
otherwise affected by reason of any investigation or inquiry made by or on
behalf of such Indemnified Party.
3.7 Eligible Holder Information. Each Eligible Holder shall furnish to
the Company such information regarding such Eligible Holder and the distribution
of Securities proposed by such Eligible Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 3.
3.8 Other Agreements. From and after the date of this Agreement the
Company shall not, without the prior written consent of Eligible Holders holding
a majority of the then outstanding Registrable Securities, enter into any
agreement with any Holder or prospective Holder of any Securities giving such
Holder or prospective Holder any registration rights the terms of which are more
favorable than the registration rights granted to the Eligible Holders
hereunder.
3.9 Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act in respect of the
Common Stock or securities of the Company convertible into or exchangeable or
exercisable for Common Stock, the Company convenants that (I) so long as it
remains subject to the reporting provisions of the Exchange Act, it will timely
file the reports required to be filed by it under the Securities Act or the
Exchange Act (including, but not limited to, the reports under Sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under
the Securities Act), and (ii) will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable securities without
registration under the Securities Act within the limitation of the exemptions
provided by (A) Rule 144 under the Securities Act, as such Rule may be amended
form time to time, or (B) any similar rule or regulation hereafter adopted by
the Commission.
3.10 Market Stand-Off Agreement. If requested by the Company and any
underwriter of Common Stock (or other Securities) with respect to any
registration or prospective registration of Securities, a Holder shall not
sell or otherwise transfer or dispose of any Common Stock (or other Securities)
of the Company held by such Holder (other than those included in the
registration) during the time reasonably requested by the underwriter, not to
exceed 180 days, following the effective date of a Registration Statement of the
Company filed under the Securities Act with respect to such registration. The
obligations described in this Subsection 3.10 shall not apply to any
registration relating solely to employee benefit plans on Form S 1 or Form S 8
or similar forms that may in the future be promulgated under the Securities Act,
or any registration relating solely to a Rule 145 transaction on Form S 4 or
similar forms that may in the future be promulgated under the Securities Act.
The Company may impose stop
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transfer instructions with respect to the Securities subject to the foregoing
restriction until the end of such 180 day or other market stand-off period.
3.11 Allocation of Registration Opportunities.
3.11.1 Requested Registrations. In any case where a registration is
to be effected pursuant to Subsection 3.1 hereof and all of the Registrable
Securities and Other Shares (including shares of Common Stock issued or issuable
upon conversion of shares of any currently unissued Series of Preferred Stock of
the Company) requested to be included in a registration on behalf of Eligible
Holders or Other Stockholders cannot be so included as a result of limitations
on the aggregate number of shares of Registrable Securities and Other Shares
that may be so included, then the number of shares of Registrable Securities and
Other Shares that may be so included shall be allocated among the Eligible
Holders and Other Stockholders requesting inclusion of shares as follows:
(A) First, (i) if Eligible Holders of Common Stock issued or
issuable upon conversion of Senior Preferred Stock shall have initiated the
registration, then Eligible Holders of Common Stock issued and issuable upon
conversion of the Senior Preferred Stock shall be entitled to participate in the
registration pro rata on the basis of the number of Registrable Securities which
each such Holder shall have requested be registered, and then Eligible Holders
of Common Stock issued and issuable upon conversion of the Junior Preferred
Stock shall be entitled to participate in the registration pro rata on the basis
of the number of Registrable Securities which each such Holder shall have
requested be registered; or (ii) if Eligible Holders of Common Stock issued or
issuable upon conversion of Junior Preferred Stock shall have initiated the
registration, then Eligible Holders of Common Stock issued and issuable upon
conversion of the Junior Preferred Stock shall be entitled to participate in the
registration pro rata on the basis of the number of Registrable Securities which
each such Holder shall have requested be registered, and then Eligible Holders
of Common Stock issued and issuable upon conversion of the Senior Preferred
Stock shall be entitled to participate in the registration pro rata on the basis
of the number of Registrable Securities which each such Holder shall have
requested be registered;
(B) Second, all such Other Stockholders and the other such Eligible
Holders shall be entitled to participate in the registration in accordance with
the relative priorities, if any, as shall exist among them; and
(C) Third, the Company shall be entitled to participate in the
registration.
3.11.2 Incidental Registrations. In any case where a registration
is to be effected pursuant to Subsection 3.2 hereof and all of the Registrable
Securities and Other Shares (including shares of Common Stock issued or issuable
upon conversion of shares of any currently unissued Series of Preferred Stock)
requested to be included in such registration on behalf of Eligible Holders and
Other Stockholders cannot be so included as a result of limitations on the
aggregate number of shares of Registrable Securities and Other Shares that may
be so included, then the number of shares of Registrable Securities and Other
Shares that may be so
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included shall be allocated among the Eligible Holders and Other Stockholders
requesting inclusion of shares as follows:
(A) First, the Person(s) (including the Company in the case of an
offering initiated by the Company) initiating such registration shall be
entitled to participate in the registration in accordance with the relative
priorities, if any, as shall exist among them;
(B) Second, the Eligible Holders and Other Stockholders shall be
entitled to participate in the registration pro rata on the basis of the number
of Registrable Securities and Other Shares which each such Holder shall have
requested be registered; and
(C) Third, if such registration shall have been initiated other than
by the Company, then the Company shall be entitled to include Securities in such
registration.
3.12 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 3.
3.13 Sales to Underwriter. Notwithstanding anything in this Agreement to
the contrary, in lieu of converting any Designated Preferred Stock prior to or
simultaneously with the filing or the effectiveness of any Registration
Statement filed pursuant to this Agreement, the Holder of such Designated
Preferred Stock may sell such Designated Preferred Stock to the underwriter of
the offering being registered if such underwriter consents thereto and if such
underwriter undertakes to convert such Designated Preferred Stock before making
any distribution pursuant to such Registration Statement and to include the
resulting Common Stock among the Securities being offered pursuant to such
Registration Statement.
3.14 Transfer of Registration Rights. The rights of an Eligible Holder
under this Section 3 to require the Company to register Securities may be
transferred or assigned by such Eligible Holder only to a transferee or assignee
of not less than 150,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like); provided, however, that the
Company is given written notice at the time of, or within a reasonable time
after, said transfer or assignment stating the name and address of the
transferee or assignee and identifying the Securities with respect to which such
registration rights are being transferred or assigned; and provided further,
that the transferee or assignee of such rights assumes in writing (a copy of
which shall be delivered to the Company) the obligations of such Eligible Holder
under this Section 3.
3.15 Termination of Registration Rights. The rights of any Eligible
Holder to request registration or inclusion of Registrable Securities in any
registration pursuant to Subsection 3.1, 3.2 or 3.5 of this Agreement shall
terminate on the earlier of (i) the closing of the first Company initiated
Public Offering of Common Stock, provided that all shares of Registrable
Securities held by such Eligible Holder may immediately be sold under Rule 144
during any 90 day period, or (ii) on such date after the closing of the first
Company initiated Public Offering of Common Stock as all shares of Registrable
Securities held by such Holder may immediately be sold under Rule 144 during any
90 day period.
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Section 4. Right of First Refusal.
4.1 Grant of Right. The Company hereby grants to each Original Holder who
owns any shares of Designated Preferred Stock or any shares of Common Stock
issued upon the conversion of shares of Designated Preferred Stock (each such
Original Holder an "Offeree Holder") a right of first refusal to purchase such
Offeree Holder's pro rata share of New Securities which the Company may, from
time to time, propose to sell and issue. An Offeree Holder's pro rata share of
New Securities for purposes of this Section 4 shall be the ratio immediately
prior to the issuance of the New Securities of (i) the sum of the number of
shares of Common Stock owned by such Offeree Holder plus the number of shares of
Common Stock into which such Offeree Holder's Designated Preferred Stock is then
convertible, to (ii) the sum of the number of shares of Common Stock owned by
all Offeree Holders plus the number of shares of Common Stock into which the
Designated Preferred Stock of all Offeree Holders is then convertible.
4.2 New Securities Defined. "New Securities" shall mean any Stock
(including Common Stock and/or Preferred Stock) whether now or hereafter
authorized, and rights, options or warrants to purchase Stock, and Securities of
any type whatsoever that are, or may become, convertible into Stock; provided,
however, that the term "New Securities" shall not include: (i) any shares of
Designated Preferred Stock; (ii) any Securities issued upon conversion of the
Designated Preferred Stock; (iii) any Securities issued pursuant to the
acquisition of another business entity or business segment of any such entity by
the Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company will own more than 50 percent of the voting
power of such business entity or business segment of any such entity; (iv) any
Securities issued to employees, consultants, officers or directors of the
Company pursuant to the Company's 1993 Stock Option Plan or any other stock
option, stock purchase or stock bonus plan, agreement or arrangement approved by
the Board of Directors; (v) any Securities issued in connection with lease
financing arrangements or strategic partnerships approved by the Board of
Directors; (vi) any Securities issued in a Public Offering; (vii) any Securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company; and (viii) any right, option or warrant to acquire any Security
excluded from the definition of New Securities pursuant to clauses (i) through
(vii) above.
4.3 Exercise of Right. In the event the Company proposes to undertake an
issuance of New Securities, it shall give to each Offeree Holder written notice
("Offer Notice") of its intention, describing the type of New Securities to be
offered, their price and the general terms upon which the Company proposes to
issue such New Securities, and offering to each Offeree Holder the right to
purchase such Offeree Holder's pro rata share of the New Securities. Each
Offeree Holder shall have 20 days after any such Offer Notice is given by the
Company within which to give to the Company written notice of such Offeree
Holder's acceptance of such offer and agreement to purchase such Offeree
Holder's entire pro rata share of such New Securities for the price and upon the
terms specified in the Offer Notice. Failure by any Offeree Holder to timely
tender such Offeree Holder's acceptance and agreement to the Company pursuant to
any Offer Notice shall be deemed a rejection of the offer contained in such
Offer Notice and a waiver
22.
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of such Offeree Holder's right of first refusal with respect to the proposed
issuance of New Securities described therein.
4.4 Refusal of Offer. If any Offeree Holder (a "Declining Holder") fails
to exercise such Offeree Holder's right to purchase New Securities pursuant to
Subsection 4.3 hereof, then the Company shall give written notice of such fact
to the remaining Offeree Holders who shall have exercised their right of first
refusal pursuant to Subsection 4.3 hereof ("Exercising Holders") and offer to
each Exercising Holder the right to purchase such portion of the Declining
Holder's pro rata share of the New Securities (the "Refused Securities") as such
Exercising Holder's pro rata share of the New Securities bears to the sum of the
pro rata shares of the New Securities of all Exercising Holders. Each Exercising
Holder shall have 15 days after any such notice is given by the Company within
which to give to the Company written notice of such Exercising Holder's
acceptance of such offer and agreement to purchase such Exercising Holder's
share of the Refused Securities so offered. Failure by any Exercising Holder to
timely tender such Exercising Holder's acceptance to the Company in connection
with any offer made pursuant to this Subsection 4.4 shall be deemed a rejection
of such offer and a waiver of such Exercising Holder's right of refusal with
respect to the proposed issuance of New Securities described therein.
4.5 Failure to Exercise. In the event the Offeree Holders fail to exercise
their right of first refusal with respect to all of the New Securities by the
end of the 15-day offer period provided in Subsection 4.4 hereof, or if the
Offeree Holders waive their right of first refusal with respect to the issuance
of New Securities pursuant to Subsection 4.6 hereof, then the Company shall have
120 days thereafter within which to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within 120 days from the date of said agreement) to sell the New Securities not
being sold to the Offeree Holders at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's Offer Notice. In the
event the Company has not within such 120-day period either sold or entered into
an agreement to sell the New Securities in accordance with the preceding
sentence, the Company shall not thereafter issue or sell any of the New
Securities described in the Offer Notice without first again offering such
Securities to the Offeree Holders in the manner provided in this Section 4.
4.6 Expiration. The right of first refusal granted under this Section 4
shall expire upon, and shall not be applicable to, the first sale of Common
Stock of the Company to the public effected pursuant to a Public Offering. The
right of first refusal set forth in this Section 4 may be waived as to all of
the Holders of any Series of Designated Preferred Stock by a written waiver
executed by Holders owning shares of such Series of Designated Preferred Stock
and Common Stock issued upon conversion of such Series of Designated Preferred
Stock representing not less than 50 percent of the sum of (i) the number of
shares of Common Stock issued upon the conversion of such Series of Designated
Preferred Stock, and (ii) the number of shares of Common Stock then issuable
upon conversion of the outstanding shares of such Series of Designated Preferred
Stock.
23.
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4.7 Transfer of Right. The right of first refusal of an Offeree Holder set
forth in this Section 4 may not be assigned or transferred, except that such
right may be assigned by such Offeree Holder (i) to any wholly-owned subsidiary
or parent of, or to any corporation or entity that is, within the meaning of the
Securities Act, controlling, controlled by or under common control with, such
Offeree Holder, (ii) to any other Offeree Holder or (iii) to any other Person
with the prior approval of the Board of Directors.
Section 5. Right of Co-Sale.
5.1 Sales by FGN. If FGN proposes to sell or transfer any shares of Common
Stock held by it in one or more related transactions which will result in the
transfer by FGN of 450,000 or more shares of Common Stock (as adjusted for any
stock dividends, combinations or splits with respect to such shares), then FGN
shall promptly give written notice (the "Co-Sale Notice") to each Original
Holder of Designated Preferred Stock (each such Holder an "Original Preferred
Holder") at least 15 days prior to the closing of such sale or transfer. The Co-
Sale Notice shall describe in reasonable detail the proposed sale or transfer by
FGN, including, without limitation, the number of shares of Common Stock to be
sold or transferred, the nature of such sale or transfer, the consideration to
be received by FGN, the name and address of each prospective purchaser or
transferee and whether the sale or transfer is being made pursuant to the
provisions of Subsection 5.5 hereof.
5.2 Right of Co-Sale. Each Original Preferred Holder shall have the right,
exercisable upon written notice given to FGN within 15 days after receipt of the
Co-Sale Notice, to participate in such sale of Common Stock on the same terms
and conditions as set forth in the Co-Sale Notice. To the extent one or more of
the Original Preferred Holders exercise such right of participation in
accordance with the terms and conditions set forth below, the number of shares
of Common Stock that FGN may sell in the proposed transaction shall be
correspondingly reduced. Each Original Preferred Holder shall have the right to
sell all or any part of that number of shares of Common Stock equal to the
product obtained by multiplying (i) the aggregate number of shares of Common
Stock covered by the Co-Sale Notice by (ii) a fraction the numerator of which is
the sum of the number of shares of Common Stock owned by such Original Preferred
Holder at the time of the sale or transfer plus the number of shares of Common
Stock into which such Original Preferred Holder's Designated Preferred Stock is
then convertible, and the denominator of which is the sum of the number of
shares of Common Stock owned by all of the Original Holders at the time of such
sale or transfer plus the number of shares of Common Stock into which the
Designated Preferred Stock of all Original Holders is then convertible.
5.3 Delivery of Certificates. Each Original Preferred Holder who exercises
his or its right to participate in FGN's sale pursuant to Subsection 5.2 hereof
(a "Participant") shall effect his or its participation in the sale by promptly
delivering to FGN for transfer to the prospective purchaser one or more
certificates, properly endorsed for transfer, which represent either (i) the
number of shares of Common Stock which such Participant elects to sell, or (ii)
that number of shares of Designated Preferred Stock which is at such time
convertible into the number of shares of Common Stock which such Participant
elects to sell; provided, however, that if the
24.
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prospective purchaser objects to the delivery of Designated Preferred Stock in
lieu of Common Stock, such Participant shall convert his or its Designated
Preferred Stock into Common Stock and deliver Common Stock to the prospective
purchaser. The Company agrees to make any such conversion concurrently with the
actual transfer of such shares to the purchaser. The Stock certificate or
certificates that the Participant delivers to FGN pursuant to this Subsection
5.3 shall be transferred to the prospective purchaser in consummation of the
sale of Common Stock pursuant to the terms and conditions specified in the Co-
Sale Notice, and FGN shall concurrently therewith remit to such Participant that
portion of the sale proceeds which such Participant is entitled to receive by
reason of such Participant's participation in such sale. If any Participant
fails to deliver his or its Stock certificates to FGN as required by this
Subsection 5.3 within 10 days of any written notice given by FGN to such
Participant requesting such delivery, then such Participant shall be deemed to
have waived his or its rights of co-sale under this Section 5 with respect to
the transaction described in the Co-Sale Notice.
5.4 Future Rights. The exercise or non exercise of the rights of Original
Preferred Holders hereunder to participate in one or more sales of Common Stock
made by FGN shall not adversely affect their rights to participate in subsequent
sales of Common Stock by FGN to the extent permitted by this Section 5.
5.5 Exempt Transfers. Notwithstanding the foregoing, the co-sale rights of
Original Preferred Holders set forth in this Section 5 shall not apply to: (i)
any pledge of Stock by FGN made pursuant to a bona fide loan transaction that
creates a mere security interest; (ii) any transfer of Stock to the officers,
directors, employees or stockholders of FGN or the Company, or to any
consultants or other Persons providing services to FGN or the Company, or to the
ancestors, descendants or spouse of any of such Persons, or to trusts for the
benefit of any such Persons; or (iii) any bona fide gift; provided, however,
that FGN shall inform the Original Preferred Holders of such pledge, transfer or
gift prior to effecting it and the pledgee, transferee or donee shall furnish to
the Company (on behalf of the Original Preferred Holders) a written agreement to
be bound by and to comply with all of the provisions of this Section 5. In
addition, and notwithstanding the foregoing, the co-sale rights of Original
Preferred Holders set forth in this Section 5 shall not apply to the sale of any
Stock by FGN pursuant to any Public Offering.
5.6 Prohibited Transfers. In the event FGN should sell any Common Stock in
contravention of the co-sale rights of the Original Preferred Holders under this
Section 5 ("Prohibited Transfer"), each Original Preferred Holder shall have the
right to sell to FGN such number of shares of Common Stock that such Original
Preferred Holder would have been entitled to transfer to the purchaser had the
Prohibited Transfer been effected pursuant to and in compliance with the terms
of this Section 5. Such sale shall be made on the following terms and
conditions:
(A) The price per share at which each Original Preferred Holder's
shares of Common Stock are to be sold to FGN shall be equal to the price per
share paid by the purchaser to FGN in the Prohibited Transfer.
25.
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(B) Within 30 days after the later of the dates on which such
Original Preferred Holder (i) received notice of the Prohibited Transfer or (ii)
otherwise became aware of the Prohibited Transfer, such Original Preferred
Holder shall, in order to exercise the option provided for in this Subsection
5.6, deliver to FGN the certificate or certificates representing shares of the
Original Preferred Holder's Common Stock to be sold, each certificate to be
properly endorsed for transfer.
(C) FGN shall, within 5 days after its receipt of the certificate or
certificates for the shares of Common Stock to be sold by such Original
Preferred Holder pursuant to this Subsection 5.6, pay the aggregate purchase
price therefor to such Original Preferred Holder.
5.7 Termination of Co-Sale Rights. The co-sale rights of Original
Preferred Holders set forth in this Section 5 shall terminate upon the earliest
to occur of: (i) the closing of a firm commitment underwritten Public Offering
covering the offer and sale of Common Stock at a price of not less than $6.60
per share (as adjusted for any stock dividends, combinations or splits with
respect to the Common Stock) and an aggregate offering price (before deduction
of underwriters' discounts and expenses) of not less than $10,000,000; (ii) the
closing of the sale by the Company of all or substantially all of its assets or
the acquisition of the Company by another Person by means of a merger or
consolidation resulting in the exchange of the outstanding shares of the
Company's Stock for securities or consideration to be issued, or caused to be
issued, by the acquiring entity or its subsidiary or (iii) such time as the sum
of the number of shares of Common Stock held by FGN plus the number of shares of
Common Stock into which FGN's Designated Preferred Stock is then convertible
constitutes less than 10 percent of the sum of the number of shares of Common
Stock then outstanding plus the number of shares of Common Stock issuable upon
the exercise of all options, warrants and rights to acquire Common Stock and the
exchange or conversion of all Securities exchangeable for or convertible into
Common Stock (including, without limitation, all shares of Preferred Stock).
Section 6. Company Covenants.
The Company covenants and agrees, until the closing of the Company's first
Public Offering but only so long as any Designated Preferred Stock remains
outstanding, as follows:
6.1 Financial Statements and Information. The Company shall furnish the
following reports to each Holder:
6.1.1 Annual Reports. As soon as practicable after the end of each
fiscal year of the Company, and in any event within 120 days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of recognized national standing selected by the Company.
26.
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6.1.2 Quarterly Reports. As soon as practicable after the end of the
first, second and third fiscal quarters, and in any event within 90 days
thereafter, a consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of each such fiscal quarter, and consolidated statements of
income and cash flows of the Company and its subsidiaries, if any, for such
period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in comparative form the figures for the corresponding periods of the previous
Company fiscal year, subject to changes resulting from normal year end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such financial statements need
not contain the notes required by generally accepted accounting principles.
6.1.3 Commission Reports. From the date that the Company becomes
subject to the reporting requirements of the Securities Exchange Act, and in
lieu of the financial information required pursuant to Subsections 6.1.1 and
6.1.2 hereof, copies of the Company's annual reports on Form 10 K and the
Company's quarterly reports on Form 10 Q, respectively.
6.1.4 Additional Information. The Company shall permit any Holder of
at least 2,000,000 shares of Registrable Securities (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and any Person
designated from time to time by such Holder, at the expense of such Holder, to
visit and inspect any of the properties of the Company, including its books and
records (and to make copies thereof and take extracts therefrom), and to discuss
its affairs, finances and accounts with the Company's officers and its
independent public accountants, all at such reasonable times and as often as any
such Holder may reasonably request.
6.1.5 Inspection Rights. The provisions of this Section 6 shall not
be in limitation of any rights which any Holder may have to inspect the books
and records of the Company and its subsidiaries (if any), or to inspect their
properties or discuss their affairs, finances and accounts, under the laws of
the jurisdictions in which they are incorporated.
6.1.6 Confidentiality. Anything in this Section 6 to the contrary
notwithstanding, no Holder by reason of this Agreement shall have access to any
trade secrets or proprietary information of the Company or of any subsidiary of
the Company. Each Holder shall hold in confidence and trust all information
delivered by the Company to such Holder, shall not disclose such information to
any third party, and shall use such information solely to evaluate and protect
such Holder's investment in Stock, except as otherwise provided in a
confidentiality agreement between such Holder and the Company.
6.2 Key Man Insurance. The Company shall use its best efforts to obtain
key man accidental death and disability insurance on the life of Floyd G.
Nichols in the amount of $1,000,000, payable to the Company.
6.3 Underwriting Public Offering. (a) From and after the date hereof and
until June 30, 1998, with respect to (i) any public offering of equity
securities by the Company (whether in a primary or secondary offering) in the
United States through an underwriter or (ii) any merger
27.
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and acquisition transaction involving the Company or any subsidiary (including
the sale of the Company or any subsidiary), the Company shall first negotiate
with Goldman, Sachs & Co. in good faith to provide investment banking services
for the Company with respect to the transaction (including, in the case of any
public offering of securities, the Company shall first negotiate with Goldman,
Sachs & Co. to act as the lead managing underwriter of such offering). Should
the parties be unable to agree upon reasonable terms after good faith
discussions, with in a reasonable period of time, the Company will be free to
negotiate with others but will also cooperate and discuss in good faith with
Goldman, Sachs & Co. to provide Goldman, Sachs & Co. a mutually satisfactory
investment banking role in the transaction.
(b) If Goldman, Sachs & Co. acts as a managing underwriter in
any public offering of securities of the Company, to the extent required by
applicable law, a Qualified Independent Underwriter (as defined in Schedule E to
the National Association of Securities Dealers, Inc. By-Laws) shall be retained
by the Company and shall be acceptable to Goldman, Sachs & Co. (which consent
shall not be unreasonably withheld), and the Company shall pay all fees and
expenses (other than underwriting discounts and commissions) of such Qualified
Independent Underwriter.
Section 7. Transfer of Securities.
7.1 Restrictions on Transfer. The Common Stock and Designated Preferred
Stock held by the Holders shall not be transferable except upon the conditions
specified in this Section 7, which conditions are intended to insure compliance
with the provisions of the Securities Act and applicable state securities laws
with respect to the transfer of Securities.
7.2 Restrictive Legends. Unless and until otherwise permitted by this
Section 7, each certificate for Common Stock or Designated Preferred Stock
issued to any Holder, or to any subsequent transferee of any Holder, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. FURTHER, SUCH TRANSFER
IS SUBJECT TO THE CONDITIONS SPECIFIED IN A THIRD AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER 31, 1996, BY AND AMONG
THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH STOCKHOLDERS'
AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF
THE COMPANY AND WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
UPON REQUEST AND WITHOUT CHARGE.
"THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A STATEMENT OF THE POWERS,
28.
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DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF COMPANY STOCK OR SERIES THEREOF
AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS."
The Company may order its Stock transfer agents to stop the transfer of any
shares of Stock bearing the legend set forth in this Subsection 7.2 until the
conditions of this Section 7 with respect to the transfer of such shares have
been satisfied.
7.3 Notice of Proposed Transfer. If, prior to any transfer or sale of any
Stock, the Holder desiring to effect such transfer or sale shall deliver a
written notice to the Company describing the manner of such transfer or sale
and, if requested by the Company, a written opinion of counsel for such Holder
(provided that such counsel, and the form and substance of such opinion, are
reasonably satisfactory to the Company) to the effect that (i) such transfer or
sale may be effected without the registration of such Securities under the
Securities Act and all applicable state securities laws, and (ii) all action
necessary for compliance with the Securities Act and such state securities laws
has been taken, then the Company shall thereupon permit or cause its transfer
agent (if any) to permit such transfer or sale to be effected.
7.4 Termination of Restrictions.
7.4.1 Securities Law Restrictions. The restrictions imposed by this
Section 7 upon the transferability of Stock shall terminate as to any particular
share of Stock when (i) such Stock shall have been effectively registered under
the Securities Act and sold by the Holder thereof in accordance with such
registration, or (ii) a written opinion to the effect that such restrictions are
no longer required or necessary under any federal or state securities laws and
regulations has been received from counsel for the Holder thereof (provided that
such counsel, and the form and substance of such opinion, are reasonably
satisfactory to the Company) or counsel for the Company, or (iii) such Stock
shall have been sold without registration under the Securities Act in compliance
with Rule 144, or (iv) the Company is reasonably satisfied that the Holder of
such Stock shall, in accordance with the terms of Subsection (k) of Rule 144, be
entitled to sell such Stock pursuant to such subsection, or (v) a letter or an
order shall have been issued to the Holder thereof by the staff of the
Commission stating that no enforcement action shall be recommended by such staff
or taken by the Commission if such Stock is transferred without registration
under the Securities Act in accordance with the conditions set forth in such
letter or order and such letter or order specifies that no subsequent
restrictions on transfer are required.
7.4.2 Co-Sale Restrictions. Notwithstanding the foregoing, if the
restrictions of this Section 7 shall terminate with respect to the shares of
Common Stock of FGN but such shares shall remain subject to the rights of co-
sale of Original Preferred Holders pursuant to Section 5 of this Agreement, then
the shares of such Common Stock shall contain the following legend:
29.
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"THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN A THIRD
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER 31,
1996, BY AND AMONG THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH
STOCKHOLDERS' AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED BY THE COMPANY
TO THE HOLDER HEREOF UPON REQUEST AND WITHOUT CHARGE."
7.5 Elimination of Legend. Whenever the restrictions imposed by this
Section 7 shall terminate, as hereinabove provided, the Holder of any particular
share of Stock then outstanding as to which such restrictions shall have
terminated shall be entitled to receive from the Company, without expense to
such Holder, one or more new certificates for Stock not bearing the restrictive
legend set forth in Subsection 7.2 hereof.
Section 8. Miscellaneous.
8.1 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8.2 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
8.3 Notices. All communications provided for under this Agreement shall be
in writing and shall be delivered by hand or by first class regular mail,
postage prepaid, to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given on
the day of personal delivery thereof on the third business day after such
mailing:
If to any Holder:
Addressed to such Holder at such Holder's address as shown on the
books of the Company or its transfer agent;
If to the Company, to:
Cell Pathways, Inc.
300 South Potamac Street, Suite 110
Aurora, CO 80012-4526
Attention: Mr. Robert J. Towarnicki
30.
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with a copy to:
Cell Pathways, Inc.
300 South Potamac Street, Suite 110
Aurora, CO 80012-4526
Attention: Corporate Secretary
or to such other Persons or at such other addresses as shall be furnished by any
such party by like notice given to the other parties to this Agreement.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
8.5 Entire Agreement. This Agreement constitutes the entire agreement by
and among the parties hereto with respect to the subject matter hereof.
8.6 Amendments. Except as otherwise specifically provided in this
Agreement, this Agreement may be amended, modified or supplemented only by a
written instrument executed by each of (i) the Company, (ii) Holders of 50
percent or more of the shares of Common Stock then outstanding, (iii) Holders of
50 percent or more of the shares of Series A and Series B Convertible Preferred
Stock then outstanding, voting as one class, and (iv) the Holders of 50 percent
or more of the shares of Series C, Series D, Series E and Series F Convertible
Preferred Stock then outstanding, voting as one class.
8.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in that State.
8.8 Intended Beneficiaries. Sections 3, 4, 5, 6 and 7 of this Agreement
are made by the parties hereto for the express benefit of Holders of Securities
to the extent provided therein, and such Holders shall be entitled to rights
thereunder subject to the limitations set forth therein.
8.9 GS Group Assignment. GS Group shall have the right, without having to
comply with the provisions of Section 7 of this Agreement, to transfer all or a
part of the Stock held by it to one or more other partnerships, corporations,
trusts or other organizations which control, are controlled by or are under
common control with GS Group or one or more of the then current, former or
future partners of GS Group, provided that such transfer occurs in compliance
with all applicable securities laws; and such transferee shall be deemed an
Original Holder entitled to the rights and subject to the limitations of this
Agreement.
8.10 No Inconsistent Agreements. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities which
is inconsistent with the rights granted to the Holders or otherwise conflicts
with the provisions hereof. The Company agrees and hereby represents that the
rights granted to the Holders hereunder do not in any way
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conflict with and are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements.
THE COMPANY:
CELL PATHWAYS, INC.
By: /s/ Robert J. Towarnicki
------------------------------
Its: Chief Executive Officer
-----------------------------
STOCKHOLDERS:
FGN, INC.
By: /s/ Richard H. Troy
------------------------------
Its: President
-----------------------------
NORTHWOOD VENTURES
By: /s/ Peter G. Schiff
------------------------------
Its: General Partner
-----------------------------
TECHNOLOGY PARTNERS
WEST FUND IV, L.P.
By: /s/ Robert J. Quy
------------------------------
Its: General Partner
-----------------------------
QUEST VENTURES II
By: /s/ William A. Boeger
------------------------------
Its:
-----------------------------
QUEST VENTURES INTERNATIONAL
By: /s/ William A. Boeger
------------------------------
Its:
-----------------------------
THE GOLDMAN SACHS GROUP, L.P.
By: The Goldman Sachs Corporation
By: /s/ Robert J. Granovsky
------------------------------
Its: Executive Vice President
-----------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Richard Drake
-----------------------------
Its: Director
-----------------------------
ATTORNEY IN FACT FOR
OTHER STOCKHOLDERS
/s/ Richard H. Troy
---------------------------------
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EXHIBIT 10.2
CELL PATHWAYS, INC.
1993 STOCK OPTION PLAN
This Stock Option Plan was originally adopted on September 13, 1993, at
which time the maximum number of shares of stock for which options granted
hereunder might be exercised was 2,258 shares of the Company's Common Stock. On
September 29, 1993, the Company effected a 50-for-1 split up of its stock,
resulting in an increase in such maximum number of shares to 112,900 shares of
Common Stock. In October, 1993, this Plan was amended to increase the maximum
number of shares of stock for which options granted hereunder might be exercised
to a total of 262,900 shares of Common Stock.
1. Purpose of the Plan. Under this Stock Option Plan (the "Plan") of Cell
Pathways, Inc., a Delaware corporation (the "Company"), the Company is
authorized to grant options ("Options") to eligible Company employees and
directors of, as well as to consultants to, the Company to purchase shares of
the Company's capital stock. The Plan is designed to enable the Company and its
subsidiaries (if any) to attract, retain and motivate their employees, directors
and consultants by providing for or increasing the proprietary interests of such
employees, directors and consultants in the Company. The Plan provides for
Options which qualify as Incentive Stock Options ("Incentive Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as Options which do not so qualify.
2. Stock Subject to Plan. The maximum number of shares of stock for which
Options granted hereunder may be exercised shall be 850,000 shares of the
Company's Common Stock, $.01 par value ("Common Stock"), as such number of
shares may be adjusted pursuant to Section 6 of this Plan. Shares of stock
subject to the unexercised portions of any Options granted under this Plan which
expire or terminate or are cancelled or forfeited may again be subject to
Options under this Plan.
3. Eligible Persons. The persons eligible to be considered for the grant of
Options hereunder are such persons employed or retained by the Company or its
subsidiaries as employees, directors or consultants in a managerial,
professional or technical capacity as are determined by the Company's Stock
Option Committee more fully described in Section 10 hereof (the "Committee").
4. Minimum Exercise Price. The exercise price for each Option granted
hereunder shall be not less than 100% of the fair market value of the stock on
the date of the grant of the Option. As used in this Plan, "Fair Market Value"
of any stock shall be determined by the Committee by reference to any national
securities market on which such stock may then be trading, or as otherwise
determined by the Committee.
5. Nontransferability. Any Option granted under this Plan shall by its
terms be nontransferable by the optionee other than by will or the laws of
descent and distribution, and
1.
<PAGE>
shall be exercisable during the optionee's lifetime only by him or by his
guardian or legal representative.
6. Capitalization Adjustments. If the outstanding shares of Common Stock
or other securities covered by Options granted under this Plan are increased or
decreased, or are changed into or exchanged for a different number or kind of
shares or securities, as a result of one or more recapitalizations, stock
splits, reverse stock splits, stock dividends or the like, then appropriate
adjustments shall be made in the number and/or kind of shares or securities for
which Options may thereafter be granted under this Plan and for which Options
then outstanding under this Plan may thereafter be exercised. Any such
adjustment in outstanding Options shall be made without changing the aggregate
exercise price applicable to the unexercised portions of such Options, but with
a corresponding adjustment in the exercise price per share or other unit of
securities issuable upon exercise of such Options.
7. Maximum Option Term. No Option granted under this Plan may be exercised
in whole or in part more than ten years after its date of grant.
8. Plan Duration. Options may not be granted under this Plan more than ten
years after the date of the adoption of this Plan, or of shareholder approval
thereof, whichever is earlier.
9. Payment. Payment for stock purchased upon any exercise of an Option
granted under this Plan shall be made in full and in cash concurrently with such
exercise, except that, if and to the extent the instrument evidencing the Option
so provides and if the Company is not then prohibited from purchasing or
acquiring shares of such stock, such payment may be made in whole or in part
with shares of the same class of stock as that then subject to the Option
(including, with the consent of the Committee, with shares of stock
simultaneously acquired upon exercise of the Option), such shares to be
delivered in lieu of cash concurrently with such exercise, the shares so
delivered to be valued on the basis of the fair market value of the stock
(determined in a manner specified in the instrument evidencing the Option) on
the day of exercise. No Option (or substituted Option pursuant to Section 15
hereof) shall be exercisable by any person subject to potential liability under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") prior to the expiration of six months from the date of grant of such
Option. An Option may be exercised in one or more installments at such time and
on such terms as may be determined by the Committee.
10. Plan Administration. The Plan shall be administered by the Committee
which shall consist of not less than two members of the Board of Directors of
the Company (the "Board") as appointed from time to time by the Board. No
member of the Committee shall be granted an Option or other equity security
under the Plan or any other plan of the Company while a member of the Committee,
nor shall any such member have been granted such a security during the one-year
period prior to appointment, if in either such case such grant would result in
such member failing to meet the definition of "disinterested person" set forth
in Rule 16b-3, as from time to time amended ("Rule 16b-3"), promulgated under
Section 16 of the Exchange Act. The interpretation and construction by the
Committee of any term or provision of this Plan or of
2.
<PAGE>
any Option granted under it shall be final. The Committee may from time to time
adopt rules and regulations for carrying out this Plan and, subject to the
provisions of this Plan, may prescribe the form or forms of the instruments
evidencing any Option granted under this Plan. Subject to the provisions of this
Plan, the Committee shall have full and final authority in its discretion to
select the employees, directors and/or consultants to be granted Options, to
grant such Options and to determine the number of shares to be subject thereto,
the exercise prices, the terms of exercise, expiration dates, vesting schedules
(including any acceleration of vesting), the terms of any modification or
amendment thereof and other pertinent provisions thereof.
11. Law and Regulations. No shares of Common Stock or other securities
shall be issued under this Plan unless and until all legal requirements
applicable to the issuance of such shares or other securities have been complied
with to the satisfaction of the Committee. The Committee shall have the right to
condition any issuance of shares or other securities hereunder on the
recipient's undertaking in writing to comply with such restrictions on the
subsequent disposition of such shares or securities as the Committee shall deem
necessary or advisable as a result of any applicable law or regulation. In the
case of Common Stock or other securities issued upon exercise of Options or in
the case of any other applicable tax withholding requirement, the person
receiving such stock or securities or otherwise subject to tax shall be required
to pay to the Company the amount of any such taxes which the Company is required
to withhold with respect to such stock or securities. The provisions of this
Plan shall be interpreted so as to comply with the conditions and requirements
of Rule 16b-3 and, if the Option is an Incentive Option, with Sections 422 and
424 of the Code, unless a contrary interpretation of any such provision is
otherwise required by applicable law.
12. Certain Transactions. If at any time while unexercised Options remain
outstanding under this Plan (a) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the Company, FGN, Inc., any
affiliate of FGN, Inc., any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, any person acquiring securities from
the Company solely pursuant to written agreement with the Company, or any
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock in the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then outstanding
securities, (b) during any period of two consecutive years commencing the day
after the first election of directors following termination of the stockholder
voting provisions of the Company's Stockholders' Agreement dated as of December
10, 1992, as amended, individuals who at the beginning of such period constitute
the Board, and any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a transaction
described in clauses (a) (c) or (d) of this Section) whose election by the Board
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof, (c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding
3.
<PAGE>
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, or (d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (each of (a),
(b), (c) and (d) an "Acceleration Event"), then each outstanding Option that has
not theretofore become exercisable according to its terms shall become
exercisable. Upon the occurrence of an Acceleration Event, the Committee shall
provide for cancellation of the unexercised portions of all Options outstanding
as of the Cancellation Date; provided, however, that if an Option has been held
for less than six months, then for purposes of such cancellation the
Acceleration Event and/or Cancellation Date shall be restricted in such manner
as the Committee may determine necessary to comply with the conditions and
requirements of Rule 16b-3. "Cancellation Date" shall mean (i) the 60th day
following the occurrence of any Acceleration Event described in clause (a) or
(b) of the first sentence hereof, and (ii) the closing of any merger,
consolidation, liquidation or sale of assets stockholder approval of which
constituted an Acceleration Event under clause (c) or (d) of the first sentence
hereof. Upon cancellation of any Option pursuant to this Section 12, the Company
shall make, in exchange therefor, a cash payment under such Option in an amount
equal to the product of the number of shares covered by the unexercised portion
of the Option multiplied by the difference between the per share exercise price
of such Option and (i) in the case of a transaction described in clause (a) or
(b) of the first sentence hereof, the highest Fair Market Value of such share at
any time during the 60-day period immediately preceding the Cancellation Date,
and (ii) in the case of a transaction described in clause (c) or (d) of the
first sentence hereof, the Fair Market Value of such share on the Cancellation
Date. The instrument evidencing any Option may also provide for acceleration of
otherwise unexercisable portions of any Option upon other specified events or
occurrences as the Committee shall determine, such as involuntary terminations
of the Option holder's employment following certain changes in the control of
the Company.
13. Restricted Stock. If the instrument evidencing the Option so provides,
shares of stock or other securities issued on exercise of an Option granted
under this Plan may upon issuance be subject to the following restrictions (and,
as used herein, "restricted stock" means shares of stock or other securities
issued on exercise of Options granted under this Plan which are still subject to
restrictions imposed under this Section 13 that have not yet expired or
terminated):
(a) shares of restricted stock may not be sold or otherwise
transferred or hypothecated;
(b) if the employment of the holder of shares of restricted stock with
the Company or a subsidiary is terminated for any reason other than his death,
normal or early retirement in accordance with his employer's established
retirement policies or practices, or total disability, the Company (or any
subsidiary designated by it) shall have the option for sixty (60) days after
such termination of employment to purchase for cash all or any part of his
restricted stock at the lesser of (i) the price paid therefor by the holder, or
(ii) the fair market value of the
4.
<PAGE>
restricted stock on the date of such termination of employment (determined in a
manner specified in the instrument evidencing the Option); and
(c) as to the shares of restricted stock affected thereby, any
additional restrictions that may be imposed on particular shares of restricted
stock as specified in the instrument evidencing the Option.
The restrictions imposed under this Section 13 shall apply as well to all
shares or other securities issued in respect of restricted stock in connection
with any stock split, reverse stock split, stock dividend, recapitalization,
reclassification, spin-off, merger, consolidation or reorganization, but such
restrictions shall expire or terminate at such time or times as shall be
specified therefor in the instrument evidencing the Option which provides for
the restrictions.
14. Financial Assistance. The Company is vested with authority under this
Plan to assist any employee or director of, or consultant to, the Company or any
of its subsidiaries to whom an Option is granted hereunder in the payment of the
purchase price payable on exercise of that Option, by lending the amount of such
purchase price to such employee, director or consultant on such terms and at
such rates of interest and upon such security (or unsecured) as shall have been
authorized by or under authority of the Committee.
15. Substituted or Amended Options. The Committee may cancel any Option
grant made under this Plan and substitute a new Option therefor, or may amend
the terms (including, without limitation, the exercise price) of any outstanding
Option. In any such case, the Committee shall determine the terms and
conditions of such new or amended Option, provided that the exercise price of
any such Option shall not be less than 100% of the fair market value of the
stock or other securities subject thereto at the date of the grant or amendment
thereof, and provided that no Option shall be cancelled or amended without the
consent of the optionee if the terms and conditions of the amended Option or new
Option to be substituted are not at least as favorable to the optionee as the
terms and conditions of the Option being amended or cancelled. The date of grant
of any substituted Option shall be the date on which such substituted Option is
granted, and the date of amendment of any amended Option shall be the effective
date of such amendment as determined by the Committee.
16. No Employment or Stockholder Rights. Neither the establishment of this
Plan nor the grant of any Option hereunder shall be construed to (a) give the
optionee any right to become or continue to be employed by the Company or any of
its subsidiaries, (b) give the optionee any benefits not specifically provided
by this Plan, or (c) in any manner limit the right of the Company or any of its
subsidiaries to modify, amend or terminate any of its employee benefit plans.
The holder of any Option shall not have any rights as a stockholder of the
Company with respect to the shares of stock which may be deliverable to him upon
exercise of such Option until such time as such shares have been delivered to
him.
17. Amendment and Termination. The Board may alter, amend, suspend or
terminate this Plan, provided that no such action shall deprive an optionee,
without his consent, of any Option granted to the optionee pursuant to this Plan
or of any of his rights under such an
5.
<PAGE>
Option, and provided further that no such action may be taken without the
approval of the stockholders of the Company where such action would:
(a) increase the maximum number of shares for which Options granted
under this Plan may be exercised;
(b) reduce the minimum permissible exercise price;
(c) extend the ten-year duration of this Plan set forth herein;
(d) alter the class of employees or other persons eligible to receive
Options under the Plan;
(e) materially increase the benefits accruing to persons under the
Plan, within the meaning of Rule 16b-3 or otherwise cause grants of Options
under, or transactions of securities pursuant to, this Plan to cease to be
exempt from liability under Section 16(b) of the Exchange Act; or
(f) require stockholder approval under the terms of any listing
agreement of any national securities exchange or quotation system on which any
of the Company's equity securities may be listed or quoted.
18. Governing Law. The laws of the State of Delaware, except its law with
respect to choice of law, shall be controlling in all matters relating to this
Plan.
6.
<PAGE>
EXHIBIT 10.3
CELL PATHWAYS, INC.
INCENTIVE STOCK OPTION AGREEMENT
Stock Option Agreement ("Agreement") made as of this ___ day of ______, by
and between Cell Pathways, Inc., a Delaware corporation ("Company"), and
__________, a resident of the State of __________ ("Grantee").
The Parties Hereto Do Hereby Agree As Follows:
1. Grant of Option. The Company considers it desirable and in its best
interest that Grantee (as an employee of the Company) be given an inducement to
acquire a proprietary interest in the Company and an added incentive to advance
the interests of the Company by being granted an option to purchase share of the
Company's Common Stock, $0.01 par value ("Common Stock"), in accordance with the
Company's 1993 Stock Option Plan, as amended (the "Plan"). In consideration of
Grantee's agreement to perform services for the Company as an employee of the
Company, the Company therefore hereby grants to Grantee the right, privilege and
option ("Option") to purchase an aggregate of shares of Common Stock (the
"Optioned Shares") at the price ("Exercise Price") of $______ per share thereof,
in the manner and subject to the conditions hereinafter provided. This Option
shall be treated as an incentive stock option under the Internal Revenue Code of
1986, as amended (the "Code").
2. Option Exercise Period. This Option may be exercised at any time in
whole or in part, subject to the Company's right to repurchase any shares which
have not vested as of the time of the Grantee's termination of service with the
Company and its subsidiaries. The terms of the Company's repurchase rights are
set forth in greater detail in the form of Early Exercise Stock Purchase
Agreement attached as Exhibit B to this form of Stock Option Agreement. This
option shall not be exercisable under this Section 2 to the extent such exercise
would cause the aggregate fair market value of any shares subject to incentive
stock options granted you by the Company or any affiliate (valued as of their
grant date) which would become exercisable for the first time during any
calendar year to exceed $100,000.
3. Option Vesting Period. The Optioned Shares shall vest based upon the
following schedule:
a. First Anniversary: On the first anniversary of the date of this
Agreement, __________ of the Optioned Shares will vest, provided that
Grantee provides services to the Company or a subsidiary of the Company on
a continuous basis until such anniversary date.
b. Second Anniversary: On the second anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides services to the Company or a subsidiary of
the Company on a continuous basis until such anniversary date.
1.
<PAGE>
c. Third Anniversary: On the third anniversary date of this Agreement
an additional __________ of the Optioned Shares will vest provided that
Grantee provides services to the Company or a subsidiary of the Company on
a continuous basis until such anniversary date.
d. Fourth Anniversary: On the fourth anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides services to the Company or a subsidiary of
the Company on a continuous basis until such anniversary date.
Notwithstanding the foregoing, all Optioned Shares shall vest at such time
as there shall have commenced the first regular sales of Company pharmaceutical
products for consumer use in the United States in commercially significant
quantities, whether such sales are effected directly by the Company or
indirectly through a licensee or other intermediary, provided the Grantee
continues to provide services to the Company or a subsidiary of the Company at
such time.
If the Company or its subsidiaries shall terminate Grantee's employment for
any reason (other than the failure of Grantee substantially to perform his
duties pursuant thereto) with the effect that Grantee shall cease to be in the
employ of the Company or its subsidiaries prior to the time that all Optioned
Shares shall have vested, then such number of Optioned Shares shall vest on the
date of termination as would have vested on the next ensuing anniversary of this
Agreement which would have occurred but for such termination of employment.
4. Method of Exercise. As to those Optioned Shares that have vested, the
Option may be exercised by the Grantee executing, dating and delivering to the
Secretary of the Company at the Company's principal place of business a written
Option Exercise Notice in the form of Exhibit A attached hereto, accompanied by
a check made payable to the Company in the amount of the aggregate Exercise
Price for the number of shares for which the Option is then being exercised. If
the Company is required to withhold on account of any present or future tax
imposed as a result of such exercise, the notice of exercise shall be
accompanied by a check made payable to the Company in the amount of such
withholding.
As to those Optioned Shares which have not yet vested, the Option may, but
only during the period of Grantee's employment with the Company or its
subsidiaries, be exercised by the method described in this Section 4 hereof;
provided however, that:
a. a partial exercise of this Option shall be deemed to cover first
any vested Optioned Shares and thereafter the earliest vesting installment
of unvested Optioned Shares;
b. any shares so purchased from installments which have not vested as
of the date of exercise shall be subject to the purchase option in favor of
the Company as described in the Early Exercise Stock Purchase Agreement
(Exhibit B) attached hereto;
c. Grantee agrees to enter into an Early Exercise Stock Purchase
Agreement in the form attached hereto.
2.
<PAGE>
5. Termination of Option. Except as otherwise stated in this Agreement or
as the parties may otherwise agree, the Option (to the extent not theretofore
exercised) shall terminate and expire at 5:00 p.m., Chicago time, on the day
immediately prior to the 10th anniversary of the date of this Agreement.
6. Transfer of Option. Grantee may not transfer this Option except by
will or the laws of descent and distribution. This Option shall not be otherwise
sold, assigned, pledged, hypothecated or otherwise transferred or disposed of in
any way, whether by operation of law or otherwise, and during the Grantee's
lifetime shall be exercisable only by the Grantee or his guardian or legal
representative.
7. Capitalization Adjustments. Subject to the provisions of the Plan, if
the outstanding shares of stock or other securities of the class then subject to
the Option are increased or decreased, or are changed into or exchanged for a
different number or kind of Company shares or other Company securities, in any
such case as a result of one or more recapitalizations, stock splits, reverse
stock splits, stock dividends or the like, then appropriate adjustments shall be
made in the number and/or kind of Company shares or other Company securities for
which the unexercised portion of this Option may thereafter be exercised, all
without any change in the aggregate Exercise Price applicable to the unexercised
portion of the Option, but with a corresponding adjustment in the Exercise Price
per share of other unit. No fractional share of Company stock shall be issued
under the Option in connection with any such adjustment. Such adjustments shall
be made by or under authority of the Company's Board of Directors or duly
authorized Committee thereof, whose determinations as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.
8. Certain Transactions. If at any time while this Option remains
outstanding:
a. any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) other than the Company, FGN, Inc., any affiliate of FGN,
Inc., any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any person acquiring securities from the
Company solely pursuant to written agreement with the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
in the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or
b. during any period of two consecutive years commencing the day
after the first election of directors following termination of the
stockholder voting provisions of the Company's Stockholders' Agreement
dated as of December 10, 1992, as amended, individuals who at the beginning
of such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (a) (c) or (d) of this
Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in
3.
<PAGE>
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof, or
c. the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidating, or
d. the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets,
(each of (a), (b), (c) and (d) above, an "Acceleration Event"), then the Option
shall become vested and may be exercised as to all Optioned Shares for which it
has not previously been exercised and as to all Optioned Shares for which the
Option has been exercised but which have not yet vested such Optioned Shares
shall vest.
Upon the occurrence of an Acceleration Event the Company's Stock Option
Committee shall provide for cancellation of the unexercised portion of the
Option as of the Cancellation Date; provided, however, that if the Option has
been held for less than six months then for purposes of such cancellation the
Acceleration Event and/or Cancellation Date shall be restricted in such manner
as the Company's Stock Option Committee may determine necessary to comply with
the conditions and requirements of Rule 16b-3. "Cancellation Date" shall mean
(i) the 60th day following the occurrence of any Acceleration Event described in
clause (a) or (b) of the first sentence hereof, and (ii) the closing of any
merger, consolidation, liquidation or sale of assets stockholder approval of
which constituted an Acceleration Event under clause (c) or (d) of the first
sentence hereof. Upon such cancellation of the Option, the Company shall make,
in exchange therefor, a cash payment under the Option in an amount equal to the
product of the number of Optioned Shares covered by the unexercised portion of
the Option multiplied by the difference between the Exercise Price and (i) in
the case of a transaction described in clause (a) or (b) of the first sentence
hereof, the highest fair market value of an Optioned Share at any time during
the 60-day period immediately preceding the Cancellation Date, and (ii) in the
case of a transaction described in clause (c) or (d) of the first sentence
hereof, the fair market value of an Optioned Share on the Cancellation Date.
The "fair market value" of Optioned Shares shall be determined by the Company's
Stock Option Committee by reference to any national securities market on which
the Optioned Shares may then be trading, or as otherwise determined by the
Company's Stock Option Committee.
9. Securities Laws. Grantee hereby represents and agrees for himself, and
for his transferees by will or the laws of descent and distribution, that unless
a registration statement under the Securities Act of 1933, as amended, is in
effect as to shares purchased upon any
4.
<PAGE>
exercise of the Option, (i) any and all shares so purchased shall be acquired
for his personal account and not with a view to or for sale in connection with
any distribution, and (ii) each notice of the exercise of any portion of the
Option shall be accompanied by a representation and warranty in writing, signed
by the person entitled to exercise the same, that the shares are being so
acquired in good faith for his personal account and not with a view to or for
sale in connection with any distribution. Notwithstanding anything else
contained in this Agreement, no share of stock or other securities shall be
issued pursuant to any exercise of the Option unless and until, in the opinion
of counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any
federal, state or other securities laws, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
10. Stock Restrictions. No shares of stock or other securities issued
upon exercise of the Option may be sold, assigned, pledged, hypothecated or
otherwise transferred or disposed of in any way unless and until, in the opinion
of counsel for the Company, such securities may be so transferred or disposed of
without causing the Company to be in violation of or incur any liability under
any federal, state or other securities laws, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
11. Restrictive Legends. Unless and until otherwise permitted by this
Section 10, each certificate for stock or other securities issued pursuant to
exercise of this Option shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, ARE HELD FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE SOLD, TRANSFERRED OR DISTRIBUTED AT ANY TIME
UNLESS A REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933 COVERING
SUCH SHARES OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
A REGISTRATION STATEMENT IN NOT REQUIRED".
The Company may order its stock transfer agents to stop the transfer of any
shares of stock or other securities bearing the legend set forth in this Section
11 until the conditions of Section 10 hereof with respect to the transfer of
such stock or other securities have been satisfied.
12. Stock Option Plan. The Option is subject to, and the Company and
Grantee agree to be bound by, all of the terms and conditions of the Plan, as
the same shall have been amended from time to time in accordance with the terms
thereof, provided that no such amendment shall deprive Grantee, without his
consent, of this Option or any of his rights hereunder. Pursuant to the Plan,
the Company's Stock Option Committee is vested with final authority to interpret
and construe the Plan and the Option, and is authorized to adopt rules and
5.
<PAGE>
regulations for carrying out the Plan. A copy of the Plan in its present form
is available for inspection during business hours by Grantee or other persons
entitled to exercise this Option at the Company's principal office.
13. No Employment or Stockholder Rights. Neither this Agreement nor the
establishment of the Plan shall be construed to (i) give Grantee any right to
become employed by, or continue to be a director of, or consultant to, the
Company or any of its subsidiaries, (ii) give Grantee any benefits not
specifically provided by this Agreement, or (iii) in any manner limit the right
of the Company or any of its subsidiaries to modify, amend or terminate the Plan
or any of its other benefit plans. Grantee shall not have any rights as a
stockholder of the Company with respect to any of the Optioned Shares until such
time as such shares have been delivered to him.
14. Notices. Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to Grantee shall be addressed to him at the address given beneath his
signature hereto or at such other address as Grantee may hereafter designate in
writing to the Company.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, other than its conflict laws provisions.
6.
<PAGE>
In Witness Whereof, the Company has entered into this Agreement and granted
the Option as of the date of this Agreement first written above.
Cell Pathways, Inc.
By
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Title
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Accepted:
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Street Address
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City and State
7.
<PAGE>
Exhibit A
OPTION EXERCISE NOTICE
To: Cell Pathways, Inc.
Attention: Secretary
The undersigned hereby exercises his/her option to acquire ____________
shares of ____________ [e.g., Common Stock] (the "Securities") pursuant to the
option granted to the undersigned in that certain Stock Option Agreement (the
"Agreement") dated _______________, 19__, by and between Cell Pathways, Inc.
(the "Company") and the undersigned, and in connection with this exercise does
hereby tender herewith as provided in the Agreement the full Exercise Price (as
defined in the Agreement) with respect to the Securities, and does hereby
represent and warrant to the Company that the Securities are being acquired in
good faith for the undersigned's own account and not with a view to or for sale
in connection with any distribution.
In Witness Whereof, the undersigned has signed this Option Exercise Notice
as of the date written below.
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Signature
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Print Name
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Date
1.
<PAGE>
EXHIBIT 10.4
CELL PATHWAYS, INC.
STOCK OPTION AGREEMENT
Stock Option Agreement ("Agreement") made as of this ___ day of __________,
by and between Cell Pathways, Inc., a Delaware corporation ("Company"), and
____________, a resident of the State of ____________ ("Grantee").
The Parties Hereto Do Hereby Agree As Follows:
1. Grant of Option. The Company considers it desirable and in its best
interest that Grantee (as a consultant to the Company) be given an inducement to
acquire a proprietary interest in the Company and an added incentive to advance
the interests of the Company by being granted an option to purchase share of the
Company's Common Stock, $0.01 par value ("Common Stock"), in accordance with the
Company's 1993 Stock Option Plan, as amended (the "Plan"). In consideration of
Grantee's agreement to perform consulting services for the Company pursuant to a
Consulting Agreement dated as of _______, the Company therefore hereby grants to
Grantee the right, privilege and option ("Option") to purchase an aggregate of
shares of Common Stock (the "Optioned Shares") at the price ("Exercise Price")
of $ ______ per share thereof, in the manner and subject to the conditions
hereinafter provided. This Option shall be treated as a non-qualified stock
option under the Internal Revenue Code of 1986, as amended (the "Code").
2. Option Exercise Period. This Option may be exercised at any time in
whole or in part, subject to the Company's right to repurchase any shares which
have not vested as of the time of the Grantee's termination of service with the
Company and its subsidiaries. The terms of the Company's repurchase rights are
set forth in greater detail in the form of Early Exercise Stock Purchase
Agreement attached as Exhibit B to this form of Stock Option Agreement.
3. Option Vesting Period. The Optioned Shares shall vest based upon the
following schedule:
a. First Anniversary: On the first anniversary of the date of this
Agreement, __________ of the Optioned Shares will vest, provided that
Grantee provides services to the Company or a subsidiary of the Company on
a continuous basis until such anniversary date.
b. Second Anniversary: On the second anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides services to the Company or a subsidiary of
the Company on a continuous basis until such anniversary date.
c. Third Anniversary: On the third anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides
1.
<PAGE>
services to the Company or a subsidiary of the Company on
a continuous basis until such anniversary date.
d. Fourth Anniversary: On the fourth anniversary date of this
Agreement an additional __________ of the Optioned Shares will vest
provided that Grantee provides services to the Company or a subsidiary of
the Company on a continuous basis until such anniversary date.
Notwithstanding the foregoing, all Optioned Shares shall vest at such time
as there shall have commenced the first regular sales of Company pharmaceutical
products for consumer use in the United States in commercially significant
quantities, whether such sales are effected directly by the Company or
indirectly through a licensee or other intermediary, provided the Grantee
continues to provide services to the Company or a subsidiary of the Company at
such time.
If the Company or its subsidiaries shall terminate Grantee's employment for
any reason (other than the failure of Grantee substantially to perform his
duties pursuant thereto) with the effect that Grantee shall cease to be in the
employ of the Company or its subsidiaries prior to the time that all Optioned
Shares shall have vested, then such number of Optioned Shares shall vest on the
date of termination as would have vested on the next ensuing anniversary of this
Agreement which would have occurred but for such termination of employment.
4. Method of Exercise. As to those Optioned Shares that have vested, the
Option may be exercised by the Grantee executing, dating and delivering to the
Secretary of the Company at the Company's principal place of business a written
Option Exercise Notice in the form of Exhibit A attached hereto, accompanied by
a check made payable to the Company in the amount of the aggregate Exercise
Price for the number of shares for which the Option is then being exercised. If
the Company is required to withhold on account of any present or future tax
imposed as a result of such exercise, the notice of exercise shall be
accompanied by a check made payable to the Company in the amount of such
withholding.
As to those Optioned Shares which have not yet vested, the Option may, but
only during the period of Grantee's employment with the Company or its
subsidiaries, be exercised by the method described in this Section 4 hereof;
provided however, that:
a. a partial exercise of this Option shall be deemed to cover first
any vested Optioned Shares and thereafter the earliest vesting installment
of unvested Optioned Shares;
b. any shares so purchased from installments which have not vested as
of the date of exercise shall be subject to the purchase option in favor of
the Company as described in the Early Exercise Stock Purchase Agreement
(Exhibit B) attached hereto;
c. Grantee agrees to enter into an Early Exercise Stock Purchase
Agreement in the form attached hereto.
2.
<PAGE>
5. Termination of Option. Except as otherwise stated in this Agreement or
as the parties may otherwise agree, the Option (to the extent not theretofore
exercised) shall terminate and expire at 5:00 p.m., Chicago time, on the day
immediately prior to the 10th anniversary of the date of this Agreement.
6. Transfer of Option. Grantee may not transfer this Option except by will
or the laws of descent and distribution. This Option shall not be otherwise
sold, assigned, pledged, hypothecated or otherwise transferred or disposed of in
any way, whether by operation of law or otherwise, and during the Grantee's
lifetime shall be exercisable only by the Grantee or his guardian or legal
representative.
7. Capitalization Adjustments. Subject to the provisions of the Plan, if
the outstanding shares of stock or other securities of the class then subject to
the Option are increased or decreased, or are changed into or exchanged for a
different number or kind of Company shares or other Company securities, in any
such case as a result of one or more recapitalizations, stock splits, reverse
stock splits, stock dividends or the like, then appropriate adjustments shall be
made in the number and/or kind of Company shares or other Company securities for
which the unexercised portion of this Option may thereafter be exercised, all
without any change in the aggregate Exercise Price applicable to the unexercised
portion of the Option, but with a corresponding adjustment in the Exercise Price
per share of other unit. No fractional share of Company stock shall be issued
under the Option in connection with any such adjustment. Such adjustments shall
be made by or under authority of the Company's Board of Directors or duly
authorized Committee thereof, whose determinations as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.
8. Certain Transactions. If at any time while this Option remains
outstanding:
a. any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) other than the Company, FGN, Inc., any affiliate of FGN,
Inc., any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any person acquiring securities from the
Company solely pursuant to written agreement with the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
in the Company, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, or
b. during any period of two consecutive years commencing the day
after the first election of directors following termination of the
stockholder voting provisions of the Company's Stockholders' Agreement
dated as of December 10, 1992, as amended, individuals who at the beginning
of such period constitute the Board, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (a) (c) or (d) of this
Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in
3.
<PAGE>
office who either were directors at the beginning off the period or whose
election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof, or
c. the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidating, or
d. the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets,
(each of (a), (b), (c) and (d) above, an "Acceleration Event"), then the Option
shall become vested and may be exercised as to all Optioned Shares for which it
has not previously been exercised and as to all Optioned Shares for which the
Option has been exercised but which have not yet vested such Optioned Shares
shall vest.
Upon the occurrence of an Acceleration Event the Company's Stock Option
Committee shall provide for cancellation of the unexercised portion of the
Option as of the Cancellation Date; provided, however, that if the Option has
been held for less than six months then for purposes of such cancellation the
Acceleration Event and/or Cancellation Date shall be restricted in such manner
as the Company's Stock Option Committee may determine necessary to comply with
the conditions and requirements of Rule 16b-3. "Cancellation Date" shall mean
(i) the 60th day following the occurrence of any Acceleration Event described in
clause (a) or (b) of the first sentence hereof, and (ii) the closing of any
merger, consolidation, liquidation or sale of assets stockholder approval of
which constituted an Acceleration Event under clause (c) or (d) of the first
sentence hereof. Upon such cancellation of the Option, the Company shall make,
in exchange therefor, a cash payment under the Option in an amount equal to the
product of the number of Optioned Shares covered by the unexercised portion of
the Option multiplied by the difference between the Exercise Price and (i) in
the case of a transaction described in clause (a) or (b) of the first sentence
hereof, the highest fair market value of an Optioned Share at any time during
the 60-day period immediately preceding the Cancellation Date, and (ii) in the
case of a transaction described in clause (c) or (d) of the first sentence
hereof, the fair market value of an Optioned Share on the Cancellation Date.
The "fair market value" of Optioned Shares shall be determined by the Company's
Stock Option Committee by reference to any national securities market on which
the Optioned Shares may then be trading, or as otherwise determined by the
Company's Stock Option Committee.
9. Securities Laws. Grantee hereby represents and agrees for himself, and
for his transferees by will or the laws of descent and distribution, that unless
a registration statement under the Securities Act of 1933, as amended, is in
effect as to shares purchased upon any
4.
<PAGE>
exercise of the Option, (i) any and all shares so purchased shall be acquired
for his personal account and not with a view to or for sale in connection with
any distribution, and (ii) each notice of the exercise of any portion of the
Option shall be accompanied by a representation and warranty in writing, signed
by the person entitled to exercise the same, that the shares are being so
acquired in good faith for his personal account and not with a view to or for
sale in connection with any distribution. Notwithstanding anything else
contained in this Agreement, no share of stock or other securities shall be
issued pursuant to any exercise of the Option unless and until, in the opinion
of counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any
federal, state or other securities laws, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
10. Stock Restrictions. No shares of stock or other securities issued
upon exercise of the Option may be sold, assigned, pledged, hypothecated or
otherwise transferred or disposed of in any way unless and until, in the opinion
of counsel for the Company, such securities may be so transferred or disposed of
without causing the Company to be in violation of or incur any liability under
any federal, state or other securities laws, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
11. Restrictive Legends. Unless and until otherwise permitted by this
Section 10, each certificate for stock or other securities issued pursuant to
exercise of this Option shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, ARE HELD FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE SOLD, TRANSFERRED OR DISTRIBUTED AT ANY TIME
UNLESS A REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO THE SECURITIES ACT OF 1933 COVERING
SUCH SHARES OR UNLESS, IN THE OPINION OF COUNSEL FOR THE COMPANY, SUCH
A REGISTRATION STATEMENT IN NOT REQUIRED".
The Company may order its stock transfer agents to stop the transfer of any
shares of stock or other securities bearing the legend set forth in this Section
11 until the conditions of Section 10 hereof with respect to the transfer of
such stock or other securities have been satisfied.
12. Stock Option Plan. The Option is subject to, and the Company and
Grantee agree to be bound by, all of the terms and conditions of the Plan, as
the same shall have been amended from time to time in accordance with the terms
thereof, provided that no such amendment shall deprive Grantee, without his
consent, of this Option or any of his rights hereunder. Pursuant to the Plan,
the Company's Stock Option Committee is vested with final authority to interpret
and construe the Plan and the Option, and is authorized to adopt rules and
5.
<PAGE>
regulations for carrying out the Plan. A copy of the Plan in its present form
is available for inspection during business hours by Grantee or other persons
entitled to exercise this Option at the Company's principal office.
13. No Employment or Stockholder Rights. Neither this Agreement nor the
establishment of the Plan shall be construed to (i) give Grantee any right to
become employed by, or continue to be a director of, or consultant to, the
Company or any of its subsidiaries, (ii) give Grantee any benefits not
specifically provided by this Agreement, or (iii) in any manner limit the right
of the Company or any of its subsidiaries to modify, amend or terminate the Plan
or any of its other benefit plans. Grantee shall not have any rights as a
stockholder of the Company with respect to any of the Optioned Shares until such
time as such shares have been delivered to him.
14. Notices. Any notice to be given to the Company shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to Grantee shall be addressed to him at the address given beneath his
signature hereto or at such other address as Grantee may hereafter designate in
writing to the Company.
15. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, other than its conflict laws provisions.
In Witness Whereof, the Company has entered into this Agreement and granted
the Option as of the date of this Agreement first written above.
Cell Pathways, Inc.
By
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Title
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Accepted:
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Street Address
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City and State
6.
<PAGE>
Exhibit A
OPTION EXERCISE NOTICE
To: Cell Pathways, Inc.
Attention: Secretary
The undersigned hereby exercises his/her option to acquire ________ shares
of __________ [e.g., Common Stock] (the "Securities") pursuant to the option
granted to the undersigned in that certain Stock Option Agreement (the
"Agreement") dated _______________, 19__, by and between Cell Pathways, Inc.
(the "Company") and the undersigned, and in connection with this exercise does
hereby tender herewith as provided in the Agreement the full Exercise Price (as
defined in the Agreement) with respect to the Securities, and does hereby
represent and warrant to the Company that the Securities are being acquired in
good faith for the undersigned's own account and not with a view to or for sale
in connection with any distribution.
In Witness Whereof, the undersigned has signed this Option Exercise Notice
as of the date written below.
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Signature
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Print Name
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Date
1.
<PAGE>
EXHIBIT 10.5
EARLY EXERCISE STOCK PURCHASE AGREEMENT
This Agreement is made by and between Cell Pathways, Inc. a Delaware
corporation (the "Corporation"), and ____________________________ ("Purchaser").
Witnesseth:
Whereas, Purchaser holds a _________ stock option to purchase shares of
common stock of the Corporation pursuant to the Corporation's 1993 Stock Option
Plan (the "Plan") which Purchaser desires to exercise; and
Whereas, Purchaser wishes to take advantage of the early exercise provision
of his option and therefore to enter into this Agreement;
Now, Therefore, It Is Agreed between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to Purchaser, an aggregate of _______ shares
of the common stock (the "Stock") of the Corporation, for an exercise price of
$_______ per share (total exercise price: ______________ ($______)), payable in
cash.
The closing hereunder shall occur at the offices of the Corporation on the
date of this Agreement or at such other time and place as the parties may
mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in the
form of Exhibit A duly endorsed (with date and number of shares left blank) and
the total exercise price in cash.
At the closing or as soon thereafter as practicable, the Purchaser shall
redeliver to the Corporation share certificates for all of the Stock that has
not yet vested ("Unvested Stock") and is to be subject to the Purchase Option
(as defined in paragraph 2 below).
2. Any Unvested Stock purchased by Purchaser pursuant to this Agreement
shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser shall cease to provide services to
the Corporation for any reason (including his death), or no reason, with or
without cause, the Purchase Option may be exercised. The Corporation shall have
the right at any time within the ninety (90) day period after Purchaser's
termination of service with the Corporation or such longer period as may be
agreed to by the Corporation and Purchaser (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Internal Revenue Code)
to purchase from Purchaser or his personal representative, as the case may be,
at the price per share paid by Purchaser pursuant to this Agreement ("Option
Price") any or all shares of Unvested Stock.
1.
<PAGE>
(b) The Corporation shall be entitled to pay for any shares purchased
pursuant to its Purchase Option at the Corporation's option in cash, by offset
against any indebtedness owing to the Corporation by Purchaser, or a combination
of both.
(c) As used herein, the relationship with the Corporation shall
include such relationship with an affiliate of the Corporation.
(d) This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on the
part of the Purchaser to continue the relationship with the Corporation, or of
the Corporation to continue the relationship with the Purchaser.
(e) The Corporation shall deliver to the Purchaser the share
certificates for Unvested Stock at such time, if any, as such Unvested Stock
shall have vested prior to exercise of this Purchase Option.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 12. Upon providing such
notice and payment or tender of the purchase price, the Corporation shall become
the legal and beneficial owner of the Stock being purchased and all rights and
interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there is
any stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Corporation, then, in such event, any and all new,
substituted or additional securities or other property to which Purchaser is
entitled by reason of his ownership of Stock will be immediately subject to the
Purchase Option and be included in the word "Stock" for all purposes of the
Purchase Option with the same force and effect as the shares of Stock then
subject to the Purchase Option. While the total Option Price shall remain the
same after each such event, the Option Price per share of Stock upon exercise of
the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
(i) "The shares represented by this certificate are subject to an
option set forth in an agreement between the Corporation and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this corporation. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares."
(ii) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, ARE HELD FOR INVESTMENT PURPOSES
ONLY AND MAY NOT BE SOLD, TRANSFERRED OR DISTRIBUTED AT ANY TIME UNLESS A
REGISTRATION STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE
2.
<PAGE>
SECURITIES ACT OF 1933 COVERING SUCH SHARES OR UNLESS, IN THE
OPINION OF COUNSEL FOR THE COMPANY, SUCH A REGISTRATION STATEMENT IS NOT
REQUIRED."
6. Purchaser acknowledges that he is aware that the Stock to be issued to
him by the Corporation pursuant to this Agreement has not been registered under
the Securities Act of 1933, as amended (the "Act"), on the basis that no
distribution or public offering of the Stock is to be effected, and in this
connection acknowledges that the Corporation is relying on the following
representations: Purchaser warrants and represents to the Corporation that he is
acquiring the Stock for investment and not with a view to or for sale in
connection with any distribution of the Stock or with any present intention of
distributing or selling the Stock and he does not presently have reason to
anticipate any change in circumstances or any particular occasion or event which
would cause him to sell the Stock. Purchaser recognizes that the Stock must be
held indefinitely unless it is subsequently registered under the Act or an
exemption from such registration is available and, further, recognizes that the
Corporation is under no obligation to register the Stock or to comply with any
exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule 144
adopted under the Act unless certain conditions are met and until Purchaser has
held the Stock for at least two (2) years. Among the conditions for use of Rule
144 is the availability of specified current public information about the
Corporation. Purchaser recognizes that the Corporation presently has no plans to
make such information available to the public.
Whether or not the Purchase Option is exercised or has lapsed, Purchaser
further agrees not to make any disposition of any of the Stock in any event
unless and until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) Purchaser shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed statement
of the circumstances surrounding the proposed disposition, and (ii) Purchaser
shall have given the Corporation an opinion of counsel, which opinion and
counsel shall be satisfactory to the Corporation, to the effect that such
disposition will not require registration of the Stock under the Act.
8. Purchaser shall not sell or transfer any of the Stock subject to the
Purchase Option or any interest therein so long as such Stock is subject to the
Purchase Option.
9. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (ii) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
3.
<PAGE>
10. Subject to the provisions of paragraphs 8 and 9 above, Purchaser (but
not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Corporation with
respect to the Stock.
11. The parties agree to execute such further instruments and to take such
further action as reasonably may be necessary to carry out the intent of this
Agreement.
12. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or five days after
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to the other party hereto as his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
13. This Agreement shall bind and inure to the benefit of the successors
and assigns of the Corporation and, subject to the restrictions on transfer
herein set forth, inure to the benefit of and be binding upon Purchaser, his
heirs, executors, administrators, successors, and assigns. Without limiting the
generality of the foregoing, the Purchase Option of the Corporation hereunder
shall be assignable by the Corporation at any time or from time to time, in
whole or in part.
In Witness Whereof, the parties hereto have executed this Agreement as of
the ____ day of __________, 19__.
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By
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Address: --------------------------------------
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Purchaser
Address: --------------------------------------
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Attachments:
Exhibit A Assignment Separate from Certificate
4.
<PAGE>
EXHIBIT 10.6
CELL PATHWAYS, INC.
1995 STOCK AWARD PLAN
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may receive a portion of their compensation through the granting of awards of
restricted stock, as defined in further detail below, and may thereby be given
an opportunity to benefit from increases in value of the stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Committee to which responsibility for administration of
the Plan has been delegated by the Board, be rights to acquire restricted stock
granted pursuant to Section 6 hereof.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Stock Option Committee of the Board.
(e) "Company" means CELL PATHWAYS, INC., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Director" means a member of the Board.
(h) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
1.
<PAGE>
(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(j) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Committee deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Committee deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Committee.
(k) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(l) "Plan" means this Cell Pathways, Inc. 1995 Stock Award Plan.
(m) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(n) "Stock Award" means any right granted under the Plan to acquire stock
of the Company.
(o) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
3. Administration.
The Plan shall be administered by the Committee. The Committee shall have
the power, subject to, and within the limitations of, the express provisions of
the Plan:
(a) To issue Stock Awards and to authorize the issuance of, and to cause
the Company to issue, common stock valued at the Fair Market Value thereof, in
accordance with the terms of the Stock Award Agreement documenting such Stock
Award.
2.
<PAGE>
(b) To determine from time to time which of the persons eligible under the
Plan shall be granted Stock Awards; when and how each Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(c) To construe and interpret the Plan and Stock Awards granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Committee, in the exercise of this power, may correct any defect, omission
or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.
(d) To amend a Stock Award as provided in Section 10(d).
(e) Generally, to exercise such powers and to perform such acts as the
Committee deems necessary or expedient to promote the best interests of the
Company.
Despite the foregoing delegation, the Board reserves the right to act
hereunder in any case where the Committee may not be able to act or where the
Board chooses to act. The Board may abolish the Committee at any time and place
all of the responsibilities for administration of the Plan in the Board.
4. Shares Subject to the Plan.
(a) The aggregate number of shares of the Company's common stock that may
be issued pursuant to Stock Awards shall be determined in the sole discretion of
the Committee (subject to the number of shares authorized for issuance under the
Company's Articles of Incorporation and the Company's available treasury
shares). Since the Plan does not establish a specific share reserve, the Plan
has not been designed to comply with the requirements of Rule 16b-3.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
Stock Awards may be granted only to Employees, Directors or Consultants.
6. Terms of Stock Awards.
Each stock award agreement shall be in such form and shall contain such
terms and conditions as the Committee shall deem appropriate. The terms and
conditions of stock award agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
award agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following
provisions as appropriate:
3.
<PAGE>
(a) Consideration. The Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock award agreement in
consideration for past services actually rendered to the Company or for its
benefit or for such other consideration, including the issuance of stock in lieu
of cash compensation, as the Committee may determine. No payment by cash or
property by a participant shall be required as consideration for the issuance of
the stock.
(b) Transferability. No rights under a stock award agreement shall be
transferable except by will or the laws of descent and distribution, except to
the extent otherwise determined by the Committee, so long as stock awarded under
such agreement remains subject to the terms of the agreement.
(c) Vesting. Shares of stock awarded under the Plan may, but need not, be
subject to a reacquisition right in favor of the Company in accordance with a
vesting schedule or vesting conditions to be determined by the Committee.
7. Covenants of the Company.
(a) During the terms of the Stock Awards, to the extent that stock
certificates documenting one or more Stock Awards have not been issued, the
Company shall keep available at all times the number of shares of stock required
to satisfy such Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue shares of stock upon grant of the Stock Award; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act of 1933, as amended, either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
8. Miscellaneous.
(a) The Committee shall have the power to accelerate the time at which a
Stock Award or any part thereof will vest pursuant to subsection 6(c),
notwithstanding the provisions in the Stock Award stating the time during which
it will vest.
(b) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment or
relationship as a Director or Consultant of any Employee, Director, Consultant
or other holder of Stock Awards for any reason or no reason.
4.
<PAGE>
(c) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(b),
as a condition of acquiring stock under any Stock Award: (1) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of the Stock Award; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Stock
Award for such person's own account and not with any present intention of
selling or otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the acquisition of stock under the Stock Award has
been registered under a then currently effective registration statement under
the Securities Act of 1933, as amended, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(d) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the acquisition of stock under a Stock
Award by any of the following means or by a combination of such means: (1)
tendering a cash payment; (2) authorizing the Company to withhold shares from
the shares of the common stock otherwise issuable or deliverable to the
participant as a result of the acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
9. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan or subject to
any Stock Award for which stock certificates have not been issued (through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
otherwise), the Plan will be appropriately adjusted in the class(es) of shares
subject to the Plan pursuant to subsection 4(a), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of shares of
stock subject to such outstanding Stock Awards.
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards
5.
<PAGE>
for those outstanding under the Plan, or (ii) such Stock Awards shall continue
in full force and effect. In the event any surviving corporation refuses to
assume or continue such Stock Awards, or to substitute similar options for those
outstanding under the Plan, then, with respect to Stock Awards held by persons
then performing services as Employees, Directors or Consultants, the time during
which such Stock Awards shall be released from the Company's reacquisition right
shall be accelerated prior to such event.
10. Amendment of the Plan and Stock Awards.
(a) The Board at any time, and from time to time, may amend the Plan.
(b) The Board may in its sole discretion submit any amendment to the Plan
or the grant of one or more Stock Awards for stockholder approval, including,
but not limited to, amendments to the Plan or Stock Awards intended to satisfy
the requirements of Section 162(m) of the Code and the regulations promulgated
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to certain executive
officers. Nothing in this subsection 10(b) or any other provision of the Plan
shall require the Board to obtain stockholder approval for the Plan, any
amendment to the Plan, or any Stock Award granted under the Plan.
(c) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(d) The Board or the Committee at any time, and from time to time, may
amend the terms of any one or more Stock Award; provided, however, that the
rights and obligations under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the person to whom the
Stock Award was granted and (ii) such person consents in writing.
11. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.
12. Effective Date of Plan.
The Plan shall become effective on the date of its adoption by the Board.
6.
<PAGE>
EXHIBIT 10.7
STOCK SUBSCRIPTION AGREEMENT
This Stock Subscription Agreement (the "Agreement") is made as of the 9th
day of May, 1994, by and between Cell Pathways, Inc., a Delaware corporation
(the "Corporation"), and __________________ ("Purchaser").
Witnesseth:
Whereas, the Corporation, hereby agrees to issue and sell to Purchaser, and
Purchaser hereby agrees to purchase and pay for, shares of Series E Convertible
Preferred Stock of the Corporation.
Now, Therefore, It Is Agreed between the parties as follows:
1. Purchaser hereby agrees to Purchase from the Corporation and the
Corporation agrees to issue and sell to Purchaser shares of Series E Convertible
Preferred Stock (the "Shares") at a purchase price of four dollars and ten cents
($4.10) per share.
2. The issuance and sale of the Shares shall take place on May 11, 1994
("Closing Date").
3. On the Closing Date, the Corporation will deliver to Purchaser a
certificate registered in Purchaser's name representing the number of Shares to
be purchased on such Closing Date. On the Closing Date, Purchaser will pay the
purchase price for the Shares being purchased on such Closing Date by delivery
to the Company of a check in the amount which represents $4.10 times the number
of Shares being purchased on such Closing Date, or by wiring such amount to the
account of Cell Pathways, Inc., No. 7867646 with the Northern Trust Company at
50 South LaSalle Street, Chicago, Illinois 60675, using Bank Routing Number
071000152.
4. Purchaser acknowledges that he is aware that the Shares to be issued to
him by the Corporation pursuant to this Agreement have not been registered under
the Securities Act of 1933, as amended (the "Act"), and that the Shares are
deemed to constitute "restricted securities" under Rule 144 promulgated under
the Act. In this connection, Purchaser warrants and represents to the
Corporation that Purchaser is obtaining the Shares for Purchaser's own account
and Purchaser has no present intention of distributing or selling said Shares
except as permitted under the Act and applicable state securities laws.
Purchaser further warrants and represents that Purchaser has either (i) a
preexisting personal or business relationship with the Corporation or any of its
officers, directors or controlling persons, or (ii) the capacity to protect his
own interests in connection with the purchase of the Shares by virtue of the
business or financial expertise of any professional advisors to Purchaser who
are unaffiliated with and who are not compensated by the Corporation or any of
his affiliates, directly or indirectly. Purchaser further acknowledges that the
exemption from registration under Rule 144 will not be available for at least
three years
1.
<PAGE>
from the date of receipt of the Shares unless at least two years from the date
of receipt (i) a public trading market then exists for the Common Stock of the
Corporation, (ii) adequate information concerning the Corporation is then
available to the public, and (iii) other terms and conditions of Rule 144 are
complied with; and that any sale of the Shares may be made only in limited
amounts in accordance with such terms and conditions and that after ninety days
after the Corporation becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Shares may be resold by
persons other than affiliates in reliance on Rule 144 without compliance with
paragraphs (c),(d),(e) and (h) thereof, and by affiliates without compliance
with paragraph (d) thereof.
5. All certificates representing the Shares shall have endorsed thereon
the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACTS OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. FURTHER, SUCH TRANSFER IS SUBJECT TO THE CONDITIONS
SPECIFIED IN AN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF MAY 31,
1994, BY AND AMONG THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH
STOCKHOLDERS' AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE
OF THE COMPANY AND WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON
REQUEST AND WITHOUT CHARGE.
(b) "THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF COMPANY STOCK
OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS."
(c) "THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF MAY 31, 1994, BY AND
AMONG THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH STOCKHOLDERS' AGREEMENT
IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL
BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST AND WITHOUT
CHARGE."
(d) Any legend required to be placed thereon by appropriate state
Blue Sky officials.
2.
<PAGE>
6. Without in any way limiting the foregoing, Purchaser further agrees
that he shall in no event make any disposition of all or any portion of the
Shares which he is being issued unless and until:
(i) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(ii) (a) He shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed statement
of the circumstances surrounding the proposed disposition, (b) he shall have
furnished the Corporation with an opinion of his own counsel to the effect that
such disposition will not require registration of such shares under the Act, and
(c) such opinion of his counsel shall have been concurred in by counsel for the
Corporation, such concurrence not to be unreasonably withheld, and the
Corporation shall have advised him of such concurrence.
7. The Corporation shall not be required (i) to transfer on its books any
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (ii) to treat as owner of such Shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
8. As also set forth in the Stockholders' Agreement, dated as of May 31,
1994, Purchaser hereby agrees that for a period of not less than 90 days and up
to a maximum of 180 days following the effective date of the first registration
statement of the Corporation covering Common Stock (or other securities) to be
sold on its behalf in an underwritten public offering, he shall not, to the
extent requested by the Corporation and any underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any Common Stock of the Corporation held by him at any time during such period
except Common Stock included in such registration.
In order to enforce the foregoing covenant, the Corporation may impose stop
transfer instructions with respect to the Common Stock held by Purchaser (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
9. If by August 10, 1994, the Company has received less than $3,000,000
in offering proceeds from the sale of the Shares, then the Purchaser shall
receive with respect to each 20 shares of Series E Preferred purchased on or
before June 10, 1994, a warrant to purchase an additional share of Series E
Preferred at an exercise price of $4.10 per share exercisable on or before June
30, 1996 in the form attached to the Offering Memorandum as Exhibit ________.
10. Purchaser hereby makes, constitutes and appoints Richard H. Troy, or
his successors, the true and lawful Attorney-in-Fact of Purchaser (said person,
or his successor, being herein referred to as the "Attorney-in-Fact") with full
power and authority in the name and on behalf of Purchaser to enter into the
Amended and Restated Stockholder Agreement attached to the Offering Memorandum
as Appendix F. This Power of Attorney and all authority conferred hereby are
granted and conferred subject to and in consideration of the interests of the
3.
<PAGE>
Corporation and the other Purchasers who purchase the Shares, and, for the
purposes of completing the purchase, this Power of Attorney and all authority
conferred hereby shall be irrevocable and shall not be terminated by any act of
the Purchaser or by operation of law. Notwithstanding the foregoing, if the
purchase of the Shares does not occur by August 10, 1994, then from and after
such date this Power of Attorney shall terminate. The Attorney-in-Fact in his
place and stead, and Purchaser hereby ratifies and confirms all that the
Attorney-in-Fact or substitute or substitutes shall do by virtue of these
presents.
11. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
12. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or delivery by
facsimile or express courier, or 4 days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to the other party hereto at its address or facsimile number hereinafter shown
below its signature or at such other address as such party may designate by ten
days' advance written notice to the other party hereto.
13. This Agreement shall be governed by the laws of the State of Delaware
and interpreted and determined in accordance with the laws of the State of
Delaware, as such laws are applied by Delaware courts to contracts made and to
be performed entirely in Delaware by residents of that state.
14. This Agreement shall inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer herein
set forth, shall be binding upon Purchaser, his heirs, executors,
administrators, successors and assigns.
15. This Agreement, together with the Exhibits hereto, constitutes the
entire agreement of the parties with respect to the subject matter hereof.
4.
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the day and year first above written.
Cell Pathways, Inc.
a Delaware corporation
By:
---------------------------------
Title:
------------------------------
Address:
----------------------------
----------------------------
Facsimile No.:
----------------------
Purchaser:
------------------------------------
Address:
----------------------------
----------------------------
Facsimile No.:
----------------------
5.
<PAGE>
EXHIBIT 10.8
PEW-________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THIS WARRANT AND THE SHARES PURCHASABLE HEREUNDER ARE SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN THAT CERTAIN CELL PATHWAYS, INC. NOTE AND WARRANT PURCHASE
AGREEMENT, DATED AS OF JUNE 5, 1995, WHICH RESTRICTIONS ON TRANSFER ARE
INCORPORATED BY REFERENCE.
WARRANT TO PURCHASE A MAXIMUM OF _______________
SHARES OF SERIES E CONVERTIBLE PREFERRED STOCK OF
CELL PATHWAYS, INC.
(Void after June 5, 1999)
This certifies that ________ (the "Holder"), or assigns, for value
received, is entitled to purchase from Cell Pathways, Inc., a Delaware
corporation (the "Company"), having a place of business at 1300 South Potomac
Street, Suite 110, Aurora, Colorado 80012-4526, a maximum of _________________
fully paid and nonassessable shares of the Company's Series E Convertible
Preferred Stock ("Preferred Stock") for cash at a price of Three Dollars and
Fifteen Cents ($3.15) per share (the "Stock Purchase Price") at any time or from
time to time up to and including 5:00 p.m. (Mountain Time) on the earliest of
(i) the closing of the initial public offering of the Company's Common Stock
pursuant to a registration statement under the Securities Act of 1933, as
amended, (ii) the sale of all or substantially all of the assets of the Company,
or (iii) June 5, 1999, such earliest day being referred to herein as the
"Expiration Date", upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Subscription Form attached hereto duly filled
in and signed and upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.
1.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. This Warrant is
exercisable at the option of the holder of record hereof, at any time or from
time to time, up to the Expiration Date for all or any part of the shares of
Preferred Stock (but not for a fraction of a share) which may be purchased
hereunder. The Company agrees that the shares of Preferred Stock purchased under
this Warrant shall be and are deemed to be issued to the Holder hereof as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered, properly endorsed, the completed,
executed Subscription Form delivered and payment made for such shares.
Certificates for the shares of Preferred Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall be in such denominations of Preferred Stock as may be
requested by the Holder hereof and shall be registered in the name of such
Holder.
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants and
agrees that all shares of Preferred Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued
Preferred Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Preferred Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed; provided, however, that
the Company shall not be required to effect a registration under federal or
state securities laws with respect to such exercise. The Company will not take
any action which would result in any adjustment of the Stock Purchase Price (as
described in Section 3 hereof) (i) if the total number of shares of Preferred
Stock issuable after such action upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares of
Preferred Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
2.
<PAGE>
total number of shares of Preferred Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Preferred Stock, together with all shares of Common Stock then outstanding and
all shares of Common Stock then issuable upon exercise of all options and upon
the conversion of all convertible securities then outstanding would exceed the
total number of shares of Common Stock then authorized by the Company's
Certificate of Incorporation.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock Purchase
Price and the number of shares purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3. Upon each adjustment of the Stock Purchase
Price, the Holder of this Warrant shall thereafter be entitled to purchase, at
the Stock Purchase Price resulting from such adjustment, the number of shares
obtained by multiplying the Stock Purchase Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Stock Purchase
Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company shall at any
time subdivide its outstanding shares of Preferred Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(a) Preferred Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Preferred Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
(b) any cash paid or payable otherwise than as a cash dividend, or
(c) Preferred Stock or additional stock or other securities or
property (including cash) by way of spinoff, split up, reclassification,
combination of shares or similar corporate rearrangement (other than (i) shares
of Preferred Stock issued as a stock split, adjustments in respect of which
shall be covered by the terms of Section 3.1 above or (ii) an event for which
adjustment is otherwise made pursuant to Section 3.4 below),
3.
<PAGE>
then, and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares or all other additional
stock and other securities and property.
3.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation shall be effected
in such a way that holders of Preferred Stock shall be entitled to receive
stock, securities, or other assets or property, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the holder hereof shall thereafter
have the right to purchase and receive (in lieu of the shares of the Preferred
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities or
other assets or property as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Preferred Stock equal to the
number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of the reorganization and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to the reorganization. In any reorganization described
above, appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Stock Purchase
Price and of the number of shares purchasable and receivable upon the exercise
of this Warrant) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume by written
instrument, executed and mailed or delivered to the registered Holder hereof at
the last address of such Holder appearing on the books of the Company, the
obligation to deliver to such Holder such
4.
<PAGE>
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
3.4 Adjustments Set Forth in Certificate of Incorporation. In addition to
the foregoing adjustments, the conversion rate of the Preferred Stock into
Common Stock is subject to adjustments as set forth in the Company's Certificate
of Incorporation. The Company represents that as of the date this Warrant was
first issued, each share of Preferred Stock was convertible into one share of
Common Stock.
3.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase Price
or in the conversion ratio of the Preferred Stock or any increase or decrease in
the number of shares purchasable upon the exercise of this Warrant, the Company
shall give written notice thereof, by first class mail, postage prepaid,
addressed to the registered Holder of this Warrant at the address of such Holder
as shown on the books of the Company. The notice shall be signed by the
Company's chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
3.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its Preferred
Stock;
(b) the Company shall declare any dividend upon its Preferred Stock
payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the holders
of its Preferred Stock any additional shares of stock of any class or other
rights;
(d) there shall be any capital reorganization or reclassification of
the capital stock of the Company or any consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(f) there shall be an initial public offering of Company securities;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of
5.
<PAGE>
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (b) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding up or public offering, at least thirty
(30) days' prior written notice of the date when the same shall take place;
provided, however, that the Holder shall make a best efforts attempt to respond
to such notice as early as possible after the receipt thereof. Any notice given
in accordance with the foregoing clause (a) shall also specify, in the case of
any such dividend, distribution or subscription rights, the date on which the
holders of Preferred Stock shall be entitled thereto. Any notice given in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Preferred Stock shall be entitled to exchange their Preferred
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, winding
up, conversion or public offering, as the case may be.
3.7 Certain Events. If any change in the outstanding Preferred Stock of the
Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Stock
Purchase Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
4. Issue Tax. The issuance of certificates for shares of Preferred Stock upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.
5. Closing of Books. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.
6. No Voting or Dividend Rights; Limitation of Liability. Nothing contained in
this Warrant shall be construed as conferring upon the holder hereof the right
to vote or to
6.
<PAGE>
consent or to receive notice as a stockholder of the Company or any other
matters or any rights whatsoever as a stockholder of the Company. No dividends
or interest shall be payable or accrued in respect of this Warrant or the
interest represented hereby or the shares purchasable hereunder until, and only
to the extent that, this Warrant shall have been exercised. No provisions
hereof, in the absence of affirmative action by the holder to purchase shares of
Preferred Stock, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the Stock
Purchase Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by its creditors.
7. Registration Rights. Upon exercise of this Warrant, the Holder shall be
entitled to participate in registrations of Company securities initiated by the
Company or other Company stockholders pursuant to that certain Second Amended
and Restated Stockholders' Agreement, dated as of August 23, 1995, among the
Company and certain of its stockholders in the capacity as an "Other
Stockholder" (as defined therein), provided that the Holder complies with all of
the obligations and duties of an "Eligible Holder" (as defined therein) with
respect to participation is such registrations.
8. Warrants Transferable. Subject to compliance with applicable federal and
state securities laws and the transfer restrictions set forth in the Note and
Warrant Purchase Agreement, dated as of June 5, 1995 (the "Agreement"), under
which this Warrant was purchased, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed and
compliance with the provisions of the Agreement. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant,
when endorsed in blank, shall be deemed negotiable, and that the holder hereof,
when this Warrant shall have been so endorsed, may be treated by the Company, at
the Company's option, and all other persons dealing with this Warrant as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented by this Warrant, or to the transfer hereof on the books of
the Company, any notice to the contrary notwithstanding; but until such transfer
on such books, the Company may treat the registered owner hereof as the owner
for all purposes.
9. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
10. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the holders of a majority of the shares subject to
Warrants issued under the
7.
<PAGE>
Agreement; provided, however, that the Stock Purchase Price with respect to a
particular Warrant may not be amended without the written consent of the holder
of such Warrant.
11. Notices. Any notice, request or other document required or permitted to be
given or delivered to the holder hereof or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. Descriptive Headings and Governing Law. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado.
14. Lost Warrants. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
15. Fractional Shares. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
8.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized as of the 25th day of August, 1995.
CELL PATHWAYS, INC.
By:
-------------------------------
Chief Executive Officer
Attest:
- --------------------
Secretary
9.
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: _______________, 19___
Cell Pathways, Inc.
1300 South Potomac Street
Suite 110
Aurora, Colorado 80012-4526
Gentlemen:
The undersigned hereby elects to exercise the warrant issued to it by
Cell Pathways, Inc. (the "Company") dated _______________, 1995 (Warrant No.
PEW-__________ (the "Warrant")), and to purchase thereunder ___________________
shares of the Series E Convertible Preferred Stock of the Company (the "Shares")
at a purchase price of _________________________ ($__________) per Share or an
aggregate purchase price of _________________________ ($__________) (the
"Purchase Price").
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
-----------------------------------------
Signature
-----------------------------------------
Title of Signatory, if Warrantholder is a
Corporation or Other Entity
10.
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO CELL PATHWAYS, INC.
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE PREFERRED STOCK ISSUABLE UPON
EXERCISE OF THE WARRANT WILL BE ISSUED.
Date: _______________, 19___
Cell Pathways, Inc.
1300 South Potomac Street
Suite 110
Aurora, Colorado 80012-4526
The undersigned, _______________ ("Purchaser"), intends to acquire shares
of the Series E Convertible Preferred Stock (the "Preferred Stock") of Cell
Pathways, Inc. (the "Company") from the Company pursuant to the exercise or
conversion of certain Warrants to purchase Preferred Stock held by Purchaser.
The Preferred Stock will be issued to Purchaser in a transaction not involving a
public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act"), and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Preferred Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Preferred Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission or
in violation of any applicable state securities law.
Purchaser has been advised that the Preferred Stock has not been registered
under the 1933 Act or state securities laws on the ground that this transaction
is exempt from registration, and that reliance by the Company on such exemptions
is predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Preferred Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Preferred Stock. Purchaser further agrees that the Company may refuse to
permit Purchaser to sell, transfer or dispose of the Preferred Stock (except as
permitted under Rule 144) unless there is in effect a
11.
<PAGE>
registration statement under the 1933 Act and any applicable state securities
laws covering such transfer, or unless Purchaser furnishes an opinion of counsel
reasonably satisfactory to counsel for the Company, to the effect that such
registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. These shares have been acquired for investment and may not be
sold or otherwise transferred in the absence of an effective registration
statement for these shares under the Securities Act and applicable state
securities laws, or an opinion of counsel satisfactory to the Company that
registration is not required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Preferred Stock
with Purchaser's counsel.
Very truly yours,
-----------------------------------------
Signature
-----------------------------------------
Title of Signatory, if Warrantholder is a
Corporation or Other Entity
12.
<PAGE>
EXHIBIT 10.9
NOTE, PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
between
CELL PATHWAYS, INC.
and
THE GOLDMAN SACHS GROUP, L.P.
<PAGE>
NOTE, PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
Note, Preferred Stock and Warrant Purchase Agreement (the "Agreement"),
dated as of December 13, 1996, between Cell Pathways, Inc. (the "Corporation"),
a Delaware corporation and The Goldman Sachs Group, L.P., a Delaware limited
partnership (the "Investor").
Witnesseth:
Whereas, upon the terms and conditions of this Agreement, the Corporation
wishes to sell to the Investor, and the Investor wishes to purchase from the
Corporation, 675,680 shares of a new series of preferred stock to be designated
by the Corporation after the date hereof, Series F Convertible Preferred Stock,
par value $.01 per share, of the Corporation (the "Series F Preferred Stock")
and warrants, substantially in the form of Exhibit A hereto, to purchase 33,784
shares of Series F Preferred Stock from the Corporation (the "Warrants") for an
aggregate purchase price of $2,500,016 (the "Purchase Price").
Whereas, the sale of Series F Preferred Stock and Warrants to the Investor
pursuant to this Agreement will be made as part of a private placement of Series
F Preferred Stock by the Corporation in compliance with the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act") (the "Series F Offering") which is intended by the Corporation
to raise $10,000,000 or more.
Whereas, the terms of the Series F Preferred Stock are as set forth in the
form of the Fifth Amended and Restated Certificate of Incorporation of the
Corporation, attached hereto as Exhibit B, which form has been approved by the
Investor and by the Board of Directors of the Corporation and is currently being
submitted to the stockholders of the Corporation for their approval (the
"Charter").
Whereas, the form of the Third Amended and Restated Stockholders Agreement,
attached hereto as Exhibit C, which form has been approved by the Investor and
by the Board of Directors of the Corporation and is currently being submitted to
the stockholders for their approval (the "Amended Stockholders' Agreement") sets
forth certain arrangements between the Corporation, the Investor and the parties
thereto with respect to ownership of capital stock of the Corporation;
Whereas, in order to facilitate the Series F Offering and provide the
Corporation with additional working capital, the Corporation wishes to sell to
the Investor and the Investor wishes to purchase from the Corporation a note,
substantially in the form attached hereto as Exhibit D (the "Note") in the
aggregate principal amount of $1,000,000 and, at the Subsequent Closing (as
defined herein) the aggregate principal amount of the Note together with any
interest accrued thereon will be credited against the purchase price payable by
the Investor at the Subsequent Closing in connection with its purchase of Series
F Preferred Stock and Warrants hereunder.
1.
<PAGE>
Accordingly, the parties hereto hereby agree as follows:
Section 1. Purchase and Sale.
1.1 The Initial Closing. At the Initial Closing (as defined in Section
1.3), the Investor shall purchase from the Corporation and the Corporation shall
sell to the Investor the Note in the aggregate principal amount of $1,000,000.
The aggregate purchase price to be paid by the Investor for the Note is
$1,000,000.
1.2 The Subsequent Closing. Subject to the conditions specified in
Section 4, at the Subsequent Closing (as defined in Section 1.3) the Investor
shall purchase and receive from the Corporation and the Corporation shall sell
and deliver to the Investor, 675,680 shares of Series F Preferred Stock and
Warrants to purchase 33,784 shares of Series F Preferred Stock (the shares of
Series F Preferred Stock issuable upon exercise of the Warrants being referred
to as the "Warrant Shares"). The aggregate purchase price to be paid by the
Investor for the Series F Preferred Stock and the Warrants under this Section
1.2 is $2,500,016 (the "Purchase Price"). At the Subsequent Closing, the
outstanding principal amount of the Note together with any interest accrued
thereon shall be applied towards payment of the Purchase Price and the Purchase
Price shall be thereby reduced on a dollar for dollar basis.
1.3 The Closings. (a) The closing of the transactions contemplated by
Section 1.1 (the "Initial Closing") shall take place simultaneously with the
execution and delivery of this Agreement. At the Initial Closing, the
Corporation shall deliver to the Investor the Note registered in the name of the
Investor or its nominee and the Investor shall pay $1,000,000 in immediately
available funds to the Corporation by wire transfer to Cell Pathways, Inc.
account No. 7867646 with the Northern Trust Company at 50 South La Salle Street,
Chicago, Illinois 60675, using Bank Routing Number 071000152.
(b) The closing of the transactions contemplated by Section 1.2
shall take place as soon as practicable after the satisfaction or waiver of the
conditions set forth in Section 4 (such date being referred to as the
"Subsequent Closing"; together with the Initial Closing, each a "Closing"). At
the Subsequent Closing, the Corporation shall deliver to the Investor a
certificate or certificates representing the shares of Series F Preferred Stock
and the Warrants purchased by the Investor registered in the name of the
Investor or its nominee. Delivery of such certificates and the Warrants to the
Investor shall be made against, and payment of the Purchase Price shall be
satisfied by, (i) return of the Note and application of the outstanding
principal amount of the Note together with any accrued interest thereon towards
payment of the Purchase Price and (ii) receipt by the Corporation from the
Investor of the remainder of the Purchase Price, which shall be paid by wire
transfer in immediately available funds to Cell Pathways, Inc. account No.
7867646 with the Northern Trust Company at 50 South La Salle Street, Chicago,
Illinois 60675, using Bank Routing Number 071000152.
(c) Each Closing shall take place at the offices of Fried, Frank,
Harris, Shriver & Jacobson, One New York Plaza, New York, NY 10004.
2.
<PAGE>
Section 2. Representations and Warranties of the Corporation. The Corporation
hereby represents and warrants to the Investor as of the date hereof and as of
the Subsequent Closing as follows:
2.1 Authorization. (a) The execution and delivery by the Corporation of
the Agreement, the Note and the Warrants (collectively, the "Documents") and the
performance by the Corporation of the Note has been duly authorized by all
requisite corporate action on the part of the Corporation (including any
required stockholder approval). At the Subsequent Closing, the performance by
the Corporation of the Agreement and the Warrants will have been duly authorized
by all requisite corporate action on the part of the Corporation (including any
required stockholder approval). Each of the Agreement and the Note constitutes,
and the Warrants when executed will constitute, a legal, valid and binding
obligation of the Corporation, enforceable against the Corporation, in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.
(b) The authorization, issuance, sale and delivery of the Note has
been duly authorized by all requisite corporate action on the part of the
Corporation. As of the Subsequent Closing, the authorization, issuance, sale and
delivery of Series F Preferred Stock and Warrants pursuant to this Agreement
and the authorization, reservation, issuance, sale and delivery of the Warrant
Shares and the shares of common stock, par value $.01 per share, of the
Corporation ("Common Stock") issuable upon conversion of any share of Series F
Preferred Stock purchased by the Investor hereunder (including any Warrant
Share) (such shares of Common Stock being referred to collectively as the
"Conversion Shares") have been duly authorized by all requisite corporate action
on the part of the Corporation (including any required stockholder approval).
Each share of Series F Preferred Stock issued pursuant to this Agreement
(including upon exercise of a Warrant) and each share of Common Stock issued
upon conversion of any share of Series F Preferred Stock (including upon
conversion of any Warrant Share) will, when issued and assuming payment of the
Purchase Price by the Investor in respect thereof, be validly issued and
outstanding, fully paid and nonassessable and will have been issued in
compliance with the Securities Act and applicable state securities and blue sky
laws.
2.2 Capitalization. The authorized capitalization of the Corporation on
the date hereof is as stated in the Corporation's Fourth Amended and Restated
Certificate of Incorporation in effect on the date hereof and, as of the
Subsequent Closing, will be as stated in the Charter.
(a) Preferred Stock. 872,400 shares designated as Series A
Convertible Preferred Stock are issued and outstanding; 848,100 shares
designated Series B Convertible Preferred Stock are issued and outstanding;
700,000 shares designated Series C Convertible Preferred Stock are issued and
outstanding; 616,807.5 designated Series D Convertible Preferred Stock are
issued and outstanding; 2,969,704 shares designated Series E Convertible
Preferred Stock are issued and outstanding and 61,250 shares of Redeemable
Preferred Stock are issued and outstanding. Except as set forth on Schedule 2.2,
the terms, designations, powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, of each series of Preferred Stock of the Corporation are stated in
the
3.
<PAGE>
Fourth Amended Certificate of Incorporation of the Corporation, the Charter,
the Stockholders' Agreement (as defined in Section 4), and the Documents, copies
of which have previously been furnished to the Investor.
(b) Common Stock. 2,718,845 shares of Common Stock are issued and
outstanding.
(d) Due Authorization, etc. All of the issued and outstanding shares
of capital stock of the Corporation have been duly authorized, are validly
issued, fully paid and nonassessable and have been issued in compliance with the
Securities Act and all applicable state securities or "blue sky" laws.
(e) No Options, etc. Except for issuance of shares of Series F
Preferred Stock in connection with the Series F Offering, the outstanding shares
of Preferred Stock, options to purchase 476,000 shares of Common Stock pursuant
to the Corporation's stock option plan and warrants to purchase 235,161 shares
of Series E Convertible Preferred Stock, there are no outstanding or authorized
warrants, options, agreements, convertible securities or other commitments
pursuant to which the Corporation is or may become obligated to issue any shares
of the capital stock or other securities of the Corporation.
(f) Restrictions. Except as set forth on Schedule 2.2(f) or as
contemplated by the Documents, the Charter and the Stockholders' Agreement,
there are, and immediately after each Closing there will be, no agreement,
restriction or encumbrance (such as a preemptive or similar right, right of
first refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, stockholders' agreement, etc., whether or not the
Company is a party thereto) with respect to the purchase, sale or voting of any
shares of capital stock or other securities of the Corporation pursuant to any
provision of law, the Certificate of Incorporation or By-Laws of the
Corporation, any agreement or otherwise.
2.3 Reservation of Shares. At the Subsequent Closing, the Corporation will
have reserved a sufficient number of shares of (i) Series F Preferred Stock
issuable upon conversion of the Warrants, and (ii) Common Stock for issuance to
the Investor upon the conversion of the Series F Preferred Stock issued to the
Investor in accordance with this Agreement and upon conversion of the Warrant
Shares.
2.4 Financial Statements; Undisclosed Liabilities. The Corporation has
furnished to the Investor audited statements of operations, stockholders' equity
and cash flows of the Corporation for the fiscal year ended December 31, 1995,
and the audited balance sheet of the Corporation as of December 31, 1995, and
the unaudited statements of operations, stockholders' equity and cash flows of
the Corporation for the nine months ended September 30, 1996 and the unaudited
balance sheet of the Corporation as of September 30, 1996 (the "September 30
Financial Statements") (all such financial statements collectively, the
"Financial Statements"). Except as described in the notes thereto, the Financial
Statements were prepared in all material respects in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby, present fairly and accurately in all material respects
the financial condition of the Corporation and the results of operations of the
4.
<PAGE>
Corporation for the respective periods covered, and are consistent with the
books and records of the Corporation. The Corporation does not have any
liabilities or obligations (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due) other than liabilities or
obligations reserved against or otherwise disclosed in the September 30
Financial Statements, except those incurred since September 30, 1996 in the
ordinary course of business consistent (in amount and kind) with past practice
(none of which is a liability resulting from breach of contract, breach of
warranty, tort, infringement, claim or lawsuit).
2.5 No Conflict. The execution, delivery and performance by the
Corporation of the Documents, the consummation by the Corporation of the
transactions contemplated hereby and thereby, the issuance, sale and delivery by
the Corporation of the Note, the Series F Preferred Stock, the Warrants, Warrant
Shares and the Conversion Shares will not (a) violate any provision of law,
statute, rule or regulation, or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body applicable
to the Corporation, or any of its properties or assets, (b) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, or result in
the creation of any encumbrance upon any of the properties or assets under, any
contract to which the Corporation is a party or its assets are bound, (c)
require the prior consent or approval of or by, or notification of or filing
with, any person (governmental or private) or (d) violate the Certificate of
Incorporation or the By-Laws of the Corporation.
2.6 Intellectual Property Rights. (a) The Corporation owns or has the
right to use or license all of the Intellectual Property (as defined below)
necessary for the operation of the business of the Corporation as currently
conducted and as proposed to be conducted. Each item of Intellectual Property
owned or used by the Corporation immediately prior to the Initial Closing
hereunder will be owned or available for use by the Corporation on identical
terms and conditions immediately subsequent to any Closing hereunder.
(b) Except as set forth on Schedule 2.6(b) hereto, to the best
knowledge of the Corporation, the Corporation has not interfered with, infringed
upon or misappropriated any Intellectual Property rights of third parties, and
the Corporation has never received any charge, complaint, claim, demand or
notice alleging an such interference, infringement or misappropriation. The
Corporation has no knowledge that the Corporation will interfere with, infringe
upon or misappropriate any Intellectual Property rights of third parties as a
result of the operation of the business after the closing. To the best knowledge
of the Corporation, no third party has interfered with, infringed upon or
misappropriated any Intellectual Property rights of the Corporation.
(c) To the best knowledge of the Corporation, Schedule 2.6(c) hereto
identifies United States patent and patent applications, registered and
unregistered trademarks, service marks and trade names and registered and
unregistered copyrights of the Corporation.
(d) Except as disclosed on Schedule 2.6(d), to the best knowledge of
the Corporation, no Intellectual Property owned by or licensed to the
Corporation is invalid or
5.
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unenforceable, is subject to any encumbrance or other restriction or is subject
to any pending or threatened claim, charge, action, suit, or proceeding
challenging the validity, enforceability or the ownership rights thereto.
(e) To the best knowledge of the Corporation, no proprietary
information, the confidentiality of which is material to the business of the
Corporation, has been disclosed to any third party other than pursuant to a
nondisclosure agreement or other than to the Corporation's representatives.
"Intellectual Property" means (a) all inventions and discoveries
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions and reexaminations thereof, (b) all trademarks,
service marks, and trade names thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all know-how, trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
process and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (e) all computer software (including data and
related documentation), (f) all other proprietary rights, (g) all copies and
tangible embodiments thereof (in whatever form or medium) and (h) all licenses
and agreements in connection therewith.
2.7 Disclosure. Neither this Agreement nor any certificate, instrument or
written statement furnished or made to the Investor by or on behalf of the
Corporation in connection with this Agreement, including any offering memorandum
relating to the Series F Offering, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact which the
Corporation has not disclosed to the Investor or its counsel in writing of which
the Corporation is aware and which is not generally available to the public
which materially and adversely affects or which could reasonably be expected to
materially and adversely affect the business, financial condition, operations,
property or affairs of the Corporation or the ability of the Corporation to
perform its obligations under the Documents.
2.8 Insurance. The Company maintains insurance with reputable insurers
against risks of liability, casualty and fire and other losses and liabilities
customarily obtained to cover comparable businesses and assets in amounts, scope
and coverage which are consistent with prudent industry practice. All such
policies and other instruments are in full force and effect and all premiums
with respect thereto have been paid. To the Company's best knowledge, the
Company has not failed to give any notice or present any claim under any such
insurance policy in due and timely fashion or as required by any of such
insurance policies or has not otherwise, through any act, omission or non-
disclosure, jeopardized or impaired full recovery of any claim under such
policies. There are no claims by the Company under any of such policies to which
6.
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any insurance company is denying liability or defending under a reservation of
rights or similar clause. The Company has not received notice of any pending or
threatened termination of any of such policies or any material premium increases
for the current policy period with respect to any of such policies and the
consummation of the transactions contemplated by this Agreement will not result
in any such termination or premium increase.
Section 3. Covenants.
3.1 Series F Offering. As soon as practicable following the Initial
Closing, the Corporation shall use its best efforts to consummate the Series F
Offering including, the timely preparation and delivery to potential investors
of an offering memorandum (the "Offering Memorandum") to be used in connection
with the Series F Offering. The Corporation shall deliver a copy of the Offering
Memoranda to the Investor at the same time that it is first delivered to any
potential investor or earlier. The Offering Memorandum shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading. In
no event shall the Corporation sell an amount of securities in the Series F
Offering which will result in the aggregate gross proceeds to be received by the
Corporation in the Series F Offering to exceed $15,000,000, without obtaining
the prior written consent of the Investor.
3.2 No Equity Issuances. Until the Subsequent Closing, the Corporation
shall not issue any equity or debt securities (including any convertible
securities) without the consent of the Investor, other than in connection with
the Series F Offering.
Section 4. Conditions to the Subsequent Closing. The obligation of the Investor
to consummate the transactions to be performed by it in connection with the
Subsequent Closing shall be subject to the satisfaction of the following
conditions:
(a) The Initial Closing shall have occurred.
(b) The Series F Offering shall have commenced and the Company shall
have delivered to the Investor a copy of the Offering Memorandum.
(c) The representations and warranties set forth in Section 2 above
shall be true and correct in all material respects as of the Subsequent Closing.
(d) The Corporation shall have performed and complied with all of its
covenants hereunder in all material respects.
(e) The Amended Stockholders' Agreement shall be duly executed and
delivered by the Corporation, the Investor and the other parties thereto.
(f) The Corporation shall have delivered to the Investor a copy of
the Charter certified by the Secretary of State of Delaware which shall be
substantially in the form attached hereto as Exhibit A.
7.
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(g) The Corporation shall have delivered evidence satisfactory to the
Investor that all consents and waivers of its stockholders necessary to
effectuate the transactions contemplated by this Agreement have been obtained.
(h) No event or change shall have occurred which, individually or in
the aggregate, has a material adverse effect on the business, assets, liability,
properties, condition (financial or otherwise), operations or results of
operations of the Corporation.
Section 5. Termination. The obligation of the parties to effect the Subsequent
Closing may be terminated (i) by the mutual written consent of the Corporation
and the Investor or (ii) by the Investor, without liability to such party on
account of such termination (provided the terminating party is not otherwise in
breach and/or default of this Agreement), if the Subsequent Closing shall not
have occurred on or before January 31, 1997.
Section 6. Further Assurances. At any time or from time to time after the date
hereof, the Corporation, on the one hand, and the Investor, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the Initial Closing or Subsequent Closing, as applicable, and to otherwise carry
out the intent of the parties hereunder.
Section 7. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the Corporation and the Investor and the respective successors,
assigns, heirs and personal representatives of the Corporation and the Investor.
Section 8. Entire Agreement. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
Section 9. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy, nationally
recognized overnight courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the address set
forth below or such other address as may hereafter be designated in writing by
such party to the other parties:
8.
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(i) if to the Corporation, to:
Cell Pathways, Inc.
One Tower Bridge, Suite 800
West Conshohocken, PA 19428
610-941-5958
Attention: Robert J. Towarnula
With a copy faxed to Richard H. Troy at 203-595-0145
(ii) if to the Investor, to:
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Robert Grunovsky
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8586
Attention: Ben Adler, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
Section 10. Amendments. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, pursuant to the written consent of the Corporation and the
Investor.
Section 11. Transfer Taxes. The Corporation agrees that it will pay, and will
hold the Investor harmless from any and all liability with respect to any
transfer, documentary, stamp or other similar taxes which may be determined to
be payable in connection with the execution and delivery and performance of
this Agreement, and that it will similarly pay and hold the Investor harmless
from all taxes in respect of the issuance of the Note, Series F Preferred Stock,
the Warrants, the Warrant Shares and the Conversion Shares to the Investor.
Section 12. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
Section 13. Nouns and Pronouns. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and vice
versa.
9.
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Section 14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law. Each of the parties hereto hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and of the United States of America, in each
case located in the County of New York, for any action, proceeding or
investigation in any court or before any governmental authority ("Litigation")
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any Litigation relating thereto except in
such courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set forth in this
Agreement shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Litigation
arising out of this Agreement or the transactions contemplated hereby in the
courts of the State of New York or the United States of America, in each case
located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Litigation brought in any such court has been brought in an
inconvenient forum.
Section 15. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Agreement is held to be invalid or unenforceable in any
respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.
Section 16. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
10.
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IN WITNESS WHEREOF, the parties hereto have duly executed this agreement as
of the date first above written.
CELL PATHWAYS, INC.
By: /s/ Richard H. Troy
-----------------------------
Name: Richard H.Troy
Title: Vice President
THE GOLDMAN SACHS GROUP, L.P.
By: THE GOLDMAN SACHS CORPORATION
/s/ J. David Rogers
----------------------------
J. David Rogers
Executive Vice President
11.
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EXHIBIT 10.10
CELL PATHWAYS, INC.
1300 SOUTH POTOMAC, SUITE 110
AURORA, CO 80012
(610) 941-2929
DATED AS OF MAY 23, 1997
New York Life Insurance Company
51 Madison Avenue
New York, NY 10010
Gentlemen:
Cell Pathways, Inc. (the "Company"), a Delaware Corporation, agrees with
you (the "Purchaser") as follows:
1. AUTHORIZATION AND SALE OF SHARES.
1.1 AUTHORIZATION OF SHARES. The Company before the Closing Date (as
defined in Section 2 below) has adopted and filed with the Secretary of State of
Delaware the Fifth Amended and Restated Certificate of Incorporation (the
"Amended and Restated Certificate") attached to the Company's Private Placement
Memorandum, dated December 1996, as Appendix D (the "Private Placement
Memorandum"), authorizing the issuance of up to 4,500,000 shares of Series F
Convertible Preferred Stock (the "Preferred Stock") with the rights, preferences
and privileges set forth therein, and will have authorized the issuance pursuant
to this Agreement and the Other Agreements (as hereafter defined) of not more
than said number of shares including shares issuable upon exercise of
outstanding warrants, of such Preferred Stock. The shares of Preferred Stock to
be sold hereunder and under the Other Agreements are sometimes referred to as
the "Shares."
1.2 ISSUANCE OF SHARES. Subject to the terms and conditions hereof, on
the Closing Date the Company will issue and sell to you, and you agree to
purchase from the Company, 675,676 Shares at the purchase price of $3.70 per
share for a total of $2,500,001.02.
1.3 OTHER AGREEMENTS. As of May 16, 1997 the Company had entered into
separate Subscription Agreements (the "Other Agreements" and, collectively with
this Agreement, the "Agreements") with other purchasers (the "Other Purchasers"
and, collectively with you, the "Purchasers") named on Schedule I to purchase an
aggregate of 1,751,870 Shares. The sale to you and the sale to the Other
Purchasers are to be separate and several sales.
1.4 USE OF PROCEEDS. The proceeds from the sale of the Shares will be
used for the purposes set forth in the Private Placement Memorandum attached
hereto as Exhibit A.
1.
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2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held at the offices of Arnold & Porter, 399
Park Avenue, New York, New York at 10:00 a.m. on May 23, 1997 or at such other
time and place to which the Company and the Purchaser may agree (the "Closing
Date").
2.2 DELIVERY. The Company will deliver to the Purchaser at the Closing a
certificate representing the Shares to be purchased by the Purchaser from the
Company (which shall be issued in the Purchaser's name, in the amount of 675,676
Shares and shall be dated as of the date payment is made to the Company) against
payment of the purchase price therefor by certified or cashier's check or wire
transfer to the account of Cell Pathways, Inc., No. 7867646 with the Northern
Trust Company at 50 South LaSalle Street, Chicago, Illinois 60675, using Bank
Routing Number 071000152.
3. CONDITIONS OF CLOSING. Your obligation to purchase and pay for the Shares
on the Closing Date is subject to the satisfaction on or before the Closing Date
of the following conditions:
3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. Prior to the
Closing Date the Company shall have duly adopted and filed the Amended and
Restated Certificate attached to the Private Placement Memorandum as Appendix D,
with the Secretary of State of the State of Delaware.
3.2 OPINION OF COMPANY COUNSEL. You shall have received from Richard H.
Troy, Esq., counsel for the Company, an opinion dated as of the Closing Date,
substantially in the form of Exhibit B hereto and as to such other matters as
you shall reasonably request.
3.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained herein shall be true and correct on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated as of the Closing Date, signed by the President or the Chief
Financial Officer of the Company, to the foregoing effect.
3.4 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed and
complied with all agreements and conditions contained herein which are required
to be performed or complied with by the Company before or at the Closing, and
you shall have received a certificate, dated as of the Closing Date, signed by
the President or a Vice President of the Company, to the foregoing effect.
3.5 FEDERAL AND STATE SECURITIES LAWS. The Company shall have complied
with the requirements of all applicable federal and state securities laws in
connection with the offer and sale of the Shares.
2.
<PAGE>
3.6 INFORMATION ACCESS AND CONFIDENTIALITY AGREEMENT. The Purchaser shall
have entered into a Confidentiality Agreement with the Company substantially in
the form of Exhibit C hereto.
3.7 CONSENTS AND WAIVERS. The Company shall have obtained any and all
consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement.
3.8 CONSUMMATION OF OTHER SALES OF SHARES. Prior to the sale and purchase
of Shares hereunder at the Closing, the Company shall have consummated the sale
and purchase of all of the Shares to be sold to the Other Purchasers referred to
in Section 1.3 pursuant to the Other Agreements referred to in Section 1.3.
3.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be satisfactory in form, scope and substance
to you and your counsel, and you and your counsel shall have received all such
counterpart originals or certified or other copies of such documents as you or
such counsel may reasonably request.
3.10 STOCKHOLDERS' AGREEMENT. The Stockholders' Agreement, substantially
in the form of Appendix E to the Private Placement Memorandum, shall have been
executed and delivered by all persons listed as parties thereto in such exhibit.
3.11 PRIVATE PLACEMENT NUMBER. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperating with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Shares.
4. COMPANY REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants as of the Closing as follows:
4.1 ORGANIZATION AND STANDING. The Company is duly organized and validly
existing under, and by virtue of, the laws of Delaware and is in good standing
under such laws. The Company has all requisite corporate power to carry on its
business as currently conducted, to own or lease its assets and to enter into
and carry out the provisions of this Agreement and the transactions contemplated
hereby. The Company is duly qualified to do business as a foreign corporation
in each jurisdiction where it is required to do so by the conduct of its
business or the nature of its assets. The Company has furnished the Purchaser
or its counsel with copies of its Articles of Incorporation, By-Laws and Amended
and Restated Certificate. Said copies are true, correct and complete and
contain all amendments through the date of this Agreement. The Company has no
subsidiaries.
4.2 CAPITALIZATION. As of the Closing Date, the authorized capital stock
of the Company is 30,061,250 shares consisting of 17,000,000 shares of Common
Stock, $.01 par value, of which 2,718,845 shares are issued and outstanding,
61,250 shares of non-convertible Redeemable Preferred Stock, $.01 par value, all
of which is issued and outstanding, and 13,000,000 shares of Preferred Stock,
10,800,715 of which have been designated as follows:
3.
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872,400 shares of Series A Convertible Preferred Stock, all of which is issued
and outstanding, 848,100 shares of Series B Convertible Preferred Stock, all of
which is issued and outstanding, 700,000 shares of Series C Convertible
Preferred Stock, all of which is issued and outstanding, 675,350 shares of
Series D Convertible Preferred Stock, 616,807.5 shares of which are issued and
outstanding, 3,204,865 shares of Series E Convertible Preferred Stock, 2,969,704
shares of which are issued and outstanding and 4,500,000 shares of Series F
Convertible Preferred Stock, 1,751,870 shares of which are issued and
outstanding as of May 16, 1997. All such issued and outstanding shares have
been duly authorized and validly issued and are fully paid and nonassessable.
The rights, preferences and privileges of the Series F Convertible Preferred
Stock are set forth in the Amended and Restated Certificate, a copy of which is
attached to the Private Placement Memorandum as Appendix D. Pursuant to Article
FOURTH, Section E 5(j) of the Amended and Restated Certificate, the Company has
reserved sufficient shares of the Common Stock of the Company for issuance upon
conversion of all shares of convertible preferred stock of all series which are
either outstanding or subject to issuance upon the exercise of warrants. The
Company has also reserved sufficient shares of Common Stock for issuance upon
the exercise of any stock options issued pursuant to the Company's 1993 Stock
Option Plan. Except for options to purchase 476,000 shares of Common Stock
pursuant to the Company's stock option plan, and 235,161 shares of Series E
Convertible Preferred Stock and 123,137 shares of Series F Convertible Preferred
Stock issuable upon exercise of outstanding warrants, there are no securities
presently outstanding, other than the securities discussed above, which are
convertible into or exchangeable for shares of Common Stock of the Company, and,
except as discussed above, there are no other option, warrants, conversion
privileges or other rights presently outstanding to purchase any of the
authorized but unissued stock of the Company. All such outstanding shares of
capital stock were issued in compliance with all applicable federal and state
securities laws. The holders of record of the issued and outstanding shares of
capital stock as of May 16, 1997 are as set forth on Schedule II.
4.3 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and shareholders, necessary for the sale and issuance of the
Shares pursuant hereto (and of the shares of Common Stock issuable upon
conversion of the Shares) and the performance of the Company's obligations
hereunder has been taken or will be taken prior to the Closing, including,
without limitation, the adoption of the Amended and Restated Certificate, which
has been accepted for filing by the Secretary of State of the State of Delaware
and is in full force and effect on the date hereof. This Agreement is a legal,
valid and binding obligation of the Company enforceable in accordance with its
terms. The Shares and the Common Stock underlying the Shares are not subject to
any preemptive rights or rights of first refusal.
4.4 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser its
audited balance sheets, statements of operations, stockholders' equity and
Statements of cash flows for the years ended December 31, 1996, 1995 and 1994
(the "Financial Statements"). The Financial Statements are complete and correct
in all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except as may be described in the notes thereto. The
Financial Statements accurately set out and describe the financial condition of
the Company as of the dates and during the periods indicated therein. As of the
date of the Financial Statements, there were
4.
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no liabilities or obligations of any nature, fixed or contingent, matured or
unmatured, which are not shown, provided for, or otherwise described in the
Financial Statements or the notes thereto.
4.5 CHANGES. Since December 31, 1996, there has not been:
(a) any change in the assets, liabilities, condition (financial or
otherwise), affairs, earnings, business, operations or prospects of the Company
from that reflected in the balance sheet as at December 31, 1996, referred to in
Section 4.4 above, except changes in the ordinary course of business which have
not been, either in any case or in the aggregate, materially adverse, and except
in respect of the offering of the Shares pursuant to the Private Placement
Memorandum;
(b) any change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty or any assurance of
performance or payment, endorsement, indemnity, warranty or otherwise;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company;
(d) any waiver by the Company of a valuable right or of a material
debt owed to it;
(e) any loans made by the Company to their respective employees,
officers or directors other than advances of expenses made in the ordinary
course of business;
(f) any declaration or payment of any dividend or other distribution
of the assets of the Company or any direct or indirect redemption, purchase or
acquisition of any of the Company's securities;
(g) any labor organization activity or labor trouble;
(h) any material adverse or negative result, report or finding
relative to the technology developments of the Company, the clinical trials with
respect thereto or the expected market or demand therefor; or, to the Company's
knowledge, any breakthrough, innovation or achievement by any of its
competitors;
(i) to the best of the Company's knowledge, any other event or
condition of any character (except for events generally applicable to the health
care industry) which has materially and adversely affected the products,
technology, business, prospects, condition, affairs, operations, properties or
assets of the Company;
(j) any obligation or liability (whether fixed or contingent, matured
or unmatured) incurred or accrued by the Company other than obligations or
liabilities incurred in the ordinary course of business;
(k) any payment, discharge or satisfaction of any liability or
obligation (whether fixed or contingent, matured or unmatured), except in the
ordinary course of business;
5.
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(l) any cancellation of any debts or any amendment, termination or
waiver of any rights of value of the Company except in the ordinary course of
business;
(m) any change in the accounting methods or accounting practices
followed by the Company or any change in depreciation or amortization policies
or rates theretofore adopted;
(n) any failure to operate the Company in the ordinary course of
business; or
(o) any agreement, whether in writing or otherwise, to take any of
the actions specified in the foregoing items.
4.6 TITLE TO PROPERTIES AND ASSETS. The Company has the full corporate
power to own or lease its assets and to carry on its businesses as presently
conducted. The Company has or will at Closing and thereafter have good and
valid title to its respective properties, leaseholds and assets, including the
properties, leaseholds and assets reflected in the balance sheet as at December
31, 1996 referred to in Section 4.4 above, except properties, leaseholds and
assets disposed of since such date at fair market value in the ordinary course
of business, and has or will at Closing and thereafter have good title to all
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance, charge, rights of first refusal or options to purchase, whether or
not relating to extensions of credit or the borrowing of money, other than as
disclosed in such balance sheet. There exists no condition which interferes
with the economic value or use of such properties and assets and all tangible
assets are in good working condition and repair (subject to ordinary wear and
tear).
4.7 TECHNOLOGY. The Company owns or has the right to use all technology
and other intellectual property presently deemed necessary for the conduct of
its business. Attached hereto as Schedule III is a list of technology and
intellectual property owned by the Company. The Company has not received any
notice of infringement of, or conflict with, asserted rights of others with
respect to any such technology and intellectual property that, individually or
in the aggregate, if the subject of an unfavorable decision, ruling, or finding,
would have a material adverse effect upon the business, operations, financial
condition, income prospects, or results of operations, present or prospective,
of the Company.
4.8 PROTECTION OF INTELLECTUAL PROPERTY. The Company has taken all
reasonable measures to protect and preserve the confidentiality of all trade
secret and other non-patented proprietary information of the Company including
the procurement of proprietary invention assignments and non-disclosure and non-
competition agreements from employees, consultants, subcontractors, customers
and other persons who have access to such information. To the best of its
knowledge, the procedures implemented by the Company are in conformity with the
practices of similarly situated companies in their respective industries.
4.9 MATERIAL CONTRACTS AND OBLIGATIONS. Attached hereto as Schedule IV is
a list of all oral or written agreements, contracts, leases, indebtedness,
liabilities and other obligations to which the Company is a party or by which it
is bound which are material to the conduct and operations of its business and
properties. Copies of such agreements, contracts, leases and documentation
evidencing such liabilities and other obligations have been inspected or made
6.
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available for inspection by the Purchaser and/or its counsel. All of such
agreements, contracts and leases are valid, binding and in full force and effect
in all material respects.
4.10 LITIGATION. There are no product liability or other actions, suits,
claims, investigations or legal, administrative or arbitration proceedings
pending or, to the best of the Company's knowledge and belief, any basis
therefor or threat thereof, against or affecting the Company or any of its
assets, properties, condition (financial or otherwise), affairs, business,
operations or prospects, nor any which questions the validity of this Agreement
or any action taken or to be taken in connection herewith.
4.11 VALIDITY. The Shares to be sold and purchased pursuant to this
Agreement (and the shares of Common Stock issuable upon conversion of the
Shares), when issued, sold and delivered in accordance with the terms and for
the consideration expressed herein, shall be duly and validly issued, fully paid
and nonassessable, and will be free and clear of any liens or encumbrances;
provided, however, that the Shares may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein or as otherwise
required at the time a transfer is proposed.
4.12 GOVERNMENTAL CONSENTS; PRIVATE OFFERING. All consents, approvals,
orders, authorizations or registration, qualification, designation, declaration
or filing with any United States federal or state governmental authority on the
part of the Company required to be obtained by the time of the Closing in
connection with the consummation of the transactions contemplated herein shall
have been obtained prior to and be effective as of the Closing. Based in part
on the representations of the Purchaser set forth in Section 5.2 below and the
Other Purchasers set forth in the Other Agreements, the offer, sale and issuance
of the Shares in conformity with the terms of this Agreement are exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Securities Act"). Neither the Company nor anyone acting on its
behalf has offered or will offer the Shares or any similar securities or any
part thereof for sale to, or solicited any offers to acquire any of the same
from, or otherwise approach or negotiate or communicate in respect thereto with,
any person or persons so as thereby to bring the offering, issue or sale of the
Shares by the Company within the registration requirements of the Securities
Act. Each of the Purchasers identified in Schedule I is an "accredited
investor" as that term is defined in Regulation D promulgated under the
Securities Act.
4.13 COMPLIANCE WITH OTHER INSTRUMENTS; NONE BURDENSOME. The Company is
not in violation, breach or default of any term of its Amended and Restated
Certificate or By-Laws, or in any material respect of any term or provision of
any mortgage, indenture, contract, agreement or instrument to which it is a
party, or, to the best of its knowledge, of any provision of any state or
federal judgment, decree, order, statute, rule or regulation applicable to or
binding upon it or any of its assets or properties. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the
Shares pursuant hereto (and any shares of Common Stock issuable upon conversion
of the Shares), will not result (with or without the giving of notice or passage
of time, or both) in any such violation or be in conflict with or
constitute a default under any such term or provision or under any judgment,
order, writ, injunction or decree of any court arbitrator, grand jury or any
governmental agency, or result in
7.
<PAGE>
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such term or provision;
and there is no such term which materially adversely affects the business,
prospects, condition (financial or otherwise), affairs or operations of the
Company or any of its properties or assets. To the best of the Company's
knowledge, no employee of the Company is in violation of any term of any
employment contract, patent or other proprietary information disclosure or non-
competition agreement or any other contract or agreement relating to the right
of any such employee to be employed by the Company because of the nature of the
business conducted or proposed to be conducted by the Company or for any other
reason, and the continued employment by the Company of its present employees
will not result in any such violation.
4.14 DISCLOSURE. No representation or warranty by the Company in this
Agreement and nothing contained in the Private Placement Memorandum or any
statement or certificate furnished or to be furnished to the Purchaser pursuant
hereto or in connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. There is
no fact within the knowledge of the Company or of any of its officers (other
than facts generally applicable to the health care industry) that has not been
disclosed herein or in writing by them to each Purchaser that materially
adversely affects, or in the future in their reasonable opinion may, insofar as
they can now foresee, materially adversely affect the business, properties,
assets or condition, financial or otherwise, of the Company.
4.15 REGISTRATION RIGHTS. Except as contained in the Stockholders'
Agreement, a form of which is attached as Appendix E to the Private Placement
Memorandum, the Company is not under any obligation to register (as defined in
Section 1 of the Stockholders' Agreement) any of its presently outstanding
securities or any of its securities which may hereafter be issued or to permit
any person to participate in any such registration.
4.16 LOANS AND MATERIAL DEBTS. Except as set forth in the Financial
Statements or notes thereto, the Company does not owe any amount to any of its
shareholders, employees, officers or directors or the members of their families
for money loaned to the Company, nor does any person or organization owe a
material debt to the Company.
4.17 TAXES. The Company will file all necessary federal, state and
municipal property, income and franchise tax returns and have paid all taxes
shown as due thereon or otherwise owed by it to any taxing authority except
those contested in good faith and for which appropriate amounts have been
reserved in accordance with generally accepted accounting principles; and there
is no tax deficiency which has been, or to the best of the knowledge of the
Company might be, asserted against the Company which would materially affect the
business or operations of the Company. The Company has paid all federal and
state payroll and withholding taxes, including but not limited to FICA, FUTA,
state unemployment taxes and income taxes required to have been paid.
8.
<PAGE>
4.18 EMPLOYEE RELATIONS. There is no collective bargaining or other union
agreement to which the Company is a party or by which it is bound, or which is
currently being negotiated. The Company neither sponsors, maintains nor
contributes to any pension, retirement, profit sharing, incentive compensation,
bonus or other employee benefit plan other than the 1993 Stock Option Plan, 1995
Stock Award Plan and a group insurance plan administered by the Principal Mutual
Life Insurance Company, including without limitation any employee benefit plan
covered by Title 4 of the Employee Retirement Income Security Act of 1974
("ERISA") or any "multi-employer plan" as defined in Section 4001(a)(3) of
ERISA. To the best knowledge of the Company, (i) no employee of the Company is
a party to or bound by any agreement, contract or commitment, or subject to any
restrictions, particularly but without limitation in connection with any
previous employment of any such person, which materially and adversely affects,
or in the future may (so far as the Company can reasonably foresee) materially
and adversely affect, the business or operations of the Company or the rights of
any such person to participate in the affairs of the Company and (ii) with the
exception of one clinical research associate and one lab technician who for
family reasons will probably not move to Pennsylvania when the Company
consolidates operations there later in 1997, no employee has any present
intention of terminating his employment with the Company, and the Company has no
present intention of terminating any such employment. Schedule V hereto sets
forth a list of all employment contracts between the Company and its employees.
4.19 INSURANCE. All of the properties, assets and operations of the
Company of a character usually insured by persons of established reputation
engaged in the same or similar businesses similarly situated are adequately
insured, by financially sound and reputable insurers, against loss, damage or
liability. There are no claims currently outstanding under the Company's
insurance policies.
4.20 TRANSACTIONS WITH AFFILIATES. The Company does not have, nor does it
have a current intent to incur, any obligation, directly or indirectly, to enter
into any transaction, including, without limitation, the purchase from, sale to
or exchange of property with, or the rendering of any service by or for, any
affiliate of the Company, except in the ordinary course of and pursuant to the
reasonable requirements of the Company's business and upon fair and reasonable
terms no less favorable to the Company than it would obtain in a comparable
arm's length transaction with a person other than any affiliate.
4.21 LEGAL INVESTMENT. On and as of the Closing Date, the purchase of and
payment for the Shares by the Purchaser shall not be prohibited by any
applicable law or government regulation including laws regulating investments by
insurance companies (without regard to any "leeway" or "basket" provisions
thereof).
4.22 SOLVENCY. The Company is, and upon giving effect to the issuance of
the Shares will be, a "solvent institution", as said term is used in Section
1405(c) of the New York Insurance Law, whose "obligations are not in default as
to principal or interest", as said terms are used in said Section 1405(c).
9.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
5.1 AUTHORIZATION. You hereby represent and warrant to the Company that
this Agreement, when executed and delivered by you, will constitute a valid and
legally binding obligation, enforceable as to you in accordance with its terms.
5.2 INVESTMENT REPRESENTATIONS. This Agreement is made with you upon the
understanding as a specific representation to the Company by you that:
(a) The Shares that you will purchase hereunder will be acquired for
your own account, not as a nominee or agent, and not with a view to or in
connection with the sale or distribution of any part thereof except in
compliance with the Securities Act; provided, however, that the disposition of
any of your property shall at all times be, and remain within, your discretion
and control.
(b) You represent and warrant that you are an "accredited investor"
as that term is defined in Regulation D promulgated under the Securities Act.
(c) You understand that the Securities you are acquiring are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. In this connection, you represent that you
are familiar with SEC Rule 144, as presently in effect, and understand the
resale limitations imposed thereby and by the Securities Act.
6. COVENANTS OF THE COMPANY.
6.1 MAINTENANCE OF EXISTENCE. The Company agrees (a) to maintain and
cause each of its subsidiaries, if any, to maintain in full force and effect
their respective corporate existences, rights and franchises and all licenses
and other rights in or to use patents, processes, licenses, trademarks, trade
names or copyrights and to preserve all trade secrets owned or possessed by them
or of a proprietary nature unless reasonably deemed by the Company not to be
necessary to the conduct of its or such subsidiary's business and (b) maintain
and preserve, and not cause a material change in, the business or nature of
operations of the Company as conducted on the date of this Agreement unless
otherwise reasonably deemed to be in the best interests of the Company and its
stockholders.
6.2 PROMPT PAYMENT OF TAXES, ETC. The Company and each of its
subsidiaries, if any, will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company or such subsidiary; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company or such
subsidiary shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company or such subsidiary will pay all
such taxes, assessments, charges or levies forthwith
10.
<PAGE>
upon the commencement of proceedings to foreclose any lien which may have
attached as security therefor. The Company and each of its subsidiaries will
promptly pay or cause to be paid when due, or in conformance with customary
trade terms or otherwise in accordance with policies related thereto adopted by
the Company's or such subsidiary's Board of Directors, all other indebtedness
incident to operations of the Company or such subsidiary.
6.3 COMPLIANCE WITH LAWS. The Company and each of its subsidiaries, if
any, shall duly observe and conform to all valid requirements of governmental
authorities relating to the conduct of their respective businesses or to their
respective properties or assets.
6.4 TRANSACTIONS WITH AFFILIATES. The Company agrees that neither it nor
any of its subsidiaries, if any, shall, directly or indirectly, enter into any
transaction, including, without limitation, the purchase from, sell to or
exchange of property with, or the rendering of any service by or for, any
affiliate of the Company or any of its subsidiaries, except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such subsidiary than it would obtain in a comparable arm's length
transaction with a person other than an affiliate.
6.5 FURTHER ASSURANCES. The Company agrees that, at any time and from
time to time on and after any Closing Date, it will, upon the request of the
Purchaser and without further consideration, take any and all steps reasonably
necessary to comply with the terms of this Agreement or any other agreements
entered into with the Purchaser pursuant hereto, and will do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged or
delivered, all such further acts, transfers, conveyances, or assurances as may
be reasonably required in order fully to comply with this Agreement or such
other agreements.
6.6 REGISTRATION RIGHTS. The Company agrees that it will not grant
registration rights with respect to any of its securities upon terms more
favorable to the holders of such securities than those contained in Section 3 of
the Stockholders' Agreement, a form of which is attached to the Private
Placement Memorandum as Appendix E.
6.7 SECURITIES FILINGS. The Company agrees to make any filings required
by the Securities and Exchange Commission (including any filing required under
Regulation D promulgated under the Securities Act) and the comparable laws of
any state whose "Blue Sky" laws are implicated by sale of the Shares, and to do
so in a timely fashion.
6.8 TERMINATION. The provisions of this Section 6 shall terminate upon
the earliest to occur of (i) the sale of the Common Stock of the Company in a
firm commitment, underwritten public offering at a public offering price (prior
to deduction of underwriter's discounts and expenses) equal to or exceeding
$6.60 per share of Common Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) and resulting in aggregate
proceeds to the Company and/or selling stockholders (prior to deduction of
underwriter's discounts and expenses and other expenses of the offering) of not
less than $10,000,000, or (ii) the written consent of the Purchaser.
11.
<PAGE>
7. TRANSFER OF SHARES.
7.1 RESTRICTIVE LEGEND. Each certificate representing (i) Shares, (ii)
shares of Common Stock issuable upon conversions of the Shares or (iii) any
other securities issued in respect of the Shares upon any stock split, stock
dividend, recapitalization, merger or similar event (unless no longer required
in the opinion of Counsel for the Company) shall be stamped or otherwise
imprinted with a legend substantially in the following form:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
(b) "THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER 31, 1996, BY
AND AMONG THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH STOCKHOLDERS'
AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY
AND WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST AND
WITHOUT CHARGE."
(c) "THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF COMPANY STOCK
OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS."
(d) Any legend required to be placed thereon by appropriate state
Blue Sky officials.
7.2 TRANSFER OR EXCHANGE OF CERTIFICATES. Subject to the terms of any
restrictive legends, the holder of any certificate, pursuant to Section 7.1, may
surrender such certificate at the principal office of the Company for transfer
or exchange. Within a reasonable time after notice to the Company from a
certificate holder of its intention to make such transfer or exchange and
without expense (other than transfer taxes, if any) to such holder, provided to
do so would not violate the Act, or any relevant Blue Sky law of a state, the
Company shall issue in exchange therefor another certificate representing the
same aggregate amount of Shares as the certificate so surrendered, containing
the same provisions and subject to the same terms and conditions as the
certificate so surrendered. Each certificate shall bear the name of such person
or persons or assigns as the owner of such surrendered certificate may
designate, and such transfer or exchange shall be made in such manner that no
gain or loss of Shares shall result therefrom.
12.
<PAGE>
7.3 DISPOSITION. The Purchaser agrees that it shall in no event make any
disposition of all or any portion of the Shares which it is being issued unless
such disposition will be accomplished in compliance with the Securities Act.
7.4 TRANSFER. The Company shall not be required (i) to transfer on its
books any Shares which shall have been sold or transferred in violation of any
of the provisions set forth in this Agreement or (ii) to treat as owner of such
Shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
7.5 LOCK-UP. As also set forth in the Stockholders' Agreement attached to
the Private Placement Memorandum as Appendix E, the Purchaser hereby agrees that
for a period of up to a maximum of 180 days following the effective date of the
first registration statement of the Company covering Common Stock (or other
securities) to be sold on its behalf in an underwritten public offering, he
shall not, to the extent requested by the Company and any underwriter, sell or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any Common Stock of the Company held by him at any time during such
period except Common Stock included in such registration.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Common Stock held by the
Purchaser (and the shares or securities of every other person to the foregoing
restriction) until the end of such period.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of New York.
8.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any party hereto and the
Closing of the transaction contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parents, subsidiaries, successors, assigns, heirs, executors and
administrators of the parties hereto and their directors, officers and
employees.
8.4 ENTIRE AGREEMENT. This Agreement and the other documents and
agreements delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties hereto with regard to the
subjects hereof and thereof.
8.5 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by first class mail, or (c) by a recognized
overnight delivery service (with charges prepaid), addressed (1) if to a
Purchaser, at such Purchaser's address set forth on page one of this Agreement,
or at such other address as such Purchaser shall have furnished to the Company
in writing, or (2) if to the
13.
<PAGE>
Company, at its office at 300 South Potomac Street, Suite 110, Aurora, CO 80012-
4526, Attention: Mr. Robert J. Towarnicki, or at such other address as the
Company shall have furnished to the Purchaser in writing.
8.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to the Company or the Purchaser of any securities
issued or to be issued hereunder, upon any breach or default of any party hereto
under this Agreement, shall impair any such right, power or remedy of the
Company or the Purchaser nor shall it be construed to be a waiver of any such
breach or default, or any acquiescence therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or the Purchaser of any breach or default
under this Agreement or any waiver on the part of the Company or the Purchaser
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in writing. All
remedies, either under this Agreement, or by law or otherwise afforded to the
Company or the Purchaser, shall be cumulative and not alternative.
8.7 PLACEMENT AGENT'S FEES. The Company (i) represents and warrants that
it has retained no finder, broker or Placement Agent in connection with the
transactions contemplated by this Agreement; and (ii) hereby agrees to indemnify
and to hold the Purchaser harmless of and from any liability for commission or
compensation to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which the
Company, or any of its employees or representatives, are responsible.
8.8 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.9 COUNTERPARTS. This Agreement and any ancillary documents required or
made necessary by this Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
8.10 SEVERABILITY. Should any provision of this Agreement be determined
to be illegal or unenforceable, such determination shall not affect the
remaining provisions of this Agreement.
8.11 EXPENSES OF FINANCING. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay the fees and
expenses of your special counsel, Arnold & Porter, in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, and save you harmless against liability for the payment of,
all reasonable, accountable, pre-approved out-of-pocket expenses arising in
connection with this transaction, including all taxes other than income taxes
payable by you, in each case with interest and penalties, if any, in respect of
the execution and delivery of this Agreement, or execution, delivery or
acquisition of any Shares or Common Stock issued under or pursuant to this
Agreement, all stenographic and printing costs, and the fees and expenses
incurred by you in connection with any modifications, amendments, waivers or
consents with
14.
<PAGE>
respect to this Agreement or the transactions contemplated hereby or in
enforcing any of your rights hereunder or under any agreement, security or
document contemplated hereby, including without limitation costs and expenses
incurred in any bankruptcy case. The obligations of the Company under this
Section 10.11 shall survive the transfer by you of any Shares or Common Stock
received upon conversion of Shares.
15.
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding agreement between you
and the undersigned.
Very truly yours,
CELL PATHWAYS, INC.
By: /s/ Richard H. Troy
--------------------------------
The foregoing Agreement is hereby accepted
as of the date first above written
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Richard Drake
---------------------------------------
Director
16.
<PAGE>
EXHIBIT 10.11
STOCK SUBSCRIPTION AGREEMENT
This Stock Subscription Agreement (the "Agreement") is made as of the _____
day of _________________, 199__, by and between Cell Pathways, Inc., a Delaware
corporation (the "Corporation"), and _________________________ ("Purchaser").
W I T N E S S E T H:
Whereas, the Corporation hereby agrees to issue and sell to Purchaser, and
Purchaser hereby agrees to purchase and pay for, shares of Series F Convertible
Preferred Stock of the Corporation.
Now, Therefore, It Is Agreed between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation and the
Corporation agrees to issue and sell to Purchaser ________________ shares of
Series F Convertible Preferred Stock (the "Shares") at a purchase price of $3.70
per share, for a total of $________________.
2. The issuance of the Shares shall take place promptly after receipt of
funds ("Closing Date").
3. On the Closing Date, the Corporation will deliver to Purchaser a
certificate registered in Purchaser's name representing the number of Shares
purchased on such Closing Date. Purchaser will pay the purchase price for the
Shares being purchased by delivery to the Company of a check in the amount of
$________________, or by wiring such amount to the account of Cell Pathways,
Inc., No. 7867646 with the Northern Trust Company at 50 South LaSalle Street,
Chicago, Illinois 60675, using Bank Routing Number 071000152.
4. Purchaser acknowledges that he is aware that the Shares to be issued
to him by the Corporation pursuant to this Agreement have not been registered
under the Securities Act of 1933, as amended (the "Act"), and that the Shares
are deemed to constitute "restricted securities" under Rule 144 promulgated
under the Act. In this connection, Purchaser warrants and represents to the
Corporation that Purchaser is obtaining the Shares for Purchaser's own account
and Purchaser has no present intention of distributing or selling said Shares
except as permitted under the Act and applicable state securities laws.
Purchaser further warrants and represents that Purchaser has either (i) a
preexisting personal or business relationship with the Corporation or any of its
officers, directors or controlling persons, or (ii) the capacity to protect his
own interests in connection with the purchase of the Shares by virtue of the
business or financial expertise
1.
<PAGE>
of any professional advisors to Purchaser who are unaffiliated with and who are
not compensated by the Corporation or any of its affiliates, directly or
indirectly. Purchaser further acknowledges that the exemption from registration
under Rule 144 will not be available for at least three years from the date of
receipt of the Shares unless at least two years from the date of receipt (i) a
public trading market then exists for the Common Stock of the Corporation, (ii)
adequate information concerning the Corporation is then available to the public,
and (iii) other terms and conditions of Rule 144 are complied with; and that any
sale of the Shares may be made only in limited amounts in accordance with such
terms and conditions and that after ninety days after the Corporation becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Shares may be resold by persons other than affiliates
in reliance on Rule 144 without compliance with paragraphs (c), (d), (e) and
(h) thereof, and by affiliates without compliance with paragraph (d) thereof.
5. All certificates representing the Shares shall have endorsed thereon
the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACTS OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE."
(b) "THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF DECEMBER 31, 1996, BY
AND AMONG THE COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH STOCKHOLDERS'
AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE COMPANY
AND WILL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST AND
WITHOUT CHARGE."
(c) "THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF COMPANY STOCK
OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS."
(d) Any legend required to be placed thereon by appropriate state
Blue Sky officials.
2.
<PAGE>
6. Without in any way limiting the foregoing, Purchaser further agrees
that he shall in no event make any disposition of all or any portion of the
Shares which he is being issued unless and until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or
(b) (i) He shall have notified the Corporation of the proposed
disposition and shall have furnished the Corporation with a detailed statement
of the circumstances surrounding the proposed disposition, (ii) he shall have
furnished the Corporation with an opinion of his own counsel to the effect that
such disposition will not require registration of such shares under the Act, and
(iii) such opinion of his counsel shall have been concurred in by counsel for
the Corporation, such concurrence not to be unreasonably withheld, and the
Corporation shall have advised him of such concurrence.
7. The Corporation shall not be required (i) to transfer on its books any
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement or (ii) to treat as owner of such Shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such Shares shall have been so transferred.
8. As also set forth in the Stockholders' Agreement, dated as of December
31, 1996, Purchaser hereby agrees that for a period of up to a maximum of 180
days following the effective date of the first registration statement of the
Corporation covering Common Stock (or other securities) to be sold on its behalf
in an underwritten public offering, he shall not, to the extent requested by the
Corporation and any underwriter, sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Common Stock of the
Corporation held by him at any time during such period except Common Stock
included in such registration.
In order to enforce the foregoing covenant, the Corporation may impose
stop-transfer instructions with respect to the Common Stock held by Purchaser
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
9. Purchaser hereby makes, constitutes and appoints Richard H. Troy, or
his successors, the true and lawful Attorney-in-Fact of Purchaser (said person,
or his successor, being herein referred to as the "Attorney-in-Fact") with full
power and authority in the name and on behalf of Purchaser to enter into the
Third Amended and Restated Stockholder Agreement. This Power of Attorney and all
authority conferred hereby are granted and conferred subject to and in
consideration of the interests of the
3.
<PAGE>
Corporation and the other Purchasers who purchase the Shares, and, for the
purposes of completing the purchase, this Power of Attorney and all authority
conferred hereby shall be irrevocable and shall not be terminated by any act of
the Purchaser or by operation of law. The Attorney-in-Fact in his place and
stead, and Purchaser hereby ratifies and confirms all that the Attorney-in-Fact
or substitute or substitutes shall do by virtue of these presents.
10. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
11. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or delivery by
facsimile or express courier, or 4 days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to the other party hereto at its address or facsimile number hereinafter shown
below its signature or at such other address as such party may designate by ten
days' advance written notice to the other party hereto.
12. This Agreement shall be governed by the laws of the State of Delaware
and interpreted and determined in accordance with the laws of the State of
Delaware, as such laws are applied by Delaware courts to contracts made and to
be performed entirely in Delaware by residents of that state.
13. This Agreement shall inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer herein
set forth, shall be binding upon Purchaser, his heirs, executors,
administrators, successors and assigns.
14. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof.
4.
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as of
the day and year first above written.
Cell Pathways, Inc.
By:
-------------------------------
Title:
-----------------------------
Address:
--------------------------
------------------------------------
Facsimile No.:
---------------------
Purchaser:
------------------------------------
Address:
--------------------------
------------------------------------
Facsimile No.:
---------------------
5.
<PAGE>
EXHIBIT 10.12
PFW-_____
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF __________
SHARES OF SERIES F PREFERRED STOCK OF
CELL PATHWAYS, INC.
(Void after July 20, 1999)
This certifies that _______________ (the "HOLDER"), or assigns, for value
received, is entitled to purchase from Cell Pathways, Inc., a Delaware
corporation (the "COMPANY"), having a place of business at 1300 S. Potomac St.,
Unit 110, Aurora, CO 80012-4526, a maximum of _______________ fully paid and
nonassessable shares of the Company's Series F Preferred Stock ("PREFERRED
STOCK") for cash at a price of $3.70 per share (the "STOCK PURCHASE PRICE") at
any time or from time to time up to 5:00 p.m. (Mountain Time) on the earlier
date of (i) the sale of all or substantially all of the assets of the Company,
or (ii) July 20, 1999, such earlier day being referred to herein as the
"EXPIRATION DATE", upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
filled in and signed and upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. Definitions of words used
in this Warrant are as follows:
CERTIFICATE OF INCORPORATION: The Fifth Amended and Restated Certificate
of Incorporation of the Company as filed with the Secretary of State of
Delaware.
COMMON STOCK: The common stock, par value $0.01 per share, of the Company.
QUALIFIED IPO: A firm commitment, underwritten public offering of the
Company's Common Stock registered under the Securities Act (other than a
registration relating solely to either a transaction under Rule 145 under the
Securities Act (or any successor to such rule) or to any employee benefit plan
of the Company) at a public offering price (prior to deduction of underwriter's
discounts and expenses) equal to or exceeding $6.60 per share of Common Stock
(as adjusted for any stock dividends,
1.
<PAGE>
combinations, or splits with respect to such shares) and resulting in aggregate
proceeds to the Company and/or selling stockholders (prior to deduction of
underwriter's discounts and expenses and other expenses of the offering) of not
less than $10 million; provided, however, that in the event that the holders of
a majority of the Series F Convertible Preferred Stock elect to waive or amend
the definition of Qualified IPO, then the Holder shall consent to such waiver or
amendment of the definition of Qualified IPO for the purposes of this Warrant.
WARRANT SHARES: Shares of Preferred Stock (and/or such other securities,
issued or issuable with respect to the Preferred Stock in connection with a
reclassification, recapitalization, merger, consolidation or other
reorganization, as provided in the Certificate of Incorporation as in effect on
the date hereof); provided, however, that from and after a Qualified IPO, upon
the exercise of all or part of this Warrant, in lieu of the issuance of each
share of Preferred Stock issuable upon such exercise, the Company shall issue a
number of shares of Common Stock determined by dividing the Series F Initial
Value by the Series F Conversion Price (as defined in the Certificate of
Incorporation, as in effect on the date hereof) then in effect with respect to
the Preferred Stock (treating for purposes of this calculation the automatic
conversion of the Preferred Stock into shares of Common Stock pursuant to
Article FOURTH Section E 5 of such Certificate of Incorporation as not having
occurred upon such Qualified IPO).
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. This Warrant is
exercisable at the option of the holder of record hereof, at any time or from
time to time, up to the Expiration Date for all or any part of the Warrant
Shares (but not for a fraction of a share) that may be purchased hereunder.
Upon receipt of this Warrant with the Subscription Form fully executed and
accompanied by payment of the aggregate Stock Purchase Price for the Warrant
Shares for which this Warrant is then being exercised, the Company shall cause
to be issued certificates for the total number of Warrant Shares for which this
Warrant is being exercised in such denominations as are requested for delivery
to the Holder registered in the name of the Holder or its nominee, and the
Company shall thereupon deliver such certificates to the Holder. The Company
agrees that the Warrant Shares purchased under this Warrant shall be and are
deemed to be issued to the Holder hereof or its nominee as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered, properly endorsed, the completed, executed Form of
Subscription delivered and payment made for such shares. Certificates for the
Warrant Shares so purchased, together with any other securities or property to
which the Holder hereof is entitled upon such exercise, shall be delivered to
the Holder hereof or its nominee by the Company at the Company's expense within
a reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares that may be
purchased under
2.
<PAGE>
this Warrant, the Company shall cancel this Warrant and execute and deliver a
new Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all Warrant Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any shareholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved, for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of authorized but unissued Warrant Shares, or other
securities and property, when and as required to provide for the exercise of the
rights represented by this Warrant. The Company will take all such action as
may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which the Warrant Shares
may be listed; provided, however, that the Company shall not be required to
effect a registration under Federal or State securities laws with respect to
such exercise. The Company will not take any action that would result in any
adjustment of the Stock Purchase Price (as defined in Section 3 hereof) (i) if
the total number of Warrant Shares issuable after such action upon exercise of
all outstanding warrants, together with all shares of Preferred Stock or Common
Stock, as the case may be, then outstanding and all shares of Preferred Stock or
Common Stock, as the case may be, then issuable upon exercise of all options and
upon the conversion of all convertible securities then outstanding, would exceed
the total number of shares of Preferred Stock or Common Stock, as the case may
be, then authorized by the Company's Certificate of Incorporation, or (ii) if
the total number of shares of Common Stock issuable after such action upon the
conversion of all such shares of Preferred Stock, together with all shares of
Common Stock then outstanding and all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all convertible securities
then outstanding would exceed the total number of shares of Common Stock then
authorized by the Company's Certificate of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of Warrant Shares purchasable upon the exercise of
this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events described in this Section 3. Upon each adjustment
of the Stock Purchase Price, the Holder of this Warrant shall thereafter be
entitled to purchase, at the Stock Purchase Price resulting from such
adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment,
3.
<PAGE>
and dividing the product thereof by the Stock Purchase Price resulting from such
adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company shall at any
time subdivide its outstanding shares of Preferred Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Preferred Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY, RECLASSIFICATION.
If at any time or from time to time the Holders of Preferred Stock (or any
shares of stock or other securities at the time receivable upon the exercise of
this Warrant) shall have received or become entitled to receive, without payment
therefor,
(a) Preferred Stock or any shares of stock or other securities that are
at any time directly or indirectly convertible into or exchangeable for
Preferred Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other distribution,
(b) any cash paid or payable otherwise than as a cash dividend, or
(c) Preferred Stock or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification, combination of
shares or similar corporate rearrangement, (other than (i) shares of Preferred
Stock issued as a stock split, adjustments in respect of which shall be covered
by the terms of Section 3.1 above or (ii) an event for which adjustment is
otherwise made pursuant to Section 3.4 below);
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (B) and (C) above) that such
Holder would hold on the date of such exercise had he been the holder of record
of such Preferred Stock as of the date on which holders of Preferred Stock
received or became entitled to receive such shares or all other additional stock
and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any
capital reorganization of the capital stock of the Company, or any consolidation
or merger of the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation shall be effected in such
a way that holders of Preferred
4.
<PAGE>
Stock shall be entitled to receive stock, securities, or other assets or
property, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provisions shall be made
whereby the holder hereof shall thereafter have the right to purchase and
receive (in lieu of the shares of the Preferred Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby) such shares of stock, securities or other assets or property
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Preferred Stock equal to the number of shares of such
stock immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby. In any reorganization described above,
appropriate provision shall be made with respect to the rights and interests of
the Holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price and
of the number of shares purchasable and receivable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument, executed and mailed
or delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
3.4 ADJUSTMENTS SET FORTH IN CERTIFICATE OF INCORPORATION. In addition to
the foregoing adjustments, the conversion price of the Series F Preferred Stock
into Common Stock is subject to adjustments as set forth in the Company's
Certificate of Incorporation.
3.5 NOTICE OF ADJUSTMENT. Upon any adjustment of the Stock Purchase Price or
in the conversion price of the Series F Preferred Stock or any increase or
decrease in the number of shares purchasable upon the exercise of this Warrant,
the Company shall give written notice thereof, by first class mail, postage
prepaid, addressed to the registered Holder of this Warrant at the address of
such Holder as shown on the books of the Company. The notice shall be signed by
the Company's chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
5.
<PAGE>
3.6 OTHER NOTICES. If at any time:
(1) the Company shall declare any cash dividend upon its Preferred Stock;
(2) the Company shall declare any dividend upon its Preferred Stock
payable in stock or make any special dividend or other distribution to the
holders of its Preferred Stock;
(3) the Company shall offer for subscription pro rata to the holders
of its Preferred Stock any additional shares of stock of any class or other
rights;
(4) there shall be any capital reorganization or reclassification of
the capital stock of the Company; or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another corporation;
or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
(6) the Company shall take any action that would result in an
adjustment of the conversion price of the Series F Preferred Stock as defined in
the Company's Certificate of Incorporation;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company, (a) at least thirty (30) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such action, dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, at least thirty (30) days' prior written notice of the date when the
same shall take place. Any notice given in accordance with the foregoing clause
(a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding-up, or conversion, as the case may be.
3.7 CERTAIN EVENTS. If any change in the outstanding Preferred Stock of
the Company or any other event occurs as to which the other provisions of this
Section 3 are
6.
<PAGE>
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Stock Purchase Price
or the application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as he would have owned had the Warrant been exercised
prior to the event and had he continued to hold such shares until after the
event requiring adjustment.
4. ISSUE TAX. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Preferred Stock issued
or issuable upon the exercise of any warrant in any manner that interferes with
the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing contained
in this Warrant shall be construed as conferring upon the holder hereof the
right to vote or to consent or to receive notice as a shareholder of the Company
or any other matters or any rights whatsoever as a shareholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the holder to
purchase shares of Preferred Stock, and no mere enumeration herein of the rights
or privileges of the holder hereof, shall give rise to any liability of such
holder for the Stock Purchase Price or as a shareholder of the Company, whether
such liability is asserted by the Company or by its creditors.
7. REGISTRATION RIGHTS. Upon exercise of this Warrant, the Holder shall be
entitled to participate in registrations of Company securities initiated by the
Company or other Company stockholders pursuant to that certain Stockholders'
Agreement dated December 31, 1996, as amended, and among the Company, FGN, Inc.,
Northwood Ventures, Technology Partners West Fund IV, L.P., Quest Ventures II,
Quest Ventures International, The Goldman Sachs Group, L.P. and certain of its
stockholders in the capacity as an Other Stockholder (as defined therein),
provided that the Holder complies
7.
<PAGE>
with all of the obligations and duties of an Eligible Holder (as defined
therein) with respect to participation in such registrations.
8. TRANSFERABILITY. Subject to compliance with applicable federal and state
securities laws and the transfer restrictions set forth below, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the holder hereof (except for transfer taxes), upon surrender of this Warrant
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by the Company, at the Company's option, and
all other persons dealing with this Warrant, as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented by
this Warrant, or to the transfer hereof on the books of the Company any notice
to the contrary notwithstanding; but until such transfer on such books, the
Company may treat the registered owner hereof as the owner for all purposes.
Without in any way limiting the representations set forth above, each
Purchaser further agrees not to make any disposition of all or any portion of
the Securities unless and until:
(a) There is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Purchaser shall have furnished the Company with
an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the 1933 Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by such Purchaser to a stockholder, partner (or retired partner) or
affiliate of such Purchaser, or transfers by gift, will or intestate succession
to any spouse or lineal descendants or ancestors, if all transferees agree in
writing to be subject to the terms hereof to the same extent as if they were
Purchasers hereunder.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, referred to in
Sections 7 and 8 shall survive the exercise of this Warrant.
8.
<PAGE>
10. MODIFICATION AND WAIVER. All purchasers in the Series F offering who
also receive warrants will receive warrants in the form of this Warrant. This
Warrant and any provision hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the Company and the
holders of a majority of the shares subject to Warrants issued in connection
with the Series F offering; provided, however, that the Stock Purchase Price
with respect to a particular Warrant may not be amended without the written
consent of the holder of such Warrant.
11. NOTICES. Any notice, request or other document required or permitted to
be given or delivered to the holder hereof or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant. All of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
13. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Colorado.
14. LOST WARRANTS. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
15. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
9.
<PAGE>
16. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities that is
inconsistent with the rights granted to the Holder or otherwise conflicts with
the provisions hereof. The Company agrees and hereby represents that the rights
granted to the Holder hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any other agreements.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this ___ day of _______________, 1997.
CELL PATHWAYS, INC.
By:________________________________
Title:_____________________________
ATTEST:
_________________________
Secretary
10.
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: ____________, 199__
Cell Pathways, Inc.
1300 S. Potomac St., Unit 110
Aurora, Colorado 80012-4526
Attn: President
Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
Cell Pathways, Inc. (the "COMPANY"), Warrant No. PFW __ dated __________
__, 1997 (the "WARRANT"), and to purchase thereunder
______________________________ shares of the Series F Preferred Stock of
the Company (the "SHARES") at a purchase price of Three Dollars and
Seventy Cents ($3.70) per Share or an aggregate purchase price of
__________________________ Dollars ($______) (the "PURCHASE PRICE").
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
______________________________________
By:___________________________________
Title:________________________________
11.
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATIONS
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO CELL PATHWAYS, INC.
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE PREFERRED STOCK ISSUABLE UPON
EXERCISE OF THE WARRANT CERTIFICATE DATED _____________ ___, 1997, WILL BE
ISSUED.
_____________________, 199__
Cell Pathways, Inc.
1300 S. Potomac St., Unit 110
Aurora, Colorado 80012-4526
Attention: President
The undersigned, __________________________________ ("PURCHASER"), intends to
acquire up to _________________________ shares of the Series F Preferred Stock
of Cell Pathways, Inc. (the "COMPANY") from the Company pursuant to the exercise
or conversion of certain Warrants to purchase Preferred Stock held by Purchaser.
The Preferred Stock will be issued to Purchaser in a transaction not involving a
public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 ACT") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Preferred Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other disposition
of the Preferred Stock in violation of the 1933 Act or the General Rules and
Regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Preferred Stock has not been registered
under the 1933 Act or state securities laws on the ground that this transaction
is exempt from registration, and that reliance by the Company on such exemptions
is predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Preferred Stock must
be held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any
12.
<PAGE>
proposed transfer or disposition by Purchaser of the Preferred Stock. Purchaser
further agrees that the Company may refuse to permit Purchaser to sell, transfer
or dispose of the Preferred Stock (except as permitted under Rule 144) unless
there is in effect a registration statement under the 1933 Act and any
applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any
state securities laws. These shares have been acquired for investment and may
not be sold or otherwise transferred in the absence of an effective
registration statement for these shares under the Securities Act and
applicable state securities laws, or an opinion of counsel satisfactory to the
Company that registration is not required and that an applicable exemption is
available."
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Preferred Stock
with Purchaser's counsel.
Very truly yours,
__________________________________
By:_______________________________
Print Name:_______________________
Title:____________________________
13.
<PAGE>
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
Agreement made as of October 12, 1996 (the "Effective Date"), between Cell
Pathways, Inc. with its principal office at 1300 So. Potomac Street, Suite 110,
Aurora, CO 80012 (the "Company") and Robert J. Towarnicki whose principal
address is 19 East Kincaid Drive, Cranbury, NJ 08512 (the "Executive").
Witnesseth
Whereas, the Company desires to induce the Executive to join the Company as
its Chief Executive Officer and as a member of the Board of Directors, subject
to the terms herein provided; and
Whereas, Executive desires to accept such employment with the Company upon
and subject to the terms herein provided.
Now, Therefore, in consideration of the premises and the mutual agreements
and undertakings herein set forth, the parties hereto covenant and agree as
follows:
Section 1. Compensation. The Company will pay Executive for his services
during the term of his employment hereunder at an initial annual rate of One
Hundred Seventy Five Thousand Dollars ($175,000) payable in accordance with
normal Company practice, but in any event not less often than monthly, subject
only to such payroll and withholding deductions as are required by law. The
Company and Executive may mutually agree from time to time to change such annual
rate of compensation. Executive shall be eligible to receive a bonus not to
exceed Twenty Five Thousand Dollars ($25,000) for the calendar year 1996 and
Thirty Five Thousand Dollars ($35,000) for each subsequent calendar year. Such
bonus shall be granted upon the successful completion of objectives to be
mutually agreed upon between the Executive and the Company's Board of Directors
and will be payable with 30 days of the end of each calendar year.
Section 2. Term. This Agreement shall continue until December 31, 1997 but
shall automatically renew for additional one year terms unless either party
provides notice to the other of its intention not to renew prior to 4 months
before the end of the each term.
Section 3. Office and Duties. Executive shall have the usual duties of
Chief Executive Officer and will report to the Company's Board of Directors.
Executive covenants and agrees that during the term of this agreement he will
devote all of his working time, attention and efforts to the performance of his
duties hereunder and will not engage in any other employment or business
activities without the approval of the Company's Board of Directors.
Section 4. Expenses. Executive shall be entitled to reimbursement for
business expenses incurred by him in connection with the performance of his
duties hereunder upon receipt of vouchers therefore in accordance with such
procedures as the Company has heretofore or may hereafter establish.
1.
<PAGE>
Section 5. Relocation Expenses. Executive shall be entitled to
reimbursement for actual out-of-pocket expenses in connection with the
relocation of the Executive and his family provided that such expenses shall not
exceed $25,000.
Section 6. Vacation During Employment. Executive shall be entitled to such
reasonable vacation as may be allowed by the Company in accordance with general
practices the Company has heretofore or may hereafter establish, but in any
event not less than three (3) weeks during each twelve (12) month period. Unused
vacation will accrue to the benefit of the Executive but in no case shall exceed
Eight (8) weeks.
Section 7. Additional Benefits. To the extent he is otherwise eligible,
Executive and his qualified dependents shall be entitled to participate in all
group insurance programs, retirement plans, profit sharing plans or other fringe
benefit plans which the Company in its sole and absolute discretion makes
available generally to its employees, provided, however, nothing herein shall
require the Company to establish or maintain any such program or plan.
Section 8. Equity Ownership. Upon the execution of this agreement, the
Executive shall be granted options to purchase 175,000 shares of common stock at
$.50 per share. The options will be subject to a 48 month vesting schedule with
25% of such options one year from the Effective Date and the remaining 75%
vesting monthly during the next 36 months. Notwithstanding the foregoing, any
unvested options shall become fully vested in the event the Company receives at
least $10.00 per share as the result of 1) a merger or consolidation of the
Company, or 2) the sale of all substantially all of the assets of the Company.
Section 9. Severance Pay. In the event that the employment of the
Executive is terminated by the Company pursuant to Section 10(c), the Company
shall continue to pay Executive compensation in accordance with the provisions
of Section 1 at the then established annual rate for a period of six(6) months
from the effective date of such termination.
Section 10. Termination of Employment. Notwithstanding any other provision
of this Agreement:
(a) Death. Executive's employment shall terminate immediately in
the event of Executive death during the term of his employment, in which event
this Agreement shall terminate without further obligation to the Executive's
legal representative under this Agreement other than those obligations accrued
hereunder as of the date of his death.
(b) Disability. The Company may terminate this Agreement after
having established the Executive's Disability, by giving the Executive written
notice of its intention to terminate his employment. For purposes of this
Agreement, the term "Disability" shall mean an injury or illness which prevents
the Executive from substantially performing the duties and responsibilities of
Chief Executive Officer for a period of 120 days.
(c) Involuntary Termination. Upon 90 days notice and with the
majority vote of the Board of Directors (excluding the Executive), the Company
may terminate the Executive's Employment at any time during the term of this
Agreement. In the event that the
2.
<PAGE>
Employment of the Executive is terminated by the Company, the Company shall
continue to pay Executive compensation in accordance with the provisions of
Section 9. In addition, if the number of vested shares owned by the Executive at
the time of termination is less than 87,500, additional shares shall immediately
vest such that the Executive's total number of vested shares at the time of
termination shall not be less than 87,500. Any remaining unvested shares shall
be canceled.
(d) Voluntary Termination. The Executive may voluntarily terminate
his employment at any time, in which event he shall receive no severance pay
other than accrued salary, vacation and any other such compensation, if any,
which applicable generally requires to be paid to terminating employees. In
addition, the vesting of stock options shall cease as of the date of
termination.
(e) For Cause. The Company may terminate the Executive for Cause.
If terminated for Cause, the Company shall pay Executive his base salary through
the date of termination. In addition, the vesting of stock options shall cease
as of the date of termination and the Company shall have no further obligations
to the Executive. The term "Cause" shall mean 1) acts of dishonesty which
materially harm the Company, 2) repeated violations of Company policies, or 3)
failure to perform his duties following a written warning from the Board of
Directors.
Section 11. Confidentiality and Non-Competition Agreement. Concurrently
with the execution hereof, Executive shall execute and deliver a Non-
Competition, Confidentiality, and Invention Assignment Agreement.
Section 12. No Conflict. Executive represents and warrants to the Company
that he is not now under any obligations to any person, firm or corporation, and
has no other interest which is inconsistent or in conflict with this Agreement,
or which would prevent, limit or impair, in any way, the performance by him of
any of the covenants or his duties in his said employment. The Effective Date of
this Agreement shall, if necessary, be deemed the first date following
termination of the Executive's current employment.
Section 13. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the law (other than the law governing
conflict of law questions) of the State of Pennsylvania.
Section 14. Termination of Prior Agreement. This Agreement shall replace
any and all prior employment Agreements between the Executive and the Company.
Section 15. Approval by the Board of Directors. This Agreement must be
approved by the Board of Directors of the Company prior to its becoming
effective.
3.
<PAGE>
In Witness Whereof, the parties have executed or caused to be executed this
Agreement as of the date first above written.
Executive Cell Pathways, Inc.
/s/ Robert J. Towarnicki By: /s/ William A. Boeger
- --------------------------- ---------------------------
Robert J. Towarnicki William A. Boeger, Chairman
of the Board of Directors
4.
<PAGE>
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
Agreement made as of September 1, 1993, between Cell Pathways, Inc. (the
"Company") with its principal office currently at 1700 Broadway, Denver, Co.
80290, and Christopher J. Blaxland, who currently resides in Radnor,
Pennsylvania (the "Executive").
Witnesseth
Whereas, the Company desires to induce the Executive to accept the position
as the Company's President upon and subject to the terms herein provided; and
Whereas, Executive desires to accept such employment with the Company upon
and subject to the terms herein provided.
Now, Therefore, in consideration of the premises and the mutual agreements
and undertakings herein set forth, the parties hereto covenant and agree as
follows:
Section 1. Base Compensation and Term. The Company will pay Executive for
his services base compensation at an initial annual rate of One Hundred Fifty
Thousand Dollars ($150,000) payable in accordance with normal Company practice,
but in any event not less often than monthly, subject only to such payroll and
withholding deductions as are required by law. The Board of Directors and
Executive may mutually agree from time to time to change such annual rate of
compensation, taking into account the capitalization of the Company and the
prevailing fair market compensation for industry executives having equivalent
duties and responsibilities in similar situations. The annual rate of base
compensation shall increase by $25,000 upon the completion of the next
significant round of financing (which shall mean at least $5 million from
sources other than present investors). Employment of Executive shall continue
in effect until it is terminated pursuant to Section 8.
Section 2. Bonus Payments. The Executive will be eligible for an annual
cash bonus equal to 25% of base compensation based upon the successful
achievement of certain milestones to be mutually agreed upon by the Executive
and the Company. In addition, the Executive will be eligible for additional
cash or stock bonuses based upon the accomplishment of other significant events
which benefit the Company and result largely from the effort of the Executive.
Section 3. Office and Duties. Executive shall serve as the President of
the Company and shall manage, direct and develop the Company's pharmaceutical
business. Executive shall report to the Chief Executive Officer, and shall
perform and discharge well and faithfully such other duties as may be assigned
to him from time to time by the Company in connection with the conduct of its
business. Executive covenants and agrees that during the term of this agreement
he will devote substantially all of his working time, attention and efforts to
the performance of his duties hereunder and will not engage in competition with
the Company's products until expiration of one year after leaving its employ.
1.
<PAGE>
Section 4. Expenses. Executive shall be entitled to reimbursement for
reasonable business and travel expenses incurred by him in connection with the
performance of his duties hereunder upon receipt of vouchers therefor in
accordance with such procedures as the Company has heretofore or may hereafter
establish. As part of Executive's travel expense, the Company shall provide, or
reimburse Executive for, an apartment in Denver, Colorado until such time as the
Company shall determine its permanent headquarters location, it being understood
that this period is expected to end no later than six months after completion of
the next round of funding. If the Company shall fail to determine, or shall
further change, the location of its permanent headquarters, the Company and the
Executive shall enter into such further arrangements as shall be reasonable
under the circumstances.
Section 5. Relocation Expense Reimbursement. Executive shall be entitled
to a reimbursement of all actual costs up to a maximum of Twenty Five Thousand
Dollars ($25,000) for moving, travel, property maintenance, and transaction
costs to relocate the Executive and his immediate family from the Radnor,
Pennsylvania area to the Company's permanent location which may be in Colorado
or elsewhere.
Section 6. Vacation During Employment. Executive shall be entitled to
such reasonable vacation as may be allowed by the Company in accordance with
general practices the Company has heretofore or may hereafter establish, but in
any event not less than four (4) weeks per year.
Section 7. Additional Benefits. To the extent he is otherwise eligible,
Executive and his qualified dependents shall be entitled to participate in all
group insurance programs, health and dental coverage (or reimbursement of
continuation of his present coverage under COBRA or otherwise until the Company
shall establish an indemnity or other non-HMO plan in keeping with the industry
standards), retirement plans, profit sharing plans or other fringe benefit plans
which the Company in its sole and absolute discretion makes available in general
to its employees. The Company will endeavor to obtain life and disability
insurance for all its employees, including Executive, with coverage and on terms
reasonable in light of industry standards.
Section 8. Termination of Employment. Notwithstanding any other provision
of this Agreement:
(a) Death. Executive's employment shall terminate immediately in the
event of Executive's death during the term of his employment, in which event
base salary shall be discontinued and the Board of Directors shall determine
whether Executive has earned any bonus payment described in Section 2.
(b) Disability. The Company may terminate Executive's employment
after having established the Executive's Disability, in which event base salary
shall be discontinued and the Board of Directors shall determine whether
Executive has earned any bonus payment described in Section 2. For purpose of
this Agreement, the term "Disability" shall mean an injury or illness which
prevents the Executive from substantially performing his duties and
responsibilities for a period of sixty (60) days.
2.
<PAGE>
(c) Involuntary Termination. The Company may terminate the Executive
at any time during the term of this Agreement. In the event that the employment
of the Executive is terminated by the Company solely pursuant to this Section
8(c), the Company shall continue to pay Executive in accordance with Section 9.
(d) Voluntary Termination. The Executive may voluntarily terminate
his employment at any time, in which event he shall receive no severance pay
other than accrued salary, vacation and any other such compensation, if any,
which is applicable and is generally required to be paid to terminating
employees.
(e) For Good Reason. The Executive may terminate his employment at
any time for Good Reason. "Good Reason" shall mean (i) the assignment to
Executive of any duties materially inconsistent with the duties and substantial
responsibilities of Executive described in Section 3 of this Agreement, or any
other action of the Company which results in a diminution in such position,
authority, duties or responsibilities, or (ii) any material failure by the
Company to comply with any of the provisions of this Agreement.
(f) Cause. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement, the term "Cause" shall mean (1) an act
or acts of dishonesty or fraud on the Executive's part which is intended to
result in his personal enrichment at the expense of the Company or which
materially harms the Company, (2) a violation of Company policies which results
in material injury to the Company, or (3) a material breach of this Agreement or
any other material agreement between the Executive and the Company. If the
Executive's employment is terminated for Cause, the Company shall pay the
Executive his full base salary through the date of termination and the Company
shall have no further obligations to the Executive under this Agreement other
than in respect of benefit plans.
Section 9. Severance Pay. In the event the Executive is terminated by the
Company solely pursuant to Section 8(c), or if the Executive terminates himself
pursuant to Section 8(e), the Company shall continue to pay the Executive his
full base compensation for a twelve (12) month period from the date of
termination. In addition, the Company will continue to provide the benefits
referred to in Section 7 for a period of twelve (12) months from termination.
Section 10. Proprietary Information and Confidentiality Agreement.
Concurrently with the execution hereof, Executive shall execute and deliver a
Proprietary Information and Confidentiality Agreement in the form of Exhibit A
hereto.
Section 11. Stock Option Grant. Concurrently with the execution hereof,
Executive and the Company shall execute and deliver a Stock Option Agreement in
the form of Exhibit B hereto whereby Executive is granted options to purchase
2177 shares of the Common Stock of the Company of which 25% shall vest and
become exercisable upon the first anniversary of Executives employment, and an
additional 25% at each of the next three anniversary dates of the Executives
employment with the Company; provided that all unvested options shall vest upon
the earlier of (a) change in control as defined in the stock option agreement
and (b) the first regular sales of Company pharmaceutical products for consumer
use in the United States in
3.
<PAGE>
commercially significant quantities, whether such sales are effected directly by
the Company or indirectly through a licensee or other intermediary.
Section 12. Amendments. This Agreement may not be amended nor shall any
waiver, change, modification, consent or discharge be effected except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any waiver, change, modification, consent or discharge is sought.
Section 13. No Conflict. Executive represents and warrants to the Company
that, as of the date hereof, he is not under any obligation to any person, firm
or corporation, and has no other interest, which is inconsistent or in conflict
with this Agreement, or which would prevent, limit or impair, in any way, the
performance by him of any of the covenants or his duties in his said employment.
Section 14. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 15. Approval by the Board of Directors. This Agreement must be
approved by the Board of Directors of the Company prior to its becoming
effective.
In Witness Whereof, the parties have executed or caused to be executed this
Agreement as of the date first above written.
Cell Pathways, Inc.
By: /s/ Floyd G. Nichols
-----------------------------------
Floyd G. Nichols
Chief Executive Officer
/s/ Christopher J. Blaxland
-----------------------------------
Christopher J. Blaxland
Executive
4.
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
Agreement made as of February 1, 1993, between Cell Pathways, Inc. (the
"Company") with its principal office at 5620 N. Kolb, Tucson, Arizona 85715 and
Rifat Pamukcu (the "Executive").
Witnesseth
Whereas, the Company desires to induce the Executive to accept the position
as the Company's Vice President of Product Development upon and subject to the
terms herein provided; and
Whereas, Executive desires to accept such employment with the Company upon
and subject to the terms herein provided.
Now, Therefore, in consideration of the premises and the mutual agreements
and undertakings herein set forth, the parties hereto covenant and agree as
follows:
Section 1. Compensation and Term. The Company will pay Executive for his
services at an initial annual rate of One Hundred Ten Thousand Dollars
($110,000) payable in accordance with normal Company practice, but in any event
not less often than monthly, subject only to such payroll and withholding
deductions as are required by law. The Company and Executive may mutually agree
from time to time to change such annual rate of compensation. The Executive
will be eligible for a Thirty Thousand Dollar ($30,000) cash bonus based upon
the successful achievement of certain milestones to be mutually agreed upon by
the Company and the Executive. Subject to provisions of Section 8, the term of
the Agreement shall be for one (1) year and will automatically be renewed for
additional one (1) year periods unless either party notifies the other party in
writing prior to 30 days before an automatic renewal would have occurred.
Section 2. Office and Duties. Executive shall have the duties of Vice
President of Product Development. Executive covenants and agrees that during
the term of this agreement he will devote all of his working time, attention and
efforts to the performance of his duties hereunder and will not engage in any
other employment or business activities without the approval of the Board of
Directors of the Company. Notwithstanding the foregoing, the Company
acknowledges that Executive may have existing contractual commitments to be met
as of the date hereof, and Executive may take such steps as may be necessary.
to fulfill those contractual commitments for a period of up to ninety (90) days
after the date of this Agreement.
Section 3. Expenses. Executive shall be entitled to reimbursement for
expenses incurred by him in connection with the performance of this duties
hereunder upon receipt of vouchers therefore in accordance with such procedures
as the Company has heretofore or may hereafter establish.
1.
<PAGE>
Section 4. Relocation Expense Reimbursement. Executive shall be entitled
to a reimbursement of all actual costs up to a maximum of Twenty Five Thousand
Dollars ($25,000) to relocate himself and his family. The Company expects that
the Executive will relocate as soon as possible, but in no event later than
February 1, 1994.
Section 5. Vacation During Employment. Executive shall be entitled to
such reasonable vacation as may be allowed by the Company in accordance with
general practices the Company has heretofore or may hereafter establish, but in
any event not less than four (4) weeks per year.
Section 6. Additional Benefits. To the extent he is otherwise eligible,
Executive and his qualified dependents shall be entitled to participate in all
group insurance programs, retirement plans, profit sharing plans or other fringe
benefit plans which the Company in its sole and absolute discretion makes
available in general to its employees.
Section 7. Severance Pay. In the event that the employment of the
Executive is terminated pursuant to Section 8(c) or 8(e) the Company shall
continue to pay Executive compensation equivalent to nine (9) months or until
Executive obtains a new job, whichever is earlier, at the heretofore described
rate and Executive will be provided with the opportunity to participate in group
insurance programs under terms equivalent to those available under COBRA.
Section 8. Termination of Employment. Notwithstanding any other provision
of this Agreement:
(a) Death. Executive's employment shall terminate immediately in the
event of Executive's death during the term of his employment, in which event,
base salary shall be discontinued.
(b) Disability. The Company may terminate this Agreement after
having established the Executive's Disability. For purpose of this Agreement,
the term "Disability" shall mean an injury or illness which prevents the
Executive from substantially performing his duties and responsibilities for a
period of one hundred eighty (180) days with sixty (60) of those days paid.
(c) Involuntary Termination. The Company may terminate the Executive
at any time during the term of this Agreement. In the event that the employment
of the Executive is terminated by the Company, the Company shall continue to pay
Executive his full base compensation in accordance with the severance provisions
of Section 7.
(d) Voluntary Termination. The Executive may voluntarily terminate
his employment at any time, in which event he shall receive no severance pay
other than accrued salary, vacation and any other such compensation, if any,
which is applicable and is generally required to be paid to terminating
employees.
2.
<PAGE>
(e) For Good Reason. The Executive may terminate his employment at
any time for Good Reason. "Good Reason" shall mean the assignment to Executive
of any duties materially inconsistent with the duties and responsibilities of
Executive described in Section 2 of this Agreement, or any other action of the
Company which results in a substantial diminution in such position, authority,
duties or responsibilities.
(f) Cause. The Company may terminate the Executive's employment for
Cause. For purposes of the Agreement, the term "Cause" shall mean (i) an act or
acts of dishonesty on the Executive's part which are intended to result in his
personal enrichment at the expense of the Company or which materially harms the
Company (ii) a violation of Company policies which result in material injury to
the Company which are not corrected after written warning or (iii) the Executive
has failed to comply with specific directions given by the Company's CEO after
two (2) written warnings not less than 30 days apart together with a majority
vote for termination by the Board of Directors. If the Executive's employment
is terminated for Cause, the Company shall pay the Executive his full base
salary through the date of termination and the Company shall have no further
obligations to the Executive under this Agreement.
Section 9. Non-Competition and Confidentiality Agreement. Concurrently
with the execution hereof, Executive shall execute and deliver a Non-Competition
and Confidentiality Agreement in the form of Exhibit A hereto.
Section 10. Amendments. This Agreement may not be amended nor shall any
waiver, change, modification, consent or discharge be effected except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any waiver, change, modification, consent or discharge is sought.
Section 11. No Conflict. Executive represents and warrants to the Company
that he is not now under any obligations to any person, firm or corporation, and
has no other interest which is inconsistent or in conflict with this Agreement,
or which would prevent, limit or impair, in any way, the performance by him of
any of the covenants or his duties in his said employment.
Section 12. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 13. Approval by the Board of Directors. This Agreement must be
approved by the Board of Directors of the Company prior to its becoming
effective.
3.
<PAGE>
In Witness Whereof, the parties have executed or caused to be executed this
Agreement as of the date first above written.
Cell Pathways, Inc.
By: /s/ Richard H. Troy
-------------------------------------
Richard H. Troy
/s/ Rifat Pamukcu
-------------------------------------
Rifat Pamukcu, Executive
4.
<PAGE>
EXHIBIT 10.19
Memorandum of Employment Between Cell Pathways, Inc. ("Company")
and Richard H. Troy ("Executive")
Commencement: Formal employment to commence January 1, 1993; services prior
thereto as consultant. Employment terminable by company at any time upon sixty
days prior written notice (Executive to continue full services and effect smooth
transition during notice period).
Duties: Those of chief financial, legal and administrative officer of Company
(election to corresponding corporate officerships as well as Secretary) until
Company growth justifies bringing on more specialized expertise (at which time
Executive will concentrate more on the legal, public affairs and corporate
secretarial functions); reports to the Board; establish Company structure,
procedures, facilities, records and reports; coordinate operational matters
consistent with the foregoing; assist in business planning, commercialization,
and financings; and such other duties as may be assigned by the Board or the
Chairman.
Compensation: Starting January 1, 1993, initial annual salary rate of $110,000
and annual bonus rate of $30,000 (based on performance); both may be changed by
mutual agreement of the Board and Executive; salary rate to increase by $50,000
at time of initial public offering. In addition, Executive will be eligible for
additional cash or stock bonuses based upon the accomplishment of other
significant events which benefit the Company and result largely from the effort
of the Executive. Consulting services for 1992, $16,000.
Benefits: Participation in Company health, dental and insurance plans as a
member of senior management (or cash equivalent of Company cost to the extent he
waives participation); participation in savings, incentive and retirement or
similar plans and perquisites, as a member of senior management; paid vacation
in accordance with Company practice, but not less than four weeks per year;
reimbursement of business expenses, including professional association dues and
expenses; payment of $20,000 to cover househunting trips, relocation
transactions, transportation and moving.
Severance: Continuation of base salary and benefits for six months following
termination date (cessation of work at end of notice period) in the event of
termination by Company (other than for Cause as defined in contract with Floyd
G. Nichols) or termination by Executive for Good Reason (as defined in contract
with Floyd G. Nichols).
Non-Competition and Confidentiality Agreement: Signed concurrently.
Cell Pathways, Inc. Richard H. Troy
By /s/ Floyd G. Nichols /s/ Richard H. Troy
------------------------------ ------------------------------
1.
<PAGE>
EXHIBIT 10.21
AGREEMENT BETWEEN
CELL PATHWAYS AND THE
DIVISION OF CANCER PREVENTION AND CONTROL,
NATIONAL CANCER INSTITUTE FOR THE
PRECLINICAL AND CLINICAL DEVELOPMENT OF
PRE-CANCER AND CANCER AGENTS
Introduction
The Division of Cancer Prevention and Control (DCPC), National Cancer Institute
(NCI), recognizes the importance of the pharmaceutical industry in the clinical
development of new cancer prevention and control agents. DCPC wishes to foster
collaboration with industry wherever possible. As part of its mission to improve
cancer care, DCPC shares with industry the important goal of defining the
contribution of a new drug or biologic in the treatment, prevention and control
of cancer. DCPC therefore recognizes and supports the need of a private sponsor
to focus at the appropriate time on clinical trials which lead to a New Drug
Application (NDA) and a Product License Application (PLA), since an NDA and a
PLA are the vehicles through which new cancer prevention and control therapies
become widely available to cancer patients and the public. Thus DCPC considers
it appropriate for the investigators sponsored by DCPC to do clinical trials of
interest to, and partially supported by, a pharmaceutical firm, provided that
the trials have scientific merit and are consistent with the overall goals of
the investigators and DCPC.
Inasmuch as DCPC coordinates a large volume of clinical research with new cancer
prevention and control agents, industry recognizes DCPC's need to be aware of
industry's plans for the clinical development of new agents of mutual interest,
particularly if a pharmaceutical firm wishes to utilize the resources of the
DCPC-supported clinical trials mechanism. Industry also recognizes the necessity
of preserving the spirit of free and open inquiry among clinical investigators.
Collaborator has researched a therapeutic method for the treatment of
precancerous lesions and related conditions involving a compound designated FGN-
1 (5-fluoro-2-methyl-1-[[4-(methylsulfonyl)phenyl]methylene]-1H-indene-3-acetic
acid; hereinafter the "Agent"). Collaborator has plans for further research
involving Agent, and desires DCPC involvement in those plans and other
activities associated with Agent.
Both DCPC and Collaborator desire to expedite further clinical testing of the
Agent and to utilize the resources of the DCPC in support of clinical trials for
APC and other conditions, and are entering into this Agreement to provide for
the conduct of such clinical trials.
1.
<PAGE>
Agreement
This Agreement ("Agreement") serves as the basis for the further clinical
codevelopment of Agent by Collaborator and the DCPC.
1. Definitions.
"Adverse Drug Reaction" means an adverse clinical experience in a patient that
may be related to an investigational agent. An "alarming" adverse drug reaction
is any serious, fatal, or life-threatening clinical experience in a patient that
is thought to be drug related. It must be reported immediately to the drug
sponsor. "Other" adverse drug reactions are reported if that effect has not been
described previously. Specific guidelines and policies for reporting adverse
drug reactions have been developed, as well as common toxicity criteria.
"Affiliates" means any corporation or other business entity controlled by,
controlling, or under common control with Collaborator. For this purpose,
"control" means direct or indirect beneficial ownership of at least fifty (50)
percent of the voting stock, or at least fifty (50) percent interest in
the income of such corporation or other business.
"Agent" means FGN-1.
"Amendment" means any formal change to this Agreement that is made after
activation.
"Annual Report" means an Annual Report which is a brief report of the progress
of an IND associated investigation where the IND sponsor is required to submit
to the FDA within 60 days of the anniversary date that the IND went into effect
(pursuant to 21 C.F.R. (S)312.33). According to DCPC policy, Annual Reports
pursuant to 21 C.F.R. (S)312.33 submitted for INDs sponsored by DCPC are made
available to the public upon written request.
"Biological Product" means any virus, therapeutic serum, toxin, antitoxin, or
analogous product applicable to the prevention, treatment or cure of diseases or
injuries of man, as further defined at 21 C.F.R. (S)600.3(h).
"Clinical Brochure" means a document containing all the relevant information
about the drug, including animal screening, preclinical toxicology, and detailed
pharmaceutical data. Also included, if available, is a summary of current
knowledge about pharmacology and mechanism of action and a full description of
the clinical toxicities.
"Clinical Trials Monitoring Service" or "CTMS" means a non-governmental
organization contracted by DCPC to receive, review, and perform data management
tasks on individual patient case report forms for investigational drug studies.
On-site audits are performed by the CTMS to assess data verification, protocol
compliance, and adherence to regulatory requirements.
2.
<PAGE>
"Clinical Trials Monitoring Service Contract" or "CTMS Contract" means the
contract which defines the obligations and the services that the non-
governmental organization CTMS (as defined supra) has agreed to provide to DCPC.
This organization is chosen by DCPC through a competitive acquisition process in
accordance with the Federal Acquisition Regulations, and all applicable DHHS,
NIH and NCI policies and procedures.
"CTMS Monitored Studies" means investigational drug studies that are monitored
by CTMS under the CTMS contract for the purpose of assuring patient safety and
prompt toxicity reporting.
"Collaborator" means Cell Pathways, Inc., a corporation organized and existing
under the laws of the State of Delaware, having a place of business at 1700
Broadway, Suite 2000, Denver, Colorado 80290, and its Affiliates, or assignees.
"Contract" means a Funding Agreement that is a research and development contract
that provides that the contractor perform for the benefit of the Government,
with an expectation of completion of the stated research goals and the delivery
of a report, data, materials or other product. Generally, Government contracts
are administered under the Federal Acquisition Regulations (FAR), codified at
Title 48 Code of Federal Regulations, Chapter 1.
"Cooperative Agreement" means a Funding Agreement that is a species of a grant,
whereby the funding Federal agency intends to be substantially involved in
carrying out the research program. Cooperative Agreements may be used where the
Federal agency intends for its scientists to directly collaborate with the
researchers of the funded institution on a joint research project. The Federal
agency may then pay for the research of both its employees and those of the
funded institution (see 45 C.F.R. Part 74).
"DCPC" means the Division of Cancer Prevention and Control, NCI.
"DHHS" means the Department of Health and Human Services.
"Drug Master Files" or "(DMFs)" means reference files submitted to FDA that are
used in the review of investigational and marketing applications for human
drugs. Drug Master Files are submitted to the FDA to allow another party to
reference this material without disclosing to that party the contents of the
file.
"Drug Product" means a finished dosage form, for example, tablet, capsule,
solution, etc., that contains an Active Ingredient generally, but not
necessarily, in association with inactive ingredients. The term also includes a
finished dosage form that does not contain an active ingredient but is intended
to be used as a placebo, as defined in 21 C.F.R. (S)210.3(a)(4). An Active
Ingredient means any component that is intended to furnish pharmacological
activity or other mitigation, treatment, or prevention of disease, or to affect
the structure or any function of the body of man or other animals. This term
includes those components that may undergo chemical change in the manufacture of
the drug product and be present in the drug product in a modified form intended
to furnish the specified activity or effect, as defined in 21 C.F.R.
(S)210.3(a)(7).
3.
<PAGE>
"Extramural Principal Investigator" means a Principal Investigator funded by NCI
under a grant, contract or cooperative agreement, who is a not a government
employee.
"FDA" means the Food and Drug Administration, DHHS.
"Funding Agreement" means a Contract, Grant, or Cooperative Agreement entered
into between a Federal agency and another party for the performance of
experimental, developmental, or research work funded in whole or in part by the
Federal Government.
"Government" means the U.S. Government and any of its agencies.
"Grant" means a Funding Agreement that is an award of financial assistance which
may be provided for support of basic research in a specific field of interest to
the funding Federal agency. (See 45 C.F.R. Part 74, for grants from the U.S.
Public Health Service.) While no specific product is anticipated, the funding
agency may review the progress and direction of the funded research.
"Group C drugs" means those drugs supported by evidence of reproducible relative
efficacy in patients with a specific tumor type, which alter the pattern of care
of the disease, and which are safely administered by properly trained physicians
without requiring specialized supportive care facilities as judged by available
abstracts, papers, and reports in the IND.
"Human Subjects" means individuals whose physiologic or behavioral
characteristics and responses are the object of study in a research project.
Under the federal regulations for the protection of human subjects, human
subjects are defined as living individuals about whom an investigator conducting
research obtains: (1) data through intervention or interaction with the
individual; or (2) identifiable private information (45 C.F.R. (S)46.102(f)).
"IND" means an Investigational New Drug Application. The IND is the legal
mechanism under which experimental drug research is performed in the United
States. An IND is submitted to the Food and Drug Administration to receive
approval to conduct experimental clinical trials. The FDA regulations require
continual updates to the IND including, but not limited to, Annual Reports,
adverse drug reaction reports, new protocols, protocol amendments and
pharmaceutical data.
"Investigator" means any physician who assumes full responsibility for the
treatment and evaluation of patients on research protocols as well as the
integrity of the research data.
"NCI" means the National Cancer Institute, NIH, DHHS.
"NDA" means a New Drug Application. The NDA is the formal process by which the
FDA approves a drug product for commercial distribution.
"NIH" means the National Institutes of Health, PHS, DHHS.
"Parties" means Collaborator and NCI.
4.
<PAGE>
"PHS" or "USPHS" means the Public Health Service, DHHS.
"PLA" means a Product License Application. The PLA is the formal process by
which the FDA approves a biological product for commercial distribution.
"PRC" means the CPRP Protocol Review Committee which reviews and approves all
studies involving CPRP investigational agents and/or activities supported by
NCI.
"Principal Investigator" means a physician who has organizational and fiscal
responsibility for the use of federal funds to conduct a plan of research which
frequently includes several clinical trials, e.g., Contract Principal
Investigator or Grant Principal Investigator.
"Project Officer" means the individual whose responsibilities include oversight
of the activities of a government contract.
"Proprietary Data" means confidential scientific, business or financial data,
provided that such data:
is not publicly known or available from other sources who are not under a
confidentiality obligation to the source of the information;
has not been made available by its owners to others without a
confidentiality obligation;
is not already known by or available to the receiving Party without a
confidentiality obligation;
does not relate to potential hazards or cautionary warnings associated with
the production, handling or use of the subject matter of this Agreement;
and
does not include an Annual Report to the FDA.
If any one or more of the above provisions of this definition is not met,
the relevant information shall no longer be considered proprietary
information.
"Raw Data" means the primary quantitative and empirical data first collected by
the intramural and extramural investigators from experiments and clinical trials
conducted under the scope of this Agreement.
"Sponsor" means an organization or individual who assumes legal responsibility
for supervising or overseeing clinical trials with investigational drugs.
"Summary Data" means a summary of the Raw Data which will be made available to
DCPC which summary is used by DCPC to prepare an Annual Report to the FDA, said
Annual Report being available to the public in accordance with DCPC policy.
5.
<PAGE>
2. Planning and Conduct of Research.
The overall plan for further clinical trials of Agent shall be a
collaborative undertaking by Collaborator and the DCPC. The overall plan
shall be formulated and agreed by both Collaborator and DCPC before
implementation of large-scale clinical testing. Each large-scale clinical
test shall be in accordance with a protocol to be agreed upon by DCPC and
Collaborator. Notwithstanding the foregoing, the DCPC is free to conduct
preclinical and clinical testing for mutually agreed upon experimental
purposes during the term of this Agreement; and Collaborator is free to
conduct preclinical and clinical testing under its own auspices for any
purpose or clinical indication. Because such independently conducted
studies by either the DCPC or Collaborator have implications for commitment
of resources by both DCPC and Collaborator, they shall also be the subject
of joint discussion and planning between the DCPC and Collaborator. There
should be frequent and full interchange between staff members of the DCPC
and Collaborator. Contracts with third parties relating to clinical trials
of Agent shall be consistent with this Agreement and subject to prior
review and comment of both DCPC and Collaborator.
Pursuant to that overall plan for further clinical trials, DCPC shall use
its reasonable best efforts to cause testing (including but not limited to
safety and efficacy testing) of Agent for APC (hereinafter "APC Clinicals")
to commence as soon as reasonably practicable in accordance with a Protocol
to be agreed upon by the parties. DCPC shall also use its reasonable best
efforts to cause testing (including but not limited to safety and efficacy
testing) of Agent for other precancerous lesion indication(s) (hereinafter
"Other Indication Clinicals") in addition to APC to commence as soon as
reasonably practicable in accordance with a Protocol to be agreed upon by
the parties, such additional indication(s) to be agreed upon by DCPC and
Collaborator. The DCPC and Collaborator shall schedule their meetings and
provide for third party contracting and other arrangements in such a
fashion that the clinical trials can proceed in a timely fashion without
undue delay.
The overall plan shall also include a collaborative undertaking by
Collaborator and DCPC for preclinical testing of Agent. The parties agree
to formulate a plan for further preclinical testing of Agent before
implementation of large-scale or resource-intensive preclinical testing.
Preclinical testing will be collaboratively developed and mutually agreed
upon and may include, but is not limited to, screening, toxicity,
pharmacology, formulation development work, manufacture of clinical dosage
form(s), or other development work. Preclinical work will be coordinated by
the Cancer Prevention Research Program of DCPC and the contact person will
be James A. Crowell, Ph.D., Project Officer, Chemoprevention
Investigational Studies Branch, CPRP, DCPC, NCI (Telephone Number (301)
496-8563) and the Collaborator contact will be Rifat Pamukcu, M.D., Pager
Telephone number 1-800-759-8888, ID #111353, or phone number 303-837-0252.
3. DCPC will submit an IND to the FDA that will cross reference any and all
IND(s) previously filed by Collaborator for the Agent for APC. DCPC will
submit IND(s) for all
6.
<PAGE>
indications for which the parties agree to Protocols under Section 2 above.
Collaborator can, at its option, file additional IND(s) with the FDA
relating to Agent for use in other indications; Collaborator will cross-
file any relevant DCPC IND(s); and Collaborator will allow DCPC continued
access to all information concerning such additional IND(s). As a general
rule, all information in INDs will be fully shared between the DCPC and
Collaborator as outlined below. However, certain information pertaining to
manufacturing processes may be held in confidence by Collaborator and need
not be disclosed to DCPC (see 8. below).
4. Protocols.
Each protocol received by DCPC from an Investigator to conduct a clinical
study will be forwarded to Collaborator for review and comment
approximately two weeks before it is reviewed by the Protocol Review
Committee (PRC) of the Cancer Prevention Research Program (CPRP). Comments
from Collaborator received by CPRP before the PRC meeting will be discussed
by the CPRP. Comments from either Collaborator or the CPRP staff that are
agreed upon in the PRC meeting will be formatted as a consensus review,
which is returned to the investigator for necessary and/or suggested
changes before the protocol can be given final approval and submitted to
the FDA. Any such protocol shall be consistent with the Protocol(s) agreed
to between Collaborator and DCPC pursuant to paragraph 2 above. A copy of
the final approved protocol will be forwarded to Collaborator at the same
time as it is submitted to the FDA. In summary, Collaborator will
codevelop with DCPC a clinical plan for the overall development of Agent
and receive copies of all DCPC-sponsored protocols both before review and
after approval.
5. Adverse Drug Reactions, Annual Reports, Other IND Data.
For any alarming adverse drug reaction reported to the DCPC, the DCPC shall
immediately inform Collaborator's Clinical Monitor of the same. The
contact person for Collaborator will be Rifat Pamukcu, M.D. Pager
Telephone number 1-800-759-8888, ID #111353, or phone number 303-837-0252.
The DCPC will use reasonable efforts to provide and review with
Collaborator copies of all adverse drug reaction (ADR) reports prior to
their submission to the FDA. Copies of any warning letters will also be
sent to Collaborator for review and comment prior to the time they are sent
to participating investigators and to the FDA. In addition, copies of the
Annual Reports and other pertinent IND data (formulation, preclinical) will
be provided to Collaborator as they become available.
6. Drug Information and Supply.
Collaborator agrees to provide to the DCPC without charge upon six (6)
months written advance notice (or such shorter Notice as Collaborator in
writing accepts) Agent in sufficient quantity to complete the protocols
sponsored by DCPC. The contact person for DCPC will be James A. Crowell,
Ph.D., Project Officer, Chemoprevention Investigational Studies Branch,
CPRP, DCPC, NCI (Telephone Number (301) 496-8563)
7.
<PAGE>
and the Collaborator contact will be Christopher J. Blaxland, President,
Cell Pathways, Inc., 1700 Broadway, Suite 2000, Denver, Colorado 80290
(Telephone Number 303/837-0252). Furthermore, Collaborator will provide
Certificates of Analysis to DCPC for each lot of finished product provided.
Agent will be distributed by DCPC to Investigators in a manner to be agreed
upon by DCPC and Collaborator. Collaborator can retain or subcontract
responsibility for manufacture, packaging, and labelling of Agent.
Collaborator will, if requested by DCPC, furnish any reasonable
documentation of manufacture, consistent with the need to preserve certain
manufacturing information confidential. DCPC investigators utilizing Agent
in clinical trials will maintain NCI drug accountability records. The
records include data on the receipt of Agent, date and quantity dispersed
by patient ID for each protocol, and date and quantity of the agent
destroyed or returned.
However, if collaborator elects to terminate their development of Agent for
a particular indication but the NCI elects to continue its development of
Agent for that indication, then Collaborator will continue to allow NCI to
purchase, at Collaborator's cost, the same Agent as is now/then being used
in ongoing clinical trials or is planned for use in future preclinical
studies and clinical trials by:
(1) allowing NCI to purchase said Agent from Collaborator
inventory upon six months written advance notice; or,
(2) arranging for an independent contractor to manufacture and
provide for NCI purchase of said Agent; or,
(3) providing to NCI all information necessary to allow NCI to
contract and manufacture said Agent independent of Collaborator;
until (i), a date on which an alternate source of equivalent materials,
acceptable to DCPC can be contracted by DCPC; or, (ii) two years after the
date of notification from Collaborator to DCPC that Collaborator elects to
terminate its obligation to supply Agent to the DCPC as set forth in this
paragraph.
If Collaborator elects to terminate its development of the Agent, but NCI
elects to continue its development of the drug, the NIH shall have a
nonexclusive, nontransferable, irrevocable, paid-up license to practice or
to have practiced for or on behalf of the United States any invention which
Collaborator may have or obtain on the Agent, its manufacture, or on the
process for use of the Agent, throughout the world, for medical research
purposes only, including those related to or connected with the prevention
and control of cancer.
7. DATA RIGHTS.
The data generated under this Agreement are considered the property of the
party that generates the data. Generally, data generated in trials
sponsored by DCPC with funding through Grants or Cooperative Agreements are
considered the property of the Extramural
8.
<PAGE>
Principal Investigator or the Cooperative Groups, respectively. Generally,
the data generated in trials sponsored by the DCPC with funding through
Contracts are the property of the DCPC. Generally, the data generated by
the DCPC are the property of the DCPC. Collaborator shall be given and have
complete access to all the data and results generated under this Agreement.
These data will be made fully available only to Collaborator for its own
analyses and for its application for FDA approval. If there are additional
costs to the investigator for providing such data, the investigator shall
be reimbursed for the reasonable additional costs by Collaborator in a
manner to be negotiated by investigator and Collaborator after discussing
the data required with the CPRP contact (Dr. James Crowell, Project
Officer, DCPC).
8. FDA MEETINGS.
All meetings with the FDA concerning Agent will be discussed by
Collaborator and the DCPC in advance and will be held on mutually agreed
upon dates. Collaborator will have the option to set the agenda for such a
meeting. One of the missions of the DCPC is to ensure that active
investigational prevention and control agents are approved and made widely
available in a timely fashion. Therefore, DCPC feels it is important to
participate in the development plan for Agent and in discussions with the
FDA regarding the design and endpoints for the pivotal trials. In addition,
DCPC expects that Collaborator will actively pursue approval of the Agent
by FDA and will take the initiative in arranging meetings with the FDA. In
the event DCPC should arrange to meet with FDA to discuss the development
of Agent without the presence of a representative(s) from Collaborator,
DCPC shall notify Collaborator in advance to afford Collaborator an
opportunity to attend, no unpublished data concerning the agent will be
discussed with the FDA without Collaborator's permission, and DCPC shall
report to Collaborator concerning any meeting with the FDA at which
Collaborator is not present.
9. PROPRIETARY DATA.
Any preclinical or formulation data considered proprietary by Collaborator
will be treated as such by the DCPC. Collaborator should state in advance
what information it considers proprietary and DCPC can accept or decline to
receive information so designated. NCI shall treat in confidence any of
Collaborator's written information that is stamped "CONFIDENTIAL" for a
period of three (3) years from the date of execution of this Agreement,
unless Collaborator informs the NCI that the Confidential Information is
still secret and confidential, and NCI concurs, in which case the
obligations hereof shall extend for a further period of two (2) years.
Such Confidential Information shall not include information or data that
was previously known to NCI or that is or becomes publicly available or
which is disclosed to NCI without a confidentiality obligation. Primary
data relating to sensitive laboratory studies will, upon request by
Collaborator, be returned to Collaborator by the DCPC. However, summaries
of all such studies will be retained in the DCPC files. All data derived
from clinical trials (including, but not limited to case report forms,
clinical laboratory test results, and pharmacokinetic test results) at a
DCPC sponsored institution will be made fully available for use and copying
9.
<PAGE>
by Collaborator in obtaining regulatory approval. The data will be made
available to the DCPC in summary form, and the summaries of these studies
prepared for the Annual Report to the FDA are, in accordance with DCPC's
standard procedures, public information.
10. DATA MANAGEMENT AND EXCHANGE.
The parties recognize that proper data management and gathering are
critical to the success of any clinical study under this Agreement.
Accordingly, the data management and gathering to be provided by third
party(ies) (i.e. a CTMS) under contract with DCPC shall be in accordance
with best accepted scientific practice, providing for all data management
activities (including data entry, editing and reporting, and delivery of
final clean (audited and verified) locked unblinded SAS-compatible data
sets) according to mutually agreed upon specifications. Collaborator shall
also have the right at its own discretion to monitor or have monitored any
such data at its own expense. Collaborator shall have timely access to data
obtained during any such clinical study, and in a format (1) sufficient for
audit and preparation for FDA purposes and (2) reasonably necessary and
convenient (e.g. on computer storage media) to Collaborator.
The DCPC will supply Collaborator with all information submitted to its IND
as outlined above, and subject to the limitations set forth in this
Agreement. The DCPC will receive information from Collaborator's IND
including Clinical Brochures, adverse drug reactions, toxicology findings
and Annual Reports. At its option, Collaborator may prepare final study
reports and safety summaries for submission by DCPC to the FDA, such
reports and summaries to be approved by the DCPC and Collaborator before
submission.
11. MONITORING.
The parties recognize that proper monitoring is critical to the success of
any clinical study under this Agreement. Accordingly, the monitoring to be
provided by third party(ies) under contract with DCPC (see paragraph 2
above) shall be in accordance with best accepted scientific practice and
with 21 C.F.R. Parts 50 and 312. Collaborator shall also have the right at
its own discretion to monitor or have monitored any such clinical study at
its own expense at times reasonable to Collaborator and the investigator.
In conjunction with the DCPC Project Officer, Collaborator has the right to
and can make arrangements to receive copies of data from DCPC's principal
investigators who have been contracted by DCPC to conduct the clinical
trial(s) of this Agreement, in the format Collaborator desires. These
Principal Investigators will be reimbursed by Collaborator for the cost of
reformatting (if any) and reproduction of the data. Copies of annual data
summaries submitted to DCPC for non-CPRP monitored studies will be
available to Collaborator upon request. More frequent monitoring of any
study can be arranged. Collaborator, at the time of protocol review,
should indicate which protocol(s) it wishes to monitor more frequently. A
section will be added to the protocol(s) to document the arrangements. Any
arrangement which involves the collection of more than summarized
10.
<PAGE>
data provided annually will be at the expense of Collaborator. Should the
DCPC conduct an audit of a study using Agent, Collaborator will be invited
to attend and participate in the data review. In addition, should
Collaborator choose to review primary medical records at the research
site(s) in preparation for an NDA or PLA submission, Gary J. Kelloff, M.D.,
Chief, Chemoprevention Investigational Studies Branch, CPRP, DCPC, NCI
(telephone number (301) 496-8563) will provide any assistance necessary to
arrange for such a review at Collaborator's expense.
12. PUBLICATIONS.
The DCPC investigators maintain the full right to present and publish the
data at such time and place as they see fit. Manuscripts from pivotal
trials or those to which Collaborator has specifically committed financial
resources should have advisory review and comment a meaningful length of
time prior to submission for publication. Collaborator, at the time of
protocol review, should indicate for which protocol(s) it wishes to review
manuscripts prior to submission. The amount of time required for the
review shall not exceed thirty (30) days. The submission for publication
or other disclosure shall be delayed for up to an additional thirty (30)
days or such other mutually agreed upon reasonable period of time upon
written request by either Party to this Agreement as necessary to preserve
U.S. or foreign patent or other Intellectual Property rights.
13. USE OF NAME AND COMMERCIALIZATION.
Collaborator may use, refer to and disseminate reprints of scientific,
medical and other published articles which disclose the name of NCI
consistent with U.S. copyright laws, provided such use does not constitute
an endorsement of any commercial product or service by NCI. Collaborator
shall take every step possible to ensure that references to the articles
are accurate, and shall explicitly state that any such reference does not
claim, infer or imply an endorsement or recommendation of the product by
the Investigator or the U.S. Public Health Service, Department of Health
and Human Services. Collaborator shall not use the name of NCI or any of
the foregoing in any advertising, packaging, or promotional material in
connection with Agent except with the written permission of NCI or as may
be required by law.
14. PATENTS.
The following provisions relating to patents are subject to Collaborator's
prior patent filings related to Agent and its analogs (a copy of
Collaborator's U.S. Patent Application is attached as Exhibit A), and this
Agreement grants no license or assignment of those patent rights, express
or implied.
Generally, the rights of ownership of inventions, discovered or made solely
in connection with work covered by this Agreement, are retained by the
organization that (1) is the employer of the inventor or (2) the
organization to whom the inventor otherwise has a contractual obligation to
assign inventions. Both Collaborator and DCPC recognize that
11.
<PAGE>
inventorship will be determined under patent law. However, pursuant to 35
U.S.C. (S)201(C) and 35 U.S.C. (S)202(c)(4), when an individual who is not
a government employee, but who is under a government funding agreement, is
the sole inventor of an invention conceived or reduced to practice in the
course of performing services funded by the DCPC or NCI pursuant to this
Agreement, the U.S. Government retains a non-exclusive, irrevocable, paid-
up license to practice the invention or to have the invention practiced
throughout the world by or on behalf of the U.S. Government. The DCPC,
however, agrees that during the term of this Agreement it will not enter
into any government funding agreement relating to Agent with any individual
who is an employee of, or has a contractual obligation to assign or license
to, Collaborator without advance notice and approval by Collaborator. NCI
will notify Collaborator immediately upon filing a patent application on
any invention its employees make while using the Agent furnished to NCI
under this Agreement. The NCI will seriously consider Collaborator's
request for a nonexclusive, partially exclusive or exclusive royalty-
bearing license to make, use and/or sell products embodying the invention
as claimed in the filed patent application, subject to the terms of 35
U.S.C. 207, 208, and 209, under 37 C.F.R. Part 404 to any invention made by
NCI investigators during this study when a U.S. Government employee is the
sole inventor.
15. OTHER INTERACTIONS.
In order to foster development of Agent, the participation of DCPC and
other NIH staff will be required at selected scientific or clinical trial
development meetings. As part of this Agreement, it is agreed that
Collaborator will provide for the transportation and lodging costs for
attendance of NIH staff in such activities. Selection of participating NIH
staff must be based on choices mutually acceptable to both Collaborator and
NCI. Both Collaborator and NCI must agree that the activities would be
appropriate under this Agreement, and acceptance of Collaborator's support
of NCI's participation in the activities will be contingent upon
appropriate NCI approval. Other interactions which materially assist the
development of potentially important new therapies will also be possible.
Again, mutual agreement and approval will be necessary, according to the
terms of this Agreement. However, notwithstanding anything to the
contrary, this agreement does not represent a Cooperative Research and
Development Agreement (CRADA under the Federal Technology Transfer Act, 15
U.S.C. 3701 et seq.).
16. LIABILITY.
No indemnification for any loss, claim, damage, or liability is intended or
provided by any party under this agreement. Each party shall be liable for
any loss, claim, damage, or liability that said party incurs as a result of
said party's activities under this agreement, except that the NCI, as an
agency of the United States, assumes liability only to the extent as
provided under the Federal Tort Claims Act (28 U.S.C. Chapter 171).
12.
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17. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
Federal law as construed by the Federal Courts of the District of Columbia.
18. SEVERABILITY.
The terms of this Agreement are severable. If any item or provision of
this Agreement shall to any extent be invalid or unenforceable, the
remainder of this Agreement shall not be affected, and each remaining item
and provision of this Agreement shall be valid and shall be enforceable to
the fullest extent permitted by law.
19. SURVIVABILITY.
The provisions of this Agreement as they relate to confidentiality shall
survive the expiration or earlier termination of this Agreement.
20. COMPLIANCE WITH HHS REGULATIONS.
DCPC and Collaborator agree to comply with all appropriate Department of
Health and Human Services regulations relating to Human Subject use, and
all Public Health Service policies relating to the use and care of
laboratory animals.
21. TERMINATION.
A. This Agreement expires on the earlier to occur of the completion of
the research or July 1, 1999. Said expiration date may be changed by
mutual agreement and written amendment of this Agreement.
B. This Agreement may be terminated at any time by the mutual written
consent of the Parties.
C. Either party may unilaterally terminate the Agreement at any time by
giving written notice to the other party at least sixty (60) days
prior to the desired termination date.
D. On expiration or earlier termination of this Agreement, Collaborator
will supply enough Agent to complete the clinical studies as are then
ongoing or have been agreed to, pursuant to the provisions of
Paragraph 6; and DCPC shall cause such clinical studies to be
completed.
13.
<PAGE>
This Agreement provides the basis for mutually satisfactory codevelopment of
Agent as a cancer prevention and control agent.
By executing this Agreement, each of the undersigned represents and confirms
that he is fully authorized to bind his identified company or entity to its
terms.
AGREED AND ACCEPTED:
For DCPC, NCI
/s/ Peter Greenwald June 30, 1994
- ------------------------------------ ---------------------------------
Peter Greenwald, M.D., Director Date
Division of Cancer Prevention and Control
National Cancer Institute
9000 Rockville Pike
Building 31, Room 10A52
Bethesda, Maryland 20892
The undersigned expressly certifies or affirms that the contents of any
statement made or reflected in this document are truthful and accurate.
For Cell Pathways, Inc.
/s/ Chris Blaxland June 21, 1994
- ------------------------------------ ----------------------------------
Chris Blaxland Date
President
14.
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EXHIBIT 10.22
AMENDMENTS
----------
<TABLE>
<CAPTION>
Current Clinical Trial Agreement Terms
CTA Management Module
<S> <C> <C> <C>
CTA #: 0104 NCI Principal Investigator: Gary Kelloff, M.D.
Effective Date: 6/30/94 Division: DCPC
Term (years): 5 years Laboratory: CDISB
Expiration: 6/30/99 Collaborator: Cell Pathways, Inc.
Title: FGN-1 for Chemoprevention
</TABLE>
New CTA Terms
- -------------
The purpose of this amendment is to change certain terms of the above
referenced Clinical Trial Agreement (CTA). These changes are reflected below
and except for these changes and those of any previous amendments, all other
provisions of the original CTA remain in full force and effect.
(1) Add to Definitions: "Additional Compounds" mean CP57, CP78, CP66
(2) Add to Paragraph 2 (Planning and Conduct of Research: DCPC shall not be
obligated to cause clinical trials of Additional Compounds to be conducted, but
would be permitted to conduct mutually agreed clinical trials in accordance with
the provisions of this Paragraph. In addition, NCI agrees not to analyze any
Additional Compound to ascertain its composition, purity, utility or efficacy in
any manner other than authorized by mutual agreement of the parties in
accordance with this Agreement, or use any Additional Compound for any purpose
other than set forth in this Agreement. The NCI agrees to keep records of how
much Additional Compound is used in pre-clinical experiments and return unused
quantities to Cell Pathways upon request.
(3) Modification to Paragraph 7 (Data Rights): Replace "for its own analysis
and for its application for FDA approval" with "for any purpose subject to the
provisions of Paragraphs 12 and 14."
(4) Add to Paragraph 9 (Proprietary Data): IN accordance with the provisions
of this Paragraph, NCI shall treat in confidence any of Collaborator's written
information related to a particular Additional Compound for a period of three
(3) years subject to the same right to extend such period for two (2) additional
years measured from the date of execution of this amendment.
(5) Add to Paragraph 12 (Publications): DCPC investigators may present and
publish data regarding a particular Additional Compound upon initiation of any
clinical trial on that particular Additional Compound in accordance with the
provisions of this Paragraph. However, in no case shall any limitation on the
publication rights specified in this Paragraph exceed a period of (1) one year
measured from the date the data is made available to the Collaborator.
(6) Modification to Paragraph 14 (Patents): Replace "filings related to Agent
and its analogs (a copy of Collaborator's US Patent Application is attached as
Exhibit A)" with "filings related to Agent and Additional Compounds and their
analogs (copies of Collaborator's US Patent Applications and issued patents are
attached as Exhibits A through E).
ACCEPTED AND AGREED TO:
National Cancer Institute Cell Pathways, Inc.
/s/ Richard H. Troy
- ----------------------------- ------------------------------------
Peter Greenwald, M.D. Title: Vice President
Division Director, DCPC ------------------------------
Cell Pathways, Inc.
September 4, 1996
- ----------------------------- -------------------------------------
Date Date
1.
<PAGE>
EXHIBIT 10.23
AMENDED
RESEARCH AND LICENSE AGREEMENT
This Agreement is effective as of this _____ day of June, 1991 between The
Arizona Board of Regents on behalf of the University of Arizona, a public
educational institution organized and existing under the laws of the State of
Arizona (hereinafter referred to as "University") and FGN, Inc., a corporation
organized and existing under the laws of the state of Illinois and FGN
Pharmaceutical Research Limited Partnership, as successor in interest hereunder
(hereinafter referred to as "FGN").
Witnesseth
Whereas, the University has expertise relating to methods and compositions
for the treatment of polyposis syndromes, polyps, carcinomas, and related
conditions;
Whereas, FGN desires to obtain an exclusive, worldwide license under any
patent applications and technical information related to any inventions
developed by University Researchers working on the sponsored research to make,
have made, use and sell Product;
Whereas, the University is willing to conduct research in the Field and
grant such license to FGN upon the terms and conditions set forth herein;
Now, Therefore, the parties hereto have mutually agreed as follows:
ARTICLE I - DEFINITION
A. "University Researchers" shall mean [ * ] and such other University
employees that work directly or collaborate with these five individuals in
research funded by FGN.
B. "Field" shall mean new drugs and compositions for the treatment of
[ * ]. The Field shall exclude University research into the following
commercially available drugs: [ * ]. The Field shall also exclude research,
requested by [ * ] into new delivery systems for commercially available [ * ]
not limited by dosage form.
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE>
These exclusions do not apply to chemical modifications, derivatives and the
like of the aforementioned commercially available drugs or to delivery systems
for drugs except for piroxicam.
C. "Affiliate" shall mean any company or other entity which controls, is
controlled by or is under common control with FGN or the University. Company or
other entity shall be deemed to control another if it owns at least 25 percent
of the outstanding voting equity or assets of the other company or entity.
D. "Product" shall mean any compound, composition, or delivery system
within the scope of any claim in any issued patent in the Patent Rights, or any
compound, composition, or delivery system recited in any therapeutic method
claim in any such patent.
E. "Patent Rights" shall mean (1) all patent applications filed by FGN on
behalf of University on inventions within the Field conceived or reduced to
practice by University researchers working on the sponsored research and that
may issue thereon; and (2) all patent applications that are divisionals,
continuations, continuations-in-part, reissues, renewals, foreign counterparts,
extensions or additions to such patent applications and patents and all patents
that may issue thereon, including, but not limited to the patent applications
(and any patent foreign or domestic that issue thereon) listed in Appendix A to
this Agreement.
F. "Improvements" shall mean all inventions or discoveries within the
scope of one or more claims of any patent or application included in Patent
Rights discovered or developed by the University during the term of this
Agreement.
G. "University-Developed Technical Information" shall mean any and all
Improvements, technical data, information, materials and other know-how
developed by University Researchers within the Field that:
1. relate to Products including without limitation chemical data,
toxicological and pharmacological data, clinical data, medical uses, and product
formulations and specifications and the like; and
2. relate to processes and techniques for the manufacture of Products,
including without limitation, preparation, purification, recovery,
specifications, characterization, and physical and chemical properties.
H. "Confidential Technical Information" in the case of the University
shall mean University information developed by the University before the
Agreement between
2.
<PAGE>
the parties of January 26, 1990 related or unrelated to the Field or developed
by the University during this Agreement or during the term of the January 26,
1990 Agreement unrelated to the Field, except information within the ambit of
Article VIII, Paragraph B. "Confidential Technical Information" in the case of
FGN shall mean FGN information developed by FGN before or during the course of
the Agreement related to the Field, except information within the ambit of
Article VIII, Paragraph B.
I. "Proceeds" shall mean:
1. in the case where Products are sold by a sublicensee of FGN, the
after-tax revenues of FGN attributable to such sublicensee sales;
2. in the case of sales of Product by FGN, FGN's Net Sales.
J. "Net Sales" shall mean the gross sales including [ * ] less the
following costs of FGN and its Affiliates: [ * ].
K. "Separate Patent" shall mean each patent within Patent Rights which
does not claim priority (e.g., by continuation, continuation in part,
divisional, reissue or foreign application filing) to an earlier filed patent or
patent application among the Patent Rights.
ARTICLE II - LICENSE OPTION
A. The University hereby grants to FGN, and warrants that it has the right
to grant, an option for an exclusive license under each Separate Patent with the
right to grant sublicenses under Patent Rights, Improvements, and University-
Developed Technical Information to make, have made, use and sell Products and
Improvements. The University retains the right to use Products and Improvements
for research and educational purposes only, under the direction of [ * ].
B. FGN will commit itself to a diligent program of commercializing at
least one Product within the Patent Rights. FGN agrees to prepare and submit on
a confidential basis to the University semiannual summaries of its progress in
pursuing the
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
3.
<PAGE>
development, production and marketing of Products. In the event the University's
review of FGN progress summaries leads University to believe that FGN has failed
to exercise reasonable diligence in the performance of its management of the
commercialization at least one Product within the Patent Rights, then University
shall have the right to advise FGN of its belief and to request remedial action.
If University and FGN disagree, either may bring the matter before that American
Arbitration Association for adjudication at their joint expense. In the event
arbitration determines that FGN has not acted diligently, and FGN does not
accelerate its activities in accordance with the arbitrator's recommended
actions, then FGN's rights under this Research and License Agreement may be
terminated by the University.
ARTICLE III - TECHNICAL INFORMATION
Promptly after the effective date of this Agreement, the University and FGN
shall disclose and furnish to each other all information related to the Field
that is then known or possessed by University Researchers relating to the Field.
The University shall from time to time thereafter promptly disclose to FGN all
University-Developed Technical Information that University Researchers may
thereafter acquire or develop during the term of this Agreement.
ARTICLE IV - RESEARCH PROGRAM
A. The University shall conduct a research program under the direction of
Dr. Lee Hixson as principal investigator (hereinafter referred to as "Research
Program") in the Field and will furnish facilities and investigators necessary
to carry out such Research Program. The Research Program shall be directed
toward development of a proprietary compound, composition, delivery systems
and/or method in the Field.
B. The University shall perform the Research Program during the three
years succeeding the effective date of this agreement. FGN shall have the
option to extend the Research Program under mutually acceptable support terms.
C. By February 1, 1992, a written Research Program and annual budget for
the second year of this Agreement will be developed by the University after
consultation with and subject to the approval of FGN. The Research Program will
outline the research to be conducted for the second year of this Agreement, and
will be updated annually thereafter by the University after consultation with
and subject to the approval of FGN, before any funds budgeted for the Research
Program in any year are spent on non-cancellable contracts and fellowships or
postdoctoral appointments that will be required.
4.
<PAGE>
D. The University acknowledges and agrees and FGN has approved a research
budget not to exceed [ * ] for the year of March 1, 1991 - March 1, 1992 for the
Research Program by FGN and the University Researchers during that year.
E. In the event of death or incapacity of [ * ] or if [ * ] should
terminate his research in the Field at the University or supervision of the
Research Program for any reason, FGN may terminate its remaining obligations
under this Agreement, solely at its option.
F. University as represented by [ * ] or his designees who are actively
engaged in the Research Program shall meet with FGN personnel at such times and
places as may be mutually agreed upon by [ * ] and FGN, but in any event at
least once every four months during the term of the Research Program to discuss
work being conducted or to be conducted under the Research Program. FGN shall
reimburse [ * ] or his designee(s) for his reasonable out-of-pocket travel and
living expenses incurred with the prior approval of FGN in connection with such
meetings.
G. During the term of this agreement, the University, upon FGN's request
to the University, shall provide FGN access to the University-Developed
Technical Information. Every four months during the Research Program, the
University shall furnish FGN with a detailed written report containing the
University-Developed Technical Information developed to date in the Research
Program. FGN may freely utilize all such University-Developed Technical
Information in any manner desired.
ARTICLE V - PATENTS
A. The University agrees that any inventions in the Field, whether
patentable or not, made by the University's employees or agents or others under
the University's control under the Research Program during the term of this
Agreement relating to the Field shall be promptly disclosed by the University to
FGN.
B. FGN shall, at its option, apply for, prosecute and maintain patents on
behalf of the University for all inventions in the Field made by the University
during the Research Program using counsel selected by FGN. FGN shall be
responsible for costs and fees in filing, prosecuting, and maintaining such
patents. FGN shall provide the University with copies of all patent
applications and written communications to or from any patent office. The
University agrees to cooperate with FGN in prosecution, and agrees to execute
all formal documents necessary to file, prosecute, and maintain such
applications.
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
5.
<PAGE>
C. Once a patent application is filed by FGN pursuant to Paragraph B
above, FGN shall have one (1) year to exercise its option for a license for that
patent application as provided in this Agreement.
D. The University acknowledges that FGN has exercised its option pursuant
to Paragraph B above as to all the patent applications listed in Appendix A, and
that FGN is exclusively licensed under all such patent applications, their
divisionals, continuations, continuations-in-part, reissues, and foreign
counterparts. The University also warrants that it has the right to grant this
exclusive license, and will provide any further assurances or execute any
documents necessary attendant to the grant of said exclusive license.
ARTICLE VI - CONSIDERATION
A. FGN shall reimburse the University for all direct and indirect costs
incurred in performance of the research program according to the budget approved
in the Research Program. Invoices will be prepared and submitted by the
University monthly to include both direct and indirect costs incurred for that
period. The indirect costs will be calculated at [*] of the total direct costs
until April 30, 1992. After April 30, 1992, indirect costs shall be calculated
at [*] of total cost. Payment of each invoice must be received by the University
within thirty days from the date of the invoice. Failure to make payment within
sixty days of the date of the invoice will constitute a material breach of this
Agreement.
B. The parties agree to negotiate in good faith on appropriate funding
support by FGN of the Research Program for each budget year beginning in March.
C. FGN will pay the University a royalty for Patent Rights and Technical
Information for each Separate Patent of [*] percent [*] of FGN Proceeds from
sales of Product. There shall be only one royalty paid per unit of Product sold
regardless of the number of sales of that Product; if payable pursuant to
Article I(I)(2), that royalty shall be paid on the highest Net Sales as between
FGN and a customer, FGN and its Affiliate, between FGN Affiliates, or between an
FGN Affiliate and a customer. Once FGN has paid a cumulative total of [*] in
royalties (which shall be increased beginning on June 1, 1994 at an annual
interest rate of [*] percent on the outstanding balance), for each Separate
Patent covering Product sold, FGN shall thereafter have the royalty-free,
exclusive license to make, have made, use and sell any Products described by any
claim or combination of claims of any patents within the Patent Rights in the
Field.
D. If an employee of the University is a co-inventor, as determined at the
time the patent application is filed with the U.S. Patent & Trademark Office,
on a patent under
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
6.
<PAGE>
the Patent Rights that cover the Product with another inventor or inventors (or
that inventor's assignee) to whom FGN has a royalty obligation, or a profit-
sharing financial obligation related to the Product, then the amounts and
percentage in paragraph C shall be adjusted in accordance with a schedule to be
agreed upon by the parties such that FGN's total royalty obligation does not
exceed [*] percent, and total royalty obligation does not exceed
[*] on each Separate Patent, but in no event shall the University's
royalty be reduced below [*] percent [*] or [*] respectively.
ARTICLE VII - PUBLICATIONS
A. FGN recognizes that the results of the University Project can be
published and agrees that researchers of the University engaged in the Project
shall be permitted to present at symposia, international and national, and/or
regional professional meetings, and to publish in journals, theses or
dissertations, or otherwise of their own choosing, the methods and results of
the Project.
B. However, the University agrees not to disclose Confidential Information
received from FGN, except under the circumstances of Article VIII, Paragraph B,
and agrees to submit to FGN a copy of any manuscript prior to submission for
publication. If within thirty (30) days after such manuscript is sent to FGN,
FGN asks the University to delay publication so that patent application(s) may
be filed, the University shall not publish or otherwise disclose to any third
party the information contained in the manuscript until (a) such time as a
patent application is filed thereon or (b) the expiration of twelve (12) months
from the date the said manuscript is sent to FGN, whichever of (a) or (b) occurs
first.
ARTICLE VIII - NON-DISCLOSURE
A. Any and all Confidential Technical Information disclosed by one party
to the other and designated as Confidential shall be maintained by the receiving
party in strict confidence and shall not be disclosed to any third party, with
the exception of the use by FGN or any of its Affiliates to present to potential
investors in the FGN project. Any information communicated orally shall be
confirmed in writing or other tangible form within thirty (30) days. Further,
the receiving party shall not use the Confidential Technical Information for any
purpose other than those purposes specified in this Agreement. The receiving
party may disclose Confidential Technical Information to employees requiring
access to it for the purposes of this Agreement provided, however, that prior to
making any such disclosures each such employee is apprised of the duty and
obligation to maintain Confidential Technical Information in confidence and not
to use such information for any purpose other than in accordance with the terms
and conditions of this Agreement. The receiving party will not be held
financially liable for any
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
7.
<PAGE>
inadvertent disclosure, but each will agree to use its reasonable efforts not to
disclose any agreed to Confidential Technical Information.
B. Nothing contained herein will in any way restrict or impair either
party's right to use, disclose, or otherwise deal with any Confidential
Technical Information which at the time of its receipt:
i. is generally available in the public domain, or thereafter becomes
available to the public through no act of the University; or
ii. was independently known prior to receipt thereof, or made
available to The University as a matter of lawful right by a third party.
C. The above obligations for Confidential Technical Information shall be
in effect for a period of three (3) years from the termination of this
Agreement.
ARTICLE IX - EFFECTIVE DATE AND TERM
This Agreement will become effective on the day and year first above
written and will remain in effect, unless sooner terminated as provided herein,
and will terminate (with the exception of the provisions of Article II, Article
V(D), and Article VI (C)) three years after its effective date, unless extended
by the parties.
ARTICLE X - TERMINATION
A. Material breach by University or FGN of the obligations or conditions
contained in this Agreement shall entitle the other party to give to the party
in material breach notice requiring the breaching party to correct such breach.
If such breach is not corrected, or substantial progress is not made toward such
correction, within ninety (90) days after the receipt of such notice, the
notifying party shall be entitled (without prejudice to any of its other rights
conferred on it by this Agreement) to terminate this Agreement by giving notice
to take effect immediately. The right of either party to terminate this
Agreement, as hereinabove provided, shall not be affected in any way by its
waiver of, or failure to take any action with respect to any previous breach.
B. FGN can terminate this Agreement at any time by giving the University
thirty (30) days written notice of termination.
C. Any termination by FGN, under paragraphs A or B of this Article shall
not terminate the provisions of Article II, Article V(D), or Article VI,
Paragraph C.
8.
<PAGE>
D. Anything herein to the contrary notwithstanding, in the event of early
termination of this Agreement by FGN pursuant to this Article, FGN shall pay all
costs accrued by the University as of the date of termination, including non-
cancellable obligations, which shall include all non-cancellable contracts and
fellowships or postdoctoral associate appointments called for in the Research
Program, incurred prior to the effective date of termination. After
termination, any obligation of FGN for fellowships or postdoctoral associates
shall end no later than the end of the academic term or semester of the
University following termination.
ARTICLE XI - ASSIGNMENT
This Agreement shall not be assignable by either party without the prior
written consent of the other party, except by FGN to the successors or assignee
of substantially all of the business of FGN related to Products.
ARTICLE XII - ENTIRE AGREEMENT AND AMENDMENTS
This Agreement contains the entire understanding of the parties with
respect to the matters contained herein and supersedes the Agreement of January
26, 1990 between the parties. This Agreement may be amended, modified or
altered only by an instrument in writing duly executed by the parties hereto.
ARTICLE XIII - NOTICES
Any notice or report required or permitted to be given or made under this
Agreement by one of the parties hereto to the other shall be in writing, and
shall be deemed effective upon receipt by the other party of such notice or
report by personal delivery, Express Mail delivery, or by registered airmail,
postage prepaid addressed as follows:
9.
<PAGE>
If to University;
Dr. Rita Manak
The University of Arizona
1430 East Fort Lowell Road
Suite 200
Tucson, Arizona 85719
and
Vice President for Research
Administration, 6th Floor
University of Arizona
Tucson, Arizona 85721
If to FGN:
Floyd G. Nichols
FGN, Inc.
5620 North Kolb Rd.
Tucson, Arizona 85715
ARTICLE XIV - SEVERABILITY
In the event that any one or more of the provisions of the Agreement should
for any reason be held by a court or authority having jurisdiction over this
Agreement, or either of the parties hereto, to be invalid, illegal or
unenforceable, such provision or provisions shall be reformed to approximate as
nearly as possible the intent of the parties, and if unreformable, shall be
deleted in such jurisdiction, elsewhere, this Agreement shall not be affected.
ARTICLE XV - GOVERNING LAW
The laws of the state of Arizona, United States of America, including
conflicts of laws principles, shall govern the interpretation of performance of
this Agreement.
ARTICLE XVI - PUBLIC DISCLOSURE OF AGREEMENT
There shall be no public disclosure of this Agreement or of the Research
Program by the parties hereto, for a period of three years from the Termination
of this Agreement, without the prior written approval of the content thereof by
The University and FGN.
10.
<PAGE>
ARTICLE XVII - NON-DISCRIMINATION
The parties agree to be bound by applicable state and federal rules
governing Equal Employment Opportunity and Non-Discrimination.
ARTICLE XVIII - ARBITRATION
The parties agree that should a dispute arise between them, in any manner,
concerning this Agreement, and said dispute involves the sum of FIFTEEN THOUSAND
DOLLARS ($15,000) or less in money damages only, exclusive of interest, cost or
attorneys' fees, the parties will submit the matter to Binding Arbitration
pursuant to the Arizona Supreme Court Rules for Compulsory Arbitration and the
decision of the arbitrator(s) shall be final and binding upon the parties.
ARTICLE XIX - STATE OBLIGATION
In the event that the performance by the Arizona Board of Regents for and
on behalf of the University of Arizona may be dependent upon the appropriation
of funds by the State Legislature of Arizona, and the Legislature fails to
appropriate the necessary funds, the Board of Regents may cancel this Agreement
without further duty or obligation other than the grant of the options under
Article II and the exclusive licenses under Article V(D). The Board Agrees to
notify FGN as soon as reasonably possible after the unavailability of said funds
comes to the Board's attention.
ARTICLE XX - CONFLICT OF INTEREST
This Agreement is subject to the provisions of A.R.S. 38-511 and the State
of Arizona may cancel this Agreement if any person significantly involved in
negotiating, drafting, securing or obtaining this Agreement for or on behalf of
the Arizona Board of Regents becomes an employee in any capacity of any other
party or a consultant to any other party with reference to the subject matter of
this Agreement while the Agreement or any extension hereof is in effect.
The University warrants that [*] have not been involved in negotiating,
drafting, securing or obtaining this Agreement.
ARTICLE XXI - MULTIPLE ORIGINALS
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
11.
<PAGE>
This Agreement may be signed in as many parts as there are parties hereto.
The total of all parts will constitute a whole.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their duly authorized representatives.
UNIVERSITY OF ARIZONA FGN, INC.
By: /s/ Charles A. Geoffrion By: /s/ Floyd G. Nichols
------------------------------------------ ---------------------------
Title: Associate Vice President for Research Title: President
--------------------------------------- ------------------------
Date: 6/13/91 Date: 6/26/91
---------------------------------------- -------------------------
12.
<PAGE>
RESEARCH AND LICENSE AGREEMENT
This Agreement is effective as of June 26, 1994, and extends the June 26,
1991 Amended Research and License Agreement between Cell Pathways, Inc. (f/k/a
FGN, Inc.) and the University of Arizona, subject to the following
modifications:
- - All references to FGN, Inc. or to FGN shall mean Cell Pathways, Inc.
- - Article I - Definition, Paragraph A, is amended as follows:
"University Researchers" shall mean [*] and other University employees
that work directly or collaborate with these two individuals in
research funded by FGN.
- - Article I - Definition, Paragraph B. is amended as follows:
"Field" shall mean new drugs and compositions for the treatment of
[*]. The Field shall exclude University research into the following
commercially available drugs: [*]. The Field shall exclude research,
requested by [*] into new delivery systems for commercially available
[*] not limited by dosage form. These exclusions do not apply to
chemical modifications, derivatives and the like of the aforementioned
commercially available drugs or to delivery systems for drugs except
for [*].
- - Article II - License Option, Paragraph A, line 8 is amended as follows:
only, under the direction of [*].
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE>
- - Article IV - Research Program
Paragraph A., line 2 is amended as follows:
the direction of [*] as principal investigators ....
Paragraph E, lines 1 and 2 are amended as follows:
E. In the event of death or incapacity of [*] or if both should
terminate their research in the Field ....
Paragraph F., lines 1, 4, 7, 8 are amended as follows:
F. University as represented by [*] or their ....
mutually agreed upon by [*] and .... the Research Program. FGN shall
reimburse [*] or their designee(s) for ....
- - Article V - Patents
Paragraph D before "their divisionals" insert "their parent
applications."
- - Article XIII - Notices. Addresses are amended as follows:
If to University:
Dr. Rita C. Manak
The University of Arizona
1430 East Fort Lowell Road
Suite 200
Tucson, Arizona 85719
Telephone (602) 621-5000
Facsimile (602) 322-0846
and
Vice President for Research
Administration, 6th Floor
University of Arizona
Tucson, Arizona 85721
Telephone (602) 621-3511
Facsimile (602) 621-7507
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
If to FGN:
Floyd G. Nichols
Cell Pathways, Inc.
1700 Broadway, Suite 2000
Denver, Colorado 80290
Telephone (303) 837-0252
Facsimile (303) 837-0253
- - Article IX is amended as follows:
This Agreement is effective as of June 26, 1994 and will remain in
effect, unless sooner terminated as provided herein, and will
terminate (with the exception of the provisions of Article II, Article
V(D) and Article VI(C) on June 26, 1997, unless extended by the
parties.
- - Article XIV - Severability, lines 7 and 8 are amended as follows:
The University warrants that [*] have not been ....
- - Appendix A is amended to include all Patent Rights as defined in Article I,
Paragraph E and Article V, Paragraph D and is attached to and made part of
this Letter to Amend.
IN WITNESS WHEREOF, the parties have caused this Letter of amend to be
executed by their duly authorized representatives as of the date the last to
sign affixes his or her signature.
Cell Pathways, Inc. The Arizona Board of Regents
on behalf of
The University of Arizona
By: /s/ Floyd G. Nichols By: /s/ Michael A. Cusanovich
------------------------------ -----------------------------------
Title: Chief Executive Officer Title: Vice President for Research
--------------------------- --------------------------------
Date: 12/14/94 Date: 12/15/94
---------------------------- ---------------------------------
I acknowledge that I have read and that I understand this Letter to Amend
between Cell Pathways, Inc. and the Arizona Board of Regents.
/s/ [*]
-------------------------------------------
[*]
/s/ [*]
------------------------------------------
[*]
* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
3.
<PAGE>
RESEARCH AND LICENSE AGREEMENT
This Agreement is effective June 26, 1997 and extends the June 26, 1991 Amended
Research and License Agreement between Cell Pathways, Inc. (f/k/a FGN, Inc.) and
the Arizona Board of Regents on behalf of The University of Arizona subject to
the following modifications:
- - Article IX is amended as follows:
This Agreement is effective as of June 26, 1997 and will remain in effect,
unless sooner terminated as provided herein, and will terminate (with the
exception of the provisions of Article II, Article V(D) and Article VI(C) on
June 26, 2000, unless extended by the parties.
- - Appendix A is amended to include all Patent Rights as defined in Article I,
Paragraph E. and Article V, Paragraph D and is attached to and made part of
this Agreement.
IN WITNESS THEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the day the last to sign affixes his
or her signature.
Cell Pathways, Inc. The Arizona Board of Regents
on behalf of
The University of Arizona
By: /s/ Richard H. Troy By: /s/ Michael A. Cusanovich
------------------------------ ------------------------------------
Title: Vice President Title: Vice President for Research
--------------------------- ---------------------------------
Date:____________________________ Date:__________________________________
I ACKNOWLEDGE THAT I HAVE READ AND THAT I UNDERSTAND THIS AGREEMENT BETWEEN CELL
PATHWAYS, INC. AND THE ARIZONA BOARD OF REGENTS ON BEHALF OF THE UNIVERSITY OF
ARIZONA.
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* CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS AND DENOTED BY AN ASTERISK, HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE
SECURITIES ACT OF 1933, AS AMENDED.
1.
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EXHIBIT 10.24
LEASE
This Lease is executed on this 9th day of August, 1993, by and WRC
Properties, Inc. (hereinafter called "Landlord"), and Cell Pathways Inc., a
Delaware corporation (hereinafter called "Tenant").
1. Demise
1.1 In consideration of the timely payment of the rent and performance of
all of the covenants and agreements by Tenant as are hereinafter set forth,
Landlord hereby leases and demises unto Tenant, and Tenant accepts, the Demised
Premises (as hereinafter defined), together with the right to use in common with
Landlord, its other tenants, subtenants and invitees thereof the common exterior
parking, service drives and trash collection areas hereinafter designated for
Tenant's use.
2. Definitions
Throughout this Lease, the following terms or words shall have the
following meaning, to wit:
2.1 "Demised Premises" is that part of the Project, being suite number
110, comprising a total floor area of 7930 square feet, in the building
addressed as 1300 South Potomac, Aurora, Colorado ("Building"), and the non-
exclusive right to use the balance of the "Project", both of which are
identified on Exhibit "A", attached hereto and incorporated herein by reference.
2.2 "Project" is that particular development, consisting of land, four (4)
buildings and other improvements, one of which is the Building, containing the
Demised Premises, all of which is depicted on Exhibit "A". The Project may be a
part of a development of greater size, located on the lands adjoining the
Project, which total development, including the Project, is hereafter called
"Development."
2.3 "Commencement Date" is (a) the 1st day of October, 1993, or (b) that
date on which Tenant shall have first taken possession of any part of the
Demised Premises, whichever shall first occur. The actual Commencement Date
shall be memorialized as provided in Section 2.5 hereof.
2.4 "Proportionate Share" is that percentage determined by dividing the
square footage from time to time in the Demised Premises (i.e., presently 7,930)
by the total square footage from time to time in the buildings in the Project
(i.e., presently 144,148). Such share shall apply, among other items, to the
determination of Tenant's Additional Rent.
2.5 "Term" means a period of five (5) years and six (6) months and zero
(0) days to be computed from 12:01 a.m. on the Commencement Date (if clause
"(a)" of Section 2.3 hereof is applicable, but if clause "(b)" thereof is
applicable, then such other period of years, months and days as shall be
determined based upon the actual Commencement Date as determined in
1.
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accordance with said clause "(b)" and expiring at 12 o'clock midnight on the
31st day of March 1999, unless earlier terminated in accordance with the
provisions of this Lease. See Addendum regarding Possession or Delay in
Commencement or Term.
2.6 "Rent" means the "Base Rent" as is hereinafter defined, and all other
financial obligations of Tenant hereunder which are herein described as
"Additional Rental" or "Additional Rent."
TENANT'S COVENANTS
3. Rent
3.1 Base Rent.* Tenant covenants and agrees to timely pay without notice,
deduction, set-off or abatement, to Landlord at its offices, or such other
address as Landlord may notify Tenant, an annualized Base Rent of Forty-Eight
Thousand Two Hundred Fourteen and 44/100 Dollars ($48,214.44**) for the term
hereof, in lawful money of the United States, in equal consecutive monthly
installments of Four Thousand Seventeen and 87/100 Dollars ($4,017.87) each, in
advance on the first day of each month during the Term hereof.*** If the Term
hereof commences, expires or is terminated on any day other than the first or
last day of a month, respectively, the Rent for the month in which such shall
occur shall be adjusted on a per diem basis.
* See Addendum regarding Rent Abatement/Rent Escalation.
** See Addendum regarding Base Rent breakdown.
*** With a ten day (10) grace period.
2.
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3.2 Rent Adjustments/Additional Rent. Commencing with the thirteenth
(13th) month of this Lease, to the extent that the Proportionate Share of the
Operating Costs, as said term is hereinafter defined, on a calendar year basis,
exceeds (or is estimated by Landlord to exceed, subject to adjustment as
hereinafter provided in Section 3.2.2) Two and 33/100 Dollars ($2.33) per square
foot of the Project ("Landlord's Share"), the Tenant agrees to pay the same to
Landlord in the manner provided in said Section 3.2.2 as Additional Rental.
3.2.1 Operating Costs. The term "Operating Costs" means the total
amounts paid or payable by Landlord, or others on behalf of Landlord, in any
calendar year, in connection with the ownership, maintenance, repair and
operations of the Project, including the Building and, including without
limiting the generality of the foregoing, the amounts paid for all energy and
fuel used in connection with common areas and used in and about the Project, but
not in the Demised Premises, the amount paid for all electricity furnished to
the Project, other than electricity furnished to and paid for by tenants in
accordance with their separate meters; the amount paid for all hot and cold
water other than that chargeable to tenants by reason of their extraordinary
consumption of water; the amount paid for all labor and/or wages and other
payments including cost to Landlord of workmen's compensation and disability
insurance, payroll taxes, welfare and fringe benefits made to janitors, security
personnel, employees, contractors and subcontractors of the Landlord involved in
the operation and maintenance of the Project; sewer taxes and charges; Real
Estate Taxes (as are hereinafter described); managerial, administrative and
telephone expenses related to the Project; the total charges of any independent
contractors employed in the care and operation, maintenance and cleaning of the
Project, including snow and trash removal and landscaping; the amount paid for
all supplies, tools, equipment and necessities which are occasioned by everyday
wear and tear; the cost of accounting services necessary to compute the rents
and charges payable by tenants; legal, inspection and consulting services; the
cost of pest control; the cost of guards and other protection services; payments
of general maintenance and repairs to the plant and equipment supplying climate
control; and the amount paid for premiums for all insurance required or deemed
desirable from time to time by Landlord or Landlord's mortgagee(s), including
without limitation loss of rent or business interruption insurance. Operating
Costs shall not, however, include interest on debt, capital retirement of debt,
costs properly chargeable to capital account except for capital expenditures
which reduce operating expenses in which case such expenditures shall be
amortized over the life of the object for such capital expenditure, or any cost
which is charged to and collected from any tenant of the Project on account of
any negligent or willful act or omission of such tenant or for which such tenant
may be liable, contractually or otherwise. The reference to "Project" in this
subparagraph (b) shall include all related facilities, including sidewalks,
loading and/or parking areas and driveways, landscaping, curbs, curb cuts and
other public areas in or around the Building, other buildings and improvements
in the Project. The provision or termination of such services or others and the
degree thereof shall be determined by Landlord. Moreover, when Landlord causes
services to be rendered by independent third parties, Landlord shall have no
liability for the performance thereof or liability therefor, provided that
Landlord has not been grossly negligent in the hiring and supervision of such
third parties.
3.
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(a) "Real Estate Taxes" shall mean and include all general and
special taxes, assessments, duties and levies, charged and/or levied upon or
assessed against the Project or any part thereof, including by way of
illustration, the Building, the land upon which it is located, any leasehold
improvements, fixtures, installations, additions and equipment, whether owned by
Landlord or Tenant, provided that Tenant shall not be burdened with taxes
attributable to improvements, fixtures, installations, additions and equipment
owned or used by another Tenant in the Project. Further, if at any time during
the Term of this Lease the method of taxation of real estate prevailing at the
time of execution hereof shall be, or has been altered so as to cause the whole
or any part of the taxes now or hereafter levied, assessed or imposed on real
estate to be levied, assessed or imposed upon Landlord, wholly or partially, as
a capital levy, sales tax, value added tax, or otherwise, or on or measured by
the rents received therefrom, then such new or altered taxes attributable to the
Project shall be deemed to be included within the term "Real Estate Taxes" for
purposes of this Section.
(b) In the event that more than the Project is developed in the
Development, there may be expenditures that are common to the Project and either
parts or all of such additional development, in which event the Landlord shall
allocate the same, to extent applicable, as Landlord shall determine, to the
Project, provided that the Project shall not be burdened thereby in excess of
value reasonably conferred.
3.2.2 Payment of Additional Rent. Any Additional Rent payable by
Tenant under Section 3.2 hereof shall be paid as follows, unless otherwise
provided: during the Term, Tenant shall pay to Landlord, monthly, in advance,
one-twelfth (1/12) of the amount of such Additional Rent on a calendar year
basis, as estimated by Landlord to become due from Tenant. Such estimate must be
adjusted by Landlord no less frequently than on an annual calendar year basis,
and Tenant shall pay installments of Additional Rent according to such estimate.
Landlord shall first deduct from the Operating Costs one-twelfth (1/12) of
Landlord's Share allocable to the Demised Premises in arriving at each month's
assessment of Additional Rent of the Tenant. As soon as the pro rata amount
payable by the Tenant for each calendar year, including the final such year or
portion thereof, has been determined, the amount shall be adjusted between the
Landlord and the Tenant. In such final year or portion thereof, any adjustment
required hereunder shall be made within sixty (60) days of such year's end. This
adjustment provision shall survive the termination or expiration of this lease.
3.2.3 Records. In connection with payment of Additional Rent under
Section 3.2 hereof, Tenant, at its expense, may examine the books of the
Project, pursuant to thirty days advance written notice, at Landlord's corporate
offices, and provided that same shall be conducted in a manner so as not to
interfere with or interrupt the operations of Landlord. Such examination,
however, shall not extend the due date for payment. In the event any dispute
shall arise relating to the accounting treatment of a component of such
Additional Rent, the determination of a mutually agreed upon independent
certified public accountant shall be binding on all parties.
3.3 Late Payments. In the event Tenant (more than three (3) times) makes a
payment of Rent or any component thereof which is less than the full amount of
such Rent or
4.
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component thereof then due, or returned marked "NSF" or "Account Closed" or the
like, Landlord may thereafter require Tenant to make all future payments of Rent
by certified or cashier's checks from banks located in the Denver Metropolitan
Area.
4. Use of Demised Premises
4.1 Permitted Uses. Tenant shall use and occupy the Demised Premises only
Pharmaceutical and Biotechnology Research and development and general
business offices in an orderly, legal, reputable and safe manner and, to the
extent of Tenant's right to do so, to use the balance of the Project for only
the purposes for which it was designed and to do so in the aforesaid manner.
Tenant shall exercise reasonable diligence and discipline to cause its invitees,
suppliers, independent contractors, customers and agents to conform to the
foregoing. No sign (except for permitted standard building signage per Exhibit
"C"), fixture, advertisement or notice shall be displayed, inscribed, painted or
affixed or established by Tenant on or in any part of the Demised Premises,
Building and/or Project, except that signs may be displayed upon the interior of
the Demised Premises which are not visible from without the Demised Premises and
which do not damage or deface any component thereof, reasonable wear and tear
excluded. Except for building standard materials and colors, Tenant shall not
install any draperies, shades or venetian blinds visible from the exterior of
the Building, unless the color, materials, shape, style and size shall have been
approved by the Landlord which approval shall be within the sole discretion of
Landlord. In no event shall Tenant cause waste to occur in, on or about the
Demised Premises or Project. Tenant shall conform to the Rules and Regulations
which are attached hereto, and incorporated by reference as, Exhibit "C", and
all modifications and additions thereto which are periodically promulgated by
Landlord. Landlord shall have the right at all times to change the Rules and
Regulations or to amend or supplement them in any reasonable manner as may be
deemed advisable for the safety, care and/or cleanliness, and for the
preservation of good order, in the Project and Development and any and all
components thereof, including the Demised Premises, provided they do not
interfere with the Permitted Uses.
5. Services
5.1 Energy. Tenant shall independently contract with third parties for its
gas and electrical energy to be used in and on the Demised Premises and shall
timely pay therefor. Landlord has no obligation to provide any energy, fuel or
telephone to Tenant for Tenant's use, or for Tenant's operations in and around
the Demised Premises.
5.2 Janitorial Services and Security Protection. If such services are
desired, Tenant at its sole expense shall timely pay all charges and costs for
janitorial services performed in and security protection for the Demised
Premises during the Term of this Lease. Tenant shall independently contract for
such services with a provider of such services.
5.
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6. Alterations/Repairs
6.1 By Tenant.
6.1.1 Alterations. Tenant shall make no structural alterations,
structural decorations, structural improvements or structural additions, in, on
or around the interior or exterior of the Demised Premises, or remove its
improvements which may become Landlord's property (hereinafter collectively
referred to as "alterations"), as hereafter provided, without first obtaining
the written consent of Landlord, which shall not be unreasonably withheld, after
Tenant shall have submitted its final plans and specifications relating thereto.
Such work must be performed in accordance with such drawings and specifications
and by such contractors engaged by Tenant, approved in writing by Landlord and
subject to all reasonable conditions which Landlord may impose, which shall not
be unreasonably withheld. All such work shall be performed free and clear of all
mechanic's and/or materialmen's liens and Landlord shall have no liability for,
or whatsoever in connection with, the performance of such work, notwithstanding
its consent to any plans and specifications or Tenant's contractor. Provided
nevertheless that Landlord may at its option, pursuant to contracts approved by
Tenant, which approval shall not be unreasonably withheld, at Tenant's expense,
require that Landlord's designated contractors be engaged for any mechanical,
electrical work or other work affecting the structure of the Building,
including, without limitation, at any time and from time to time, repairs when
same, in Landlord's opinion, are needed and periodic maintenance consistent with
manufacturers' recommendations and/or requirements and in accordance with the
recommendations and/or requirements specified by the installing mechanical
engineer or contractor or any mechanical engineer retained or designated by
Landlord. At Landlord's election, Tenant shall submit to Landlord's supervision
over construction, shall provide Landlord upon request with financial assurances
prior to the commencement of alterations, and, pursuant to contracts approved by
Tenant, which approval shall not be unreasonably withheld, promptly pay to
Landlord's or to Tenant's subcontractors as the case may be, when due, the cost
of all such work and of all materials, labor and services involved therein.
Tenant covenants that Tenant will not suffer or permit during Term hereof any
mechanics' or other liens for work, labor, services or materials ordered by
Tenant or for the cost of which Tenant may be obligated, pursuant to contracts
approved by Tenant, which approval shall not be unreasonably withheld, to attach
to Demised Premises, the Building or portion of the Project and that whenever
and so often as any such liens shall attach or claims therefor shall be filed,
Tenant shall within forty-five (45) days after Tenant has notice of the claim of
lien, procure the discharge thereof. Tenant shall, at its own cost and expense,
take out or cause to be taken out any additional insurance and payment and
performance bonds reasonably required by Landlord to protect Landlord's and
Tenant's interest during the period of, or otherwise with respect to, the
alteration. At least five (5) days prior to the commencement of any work
permitted to be done by Tenant, Tenant shall notify Landlord of the proposed
work and the names and addresses of the persons supplying labor and materials
for work so that Landlord may avail itself of the provisions of Colorado law.
During any such work
6.
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on Demised Premises, Landlord shall have the right to inspect the Demised
Premises at all reasonable times, and shall have the right to post thereon
notices such as those provided for by Colorado law. All alterations, additions
or improvements made by either party (except only moveable office furniture not
attached to the Building and laboratory equipment, shelves, cabinets, animal
cages, supplies and equipment), at the expense of either party, shall be deemed
a part of the Building and the property of Landlord and shall remain upon and be
surrendered with the Demised Premises as a part thereof without molestation,
disturbance or damage at the termination or expiration of this Lease.
Notwithstanding said ownership of such items, the Landlord may notify Tenant
prior to the end of the term that it elects to have Tenant remove said
additions, alterations, and improvements and restore the Demised Premises to the
condition in which said Premises were prior to the making of such alterations,
additions or improvements, reasonable wear and tear excepted, provided, however,
that this shall not apply to tenant improvements constructed in accordance with
Exhibit B-2. In such event title to such items shall pass to Tenant upon
removal, but no express or implied warranties by Landlord relating to such
property shall occur incidental to such transfer or otherwise. This covenant
includes the obligation to replace broken glass on or constituting a portion or
component of the Demised Premises.
6.1.2 Repairs.
(a) Tenant shall, at its own cost and expense, (1) repair or
replace any damage to all or any part of the Demised Premises or any other
portion of the Project or Development caused by Tenant or Tenant's agents,
employees, invitees, licensees or visitors; (2) continuously maintain or cause
to be maintained, as suggested by equipment manufacturer, all heating, air
conditioning, plumbing, venting and electrical systems and equipment in a safe
and good operating condition; (3) to maintain the balance of the Demised
Premises or any component thereof (except for items of maintenance and repair
specifically assumed by Landlord hereunder, but including doors, stairs, loading
docks, signs, etc.) in safe, well maintained condition. If Tenant fails to
promptly maintain or repair as aforesaid despite notice from Landlord, Landlord,
at its option, may maintain or make the repairs or replacements and Tenant shall
reimburse Landlord for the cost thereof, plus interest at the rate hereinafter
specified, within five (5) days after demand by Landlord.
(b) Tenant shall not allow any damage to be committed on any
portion of the Demised Premises, Project and Development and, at the termination
of this Lease, by lapse of time or otherwise, Tenant shall deliver the Demised
Premises to Landlord in as good condition as at the date of first possession of
Tenant, ordinary wear and tear, and permitted alterations and improvements,
excepted. The cost and expense of any repairs necessary to so restore the
condition of the Demised Premises shall be borne by Tenant but, if Landlord
specifically undertakes to restore the Demised Premises pursuant to contracts
approved by Tenant, which approval shall not be unreasonably withheld, it shall
have a right of reimbursement from Tenant, plus interest at the rate hereinafter
specified, within five (5) days after demand by Landlord.
(c) Tenant shall conform to the requirements of 6.1.1 hereof
when it performs or causes to be performed any repairs.
7.
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6.2 By Landlord.
6.2.1 Repairs. Unless otherwise expressly provided, Landlord shall
not be required to make any improvements, replacements or repairs of any kind or
character to the Demised Premises, the Project or the Development or any portion
thereof during the term of this Lease, except those relating to the maintenance
of the roof, foundation, and the structural support of the roof and exterior
walls (excluding all doors, loading docks, exterior stairs, Tenant signs and
related equipment) of the Demised Premises, Project and Development in good
repair and condition, except for reasonable wear and tear. Landlord shall not be
liable to Tenant, except as expressly provided in this Lease, for any damage or
inconvenience, and Tenant shall not be entitled to any abatement or reduction of
rent by reason of any repairs, alterations or additions required to be made by
Landlord under this Lease.
6.2.2 Alterations. Landlord hereby reserves the right from time to
time to make repairs in and/or to or changes in, additions to, subtractions from
or rearrangements of the Demised Premises, the Project or the Development,
including, without limitation, all improvements at any time thereof, all
entrances and exits thereto, and to grant, modify and terminate easements or
other agreements pertaining to the use and maintenance of all or parts of the
Building or Project and to make changes or additions to the pipes, conduits,
utilities and other necessary services in and/or to the Demised Premises or
which serve other portions of the Project or the Development, provided that
Tenant shall not be thereby unreasonably restricted in Tenant's quiet enjoyment
of the Demised Premises for the Permitted use.
6.3 Liability Limitations.
6.3.1 Landlord's Liability. Tenant shall neither hold nor attempt to
hold Landlord liable (a) for any injury to persons, including death, or damage
to property, either proximate or remote, as the result of or caused by any
repairs, alterations or accident occurring in, to or upon the Demised Premises,
the Project or the Development or any component thereof, to property adjacent to
the Project or the Development, or other parts of the Building not herein
demised, whether by reason of the negligence or fault of the Landlord or
occupants thereof or any other person or otherwise, nor (b) for any injury or
damage occasioned by Landlord's simple negligence, gas, smoke, rain, snow, wind,
ice, hail, water, however occasioned, lightening, earthquake, war, civil
disorder, strike, lack of fuel or energy, defective electric wiring or the
breaking or stoppage of the plumbing or sewerage upon, to or in the Building or
adjacent premises, whether said breaking or stoppage results from freezing or
otherwise; provided, however, that the foregoing shall not apply to Landlord's
breach of contract, violation of law, gross negligence or intentional tort or to
the extent otherwise provided for by Colorado law.
6.3.2 Tenant Indemnification. Tenant shall indemnify, defend, and
save harmless Landlord of and from all liability for damages or claims against
Landlord on account of injuries to the person, including death, or damage to the
property of any other tenant in the Project or the Development, or to any other
person within any part of the Project or the Development for any purpose
whatsoever, where the injuries are caused by the negligence or wrongful
misconduct of the Tenant, its agents, servants or employees, or of any other
person entering upon the
8.
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Demised Premises or any part of the Project or the Development under express or
implied invitation of Tenant or other parties who have a right or license to be
in the Project or the Development, or where such injuries are the result of the
violation of ordinances, rules, regulations, decrees or orders of any
governmental or quasi-governmental agency of competent jurisdiction, including,
without limitation, boards of insurance underwriters, or of any of the rules and
regulations provided for herein by any of such persons; provided, however, that
Tenant shall not be liable for any damages attributable to Landlord's gross
negligence, breach of contract, violation of Law or intentional tort.
7. Business and Other Taxes
7.1 Tenant shall fully and timely pay all taxes and assessments levied,
charged or assessed against or in respect of Tenant's occupancy and/or use of
the Demised Premises, the Project or the Development or any activities therein
conducted (e.g., sales taxes) or in respect of the personal property, trade
fixtures, furniture and facilities of Tenant on the Demised Premises, the
Project or the Development, if any, and to indemnify, defend and hold Landlord
harmless from and against all payment of such taxes and assessments and against
all loss, costs, charges and expenses (including attorneys' fees) occasioned by
or arising from any and all such taxes, rates, duties, assessments and to
promptly deliver to Landlord for inspection, upon request of the Landlord,
evidence satisfactory to Landlord of any such payments.
8. Acceptance of Premises
8.1 Subject to the provisions of 2.5, Landlord will complete the Demised
Premises in accordance with Exhibit "B". Tenant acknowledges that it will
examine the Demised Premises before taking possession hereunder. Unless Tenant
furnishes Landlord with a notice in writing specifying any defect in the
construction of the Demised Premises within ten (10) days after taking
possession, such taking of possession shall be conclusive evidence as against
the Tenant that at the time of taking possession the Demised Premises were in
good order and satisfactory condition; provided, that the following shall not
apply to latent or hidden defects or conditions which are in violation of
applicable laws, regulations or ordinance.
9. Estoppel Certificates
9.1 By Tenant. Tenant agrees that it will at any time and from time to
time, upon not less than ten (10) days' prior notice, execute and deliver to the
Landlord a statement in writing, provided by Landlord, certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
modifications and that the Lease, as modified, is in full force), the amount of
the Rent then being paid hereunder, the dates to which the same, by installment
or otherwise, and each component thereof have been paid, and whether or not
there is any claimed existing default or event which with the passage of time or
the giving of notice or both would result in such a default on the part of
Landlord of which the Tenant has notice and such other information as may be
required by Landlord, its mortgagees, prospective purchasers or any governmental
entity. Failure of Tenant to timely execute said statement shall constitute an
unconditional acknowledgment that the Tenant's status under the Lease is as
thereafter represented by the
9.
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Landlord as of the date of the request for such statement, provided that such
statement as finished by Landlord to Tenant for signature is both true and
complete in all material respects.
9.2 By Landlord. Landlord agrees to provide a statement as described in
and in accordance with and subject to the remedy provided in 9.1 hereof.
10. Surrender
10.1 End of Term. Tenant shall surrender and deliver up possession of the
Demised Premises promptly at the expiration or earlier termination of this
Lease.
11. Insurance
11.1 Tenant's Obligations. During the term of this Lease, Tenant, at its
sole cost and expense and for the mutual benefit of Landlord, Landlord's
mortgagee(s) and Tenant, shall obtain and maintain in full force the following
insurance:
11.1.1 Casualty. Casualty insurance, including fire, extended perils
coverage and coverage for smoke damage on all of the personal property located
within the Demised Premises and on all improvements which may have been made by
Tenant to and/or in the Demised Premises.
11.1.2 Property/Liability. Property damage and public liability
insurance including personal injury liability, contractual liability, non-owned
automobile liability, owners' and contractors' protective insurance coverage and
a cross liability clause with respect to the Demised Premises and the Tenant's
use of any part of the Building, the Project and the Development, and which
coverage shall include the business operations conducted by the Tenant and any
other persons on the Demised Premises, and by Tenant, its agents and employees,
upon the Project or the Development or any portion thereof. Such policies shall
be written on a comprehensive basis with limits of not less than One Million
Dollars ($1,000,000.00) for any one occurrence and such higher limits as the
Landlord or the mortgagee(s) of the Landlord may reasonably require from time to
time.
11.1.3 Workmen's Compensation. Workmen's Compensation insurance
insuring Landlord and Tenant from all claims for personal injury and death in
such amounts as may, from time to time, be sufficient to pay the maximum
accumulated award allowed by Colorado law.
11.2 Policy Requirements. Any other form or forms of insurance as the
Landlord or the mortgagee(s) of the Landlord may reasonably require from time to
time in form, in amounts and for insurance risks against which a prudent tenant
would protect itself. All policies shall be maintained with insurers who are
qualified to do business in Colorado and are acceptable to Landlord and in form
satisfactory from time to time to the Landlord. The Tenant agrees that
certificates of insurance will be delivered to the Landlord not later than ten
(10) days prior to Commencement Date or when Tenant takes possession of all or
any part of the Demised Premises, whichever shall first occur. All policies
shall name Landlord, and Landlord's
10.
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mortgagee(s) if Landlord so requests, as additional insureds, and shall contain
an undertaking by the insurers to notify the Landlord and the mortgagee(s) of
the Landlord in writing by registered or certified mail, not less than thirty
(30) days prior to the effective date of any material change, cancellation or
other termination thereof.
12. Entry by Landlord
12.1 Entry Permitted. Without creating any obligation to repair any
matter not specifically assumed by Landlord hereunder, Tenant agrees to permit
Landlord, or its agents to enter upon the Demised Premises at any time for the
purpose of inspecting and/or of making repairs, alterations or improvements to
the Demised Premises or to the Building or any component part of either of them,
and the Tenant shall not be entitled to compensation set-off or concession
whatsoever for any inconvenience, nuisance or discomfort occasioned thereby.
Landlord shall attempt to proceed hereunder in such manner as to minimize
interference with Tenant's use and enjoyment of the Demised Premises, but,
notwithstanding the foregoing, Landlord shall not be obligated to cause such
work to be done on any evening, weekend, holiday or over-time basis. Tenant
shall permit Landlord or its agents to exhibit and show the Demised Premises to
prospective tenants during normal business hours of the last six (6) months of
the Term or any renewal thereof.
13. Assignment and Subletting
13.1 Permissible Occupants. Tenant shall not permit any part of the
Demised Premises to be used or occupied by any persons other than Tenant, and
the employees, servants and agents of Tenant, nor permit any part of the Demised
Premises to be used or occupied by any licensee or concessionaire, or permit any
persons to be upon the Demised Premises other than Tenant and Tenant's
employees, customers and others having lawful business with them. Tenant shall
include such partnerships and corporations through which Tenant conducts its
business as well as the University of Colorado or any subdivision thereof with
which Tenant is working.
13.2 Sublet/Assignment. Tenant shall not assign all or any interest in
this Lease, nor sublet nor part with the possession of all or part of the
Demised Premises without the prior written consent of Landlord, which consent
shall not be unreasonably withheld; provided, however, such consent to any
assignment or subletting shall not relieve the Tenant from its obligations for
the payment of all Rental due hereunder and for the full and faithful observance
and performance of Tenant's covenants, terms and conditions of this Lease.
Without limiting the generality of anything foregoing, Landlord shall be
entitled to withhold consent to a proposed assignment if the proposed assignee
has either less financial stability, viability or net worth or conducts its
business substantially differently from the manner or method of Tenant or shall
use the Demised Premises for activities different from Tenant. The sale or
transfer of "control" (as hereinafter defined) of the Tenant, if Tenant is a
corporation, shall constitute an assignment of the Lease for purposes of this
paragraph. "Control" shall denote a simple majority of stock ownership of a
close corporation or the right to vote in sufficient quantity so as to either
vary affirmative major policy and/or decisions and/or elect a substantial number
of the board of directors, or prevent the affirmative vote of major policy or
decisions (e.g., merger, sale of
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substantially all assets, etc.) either by forbearing to vote or affirmatively
voting against them. Consent of the Landlord to an assignment or subletting
shall not in any way be construed to relieve the Tenant from obtaining the
consent of the Landlord to any further assignment or subletting. Landlord's
consent shall not relieve Tenant or any subsequent assignee from liability under
this Lease. In no event may a Tenant sublease for a Rent that is less than the
then current prevailing rate charged to new tenants in the Project. If Tenant
collects any rent or other amounts from a subtenant or assignee in excess of the
Base Rent, Additional Rent and Tenant's share of increases in Operating Costs,
Tenant shall pay to Landlord, as and when Tenant receives the same, all such
excess amounts received by Tenant.
13.3 Landlord's Consent. If Tenant requests Landlord's consent to an
assignment of this Lease or to a subletting of the whole or any part of the
Demised Premises, Tenant shall submit to Landlord the name of the proposed
assignee or subtenant and such information as to the nature of its business and
its financial responsibility, capability and status as Landlord may reasonably
require, and amount of rent to be paid, and the effective date of the proposed
assignment or sublease. Upon receipt of such request and information from and/or
about the Tenant's proposed assignee or subtenant, Landlord shall have the
right, exercisable by notice within a reasonable period thereafter in writing to
approve or disapprove of such proposed transaction or to cancel and terminate
this Lease if the request is to assign this Lease or to sublet all of the
Demised Premises, or if the request is to sublet a portion of the Demised
Premises only, to cancel and terminate this Lease as to such portion. Such
decision shall be binding upon the Tenant. No effective date of such proposed
transaction shall be prior to the completion of the procedures set forth in this
paragraph 13.3. Notwithstanding any approval by Landlord pursuant hereto, no
such assignment or subletting shall, in any manner whatsoever, operate to or
have the effect of releasing or discharging Tenant from any obligation or
performance required of Tenant under any provision of this Lease. If Landlord
shall exercise such right Tenant shall surrender possession of the entire Leased
Premises or the portion which is the subject of the right, as the case may be,
on the date set forth in such notice in accordance with the provisions of this
Lease relating to surrender of the Leased Premises at the expiration of the
Term. If this Lease shall be cancelled as to a portion of the Leased Premises
only, the base rent (together with any escalations therein) payable by the
Tenant under this Lease shall be abated proportionately.
14. Compliance with Laws, Rules and Regulations
14.1 Tenant's/Landlord's Obedience of Laws, Etc. Tenant and or Landlord
shall comply with all laws, ordinances, orders, rules and regulations of state,
federal, municipal or other governmental and quasi-governmental entities,
including, without limitation, boards of insurance underwriters, agencies or
bodies having jurisdiction relating to the use, condition and occupancy of the
Demised Premises, the Project and the Development. Tenant and or Landlord shall
neither do nor cause to be done anything that will increase the real estate
taxes or insurance premiums or risks of the Landlord and or Tenant.
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LANDLORD'S COVENANTS
15. Services
15.1 Water, Sewer and Common Area. During the Term hereof and as long as
Tenant shall occupy said Demised Premises pursuant to the provisions of this
Lease, and shall not then be in default of any of its obligations hereunder,
Landlord agrees to furnish or cause to be furnished at those points of supply
provided for general use of all tenants in the Building, physical facilities for
water and sewer, exterior lighting in the Project, snow removal, centralized
trash removal, landscape and parking area maintenance in the Project, as may be
reasonably required for the reasonable use and occupation of the Demised
Premises in conformity with all Federal and State Statutes, regulations,
Presidential and governmental Executive Orders and other governmental and quasi-
governmental action and/or laws applicable thereto or Landlord's voluntary
program of conservation of energy or water consistent with current mores in the
community. It is understood that Tenant's use of such services shall be limited
to that which is necessary for normal use. Tenant shall pay on demand to
Landlord for the use of such services beyond that which is necessary for normal
use. Landlord shall not provide relamping or reballasting (although it reserves
the right to periodically reballast and/or refixture on a group basis). Any and
all of the foregoing shall be deemed Operating Costs.
15.2 Interruption or Discontinuance of Landlord's Services. Whenever
and to the extent that Landlord shall be unable to fulfill or shall be delayed
or restricted in the fulfillment of any obligation hereunder in respect to the
supply or provision of any service or utility or the doing of any work or the
making of any repairs by reason of being unable to obtain, after reasonable
efforts to do so, the material, goods, equipment, service, utility, energy, fuel
or labor required to enable it to fulfill such obligation or by reason of any
statute, law or any regulation or order passed or made pursuant thereto or by
reason of the order or direction of any administrator, controller or board, or
any governmental or quasi-governmental department or officer or other authority,
or by reason of not being able to obtain any permission or authority required
thereby, or during periods of inspection, alteration or improvement of the
Building or any part of the Project or the Development, or by reason of any
other cause beyond its control, whether of the foregoing character or not,
Landlord shall be entitled to extend the time for fulfillment of such obligation
by a time equal to the duration of such delay or restriction, and Tenant shall
not be entitled to compensation, abatement of Rent or recovery of damages, for
any inconvenience, nuisance, discomfort or otherwise thereby occasioned. Tenant
agrees that if any payment of rent as herein provided shall remain unpaid for
more than fifteen (15) days after it shall have become due, Landlord may,
with notice to Tenant, discontinue furnishing any or all of such services
until all arrearages of Rent have been paid in full, and the Landlord shall not
be liable for damages to person or property for any such discontinuance or
consequential damages resulting therefrom. Furthermore, such discontinuance
shall not be construed as an eviction or constructive eviction of Tenant or
justification for an abatement of Rent or any component thereof, or operate to
release Tenant from any of the Tenant's obligations hereunder. If the utilities
are shut off through the fault of the Landlord for more then three (3) days,
then rent shall abate.
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16. Quiet Enjoyment
16.1 Tenant's Right to Enjoy Premises. Landlord agrees that as long as
the full and timely payment of the Rent shall occur and as long as Tenant keeps
and performs each of its obligations under this Lease, Tenant may peaceably and
quietly enjoy the Demised Premises subject, nevertheless, to all now existing or
hereafter created mortgages and/or encumbrances and ground and/or other leases
hereafter created to which this Lease may be or shall become subject and
subordinate, provided that Tenant's rights hereunder shall not be thereby
diminished nor obligations thereby increased. Subject to the foregoing, Landlord
agrees to warrant and defend Tenant in the quiet enjoyment and possession of the
Demised Premises during the term of this Lease insofar as any claim that may be
asserted through the Landlord.
17. Landlord's Insurance
17.1 Landlord's Obligation to Insure. Landlord covenants and agrees that
throughout the Term it will insure the Building and the Building Standard
Improvements installed therein at Landlord's expense, against damage by fire and
extended perils coverage, and will carry public liability and property damage
insurance, all in such reasonable amounts and with such reasonable deductions as
would be carried by a prudent owner of a similar property in the Metropolitan
area of Denver. Notwithstanding any contribution by Tenant to the cost of
insurance premiums, as provided herein, Tenant acknowledges that it has no right
to receive any proceeds from any such insurance policies carried by Landlord and
that such insurance will be for the sole benefit of Landlord with no coverage
for Tenant for any risk insured against.
17.2 Tenant's Obligation Re Insurability. If any insurance policy upon
the Building shall be cancelled or cancellation shall be threatened or the
coverage thereunder reduced or threatened to be reduced, or the cost thereof
increased or threatened to be increased, by reason of the appearance or
existence of a hazard or the use or occupation of the Demised Premises by
Tenant other then in accordance with Permitted Uses, or by any assignee or
subtenant of Tenant or by Tenant being upon the Demised Premises and, if Tenant
fails to remedy such condition giving rise to such event within forty-eight (48)
hours after notice thereof, Landlord may, at its option, enter upon the Demised
Premises and attempt to remedy such condition and Tenant shall forthwith pay the
cost thereof to Landlord as Additional Rent. The Landlord shall not be liable
for any damage or injury caused to any property of Tenant or of others located
on or in the Demised Premises as a result of such entry and resolution other
than may be occasioned by Landlord's breach of contract, negligence or violation
of Law. In the event that Landlord shall be unable to remedy such condition,
then Landlord shall have all the remedies provided for in this Lease relating to
a default by Tenant. Notwithstanding the foregoing provisions of this Section
17.2, if Tenant fails to remedy as aforesaid, Tenant shall be in default of its
obligations hereunder and Landlord shall have no obligation to attempt to remedy
such default. If during the Term, the cost of any insurance carried by Landlord
is increased due to the occupancy or activities of Tenant, Tenant will pay to
Landlord on demand, as Additional Rent, any such additional insurance premiums
or cost.
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18. Abatement of Rent
18.1 Abatement of Base Rent. In the event of fire or other casualty,
against which Landlord is insured, and which is not caused by the negligence of
Tenant, the Base Rent shall abate in the proportion that the unusable portion of
the Demised Premises, as reasonably determined by Landlord, is of the total area
of the Demised Premises until the Demised Premises are rebuilt; and Landlord
agrees that it will with reasonable diligence repair the Demised Premises,
unless Tenant is obliged to repair under the terms hereof, or unless this Lease
is terminated as hereinafter provided; subject to the provisions of Sections
18.2.1 and 18.2.2 and 18.3. Any abatement hereunder shall continue as to all or
any portion of the Demised Premises only until and to the extent that same or
any portion thereof shall be repaired or restored so that it can be beneficially
used by Tenant.
18.2.1 Landlord's Right to Terminate in Respect of Demised Premises.
If the Demised Premises is damaged or destroyed by any cause whatsoever, and if,
in the reasonable opinion of Landlord, the Demised Premises cannot be rebuilt or
made fit for the purposes of Tenant within one hundred twenty (120) days after
the damage or destruction, within reasonable economic considerations as
determined by Landlord, Landlord instead of rebuilding or making the Demised
Premises fit for Tenant, may, at its option, terminate this Lease by giving to
Tenant within fifty (50) days after such damage or destruction, notice of
termination, and thereupon Rent and any other payments for which Tenant is
liable under this Lease (subject to Section 18.1) shall be apportioned based
upon, and paid to, the date of such termination and thereupon Tenant shall
immediately deliver possession of the Demised Premises to Landlord. Thereafter,
both parties hereto shall be free and discharged of all further obligations
hereunder, except for any liens which may thereafter be asserted against
property of Landlord by reason of Tenant's acts or omissions or any other
obligations of Landlord or Tenant, which by the terms of this Lease, either
explicitly expressed or implied, or otherwise, are intended to survive such
termination or expiration.
18.2.2 Landlord's Right to Terminate in Respect of Building.
Irrespective of whether the Demised Premises is damaged or destroyed, in the
event fifty percent (50%) or more of the area in the Building is damaged or
destroyed by any cause whatsoever, and if, in the reasonable opinion of
Landlord, the said area cannot be rebuilt or made fit for the purpose of the
tenants of such space within one hundred and eighty (180) days after the damage
or destruction, the Landlord may, at its option, terminate this Lease by giving
to Tenant, within fifty (50) days after such damage, notice of termination
requiring it to vacate the Demised Premises sixty (60) days after delivery of
the notice of termination and thereupon Rent and any other payments, if
otherwise payable hereunder,
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shall be apportioned and paid to the date on which possession is relinquished
and Tenant shall deliver possession of the Demised Premises to Landlord in
accordance with such notice of termination. This provision is without prejudice
to any other rights of either party.
18.3 Landlord's Right to Remedy. If the fire or other casualty causing
damage to the Demised Premises or other parts of the Building or any component
of the Project or of the Development shall have been caused by the negligence or
misconduct of Tenant, its agents, servants or employees, or of any other person
entering the Demised Premises under express or implied invitation of the Tenant,
such damage, at Landlord's election, shall be repaired by the Landlord at the
expense of the Tenant, pursuant to contracts approved by Tenant, which approval
shall not be unreasonably withheld, despite contrary provisions, if any,
appearing in this Lease and, in such event, there shall be no abatement of the
Rent.
18.4 Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant hereby waive and release each other to the
extent of insurance proceeds actually received, only, of and from any and all
rights of recovery, claim, action or cause of action, against each other, their
agents, officers and employees, for any loss or damage that may occur to the
Demised Premises, improvements to the Building or any other components of the
Project or of the Development, or personal property within the Building, by
reason of fire or the elements regardless of cause or origin, including
negligence of Landlord or Tenant and their agents, officers and employees.
Because this paragraph will preclude the assignment of any claim mentioned in it
by way of subrogation (or otherwise) to an insurance company (or any other
person), each party to this Lease agrees to immediately give to each insurance
company which has issued policies required under this Lease, written notice of
the terms of the mutual waivers contained in this paragraph, and to have the
insurance policies properly endorsed, if necessary, to prevent the invalidation
of the insurance coverages by reason of the mutual waivers contained in this
paragraph and to provide the other party hereto with a duplicate original of
such certificate.
MUTUAL COVENANTS
19. Condemnation
19.1 Eminent Domain or Sale in Lieu Thereof. If all of the Demised
Premises are taken by condemnation or by conveyance in lieu thereof (hereinafter
together referred to as a "taking"), this Lease shall terminate on the date when
the Demised Premises shall be so taken, and the Rent shall be apportioned as of
such date. If part of the Demised Premises, the Building or the Project is the
subject of a taking and the balance thereof is thereby not reasonably suitable
for the continued conduct of Landlord's or Tenant's business, taking into
consideration, without limitation, of the nature, size and scope of such
business immediately prior to the taking, then either party hereto may elect by
written notice to the other, within not less than twenty (20) days following
such taking, to terminate this Lease, whereupon all Rent and any other charges
hereunder shall be apportioned as of the date of such taking. If a taking
involves less than all of the Demised Premises and if neither party hereto
elects to terminate this Lease, then with respect to the portion not taken, the
Rent shall be reduced ratably and Landlord
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shall, within a reasonable time, restore the Demised Premises to an
architecturally complete unit. No part of any award shall belong to Tenant.
20. Substitution of Demised Premises
21. Subordination
21.1 Lease to Be Subordinate. This Lease is subject to and subordinate to
all first mortgages (including any deed of trust and mortgage securing notes,
bonds and all indentures supplemental thereto and to no other) and all renewals,
modifications, consolidations, replacements and extensions thereof of such
mortgages which may now or hereafter affect the Demised Premises or any part
thereof. This clause shall be self-operative and no further instrument of
subordination shall be required in order for the same to be effective.
Notwithstanding the foregoing, Tenant hereby appoints the Landlord its
irrevocable attorney-in-fact, coupled with an interest of the Tenant, for the
purpose of executing any acknowledgement or agreement required by any mortgagee,
lender or land lessor of Landlord, or the lessor which shall have purchased all
or a portion of land and/or the buildings in the Project and master leased the
same to the seller or some other party of Landlord. Notwithstanding the
foregoing, Tenant agrees that any holder of a first mortgage shall have the
right at any time during the term hereof to subordinate any rights of such first
mortgagee to the rights of the Tenant under this Lease or such terms and subject
to such conditions as the first mortgagee may deem appropriate. Tenant agrees to
execute a Subordination of Mortgage in form similar to that set forth in Exhibit
"D" attached hereto upon Landlord's request.
22. Default
22.1 Tenant Default. Upon the happening of any one or more of the
following events, Landlord may give notice to Tenant stating that this Lease is
terminated on a therein specified date and if such notice shall be given, this
Lease shall terminate on the date so stated if no other specific limitation is
elsewhere provided in this Lease.
(a) The failure of Tenant to timely and fully pay any installment of
Rent within ten (10) days of the due date, or other charge or money obligation
herein required to be paid by Tenant (hereinafter called a "Monetary Default");
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(b) The failure of Tenant to perform any one or more of its other
agreements under this Lease other than such as would result in a Monetary
Default (hereinafter called a "Non-Monetary Default") within ten (10) days after
written notice to Tenant specifying the agreement or agreements or covenant or
covenants Tenant has not performed; provided, however, that if a greater or
lesser time period is expressly provided with respect to a particular Non-
Monetary Default under any other provision of this Lease, such other time period
shall control;
(c) The levying of a writ of execution or attachment or assertion of
any lien of any type, on or against the property of Tenant or the Landlord (as a
result of Tenant's omission or commission) and the same has not been released or
discharged within forty-five (45) days thereafter;
(d) The interest of Tenant in this Lease or the Demised Premises or
any part thereof shall be taken upon execution or by other process of law
directed against Tenant, or shall be taken or subject to any attachment at the
instance of any creditor of or claimant against Tenant and said attachment shall
not be discharged within forty-five (45) days after the levy thereof;
(e) Tenant shall be involved in financial difficulties as evidenced
by (i) its admitting in writing its inability to pay debts generally as they
become due; or (ii) its making an assignment of all or a substantial part of its
property for the benefit of its creditors; or (iii) its seeking or consent to or
acquiescing in the appointment of a receiver or trustee for all or a substantial
part of its property or of the Demised Premises or of its interest in this
Lease; or (iv) the entry of a court order without its consent, which order shall
not have been vacated, set aside or stayed within forty-five (45) days from the
date of entry, appointing a receiver or trustee for all or a substantial part of
its property;
(f) The instituting of proceedings in a court of competent
jurisdiction for the involuntary bankruptcy, arrangement, reorganization,
liquidation or dissolution of Tenant under the Federal Bankruptcy Act (as now or
hereafter in effect) or any state bankruptcy or insolvency act, or for its
adjudication as a bankrupt or insolvent, or for the appointment of a receiver of
the property of Tenant, and said proceedings shall not have been dismissed, or
any receiver, trustee or liquidator appointed therein shall not have been
discharged within forty-five (45) days after the institution of said
proceedings;
(g) The instituting of proceedings for the voluntary bankruptcy
arrangement, reorganization, liquidation or dissolution of Tenant under the
Federal Bankruptcy Act (as now or hereafter in effect) or any state bankruptcy
or insolvency act or if Tenant shall otherwise take advantage of any state or
federal bankruptcy or insolvency act as a bankrupt or insolvent;
Notwithstanding any such termination, Tenant shall remain liable to
Landlord as hereinafter provided in Section 23.1 of this Lease.
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23. Remedies
23.1 General. If an event of default set forth in Section 22.1
occurs, Landlord shall have the following rights and remedies, in addition to
all other remedies at law or equity, and none of the following, whether or not
exercised by Landlord, shall preclude the exercise of any other right or remedy
whether herein set forth or existing at law or equity.
23.2 Self-Help. Landlord may, upon the happening of any one or more of
the above-mentioned events of default and whether or not Landlord has elected to
terminate this Lease as provided above, re-enter the Demised Premises with
process of law using such force as may be necessary, and remove all persons and
chattels therefrom or may, at Landlord's option, change the locks or otherwise
refuse Tenant access to or possession of the Demised Premises, and Landlord
shall not be liable for damages or otherwise by reason of any of its acts in
accordance herewith. Notwithstanding any termination of this Lease by Landlord,
Tenant shall remain liable for the Rent which would be payable for the balance
of the Lease Term had the Lease not been terminated, less such amounts as are
realized by Landlord in a reletting of the Demised Premises. It is further
understood that Tenant will pay, in addition to the Rent, such additional sums
as a court of competent jurisdiction may adjudge reasonable as attorneys' fees
in any suit or action instituted by Landlord to enforce the provisions of this
Lease, or the collection of the Rent or any component thereof due Landlord
hereunder provided Landlord prevails in such suit or action. Any property
belonging to Tenant or any person holding by, through or under Tenant, or
otherwise found upon the Demised Premises may be removed therefrom and stored in
any public warehouse at the cost and for the account of Tenant. If Tenant should
abandon, vacate or surrender the Demised Premises or be dispossessed by process
of law, any personal property left upon the Demised Premises may be deemed
abandoned, or, at the option of Landlord, on such re-entry Landlord may take
possession of any and all furniture, fixtures or chattels in or on said Demised
Premises and sell the same for the best price that can be obtained at public or
private sale and out of the money arising therefrom, pay the amount due
Landlord, and all costs resulting from the execution of the provisions hereof,
paying the surplus, if any, to Tenant. Tenant expressly releases Landlord and
its successors and assigns of all claims which might exist by reason of any
termination of or re-entry under this Lease and removal of Tenant's property, or
sale thereof pursuant to the provisions of this paragraph 23.2 and hereby waives
any and all rights of redemption under any statute or rule of law in effect at
the time of the termination or re-entry.
23.3 Cure by Landlord. In the event of any default hereunder by Tenant,
Landlord may immediately or at any time thereafter, without notice, cure the
same for and on the account and at the expense of Tenant. If Landlord at any
time, by reason of such breach, is compelled to pay, or elects to pay, any sum
of money or do any act which will require the payment of any sum of money, or is
compelled to incur any expense, including reasonable attorneys' fees in
obtaining advice, instituting or prosecuting any action or proceeding to enforce
Landlord's rights hereunder, the sum so paid by Landlord, with interest thereon
at annual rate of default interest as provided in paragraph 33.1, from the date
of payment thereof, shall be deemed to be Additional
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Rent hereunder and shall be due from Tenant to Landlord within ten (10) days
after demand by Landlord.
23.4 Right to Re-Let. Upon the happening of any event of default,
Landlord may, whether or not Landlord has elected to terminate this Lease as
above provided, re-enter and relet the Demised Premises, or any part thereof,
for such term or terms and at such rent or rentals and upon such other terms and
conditions as Landlord may deem advisable, with the right to make alterations
and repairs. No such re-entry or taking of possession shall be construed as an
election on Landlord's part to terminate this Lease unless a written notice of
termination be given to Tenant as heretofore provided. Tenant shall, in the case
of any such reletting, remain liable to Landlord for damages for breach of
Tenant's covenants under this Lease in any amount equal to the Rent which would
be payable hereunder for the balance of the Term, plus all costs, interest, and
expenses incurred by Landlord in connection with re-entry and the repair,
renovation, brokers' commissions, attorneys' fees and other charges incurred in
connection with the remodeling and/or repair of the Demised Premises and the
reletting thereof, less the net avails, if any, of any such reletting.
24. No Implied Surrender or Waiver
24.1 Negation of Implied Waiver. No act or thing done by Landlord or its
agents during the term hereof shall be deemed an acceptance of a surrender of
the Demised Premises and no agreement to accept the surrender of the Demised
Premises shall be valid unless the same be made in writing and subscribed by
Landlord. The mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy Landlord might have, either in law, in equity, or
elsewhere provided in this Lease, nor shall the waiver of or redress for any
violation of any agreement, covenant or condition in this Lease contained or any
of the Rules and Regulations or hereafter adopted or modified by Landlord
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of any original violation. The receipt by
Landlord of Rent or of any component thereof with knowledge of the breach of any
agreement or covenant in this Lease shall not be deemed a waiver of such breach.
The failure of Landlord to enforce any of the Rules and Regulations against
Tenant and/or any other tenant in the Building, the Project or the Development
shall not be deemed a waiver of such Rules and Regulations or any part thereof.
The receipt by the Landlord of Rent or any component thereof from any assignee,
subtenant or occupant of said Demised Premises or any part thereof shall not be
deemed a waiver of the covenants in this Lease relating to assignment and
subletting or an acceptance of the assignee, subtenant or occupant as Tenant, or
a release of Tenant from the further observance or performance by Tenant of the
covenants in this Lease. No provisions of this Lease shall be deemed to have
been waived by Landlord unless such waiver shall be in writing signed by
Landlord. No employee of Landlord or its agents shall have any power to accept
the surrender of the keys to the Demised Premises prior to the termination of
this Lease and the delivery of keys to any employee or agent of Landlord shall
not operate as a termination of this Lease or a surrender of the Demised
Premises. No payment by Tenant, or receipt by Landlord, of a lesser amount than
the Rent herein stipulated shall be deemed to be
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other than an account of the earliest accruing Rent, 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, and 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 available to Landlord.
25. Holding Over, Tenancy Month-to-Month
25.1 Holding Over. If after the expiration of the Term, Tenant shall
remain in possession of the Demised Premises and continue to pay rent, without
any written agreement as to such holding, then such holding shall be deemed and
taken to be a holding upon a tenancy for month-to-month, subject to all the
terms and conditions hereof on the part of Tenant to be observed and performed
and at a monthly rental equivalent to one hundred fifty percent (150%) of the
monthly installments hereinabove provided for, including, without limitation,
all applicable Additional Rent, all of which shall be payable in advance on the
first day of each calendar month.
26. Payments after Termination
26.1 No Reinstatement. No payments of money by Tenant to Landlord after
the termination of this Lease, or after the giving of any notice (other than a
Demand for Payment of Rent) by Landlord to Tenant, shall reinstate, continue or
extend the term of this Lease or affect any notice given to Tenant prior to the
payment of such money, it being agreed that after the service of notice or the
commencement of an action or after final judgment granting Landlord possession
of said Premises, Landlord may receive and collect any rent or any other sums of
money due under the terms of this Lease, and the payment of the same shall not
waive said notice or in any manner affect any pending action or any judgment
obtained.
27. Rights of Mortgagee/Purchaser
27.1 Attornment. Tenant accepts this Lease subject and subordinate to any
recorded first mortgage or deed of trust presently existing and/or hereafter
created by or through the Landlord and asserted against the Demised Premises,
Building, Project or Development provided in Section 21.1. If the interests of
Landlord under this Lease shall be transferred by reason of foreclosure or other
proceedings of enforcement of any mortgage or deed of trust on the Demised
Premises or as a result of the enforcement of a conditional assignment of this
Lease as collateral for Landlord's debt, or otherwise, Tenant shall be bound to
the transferee (sometimes called the "Purchaser") under the terms, covenants and
conditions of this Lease for the balance of the term remaining, and any
extensions or renewals, with the same force and effect as if the Purchaser were
Landlord under this Lease, and Tenant agrees to attorn to the Purchaser,
including the mortgagee under any such mortgage, if it be the Purchaser, as its
landlord, the attornment to be effective and self-operative without the
execution of any further instruments upon the Purchaser succeeding to the
interest of Landlord under this Lease. The respective rights and obligations of
Tenant and the Purchaser upon the attornment, to the extent of the then
remaining balance of the
21.
<PAGE>
term of this Lease, and any extensions and renewals, shall be and are the same
as those set forth in this Lease. Notwithstanding the foregoing, the Purchaser,
if it be a mortgagee shall only be obliged to perform those obligations of
Landlord under this Lease to the extent they accrue during its ownership.
Moreover, upon transfer of Landlord's interest hereunder, by operation of law or
otherwise, neither the owner of record for whom Real Property Systems, Inc. is
acting as independent contractor hereunder, nor Real Property Systems, Inc.
shall have any further liability hereunder.
28. Security Deposit
28.1 Security for Tenant's Performance. Tenant shall keep on deposit with
Landlord at all times during the term of this Lease, the sum of Four Thousand
Seventeen and 87/100 Dollars ($4,017.87), as security for the payment by Tenant
of the rent and any other sums due under this Lease and for the faithful
performance of all the terms, conditions and covenants of this Lease. See
Addendum regarding Security Deposit. If at any time during the term of this
Lease, Tenant shall be in default in the performance of any provision of this
Lease, Landlord may but shall not be required to use any such deposit, or so
much thereof as Landlord deems necessary or proper, in payment of any Rent or
any other sums due under this Lease which are in default, in reimbursement of
any expense incurred by Landlord and in payment of the damages of whatsoever
kind, nature or description incurred by Landlord by reason of Tenant's default,
or at the option of Landlord, the same may be retained by Landlord as liquidated
damages. In such event, Tenant shall, on written demand of Landlord forthwith
remit to Landlord a sufficient amount in cash to restore such deposit to its
original amount. In the event such deposit has not been utilized as aforesaid,
such deposit, or as much thereof as has not been utilized for such purposes,
shall be refunded to Tenant, without interest upon full performance of all of
the obligations under this Lease to be performed by Tenant. Landlord shall have
the right to commingle such deposit with other funds of Landlord. Landlord shall
deliver the Security Deposit to the purchaser of Landlord's interest in the
Demised Premises in the event such interest be sold, and thereupon, Landlord and
the owner of record shall be discharged from further liability with respect to
such deposit. Notwithstanding the above provisions of this paragraph, if claims
of Landlord exceed the Security Deposit, Tenant shall remain liable for the
balance of such claims and Landlord shall not deliver the Security Deposit to
Tenant.
29. Authority
29.1 Authority to Execute. Tenant agrees to provide Landlord, within ten
(10) working days after the execution date hereof, with certified copies of
duly executed and notarized documents authorizing the execution of this Lease by
those parties who executed it on Tenant's behalf and, in conjunction therewith,
provide evidence reasonably satisfactory to Landlord that Tenant is duly
organized, in good standing in its state of incorporation and in Colorado and if
a foreign corporation, that it is authorized to transact business under the laws
of the State of Colorado.
22.
<PAGE>
29.2 Appointment of Landlord's Representative. Landlord hereby appoints
Real Property Systems, Inc., as its representative for the purpose of
negotiating the within Lease on Landlord's behalf as well as managing the
project of which the Demised Premises are a part. Landlord shall have the right
to designate such other representatives from time to time, upon giving Tenant
notice as provided herein.
30. Notices
30.1 Giving of Notice. Any notice, request, statement or other writing,
pursuant to this Lease, shall be deemed to have been given if sent by registered
prepaid post or certified mail, return receipt requested, or delivered by hand,
as follows:
To Landlord: c/o Real Property Systems, Inc.
10375 E. Harvard Avenue
Suite 101
Denver, CO 80231
Attn: David Lutes
To Tenant: at the Demised Premises
With a copy also
sent to: Floyd Nichols
Cell Pathways, Inc.
5620 N. Kalb Road
Tucson, AZ 85715
and such notice shall be deemed to have been received by the Landlord/Tenant, as
the case may be, on the third full business day after the date on which it shall
have been postmarked.
31. Entire Lease Agreement
31.1 Integration. Tenant acknowledges that there are no covenants,
representations, warranties, agreements or conditions expressed or implied,
collateral or otherwise forming part of or in any way affecting or relating to
this Lease save as expressly set out in this Lease and that this Lease,
including the Exhibits attached hereto, constitutes the entire "Lease" and
agreement between Landlord and Tenant and may not be modified except as herein
explicitly provided or except by agreement in writing of equal formality hereto
executed by Landlord and Tenant. Nothing in this Lease shall be deemed to create
any relationship between the parties hereto other than Landlord and Tenant.
32. Captions and Exhibits
32.1 Headings. The captions appearing within the body of this Lease have
been inserted as a matter of convenience and for reference only and in no way
define, limit or enlarge
23.
<PAGE>
the scope or meaning of this Lease or of any provision hereof. The Exhibits to
the Lease are as follows:
<TABLE>
<CAPTION>
<S> <C>
Exhibit "A" Legal Description and Project Plan
Exhibit "B" Work Letter Agreement
Exhibit "B-1" Estoppel and Commencement Date Certificate
Exhibit "B-2" Space Plan
Exhibit "B-3" Deleted Intentionally
Exhibit "C" Rules and Regulations
Exhibit "D" Subordination of Mortgage
Exhibit "E" Hazardous Materials
</TABLE>
33. Interest on Past Due Obligations
33.1 Interest. Any amount due from Tenant to Landlord hereunder which is
not paid when due shall bear interest at the rate of six percent (6%) per annum
plus the Prime Rate from time to time charged by Colorado National Bank of
Denver, Colorado (herein sometimes called the "default rate") from the due date
until paid, unless otherwise specifically provided herein, but the payment of
such interest shall not excuse or cure any default by Tenant under this Lease.
Any change in the default rate resulting from a change in said Prime Rate shall
be effective as of the first day of the month immediately following any relevant
change in such Prime Rate.
34. Rules and Regulations
34.1 Promulgation of Additional Rules and Regulations. The Landlord
may, from time to time, promulgate such Rules and Regulations as, in Landlord's
opinion, are reasonable and/or necessary and Tenant, on behalf of itself, its
employees, agents and any others permitted by Tenant to occupy or enter the
Demised Premises, the Building or the balance of the Project or the Development
who will at all times abide by said Rules and Regulations which shall be deemed
effective and binding upon such parties upon notice being given pursuant to
Section 30.1, provided, that such rules and regulations shall not interfere
with Tenant's Permitted Uses, as set forth in Section 4.1 hereof. A material
default in the full and timely performance and observance of such Rules and
Regulations in effect from time to time shall constitute a material default
hereunder.
24.
<PAGE>
35. Severability
35.1 Provisions Deemed Severed. Landlord and Tenant agree that all of
the provisions of this Lease are to be construed as covenants and agreements as
though the words importing such covenants and agreements were used in each
separate paragraph hereof. Should any provision or provisions of this Lease be
illegal or not enforceable it or they shall be considered separate and deemed
severed from this Lease and the remaining provisions hereof shall remain in
force and be binding upon the parties hereto as though the said provision or
provisions had never been included.
36. Governing Law
36.1 Interpretation and Construction. The parties acknowledge that
this Lease is to be interpreted and construed in accordance with the laws of the
State of Colorado. Pronouns of the masculine gender shall be deemed
to include the feminine gender; and singular pronouns shall be deemed to include
the plural and vice versa, where the context shall require. The terms
"mortgage," "mortgagor" and "mortgagee" shall be deemed to include "deed of
trust," "grantor," "trustee" and "beneficiary," respectively, where the context
shall require. The terms "herein," "hereof" and words of similar import shall
be deemed to refer to this entire Lease, rather than just the particular
provisions in which such terms appear, unless the context shall otherwise
require.
37. Time
37.1 Time and Manner of Execution. Notwithstanding any provision to the
contrary herein set forth, unless this Lease is executed by an officer of
Landlord and by the Tenant hereinabove named and returned to WRC PROPERTIES,
INC. on or before the ___day of ________, 19__, then this Lease shall be null
and void and of no binding effect.
37.2 Time is of the Essence. Subject to Section 15.2 hereof, time is of
the essence in the performance of all of the terms and provisions of this Lease.
38. Counterparts
38.1 Execution of Counterparts. This Lease may be executed in the form of
counterparts, in which event all such counterparts shall be deemed to be one and
the same instrument.
39. Successors and Assigns
39.1 Binding Effect. Except as otherwise provided in this Lease, all
terms, conditions and covenants to be observed and performed by the parties
hereto shall be applicable to and binding upon the respective heirs, personal
representatives, successors, assigns and legally appointed representatives.
25.
<PAGE>
In Witness Whereof, the parties hereto have caused this Lease to be
executed as of the day and year first above written.
CELL PATHWAYS, INC., WRC PROPERTIES, INC.
a Delaware corporation
By: /s/ Floyd G. Nichols By: /s/ Nicholas E. Stolatis
------------------------------- --------------------------------
Its: President Its: Assistant Secretary
------------------------------ -------------------------------
("Tenant") ("Landlord")
26.
<PAGE>
Acknowledgment by Corporate Tenant
STATE OF COLORADO )
) ss.
County of Denver )
The foregoing instrument was acknowledged before me this 27th day of
May, 1993, by Floyd G. Nichols, as President of Cell Pathways.
My commission expires: 7/26/94
Witness my hand and official seal.
/s/ Paula K. Harrison
-------------------------------
Notary Public
Address: 650 S. Cherry St. #300
-----------------------
Denver, CO 80222
-------------------------------
Acknowledgment by Landlord
STATE OF )
) ss.
County of )
The foregoing instrument was acknowledged before me this __ day of
____________, 19__, by___________________________________, as __________________
of WRC Properties, Inc.
My commission expires:___________________________
Witness my hand and official seal.
-------------------------------
Notary Public
Address:
-----------------------
-------------------------------
27.
<PAGE>
ADDENDUM NUMBER ONE
This Addendum Number One ("Addendum") is attached to and hereby forms a
part of that certain Lease dated of even date herewith (the "Lease"), wherein
WRC Properties, Inc. is landlord ("Landlord") and Cell Pathways Inc., a Delaware
corporation, is tenant ("Tenant"), with respect to certain space located at 1300
South Potomac Street, Suite 110, Aurora, Colorado 80012, more commonly known as
East by Southeast ("Property").
WHEREAS, the parties desire to supplement the Lease and make certain
revisions thereto with respect to certain matters and agreements contained
therein.
NOW THEREFORE, in consideration of their mutual covenants and conditions
contained herein, and for such other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Rent Abatement/Escalations. Provided Tenant is not in default of any term
or condition of the Lease and that an event has not occurred which, with the
giving of notice or passage of time, would constitute a default, Tenant's
obligation for payment of the first six monthly installments of Net Rent from
October 1, 1993 through March 31, 1994 in the aggregate amount of $14,868.75
shall be abated. (See below.) In the event Tenant fails to perform its
obligations under the Lease, Landlord shall be entitled to recover from Tenant
all amounts of Base Rent which have been abated pursuant to this paragraph.
Rents payable are adjusted by Rent Abatement/Escalations during the Term of the
Lease, are as follows:
<TABLE>
<CAPTION>
Rent Adj./Addtl. Rent Adj./Addtl. Total Rent/
Months Net Rent/Sq.Ft. Net Rent/Month Rent/Sq. Ft. (a) Rent/Month (a) Month
- ----------- --------------- -------------- ---------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
1-3 -0- -0- $2.33* $ 769.87 $ 769.87
4-6 -0- -0- $2.33** $1,539.74 $1,539.74
7-48 $3.75*** $2,478.13 $2.33 $1,539.74 $4,017.87
49-66 $4.25 $2,808.54 $2.33 $1,539.74 $4,348.28
</TABLE>
Months 1-3 reflect payment of operating expenses on 3,965 sq.ft. only.
** Months 4-6 reflect payment of operating expenses on 7,930 sq.ft. only.
*** Base Rent Breakdown: Represents $3.50 per sq.ft. Net Rent plus $.25 (HVAC
maintenance and repair).
(a) Subject to Operating Cost Adjustments per paragraph 3.2 of the Lease.
2. Lease Renewal. Provided Tenant is not in default of any term or condition
of the Lease and that an event has not occurred which, with the giving of notice
or passage of time, would constitute a default, Tenant shall be entitled to
renew this lease ("Option to Renew") for one (1) successive additional term of
five (5) years ("Option Term") on the following terms and conditions:
1.
<PAGE>
(a) Tenant shall notify Landlord in writing of Tenant's election to
exercise the Option to Renew on or before one hundred eighty (180) days prior to
the expiration of the Lease Term. Tenant shall execute an Amendment to the
Lease evidencing such renewal within fifteen (15) days of delivery thereof to
Tenant by Landlord.
(b) Tenant's leasing of the Premises during the Option Term shall be upon
the same terms and conditions as set forth in the Lease, with the exception of
Base Rent, and except for any provision hereof granting Tenant an option to
renew, tenant finish allowance or other concession.
(c) The Net Rent during the Option Term shall be at the then market rate
for the Building. In no event shall the Net Rent be less than the Net Rent
payable during the last year of the Lease, nor shall the Net Rent exceed $7.00
per square foot. Within fifteen (15) days after receipt by Landlord of Tenant's
notice of exercise of the applicable Option to Renew, Landlord shall notify
Tenant, in writing, of the applicable Net Rent rate to be in effect during such
Option Term. Tenant shall have fifteen (15) days thereafter within which to
notify Landlord, in writing, of Tenant's exercise of the Option to Renew at the
stated rental, and Tenant shall execute an Amendment of the Lease evidencing
such renewal within fifteen (15) days after delivery thereof to Tenant from
Landlord.
(e) Failure of Tenant to exercise the Option to Renew in the time and
manner set forth herein shall result in automatic termination of the Option to
Renew.
(f) The Option to Renew may not be exercised by an subtenant or assignee
of Tenant, and is not transferable by Tenant to any other party.
(g) The Option to Renew shall be subordinate and subject to any rights or
options on such space in favor of any other tenants in the Building existing on
the date hereof.
3. First Right of Opportunity. Provided that Tenant is not in default of any
term or condition of the Lease and that an event has not occurred which, with
the giving of notice or passage of time would constitute a default, Tenant shall
have the right of first opportunity ("Right of First Opportunity") to lease
those certain adjacent spaces in the Building, commonly known as Suite 130,
Suite 126, and Suite 124, and identified on Exhibit A attached hereto and
incorporated herein by this reference ("Adjacent Space"), on the following terms
and conditions:
(a) Tenant may exercise the Right of First Opportunity at any time by
written notice to Landlord prior to Tenant's receipt of a Third Party Notice to
the extent that such space is available or by written notice thereof to Landlord
by execution of a lease agreement or amendment hereto, as appropriate, within
fifteen (15) days thereafter. In the event Tenant exercises the Right of First
Opportunity prior to receipt of a Third Party Notice, Tenant shall be obligated
to lease all Adjacent Space of the designated suite, at the then current market
rate for comparable space and lease terms in the Building, and in no event shall
the per square foot Base Rent payable with respect to the Adjacent Space be less
than the per square foot Base Rent payable for the Premises. Provided that if
Tenant elects the First Right of Opportunity within the first twelve (12) months
of the Original Lease commencement date, then the Net
2.
<PAGE>
Rent shall be $3.75 NNN, and the Landlord shall furnish a paint and carpet
allowance not to exceed $2.00 per square foot.
(b) The Right of First Opportunity shall not be exercised by any subtenant
or assignee, and is not transferable to any other party.
(c) Tenant shall accept such Adjacent Space leased pursuant to this Right
of Opportunity in its then existing "as is" condition and Landlord shall have no
obligation with respect to performing any tenant improvements or remodeling work
with respect to such space, except as expressly stated herein.
(d) The Right of First Opportunity shall be subordinate and subject to any
rights or options on such space in favor of any other tenants in the Building
existing on the date hereof.
4. HVAC Maintenance and Repair. Landlord agrees to maintain and repair the
HVAC system for an additional $.25 per square feet per year, which has been
included in the Net Rent per square foot specified in Paragraphs 1 and 3(a) of
the Addendum.
5. Intentionally deleted.
6. Tenant Improvements. Landlord shall provide a paint and carpet allowance
not to exceed $2.00 per square foot ($15,860.00). Tenant shall be reimbursed
for paint and carpet (not to exceed $2.00 per rentable square foot) upon
completion of improvements, presentation of original invoices, and inspection
and approval by property manager. In the event Tenant defaults, all Tenant
Improvements and fixtures in the suite shall become the property of the
Building.
7. Possession or Delay in Commencement or Term. If Landlord cannot deliver
possession of the Demised Premises to Tenant at the commencement of the term
hereof, this Lease shall not be void or voidable, nor shall Landlord be liable
to Tenant for any loss or damage resulting therefrom, but in that event the term
of this Lease shall be amended to commence on the date when Landlord can deliver
possession and the expiration date shall be extended accordingly. If, as a
result of such postponement, the term would begin other than on the first day of
the month, the commencement date shall be further postponed until the first day
of the following month, but Tenant shall pay rent prorated for such partial
month occupancy in advance. All other terms and conditions of this Lease shall
be in force and effect during such partial month. Upon Landlord's request, the
parties agree to execute a writing in the form of Exhibit B-1, attached hereto
and expressly incorporated herein by this reference, to record the commencement
and expiration dates hereof.
8. See Rider to Addendum.
9. Tenant hereby agrees to and accepts the rules and regulations as stated in
Exhibit "C", except as expressly modified herein.
3.
<PAGE>
10. Incorporation of Lease Terms; Conflict. With the exception of those
matters set forth in this Addendum, Tenant's leasing of the Property during the
Term of the Lease shall be subject to all terms, covenants and conditions of the
Lease. In the event of any express conflict or inconsistency between the terms
of this Addendum and the terms of the Lease, the terms of this Addendum shall
control and govern. Except as expressly modified by this Addendum, all other
terms and conditions of the Lease are hereby ratified and affirmed.
In Witness Whereof, the parties hereto have executed this Addendum as of
the even date and year as the Lease.
"LANDLORD" "TENANT"
WRC PROPERTIES, INC. CELL PATHWAYS, INC.,
a Delaware corporation
By: /s/ Nicholas E. Stolatis By: /s/ Floyd G. Nichols
---------------------------- ----------------------------
Its: Assistant Secretary Its: President
--------------------------- ---------------------------
4.
<PAGE>
RIDER TO ADDENDUM
8. Further Representations and Understandings. Anything in the Addendum or the
Lease to the contrary notwithstanding, Landlord further represents and agrees
that: the Demised Premises comprise 7,930 square feet, Suites 124, 126 and 130
comprise the square footage shown on Exhibit "A", and the total square footage
of all buildings in the Project currently comprises 144,148 square feet; that
the Demised Premises, and all other buildings in the Project to the extent
material to Tenant's occupancy of the Demised Premises, are in material
compliance with all applicable laws, regulations, ordinances and codes; that the
Demised Premises are generally in suitable condition for occupancy for the
Permitted Uses, subject to alterations and improvements suggested by Tenant;
that, unless waived in writing by both Landlord and Tenant, the Commencement
Date shall not occur earlier than the date on which the Demised Premises are in
compliance with and licensed under all laws, regulations, codes and ordinances
materially necessary to permit occupancy of the Demised Premises for the
Permitted Uses; that the Tenant shall not be obliged to make payments for items
which are duplicative of what the Tenant is paying for in Rent; and that Tenant
shall not be liable for, or responsible to indemnify respect of, matters arising
from Landlord's breach of contract, negligence, intentional tort or violation of
law, regulation or ordinance; and that, anything in the present or future Rules
and Regulations to the contrary notwithstanding, Tenant shall be permitted to
house laboratory animals and otherwise engage in the Permitted Use of conducting
pharmaceutical and biotechnical research and development in the Demised
Premises.
<PAGE>
Exhibit "A" to Lease
Legal Description and Project Plan
Attached to and incorporated by reference in that certain Lease dated
August 9, 1993, between WRC Properties, Inc. ("Landlord") and Cell Pathways
Inc., a Delaware corporation ("Tenant"), showing outlined in red Suite No. 110
in the building addressed as 1300 South Potomac Street, Aurora, Colorado 80012,
and described as that tract of land being Block 1, Lot 1, of "East by Southeast
Subdivision, Filing No. 2" in Township 4 South, Range 67 West of the Sixth
Principle Meridian, City of Aurora, County of Arapahoe, State of Colorado.
Beginning at the Southeast corner of said Block 1, Lot 1, said beginning
point being also a point on the West right-of-way line of Interstate
Highway 225; thence Westwardly along the South line of said Block 1, Lot 1,
South 89(degrees)39'07" West 532.92 feet to a point on the East line of
South Potomac Street; thence Northwardly along said East line along a curve
to the left, whose radius point bears South 73(degrees)23'47" West 1,035
feet from the last mentioned point, a distance of 485.66 feet to a point;
thence North 89(degrees)39'07" East of 745.59 feet to a point on the
aforesaid West line of Interstate Highway 225; thence Southwardly along
said West line South 13(degrees)29'37" East 21.80 feet and South
3(degrees)20'44" East 397.32 feet to the point of beginning and containing
5.942 acres.
[Drawing of property description]
First Rights of Opportunity
Suite 124, 5,626 square feet
Suite 126, 4,654 square feet
Suite 130, 8,550 square feet
<PAGE>
Exhibit B-1
Estoppel and Commencement Date Certificate
This Estoppel and Commencement Date Certificate ("Certificate") is executed
this _____ day of _____________, 19___, by WRC Properties, Inc. ("Landlord") and
____________ ("Tenant") with respect to and forming a part of that certain
Office Building Lease ("Lease") dated _______________, 19____ for the premises
commonly known as _______________________________, Colorado ("Premises").
WITNESSETH
Whereas, the parties desire to reaffirm and/or amend and certify to certain
provisions of the Lease; and
Whereas, the parties desire that the matters set forth herein be conclusive
and binding on the parties.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. The Lease Commencement Date is deemed and agreed to be _______________,
19____, and the Lease Termination Date is agreed and deemed to be _____________,
19____, unless sooner terminated, as provided therein.
2. Tenant's first installment of Base Rent in the amount of
__________________________ Dollars ($________) for the period of ______________,
19____, is due on/was paid on _______________, 19____.
3. Tenant's first installment of Tenant's Prorata Share of Operating
Expenses in the amount of __________________________ Dollars ($________) is due
on/was paid on _______________, 19____.
4. By execution hereof, Tenant acknowledges and agrees that all
improvements or other work required of Landlord has been satisfactorily
performed and Tenant hereby accepts the Premises in full compliance with the
terms and conditions of the Lease.
5. Except as may be amended herein, all terms and conditions of the Lease
shall continue in full force and effect and are hereby republished and
reaffirmed in their entirety.
6. This Certificate shall be binding upon and may be relied upon by the
parties hereto and their respective legal representatives, successors, and
assigns.
1.
<PAGE>
In Witness Whereof, the parties have executed this Certificate as of the
day and year first above written.
Landlord
WRC Properties, Inc.
By: ________________________
Title: _____________________
Tenant:
Cell Pathways, Inc.
a Delaware corporation
By: ________________________
Title: _____________________
2.
<PAGE>
Exhibit "B-2" to
Work Letter Agreement
Space Plan
Attached to and incorporated by reference in that certain Work Letter
Agreement dated __________________, 19___, between WRC Properties, Inc.
("Landlord") and Cell Pathways Inc., a Delaware corporation ("Tenant").
(Space plan mutually agreed upon by Landlord and Tenant to be attached.)
<PAGE>
Exhibit B-2
[Space plan]
<PAGE>
Exhibit "C"
Rules and Regulations
It is further agreed that the following Rules and Regulations shall be and
are hereby made a part of this Lease and Tenant agrees that its employees and
agents, or any others permitted by Tenant to occupy or enter said Demised
Premises, will at all times abide by said rules and regulations and that a
default in the performance and observance thereof shall operate the same as any
other defaults in the Lease to which this Exhibit "C" is attached and
incorporated by reference:
1. The sidewalks, entries, passages, corridors and stairways of the
Project and the Development shall not be obstructed by Tenant, or its agents or
employees, or used for any purpose other than ingress and egress to and from the
Demised Premises.
2. In order to create conformity and order of the Tenant's identification
in the Project and the Development, no sign, advertisement or notice shall be
inscribed, painted or affixed on any part of the inside or outside of the
Building or elsewhere in the Project and the Development unless the color,
material, design, size, style, and location thereof, shall be first designated
by Landlord, and such signs shall be promptly erected and maintained by Tenant,
at its expense. Landlord shall have the right to remove all non-permitted signs
without notice to Tenant, but at the expense of Tenant.
3. Tenant shall not do or permit anything to be done in, on or about the
Demised Premises, the Project or the Development, or bring or keep anything
therein, which will in any way obstruct or interfere with the rights of other
tenants in the Project or the Development, or in any way injure or annoy them,
or potentially do so, which shall include, by way of illustration only, the
placing, installing or operating in, on or around the Demised Premises or
elsewhere in the Project or the Development, any engine, stove or machinery, or
conduct mechanical operations or cook foods or materials, or place or use in, on
or about the Demised Premises any explosives, gasoline, kerosene, oil, acids,
caustics or any inflammable, explosive or hazardous material without the prior
written consent of Landlord, which may arbitrarily be withheld.
4. Water closets and other water, electric or heating/air
conditioning/venting fixtures shall not be used for any purpose other than that
for which the same are intended, and any damage resulting to the same from
misuse on the part of Tenant, its agents, invitees or employees, or any defacing
or other damage to any part of the Development by Tenant, its agents, invitees
or employees, shall be paid for, upon demand, by Tenant. No person shall waste
water by interfering with or adjusting faucets. Moreover, no electric floor
space heaters shall be allowed without the prior written consent of Landlord.
5. No birds, reptiles or animals shall be allowed in any part of the
Demised Premises, the Building, the Project or the Development. No person shall
disturb the occupants of any of the foregoing by the use of any radio or musical
instrument or by the making of loud or irritating noises, or any unauthorized or
unreasonable use (e.g., lodging or sleeping quarters).
1.
<PAGE>
6. Bicycles or other vehicles shall be stored only in areas periodically
designated by Landlord for such purposes, if any.
7. Tenant shall not allow anything to be thrown by Tenant, its agents,
employees or those in the Project or the Development at the express or implied
invitation of Tenant, out of the windows or doors and the front door of the
Demised Premises shall be kept closed at all times, except as provided in the
immediately succeeding sentence. Except in case of fire or other emergency,
Tenant shall not open any outside window or maintain an open door which may
interfere with the proper functioning of the air-conditioning, heating or
ventilation systems in the Demised Premises or the Building.
8. No additional lock or locks or substitutions for existing locks shall
be installed by or on behalf of Tenant on any door in the Building unless
written consent of Landlord shall first have been obtained. Two keys to each of
the exterior doors of the Demised Premises will be furnished at the cost of and
by Landlord, and neither Tenant, its agents or employees, shall have any
duplicate key made. Additional keys will be furnished by Landlord at a nominal
charge to Tenant. At the termination of this tenancy, Tenant shall promptly
return to Landlord all keys to the Demised Premises, and if same are not so
returned, Landlord may change the locks to the Demised Premises and the cost of
same and keys therefor may be deducted from the Security Deposit.
9. Any painting, remodeling, decorating of or repairs to the Demised
Premises as may be agreed to be done by and at the expense of Landlord shall be
done during regular working hours; should Tenant desire such work done on
Saturdays, Sundays, holidays or other than during regular working hours, Tenant
shall pay, on demand, for the extra cost thereof.
10. Canvassing, soliciting, petitioning and peddling in or about the
Building and the balance of the Project and the Development are prohibited, and
Tenant shall timely and faithfully cooperate with Landlord in the enforcement of
this provision.
11. Tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service on or to the Demised Premises
for Tenant, to Landlord for its approval and supervision before performance of
any contractual service. This provision shall apply to all work performed in the
Building including installation of telephones, telegraph equipment, electrical
devices and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment of any other physical portion of
the Building.
12. Landlord will not be responsible or liable for lost, stolen or
mysteriously disappearing personal property, equipment, money or jewelry from
Tenant's area or common areas (e.g., parking or trash areas).
13. Employees or agents of Landlord shall not receive or carry messages or
packages for or to any Tenant or other person, nor contract with or render free
or paid services to any Tenant or Tenant's agents, employees or invitees.
2.
<PAGE>
14. Landlord will not permit entrance to the Demised Premises by use of
pass key controlled by Landlord, to any person at any time without written
permission by Tenant, except employees, contractors or service personnel
directly supervised by Landlord.
15. The Tenant shall provide at its expense within a reasonable time after
the execution of the Lease such signs of design, materials, content and location
as Landlord shall approve or establish from time to time in order to have
uniformity of Tenant's identification throughout the Project.
16. Tenant, its agents, employees, and invitees, shall be entitled to park
in the common parking area in the Project. Tenant agrees that no vehicles
belonging to, or subject to the control of, Tenant, its employees, agents or
invitees shall be allowed to remain stored in any such parking area. For the
purposes of this paragraph, "stored" shall mean remaining stationary for a
period longer than three consecutive days. Landlord reserves the right to
determine in its absolute discretion whether parking facilities are becoming
crowded and, in such event, to allocate parking spaces or areas of parking to
Tenant and other tenants. No automobiles or other vehicles shall be serviced or
washed upon the Project or the Development.
17. Tenant shall cooperate with Landlord in a timely and faithful manner
in keeping and maintaining common areas of the Project and the Development in a
clean, sightly, orderly and well-groomed condition and shall not remove
receptacles from designated trash areas.
18. The Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may, from time to time, be
required or desirable for the safety, security, care and cleanliness of the
Project and the Development and preservation of good order therein, it being
Landlord's intent that same be maintained and operated in a first-class manner.
19. Wherever there now is, or shall hereafter be, any inconsistency
between the provisions of these Rules and Regulations (as same may be amended,
modified or added to, from time to time) and the provisions of said Lease, the
more restrictive provisions shall control.
3.
<PAGE>
Exhibit "D"
Subordination of Mortgage
___________________ as owner and holder of a certain Promissory Note dated
_______________________ in the principal sum of ____________________________
Dollars ($_______) and of a certain Mortgage or Deed of Trust of even date
therewith and securing said Note, recorded on ________________, in Book
___________, at Page ___________, in the Office of the Clerk and Recorder of
Arapahoe County, Colorado, now a first lien upon the premises more particularly
demised and described in that certain Lease dated _______________________, by
and between East by Southeast Venture, a Missouri general partnership, as
Landlord and ___________________________________ as Tenant, and upon other
property, in consideration of such leasing and of the sum of One Dollar ($1.00)
and other good and valuable consideration, receipt of which is hereby
acknowledged,
Does hereby covenant and agree that the said Mortgage or Deed of Trust
shall be and the same is hereby made subordinate to the said Lease with the same
force and effect as if the said Lease had been executed, delivered and recorded
prior to the execution, delivery and recording of the said Mortgage or Deed of
Trust;
Except, However, that this Subordination shall not affect nor be applicable
to and does hereby expressly exclude:
(a) The prior right, claim and lien of the said Mortgage or Deed of Trust
in, to and upon any award or other compensation heretofore or
hereafter to be made for any taking by eminent domain of any part of
the said premises, and to the right of disposition thereof in
accordance with the provisions of the said Mortgage or Deed of Trust,
(b) The prior right, claim and lien of the said Mortgage or Deed of Trust
in, to and upon any proceeds payable under all policies of fire and
rent insurance upon the said premises and as to the right of
disposition thereof in accordance with the terms of the said Mortgage
or Deed of Trust, and
(c) Any lien, right, power or interest, if any, which may have arisen or
intervened in the period between the recording of the said Mortgage or
Deed of Trust and the execution of the said lease, or any lien or
judgment which may arise at any time under the terms of such lease.
This Subordination shall inure to the benefit of and shall be binding upon
the undersigned, its successors and assigns.
1.
<PAGE>
In Witness Whereof, this Subordination has been duly signed and delivered
by the undersigned this ____ day of _______________, 19___.
__________________________________
By: ______________________________
Vice President
By: ______________________________
Assistant Secretary
STATE OF )
)ss.
County of )
The foregoing instrument was acknowledged before me this ____ day of
_______________, 19___, by _________________________, as Vice President and
_________________________, as Assistant Secretary of ___________________.
My commission expires: _____________
Witness my hand and official seal.
__________________________________
Notary Public
Address of Notary: _______________
__________________________________
2.
<PAGE>
Tenant's Agreement
The undersigned, as Tenant under the Lease herein described, does hereby
accept and agree to the terms of the foregoing Subordination, which shall inure
to the benefit of and be binding upon the undersigned and the heirs, executors,
administrators, legal representatives, successors and assigns of the
undersigned.
By: __________________________
__________________________
STATE OF )
)ss.
County of )
The foregoing instrument was acknowledged before me this ____ day of
_______________, 19___, by _________________________, as ____________________
of ________________________.
My commission expires: _____________
Witness my hand and official seal.
__________________________________
Notary Public
Address of Notary: _______________
__________________________________
<PAGE>
Exhibit "E"
1. Hazardous Materials
Tenant shall not (either with or without negligence) cause or permit the
escape, disposal or release of any active or other hazardous substances, or
materials. Tenant shall not allow the storage or use of such substances or
materials in any manner not sanctioned by law or by the highest standards
prevailing in the industry for the storage and use of such substances or
materials, nor allow to be brought into the Project any such materials or
substances except to use in the ordinary course of Tenant's business, and
then only after written notice is given to Landlord of the identity of such
substances or materials. Without limitation, hazardous substances and
materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any applicable state or local laws
and the regulations adopted under these acts. If, as a direct or sole
result of Tenant's negligence, acts or omissions, any lender or
governmental agency shall ever require testing to ascertain whether or not
there has been any release of hazardous materials, then the reasonable
costs thereof shall be reimbursed by Tenant to Landlord upon demand as
additional charges if such requirement applies to the Premises. In
addition, Tenant shall execute affidavits, representations and the like
from time to time at Landlord's request concerning Tenant's best knowledge
and belief regarding the presence of hazardous substances or materials on
the Premises. In all events, Tenant shall indemnify Landlord in the manner
elsewhere provided in this lease from any release of hazardous materials on
the Premises occurring while Tenant is in possession, or elsewhere, if
caused solely by the negligence, acts, or omissions of Tenant or persons
acting under Tenant. The within covenants shall survive the expiration or
earlier termination of the Lease term.
<PAGE>
6/20/97 EXHIBIT 10.25
AGREEMENT OF LEASE
BETWEEN
MARAVE ASSOCIATES, L.P.
AS LANDLORD
AND
CELL PATHWAYS, INC.
AS TENANT
<PAGE>
LEASE
-----
LEASE made this 20TH day of JUNE, 1997, by and between MARAVE ASSOCIATES,
---- ---- ------------------
L.P. (hereinafter called "LANDLORD"), and CELL PATHWAYS, INC., a Delaware
- ---- --------------------
Corporation (hereinafter called "TENANT").
WITNESSETH, THAT:
1. DEMISED PREMISES. Landlord, for the term and subject to the
provisions and conditions hereof, leases to Tenant, and Tenant accepts from
Landlord, the space (hereinafter referred to as the "DEMISED PREMISES") and more
particularly described by the area on the floor plans annexed hereto as EXHIBIT
"A" consisting of approximately 40,000 rentable square feet on the GROUND floor
------
of the building (hereinafter referred to as the "BUILDING") known as the TWO
---
ELECTRONIC DRIVE located in HORSHAM, PA to be used by Tenant for the purpose of
- ---------------- -----------
GENERAL OFFICES AND BIOLOGY AND CHEMISTRY LABS FOR RESEARCH AND DEVELOPMENT and
- ---------------------------------------------------------------------------
for no other purpose.
2. TERM. Tenant shall use and occupy the Demised Premises for a term
of TEN (10) YEARS AND ZERO (0) MONTHS commencing on the 15TH day of JULY, 1997,
---------------------------------- ---- -----------
and ending on the 15TH day of JULY, 2007, unless sooner terminated as herein
---- -----------
provided as further described in Schedule "A". Tenant shall occupy only a
portion of the Demised Premises (the "July Space" as shown on Exhibit C) from
July 15th until the date Landlord delivers possession of the entire Demised
Premises, estimated to be September 15th, 1997.
3. MINIMUM RENT.
A. See Rent Schedule on the Rider attached hereto as SCHEDULE "A".
The first monthly installment of Minimum Rent payable under this Lease shall be
due and payable on the execution of this Lease and subsequent installments shall
be payable on the first day of each month of the term hereof as set forth on the
Rent Schedule.
B. All rent and other sums due to Landlord hereunder (hereinafter
called "RENT") shall be made payable to MARAVE ASSOCIATES, L.P. at 215 SOUTH
----------------------- ---------
BROAD STREET, SUITE 600, PHILADELPHIA, PA 19107 or to such other party or at
- ------------------------------------------------
such other address as Landlord may designate, from time to time, by written
notice to Tenant, without demand and without deduction, set-off or counterclaim
(except to the extent demand or notice shall be expressly provided for herein).
C. If Landlord, at any time or times, shall accept Rent or any other
sum due to it hereunder after the same shall become due and payable, such
acceptance shall not excuse delay upon subsequent occasions, or constitute or be
construed as, a waiver of any of Landlord's rights hereunder.
Page - 1
<PAGE>
4. PAYMENT OF TAXES, OPERATING COSTS, COST OF ELECTRICITY.
A. DEFINITIONS. As used in this Section 4, the following terms
shall be defined as hereinafter set forth:
(1) "TAXES" shall mean all real estate taxes and assessments,
general and special, ordinary or extraordinary, foreseen or unforeseen, imposed
upon the Building or with respect to the ownership thereof and the parcel of
land appurtenant thereto. If, due to a future change in the method of taxation,
any franchise, income, profit or other tax, however designated, shall be levied
or imposed in substitution, in whole or in part, for (or in lieu of) any tax
which would otherwise be included within the definition of Taxes, such other tax
shall be deemed to be included within Taxes as defined herein.
(2) "TENANT'S FRACTION" shall be 40,000/40,000 as of September 15,
-------------
1997 or the date Landlord delivers possession of the entire Demised Premises.
(3) OPERATING EXPENSES
(A) Operating Expenses shall mean, except as hereinafter
limited, Landlord's actual out-of-pocket expenses in respect of the operation,
maintenance and management of the Building (after deducting any reimbursement,
discount, credit, reduction or other allowance received by Landlord) and shall
include, without limitation: (1) wages and salaries (and taxes imposed upon
employers with respect to such employees) for rendering service in the normal
operation, cleaning, maintenance, and repair of the Building; (2) contract costs
of contractors hired for the operation, maintenance and repair of the Building;
(3) the cost of steam, electricity, water and sewer and other utilities (except
for electricity and any other utility, which is separately charged by Landlord
to the Demised Premises as herein provided) chargeable to the operation and
maintenance of the Building; (4) cost of insurance for the Building, including
fire and extended coverage, elevator, boiler, sprinkler leakage, water damage,
public liability and property damage, plate glass, and rent protection, but
excluding any charge for increased premiums due to acts or omissions of other
occupants of the Building or because of extra risk which are reimbursed to
Landlord by such other occupants; (5) supplies; (6) legal and accounting
expenses pertaining to the Building; and (7) Taxes; (8) management fees; (9) the
cost of oil for heat in tenants space.
The term "OPERATING EXPENSES" shall not include: (1) the cost of redecorating
or repairing not provided on a regular basis to tenants of the Building; (2) the
cost of any repair or replacement items which, by standard accounting practice,
should be capitalized; (3) any charge for depreciation, interest or rents paid
or incurred by Landlord; (4) any charge for Landlord's income tax, excess profit
taxes, franchise taxes or similar taxes on Landlord's business; and (5)
commissions.
(4) "DEMISED RENTABLE SQUARE FEET" shall mean 40,000 square feet.
------
(5) "RENTABLE SQUARE FEET IN THE BUILDING" shall mean 40,000 square
------
feet.
Page - 2
<PAGE>
B. PAYMENT OF OPERATING EXPENSES AND TAXES.
(1) For and with respect to each calendar year of the term of this
Lease (and any renewals or extensions thereof) there shall accrue, as additional
rent, an amount equal to the product obtained by multiplying the Tenant's
Fraction by the amount of Operating Expenses and Taxes for such year
(appropriately pro-rated for any partial calendar year included within the
beginning or end of the term).
(2) Landlord shall furnish to Tenant as soon as reasonably possible
after the beginning of each calendar year of the term hereof:
(a) A statement (the "EXPENSE STATEMENT") setting forth (1)
Operating Expenses for the previous calendar year, and (2) Tenant's Fraction of
the Operating Expenses for the previous calendar year; and
(b) A statement of Landlord's good faith estimate of
Operating Expenses for the current calendar year, and the amount of Tenant's
Fraction thereof (the "ESTIMATED SHARE"), for the current calendar year.
(3) Beginning with the next installment of minimum rent due after
delivery of the foregoing statements to Tenant, Tenant shall pay to Landlord, on
account of its share of Operating Expenses:
(a) One-twelfth of the Estimated Share multiplied by the
number of full or partial calendar months elapsed during the current calendar
year up to and including the month payment is made, plus any amounts due from
Tenant to Landlord on account of Operating Expenses for prior periods of time,
less:
(b) The amount, if any, by which the aggregate of payments
made by Tenant on account of Operating Expenses for the previous calendar year
exceed those actually due as specified in the Expense Statement.
(4) On the first day of each succeeding month up to the time Tenant
shall receive a new Expense Statement and statement of Tenant's Estimated Share,
Tenant shall pay to Landlord, on account of its share of Operating Expenses,
one-twelfth of the then current Estimated Share. Any payment due from Tenant to
Landlord, or any refund due from Landlord to Tenant, on account of Operating
Expenses not yet determined as of the expiration of the term hereof shall be
made within twenty (20) days after submission to Tenant of the next Expense
Statement.
Page - 3
<PAGE>
5. UTILITIES SEPARATELY CHARGED TO DEMISED PREMISES. Tenant shall be
responsible for all utilities (including gas and electric) which are consumed
within the Demised Premises. If a separate meter is installed, Tenant shall pay
for the consumption of such utilities based on its metered usage. If no meter
is installed, Tenant shall pay a pro-rata share of any utility charges covering
the Demised Premises and other areas of the Building which pro-rata share shall
be based on the percentage which the Demised Rentable Square Feet bears to the
square footage of the areas of the Building serviced by such utility. Utility
bills shall be paid by Tenant within ten (10) days after the receipt and non-
payment or late payment of such bills shall be considered a default under this
Lease.
6. SECURITY DEPOSIT. As additional security for the full and prompt
performance by Tenant of the terms and covenants of this Lease, Tenant has
deposited with the Landlord the sum of TWENTY THREE THOUSAND THREE HUNDRED
-----------------------------------
THIRTY TWO DOLLARS AND ZERO CENTS ($23,332.00) in the form of an irrevocable
- ----------------------------------------------
Letter of Credit which shall not constitute rent for any month (unless so
applied by Landlord on account of Tenant's default). Tenant shall, upon demand,
restore any portion of said security deposit, which may be applied by Landlord
to the cure of any default by Tenant hereunder. To the extent that Landlord has
not applied said sum on account of a default, the security deposit shall be
returned (without interest) to Tenant promptly after termination of this Lease.
7. CARE OF DEMISED PREMISES. Tenant agrees, on behalf of itself, its
employees and agents that it shall:
(A) Comply at all times with any and all Federal, state, and local
statutes, regulations, ordinances, and other requirements of any of the
constituted public authorities relating to its use and occupancy of the Demised
Premises.
(B) Give Landlord access to the Demised Premises at all reasonable
times, without charge or diminution of rent, to enable Landlord (i) to examine
the same and to make such repairs, additions and alterations as Landlord may be
permitted to make hereunder or as Landlord may deem advisable for the
preservation of the integrity, safety and good order of the Building or any part
thereof; and (ii) upon reasonable notice, to show the Demised Premises to
prospective mortgagees and purchasers and, during the six (6) months prior to
expiration of the term, to prospective tenants;
(C) Keep the Demised Premises in good order and condition and replace
all glass broken by Tenant, its agents, employees or invitees with glass of the
same quality as that broken, except for glass broken by fire and extended
coverage type risks, and commit no waste in the Demised Premises;
Page - 4
<PAGE>
(D) Upon the termination of this Lease in any manner whatsoever,
remove Tenant's goods effects and those of any other person claiming under
Tenant, and quit and deliver up the Demised Premises to Landlord peaceably and
quietly in as good order and condition at the inception of the term of this
Lease or as the same hereafter may be improved by Landlord or Tenant, reasonable
use and wear thereof, damage from fire and extended coverage type risks, and
repairs which are Landlord's obligation excepted. Goods and effects not removed
by Tenant at the termination of this Lease, however terminated, shall be
considered abandoned and Landlord may dispose of and/or store the same as it
deems expedient, the cost thereof to be charged to Tenant;
(E) Not place signs on the Demised Premises except on doors and then
only of a type and with lettering and text approved by Landlord. Identification
of Tenant and Tenant's location shall be provided in a directory in the Building
lobby; and proportionally on any exterior building signage
(F) Not overload, damage or deface the Demised Premises or do any act
which might make void or voidable any insurance on the Demised Premises or the
Building or which may render an increased or extra premium payable for insurance
(and without prejudice to any right or remedy of Landlord regarding this
subparagraph, Landlord shall have the right to collect from Tenant, upon demand,
any such increase or extra premium).
Tenant shall maintain at its own sole cost adequate insurance coverage for all
of its equipment, furniture, supplies and fixtures and provide Landlord with
certificates evidencing such coverage;
(G) Not make any alteration of or addition to the Demised Premises
without the prior written approval of Landlord (except for work of a decorative
nature) which approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, consent will not be required for construction of
15,000 square feet or less of laboratory space provided such construction.
(1) does not alter or affect in anyway the structural integrity
of the building, and
(2) complies with all federal, state and local laws and
regulations pertaining to the construction of laboratory space.
(H) Not install or authorize the installation of any coin operated
vending machines, except for the dispensing of cigarettes, coffee, and similar
items to the employees of Tenant for consumption upon the Demised Premises;
(I) Observe the rules and regulations annexed hereto as EXHIBIT "B",
as the same may from time to time be amended by Landlord for the general safety,
comfort and convenience of Landlord, occupants and tenants of the Building; and
provided that Tenant's use shall supercede such rules and regulations.
(J) Keep the Demised Premises heated at a level of forty-five degrees
(45 degrees) to keep the sprinkler system and plumbing from freezing.
Page - 5
<PAGE>
8. SUBLETTING AND ASSIGNING. Tenant shall not assign this Lease or
sublet all or any portion of the Demised Premises without first obtaining
Landlord's prior written consent thereto which consent shall not be unreasonably
withheld. If such consent is given, it will not release Tenant from its
obligations hereunder and which will not be deemed a consent to any further
subletting or assignment. If Landlord consents to any such subletting or
assignment, it shall nevertheless be a condition to the effectiveness thereof
that a fully executed copy of the sublease or assignment be furnished to
Landlord and that any assignee assume in writing all obligations of Tenant
hereunder. Tenant shall not mortgage or encumber this Lease.
9. DELAY IN POSSESSION. If Landlord shall be unable to deliver
possession of the Demised Premises to Tenant on the date specified for
commencement of the term hereof because of the holding over or retention of
possession of any tenant or occupant, or if repairs, improvements or decoration
of the Demised premises are not completed, or for any other reason, Landlord
shall not be subject to any liability to Tenant. Under such circumstances, the
rent reserved and covenanted to be paid herein shall not commence until
possession of the July Space or the Demised Premises, as applicable, is given or
until Landlord shall give written notice to Tenant that the July Space or the
Demised Premises, as applicable, are available for occupancy by Tenant,
whichever shall first occur, and no such failure to give possession shall in any
other respect affect the validity of this Lease or any obligation to extend the
term of this Lease. Notwithstanding the foregoing, if Landlord is unable to
deliver possession of the July Space on July 15th, 1997, Tenant will receive a
rent credit of $500.00 for every day beyond July 15th, 1997 (e.g. possession
July 20th - $2,500.00 rent credit). In addition if Landlord is unable to deliver
possession of the balance of the Demised Premises by September 15th, 1997,
Tenant shall receive a rent credit of $1,600.00 for every day beyond September
15th, 1997. (e.g. possession September 20th, 1997 - $8,000.00 rent credit). Any
rent credit not used against rent shall be paid in cash.
10. FIRE OR CASUALTY. In case of damage to the Demised Premises or the
Building by fire or other casualty, Tenant shall give immediate notice thereof
to Landlord. Landlord shall thereupon cause the damage to be repaired with
reasonable speed, subject to delays, which may arise by reason of adjustment of
loss under insurance policies and for delays beyond the reasonable control of
Landlord. To the extent and for the time that the Demised Premises are thereby
rendered untenantable, the rent shall proportionately abate.
In the event the damage shall be so extensive that Landlord shall decide not to
repair or rebuild, or if any mortgagee, having the right to do so, shall direct
that the insurance proceeds are to be applied to reduce the mortgage debt rather
than to the repair of such damage, this Lease shall, at the option of Landlord,
exercisable by written notice to Tenant given within thirty (30) days after
Landlord is notified of the casualty, be terminated as of a date specified in
such notice (which shall not be more than ninety (90) days thereafter), and the
rent (taking into account any abatement as aforesaid) shall be adjusted to the
termination date. Thereafter, Tenant shall promptly vacate the Demised Premises.
Page - 6
<PAGE>
11. LIABILITY. Tenant agrees that Landlord and its building manager and
their officers, employees and agents shall not be liable to Tenant, and Tenant
hereby releases said parties, for any personal injury or damage to or loss of
personal property in the Demised Premises from any cause whatsoever unless such
damage, loss or injury is the result of the willful misconduct or gross
negligence of Landlord, its building manager, or their officers, employees or
agents, and Landlord and its building manager and their officers, employees, or
agents, and Landlord and its building manager and their officers or employees
shall not be liable to Tenant for any such damage or loss whether or not the
result of their willful misconduct or gross negligence to the extent Tenant is
compensated therefor by Tenant's insurance. Tenant shall and does hereby
indemnify and hold Landlord harmless of and from all loss or liability incurred
by Landlord in connection with any failure of Tenant to fully perform its
obligations under this Lease and in connection with any personal injury or
damage of any type or nature occurring in or resulting out of Tenant's use of
the Demised Premises, unless due to Landlord's willful misconduct or gross
negligence.
12. EMINENT DOMAIN. If the whole or a substantial part of the Building
shall be taken or condemned for a public or quasi-public use under any statute
or by right of eminent domain or private purchase in lieu thereof by any
competent authority, Tenant shall have no claim against Landlord and shall not
have any claim or right to any portion of the amount that may be awarded as
damages or paid as a result of any such condemnation or purchase; and all rights
of the Tenant to damages therefore are hereby assigned by Tenant to Landlord.
The foregoing shall not, however, deprive Tenant of any separate award for
moving expenses or for any other award which would not reduce the award payable
to Landlord. Upon the date the right to possession shall vest in the condemning
authority, this Lease shall cease and terminate with rent adjusted to such date,
and Tenant shall have no claim against Landlord for the value of any unexpired
term of this Lease.
13. INSOLVENCY. (a) The appointment of a receiver or trustee to take
possession of all or a portion of the assets of Tenant, or (b) an assignment by
Tenant for the benefit of creditors, or (c) the institution by or against Tenant
of any proceedings for bankruptcy or reorganization under any state or federal
law (unless, in the case of involuntary proceedings, the same shall be dismissed
within ninety (90) days after institution), or (d) any execution issued against
Tenant which is not stayed or discharged within fifteen (15) days after issuance
of any execution sale of the assets of Tenant, shall constitute a breach of this
Lease by Tenant. Landlord, in the event of such a breach, shall have, without
need of further notice, the rights enumerated in Section 14 herein.
Page - 7
<PAGE>
14. DEFAULT.
A. If Tenant shall fail to pay rent or any other sum payable to
Landlord hereunder within fifteen (15) days from the date of written notice from
Landlord (which will only be required twice in any given year), or if Tenant
shall fail to perform or observe any of the other covenants, terms or conditions
contained in this Lease within thirty (30) days from the date of written notice
to Tenant (or such longer period as is reasonably required to correct any such
default, provided Tenant promptly commences and diligently continues to
effectuate a cure, but in any event within thirty (30) days after written notice
thereof by Landlord) or if any of the events specified in Section 13 occur, or
if Tenant vacates or abandons the Demised Premises during the term hereof or
removes or manifests an intention to remove any of Tenant's goods or property
therefrom other than in the ordinary and usual course of Tenant's business, then
and in any of said cases (notwithstanding any former breach of covenant or
waiver thereof in a former instance), Landlord, in addition to all other rights
and remedies available to it by law or equity or by any other provisions hereof,
may at any time thereafter:
(i) upon three (3) days notice to Tenant, declare to be
immediately due and payable, on account of the rent and other charges herein
reserved for the balance of the term of this Lease (taken without regard to any
early termination of said term on account of default), a sum equal to the
Accelerated Rent Component (as hereinafter defined), and Tenant shall remain
liable to Landlord as hereinafter provided; and/or
(ii) whether or not Landlord has elected to recover the
Accelerated Rent Component, terminate this Lease on at least five (5) days
notice to Tenant and, on the date specified in said notice, this Lease and the
term hereby demised and all rights of Tenant hereunder shall expire and
terminate and Tenant shall thereupon quit and surrender possession of the
Demised Premises to Landlord in the condition elsewhere herein required and
Tenant shall remain liable to Landlord as hereinafter provided.
B. For purposes herein, the Accelerated Rent Component shall mean
the aggregate of:
(i) all rent and other charges, payments, costs and expenses due
from Tenant to Landlord and in arrears at the time of the election of Landlord
to recover the Accelerated Rent Component;
(ii) the minimum rent reserved for the then entire unexpired
balance of the term of this Lease (taken without regard to any early termination
of the term by virtue of any default), plus all other charges, payments, costs
and expenses herein agreed to be paid by Tenant up to the end of said term which
shall be capable of precise determination at the time of Landlord's election to
recover the Accelerated Rent Component; and
Page - 8
<PAGE>
(ii) Landlord's good faith estimate of all charges, payments,
costs and expenses herein agreed to be paid by Tenant up to the end of said term
which shall not be capable to precise determination as aforesaid (and for such
purposes no estimate of any component of additional rent to accrue pursuant to
the provisions of Section 4 hereof shall be less than the amount which would be
due if each such component continued at the highest monthly rate or amount in
effect during the twelve (12) months immediately preceding the default).
(C) In any case in which this Lease shall have been terminated, or in
any case in which Landlord shall have elected to recover the Accelerated Rent
Component and any portion of such sum shall remain unpaid, Landlord may, without
future notice, enter upon and repossess the Demised Premises, by force, summary
proceedings, ejectment or otherwise, and may dispossess Tenant and remove Tenant
and all other persons and property from the Demised Premises and may have, hold
and enjoy the Demised Premises and the rents and profits therefrom. Landlord
may, in its own name, as agent for Tenant, if this Lease has not been
terminated, or in its own behalf, if this Lease has been terminated, relet the
Demised Premises or any part thereof for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of the this Lease) and on such terms (which may include
concessions of free rent) as Landlord in its sole discretion may determine.
Landlord may, in connection with any such reletting, cause the Demised Premises
to be redecorated, altered, divided, consolidated with other space or otherwise
changed or prepared for reletting. No reletting shall be deemed a surrender and
acceptance of the Demised Premises.
(D) Tenant shall, with respect to all periods of time up to and
including the expiration of the term of this Lease (or what would have been the
expiration date in the absence of default or breach) remain liable to Landlord
as follows:
(i) In the event of termination of this Lease on account of
Tenant's default or breach, Tenant shall remain liable to Landlord for damages
equal to the rent and other charges payable under this Lease by Tenant as if
this Lease were still in effect, less the net proceeds of any reletting after
deducting all costs incident thereto (including without limitation all
repossession costs, brokerage and management commissions, operating and legal
expenses and fees, alteration costs and expenses of preparation for reletting)
and to the extent such damages shall not have been recovered by Landlord by
virtue of payment by Tenant of the Accelerated Rent Component (but without
prejudice to the right of Landlord to demand and receive the Accelerated Rent
Component), such damages shall be payable to Landlord monthly upon presentation
to Tenant of a bill for the amount due.
(ii) In the event and so long as this Lease shall not have been
terminated after default or breach by Tenant, the rent and all other charges
payable under this Lease shall be reduced by the net proceeds of any reletting
by Landlord (after deducting all costs incident thereto as above set forth) and
by any portion of the Accelerated Rent Component paid by Tenant to Landlord, and
any amount due to Landlord shall be payable monthly upon presentation to Tenant
of a bill for the amount due.
Page - 9
<PAGE>
(E) In the event Landlord shall, after default or breach by Tenant,
recover the Accelerated Rent Component from Tenant and it shall be determined at
the expiration of the term of this Lease (taken without regard to early
termination for default) that a credit is due Tenant because the net proceeds of
reletting, as aforesaid, plus amounts paid to Landlord by Tenant exceed the
aggregate of rent and other charges accrued in favor of Landlord to the end of
said term, Landlord shall refund such excess to Tenant, without interest,
promptly after such determination.
(F) Landlord shall use commercially reasonable efforts, but in no
event be responsible or liable for any failure, to relet the Demised Premises or
any part thereof, or for any failure to collect any rent due upon a reletting.
(G) As an additional and cumulative remedy of Landlord in the event
of termination of this Lease by Landlord following any breach or default by
Tenant, Landlord, at its option, shall be entitled to recover damages for such
breach in an amount equal to the Accelerated Rent Component (determined from and
after the date of Landlord's election under this subsection (G) less the fair
rental value of the Demised Premises for the remainder of the term of this Lease
(taken without regard to the early termination) and such damages shall be
payable by Tenant upon demand. Nothing contained in this Lease shall limit or
prejudice the right of Landlord to prove and obtain as damages incident to a
termination of this Lease, in any bankruptcy, reorganization or other court
proceedings, the maximum amount allowed by any statute or rule of law in effect.
(H) In the event of any default occurrence by which Landlord shall
have the rights and remedies specified in this Section 14:
(i) INTENTIONALLY DELETED
(ii) For the purpose of obtaining possession of the Demised
Premises, Tenant hereby authorizes and empowers any prothonotary or attorney of
any court of record to appear for Tenant and to file in any court an agreement
for entering an amicable action and judgment in ejectment for recovery of
possession, and/or to confess judgment for possession against Tenant and those
claiming by, through or under Tenant in favor of Landlord by Complaint to
Confess Judgment or otherwise, and Tenant agrees that upon such entry or
judgment a writ of possession for the Demised Premises may forthwith issue; and
(I) Tenant hereby waives all errors and defects of a procedural
nature in any proceedings brought against it by Landlord under this Lease.
Tenant further waives the right to any notices to quit as may be specified in
the Landlord and Tenant Act of Pennsylvania, as amended, and agrees that five
(5) days notice shall be sufficient in any case where a longer period may be
statutorily specified.
(J) If rent or any other sum due from Tenant to Landlord shall be
overdue for more than five (5) business days after notice from Landlord, it
shall thereafter bear interest at the rate of 4 points over prime rate per annum
(or, if lower, the highest legal rate) until paid.
Page - 10
<PAGE>
15. SUBORDINATION. This Lease is and shall be subject and subordinate to
all the terms and conditions of all underlying mortgages and to all ground or
underlying leases of the entire Building which may now or hereafter be secured
upon the Building, and to all renewals, modifications, consolidations,
replacements and extensions thereof. This clause shall be self-operative and no
further instrument of subordination shall be necessary. Tenant shall execute,
within fifteen (15) days after request, any certificate that Landlord may
reasonably require acknowledging such subordination. Notwithstanding the
foregoing, provided Tenant is not in Default, both the party holding the
instrument to which this Lease is subordinate and Tenant, at the option of
either, shall have the right to recognize and preserve this Lease in the event
of any foreclosure sale, possessory action or other transaction, and in such
case this Lease shall continue in full force and effect and Tenant shall attorn
the proper party and shall execute, acknowledge and deliver any instrument that
has for its purpose and effect the confirmation of such attornment in accordance
with a mutually acceptable SNDA Agreement.
16. NOTICES. All bills, statements, notices or communications which
Landlord may desire or be required to give to Tenant shall be deemed
sufficiently given or rendered if in writing and either delivered to an officer
of Tenant or sent by registered or certified mail addressed to Tenant at the
Building, and the time of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant or deposited in the
mail, as the case may be. Any notice by Tenant to Landlord must be served by
registered or certified mail addressed to Landlord at the address where the last
previous rental hereunder was payable, or in the case of subsequent change upon
notice given, to the latest address furnished.
17. HOLDING-OVER. Should Tenant continue to occupy the Demised Premises
after expiration of the term of this Lease or any renewal or renewals thereof,
or after a forfeiture incurred, such tenancy shall (without limitation of any of
Landlord's rights or remedies therefor) be one at sufferance from month to month
at a minimum monthly rental equal to twice the rent payable for the last month
of the term of this Lease.
18. MISCELLANEOUS.
A. Tenant represents and warrants that it has not employed any
broker or agent as its representative in the negotiation for or the obtaining of
this Lease other than Tom Tadley of Franklin Realty Development Corporation
located at 765 Skippack Pike, Suite 200 in Blue Bell, PA 19422, and agrees to
indemnify and hold Landlord harmless from any and all cost or liability for
compensation claimed by any broker or agent with whom it has dealt. Landlord
agrees to compensate Franklin Realty.
Page - 11
<PAGE>
B. The word "TENANT" as used in this Lease shall be construed to
mean tenants in all cases where there is more than one tenant, and the necessary
grammatical changes required to make the provisions hereof apply to
corporations, partnerships or individuals, men or women, shall in all cases be
assumed as though in each case fully expressed. This Lease shall not inure to
the benefit of any assignee, heir, legal representative, transferee or successor
of Tenant except upon the express written consent or election of Landlord.
Subject to the foregoing limitation, each provision hereof shall extend to and
shall, as the case may require, bind and inure to the benefit of Tenant and its
heirs, legal representatives, successors and assigns.
C. The term "LANDLORD" as used in this Lease means the fee owner of
the Building or, if different, the party holding and exercising the right, as
against all others (except space tenants of the Building) to possession of the
entire Building. Landlord above-named represents that it is the holder of such
rights as of the date of execution hereof. In the event of the voluntary
transfer of such ownership or right to a successor-in-interest of Landlord,
Landlord shall be freed and relieved of all liability and obligation hereunder
which shall thereafter accrue (and, as to any unapplied portion of Tenant's
security deposit, Landlord shall be relieved of all liability therefor upon
transfer of such portion to its successor in interest) and Tenant shall look
solely to such successor in interest for the performance of the covenants and
obligations of the Landlord hereunder which shall thereafter accrue.
Notwithstanding the foregoing, no mortgagee or ground lessor which shall succeed
to the interest of Landlord hereunder (either in terms of ownership or
possessory rights) shall (i) be liable for any previous act or omission of a
prior landlord; (ii) be subject to any rental offsets or defenses against a
prior landlord; (iii) be bound by any amendment of this Lease made without its
written consent, or by payment by Tenant of rent in advance in excess of one (1)
month's rent; or (vi) be liable for any security not actually received by it.
Subject to the foregoing, the provisions hereof shall be binding upon and inure
to the benefit of the successors and assigns of Landlord. Notwithstanding
anything to the contrary contained in this Lease, any liability of Landlord, its
agents, partners or employees, arising out of or in respect of this Lease, the
Demised Premises or the Building, and, if Landlord shall default in the
performance of Landlord's obligation under this Lease or otherwise, Tenant shall
look solely to the equity of Landlord in its interest in the Building.
D. Tenant and Landlord agree to execute a memorandum of this Lease,
which may be recorded by Landlord or Tenant. Tenant also agrees to execute any
assignment of this Lease by Landlord, evidencing its consent to such assignment.
19. LANDLORD IMPROVEMENT. Landlord will deliver possession of the
Demised Premises to Tenant in broom swept condition, and Landlord shall not make
any improvements to the Demised Premises, subject to Exhibit C.
Page - 12
<PAGE>
20. WAIVER OF SUBROGATION. Each party hereto waives any and every claim
which arises or which may arise in its favor and against the other party hereto
during the term of this Lease, or any extension or renewal thereof, for any and
all loss of, or damage to, any of its property located within or upon or
constituting a part of the Building, to the extent that such loss or damage is
recovered under an insurance policy or policies and to the extent such policy or
policies contain provisions permitting such waivers of claims. Each party
agrees to request its insurers to issue policies containing such provisions and
if any extra premium is payable therefor, the party which would benefit from the
provision shall have the option to pay such additional premium in order to
obtain such benefit.
21. RENT TAX. If, during the term of this Lease or any renewal or
extension thereof, any tax is imposed upon the privilege of renting or occupying
the Demised Premises or upon the amount of rentals collected therefor, Tenant
will pay each month, as additional rent, a sum equal to such tax or charge that
is imposed for such month, but nothing herein shall be taken to require Tenant
to pay any income, estate, inheritance or franchise tax imposed upon Landlord.
22. PRIOR AGREEMENT, AMENDMENTS. Neither party hereto has made any
representations nor promises except as contained herein or in some further
writing signed by the party making such representation or promise. No agreement
hereinafter made shall be effective to change, modify, discharge or effect an
abandonment of this Lease, in whole or in part, unless such agreement is in
writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought. Tenant agrees to execute any
amendment to this Lease required by a mortgagee of the Building, which amendment
does not materially adversely affect Tenant's rights or obligations hereunder.
23. CAPTIONS. The captions of the paragraphs in this Lease are inserted
and included solely for convenience and shall not be considered or given any
effect in construing the provisions hereof.
24. MECHANIC'S LIEN. Tenant shall, within ten (10) days after notice from
Landlord, discharge any mechanic's lien for materials or labor claimed to have
been furnished to the Demised Premises on Tenant's behalf (except for work
contracted for by Landlord) and shall indemnify and hold harmless Landlord from
any loss incurred in connection therewith.
25. LANDLORD'S RIGHT TO CURE. Landlord may (but shall not be obligated),
on five (5) days notice to Tenant (except that no notice need be given in case
of emergency) cure on behalf of Tenant any default hereunder by Tenant, and the
cost of such cure (including any attorney's fees incurred) shall be deemed
additional rent payable upon demand.
Page - 13
<PAGE>
26. PUBLIC LIABILITY INSURANCE. Tenant shall at all times during the term
hereof maintain in full force and effect with respect to the Demised Premises
and Tenant's use thereof, comprehensive public liability insurance, naming
Landlord as an additional insured, covering injury to persons in amounts at
least equal to Five Hundred Thousand ($500,000) Dollars combined single limit
bodily injury and property. Tenant shall lodge with Landlord duplicate
originals or certificates of such insurance at or prior to the commencement date
of the term hereof, together with evidence of paid-up premiums, and shall lodge
with Landlord renewals thereof at least fifteen (15) days prior to expiration.
27. ESTOPPEL STATEMENT. Tenant shall from time to time, within ten (10)
days after request by Landlord, execute, acknowledge and deliver to Landlord a
statement certifying that this Lease is unmodified and in full force and effect
(or that the same is in full force and effect as modified, listing any
instruments or modifications), the dates to which rent and other charges have
been paid, and whether or not, to the best of Tenant's knowledge, Landlord is in
default or whether Tenant has any claims or demands against Landlord (and, if
so, the default, claim and/or demand shall be specified).
28. ENVIRONMENTAL COMPLIANCE.
A. Tenant hereby covenants and agrees to use and occupy the Demised
Premises and to conduct its business and operations thereupon in full compliance
with all applicable statutes, codes, rules, regulations, and ordinances as they
may change from time to time pertaining to the protection of the environment and
to hazardous substances and hazardous wastes as those terms may be defined from
time to time in such statutes, codes, rules, regulations, and ordinances
("ENVIRONMENTAL LAWS").
B. Tenant shall promptly provide Landlord with copies of all
correspondence from or to the U.S. Environmental Protection Agency, the
Pennsylvania Department of Environmental Resources or any other federal, state
or local governmental agency which pertains to the Demised Premises regarding
but not limited to the following: (1) Tenant's compliance with the
Environmental Laws; (2) any permits which Tenant may be required to obtain
pursuant to the Environmental Laws; (3) any release or threat of release of a
hazardous substance or hazardous waste which has occurred in the Demised
Premises.
C. Tenant shall immediately notify Landlord of its receipt of any
notices of alleged violations of the Environmental Law from any other party
including but not limited to governmental agencies including requests for
information.
D. Tenant shall promptly provide Landlord with copies of any
documents required to be kept or prepared by Tenant or maintained at the Demised
Premises pursuant to the Pennsylvania Worker Right to Know Act, 35 P.S. 7301 et
seq., and the regulations promulgated thereunder.
E. Tenant shall promptly supply to Landlord true and complete copies
of all sampling and test results obtained from any samples and tests taken at or
around the Demised Premises.
Page - 14
<PAGE>
F. In the event of any "RELEASE" of a "HAZARDOUS SUBSTANCE" or
"HAZARDOUS WASTE" as those terms are defined in any of the Environmental Laws,
which release requires notification of any governmental agency, Tenant shall
immediately notify Landlord of the release and provide a full, true and complete
description of the release, the substances involved and the remedial efforts
taken.
G. At any time during the term hereof, Landlord shall have a right
to enter upon the Demised Premises to inspect the Demised Premises and to
evaluate Tenant's compliance with the Environmental Laws. Such right of access
shall include a right to review Tenant's records pertaining to compliance with
the Environmental Laws. Tenant hereby agrees to cooperate with Landlord in any
such inspection and evaluation.
H. Tenant hereby agrees to indemnify, defend and hold Landlord
harmless from and against any and all claims, demands, judgments, suits, liens,
actions, and other proceedings, arising out of or relating to the removal,
remediation, corrective action or clean up of any hazardous waste or hazardous
substance as defined in the Environmental Laws or any other proceedings or
actions threatened, or brought for the enforcement of any Environmental Laws now
or hereafter applicable to the Demised Premises and resulting from or arising
out of Tenant's use, operation, and occupation thereof during the term of this
Lease. Such indemnification shall include but not be limited to costs of
investigation, engineering fees, attorney's fees, costs of remediation and clean
up and future site maintenance.
I. Prior to the commencement date of this Lease, Tenant shall supply
to Landlord an affidavit of an officer or principal of Tenant setting forth
Tenant's SIC number (when applicable) and a detailed description of Tenant's
operation and the processes Tenant will undertake at the Demised Premises,
including a description and quantification of any hazardous substances and
hazardous waster generated, manufactured, refined, transported, treated, stored,
handled or disposed of at or from the Demised Premises. Following the
commencement of the lease term, Tenant shall update this affidavit in the event
of any changes in Tenant's operations, SIC number or use of hazardous substances
and waste. Tenant shall also supplement and update such affidavit upon each
anniversary of the commencement of the lease term.
J. All of the terms and conditions of this Section shall survive the
termination of this Lease Agreement for so long as any liability may arise under
the Environmental Laws with respect to the Demised Premises.
29. QUIET ENJOYMENT. Tenant, upon paying the Fixed Rent, additional
rent and all other charges herein provided for and observing and keeping all
covenants, agreements and conditions of this Lease on its part to be kept, shall
quietly have and enjoy the Demised Premises during the term of this Lease
without hindrance or molestation by anyone claiming by or through Landlord,
subject, however, to the exceptions, reservations and conditions of this Lease,
and Landlord will maintain the structure of the building in a tenantable
condition.
Page - 15
<PAGE>
30. OPTION TO PURCHASE. Tenant is hereby granted the Option to Purchase
the Demised Premises for the price, and upon the terms and conditions, set forth
in the Agreement of Sale attached hereto in Exhibit "D", (the "Agreement of
Sale"). In order to exercise this option, Tenant shall, on or before March 31,
1998, execute and contemporaneously date at least two counterparts of the
Agreement of Sale and hand deliver or forward them by certified mail to the
Landlord, together with a certified check in the amount of $100,000.00
representing the deposit money provided for therein. Upon receipt by Landlord
of the counterparts of the Agreement of Sale, together with the deposit money
check, it shall be the obligation of Landlord to sign a copy of the Agreement of
Sale and return it to Tenant within ten (10) days. Settlement shall take place
within the specified time set forth in the Agreement. In the event Tenant does
not exercise its Option to Purchase in accordance with the above terms, this
Option to Purchase shall become null and void on April 1, 1998, and all rights
and remedies and obligations of both Landlord and Tenant with respect to this
option shall cease as of that date. With reference to Tenant's Option to
Purchase provided herein, Landlord represents to Tenant the following:
(a) Landlord is the present Owner in fee of the Demised Premises, and
presently has full power to convey good and marketable title, and such as will
be insured at standard rates by any reputable title insurance company doing
business in Montgomery County, Pennsylvania, except as to encumbrances listed in
subparagraph (b) below;
(b) To the best of our knowledge there are no encumbrances on title
to the Demised Premises except as shown on attached Exhibit E and the Right of
Way, dated February 13, 1997 granted to PECO Energy Company by Marave
Associates, L.P. recorded in Deed Book 5181 page 1406 recorded on April 3, 1997.
(c) Between the date hereof and the earlier of the expiration of
Tenant's Option to Purchase hereunder or the settlement date provided in the
Agreement of Sale, Landlord shall not sell, alienate or encumber the Demised
Premises except with the written consent of Tenant, and Landlord will pay when
due, and otherwise remain in compliance, with all obligations of the Landlord
under encumbrances set forth in subparagraph (b) above provided, however, that
Landlord may mortgage the Demised Premises under the following conditions;
(i) The amount and terms of that mortgage are such that Landlord
will be able to satisfy and discharge the mortgage upon Tenant's purchase of the
property under its Option to Purchase the Demised Premises;
(ii) Landlord will use commercially reasonable efforts to make
any new mortgage assumable by Tenant upon Tenant's exercise of the Option to
Purchase; and
(iii) Landlord will maintain sufficient financial condition to
enable it to, and will in fact, satisfy and discharge such mortgage upon
Tenant's Purchase of the Demised Premises.
(d) All representations of paragraph 7 of the Agreement of Sale are
true as of the date hereof.
Page - 16
<PAGE>
31. CONTRACTION OPTION. Upon one month written notice to Landlord, Tenant
may return to the Landlord 5,000 square feet (that can be separately demised and
leased by Landlord, the "Portion") of the Demised Premises, effective no later
than July 1, 1998. Upon effective date of the return of the Portion to the
Landlord, the Minimum Rent, Operating Expenses, Taxes and any other amounts
payable hereunder shall be proportionately reduced, and the respective
definitions and provisions of this Lease shall be deemed amended to reflect that
the Demised Premises have been reduced by the Portion.
IN WITNESS WHEREOF, the parties hereto have executed this Lease or caused
this Lease to be executed by their duly authorized representatives the day and
year first above written.
LANDLORD:
--------
MARAVE ASSOCIATES, L.P.
BY: /s/ Authorized Signer
---------------------------
DATE: 6 / 20 / 97
---- ---- ----
TENANT:
------
CELL PATHWAYS, INC.
BY: /s/ Richard H. Troy
-------------------------
DATE: 6 / 20 / 97
---- ---- ----
Page - 17
<PAGE>
SCHEDULE "A"
RENT RIDER FOR JULY SPACE
---------- --------------
<TABLE>
<CAPTION>
----------------------------------------------------------------
PERIOD RENT
------ ----
----------------------------------------------------------------
<S> <C>
July 15, 1997 - July 31, 1997 $1,300.00
----------------------------------------------------------------
August 1, 1997 - August 31, 1997 $2,600.00
----------------------------------------------------------------
September 1, 1997 - September 14, 1997 $1,300.00
----------------------------------------------------------------
</TABLE>
RENT RIDER FOR DEMISED PREMISES
-------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
PERIOD RENT
------ ----
----------------------------------------------------------------------------
<S> <C>
September 15, 1997 - September 30, 1997 $11,666.00 per month
----------------------------------------------------------------------------
October 1, 1997 - March 31, 1998 $23,332.00 per month
----------------------------------------------------------------------------
April 1, 1998 - June 30, 1998 $38,333.00 per month
----------------------------------------------------------------------------
July 1, 1998 - June 30, 2002 $36,666.67 per month
----------------------------------------------------------------------------
July 1, 2002 - July 15, 2007 $39,166.67 per month
----------------------------------------------------------------------------
</TABLE>
The Monthly Rent for the July Space and the Demised Premises shall be prorated
based on the actual date of delivery of premises to Tenant.
Page - 18
<PAGE>
EXHIBIT "A"
[Floor Plan]
Page - 19
<PAGE>
EXHIBIT "B"
BUILDING RULES AND REGULATIONS
1. The sidewalks, entryways, passages, corridors, stairways and elevators
shall not be obstructed by any of the tenants, their employees or agents, or
used by them for purposes other than ingress or egress to and from their
respective suites. All safes or other heavy articles shall be carried up or into
the leased premises only at such times and in such manner as shall be prescribed
by the Landlord and the Landlord shall in all cases have the right to specify a
maximum weight and proper position or location of any such safe or other heavy
article. The Tenant shall pay any damage done to the Building by taking in or
removing any safe or from overloading any floor in any way. The Tenant shall
pay for the cost of repairing or restoring any part of the Building, which shall
be defaced or injured by a tenant, it's agents or employees.
2. Each tenant will refer all contractors, contractor's representatives
and installation techniques rendering any service on or to the leased premises
for the tenant to Landlord for Landlord's approval and supervision before
performance of any contractual service. This provision shall apply to all work
performed in the Building, including installation of telephones, telegraph
equipment, electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the Building.
3. No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building as shall first
be designated by Landlord; there shall be no obligation or duty on Landlord to
allow any sign, advertisement or notice to be inscribed, painted or affixed on
any part of the inside or outside of the Building except as specified in a
tenant's lease. Signs on or adjacent to doors shall be in color, size and style
approved by Landlord, the cost to be paid by the tenants. Landlord will provide
a directory in a conspicuous place, with the names of tenants, Landlord will
make any necessary revision in this within a reasonable time after notice from
the tenant of an error or of a change making revision necessary. No furniture
shall be placed in front of the Building or in any lobby or corridor without
written consent of Landlord.
4. No tenant shall do or permit anything to be done in it's leased
premises, or bring to keep anything therein, which will in any way increase the
rate of fire insurance on the Building, or on property kept therein, or obstruct
or interfere with the rights of other tenants, or in any way injure or annoy
them, or conflict with the laws relating to fire prevention and safety, or with
any regulations of the fire department, or with any insurance policy upon the
Building or any part thereof, or conflict with any rules or ordinances of any
Board of Health or other governing bodies having jurisdiction over the Building.
5. The janitor of the Building may at all times keep a pass-key, and he
and other agents of the Landlord shall at all times be allowed admittance to the
leased premises for purposes permitted in Tenant's lease.
Page - 20
<PAGE>
6. No additional locks shall be placed upon any doors without the written
consent of the Landlord. All necessary keys shall be furnished by the Landlord,
and the same shall be surrendered upon the termination of this Lease, and the
Tenant shall then give the Landlord or his agents explanation of the combination
of all locks upon the doors of vaults.
7. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or abuse by a tenant or it's agents, employees or
invitees, shall be borne by the Tenant.
8. No person shall disturb the occupants of the Building by the use of
any musical instruments; the making or transmittal of noises which are audible
outside the leased premises, or any unreasonable use. No dogs or other animals
or pets of any kind will be allowed in the Building.
9. No bicycles or similar vehicles will be allowed in the Building.
10. Nothing shall be thrown out the windows of the building or down the
stairways or other passages.
11. Tenants shall not be permitted to use or to keep in the Building any
kerosene, camphene, burning fluid or other illuminating materials.
12. If any tenant desires telegraphic, telephonic or other electric
connections, Landlord or it's agents will direct the electricians as to what and
how the wires may be introduced, and without such directions no boring cutting
for wires will be permitted.
13. If a tenant desires shades, they must be of such shape, color,
materials and make as shall be prescribed by Landlord. No outside awning shall
be permitted.
14. No portion of the Building shall be used for the purposes of lodging
rooms or for any immoral or unlawful purposes.
Page - 21
<PAGE>
RENT RIDER
<TABLE>
<CAPTION>
PERIOD MONTHLY ANNUALLY
------ ------- --------
<S> <C> <C>
Months 1 - 3 $ 2,600.00 $ 31,200.00
Months 4 - 9 $23,332.00 $279,984.00
Months 10 - 12 $38,333.00 $459,996.00
Months 13 - 60 $36,666.67 $440,000.00
Months 61 - 120 $39,166.67 $470,000.00
</TABLE>
Monthly Rent for the July Space payable prorata until delivery of Demised
Premises.
Page - 22
<PAGE>
EXHIBIT D
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (the "Agreement") is made this _____ day of
______________, 199___, between Marave Associates L.P., a Pennsylvania Limited
Partnership, hereinafter called Seller, and Cell Pathways, Inc., a Delaware
corporation, or its nominee, hereinafter called Buyer.
BACKGROUND
A. Seller is the owner of a certain tract or parcel of land with
improvements thereon located in Horsham Township, Montgomery County,
Pennsylvania and situate as shown on a Plan of Horsham Industrial Properties,
Inc. made by Robert T. Bennett, dated June 17, 1982 and revised and recorded in
the office for the Recording of Deeds in and for Montgomery County, Pennsylvania
in Plan Book A-44 page 259 (hereinafter the "Property." )
B. Buyer intends and hereby agrees to purchase the Property from Seller
under the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual promises herein contained,
the sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Seller hereby agrees to sell, assign, transfer and convey the Property
to Buyer and Buyer hereby agrees to purchase the Property from Seller upon the
terms and conditions herein set forth.
<PAGE>
2. The Purchase price to be paid by Buyer to Seller shall be Three
Million, Four Hundred Thousand ($3,400,000.00) Dollars (the "Purchase Price") to
be paid as follows:
a. Cash or certified check at the signing of this Agreement:$100,000.00
; and
b. Wired funds at Settlement:$3,300,000.00;
3. Settlement shall be held at a site to be determined, on or before
ninety (90) days from the date hereof.
4. Within sixty (60) days from the date of this Agreement, Buyer or its
nominee shall obtain and provide Seller with a mortgage commitment for the
purchase of the Property under the following terms and conditions:
a. Amount: 80% of the Purchase Price;
b. Amortization: 25 years or longer;
c. Payment due: 10 years or thereafter;
d. Interest rate: 9% or lower.
In the event the mortgage commitment is not obtained within the time set forth
above, notwithstanding reasonable efforts by Buyer and with the assistance of
Seller, Buyer shall not be required to purchase the Property. All deposit
monies paid on account shall be returned to Buyer.
5. The premises are to be conveyed free and clear of all liens,
encumbrances, and easements, excepting the following: existing building
restrictions, ordinances, easements of roads, privileges or rights of public
service companies, if any, or easements or restrictions visible upon the ground.
Otherwise the
2
<PAGE>
title to the Property shall be good and marketable and such as will be insured
by any reputable Title Insurance Company at the regular rates.
6. In the event that Seller is unable to give a good and marketable title
or such as will be insured by any reputable Title Company, subject as aforesaid,
Buyer shall have the option of taking such title as the Seller can give without
abatement of price or of being repaid all monies paid by Buyer and held in
escrow on account of the purchase price and in the latter event there shall be
no further liability or obligation on either of the parties hereto and this
Agreement shall become null and void.
7. Seller hereby makes the following representations to Buyer:
a. Seller has obtained all consents, approvals, and authorizations from
all persons, entities, and governmental authorities required to enter into this
Agreement and to consummate the transaction contemplated hereby;
b. Seller has received no notices from any governmental or quasi
governmental agency that the Property is currently in violation of any law,
ordinance, rule or regulation;
c. There are currently no unpaid special assessments against the
Property, and Seller has no knowledge of any anticipated or pending special
assessments for improvements or capital expenditures, matured or unmatured;
d. The zoning classification of the Property is I2, Light
Manufacturing, and the present use of the Property is in
3
<PAGE>
compliance with all applicable zoning and planning laws and ordinances;
e. There are no rollback taxes, interest, penalties and fees arising
out of this conveyance under Acts 319, 515 or other covenant; and
f. To Seller's knowledge, the Property has not been used for the
disposal of refuse or waste, or for the generation, processing, manufacture,
storage, handling, treatment or disposal of any hazardous or toxic waste,
substance, petroleum product or material ("Hazardous Substance"). No (i)
asbestos containing materials or (ii) machinery, equipment or fixtures
containing polychlorinated biphenyls ("PCBs"), or (iii) storage tanks for
gasoline or any other substance or (iv) urea formaldehyde foam insulation, have
been installed, used, stored, handled or located on or beneath the Property. To
Seller's knowledge, no Hazardous Substance has been installed, used stored,
handled or located on or beneath the Property, which Hazardous Substance, if
found on or beneath the Property, or improperly disposed of off of the Property,
would subject the owner or occupant of the Property to damages, penalties,
liabilities or an obligation to perform any work, cleanup, removal, repair,
construction, alteration, demolition, renovation or installation in or in
connection with the Property ("Environmental Cleanup Work"), in order to comply
with any federal, state or local law, regulation, ordinance or order concerning
the environmental state, condition or quality of the Property ("Environmental
Law") applicable to owner's,
4
<PAGE>
operators or developers of real property. No notice from any governmental body
has ever been served upon Seller, or, to the best of Seller's knowledge after
due inquiry, any occupant or prior owner of the Property, or any portion
thereof, claiming any violation of any Environmental Law, or requiring or
calling attention to the need for any Environmental Cleanup Work on or in
connection with the Property in order to comply with any Environmental Law.
8. Buyer represents that its execution and performance of this Agreement
and the consummation of the transaction contemplated hereby has been duly
authorized by its directors and no other action is required by law, its Articles
of Incorporation, its Bylaws, or otherwise, for such authorization.
9. Real estate taxes, and water, sewer or other utility charges shall be
apportioned on a per diem basis at and as of the date of settlement. All real
estate transfer taxes will be divided equally between Buyer and Seller at
settlement.
10. Conveyance from Seller shall be by fee simple deed of special warranty.
11. Formal tender of an executed deed and purchase money is hereby waived.
12. Until the date of settlement, Seller shall maintain public liability
insurance and fire and extended coverage insurance on the property.
13. If prior to the date of settlement (a) all or a material part of the
building on the premises is destroyed by fire or the
5
<PAGE>
elements or by any cause beyond either party's control, or (b) all or a material
part of the Property is taken by eminent domain, either party may by written
notice to the other elect to cancel this Agreement prior to the date of
settlement. In the event that either party shall so elect, both parties shall be
relieved and released of and from any further liability hereunder, and Seller
shall forthwith return to Buyer all deposit monies paid on account. Unless this
Agreement is so canceled, it shall remain in full force and effect, and Seller
shall pay to Buyer at settlement (and at any relevant time thereafter) any sums
of money collected (prior to Settlement or at a later date) by Seller under
policies of insurance or renewals thereof, after deducting any amounts Seller
shall have agreed to pay for repairs or restoration of the damage. In addition,
Seller shall assign, transfer and set over to Buyer all of Seller's right, title
and interest in and to said policies and further sums payable thereunder, and if
any part of the Property shall have been taken by eminent domain, Seller shall
assign , transfer and set over to Buyer all of Seller's right, title and
interest in and to any awards that may be made for such taking. If prior to the
date of settlement (a) an immaterial part of the main building on the premises
is destroyed by fire or the elements or by any cause beyond either party's
control, or (b) an immaterial part of the Property is taken by eminent domain,
neither party shall have the right to cancel this Agreement, and Buyer shall be
entitled to an equitable abatement of the Purchase Price to the extent of the
6
<PAGE>
destruction or taking.
14. It is understood that Buyer has inspected the Property and that Buyer
has agreed to purchase it as a result of such inspection and not because of or
in reliance upon any representation made by Seller or by any agent of Seller,
other than as noted herein, and that Buyer has agreed to purchase it in its
present condition unless otherwise specified herein.
15. Any notices or ordinances filed prior to the date of Settlement by any
governing authority for which a lien could be filed are to be complied with at
the expense of Seller. Any such notices or ordinances filed subsequent to the
date of settlement are to be complied with at the expense of Buyer.
16. This Agreement and the Lease Agreement to which it is an Exhibit,
contain the whole Agreement between Seller and Buyer and there are no other
terms, obligations, covenants, representations, statements or conditions, oral
or otherwise of any kind whatsoever concerning this sale.
17. Any changes or additions to this Agreement must be made in writing and
executed by the parties hereto.
18. This Agreement shall be binding upon the respecting heirs, executors,
administrators, successors and, to the extent assignable, on the assigns of the
parties hereto.
19. This Agreement is to be construed and interpreted in accordance with
the laws of the Commonwealth of Pennsylvania.
20. All notices or other communications required or permitted to be given
under the terms of this Agreement shall be
7
<PAGE>
in writing, sent by Certified Mail, postage prepaid, return receipt requested,
addressed as follows:
If to Buyer: If to Seller:
Cell Pathways, Inc. Marave Associates, L.P.
Two Electronic Drive 555 North Lane
Horsham, PA Suite 6101
attn: Robert J. Towarnicki Conshohocken, PA 19428
attn: Michael Fink
With a Copy to: With a Copy to:
Samuel J. Trueblood, Esquire N/A
Trueblood & Amacher
One Montgomery Plaza
Suite 902
Norristown, PA 19401
or to such other address as the parties hereto provide in writing.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals, the day and year first above written.
SELLER
Marave Associates, L.P.
By:__________________________
General Partner
Attest:______________________
BUYER
Cell Pathways, Inc.
By:__________________________
Robert J. Towarnicki,
Chief Executive Officer
Attest:______________________
8
<PAGE>
EXHIBIT 11.1
CELL PATHWAYS, INC.
STATEMENT RE: COMPUTATION OF PRO FORMA NET
LOSS PER SHARE
For the Year For the Six
Ended Months Ended
December 31, 1996 June 30, 1997
----------------- -------------
Weighted average common
shares outstanding 1,452,607 1,504,734
Preferred shares convertible
into common 5,965,687 5,965,687
SAB 83 option shares 189,839 189,839
SAB 83 warrant shares 30,512 30,512
---------- ----------
7,638,645 7,690,772
========== ==========
Net Loss ($4,735,000) ($3,443,000)
Pro forma net loss per share $0.62 $0.45
========== ==========
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 31, 1997 on the financial statements included in or made part of
this registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
October 9, 1997
<PAGE>
Exhibit 23.3
[LETTERHEAD OF BRINKS HOFER GILSON & LIONE APPEARS HERE]
October 9, 1997
Cell Pathways, Inc.
702 Electronic Drive
Horsham, PA 19044
Gentlemen:
We refer to the Registration Statement on Form S-1 of Cell Pathways, Inc. (the
"Company") proposed to be filed with the Securities and Exchange Commission for
the registration of the Company's Common Stock and to the related Prospectus. We
hereby consent to the reference to our firm in such Prospectus under the heading
"Experts" as that term applies to expertise in the field of Intellectual
Property matters specifically addressed by the Registration Statement.
Very truly yours,
BRINKS HOFER GILSON & LIONE
/s/ JOHN J. PAVLAK
John J. Pavlak
JJP/bs
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM S-1
REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 JUN-30-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 839 13,488
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 910 13,755
<PP&E> 256 318
<DEPRECIATION> 71 96
<TOTAL-ASSETS> 1,106 13,988
<CURRENT-LIABILITIES> 1,223 972
<BONDS> 62 36
1 1
15,137 31,736
<COMMON> 15 15
<OTHER-SE> (15,332) (18,772)
<TOTAL-LIABILITY-AND-EQUITY> 1,106 12,979
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,826 3,566
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,735) (3,443)
<EPS-PRIMARY> (0.62) (0.45)
<EPS-DILUTED> (0.62) (0.45)
</TABLE>
