<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SCRIPTGEN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 22-3193172
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
200 BOSTON AVENUE
MEDFORD, MA 02155
(781) 393-8000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
MARK T. WEEDON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCRIPTGEN PHARMACEUTICALS, INC.
200 BOSTON AVENUE
MEDFORD, MA 02155
(781) 393-8000
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
with copies to:
<TABLE>
<S> <C>
CARL E. KAPLAN, ESQ. RICHARD R. PLUMRIDGE, ESQ.
FULBRIGHT & JAWORSKI L.L.P. LUCI STALLER ALTMAN, ESQ.
666 FIFTH AVENUE BROBECK, PHLEGER & HARRISON LLP
NEW YORK, NEW YORK 10103 1633 BROADWAY, 47TH FLOOR
(212) 318-3000 NEW YORK, NEW YORK 10019
(212) 581-1600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC:
As soon as practicable after this 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, as amended (the "Securities Act"), 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, please 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 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.01 par
value per share....................................................................... $44,850,000 $13,591
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE 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 becomes effective.
This prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such State.
<PAGE>
PROSPECTUS Subject to Completion, Dated November 20, 1997
- --------------------------------------------------------------------------------
Shares
[LOGO]
SCRIPTGEN PHARMACEUTICALS, INC.
Common Stock
------------------------------------------------------------
All of the shares of Common Stock offered hereby (the "Offering") are
being offered by Scriptgen Pharmaceuticals, Inc. ("Scriptgen" or the "Company").
Prior to the Offering, there has been no public market for the Common Stock. It
is currently estimated that the initial public offering price will be between
$ and $ per share. See "Underwriting" for the factors to be considered
in determining the initial public offering price.
Application has been made to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol "SCRP."
Concurrent with the Offering, Hoechst Marion Roussel has agreed to purchase
shares of Common Stock directly from the Company (assuming an initial
public offering price of $ ), for an aggregate purchase price of
$3,000,000, pursuant to an existing agreement with the Company (the "Private
Placement"). See "Business--Collaborative Arrangements."
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 8-18.
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 Discounts Proceeds to
Public and Commission(1) Company(2)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Per Common Share $ $ $
- -----------------------------------------------------------------------------------------------------
Total(3) $ $ $
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SEE "UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES OF THE OFFERING PAYABLE BY THE COMPANY ESTIMATED
TO BE $ .
(3) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
ADDITIONAL SHARES OF COMMON STOCK ON THE SAME TERMS PER SHARE SOLELY
TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE
TOTAL PRICE TO PUBLIC WILL BE $ , THE TOTAL UNDERWRITING DISCOUNTS
AND COMMISSIONS WILL BE $ AND THE TOTAL PROCEEDS TO COMPANY WILL BE
$ . SEE "UNDERWRITING."
The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the delivery of the certificates
therefor will be made at the offices of SBC Warburg Dillon Read Inc., New York,
New York, on or about , 1998. The Underwriters include:
SBC WARBURG DILLON READ INC. VOLPE BROWN WHELAN & COMPANY
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
Graphical depiction of the application of Scriptgen's platform of drug discovery
technologies.
Scriptgen's drug discovery process begins in the cell as DNA is transcribed
to a folded protein or a structural RNA. GATE measures the effects of transient
gene inactivation after this conversion to identify and validate novel gene
products for use as targets. ATLAS and SCAN are used to rapidly screen the
target folded proteins and target folded RNA against compounds from the
Company's 250,000 compound library or the compound libraries of its
collaborators. These high throughput assay systems identify and measure the
affinity of ligands (compounds that bind to the target). These ligands may then
be tested to identify drug candidates.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
FINANCIAL STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS INDICATED OTHERWISE, ALL INFORMATION IN THIS PROSPECTUS (I)
ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED, (II)
GIVES RETROACTIVE EFFECT TO THE CONVERSION OF THE COMPANY'S SERIES A PREFERRED
STOCK, SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK TO COMMON STOCK,
PAR VALUE $0.01 PER SHARE (THE "COMMON STOCK") UPON THE CONSUMMATION OF THE
OFFERING, (III) GIVES EFFECT TO THE FILING OF AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION CREATING A CLASS OF UNDESIGNATED PREFERRED
STOCK AND (IV) GIVES RETROACTIVE EFFECT TO A SUBSEQUENT 1-FOR-3.07459 REVERSE
SPLIT OF THE SHARES OF COMMON STOCK, TO BE EFFECTED BEFORE THE COMPLETION OF THE
OFFERING. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS ANTICIPATED IN THOSE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN OF THE FACTORS SET FORTH IN THIS PROSPECTUS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING
"RISK FACTORS."
THE COMPANY
Scriptgen Pharmaceuticals, Inc. ("Scriptgen" or the "Company") utilizes its
proprietary high throughput technologies to enable and accelerate the discovery
of innovative small molecule drugs. Scriptgen's technology platform allows the
Company and its collaborators to exploit the opportunities afforded by advances
in genomics and combinatorial chemistry, and opens new avenues of drug
discovery. The Company's technology platform identifies and validates novel gene
targets for therapeutic intervention, and then uses novel assay systems to
rapidly screen compounds against those targets, even before the gene target's
characteristics or functions are well understood. The Company believes that the
application of its technologies addresses many of the limitations associated
with traditional drug discovery and provides substantial cost savings
opportunities. The Company commercializes its technology platform through (i)
collaborations with pharmaceutical and technology companies and (ii) the
Company's internal development program.
The Company's core technologies include GATE (Genetics Assisted Target
Evaluation), a family of high throughput target identification and validation
systems, and ATLAS (Any Target Ligand Affinity Screen) and SCAN (Screen for
Compounds with Affinity for Nucleic Acids), the high speed, solution based,
assay systems which identify compounds that bind to virtually any protein or
structured RNA, respectively. GATE measures the effects of transiently removing
a specific gene from a cell, and by reproducing conditions that closely resemble
drug mechanism of action, generates data more predictive of target behavior than
traditional methods. ATLAS and SCAN rapidly measure the affinity (strength) of
compounds that bind to targets even before the gene functions are well
understood, enabling the Company to work with targets that are unsuitable for
traditional high throughput screens. The Company believes ATLAS and SCAN
increase dramatically the number of targets and compounds that may be screened
in a given time period, and reduce to weeks what often requires months or years
of assay development time when using traditional high throughput functional
assays. The Company has used GATE to identify and validate novel infectious
disease targets, and has used ATLAS and SCAN to identify lead compounds, two of
which have progressed to pre-clinical development. ATLAS and SCAN are broadly
applicable to research in multiple therapeutic areas, and have demonstrated
utility in the areas of anti-infectives, oncology, cardiovascular, and
respiratory and immunologic disorders.
The Company's strategy is to maximize the commercial opportunities presented
by its technology platform and pipeline of drug candidates by entering into
multiple collaborations and retaining rights to independently develop certain
products. Scriptgen has collaborative agreements with pharmaceutical and
technology companies, and routinely evaluates opportunities to enter into
collaborations with other potential partners.
HOECHST MARION ROUSSEL. The Company is using its technology platform
to seek to identify new fungal targets and antifungal drug candidates in
a collaboration with Hoechst Marion Roussel ("HMR"). The Company expects
to have received an aggregate of $9 million from HMR under the
collaboration by the completion of the Offering, of which $6 million
will be technology
4
<PAGE>
access fees and $3 million will be proceeds from the sale of Common
Stock to HMR concurrent with the Offering. The Company will also receive
research and development payments, and will receive payments when and if
certain milestones are achieved and royalties on the sales of any new
drug resulting from the collaboration.
ELI LILLY AND COMPANY. Scriptgen is using ATLAS to identify novel
drug candidates active against two targets selected by Eli Lilly and
Company ("Eli Lilly"). Two additional targets may be selected by Eli
Lilly for high throughput screening in 1998, assuming certain milestones
are met. In October 1997, Eli Lilly and the Company expanded the scope
of the collaboration to screen additional compounds from the Company's
compound library. Under the agreement with Eli Lilly, Scriptgen receives
research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any new
drug resulting from the collaboration.
HOFFMANN-LA ROCHE INC. The Company is using ATLAS to identify drug
candidates against a cancer-related target identified by Hoffmann-La
Roche Inc. ("Roche"). Under the agreement with Roche, Scriptgen receives
research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any new
drug resulting from the collaboration.
MONSANTO COMPANY. Scriptgen is using its technology platform in a
collaboration with Monsanto Company ("Monsanto") to identify and
validate novel fungal targets from plant pathogens and to identify novel
antifungal agents. Under the agreement with Monsanto, Scriptgen receives
research and development payments and will receive payments when and if
certain milestones are achieved and royalties on the sales of any
product developed by Monsanto for IN PLANTA applications.
Scriptgen's internal development efforts have initially focused on
anti-infectives, where it has identified novel cidal (kills the pathogen)
targets and lead compounds in the fungal, bacterial and viral areas. The Company
has also completed feasibility studies on novel targets in a number of other
areas, including oncology and immunologic disorders, and in several cases has
identified drug candidates. The Company believes that the anti-infective market
is attractive as an initial field of focus because of the large market
potential, the particular suitability of the Company's proprietary technology
and the relatively low technical and regulatory hurdles for this class of
diseases. Scriptgen has progressed rapidly in the anti-infective area and has
four lead compounds in development as well as a number of other potential drug
candidates under review. Scriptgen has identified two small molecule lead
compounds which demonstrate oral activity in animal models against a broad
spectrum of fungal pathogens, including certain strains resistant to current
drugs. The Company has also identified a small molecule lead compound which
shows broad spectrum antibacterial efficacy against drug resistant strains and
is currently in animal studies and one lead compound that has shown strong
antiviral activity IN VITRO against Hepatitis B virus. The Company is evaluating
a number of other potential development candidates.
The Company has also applied its drug discovery technologies to develop
novel coalescent compounds, which are small molecules connected by a molecular
tether that bind to both active and neutral sites. Scriptgen believes such
compounds may lead to more specific and potent therapeutics and allow for the
discovery of small molecule mimics of therapeutic proteins.
Scriptgen Pharmaceuticals, Inc. was incorporated in Delaware on September
17, 1992. The Company maintains its principal executive offices at 200 Boston
Avenue, Medford, Massachusetts 02155. The Company's telephone number is (781)
393-8000.
------------------------
"SCRIPTGEN" AND THE SCRIPTGEN LOGO AS IT APPEARS ON THE COVER PAGE OF THIS
PROSPECTUS ARE TRADEMARKS OF THE COMPANY FOR WHICH REGISTRATION APPLICATIONS
HAVE BEEN FILED WITH THE UNITED STATES PATENT AND TRADEMARK OFFICE. ALL OTHER
TRADEMARKS AND TRADENAMES REFERENCED IN THIS PROSPECTUS ARE THE PROPERTY OF
THEIR RESPECTIVE OWNERS.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......................... shares
Common Stock to be outstanding after the Offering........... share
Use of proceeds............................................. To fund research and
development and for general
corporate purposes, including
working capital.
Proposed Nasdaq National Market Symbol...................... SCRP
</TABLE>
- --------------
(1) Includes an aggregate of shares of Common Stock (based on an assumed
initial public offering price of $ per share) to be issued to HMR in
the Private Placement. Excludes: (i) 701,508 shares of Common Stock issuable
upon exercise of outstanding options at a weighted average exercise price of
$0.34 per share, (ii) 49,763 shares of Common Stock issuable upon exercise
of warrants outstanding at an exercise price of $3.07 per share and 32,525
shares of Common Stock issuable upon exercise of warrants outstanding at an
exercise price of $5.53 per share and (iii) shares of Common Stock
reserved for issuance upon exercise of options or in connection with other
awards that may be granted in the future under the Company's proposed 1997
Equity Incentive Plan (the "1997 Plan"). See "Management--Employment
Agreements" and "--Stock Options," "Employee Benefit Plans--1997 Equity
Incentive Plan" and "--1994 Stock Option Plan," "Description of Capital
Stock-- Warrants" and Notes 6 and 8 of Notes to Financial Statements.
6
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 17, 1992 DECEMBER 31, SEPTEMBER 30,
TO ------------------------------------------ ------------------------
DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997
------------------- --------- --------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Collaborative agreements............ -- -- -- -- $ 975 $ 975 $ 467
SBIR grants......................... -- -- -- $ 260 232 222 138
----- --------- --------- --------- --------- ----------- -----------
-- -- -- 260 1,207 1,197 605
----- --------- --------- --------- --------- ----------- -----------
Cost of revenue:
Collaborative agreements............ -- -- -- -- 174 174 124
SBIR grants......................... -- -- -- 260 232 222 138
----- --------- --------- --------- --------- ----------- -----------
-- -- -- 260 406 396 261
----- --------- --------- --------- --------- ----------- -----------
Gross profit........................ -- -- -- -- 801 801 344
Operating expenses:
Research and development............ $ 455 $ 1,833 $ 3,157 3,152 3,958 2,757 4,273
General and administrative.......... 94 652 998 1,299 906 669 831
----- --------- --------- --------- --------- ----------- -----------
549 2,485 4,155 4,451 4,865 3,427 5,104
----- --------- --------- --------- --------- ----------- -----------
Loss from operations................ (549) (2,485) (4,155) (4,451) (4,064) (2,626) (4,761)
Other income (expense), net 1 (62) (146) (128) 19 12 (15)
----- --------- --------- --------- --------- ----------- -----------
Net loss............................ $ (549) $ (2,547) $ (4,301) $ (4,579) $ (4,044) $ (2,614) $ (4,775)
----- --------- --------- --------- --------- ----------- -----------
----- --------- --------- --------- --------- ----------- -----------
Pro forma net loss per share
(unaudited) (1)..................... $ (0.59) $ (0.64)
--------- -----------
--------- -----------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited) (1)..................... 6,897 7,435
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(2)
---------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 197 $
Working capital....................................................................... (1,200)
Total assets.......................................................................... 2,478
Noncurrent portion of capital lease obligations....................................... 501
Redeemable convertible preferred stock................................................ 20,279
Accumulated deficit................................................................... (21,169)
Total stockholders' deficit........................................................... (20,744)
</TABLE>
- --------------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of net loss per share and shares used in computing net loss per
share.
(2) Adjusted to give effect to: (i) the sale of shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price
of $ per share) and the application of the net proceeds therefrom and
(ii) the sale of shares of Common Stock (at an assumed offering price
of $ per share) to HMR in the Private Placement and the application of
the net proceeds therefrom. See "Use of Proceeds."
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING AN INVESTMENT IN THE COMPANY. THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF THE FACTORS SET FORTH IN
THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS.
HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES; UNCERTAINTY OF FUTURE
PROFITABILITY
At September 30, 1997, the Company had incurred an accumulated deficit of
approximately $21.2 million. Losses have resulted principally from costs
incurred in research and development activities related to the Company's efforts
to develop and commercialize its proprietary technology and to develop drug
candidates and from the associated administrative costs. The Company expects to
incur significant additional operating losses over the next several years and
expects cumulative losses to increase substantially due to expanded research and
development efforts, pre-clinical and clinical trials and the possible
development of manufacturing, marketing and sales capabilities. For the
foreseeable future, the Company expects that its revenues will be limited to
payments received under its drug development collaborations that it has
established or will establish (net of royalties required to be paid by the
Company with respect to such payments) and small business innovation research
("SBIR") grants. There can be no assurance, however, that the Company will be
able to establish any additional collaborative relationships on terms acceptable
to the Company or maintain in effect its current collaborative agreements. The
Company's ability to achieve significant revenue or become profitable is
dependent on the success of its collaborative arrangements and its ability to
continue to commercialize its technology platform and gain industry acceptance
of its services and technologies, to enter into additional collaborations for
the development of drugs, to identify lead compounds and successfully develop
drug candidates resulting from its own internal development programs, to obtain
patent protection for its technology and drug candidates, to obtain regulatory
approvals for drug candidates and to arrange for the manufacture and
commercialization of any drugs resulting from its operations. The Company will
not receive revenues or royalties from commercial drug sales for a significant
number of years, if at all. Failure to receive significant revenues or achieve
profitable operations would impair the Company's ability to sustain operations.
There can be no assurance that the Company will ever successfully identify,
develop, commercialize, patent, manufacture or arrange for the manufacture of,
or market or arrange for the marketing of, any products, obtain required
regulatory approvals or achieve profitability. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE UPON PRESENT AND FUTURE COLLABORATIVE ARRANGEMENTS
The Company's strategy for the development and commercialization of its
technology platform and drug candidates requires the Company to enter into
various collaborative arrangements. To date, substantially all revenues received
by the Company have been from its drug discovery collaborations and the Company
expects that substantially all revenues for the foreseeable future will be
limited to payments received under such collaborations and any future
collaborations the Company may enter into. Because pharmaceutical and
biotechnology companies engaged in drug discovery activities have historically
conducted drug discovery activities, including target identification and
validation and compound screening, through their own internal research
departments, these companies must be convinced that the Company's technologies
justify entering into collaborative agreements with the Company. The Company's
ability to succeed will be dependent, in part, upon the willingness of potential
collaborators to incorporate the Company's technologies into their own drug
discovery programs. There can be no assurance that the Company will be able to
negotiate additional collaborative agreements in the future on acceptable terms,
if at all, that such current or future collaborative agreements will be
successful and provide the Company
8
<PAGE>
with expected benefits, or that current or future collaborators will not pursue
or develop alternative technologies either on their own or in collaboration with
others, including the Company's competitors, as a means for identifying lead
compounds or targets. To the extent the Company chooses not to or is unable to
enter into such agreements, or to the extent the Company is unable to maintain
in effect its current collaborative agreements, it will require substantially
greater capital to undertake the research, development and commercialization of
its technologies and drug development program at its own expense. In the absence
of such collaborative agreements, the Company may be required to curtail its
research and development activities and operations to a significant extent. In
November 1996, one of the Company's collaborative partners elected not to
continue developing a program which was the subject of a collaborative agreement
with the Company, which election the Company believes was unrelated to the
Company's performance of its obligations under such arrangement.
Under the Company's current collaborative agreements, the Company has the
opportunity to receive payments upon the achievement by its collaborators of
certain drug development milestones and royalties on sales of drugs covered
under such arrangements. As a result, the Company's receipt of revenues (whether
in the form of milestone payments or royalties on sales) under the collaborative
agreements is for the most part dependent upon the decisions made by, and the
manufacturing and marketing resources of, its collaborative partners. The
Company's collaborative partners are not obligated to develop or commercialize
any drug resulting from the collaborative agreements. Development and
commercialization of drug candidates will therefore depend not only on the
achievement of research objectives by the Company and its collaborators, which
cannot be assured, but also on each collaborator's own financial, competitive,
marketing and strategic considerations, all of which are outside the Company's
control. Such strategic considerations may include the relative advantages of
alternative drugs being marketed or developed by others, including relevant
patent and proprietary positions. There can be no assurance that the interests
and motivations of the Company's collaborators are, or will remain, aligned with
those of the Company, that current or future collaborators will not pursue
alternative technology in preference to that of the Company either on their own
or in collaboration with others, including the Company's competitors, or that
such collaborators will successfully perform their development, regulatory,
compliance, manufacturing or marketing functions. In addition, there can be no
assurance that any product will be developed and commercialized as a result of
such collaborations, that any such development or commercialization would be
successful or that disputes will not arise over the application of payment
provisions for drug candidates. Failure to successfully manage existing and
future collaborative relationships, maintain confidentiality among such
relationships or prevent the occurrence of such conflicts could lead to disputes
that result in, among other things, a significant strain on management
resources, legal claims involving significant time and expense and loss of
reputation, a loss of capital or a loss of collaborators, any of which could
have a material adverse effect on the Company's business, operating results and
financial condition.
EARLY STAGE OF DRUG DEVELOPMENT; ABSENCE OF DEVELOPED PRODUCTS
Since inception, the Company has received no revenues from drug sales. The
Company's internal drug development programs and the programs on which it is
working with its collaborative partners are at an early stage, and the Company
does not expect that any drugs resulting from its internal development efforts,
or from the joint efforts of the Company and its collaborative partners, will be
commercially available for a significant number of years, if at all. The
Company's present drug candidates, and any future drug candidates developed by
the Company or developed jointly by the Company and its collaborative partners
will require significant additional research and development efforts to
establish safety and efficacy, including extensive pre-clinical (animal and IN
VITRO data) and clinical testing and regulatory approval, prior to commercial
sale. None of the Company's drug candidates have advanced to any phase of
clinical trials, and only two of the Company's drug candidates have advanced to
pre-clinical development. There can be no assurance that the approaches of the
Company or its collaborative partners to drug discovery will be effective or
will result in the development of any drug. The Company's present and potential
drug candidates or other drug candidates resulting from the joint efforts of the
Company and its
9
<PAGE>
collaborative partners, will be subject to the risks of failure inherent in the
development of pharmaceutical products based on new technologies. These risks
include the possibilities that any or all of the Company's drug candidates or
such other drug candidates will be found to be unsafe, ineffective or toxic or
otherwise fail to meet applicable regulatory standards or receive necessary
regulatory clearances, that these drug candidates, if safe and effective, will
be difficult to develop into commercially viable drugs or to manufacture on a
large scale or will be uneconomical to market, that proprietary rights of third
parties will preclude the Company or its collaborative partners from marketing
such drugs, or that third parties will market superior or equivalent drugs. The
failure to develop safe, commercially viable drugs would have a material adverse
effect on the Company's business, operating results and financial condition.
NEW AND UNCERTAIN TECHNOLOGY
The Company's drug discovery technology platform and ongoing research and
development programs incorporate new and rapidly evolving approaches to the
identification and validation of novel targets and
the identification of lead compounds. Elements of the Company's technology
platform are utilized by the Company in all of its collaborative arrangements as
well as in its own internal development program. As the Company's technology
platform is used, it is possible that previously unanticipated limitations or
defects may emerge. There can be no assurance that unforseen complications will
not arise as the Company's technologies are utilized in the drug discovery
process that could materially delay or limit their use in connection with the
drug development programs of the Company or its collaborative partners, result
in the termination of the collaborative agreements, or prevent the technologies
from being utilized at the quality and capacity levels required for success. In
addition, there can be no assurance that expenditures for research and
development will lead to the development of useful technologies. Development of
new drugs is highly uncertain, and no assurance can be given that the Company's
drug discovery technologies will be used successfully in the development of drug
candidates or result in any commercially successful drug.
COMPETITION AND THE RISK OF OBSOLESCENCE OF TECHNOLOGY
Competition among drug discovery companies, and pharmaceutical and
biotechnology companies which are involved in drug discovery, is intense.
Because the Company's technology platform incorporates a number of different
technologies, the Company competes in many areas, including target
identification and validation, assay development and high throughput screening.
The Company competes directly against other drug discovery companies, the
research departments of pharmaceutical and biotechnology companies and other
commercial enterprises, government agencies, and numerous academic and research
institutions. Such companies and other entities are conducting research in
various areas which constitute portions of the Company's technology platform,
either on their own or in collaboration with others. There can be no assurance
that drug discovery companies which currently compete with the Company in
specific areas will not merge or enter into joint ventures or other alliances
with one or more other such companies and become substantial multi-point
competitors or that the Company's collaborators will not assemble their own
competing drug discovery technologies. Genomics and combinatorial chemistry
companies, among others, may also expand their business to include compound
screening or screen development, either alone or pursuant to alliances with
others. The Company anticipates that it will face increased competition in the
future as new companies enter the market and advanced technologies, including
more sophisticated information technologies, become available. The Company's
drug discovery technologies, in particular GATE, ATLAS and SCAN, may be rendered
obsolete or uneconomical by advances in existing technological approaches or the
development of different approaches by one or more of the Company's current or
future competitors. In particular, the Company's technology faces competition
from companies engaged in gene sequencing, functional genomics and differential
gene expression technology in the area of target validation, and companies
engaged in high throughput screening. Many of the Company's competitors have
greater financial and personnel resources, and more experience in research and
development, than the Company. There can be no assurance that the Company's
competitors will not succeed in
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developing technologies and drugs that are more effective or less costly than
any which are being developed by the Company or which would render the Company's
technology and any future drugs obsolete and noncompetitive.
In addition, some of the Company's competitors have greater experience than
the Company in conducting pre-clinical and clinical trials and obtaining U.S.
Food and Drug Administration ("FDA") and other regulatory approvals.
Accordingly, the Company's competitors may succeed in obtaining FDA or other
regulatory approvals for competing drug candidates more rapidly than the
Company. Companies that complete clinical trials, obtain required regulatory
agency approvals and commence commercial sale of their drugs, before their
competitors, may achieve a significant competitive advantage, including certain
patent and FDA marketing exclusivity rights that would delay the Company's
ability to market certain products. There can be no assurance that drugs, if
any, resulting from the Company's internal development efforts or the joint
efforts of the Company and its collaborators will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
ADDITIONAL FINANCING REQUIREMENTS; UNCERTAINTY OF AVAILABLE FUNDING
The Company will require substantial additional funds for the further
development of its drug discovery technologies, its internal development
programs, for operating expenses, for pursuing regulatory approvals, for the
possible development of manufacturing, marketing and sales capabilities and for
prosecuting and defending its intellectual property rights before it can expect
to realize significant revenues from commercial sales, if any. The Company
believes that the net proceeds of the Offering, together with revenues from its
collaborative agreements, its existing capital resources, SBIR grants and
interest income will be sufficient to fund its operating expenses and capital
requirements as currently planned through the end of 2000. However, there can be
no assurance that such funds will be sufficient to fund its operating expenses
and capital requirements during such period. The Company's actual cash
requirements may vary materially from those now planned and will depend upon
numerous factors, including the ability of the Company to enter into additional
collaborative arrangements, the achievement of milestones under the Company's
collaborative arrangements on a timely basis or at all, changes in the Company's
existing collaborative arrangements, the results of the Company's internal
development programs, the timing and results of pre-clinical and clinical
trials, the timing and costs of obtaining regulatory approvals, the timing and
level of the expansion of the Company's facilities, the level of resources, if
any, that the Company commits to the development of manufacturing, marketing and
sales capabilities, the technological advances and activities of competitors and
other factors. Thereafter, the Company will need to raise substantial additional
capital to fund its operations. The Company intends to seek such additional
funding through public or private financing or collaborative or other
arrangements with collaborative partners. If additional funds are raised by
issuing equity securities, further dilution to existing stockholders may result
and future investors may be granted rights superior to those of existing
stockholders. There can be no assurance, however, that additional financing will
be available from any of these sources or, if available, will be available on
acceptable or affordable terms. If adequate funds are not available, the Company
may be required to delay, reduce the scope of or eliminate one or more of its
research and development programs or to obtain funds by entering into
arrangements with collaborative partners or others that require the Company to
issue additional equity securities or to relinquish rights to certain
technologies or drug candidates that the Company would not otherwise issue or
relinquish in order to continue independent operations. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH
The Company has recently experienced, and expects to continue to experience,
significant growth in the number of its employees and the scope of its
operations. This growth has placed, and may continue to
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place, a significant strain on the Company's management, operations and systems.
The Company's ability to manage such growth effectively will depend upon
attracting, hiring and retaining skilled employees. In addition, in order to
increase capacity to remain competitive and satisfy the needs of current and
future collaborative partners, the Company will be required in the near future
to obtain additional office and laboratory space, capital equipment and
resources. There can be no assurance that the Company will be able to manage its
growth, and the Company's inability to manage growth effectively could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business-- Employees" and "--Properties."
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain U.S. and
foreign patent protection for its drug candidates and the components of its
technology platform, preserve its trade secrets and operate without infringing
the proprietary rights of third parties. Because of the length of time and
expense associated with bringing new drug candidates through the development and
regulatory approval process to the marketplace, drug discovery companies have
traditionally placed considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and processes. The
Company's policy is to make diligent efforts to protect its screening
technologies, targets, compounds, and certain other technology by, among other
things, filing, or causing to be filed on its behalf, patent applications in the
United States Patent and Trademark Office ("USPTO"), and elsewhere where the
Company deems appropriate and cost effective. There can be no assurance that
patents will be granted with respect to any of the Company's or its licensors'
patent applications which are pending or may be filed in the future. Further,
there can be no assurance that any rights the Company may have under issued
patents will provide the Company with significant protection against competitive
products or otherwise be commercially viable. Legal standards relating to the
validity of patents covering pharmaceutical and biotechnological inventions and
the scope of claims made under such patents are still developing, and thus there
is no consistent policy in this regard. The patent position of a drug discovery
company such as Scriptgen is highly uncertain and involves complex legal and
factual questions. There can be no assurance that any existing or future patents
issued to, or licensed by, the Company will not subsequently be challenged,
infringed upon, invalidated or circumvented by others. In addition, patents may
have been granted, or may be granted, covering processes or products that are
necessary or useful to the development of the Company's technologies, targets
and compounds. If any of the Company's technologies, targets or compounds are
found to infringe upon the patents or other intellectual property of others, the
Company's ability to develop and commercialize its technologies, targets and
compounds could be severely restricted or prohibited. In such event, the Company
may be required to obtain licenses from third parties to utilize their patents
or other proprietary rights. There can be no assurance that the Company will be
able to obtain such licenses on acceptable terms, or at all. There is
significant litigation in the pharmaceutical and biotechnology industry
regarding patents and other proprietary rights. If the Company becomes involved
in litigation regarding its proprietary rights or the proprietary rights of
others, the Company could incur substantial costs in defending infringement
claims, obtaining licenses, engaging in interference and opposition proceedings
or other challenges to its patent rights or proprietary rights made by third
parties, or in bringing such proceedings or enforcing any patent rights against
third parties. The Company's inability to obtain necessary licenses or its
involvement in proceedings concerning patent rights could have a material
adverse effect on the business, operating results and financial condition of the
Company.
The Company has filed a provisional patent application claiming certain
aspects of its GATE technology. The Company is aware that another party has
applied for a patent for certain technologies which may overlap with or dominate
parts of the Company's GATE technology. The Company is in negotiations with such
party to acquire a license of such party's rights covered by its patent
application. If the Company determines to seek to obtain such license, there can
be no assurance that the Company will be able to obtain such a license on terms
favorable to the Company, if at all. See "Business--Patents and Proprietary
Technology."
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In addition to patent protection, the Company relies on trade secrets,
know-how and technological advances which it seeks to protect, in part, by
confidentiality agreements with its collaborative partners, employees, advisors
and consultants. There can be no assurance that these confidentiality agreements
will not be breached, that the Company would have adequate remedies for any such
breach, or that the Company's trade secrets, know-how and technological advances
will not otherwise become known or be independently discovered by others. See
"Business--Patents and Proprietary Technology."
DEPENDENCE UPON ACCESS TO CERTAIN MATERIALS AND INFORMATION
The Company obtains compounds and other test material, related clinical and
other biological information and animal models through collaboration with
commercial organizations and academic institutions. Use of the Company's
technology platform in connection with its collaborative arrangements and
internal development programs requires access to such materials and information
and there is substantial competition for such materials and information. There
can be no assurance that the Company will continue to be able to obtain access
to such materials and information upon terms acceptable to the Company, if at
all. Any material lack of availability of such materials and information could
have a material adverse effect on the Company's ability to perform its
obligations under one or more of its collaborative agreements, which in turn
would have a material adverse effect on the Company's business, operating
results and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the efforts of the members of its
management team, scientific advisory board and scientific staff. The loss of the
services of one or more of these individuals might impede the Company's
development of its technology and the achievement of its business objectives.
Because of the specialized scientific nature of the Company's business, the
Company is highly dependent upon its ability to attract and retain qualified
scientific and technical personnel. There is intense competition among drug
discovery companies, pharmaceutical companies, biotechnology companies and
universities and other research institutions for qualified personnel in the
areas of the Company's activities. There can be no assurance that the Company
will be able to continue to attract and retain the qualified personnel necessary
for the development of its business. Loss of the services of, or failure to
recruit, key scientific and technical personnel could adversely affect the
Company's business, operating results and financial condition. See
"Business--Employees" and "Management--Executive Officers, Directors and Key
Employees."
SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS
To date, a majority of all revenue earned by the Company has been from its
collaborative agreements, and the Company expects that substantially all revenue
for the foreseeable future will result from such collaborations and any future
collaborations the Company may enter into. The timing of any fees or milestone
or other payments under such collaborations is expected to vary greatly from
quarter to quarter, depending on numerous factors. Operating results may
therefore vary substantially from quarter to quarter and will not necessarily be
indicative of results in subsequent periods. In addition, over the next several
years, the Company expects to incur non-cash compensation charges each quarter
resulting from the amortization of approximately $2.7 million in unearned
compensation recorded on the Company's balance sheet as of September 30, 1997.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 6 of Notes to Financial Statements.
LACK OF MANUFACTURING, MARKETING AND SALES CAPABILITY AND EXPERIENCE
The Company has not invested in the development of manufacturing, marketing
or sales capabilities. The Company has no experience in, and currently lacks the
facilities and personnel to engage in, the manufacture of products in accordance
with Good Manufacturing Practices ("GMP") as prescribed by the
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FDA or to produce an adequate supply of compounds to meet future requirements
for clinical trials. If the Company is unable to contract for or develop
manufacturing capabilities on acceptable terms, the Company's ability to conduct
pre-clinical and clinical trials with the Company's drug candidates, will be
adversely affected, resulting in delays in the submission of drug candidates for
regulatory approvals and in the initiation of new development programs, which in
turn could materially impair the Company's competitive position and the
possibility of achieving profitability.
The Company has no experience in marketing drugs. The Company will likely
seek to collaborate with a third party to market any drugs the Company may
develop, although in certain cases it may seek to market and sell such drugs
directly. If the Company seeks to collaborate with a third party, there can be
no assurance that a collaborative arrangement would be reached on acceptable
terms, if at all. If the Company seeks to market and sell such drugs directly,
the Company will need to hire additional personnel skilled in marketing and
sales if it develops any drug with commercial potential. There can be no
assurance that the Company will be able to obtain candidates, or establish
third-party relationships to provide, any or all of these capabilities.
UNCERTAINTY ASSOCIATED WITH PRE-CLINICAL AND CLINICAL TESTING
Before obtaining regulatory approvals for the commercial sale of any of the
Company's potential drugs, the drug candidates will be subject to extensive
pre-clinical and clinical trials to demonstrate their safety and efficacy in
humans. The Company will likely be dependent on third parties to conduct
clinical trials for its internally developed drug candidates. In the event that
the Company is unable or otherwise determines not to enter into collaborative
arrangements with a third party to conduct clinical trials for its drug
candidates, the Company would need to recruit and retain the proper personnel to
manage such process. The Company has limited experience in pre-clinical
development and no experience in clinical trials, and no clinical trials have
been commenced with respect to any of the Company's potential drug candidates.
Furthermore, there can be no assurance that pre-clinical or clinical trials of
any present or future drug candidates will demonstrate the safety and efficacy
of such drug candidates at all or to the extent necessary to obtain regulatory
approvals. Companies in the biotechnology industry have suffered significant
setbacks in advanced clinical trials, even after demonstrating promising results
in earlier trials. The failure to adequately demonstrate the safety and efficacy
of a drug candidate under development could delay or prevent regulatory approval
of the drug candidate and could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Government
Regulation."
IMPACT OF EXTENSIVE GOVERNMENT REGULATION
The FDA and comparable agencies in foreign countries impose substantial
requirements upon the introduction of pharmaceutical products through lengthy
and detailed pre-clinical, laboratory and clinical testing procedures, sampling
activities and other costly and time-consuming procedures to establish their
safety and efficacy. All of the Company's current and future drug candidates and
any drug candidates that result from the Company's collaborations will require
governmental approvals for commercialization, none of which have been obtained.
Pre-clinical and clinical trials and manufacturing of the Company's drug
candidates will be subject to the rigorous testing and approval processes of the
FDA and corresponding foreign regulatory authorities. Satisfaction of these
requirements typically takes a significant number of years and can vary
substantially based upon the type, complexity and novelty of the product. There
can be no assurance as to when the Company, independently or with its
collaborative partners, might first submit an investigational new drug
application for FDA or other regulatory review. Government regulation also
affects the manufacturing and marketing of pharmaceutical products.
The effect of government regulation may be to delay marketing of the
Company's potential drugs for a considerable or indefinite period of time,
impose costly procedural requirements upon the Company's activities and furnish
a competitive advantage to larger companies or companies more experienced in
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regulatory affairs. Delays in obtaining governmental regulatory approval could
adversely affect the Company's marketing as well as the Company's ability to
generate significant revenues from commercial sales. There can be no assurance
that FDA or other regulatory approvals for any drug candidates developed by the
Company will be granted on a timely basis or at all. Moreover, if regulatory
approval of a drug candidate is granted, such approval will impose limitations
on the indicated use(s) for which such drug may be marketed. Even if initial
regulatory approvals for the Company's drug candidates are obtained, the
Company, its drugs and its manufacturing facilities, if any, would be subject to
continual review and periodic inspection, and later discovery of previously
unknown problems with a drug, manufacturer or facility may result in
restrictions on such drug or manufacturer, including withdrawal of the drug from
the market. In addition, the Company would be required to comply with FDA
requirements for labeling, advertising, record keeping, and reporting of adverse
experiences and other information. The regulatory standards are applied
stringently by the FDA and other regulatory authorities and failure to comply
can, among other things, result in fines, injunctions, denial or withdrawal of
regulatory approvals, product recalls or seizures, operating restrictions and
criminal prosecution.
As with many biotechnology and pharmaceutical companies, the Company is
subject to numerous environmental and safety laws and regulations. Any violation
of, and the cost of compliance with, these regulations could materially
adversely affect the Company's business, operating results and financial
condition. The Company is subject to periodic inspections and has not received
notice of any material violations of any environmental or safety law or
regulation. See "Business--Government Regulation."
HAZARDOUS MATERIALS
The research and development processes of the Company involve the controlled
use of hazardous materials, chemicals and various radioactive compounds,
including microbial organisms and other biological materials. The Company is
subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. 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. There can be no assurance that the Company
will not be required to incur significant costs to comply with environmental
laws and regulations in the future.
REIMBURSEMENT AND DRUG PRICING UNCERTAINTY
The successful commercialization of, and the interest of potential
collaborative partners to invest in, the Company's technology platform or drug
candidates will depend substantially on reimbursement of the costs of the
resulting drugs and related treatments at acceptable levels from government
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). There can be no assurance that reimbursement
in the United States or elsewhere will be available for any drugs the Company or
its collaborative partners may develop or, if available, will not be decreased
in the future, or that reimbursement amounts will not reduce the demand for, or
the price of, such drugs, thereby adversely affecting the Company's business. If
reimbursement is not available or is available only to limited levels, there can
be no assurance that the Company will be able to obtain collaborative partners
to manufacture and commercialize any future drugs, or would be able to obtain a
sufficient financial return on its own manufacture and commercialization of any
future drugs.
Third-party payors are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations such as HMOs, which can
control or significantly influence the purchase of health care services and
products, as well as legislative proposals to reform health care or reduce
government insurance programs, may result in lower prices for pharmaceutical
products. The cost containment measures that health care providers are
instituting, including practice protocols and guidelines and clinical pathways,
and the effect of any health care reform, could materially adversely affect the
Company's ability to sell its drugs, if any.
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Moreover, the Company is unable to predict what additional legislation or
regulation, if any, relating to the health care industry or third-party coverage
and reimbursement may be enacted in the future or what effect such legislation
or regulation would have on the Company's business, operating results or
financial condition.
POTENTIAL PRODUCT LIABILITY AND AVAILABILITY OF INSURANCE
The Company's business exposes it to potential liability risks that are
inherent in the testing, manufacturing and marketing of pharmaceutical products.
The use of the Company's drug candidates in clinical trials may expose the
Company to product liability claims and possible adverse publicity. These risks
will expand with respect to the Company's drug candidates, if any, that receive
regulatory approval for commercial sale. Product liability insurance for the
biotechnology industry is generally expensive, if available at all. The Company
does not have product liability insurance but intends to obtain such coverage if
and when its drug candidates are tested in clinical trials. However, such
coverage is becoming increasingly expensive and there can be no assurance that
the Company will be able to obtain insurance coverage at acceptable costs or in
a sufficient amount, if at all, or that a product liability claim would not
adversely affect the Company's business, operating results or financial
condition.
BROAD DISCRETION IN APPLICATION OF NET PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $ million
($ million if the Underwriters' over-allotment option is exercised in full)
after deducting underwriting discounts and commissions and estimated offering
expenses. The Company intends to use the net proceeds from the Offering
principally for research and development, working capital and general corporate
purposes. The Company's management and Board of Directors will have broad
discretion with respect to the application of such proceeds, and the amounts
actually expended by the Company for working capital purposes may vary
significantly depending on a number of factors. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price per share of the Common Stock will be
determined by negotiations between management of the Company and the managing
underwriters of the Offering. Application has been made for the Common Stock to
be quoted on the Nasdaq National Market; however, there can be no assurance that
an active trading market will develop and be sustained subsequent to the
Offering. The market price of the Common Stock may fluctuate substantially
because of a variety of factors, including announcements concerning existing or
future collaborative arrangements, announcements of technological innovations or
new products by the Company, its collaborators or its competitors, disclosure of
results of clinical testing or regulatory proceedings, developments in patents
or other proprietary rights, quarterly fluctuations in results of operations,
changes in earnings estimates by analysts, sales of Common Stock by existing
holders, loss of key personnel and other factors. In addition, the stock market
in general, and the market for biotechnology and pharmaceutical stocks, has
historically been subject to extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies. In the past, following periods of volatility in the market
price of a company's securities, class action securities litigation has often
been instituted against such a company. Any such litigation instigated against
the Company could result in substantial costs and diversion of management's
attention and resources, which could have a material adverse effect on the
Company's business, financial condition and operating results. See
"Underwriting."
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IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share of Common Stock is substantially
higher than the net tangible book value per share of the Common Stock.
Purchasers of shares of Common Stock in the Offering will experience immediate
and substantial dilution of $ in the pro forma net tangible book value
per share of Common Stock. To the extent outstanding warrants and options to
purchase Common Stock are exercised, there will be further dilution. See
"Dilution."
CONTROL BY CERTAIN PRINCIPAL STOCKHOLDERS
Following completion of the Offering, the Company's executive officers and
directors and their affiliated entities as a group will beneficially own
approximately % of the outstanding Common Stock. As a result, Scriptgen's
executive officers and directors as a group will have a significant influence
over, the outcome of all matters submitted to a vote of the Company's
stockholders, including the election of directors and significant corporate
transactions. The shares beneficially owned by the Company's executive officers,
directors and affiliates, combined with the ability of the Board of Directors to
issue shares of preferred stock without further vote or action by the
stockholders, may have the effect of delaying, deferring or preventing a change
in control of the Company without further action by the stockholders. See
"Management" and "Principal Stockholders."
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE; ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation, as it is proposed to be
amended and restated (the "Restated Certificate"), authorizes the Board of
Directors of the Company, without stockholder approval, to issue additional
shares of Common Stock and to fix the rights, preferences and privileges of and
issue up to 4,000,000 shares of preferred stock with voting, conversion,
dividend and other rights and preferences that could adversely affect the voting
power or other rights of the holders of Common Stock. The issuance of preferred
stock, rights to purchase preferred stock or additional shares of Common Stock
may have the effect of delaying or preventing a change in control of the
Company. In addition, the possible issuance of preferred stock or additional
shares of Common Stock could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Common Stock or limit the price that
investors might be willing to pay for shares of the Common Stock. Further, the
Restated Certificate provides 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 stockholders and may not be effected by any consent in
writing. Special meetings of the stockholders of the Company may be called only
by the Chairman of the Board of Directors, the President of the Company, or by a
majority of the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors. These and other provisions
contained in the Restated Certificate and the Company's By-Laws, as well as
certain provisions of the Delaware General Corporation Law, could delay or make
more difficult certain types of transactions involving an actual or potential
change in control of the Company or its management (including transactions in
which stockholders might otherwise receive a premium for their shares over then
current market prices) and may limit the ability of stockholders to remove
current management of the Company or approve transactions that stockholders may
deem to be in their best interests and, therefore, could adversely affect the
price of the Common Stock. See "Description of Capital Stock--Preferred Stock"
and "--Delaware Anti-Takeover Law and Certain Charter Provisions."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of such shares in the public market or the
availability of such shares for future sale could adversely affect the market
price of these shares of Common Stock and the Company's ability to raise
additional capital at a price favorable to the Company. Upon completion of the
Offering and the Private Placement, the Company will have shares of Common
Stock outstanding (assuming no exercise of outstanding options or warrants). Of
these shares, the shares sold pursuant to the
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Offering will be freely tradable without restriction or further registration
under the Securities Act of 1933, as amended (the "Securities Act"), except
those shares acquired by "affiliates" of the Company within the meaning of the
Securities Act which will be subject to the resale limitations of Rule 144
promulgated thereunder. The remaining shares (the "Restricted Shares")
(including the shares of Common Stock, based on an assumed initial public
offering price of $ per share, sold in the Private Placement) will be
restricted securities within the meaning of Rule 144 and may be sold only if
registered under the Securities Act or sold in accordance with an applicable
exemption from registration, such as Rule 144. The Company, its executive
officers and directors and substantially all of its stockholders have agreed not
to offer, sell, contract to sell, grant any option to sell, or otherwise dispose
of, directly or indirectly, any Common Stock or securities convertible into or
exchangeable for Common Stock or warrants or other rights to purchase Common
Stock owned by them, subject to certain limited exceptions, during the 180 days
after the date of this Prospectus (the "Lock-Up Period"), without the prior
consent of SBC Warburg Dillon Read Inc. However, SBC Warburg Dillon Read Inc.
may, in its sole discretion, and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. Commencing at the end
of the Lock-Up Period shares will be eligible for sale in the public
market, subject to compliance with Rule 144. Of such shares, will be
eligible for sale, without limitation, pursuant to Rule 144(k). The remaining
shares of Common Stock held by existing stockholders will become eligible
for sale at various times over a period of two years. The Company has granted to
certain security holders demand and piggyback registration rights covering an
aggregate of shares of Common Stock. The Company expects to file a
Registration Statement on Form S-8 registering shares of Common Stock reserved
for issuance upon exercise of options granted under the Company's 1997 Plan and
1994 Stock Option Plan following completion of the Offering. See "Shares
Eligible for Future Sale" and "Underwriting."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby, at an assumed initial public offering price
of $ per share, and after deducting underwriting discounts and
commissions and other estimated offering expenses, are estimated to be
approximately $ ($ if the Underwriters' over-allotment option is
exercised in full). The gross proceeds to the Company from the sale of shares of
Common Stock pursuant to the Private Placement are expected to be $3,000,000.
The Company intends to use the net proceeds from the Offering and the
Private Placement primarily to fund its research and development activities and
for general corporate purposes, including working capital. The amounts actually
expended by the Company for working capital purposes will vary significantly
depending upon a number of factors, including the progress of the Company's
collaborations and its internal development efforts, the timing of the Company's
leasing of additional laboratory and office space, future revenue growth, if
any, and the amount of cash, if any, generated by the Company's operations. The
Company's management will retain broad discretion in the allocation of the net
proceeds of the Offering and the Private Placement. See "Risk Factors--Broad
Discretion in Application of Net Proceeds."
Pending such uses, the Company intends to invest the net proceeds in
short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently anticipates that any future earnings will be
retained by the Company for the development and operations of its business.
Accordingly, the Company does not anticipate paying cash dividends on the Common
Stock in the foreseeable future.
19
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted to reflect (i) the sale by the Company of the
shares of Common Stock offered hereby and offered pursuant to the Private
Placement (assuming an initial public offering price of $ per share) and the
application of estimated net proceeds therefrom, as described in "Use of
Proceeds" and (ii) the conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock into shares of Common Stock and the
amendment of the Company's Restated Certificate of Incorporation. See
"Description of Capital Stock." The following table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(2)
---------- --------------
(IN THOUSANDS)
Capital lease obligations, less current portion (1)................................... $ 501 $ 501
Redeemable convertible preferred stock, $0.01 par value; 21,500,000 shares authorized
and 17,036,265 shares issued and outstanding, actual; none authorized or issued and
outstanding, as adjusted............................................................ 20,279 --
---------- --------------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, no shares authorized or issued and outstanding,
actual; 4,000,000 shares authorized and no shares issued and outstanding, as
adjusted..........................................................................
Common stock, $0.01 par value, 30,000,000 shares authorized and 1,373,378 shares
issued and 1,014,630 outstanding, actual; shares issued and shares
outstanding, as adjusted.......................................................... 14
Additional paid-in capital.......................................................... 3,126
Accumulated deficit................................................................. (21,169) (21,169)
Unearned compensation............................................................... (2,660) (2,660)
Treasury stock, at cost (358,748 shares at actual and as adjusted).................. (55) (55)
---------- --------------
Total stockholders' equity (deficit).............................................. (20,744)
---------- --------------
Total capitalization............................................................ $ 36 $
---------- --------------
---------- --------------
</TABLE>
- --------------
(1) See Note 8 of Notes to Financial Statements for a description of the
Company's capital lease obligations.
(2) Excludes: (i) 701,508 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $0.34 per share,
(ii) 49,763 shares of Common Stock issuable upon exercise of warrants
outstanding at an exercise price of $3.07 per share and 32,525 shares of
Common Stock issuable upon exercise of warrants outstanding at an exercise
price of $5.53 per share and (iii) shares of Common Stock reserved for
issuance upon exercise of options or in connection with other awards that
may be granted in the future under the proposed 1997 Plan. See "Management--
Employment Agreements" and "--Stock Options," "Employee Benefit Plans--1997
Equity Incentive Plan" and "--1994 Stock Option Plan," "Description of
Capital Stock--Warrants" and Notes 6 and 8 of Notes to Financial Statements.
20
<PAGE>
DILUTION
As of September 30, 1997, the pro forma net tangible book value of the
Company was approximately $(465,000), or $(0.07) per share. Pro forma net
tangible book value per share represents the amount of tangible net assets of
the Company, less total liabilities, divided by the pro forma number of shares
of Common Stock outstanding as of September 30, 1997. After giving effect to the
sale by the Company of the shares of Common Stock offered hereby and offered
pursuant to the Private Placement (assuming an initial public offering price of
$ per share) and the application of the net proceeds therefrom, the pro
forma net tangible adjusted book value of the Company at September 30, 1997
would have been approximately $ million, or $ per share. This
amount represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in net
tangible book value of $ per share to purchasers of Common Stock in the
Offering. The following table illustrates this per share dilution, without
giving effect to any exercise of the Underwriters' over-allotment option:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Pro forma net tangible book value per share as of September 30,
1997.............................................................. $ (0.07)
Increase per share attributable to new investors(1).................
---------
Pro forma net tangible book value per share after the Offering and the
Private Placement...................................................
---------
Dilution per share to new investors................................... $
---------
---------
</TABLE>
- --------------
(1) Includes increase attributable to the sale of shares in the Offering and
the Private Placement.
The following table summarizes, on a pro forma basis as of September 30,
1997, the number of shares of Common Stock purchased from the Company, the total
consideration paid, and the average price per share paid by existing
stockholders of the Company and by new investors purchasing shares from the
Company in the Offering and the Private Placement, at an assumed initial public
offering price of $ per share, before deducting underwriting discounts
and commissions and the estimated offering expenses payable by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------------- ---------------------------- PRICE
NUMBER PERCENT(1) AMOUNT PERCENT PER SHARE
---------- --------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 6,914,366 % $ 23,417,000 % $ 3.40
New investors................................
-- --
---------- -------------
Total........................................ % $ %
-- --
-- --
---------- -------------
---------- -------------
</TABLE>
- --------------
(1) If exercised, the Underwriters' over-allotment option to purchase
additional shares will further reduce the percentage held by existing
stockholders to % and increase the percentage held by new investors to
%.
The foregoing tables exclude as of November 15, 1997: (i) 701,508 shares of
Common Stock issuable upon exercise of outstanding options at a weighted average
exercise price of $0.34 per share, (ii) 49,763 shares of Common Stock issuable
upon exercise of warrants outstanding at an exercise price of $3.07 per share
and 32,525 shares of Common Stock issuable upon exercise of warrants outstanding
at an exercise price of $5.53 per share and (iii) shares of Common Stock
reserved for issuance upon exercise of options or in connection with other
awards that may be granted in the future and otherwise under the proposed 1997
Plan. See "Management--Employment Agreements" and "--Stock Options," "Employee
Benefit Plans--1997 Equity Incentive Plan" and "--1994 Stock Option Plan,"
"Description of Capital Stock" and Notes 6 and 8 of Notes to Financial
Statements.
21
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below as of December 31, 1995 and 1996
and for the years ended December 31, 1994, 1995 and 1996 have been derived from
the Company's financial statements, which have been audited by Price Waterhouse
LLP, independent accountants, and are included elsewhere herein. The selected
financial data as set forth below as of December 31, 1992, 1993 and 1994 and for
the period from September 17, 1992 ("Inception") to December 31, 1992 and for
the year ended December 31, 1993 have been derived from the Company's audited
financial statements not included herein. The selected financial data as set
forth below as of September 30, 1997, and for the nine months ended September
30, 1996 and 1997 have been derived from the Company's unaudited financial
statements which are included elsewhere herein. The unaudited financial
statements have been prepared by the Company on a basis consistent with the
Company's audited financial statements and, in the opinion of management,
include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the Company's results of operations and
financial condition for such periods. Operating results for the nine months
ended September 30, 1997 are not necessarily indicative of results that may be
expected for the entire year ending December 31, 1997. The selected financial
data set forth below should be read in conjunction with the Financial Statements
and related Notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which are included elsewhere
herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED
PERIOD FROM DECEMBER 31, SEPTEMBER 30,
INCEPTION TO ------------------------------------------ --------------------
DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997
----------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (UNAUDITED)
Revenue:
Collaborative agreements................. -- -- -- -- $ 975 $ 975 $ 467
SBIR grants.............................. -- -- -- $ 260 232 222 138
----- --------- --------- --------- --------- --------- ---------
-- -- -- 260 1,207 1,197 605
----- --------- --------- --------- --------- --------- ---------
Cost of revenue:
Collaborative agreements................. -- -- -- -- 174 174 124
SBIR grants.............................. -- -- -- 260 232 222 138
----- --------- --------- --------- --------- --------- ---------
-- -- -- 260 406 396 261
----- --------- --------- --------- --------- --------- ---------
Gross profit............................. -- -- -- -- 801 801 344
Operating expenses:
Research and development................. $ 455 $ 1,833 $ 3,157 3,152 3,958 2,757 4,273
General and administrative............... 94 652 998 1,299 906 669 831
----- --------- --------- --------- --------- --------- ---------
549 2,485 4,155 4,451 4,865 3,427 5,104
----- --------- --------- --------- --------- --------- ---------
Loss from operations..................... (549) (2,485) (4,155) (4,451) (4,064) (2,626) (4,761)
----- --------- --------- --------- --------- --------- ---------
Other income (expense), net................ 1 (62) (146) (128) 19 12 (15)
----- --------- --------- --------- --------- --------- ---------
Net loss................................. $ (549) $ (2,547) $ (4,301) $ (4,579) $ (4,044) $ (2,614) $ (4,775)
----- --------- --------- --------- --------- --------- ---------
----- --------- --------- --------- --------- --------- ---------
Pro forma net loss per share
(unaudited)(1)........................... $ (0.59) $ (0.64)
--------- ---------
--------- ---------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited)(1)........................... 6,897 7,435
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................... -- $ 1,418 $ 922 $ 241 $ 1,314
Working capital.............................................. (573) 2,274 (1,939) 92 3,350
Total assets................................................. 25 3,726 2,760 2,689 5,747
Noncurrent portion of capital lease obligations.............. -- 345 926 636 424
Redeemable convertible preferred stock....................... -- 6,203 6,403 12,982 20,279
Accumulated deficit.......................................... (549) (3,256) (7,685) (12,309) (16,394)
Total stockholders' deficit.................................. (549) (3,230) (7,494) (12,123) (16,126)
<CAPTION>
SEPTEMBER 30,
1997
---------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................... $ 197
Working capital.............................................. (1,200)
Total assets................................................. 2,478
Noncurrent portion of capital lease obligations.............. 501
Redeemable convertible preferred stock....................... 20,279
Accumulated deficit.......................................... (21,169)
Total stockholders' deficit.................................. (20,744)
</TABLE>
- --------------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of net loss per share and shares used in computing net loss per
share.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH "SELECTED
FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND RELATED NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF THE FACTORS SET FORTH
IN THIS PROSPECTUS.
OVERVIEW
Scriptgen utilizes its proprietary high throughput technologies to enable
and accelerate the discovery of innovative small molecule drugs. Scriptgen's
technology platform allows the Company and its collaborators to exploit the
opportunities afforded by advances in genomics and combinatorial chemistry, and
opens new avenues of drug discovery. The Company's strategy is to maximize the
commercial opportunities presented by its technology platform and pipeline of
drug candidates by entering into multiple collaborations and retaining rights to
independently develop certain products.
Since its incorporation and commencement of operations in September 1992,
the Company has been developing its drug discovery technologies, and has used
such technologies in its collaborations and for its internal development
programs. As of November 15, 1997, the Company has received approximately $25.4
million in funding through the sale of preferred stock and from payments under
the Company's collaborative agreements. Additionally, the Company has received
several SBIR grants from the National Institutes of Health. The Company has a
limited history of operations and has experienced significant operating losses
since Inception. The Company expects to incur significant additional operating
losses over the next several years and expects cumulative losses to increase
substantially due primarily to expanded research and development efforts,
pre-clinical and clinical trials.
To date, a majority of all revenue earned by the Company has been from its
collaborative agreements, and the Company expects that substantially all revenue
for the foreseeable future will result from such collaborations and any future
collaborations the Company may enter into. The timing of any fees or milestone
or other payments under such collaborations is expected to vary greatly from
quarter to quarter, depending on numerous factors. Operating results may
therefore vary substantially from quarter to quarter and will not necessarily be
indicative of results in subsequent periods. See "Risk Factors--Dependence Upon
Present and Future Collaborative Agreements" and "--Significant Fluctuations in
Quarterly Results."
Revenue derived under the Company's collaborative agreements is recognized
as drug discovery activities are performed. Cash received in advance of
activities performed is recorded as deferred revenue. Certain agreements also
provide for payments to the Company upon the achievement of certain milestones
as well as royalties on the net sales of any products developed resulting from
the collaborations, as defined in the respective agreements. Any revenue related
to milestones will be recognized as the milestones are achieved and any revenue
related to royalties will be recognized as earned.
Revenue from SBIR grants to conduct research and development is recognized
as eligible costs are incurred up to the funding limit. Eligible grant-related
costs which have been incurred in advance of cash receipts are recorded as
receivables.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
REVENUE. Total revenue in the nine months ended September 30, 1997 was
$604,784 compared to $1,196,585 in the nine months ended September 30, 1996. The
Company recognized $467,000 of revenue in the nine months ended September 30,
1997 under its collaborative agreement with Eli Lilly and $975,000
23
<PAGE>
of revenue in the nine months ended September 30, 1996 under a collaborative
agreement which was concluded in 1996. In addition, the Company recognized
$137,784 and $221,585 of revenue related to SBIR grants in the nine months ended
September 30, 1997 and 1996, respectively.
COST OF REVENUE. Cost of revenue reflects certain direct and overhead
expenses associated with collaborations in progress in addition to eligible
expenses incurred related to SBIR grants. Cost of revenue was $261,299 in the
nine months ended September 30, 1997 compared to $395,750 in the nine months
ended September 30, 1996.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
were $4,273,149 in the nine months ended September 30, 1997 compared to
$2,757,439 in the nine months ended September 30, 1996, an increase of
$1,515,710 or 55.0%. The increase was largely due to increased costs related to
additional personnel and, to a lesser extent, increases in depreciation,
amortization and patent expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $830,908 in the nine months ended September 30, 1997 compared to $669,108
in the nine months ended September 30, 1996, an increase of $161,800 or 24.2%.
The increase was primarily due to amortization of unearned compensation and an
increase in costs associated with additional personnel, public relations and
other administrative expenses offset by a decrease in the use of consultants.
OTHER INCOME AND EXPENSE, NET. Other income and expense, net was $(14,884)
in the nine months ended September 30, 1997 compared to $12,204 in the nine
months ended September 30, 1996, a decrease of $27,088 or 222.0%. The decrease
was primarily due to a decrease in interest income as a result of a decrease in
the average cash balance during the nine months ended September 30, 1997. In
addition, interest expense increased due to an increase in the average balance
of outstanding capital lease obligations.
YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUE. Total revenue in 1996 was $1,206,620 compared to $260,415 in 1995.
The Company recognized $975,000 of revenue in 1996 under a collaborative
agreement which was concluded in 1996. No collaborative agreements were in
progress in 1995. In addition, the Company recognized $231,620 and $260,415 of
revenue under SBIR grants in 1996 and 1995, respectively.
COST OF REVENUE. Cost of revenue was $405,785 in 1996 compared to $260,415
in 1995.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
were $3,958,201 in 1996 compared to $3,152,494 in 1995, an increase of $805,707
or 25.6%. The increase was largely due to increased costs related to additional
personnel, laboratory materials and supplies, patent costs and depreciation and
amortization expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $906,452 in 1996 compared to $1,298,684 in 1995, a decrease of $392,232 or
30.2%. The decrease was primarily due to expenses incurred in 1995 under a
separation agreement with a former chief executive officer of the Company.
OTHER INCOME AND EXPENSE, NET. Other income and expense, net was $19,799 in
1996 compared to $(127,749) in 1995, an increase of $147,548, or 115.5%. This
increase was due to an increase in interest income as a result of an increase in
the average cash balance in 1996. This increase was offset by a decrease in
interest expense as a result of the decrease in the average balance of
outstanding capital lease obligations and the conversion of convertible debt
during 1995.
24
<PAGE>
YEARS ENDED DECEMBER 31, 1995 AND 1994
REVENUE. Total revenue in 1995 was $260,415, consisting only of revenue
recognized under SBIR grants. No revenue was recognized in 1994.
COST OF REVENUE. Cost of revenue related to SBIR grants was $260,415 for
1995. No such grants were in place during 1994.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
were $3,152,494 in 1995 compared to $3,156,734 in 1994.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1,298,684 in 1995 compared to $998,194 in 1994, an increase of $300,490 or
30.1%. The increase was primarily due to increased executive and administrative
staffing and consultant expenses used to support the growth of the Company's
research and development.
OTHER INCOME AND EXPENSE, NET. Other income and expense, net was $(127,749)
in 1995 compared to $(146,046) in 1994, a decrease of $18,297 or 12.5%. This
decrease was due to an increase in interest income as a result of an increase in
the average cash balance offset by an increase in interest expense as a result
of an increase in outstanding capital lease obligations and the issuance of
convertible debt.
INCOME TAXES
The Company has generated taxable losses from operations since Inception
and, accordingly, has no taxable income available to offset the carryback of net
operating losses. Based upon the weight of all available evidence, the Company
has provided a full valuation allowance for its deferred tax assets since, in
the opinion of management, realization of these future benefits is not
sufficiently assured (defined as a likelihood of slightly more than 50 percent).
LIQUIDITY AND CAPITAL RESOURCES
Since Inception, the Company has financed its operations through the sale of
preferred stock, payments received under the Company's collaborative
arrangements, equipment financing, SBIR grants and interest earned on invested
capital. The Company's total cash, cash equivalents and investments balance at
September 30, 1997 was $1,064,157 compared to $4,338,237 at December 31, 1996.
The Company received approximately $1,405,000 under its collaborative agreements
and $137,784 in SBIR grants during the nine months ended September 30, 1997. In
October 1997, the Company entered into a collaborative arrangement with HMR. The
Company expects that the total amounts it will have received from HMR under its
collaborative agreement from October 1997 through February 1998 will approximate
$12,000,000, of which $6,000,000 will be technology access fees, $3,000,000 will
be research and development payments and $3,000,000 will be proceeds from the
Private Placement. There can be no assurance that the Company will receive any
additional payments under its present or any future collaborative agreements.
See "Risk Factors--Dependence Upon Present and Future Collaborative
Arrangements" and "Business--Collaborative Arrangements."
Net cash used in operating activities for the nine months ended September
30, 1997 was $2,737,087 compared to $2,555,823 for the nine months ended
September 30, 1996. Net cash used in operating activities was $3,568,031 in 1996
compared to $3,744,478 and $3,876,939 in 1995 and 1994, respectively. The cash
used in operations was primarily to fund research and development and for
general and administrative expenses.
As of September 30, 1997, the Company had invested $3,018,000 in property
and equipment, primarily in facility renovations and laboratory equipment. These
acquisitions were funded by capital lease financings which have an aggregate
outstanding principal balance of $984,627 at September 30, 1997 due at various
dates through the year 2000 with interest rates ranging between 8%-8.5% and 15%
for equipment
25
<PAGE>
and facility renovations, respectively. The Company expects substantially all of
its capital expenditures in 1997 to be funded through capital lease equipment
financing. In connection with these capital leases, the Company has issued
warrants for 253,000 shares of its redeemable convertible preferred stock
through November 1997.
Pursuant to several license and sponsored research agreements, the Company
has paid to date an aggregate of approximately $1,300,000 in the form of license
and research and development fees. Under existing sponsored research agreements,
the Company remains obligated to pay approximately $100,000 in additional
research payments. Under such agreements and other agreements, the Company is
required to make payments upon the achievement of certain milestones, to pay
royalties on certain drug sales, if any, and to pay other amounts in connection
with sublicenses, if any (collectively, "Contingent Payments"). To date, the
Company has not become obligated to make any Contingent Payments under such
agreements and does not anticipate becoming obligated to make any such payments
in the near future.
The Company believes that the net proceeds of the Offering, together with
revenue from its collaborative agreements, the Private Placement, its existing
capital resources, SBIR grants and interest income will be sufficient to fund
its operating expenses and capital requirements as currently planned through the
end of 2000. The Company's actual cash requirements may vary materially from
those now planned and will depend upon numerous factors, including the ability
of the Company to enter into additional collaborative arrangements, the
achievement of milestones under the Company's collaborative arrangements on a
timely basis or at all, changes in the Company's existing collaborative
arrangements, the results of the Company's internal development programs, the
timing and results of pre-clinical and clinical trials, the timing and costs of
obtaining regulatory approvals, the timing and level of the expansion of the
Company's facilities, the level of resources, if any, that the Company commits
to the development of manufacturing, marketing and sales capabilities, the
technological advances and activities of competitors and other factors. There
can be no assurance that the net proceeds of the Offering, together with the
Company's revenue from collaborative agreements, the Private Placement, its
existing capital resources, SBIR grants and interest income will be sufficient
to fund the Company's operating expenses and capital requirements during such
period. Thereafter, the Company will need to raise substantial additional
capital to fund its operations. The Company intends to seek such additional
funding through public or private financing, collaborations or other
arrangements. See "Use of Proceeds" and "Risk Factors--Additional Financing
Requirements; Uncertainty of Available Funding."
26
<PAGE>
BUSINESS
OVERVIEW
Scriptgen utilizes its proprietary high throughput technologies to enable
and accelerate the discovery of innovative small molecule drugs. Scriptgen's
technology platform allows the Company and its collaborators to exploit the
opportunities afforded by advances in genomics and combinatorial chemistry, and
opens new avenues of drug discovery. The Company's technology platform
identifies and validates novel gene targets for therapeutic intervention, and
then uses novel assay systems to rapidly screen compounds against those targets,
even before the gene target's characteristics or functions are well understood.
The Company believes that the application of its technologies addresses many of
the limitations associated with traditional drug discovery and provides
substantial cost savings opportunities. The Company commercializes its
technology platform through (i) collaborations with pharmaceutical and
technology companies and (ii) the Company's internal development program.
The Company's core systems include GATE (Genetics Assisted Target
Evaluation), a family of high throughput target identification and validation
systems, and ATLAS (Any Target Ligand Affinity Screen) and SCAN (Screen for
Compounds with Affinity for Nucleic Acids), the high speed, solution based,
assay systems which identify compounds that bind to virtually any protein or
structured RNA, respectively. GATE measures the effects of transiently removing
a specific gene from a cell, and by reproducing conditions that closely resemble
drug mechanism of action, generates data more predictive of target behavior than
traditional methods. ATLAS and SCAN rapidly measure the affinity of compounds
that bind to targets even before the gene functions are well understood,
enabling the Company to work with targets that are unsuitable for traditional
high throughput screens. The Company believes ATLAS and SCAN increase
dramatically the number of targets and compounds that may be screened in a given
time period, and reduce to weeks what often requires months or years of assay
development time when using traditional high throughput functional assays. The
Company has used GATE to identify and validate novel infectious disease targets,
and has used ATLAS and SCAN to identify lead compounds, two of which have
progressed to pre-clinical development. ATLAS and SCAN are broadly applicable to
research in multiple therapeutic areas, and have demonstrated utility in
anti-infectives, oncology, cardiovascular, and respiratory and immunologic
disorders.
The Company's strategy is to maximize the commercial opportunities presented
by its technology platform and pipeline of drug candidates by entering into
multiple collaborations and retaining rights to independently develop certain
products. Scriptgen has collaborative agreements with pharmaceutical and
technology companies, and routinely evaluates opportunities to enter into
collaborations with other potential partners. The Company currently has
collaborations with HMR, Eli Lilly, Roche, Monsanto and ArQule, Inc. Scriptgen's
internal development efforts have initially focused on anti-infectives, where it
has identified novel cidal targets and lead compounds in the fungal, bacterial
and viral areas.
DRUG DISCOVERY TECHNOLOGIES
Drug discovery and development is a complex process which averages 15 years
from inception to FDA approval at a cost of more than $500 million. According to
an industry source, only five in 5,000 compounds that enter pre-clinical testing
advance to clinical testing, and only one of those five is approved as a drug.
Consequently, technologies and methods which may make the drug discovery process
faster, less costly, and more effective are in great demand.
The Company's technology platform is complementary to emerging drug
discovery approaches, including gene sequencing, functional genomics and
differential gene expression. The chart following outlines the drug discovery
process, and indicates the steps in that process where the Company's and these
complementary technologies apply.
27
<PAGE>
[CHART]
Advances in genomics and related technologies are dramatically increasing
the number of potential drug targets available and have created a bottleneck in
the target validation phase of drug discovery. It has been estimated that there
are only approximately 400 human drug discovery targets for which drugs have
been developed. Although genomics and related technologies have the potential to
identify thousands of additional targets per year, these targets may not be
therapeutically relevant. For example, differential gene expression compares
gene transcription patterns in normal and diseased tissues, typically
identifying several hundred genes which are up or down regulated in diseased
cells relative to normal cells, but whose relevance to the cause of the
underlying disease is not apparent. Consequently, many of these targets will
require validation, a process that can consume two or more years with
conventional approaches. Further, existing gene-based technologies are limited
in screening potential because: (i) they can be used only to identify compounds
that affect transcription (the process by which DNA is transcribed into RNA),
(ii) they generally have very low throughput, (iii) they identify gene targets
which have unknown function and (iv) they do not accommodate the complexity of
gene interactions in the disease process.
SCRIPTGEN'S DRUG DISCOVERY APPROACH
Scriptgen's drug discovery technology platform enables the Company and its
collaborators to exploit the opportunities afforded by advances in genomics and
combinatorial chemistry, and opens new avenues of drug discovery. Scriptgen's
primary drug discovery technologies are GATE, a family of high throughput target
identification and validation systems, and ATLAS and SCAN, the high speed,
solution based assay systems, which identify compounds that bind to virtually
any protein or structured RNA, respectively. The Company also possesses a
diverse 250,000 compound library consisting of defined small molecule chemical
entities, including 15,000 natural product extracts, and has access to validated
IN VIVO animal models of infectious diseases through the Company's collaboration
with Boston Medical Center.
28
<PAGE>
Scriptgen's drug discovery technology platform is unique because it
identifies and validates multiple gene targets, and rapidly measures the
affinity of compounds that bind to such gene targets even before the gene
functions are well understood. This approach enables the Company and its
collaborators to work with targets that are unsuitable for traditional high
throughput screens and greatly increases the number of targets and compounds
that may be screened in a given time period.
TARGET DISCOVERY AND VALIDATION SYSTEMS (GATE)
GATE consists of a family of high throughput target identification and
validation technologies which the Company has successfully applied in fungi,
bacteria and viruses. GATE's regulated gene knockout technology measures the
effects of transient gene inactivation. It reproduces conditions that more
closely resemble drug mechanism of action than conventional gene inactivation
methods, which the Company believes makes GATE more predictive of target
behavior and hence more informative as a target validation technique. An
analogous technology for mammalian cells, CellGATE, is under development.
GATE has been applied by the Company to infectious diseases where the
desired result of drug treatment is to kill the invading pathogen without severe
side effects to the patient. GATE determines whether the pathogen dies as a
result of a specific inactivation of a gene product, how quickly it dies and how
much of the target must be modified to kill the pathogen. Because GATE focuses
on cidal targets, the Company is able to focus its efforts on identifying
compounds which the Company believes may have a high probability of being
effective against the disease with low toxicity and side effects.
HIGH THROUGHPUT ASSAY SYSTEMS (ATLAS AND SCAN)
ATLAS and SCAN are high throughput affinity assay systems that allow drug
discovery to focus rapidly on ligands, those rare compounds that bind to a
target, and therefore have the potential to become valid therapeutics. ATLAS and
SCAN are based on the thermodynamic principle that protein and RNA have
measurable stability, as well as the fact that all drugs act by binding to and
further stabilizing a specific target. Thus, ATLAS and SCAN may be applied to
virtually any identified target, even before its characteristics or functions
are well understood. These technologies are able to identify and distinguish
among ligands that bind to active and neutral sites, and measure the affinity of
binding, which indicates the potential of drug potency.
In contrast, conventional high throughput drug discovery technologies
measure the effect of test compounds only on the function of a target. Before
such a functional screening approach may be initiated, the biochemical function
of the target must be well understood. This detailed characterization often
requires extensive time and effort before a target can be screened, if at all.
ATLAS and SCAN have shown the ability to overcome many of the limitations of
high throughput drug screening and allow access to targets of unknown function,
thereby offering the following advantages:
- TARGET FLEXIBILITY. ATLAS and SCAN require essentially no pre-existing
biochemical understanding of the target molecule and are compatible with
virtually any target protein or structured RNA. Using ATLAS and SCAN,
screening can begin earlier than with conventional high throughput
methods.
- COMPOUND DIVERSITY. ATLAS and SCAN work in solution phase, and are used to
search for drug candidates from a wide diversity of chemical sources
including combinatorial, small molecule, peptide and natural product
compound libraries.
- RAPID ASSAY DEVELOPMENT. Many functional assays using biochemical, cell or
animal based methods take months or years to develop. ATLAS and SCAN can
be applied in a matter of weeks because they measure only the universal
principle of drug binding and are independent of protein and nucleic acid
function.
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- EFFICIENT, HIGH THROUGHPUT MODE. ATLAS and SCAN are compatible with modern
robotic and automated equipment, operate in high throughput mode and can
test thousands of compounds each week using minute compound amounts and
very little target protein or RNA.
- RAPID ELIMINATION OF NON-CANDIDATE COMPOUNDS. Used in a pre-screening
mode, ATLAS and SCAN rapidly eliminate compounds that are not ligands and
allow a focused and efficient development effort to be concentrated only
on those compounds with the greatest potential for therapeutic benefit. In
a typical high throughput assay using ATLAS, 99.9% of the screened
compounds are eliminated as potential drug candidates.
- QUANTITATIVE MEASURE OF DRUG BINDING. ATLAS and SCAN, unlike many drug
discovery technologies, are sensitive assay systems which identify even
weakly binding ligands, and provide a quantitative measure of how tightly
a potential drug binds to its target.
- EXPANDS DRUG DISCOVERY BEYOND REGULATION OF GENE TRANSCRIPTION. While
traditional gene expression methods are limited to measuring initial gene
transcripts, ATLAS and SCAN measure the binding to final gene products,
thereby enhancing the ability to identify promising lead compounds.
COALESCENT DRUG DESIGN. For many target proteins, it is very difficult to
develop a single molecule with both inhibitory activity and sufficient
specificity for pharmaceutical applications. This difficulty is often a
consequence of the fact that proteins with similar functions have similar active
sites. In contrast, the neutral site surfaces of related proteins are
dissimilar, and thus compounds that also bind outside of the active site can
have specificity for the target protein. The Company has applied ATLAS to
develop novel coalescent compounds, which are small molecules connected by a
molecular tether that bind to both active and neutral sites. The binding
energies of the functional groups are nearly exponentially additive, allowing
for highly specific coalescent drug candidates to be forged even from weakly
binding compounds. Coalescent drug candidates have the potential to address a
broad spectrum of heretofore intractable protein targets.
The Company is exploring the development of small molecule coalescent
compounds to mimic the action of protein drugs such as human growth hormone and
erythropoietin. The receptors for these proteins typically comprise two subunits
that span the cell membrane. The therapeutic protein binds to two distinct sites
on the extracellular portion of its receptor, one on each subunit, thereby
causing the subunits to pull together (dimerization). The dimerization of the
intracellular portions of the receptor subunits initiates a signaling pathway
which results in the intended therapeutic effect. Scientists have struggled to
design small molecule analogs of therapeutic proteins because small molecules
are unable to span the distance between the extracellular parts of the receptor
subunits. While the internal arms of the protein are much closer together, they
are not the active sites and thus have not been available as targets using
conventional assay technologies. ATLAS allows for the identification of ligands
that bind to the internal arms of these receptor subunits, making it possible to
construct small molecule coalescent compounds capable of causing dimerization of
the subunits and, hence, initiating a therapeutic response.
ADDITIONAL DRUG DISCOVERY TOOLS
COMPOUND LIBRARY. Scriptgen has a library of approximately 250,000
compounds including 15,000 mixtures of natural product extracts. These compounds
have been obtained from a variety of sources, and were selected from a larger
catalog of compounds based on their diversity and pharmacological profiles.
Through analogs of the compounds in the library, and the use of combinatorial
chemistry techniques, Scriptgen has access to more than 1,000,000 compounds. The
Company uses these compounds for high throughput screening in its internal
development program as well as in its collaborative arrangements. While the
compound library is used to identify therapeutic candidates against specific
targets, the lead compounds anticipated to be developed by Scriptgen will be
unique patented analogs, specifically designed using medicinal chemistry
techniques to optimize their efficacy.
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ANIMAL MODELS. The Company's collaboration with Boston Medical Center to
test potential antibacterial and antifungal drug candidates gives the Company
access to a number of validated and predictive animal models of infectious
diseases to evaluate the efficacy and safety of the Company's lead compounds.
STRATEGY
Scriptgen's strategy is to maximize the commercial opportunities presented
by its technology platform and pipeline of drug candidates. To implement this
strategy the Company will continue to:
ESTABLISH COLLABORATIVE RELATIONSHIPS. The Company enters into
collaborations with pharmaceutical and technology companies: (i) to perform high
throughput target identification and validation, assay development and lead
compound identification for its collaborators' drug discovery programs to
generate near-term revenue, (ii) to jointly discover and develop new drugs in
targeted areas, under agreements that provide the Company with near-term revenue
and the opportunity to receive substantial milestone payments and royalties and
(iii) to develop or commercialize selected drug candidates from the Company's
internal pipeline at such time as a collaboration is determined to represent the
best opportunity to maximize the commercial value of a particular candidate. The
Company currently has collaborations with HMR, Eli Lilly, Roche and Monsanto,
and routinely evaluates opportunities to enter into collaborations with other
potential partners.
DEVELOP INTERNALLY A PIPELINE OF DRUG DEVELOPMENT CANDIDATES. Recognizing
that many promising drug candidates fail in subsequent stages of development,
the Company believes that it is essential to have a pipeline of new drug
candidates from which to choose. Scriptgen is developing a pipeline by using its
high throughput technologies to identify multiple lead candidates, initially
focusing in the antifungal, antibacterial and antiviral areas. The Company
develops drug candidates either alone or in conjunction with partners depending
on such factors as estimated development costs and potential regulatory approval
time and hurdles.
EXPAND PROPRIETARY DRUG DISCOVERY TECHNOLOGY PLATFORM. Scriptgen has an
ongoing research program aimed at expanding the capabilities and potential
applications for the Company's technologies, while simultaneously attempting to
increase their efficiency. In addition, the Company strives to identify, develop
and acquire other technologies, and to collaborate to obtain technologies that
can substantially enhance the drug discovery process. For example, the Company
has enhanced and expanded its core drug discovery technologies to include
technologies that allow ligands to be sorted rapidly according to the active and
neutral sites on the target. These technology enhancements have been
instrumental in the Company's obtaining SBIR funding for its coalescent drug
design program.
MAINTAIN AND ENHANCE STRONG PROPRIETARY POSITION. Scriptgen pursues an
aggressive strategy to protect its proprietary drug discovery technologies,
including certain targets, assays, lead compounds and certain other
technologies, through patents, trade secret law and confidentiality agreements.
COLLABORATIVE ARRANGEMENTS
The Company has entered into collaborative arrangements with pharmaceutical
and technology companies.
HOECHST MARION ROUSSEL. In October 1997, the Company entered into a
collaboration with HMR pursuant to which the Company will seek to identify new
fungal targets and antifungal drug candidates. In each year of the
collaboration, Scriptgen will use GATE to identify and validate fungal targets,
some of which will be screened against compounds from Scriptgen's and HMR's
compound libraries utilizing ATLAS, SCAN and other technologies. HMR will
determine whether to proceed with the development of any lead compounds
discovered, and will receive an exclusive, worldwide license to develop and
commercialize any resulting drug candidate. Under the terms of the collaboration
agreement, Scriptgen has
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received initial cash payments, and HMR is required to fund Scriptgen's research
and development activities in connection with the collaboration up to a
specified amount for a period of three years. The Company expects to have
received an aggregate of $9 million from HMR under the collaboration by the
completion of the Offering, of which $6 million will be technology access fees
and $3 million will be proceeds from the sale of Common Stock to HMR
concurrently with the Offering. The Company will also receive research and
development payments and will receive payments when and if certain milestones
are achieved and royalties on the sales of any new drug resulting from the
collaboration. HMR may terminate the collaboration by giving the Company six
months' prior written notice at any time after the end of the second year of the
collaboration.
ELI LILLY. In May 1997, the Company entered into a collaboration with Eli
Lilly under which Scriptgen is using ATLAS to identify novel drug candidates
against two targets selected by Eli Lilly. Two additional targets may be
selected by Eli Lilly for high throughput screening in 1998, assuming certain
milestones are met. In October 1997, Eli Lilly and the Company expanded the
scope of the collaboration to screen additional compounds from the Company's
compound library. Under the agreement with Eli Lilly, Scriptgen receives
research and development payments and will receive payments when and if certain
milestones are achieved and royalties on the sales of any new drug resulting
from the collaboration.
ROCHE. In September 1995, the Company entered into a collaboration with
Roche pursuant to which the Company is using ATLAS to identify novel drug
candidates against a cancer-related target identified by Roche. Under the
agreement with Roche, Scriptgen receives research and development payments and
will receive payments when and if certain milestones are achieved and royalties
on the sales of any new drug resulting from the collaboration.
MONSANTO. In November 1997, the Company entered into a collaboration with
Monsanto under which Scriptgen is using its technology platform to identify and
validate novel fungal targets from plant and human pathogens and to identify
novel agents and drugs against such targets. The agreement provides Scriptgen
with 68,000 small molecule compounds from Monsanto's library for use by the
Company. The Company will pay Monsanto royalties and milestones on any human
anti-infective drug developed and commercialized as a result of the
collaboration. Scriptgen receives research and development payments and will
receive payments when and if certain milestones are achieved and royalties on
the sales of any product developed by Monsanto for IN PLANTA applications.
ARQULE, INC. The Company has entered into a collaboration with ArQule, Inc.
("ArQule") pursuant to which the Company incorporates compounds owned by ArQule
into the Company's library. The Company is screening certain of the ArQule
compounds against the Company's fungal, bacterial and viral targets. In the
event that active compounds are identified and selected for development,
Scriptgen and ArQule may enter into an agreement to share the costs of
development and the proceeds of any resulting commercial product.
There can be no assurance that any drug candidates will be identified during
the Company's present collaborations or that, if identified, the Company's
collaborative partners will elect to proceed with the development of any drug
candidates. The Company's collaborative partners are not obligated to develop or
commercialize any drug candidates resulting from the collaborative agreements.
As a result, there can be no assurance that any of the milestone or royalty
payments contemplated by such collaborations will be made. See "Risk
Factors--Dependence Upon Present and Future Collaborative Arrangements."
SCRIPTGEN'S INTERNAL DEVELOPMENT PROGRAM
OVERVIEW
Scriptgen's internal development efforts have initially focused on
anti-infectives, where it has identified novel cidal targets and lead compounds
in the fungal, bacterial and viral areas. Scriptgen has
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progressed rapidly in the anti-infective area and has four lead compounds in
development as well as a number of other potential drug candidates under review.
The Company has also completed feasibility studies on novel targets in a number
of other areas, including oncology and immunologic disorders, and in several
cases has identified drug candidates. The Company believes that the
anti-infective market is attractive as an initial field of focus because of the
following:
- LARGE MARKET. Infectious diseases are the leading cause of death
worldwide. According to 1996 sales data compiled by IMS International,
anti-infective drugs generated approximately $30 billion in worldwide
sales and constituted the fourth largest pharmaceutical market worldwide.
- SCRIPTGEN TECHNOLOGY UNIQUELY SUITED FOR ANTI-INFECTIVES. The clinical
efficacy of certain anti-infective drugs is being threatened by emerging
strains of drug resistant pathogens and opportunistic infections arising
from the growing number of immunosuppressed patients. In addition,
scientists have recognized that newly identified pathogens are causing
outbreaks of disease. GATE allows a determination of whether the pathogen
dies as a result of a specific inactivation of a gene product, how quickly
it dies and how much of the target must be modified to produce the desired
effect. ATLAS and SCAN are used to quickly identify potential drug
candidates for these validated targets. These technologies allow the
Company to focus its efforts on identifying compounds with a high
probability of being effective against the disease with low toxicity and
side effects.
- FEWER TECHNICAL AND REGULATORY HURDLES TO OVERCOME. Anti-infective drug
development faces fewer technical hurdles in large part because invading
pathogens are distinct organisms that can be identified and targeted
separately from human host cells. In addition, because animal models for
anti-infectives are considered to be fairly predictive of the therapeutic
response in patients, and pharmacokinetic and pharmacodynamic parameters
can be modeled in animals, there are fewer technical and regulatory
hurdles. Initial human clinical studies to determine safety and efficacy
of new anti-infective drugs can be conducted in short-term studies.
Additionally, measures of drug efficacy are well established.
TARGET IDENTIFICATION AND VALIDATION AND HIGH THROUGHPUT SCREENING
Scriptgen focuses on the identification and validation of targets essential
for the survival of the pathogen. Scriptgen uses GATE in its structured target
selection process to focus on targets which are predictive of the following
desirable therapeutic objectives: microbicidal, fast-acting, low toxicity, broad
spectrum activity and low resistance. Scriptgen has validated more than 45 cidal
fungal, bacterial and viral targets and is validating a number of others.
Validated targets meeting the selection criteria are screened against the
Company's compound library in a high throughput mode. Depending upon the nature
of the individual target, functional assays may be used directly, or after
pre-screening with ATLAS or SCAN. Compounds that demonstrate specific anti-
infective activity are carefully scrutinized for their suitability as drug
candidates before being advanced into preliminary development. Criteria used for
selecting development candidates include: low molecular weight, chemical
feasibility and manufacturing cost, potential toxicity, cellular uptake,
metabolic stability and specificity. Compounds selected are then subjected to
preliminary modifications using medicinal as well as directed combinatorial
chemistry techniques, and a variety of analogs are produced for testing in
animal models.
DRUG CANDIDATES IN DEVELOPMENT
Scriptgen's internal development program has made rapid progress in the
anti-infective area. The Company currently has four lead compounds in
development as well as a number of other compounds under review, even though it
has not yet screened all of its compounds against all of its targets.
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ANTIFUNGALS. Scriptgen's program has identified three families of compounds
that show broad spectrum antifungal activity, including effectiveness against
drug resistant strains of CANDIDA ALBICANS, the most widespread cause of life
threatening fungal infections. Two low molecular weight compounds, ST61219 and
ST61769, have been chosen for further development. In animal studies, these
compounds have cured mice infected with CANDIDA ALBICANS, including a strain
resistant to a marketed antifungal, flucanazole, at oral doses that produced no
overt side effects.
Initial pre-clinical data, including animal studies, on ST61219 and ST61769
indicate that these compounds may have several advantages over Diflucan
(flucanazole) and Sporanox (itraconazole), the current market leaders in the
antifungal area with worldwide sales in excess of $1.0 billion in 1996. These
advantages include:
- CIDALITY. ST61219 and ST61769 kill the pathogen rather than simply inhibit
its growth temporarily (static). Cidality eliminates the need for chronic
application of static compounds which has the potential of adverse side
effects and may give rise to drug resistance. Cidality is particularly
important for that large segment of the patient population suffering from
opportunistic infections because of impaired immune systems.
- RAPID ACTIVITY. ST61219 and ST61769 act much more rapidly, which may allow
for reduced dosing over a shorter time period. This faster cidality may
result in a lower probability for the development of resistance.
- BROAD SPECTRUM. ST61219 and ST61769 are effective against a broad range of
pathogens, as well as specific strains that have developed resistance to
the current drugs.
ANTIBACTERIALS. Scriptgen's program has identified a family of compounds
which shows broad spectrum antibacterial activity, and is efficacious against
drug resistant strains of STAPHYLOCOCCUS AUREUS, a major cause of bacterial
infections. From this family, one low molecular weight compound, ST41590, has
been selected for further development. ST41590 is a natural product extract and
is amenable to an efficient chemical synthesis.
Initial pre-clinical data on ST41590 indicate that it may have a significant
therapeutic advantage over available antibiotics because of its broad spectrum
activity, rapid cidality and efficacy against pathogenic strains resistant to
current drugs.
ANTIVIRALS. High throughput functional screening has traditionally been
unavailable to antiviral drug discovery because the small genomes of viruses
produce few potential targets for therapeutic intervention. Furthermore, most of
the targets that have been identified are not fully characterized and are
difficult to incorporate into high throughput assays. ATLAS and SCAN overcome
these difficulties and enable Scriptgen to screen compounds against novel
targets in Hepatitis B virus and Hepatitis C virus. The Company has identified
four families of compounds that have shown antiviral activity against Hepatitis
B virus. One low molecular weight compound, ST135647, has been selected for
further development. The remaining compounds are being analyzed for their
suitability as drug candidates.
Initial pre-clinical data on ST135647 indicate that it may have several
advantages over drug candidates known by the Company to be in development
("Known Drug Candidates"), including the following:
- NOVEL TARGET. ST135647 acts on a novel target of the Hepatitis B virus
that is critical for replication. The Company believes that ST135647 will
overcome problems of resistance that have already emerged with some of the
Known Drug Candidates that act on different viral targets.
- EFFICACIOUS. ST135647 has been shown in preliminary tests to be a potent
inhibitor of viral replication at concentrations that have shown minimal
toxic effects to the human liver cells in which the virus replicates. Some
of the Known Drug Candidates have shown limited efficacy or undesirable
side effects.
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- POTENTIAL FOR COMBINATION THERAPY. ST135647 may act beneficially in
combination with some of Known Drug Candidates because of its novel site
of action. Many experts agree that multi-drug therapy represents the most
effective approach for treatment of Hepatitis B virus.
PATENTS AND PROPRIETARY TECHNOLOGY
Patent protection for the Company's technologies, targets and compounds is
important to its business. The Company has filed certain U.S. and foreign patent
applications and has certain issued U.S. patents and allowed U.S. patent
applications. To date, no foreign patents have been issued and no foreign patent
applications have been allowed.
Two of the Company's U.S. patents and one of its allowed U.S. patent
applications claim aspects of the Company's ATLAS screening technology. The two
issued U.S. patents and the allowed U.S. patent application in the ATLAS field
claim certain methods whereby a target protein is incubated in the presence and
absence of several test ligands, and evaluated based on the extent to which the
target protein is folded, unfolded, or intermediately folded in the absence or
presence of the test ligands. The Company also has a notice of allowance for a
patent application that claims a certain fungal target protein complex, known as
TAF, which is important in certain gene transcription events in the model yeast
S. CEREVISIAE. This fungal protein complex may be relevant to the Company's
research because it may be used as a target protein in the Company's screening
technologies in order to identify compounds that interfere with the fungal life
cycle, and to confirm the biological activity of such compounds. The Company's
issued patents expire in 2013.
The Company's success will depend in part on its ability to obtain U.S. and
foreign patent protection for its drug candidates and the components of its
technology platform, preserve its trade secrets and operate without infringing
the proprietary rights of third parties. Because of the length of time and
expense associated with bringing new drug candidates through the development and
regulatory approval process to the marketplace, drug discovery companies have
traditionally placed considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and processes. The
Company's policy is to make diligent efforts to protect its screening
technologies, targets, compounds, and certain other technology by, among other
things, filing, or causing to be filed on its behalf, patent applications in the
USPTO, and elsewhere where the Company deems appropriate and cost effective.
There can be no assurance that patents will be granted with respect to any of
the Company's or its licensors' patent applications which are pending or may be
filed in the future. Further, there can be no assurance that any rights the
Company may have under issued patents will provide the Company with significant
protection against competitive products or otherwise be commercially viable.
Legal standards relating to the validity of patents covering pharmaceutical and
biotechnological inventions and the scope of claims made under such patents are
still developing, and thus there is no consistent policy in this regard. The
patent position of a drug discovery company such as Scriptgen is highly
uncertain and involves complex legal and factual questions. There can be no
assurance that any existing or future patents issued to, or licensed by, the
Company will not subsequently be challenged, infringed upon, invalidated or
circumvented by others. In addition, patents may have been granted, or may be
granted, covering processes or products that are necessary or useful to the
development of the Company's technologies, targets and compounds. If any of the
Company's technologies, targets or compounds are found to infringe upon the
patents or other intellectual property of others, the Company's ability to
develop and commercialize its technologies, targets and compounds could be
severely restricted or prohibited. In such event, the Company may be required to
obtain licenses from third parties to utilize their patents or other proprietary
rights. There can be no assurance that the Company will be able to obtain such
licenses on acceptable terms, or at all. There is significant litigation in the
pharmaceutical and biotechnology industry regarding patents and other
proprietary rights. If the Company becomes involved in litigation regarding its
proprietary rights or the rights of others, the Company could incur substantial
costs in defending infringement proprietary claims, obtaining licenses, engaging
in interference and opposition proceedings or other
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challenges to its patent rights or other proprietary rights, or in bringing such
proceedings or enforcing any proprietary rights against third parties. The
Company's inability to obtain necessary licenses or its involvement in
proceedings concerning proprietary rights could have a material adverse effect
on the business, operating results and financial condition of the Company.
The Company has filed a provisional patent application claiming certain
aspects of its GATE technology. The Company is aware that another party has
applied for a patent for certain technologies which may overlap with or dominate
parts of the Company's GATE technology. The Company is in negotiations with such
party to acquire a license of such party's rights covered by its patent
application. If the Company determines to seek to obtain such license, there can
be no assurance that the Company will be able to obtain such a license on terms
favorable to the Company, if at all. Further, if the claims in the two
aforementioned patent applications are found to be sufficiently similar, the
USPTO may declare an interference proceeding which may result in the Company's
patent application being rejected. Even if the interference proceeding is
decided favorably to the Company, participation in the proceeding would likely
be costly to the Company. Whether or not an interference proceeding is declared,
the other party may be issued a patent which claims all or part of the Company's
GATE technology. If the Company determines to pursue such license and is
unsuccessful in this regard, the Company could be severely restricted or
prohibited from using, manufacturing and selling products resulting from the
Company's GATE technology. Such restriction or prohibition, or the failure to
obtain such license could have a material adverse effect on the Company's
business, operating results and financial condition.
The Company and Boston University are joint owners of the patent covering
improvements to the synthesis of ST41590. The Company is negotiating the terms
of an exclusive license of Boston University's rights under such patent, but
until an agreement is negotiated and executed, both parties will continue to be
able to develop and commercialize such compound. There can be no assurance that
the Company will be able to obtain such a license.
The Company acquired certain rights in its ATLAS screening technology
pursuant to an Assignment Agreement with the two inventors of ATLAS (the
"Assignors"), one of whom, Andrew A. Pakula, is now the Company's Head of Drug
Discovery Technologies. Pursuant to the terms of the Assignment Agreement, as
amended, the Company is obligated to pay to the Assignors certain royalties on
amounts received by the Company from (i) net sales of products developed using
ATLAS, (ii) royalties from licenses granting third parties the right to make,
use or sell products developed using ATLAS and (iii) royalties from licenses
granting third parties the right to use ATLAS.
In addition to patent protection, the Company relies on trade secrets,
know-how and technological advances which it seeks to protect, in part, by
confidentiality agreements with its collaborative partners, employees, advisors
and consultants. There can be no assurance that these confidentiality agreements
will not be breached, that the Company would have adequate remedies for any such
breach, or that the Company's trade secrets, know-how and technological advances
will not otherwise become known or be independently discovered by others.
GOVERNMENT REGULATION
OVERVIEW
Regulations imposed by United States federal, state and local authorities,
as well as their counterparts in other countries, are a significant factor in
the conduct of the research, development, manufacturing and marketing activities
for the Company's potential drug candidates.
The development, manufacture and marketing of drugs developed by the Company
or its collaborative partners are subject to regulation by numerous governmental
agencies in the United States, principally the FDA, by state and local
governments, and in some instances by foreign governments. Pursuant to the
Federal Food, Drug, and Cosmetic Act and the regulations promulgated thereunder
(the "FDC Act"), the
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FDA regulates the pre-clinical and clinical trials, safety, effectiveness,
manufacture, labeling, storage, distribution and promotion of drugs.
Noncompliance with applicable requirements can result in, among other things,
fines, injunctions, recall or seizure of products, total or partial suspension
of production, refusals to permit products to be imported into or exported out
of the United States, failure of the government to grant approval for new drugs
or antibiotic products, withdrawal of marketing approvals, denial or suspension
of government contracts and criminal prosecution.
Product development and approval within the FDA regulatory framework usually
take a significant number of years, involve the expenditure of substantial
capital resources and are uncertain. Moreover, there is no assurance that the
current regulatory framework will not change or that additional regulatory
standards will not be promulgated at any stage of the Company's or its
collaborative partners' product development that may adversely affect approval,
delay the submission or review of an application or require additional
expenditures by the Company.
U.S. REGULATORY PROCESS
New drugs must be found safe and effective by the FDA through the approval
of a new drug application ("NDA") pursuant to section 505 of the FDC Act prior
to marketing in interstate commerce. Prior to this, the pre-clinical data
(animal and IN VITRO laboratory data) and clinical data (human data) are
regulated by the FDA pursuant to regulations and the issuance and continuing FDA
oversight of an investigational new drug application ("IND"). Post-NDA approval,
the FDA maintains continuing regulatory control over the marketing of approved
drugs, regulating most closely manufacturing, promotional activities and the
appropriate submission of adverse reaction information. Any material changes to
the indication for use, other labeling or manufacturing, require FDA approval of
a supplement to the NDA prior to any such change being made.
Before testing in the United States of any compounds with potential
therapeutic value in human test subjects may begin, stringent government
requirements for pre-clinical data must be satisfied. Pre-clinical testing
includes both IN VITRO and IN VIVO laboratory evaluation and characterization of
the safety and efficacy of a drug and its formulation. Laboratories involved in
pre-clinical testing must comply with FDA regulations regarding Good Laboratory
Practices. Pre-clinical testing results obtained from studies in several animal
species, as well as from IN VITRO studies, are submitted to the FDA as part of
the IND and are reviewed by the FDA prior to the commencement of human clinical
trials. These pre-clinical data must provide an adequate basis for evaluating
both the safety and the scientific rationale for the initial (Phase I) studies
in human volunteers. Unless the FDA objects to an IND, the IND becomes effective
30 days following its receipt by the FDA. There can be no assurance that
submission of an IND will result in the commencement of human clinical trials.
Moreover, once trials have commenced, the FDA may stop the trials by placing
them on "clinical hold" because of concerns about, for example, the safety of
the product being tested. Such clinical holds either before the clinical studies
commence or after commencement may result in either a temporary halt to the
study or abandonment of any further work whatsoever.
Clinical trials, which involve the administration of the investigational
drug to healthy volunteers or to patients under the supervision of a qualified
principal investigator, are typically conducted in three sequential phases,
although the phases may overlap with one another. Clinical trials must be
conducted in accordance with the FDA's Good Clinical Practices, under protocols
that detail the objectives of the study, the parameters to be used to monitor
safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND. Further, each clinical study must be
conducted under the auspices of an independent Institutional Review Board (the
"IRB") at the institution where the study will be conducted. The IRB will
consider, among other things, ethical factors, the safety of human subjects,
informed consent requirements and the possible liability of the institution.
Compounds must be formulated according to the FDA's current Good Manufacturing
Practice regulations ("cGMP").
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Phase I clinical trials represent the initial administration of the
investigational drug to a small group of healthy human subjects or to a group of
selected patients with the targeted disease or disorder. The goal of Phase I
clinical trials is typically to test for safety (adverse effects), dose
tolerance, absorption, biodistribution, metabolism, excretion and clinical
pharmacology and, if possible, to gain early evidence regarding efficacy.
Phase II clinical trials involve a small sample of the actual intended
patient population and seek to assess the efficacy of the drug for specific
targeted indications, to determine dose tolerance and the optimal dose range and
to gather additional information relating to safety and potential adverse
effects.
Once an investigational drug is found to have some efficacy and an
acceptable safety profile in the targeted patient population, Phase III clinical
trials are initiated to confirm the further clinical safety and efficacy of the
investigational drug in a broader sample of the general patient population at
geographically dispersed study sites in order to determine the overall
risk-benefit ratio of the drug and to provide an adequate basis for product
labeling. The Phase III clinical development program consists of expanded,
large-scale studies of patients with the target disease or disorder to obtain
definitive statistical evidence of the efficacy and safety of the proposed
product and dosage regimen. These studies may include investigation of the
effects in subpopulations of patients, such as the elderly, children, etc. All
of the phases of clinical studies must be conducted in conformance with the
FDA's investigational new drug and bioresearch monitoring regulations (such as
IRB, informed consent and sponsor monitoring requirements).
All data obtained from a comprehensive development program including
research and product development, manufacturing, pre-clinical and clinical
trials and related information are submitted in an NDA to the FDA and the
corresponding agencies in other countries for review and approval. In addition
to reports of the trials conducted under the IND application, the NDA includes
information pertaining to the preparation of the new drug, analytical methods,
details of the manufacture of finished products and proposed product packaging
and labeling. Although the FDC Act requires the FDA to review NDAs within 180
days of their filing, in practice longer times are usually required. The FDA
also frequently requests that additional information be submitted, requiring
significant additional review time. As a result of the Prescription Drug User
Fee Act, the FDA has made commitments to speed the review of NDAs and NDA
Supplements. While implementation of this by the FDA has sped up certain
decision-making by the FDA, it has not, with regard to many drugs, sped up the
overall development and approval time. Any proposed product of the Company
likely would be subject to demanding and time-consuming NDA approval procedures
in virtually all countries where marketing of the products is intended. These
regulations define not only the form and content of safety and efficacy data
regarding the proposed product but also impose specific requirements regarding
manufacture of the product, quality assurance, packaging, storage, documentation
and record keeping, labeling, advertising and marketing procedures.
Timetables for the various phases of clinical trials and NDA approval cannot
be predicted with any certainty. The Company, its collaborative partners or the
FDA may suspend clinical trials at any time if it is believed that individuals
participating in such trials are being exposed to unacceptable health risks.
Even assuming that clinical trials are completed and that an NDA is submitted to
the FDA, there can be no assurance that the NDA will be reviewed by the FDA in a
timely manner or that once reviewed, the NDA will be approved. The approval
process is affected by a number of factors, including the severity of the
targeted indications, the availability of alternative treatments and the risks
and benefits demonstrated in clinical trials. The Company's ability to market
its products successfully is further dependent on the patent and marketing
exclusivity rights of a competitor's products.
Among the other requirements for drug product approval is the requirement
that the manufacturer conform to the FDA's cGMP regulations. Manufacturers also
must continue to expend time, money and effort in product, record keeping and
quality control to assure that the product meets applicable specifications and
other requirements. The manufacturer also has obligations to report post
marketing
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adverse drug experiences to the FDA. The FDA periodically inspects manufacturing
facilities in the United States to assure compliance with applicable cGMP and
other regulatory requirements. Failure of the Company (or manufacturer of a
Company product) to comply with cGMP regulations or other FDA regulatory
requirements could have a material adverse effect on the Company and result in
one or more regulatory actions affecting either the product, the Company and its
officials, or both.
Completing the multitude of steps necessary before marketing can begin
requires the expenditure of considerable resources and can consume a long period
of time. Delay or failure in obtaining the required approvals or clearances by
the Company, its collaborative partners or its licensees would have an adverse
effect on the ability of the Company to generate sales or royalty revenue. In
addition, the impact of new or changed laws or regulations cannot be predicted.
There can be no assurance that the regulatory framework described above will
not change or that additional regulations will not arise that may affect
approval of or delay an IND or an NDA. In addition, there can be no assurance
that there will not be a change in currently accepted scientific standards that
may affect the ultimate approval of such products. Moreover, because the
Company's present collaborative partners are, and it is expected that the
Company's future collaborative partners may be, primarily responsible for
pre-clinical and clinical trials, regulatory approvals, manufacturing and
commercialization of drugs, the ability to obtain and the timing of regulatory
approvals are not within the control of the Company. Should the collaborative
partners develop regulatory problems, for example, cGMP violations, such
problems may adversely impact upon the Company's resources.
Prior to the commencement of marketing a product in other countries,
approval by the regulatory agencies in such countries is required, whether or
not FDA approval has been obtained for such product. The requirements governing
the conduct of clinical trials and product approvals vary widely from country to
country, and the time required for approval may be longer or shorter than the
time required for FDA approval. Although there are some procedures for unified
filings for certain European countries, in general, each country has its own
procedures and requirements.
The Company is also subject to regulation under other federal laws and
regulation under state and local laws, including laws relating to occupational
safety, laboratory practices, controlled substances, the use, handling and
disposition of radioactive materials, environmental protection and hazardous
materials. Although the Company believes that its safety procedures for handling
and disposing of radioactive compounds and other hazardous materials used in its
research and development activities comply with the standards prescribed by
federal, state and local regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of any
such accident, the Company could be held liable for any damages that result and
any such liability could exceed the resources of the Company.
COMPETITION
Competition among drug discovery companies and pharmaceutical and
biotechnology companies which are involved in drug discovery is intense. Because
the Company's technology platform incorporates a number of different
technologies, the Company competes in many areas, including target
identification and validation, assay development and high throughput screening.
The Company competes directly against other drug discovery companies, the
research departments of pharmaceutical and biotechnology companies, other
commercial enterprises, government agencies and numerous academic and research
institutions. Such companies and other entities are conducting research in
various areas which constitute portions of the Company's technology platform,
either on their own or in collaboration with others. There can be no assurance
that drug discovery companies which currently compete with the Company in
specific areas will not merge or enter into joint ventures or other alliances
with one or more other such companies and become substantial multi-point
competitors or that the Company's collaborators will not assemble their own
competing drug discovery technologies. Genomics and combinatorial chemistry
companies, among
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<PAGE>
others, may also expand their business to include compound screening or screen
development, either alone or pursuant to alliances with others. The Company
anticipates that it will face increased competition in the future as new
companies enter the market and advanced technologies, including more
sophisticated information technologies, become available. The Company's drug
discovery techologies, in particular GATE, ATLAS and SCAN, may be rendered
obsolete or uneconomical by advances in existing technological approaches or the
development of different approaches by one or more of the Company's current or
future competitors. In particular, the Company's technology faces intense
competition from drug discovery companies engaged in gene sequencing, functional
genomics, and differential gene expression technology in the area of target
validation, and companies engaged in high throughput screening. Many of the
Company's competitors have greater financial and personnel resources, and more
experience in research and development, than the Company. There can be no
assurance that the Company's competitors will not succeed in developing
technologies and drugs that are more effective or less costly than any which are
being developed by the Company or which would render the Company's technology
and any future drugs obsolete and noncompetitive.
In addition, some of the Company's competitors have greater experience than
the Company in conducting pre-clinical and clinical trials and obtaining FDA and
other regulatory approvals. Accordingly, the Company's competitors may succeed
in obtaining FDA or other regulatory approvals for competing drug candidates
more rapidly than the Company. Companies that complete clinical trials, obtain
required regulatory agency approvals and commence commercial sale of their
drugs, before their competitors may achieve a significant competitive advantage,
including certain patent and FDA marketing exclusivity rights that would delay
the Company's ability to market certain products. There can be no assurance that
drugs, if any, resulting from the Company's internal development efforts or the
joint efforts of the Company and its collaborators will be able to compete
successfully with competitors' existing products or products under development
or that they will obtain regulatory approval in the United States or elsewhere.
EMPLOYEES
As of November 1, 1997, the Company had 46 full time employees, 39 of whom
were engaged in research and development and seven of whom were engaged in
management, administration and finance. Doctorates are held by approximately 35%
of the Company's full time employees. In addition, the Company employs
individuals on a rotating, full time basis to fill a variety of research
positions. The Company's policy is to have each of its directors, officers,
employees and advisors sign an agreement which prohibits the disclosure of
confidential information to anyone outside the Company and requires disclosure
and assignment to the Company of ideas, developments, discoveries and inventions
made by the employee.
The Company's employees are not covered by a collective bargaining
agreement. The Company has never experienced an employment-related work stoppage
and considers its employee relations to be good.
PROPERTIES
The Company's headquarters and research and development facilities are
located in a 15,440 square foot facility in Medford, Massachusetts. The Company
has leased the premises through October 30, 1998. The Company plans to lease at
least 15,000 square feet of additional office and laboratory space within the
next twelve months to support expansion of its programs.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following sets forth the name, ages and positions of the executive
officers, directors and key employees of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Mark T. Weedon....................................... 46 President, Chief Executive Officer and Director
Michael G. Palfreyman, M.R.
Pharm. S., Ph.D., D.Sc............................. 52 Vice President of Research and Development
Karen A. Hamlin...................................... 38 Senior Director of Operations, Secretary and
Treasurer
Barry Weinberg....................................... 59 Chairman of the Board
David Baltimore, Ph.D................................ 59 Director
Allan R. Ferguson.................................... 55 Director
Jason S. Fisherman, M.D.............................. 41 Director
KEY EMPLOYEES:
Jacob J. Clement, Ph.D............................... 53 Senior Director of Technology Development
Yibin Xiang, Ph.D.................................... 47 Director of Chemistry
Andrew A. Pakula, Ph.D............................... 39 Head of Drug Discovery Technologies
C. Richard Wobbe, Ph.D............................... 40 Head of Infectious Disease Programs
</TABLE>
- --------------
MARK T. WEEDON has been President, Chief Executive Officer and director of
the Company since August 1997. From 1987 to August 1997, Mr. Weedon held various
positions with Glaxo-Wellcome plc, a pharmaceutical company, including Global
General Manager of OTC Operations (1995-August 1997), Director of Group
Licensing for Burroughs Wellcome Foundation plc (1993-1995) and President of
Burroughs Wellcome Inc. (Canada) (1990-1993). Mr. Weedon received a B.A. from
the University of Toronto and an M.B.A. from the University of Western Ontario.
MICHAEL G. PALFREYMAN, M.R. PHARM. S., PH.D., D.SC. joined the Company in
October 1994 as Vice President of Research and Development. From 1976 until
October 1994, Dr. Palfreyman held various positions with Marion Merrell Dow Inc.
and its predecessor, the Merrell Dow Research Institute, including Vice
President of Marion Merrell Dow Research North America (1992 to October 1994),
Vice President of Global Biological and Scientific Affairs (1991-1992) and
Director of Pharmacological Sciences (1987-1991). Dr. Palfreyman received his
undergraduate, Ph.D. and D.Sc. degrees from the University of Nottingham,
England, from which he also holds an advanced degree in Pharmacy.
KAREN A. HAMLIN joined the Company in December 1992 and serves as Senior
Director of Operations, Secretary and Treasurer. From December 1988 until
December 1992, Ms. Hamlin was Director of Operations at Transkaryotic Therapies,
Inc., a biotechnology company. From January 1987 to December 1988, Ms. Hamlin
was responsible for Laboratory Operations and Regulatory Compliance at Cambridge
Research Laboratory, a division of Ortho-Clinical Diagnostics, an affiliate of
Johnson & Johnson. Ms. Hamlin received a B.S. in Biology from St. Anselm College
and an M.S. in Biological Sciences from Rutgers University.
BARRY WEINBERG has served as Chairman of the Board of Directors of the
Company since September 1993. Mr. Weinberg was also the Company's President and
Chief Executive Officer from December 1995 until August 1997. Mr. Weinberg was a
co-founder and is currently President of CW Group, a venture capital firm
specializing in the health-care industry. Mr. Weinberg holds a B.S. in
Electrical Engineering from the Massachusetts Institute of Technology and an
M.B.A. from New York University.
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DAVID BALTIMORE, PH.D. has served as a director of the Company since August
1994. Since July 1994, Dr. Baltimore was the Ivan R. Cottrell Professor of
Molecular Biology at the Massachusetts Institute of Technology until October
1997 when he became President of California Institute of Technology. From 1990
until July 1994, Dr. Baltimore was a professor at Rockefeller University and
served as its president from 1990 until 1991. Dr. Baltimore founded the
Whitehead Institute at the Massachusetts Institute of Technology in 1982 and
served as its Director from 1982 until 1990. Dr. Baltimore received the Nobel
Prize in 1975 for his discovery of reverse transcriptase. Dr. Baltimore holds a
B.S. in Chemistry from Swarthmore College, and a Ph.D. from Rockefeller
University.
ALLAN R. FERGUSON has served as a director of the Company since September
1993. Since 1993, Mr. Ferguson has been a general partner of Atlas Venture, a
venture capital firm, and since 1991 he has served as the Managing General
Partner of the venture capital firm of Aspen Ventures. From 1986 to 1991 he
served as President of 3i Ventures, another venture capital firm. Mr. Ferguson
currently serves as a director of ArQule, Inc. and Autoimmune Inc. He received a
B.S. in Chemical Engineering from the University of Delaware.
JASON S. FISHERMAN, M.D. has served as a director of the Company since April
1995. Dr. Fisherman is a partner at Advent International Corporation, a venture
capital firm where he specializes in biotechnology and health-care companies.
From 1991 to 1994, Dr. Fisherman was Senior Director of Medical Research at
Enzon, Inc., a biopharmaceutical company. He currently serves as a director of
ILEX Oncology, Inc. and several private health-care companies. Dr. Fisherman
received a B.A. in Molecular Biophysics and Biochemistry from Yale University,
an M.D. from the University of Pennsylvania and an M.B.A. from the Wharton
School at the University of Pennsylvania.
JACOB J. CLEMENT, PH.D. joined the Company in March 1997 and serves as
Senior Director of Technology Development. From 1988 until March 1997, Dr.
Clement held various positions with Abbott Laboratories, including Director, New
Lead Discovery Area (1993-March 1997), Head, Antitumor Development Venture
(1992-1993) and Senior Project Leader, Anti-infectives Area (1991-1993). Dr.
Clement received a B.A. in Biology from St. Mary's University and an M.S. in
Microbiology from Roosevelt University and a Ph.D. and an M.S.P.H. from the
University of North Carolina. Dr. Clement conducted research and taught at the
University of Minnesota.
YIBIN XIANG, PH.D. joined the Company in October 1997 as Director of
Chemistry. From May 1993 until October 1997, Dr. Xiang held various positions
with Genetics Institute, including Senior Scientist and Head of Medicinal
Chemistry (October 1996-October 1997) and Principal Scientist and Head of
Medicinal Chemistry (1993-October 1996) in the Small Molecule Drug Discovery
department. From 1988 until 1993 Dr. Xiang worked in the Medicinal Chemistry
Department at Merck-Frosst in Canada as Research Fellow. Dr. Xiang received a
B.A. in Chemistry from Shanghai Medical University and a Ph.D. in Chemistry from
the Swiss Federal Polytechnic Institute. Dr. Xiang conducted postdoctoral
studies with Professor E.J. Corey at Harvard University.
ANDREW A. PAKULA, PH.D. joined the Company in February 1993 and serves as
Head of Drug Discovery Technologies. Dr. Pakula received a B.S. in Biology and
Chemistry from Tufts University and a Ph.D. in Biology from the Massachusetts
Institute of Technology. From 1989 until the end of 1992 Dr. Pakula conducted
postdoctoral studies in the laboratory of Dr. Melvin Simon at the California
Institute of Technology, where he was a Senior Postdoctoral Fellow.
C. RICHARD WOBBE, PH.D. joined the Company in August 1994 and serves as Head
of Infectious Disease Programs. From July 1991 until August 1994, Dr. Wobbe was
with Merck Research Laboratories, where he developed assays for analyzing the
regulation of viral gene transcription. Dr. Wobbe received a B.S. in
Biochemistry from Centre College and a Ph.D. in Biochemistry from the University
of Tennessee. Dr. Wobbe conducted postdoctoral studies at Sloan-Kettering Cancer
Center and at Harvard University.
All directors hold office until the next meeting of the stockholders of the
Company and until their successors are elected and qualified. All directors were
elected to the Board of Directors pursuant to a
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stockholders' agreement, which will terminate upon consummation of the Offering.
Officers are appointed to serve, at the discretion of the Board of Directors,
until their successors are appointed.
Prior to the completion of the Offering, the Board of Directors will
establish an Audit Committee and a Compensation Committee. The Audit Committee
will be charged with reviewing the Company's annual audit and meeting with the
Company's independent accountants to review the Company's internal controls and
financial management practices. The Compensation Committee will recommend to the
Board of Directors the compensation for the Company's key employees.
SCIENTIFIC ADVISORY BOARD
The Company has established a Scientific Advisory Board consisting of twelve
members with experience in fungal, bacterial and viral gene expression,
structural biology, pharmacology and drug design. Its members work closely with
the Company's management and scientists, assess the scientific and medical
direction of the Company, review research and development progress, and evaluate
new technologies that relate to the Company's development. The Scientific
Advisory Board meets as a group two times per year and members are available
individually on an ongoing basis. The co-chairmen of the Scientific Advisory
Board are the two founding scientists of the Company, Michael R. Green, M.D.,
Ph.D., and Peter S. Kim, Ph.D.
All of the Company's Scientific Advisory Board members have signed
consulting agreements with the Company and have either purchased shares of
Common Stock or been granted options to purchase Common Stock.
The members of Scriptgen's Scientific Advisory Board are:
MICHAEL R. GREEN, M.D., PH.D. is a Professor of Biochemistry and Molecular
Biology at the University of Massachusetts Medical Center and an Investigator at
the Howard Hughes Medical Institute. Dr. Green's expertise is in the
transcriptional control of viral, fungal and human gene expression. He is a
recipient of the Presidential Young Investigator Award, the Searle Scholar Award
and the McKnight Award in Neurosciences. Dr. Green consults with the Company on
its antifungal and antiviral programs with specific emphasis on transcription
and its role in gene expression. Dr. Green received his B.S. in Biochemistry
from the University of Wisconsin, Madison and his M.D. and Ph.D. in Biochemistry
from Washington University in St. Louis.
PETER S. KIM, PH.D. is a Member of the Whitehead Institute, a Professor of
Biology at the Massachusetts Institute of Technology and an Associate
Investigator at the Howard Hughes Medical Institute. Dr. Kim is also a member of
the National Academy of Sciences. Dr. Kim's expertise is in macromolecular
recognition, including the interaction between transcription factors, and in
protein design, protein folding and viral membrane fusion. He has received the
1994 Eli Lilly Award in Biological Chemistry from the American Chemical Society,
the 1994 DuPont Merck Award of the Protein Society and the 1993 National Academy
of Sciences Award in Molecular Biology. Dr. Kim consults with the Company on its
drug discovery programs focusing on structural biology and protein chemistry.
Dr. Kim received his A.B. in Chemistry from Cornell University and his Ph.D. in
Biochemistry from Stanford University.
THOMAS C. ALBER, PH.D. is a Professor of Molecular and Cell Biology at the
University of California, Berkeley. Dr. Alber is an expert in X-ray
crystallography and protein structure. He consults with the Company on its
affinity programs utilizing his expertise in protein structure/function
relationships. Dr. Alber received his B.A. in Chemistry from the University of
California, Santa Cruz and his Ph.D. in Biology from the Massachusetts Institute
of Technology.
STEPHEN K. BURLEY, M.D., D. PHIL. is an investigator at the Howard Hughes
Medical Institute. Dr. Burley is an expert in structural biology. He consults
with the Company on the biochemistry and molecular biology of fungal
transcription factors and in certain target areas. Dr. Burley received his B.S.
in Physics from the University of Western Ontario and his D. Phil. from Oxford
University and his M.D. from Harvard Medical School.
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<PAGE>
FRED E. COHEN, M.D., D. PHIL. is a Professor of Medicine and Pharmaceutical
Chemistry at the University of California, San Francisco. He is an expert in the
molecular modeling of low molecular weight drugs and their interactions with
macromolecules. Dr. Cohen consults with the Company on pharmaceutical drug
design and in molecular modeling. Dr. Cohen was a Rhodes Scholar and received
his B.S. in Molecular Biochemistry and Biophysics from Yale University, his M.D.
from Stanford University and his D. Phil. in Molecular Biophysics from Oxford
University.
DANIEL S. KEMP, PH.D. is a Professor of Chemistry at the Massachusetts
Institute of Technology. Dr. Kemp is an expert in the chemical synthesis of
peptides and proteins, protein structure and function and bio-organic chemistry.
He consults with the Company on organic and medicinal chemistry. Dr. Kemp
received his B.A. in Chemistry from Reed College and his Ph.D. in Organic
Chemistry from Harvard University.
DAVID M. LIVINGSTON, M.D. is a staff member at the Brigham and Women's
Hospital and the Dana-Farber Cancer Institute, where he was Director and
Physician-in-Chief from 1991 to 1995. Dr. Livingston also holds the Emil Frei
Professor of Medicine chair at Harvard Medical School. Dr. Livingston, an expert
in Oncology, specializes in tumor suppressor gene function and cell cycle
control. He consults with the Company on the clinical aspects of pharmaceutical
drug development. Dr. Livingston received his B.A. from Harvard University and
his M.D. from Tufts University of Medicine.
BERNARD MACH, M.D., PH.D. is a Professor of Genetics and Microbiology at the
University of Geneva Medical School in Geneva, Switzerland. Dr. Mach is a Member
of the French Academy. He is an expert in the molecular and genetic basis of
immune responses. Dr. Mach discovered and first reported cDNA cloning in 1975
and introduced and developed molecular genotyping of HLA in 1985. Dr. Mach
consults with the Company on its drug development programs with an emphasis on
gene expression and cellular immunology. Dr. Mach received his M.D. from the
University of Geneva and his Ph.D. from Rockefeller University.
CAROL PRIVES, PH.D. is a Professor at Columbia University. She is an expert
on p53 and other tumor suppressor proteins and their role in the regulation of
transcription. Dr. Prives consults with the Company on the selection of
transcription based targets and their role in the cause of disease. Dr. Prives
received her B.Sc. and Ph.D. degrees in Biochemistry from McGill University.
ROBERT T. SAUER, PH.D. is the Edwin C. Whitehead Professor of Biology and
the Associate Head of the Department of Biology at the Massachusetts Institute
of Technology. Dr. Sauer is also a member of the National Academy of Sciences.
He is an expert in protein structure determination through genetic selection
methodology. Dr. Sauer consults with the Company on ATLAS and SCAN, as well as
bacterial transcription and its role in genetic selection. Dr. Sauer received
his B.A. in Biophysics from Amherst College and his Ph.D. in Biochemistry from
Harvard University.
KEVIN STRUHL, PH.D. holds the David Wesley Gaiser Professorship in and is
the Acting Chairman of Biological Chemistry at the Harvard Medical School. Dr.
Struhl is an expert in transcriptional regulatory mechanisms in yeast and
functional relationships between yeast and human proteins. He developed early
methods for elucidating the relationships between protein structure and function
particularly as they relate to transcriptional regulation in yeast. Dr. Struhl
consults with the Company on its antifungal program with a focus on fungal
transcription and genetic selection. Dr. Struhl received his B.S. and M.S.
degrees in Biology from the Massachusetts Institute of Technology and his Ph.D.
in Biochemistry from Stanford University.
ALAN M. SUGAR, M.D. is a Professor of Medicine at Boston University School
of Medicine and the Director of the Clinical Center Laboratory at Boston Medical
Center. Dr. Sugar's expertise is in pre-clinical and clinical antifungal drug
development and the pathogenesis of fungal diseases. He consults with the
Company on its antifungal program, with an emphasis on microbiology, animal
modeling systems and clinical evaluation. Dr. Sugar received his M.D. from
Jefferson Medical College.
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DIRECTOR COMPENSATION
David Baltimore receives $10,000 annually for being a director of the
Company. No other non-employee director receives any cash compensation. Barry
Weinberg, the Chairman of the Board of the Company, was granted stock options in
1996. See "--Stock Options."
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's acting Chief
Executive Officer and the next most highly compensated executive officer for
services rendered to the Company during the fiscal year ended December 31, 1996
(the "Named Executive Officers"). No other executive officer of the Company
earned in excess of $100,000 during 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- -------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
COMPEN- OPTIONS/ COMPEN-
NAME AND PRINCIPAL POSITION SALARY BONUS SATION SARS SATION
- -------------------------------------------------------- ---------- ----------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Barry Weinberg.......................................... $ 0 $ 0 $ 0 48,787 $ 0
Acting President and Chief Executive
Officer and Chairman of the Board(1)
Michael G. Palfreyman................................... $ 175,000 $ 0 $ 15,000(2) 76,433 $ 0
Vice President of Research
and Development
</TABLE>
- --------------
(1) Mr. Weinberg acted as the Company's President and Chief Executive Officer
from December 1995 to August 1997. Mark T. Weedon became President and Chief
Executive Officer of the Company in August 1997. See "--Employment
Agreements."
(2) Represents a housing allowance of $15,000.
EMPLOYMENT AGREEMENTS
In June 1997, the Company entered into an employment agreement with Mark T.
Weedon, President and Chief Executive Officer of the Company, which may be
terminated by either party upon 30 days' notice. Pursuant to such agreement, Mr.
Weedon receives an annual base salary of $230,000, subject to a review at the
end of his first year of employment. Also pursuant to such agreement, Mr. Weedon
will receive a $25,000 bonus upon the closing of the Offering and a guaranteed
$25,000 bonus no later than the first anniversary of his employment with the
Company. The options are immediately exercisable, although the shares of Common
Stock issued upon exercise are restricted, and remain subject to repurchase by
the Company, until such time as the corresponding options vest. Pursuant to his
employment agreement, Mr. Weedon was awarded options to purchase 339,558 shares
of Common Stock at a price of $0.15 per share. Such options vest over the first
four years of his employment with the Company at the rate of 1/48th of such
shares each month, provided that all options will vest if the Company is sold
for a purchase price of at least $15.37 per share. Each vested option is
exercisable at any time after the date of vesting up until one year following
Mr. Weedon's termination of employment with the Company. Pursuant to his
employment agreement, Mr. Weedon was reimbursed for relocation and other
expenses incurred as a result of his commencement of employment with the Company
aggregating approximately $30,000. In the event that Mr. Weedon's employment is
terminated without cause during the first year of his employment with the
Company, he will continue to receive his then-current salary and benefits for
the shorter of nine months or the period during which he remains unemployed. In
the event that Mr. Weedon's employment is terminated without cause during the
second year of his employment with the Company, he will continue to
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receive his then-current salary and benefits for the shorter of six months or
the period during which he remains unemployed. In the event that Mr. Weedon's
employment is terminated after his second year of employment with the Company,
he will continue to receive his then-current salary and benefits for the shorter
of four months or the period during which he remains unemployed.
In September 1994, the Company entered into an employment agreement with Dr.
Michael G. Palfreyman, Vice President of Research and Development for the
Company. Dr. Palfreyman's employment agreement provides for the payment of an
annual base salary of $175,000 and an annual performance bonus of up to 20% of
his annual salary as of January of such year. Pursuant to his employment
agreement, Dr. Palfreyman was awarded options to purchase 53,666 shares of
Common Stock at a price of $0.15 per share. Such options vest over the first
four years of his employment with the Company at the rate of 1/48th of such
shares each month. Pursuant to his employment agreement, Dr. Palfreyman was
reimbursed for relocation expenses aggregating approximately $37,000 and
temporary living expenses aggregating approximately $12,000. Dr. Palfreyman also
received housing allowances of $20,000 and $15,000 in 1995 and 1996,
respectively, and he is currently receiving in equal monthly installments a
$9,000 housing allowance for 1997. Dr. Palfreyman also received a one-time cash
payment of $30,000 as compensation for lost bonuses from his previous employer.
In the event that Dr. Palfreyman's employment is terminated without cause, he
will be entitled to severance payments equal to three times his then-current
monthly base salary.
In December 1992, the Company entered into an employment agreement with
Karen A. Hamlin, Senior Director of Operations, Secretary and Treasurer of the
Company. Ms. Hamlin's employment agreement provides for the payment of an annual
base salary of $75,000. Pursuant to her employment agreement, Ms. Hamlin was
awarded 11,384 shares of restricted Common Stock at a price of $0.03 per share.
Of such shares, 1,138 vested immediately and the remaining shares vest over the
four-year period commencing on the first anniversary of her employment with the
Company at the rate of 1/48th of such shares per month. In the event that Ms.
Hamlin's employment is terminated without cause at any time, she will be
entitled to severance payments equal to six times her then-current monthly base
salary.
STOCK OPTIONS
The following table sets forth certain summary information concerning
individual grants of stock options made during the year ended December 31, 1996
to each of the Named Executive Officers.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SHARES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ---------------------------------
NAME GRANTED IN 1996(2) SHARE DATE 0% 5% 10%
- ------------------------------ ----------- ----------- ----------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry Weinberg................ 48,787 31.9% $ 0.15 12/12/06 $ 82,450 $ 138,904 $ 225,517
Michael G. Palfreyman......... 27,646 18.1% $ 0.15 01/01/06 -- 2,608 6,609
48,787 31.9% $ 0.15 12/12/06 82,450 138,904 225,517
</TABLE>
- --------------
(1) These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the terms of the options in accordance with
rates specified in applicable federal securities regulations. Actual gains,
if any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. There is no representation
that the rates of appreciation reflected in this table will be achieved.
(2) Based on an aggregate of options to purchase 152,964 shares of Common Stock
granted to employees in 1996, including options granted to the Named
Executive Officers.
46
<PAGE>
The following table sets forth at December 31, 1996 the number of options
and the value of unexercised options held by each of the Named Executive
Officers:
AGGREGATED YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT TO VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT YEAR IN-THE-MONEY
END OPTIONS AT YEAR END(1)
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ------------ --------------- ------------- ----------------
Barry Weinberg............................... 48,787 --
Michael G. Palfreyman........................ 29,069 101,030
</TABLE>
- --------------
(1) The dollar values have been calculated by determining the difference between
the fair market value of the securities underlying the options at December
31, 1996 and the exercise prices of the options. Solely for purposes of
determining the value of options at December 31, 1996, the Company has
assumed that the fair market value of shares of Common Stock issuable upon
exercise of options was $ per share, the assumed initial public
offering price, since the Common Stock was not traded in an established
market prior to the Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company intends to establish a Compensation Committee prior to the
Offering. All matters concerning executive officer compensation have
historically been addressed by the Board of Directors because the Company did
not have a Compensation Committee.
EMPLOYEE BENEFIT PLANS
1997 EQUITY INCENTIVE PLAN
The Company anticipates that a 1997 Equity Incentive Plan (the "1997 Plan")
will be adopted by the Company in November 1997 under which an aggregate of
shares of the Company's Common Stock will be reserved for issuance
pursuant to the exercise of stock awards granted to employees, directors,
consultants and advisers.
1994 STOCK OPTION PLAN
During 1994, the Company adopted its 1994 Stock Option Plan (the "1994
Plan"), which provides for the issuance of incentive stock options to officers
and other employees of the Company and nonstatutory stock options, awards of
stock, and direct stock purchase opportunities to directors, officers, employees
and consultants of the Company. At November 15, 1997, the total number of shares
which remain available for issuance under the Plan is 23,313. The options are
exercisable at various dates and will expire no more than ten years from the
date of grant or in the case of certain nonstatutory options, 15 years from the
date of grant. The exercise price of each option is determined by the Board of
Directors. In the case of incentive stock options, the exercise price may not be
less than 100% of the fair market value of the share at the time the option is
granted. For holders of more than 10% of the Company's total combined voting
power of all classes of stock, incentive stock options may not be granted at
less than 110% of the fair market value of the Company's Common Stock at the
date of grant and may not exceed a term of five years.
401(K) PLAN
The Company adopted a retirement savings plan (the "401(k) Plan") effective
in January 1995. Employees who have attained age 18 and have completed six
months of service with the Company may participate in the 401(k) Plan.
Participants in the 401(k) Plan may defer compensation in an amount not in
excess of 15% of the employee's total annual compensation from the Company, up
to the annual statutory limit ($9,500 in 1997). The Company may make matching
contributions in an amount determined by the Board of Directors. All
contributions are credited to separate accounts maintained in trust for each
47
<PAGE>
participant and are invested, at the participant's direction, in one or more of
the investment funds made available under the 401(k) Plan. Matching
contributions become 20% vested after a participant's second year of service
with the Company and are subject to 20% annual vesting thereafter. The 401(k)
Plan is intended to qualify under Section 401 of the Internal Revenue Code so
that contributions to the 401(k) Plan, and income earned on plan contributions,
are not taxable to employees until withdrawn, and so that the contribution will
be deductible by the Company when made.
STOCK RESTRICTION AGREEMENTS
The Company has executed stock restriction agreements with certain common
stockholders. Each agreement gives the Company the right to repurchase a certain
number of shares, at the original issuance price, held by such stockholder if he
or she ceases to be a director, employee or consultant, as applicable, of the
Company. The purchase option rights lapse at various dates through July 1998. At
November 15, 1997, 28,963 shares of the Company's outstanding common stock were
subject to these repurchase options.
48
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENT OF SECURITIES
Since the Company's inception in September 1992 through September 1997, the
Company issued, in private placement transactions, the following shares of
Common Stock and Preferred Stock (including shares of Common Stock issued upon
the exercise of options and net of shares of Common Stock repurchased by the
Company): 933,317 shares of Common Stock at prices ranging between $0.03 and
$0.15 per share; 81,312 shares of Common Stock at a price of $0.15 in cash in
connection with loans in an aggregate of $2,500,000 to the Company (the "Bridge
Loan Transaction"); 6,403,325 shares of Series A Preferred Stock (convertible
into 2,082,660 shares of Common Stock) at a price of $1.00 per share; 6,579,086
shares of Series B Preferred Stock (convertible into 2,139,826 shares of Common
Stock) at a price of $1.00 per share and 4,053,854 shares of Series C Preferred
Stock (convertible into 1,318,502 shares of Common Stock) at a price of $1.80
per share.
In connection with the Bridge Loan Transaction, the Company became indebted
to the following parties in the following amounts from September 1994 through
February 1995: CW Ventures II, L.P. in the amount of $645,250; Atlas Venture
Fund II, L.P. in the amount of $524,250; New Enterprise Associates V in the
amount of $443,500; Accel IV L.P. in the amount of $371,210; Accel Investors '93
L.P. in the amount of $16,409; Accel Japan L.P. in the amount of $35,480; Accel
Keiretsu L.P. in the amount of $7,983; Ellmore C. Patterson Partners in the
amount of $9,757; Prosper Partners in the amount of $2,661 and Venrock
Associates in the amount of $443,500. All of such loans were evidenced by
promissory notes bearing an interest rate of 4.25% until December 31, 1994 and
9.50% from January 1, 1995 until April 15, 1995, when these notes, together with
accrued interest thereon, were converted into an aggregate of 2,579,086 shares
of Series B Preferred Stock (convertible into 838,839 shares of Common Stock).
Barry Weinberg and Allan R. Ferguson, directors of the Company, are affiliated
with CW Ventures II, L.P. and Atlas Venture Fund II, L.P., respectively. See
"Management."
In August 1997, the Company issued to Mark T. Weedon options to purchase
339,558 shares of Common Stock at an exercise price of $0.15 per share in
connection with his acceptance of employment with the Company. Mr. Weedon
subsequently exercised options to purchase 33,956 shares of Common Stock, which
shares are subject to certain restrictions. See "Management--Employment
Agreements."
In connection with certain equipment leasing agreements, the Company issued
warrants to purchase the following shares of Preferred Stock: 153,000 shares of
Series A Preferred Stock at an exercise price of $1.00 per share and 100,000
shares of Series C Preferred Stock at an exercise price of $1.80 per share. Such
warrants will be exercisable for an aggregate of 82,288 shares of Common Stock
following the Offering. See "Description of Capital Stock--Warrants."
Each outstanding share of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock will automatically convert into 0.32525 shares of
Common Stock upon the closing of the Offering.
49
<PAGE>
The purchasers of the Common Stock, Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock described above include, among
others, the following officers, directors and beneficial owners of more than
five percent of the Company's voting securities:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK, AS
CONVERTED (2)
COMMON ----------------------------------
PURCHASER (1) STOCK SERIES A SERIES B SERIES C
- --------------------------------------------------------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CW Ventures II, L.P. (3)....................................... 61,507 520,814 342,424 75,387
Atlas Venture Fund II, L.P. (4)................................ 68,789 423,136 278,211 61,249
New Enterprise Associates V.................................... 27,038 357,887 235,358 51,809
Lombard Odier & Cie............................................ -- -- -- 903,535
Advent International Investors II Limited Partnership (5)...... -- -- 3,252 277
Advent Performance Materials Limited Partnership (5)........... -- -- -- 63,242
Golden Gate Development and Investment Limited Partnership
(5).......................................................... -- -- 78,059 6,655
Rovent II Limited Partnership (5).............................. -- -- 406,558 34,662
Accel IV L.P. (6).............................................. 23,678 392,256 196,995 43,364
Accel Investors '93 L.P........................................ 534 -- 8,708 1,917
Accel Japan L.P................................................ 2,163 28,631 18,829 4,145
Accel Keiretsu L.P............................................. 260 -- 4,237 932
Ellmore C. Patterson Partners.................................. 317 -- 5,178 1,140
Prosper Partners............................................... 87 -- 1,412 311
Venrock Associates (7)......................................... 27,038 357,887 235,358 32,121
Venrock Associates II, L.P..................................... -- -- -- 19,687
Mark T. Weedon................................................. 33,956 -- -- --
Barry Weinberg (8)............................................. 89,118 -- -- --
Andrew A. Pakula............................................... 11,384 -- -- --
Karen A. Hamlin................................................ 11,384 -- -- --
</TABLE>
- --------------
(1) Certain of the purchasers are entitled to registration rights. See
"Description of Capital Stock-- Registration Rights."
(2) The number of shares under each column reflects the number of shares of
Common Stock into which the shares of Series A, Series B and Series C
Preferred Stock are convertible, giving effect to the conversion of each
share of Preferred Stock into 0.32525 shares of Common Stock.
(3) Does not include 89,118 shares of Common Stock issued to Barry Weinberg,
Chairman of the Board of Directors of the Company. Mr. Weinberg is a general
partner of CW Partners III, L.P., which is the general partner of CW
Ventures II, L.P.
(4) Allan R. Ferguson, a director of the Company, is a general partner of Atlas
Venture Associates II, L.P., which is the general partner of Atlas Venture
Fund II, L.P.
(5) Jason S. Fisherman, a director of the Company, is Vice President of Advent
International Corporation, which is the general partner of Advent
International Investors II Limited Partnership and Advent International
Limited Partnership, which is the general partner of Advent Performance
Materials Limited Partnership, Golden Gate Development and Investment
Limited Partnership and Rovent II Limited Partnership.
(6) Includes an aggregate of 1,047 shares of Common Stock and 91,330 shares of
Series A Preferred Stock (convertible into 29,705 shares of Common Stock)
subsequently transferred by Accel IV L.P. to Accel Keiretsu L.P., Accel
Investors '93 L.P., Ellmore C. Patterson Partners and Prosper Partners.
(7) Includes 8,371 shares of Common Stock, 340,628 shares of Series A Preferred
Stock (convertible into 110,788 shares of Common Stock) and 224,008 shares
of Series B Preferred Stock (convertible into
50
<PAGE>
72,858 shares of Common Stock) subsequently transferred by Venrock
Associates to Venrock Associates II, L.P.
(8) Does not include 61,508 shares of Common Stock, 1,601,289 shares of Series A
Preferred Stock (convertible into 520,814 shares of Common Stock), 1,052,812
shares of Series B Preferred Stock (convertible into 342,424 shares of
Common Stock) and 231,783 shares of Series C Preferred Stock (convertible
into 75,387 shares of Common Stock) issued to CW Ventures II, L.P. Mr.
Weinberg is a general partner of CW Partners III, L.P., which is the general
partner of CW Ventures II, L.P.
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND ADVISORS
The Company has employment agreements with Mark T. Weedon, its President and
Chief Executive Officer and a director of the Company, Michael G. Palfreyman,
its Vice President of Research and Development and Karen A. Hamlin, its Senior
Director of Operations, Secretary and Treasurer. See "Management--Employment
Agreements."
David Baltimore receives $10,000 annually for being a director of the
Company and was granted non-statutory options to purchase 24,394, 40,656 and
8,132 shares of Common Stock in 1994, 1996 and 1997, respectively, at an
exercise price of $0.15 per share.
Under the terms of a sponsored research agreement, the Company paid the
University of Massachusetts Medical Center a total of $1,000,000 in 1992 through
1994 for research performed in Dr. Green's laboratory. The Company is not
obligated to make any additional payments for research under such agreement.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of November 1, 1997, after
giving effect to the Offering and the Private Placement, by: (i) each person
known to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers of the Company and (iv) all executive officers and directors as a
group. All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
------------------------
<S> <C> <C> <C>
SHARES
NAME AND ADDRESS BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER (1) OWNED (2) OFFERING OFFERING
- --------------------------------------------------------------------------------- ----------- ----------- -----------
CW Ventures II, L.P. (3)......................................................... 1,089,575 16.6%
c/o CW Group, Inc.
1041 Third Avenue
New York, NY 10021
Atlas Venture Fund II, L.P....................................................... 831,385 12.7%
c/o Atlas Venture
222 Berkeley Street, 19th Floor
Boston, MA 02166
New Enterprise Associates V...................................................... 672,092 10.3%
c/o New Enterprise Associates
1119 St. Paul Street
Baltimore, MD 21202
Lombard Odier & Cie.............................................................. 903,536 13.8%
11 rue de la Corraterie
Geneva Switzerland
Entities affiliated with Advent International Corporation (4).................... 592,709 9.0%
101 Federal Street
Boston, MA 02110
Entities affiliated with Accel Partners (5)...................................... 672,094 10.3%
428 University Avenue
Palo Alto, CA 94301
Venrock Associates and Venrock Associates II, L.P. (6)........................... 672,093 10.3%
30 Rockefeller Plaza
New York, NY 10112
Mark T. Weedon (7)............................................................... 339,558 4.9%
Michael G. Palfreyman (8)........................................................ 53,181 *
Karen A. Hamlin (9).............................................................. 12,431 *
Barry Weinberg (10).............................................................. 1,089,575 16.6%
David Baltimore (11)............................................................. 22,767 *
Allan R. Ferguson (12)........................................................... 831,385 12.7%
Jason S. Fisherman (13).......................................................... 592,709 9.0%
All directors and executive officers as a group (7 persons) (14)................. 2,941,606 42.4%
</TABLE>
- --------------
*Less than 1.0%
52
<PAGE>
(1) Unless indicated otherwise, the address of the beneficial owners is: c/o
Scriptgen Pharmaceuticals, Inc., 200 Boston Avenue, Medford, Massachusetts
02155.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock issuable pursuant to
options, to the extent such options are currently exercisable or convertible
within 60 days of November 1, 1997, are treated as outstanding for computing the
percentage of the person holding such securities but are not treated as
outstanding for computing the percentage of any other person. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to shares, subject to community property laws where
applicable. Percentage of beneficial ownership is based on 6,555,641 shares of
Common Stock outstanding as of November 11, 1997 and shares of Common
Stock outstanding after completion of the Offering and the Private Placement
(assuming an initial public offering price of $ per share and in each
case after giving effect to the 1-for-3.07459 reverse split of the Common Stock
to be effected before the completion of the Offering and the conversion of all
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock into Common Stock upon the closing of the Offering).
(3) Includes 89,443 shares held by Barry Weinberg, Chairman of the Board of
Directors.
(4) Includes the ownership by the following venture capital funds of which
Advent International Corporation is the general partner, or the general partner
of the general partner, of: 3,530 shares held by Advent International Investors
II Limited Partnership, 63,243 shares held by Advent Performance Materials
Limited Partnership, 84,715 shares held by Golden Gate Development and
Investment Limited Partnership and 441,221 shares held by Rovent II Limited
Partnership. In its capacity as general partner, Advent International
Corporation exercises sole voting and investment power with respect to all
shares held by these funds. Advent International Corporation exercises its
voting and investment power through a group of three persons: Douglas R. Brown,
President and Chief Executive Officer, Jason S. Fisherman, Vice President, and
Janet L. Hennessy, Vice President responsible for monitoring public securities,
none of whom may act independently and a majority of whom must act in concert to
exercise voting or investment power over the beneficial holdings of such entity.
Therefore, no individual in this group other than Advent International
Corporation is deemed to have sole voting or investment power. Advent
International Corporation may be deemed to beneficially own all 592,709 shares.
(5) Includes 562,541 shares held by Accel IV L.P., 53,767 shares held by
Accel Japan L.P., 12,098 shares held by Accel Keiretsu L.P., 24,868 shares held
by Accel Investors '93 L.P., 14,787 shares held by Ellmore C. Patterson Partners
and 4,033 shares held by Prosper Partners.
(6) Includes 460,389 shares held by Venrock Associates and 211,704 shares
held by Venrock Associates II, L.P.
(7) Includes 305,602 shares issuable upon the exercise of options.
(8) Includes 53,181 shares issuable upon the exercise of options.
(9) Includes 1,047 shares issuable upon the exercise of options.
(10) Includes 1,000,132 shares held by CW Ventures II, L.P.
(11) Includes 22,767 shares issuable upon the exercise of options.
(12) Includes 831,385 shares held by Atlas Venture Fund II, L.P. Mr. Ferguson
is a general partner of Atlas Venture Associates II, L.P., the general partner
of Atlas Venture Fund II, L.P. Mr. Ferguson disclaims beneficial ownership of
such shares except to the extent of his pecuniary interest therein.
(13) Includes 3,530 shares held by Advent International Investors II Limited
Partnership, 63,243 shares held by Advent Performance Materials Limited
Partnership, 84,715 shares held by Golden Gate Development and Investment
Limited Partnership and 441,221 shares held by Rovent II Limited Partnership.
Dr. Fisherman is the Vice President of Advent International Corporation, which
is the general partner of Advent International Investors II Limited Partnership
and Advent International Limited Partnership, which is the general partner of
Advent Performance Materials Limited Partnership, Golden Gate Development and
Investment Limited Partnership and Rovent II Limited Partnership. Dr. Fisherman
disclaims beneficial ownership of all such shares.
(14) See notes 7 through 13 above.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the Offering and the filing of the amendment to the
Company's Restated Certificate of Incorporation referred to below, the
authorized capital stock of the Company will consist of 30,000,000 shares of
Common Stock, $0.01 par value, and 4,000,000 shares of Preferred Stock, $0.01
par value.
As of November 1, 1997, there were 1,014,629 shares of Common Stock
outstanding, which were held of record by 45 stockholders, 6,403,325 shares of
Series A Preferred Stock outstanding, which were held of record by 12
stockholders, 6,579,086 shares of Series B Preferred Stock outstanding, which
were held of record by 15 stockholders, and 4,053,854 shares of Series C
Preferred Stock outstanding, which were held of record by 17 stockholders. Upon
the closing of the Offering, and after giving effect to the issuance of
shares of Common Stock offered by the Company hereby, the issuance of
shares of Common Stock pursuant to the Private Placement (assuming an
initial public offering price of $ per share) and the conversion of each
share of the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock into 5,540,988 shares of Common Stock, there will be
shares of Common Stock and no shares of Preferred Stock issued and
outstanding. See "--Preferred Stock."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. The vote required for election to
the Board of Directors is a plurality of votes properly cast at any meeting of
the stockholders at which a quorum is present. For any other action by the
stockholders, the vote required is a majority of votes properly cast at any such
meeting, unless otherwise expressly provided by law or by the Company's Restated
Certificate of Incorporation or By-Laws. Subject to the rights and preferences
of any Preferred Stock which may be outstanding, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor and, subject to the
rights and preferences of any Preferred Stock which may be outstanding, the
holders of Common Stock are entitled to receive ratably the net assets of the
Company upon the liquidation, dissolution or winding up of the Company after the
payment of all debts and other liabilities. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in the
Offering will be, when issued and paid for, fully paid and nonassessable. The
rights, privileges and preferences of holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any shares of
Preferred Stock that are currently outstanding or that the Company may designate
and issue in the future.
At present, there is no active trading market for the Common Stock.
Application has been made to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol "SCRP." See "Risk Factors--No Prior
Public Market; Possible Volatility of Stock Price."
PREFERRED STOCK
The Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock are entitled to various preferences and rights in the event of a
liquidation, dissolution or winding-up of the Company and upon a declaration by
the Board of Directors of the payment of dividends. Each share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock is
convertible into 0.32525 shares of Common Stock, and upon the closing of the
Offering, all of the outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock will be converted automatically
into an aggregate of 5,540,988 shares of Common Stock. The holders of Common
Stock, Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock have approved an amendment to the Company's Restated Certificate, which
will be filed with the Secretary of State of Delaware immediately following the
closing of the Offering. The Restated Certificate will, among other things,
increase the number of
54
<PAGE>
authorized shares of Preferred Stock to 4,000,000, and will eliminate all
references to Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock.
The Restated Certificate will give the Board of Directors the authority to
issue 4,000,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions, including dividend,
conversion, voting, redemption (including sinking fund provisions), and other
rights, liquidation preferences, and the number of shares constituting any
series and the designations of such series, without any further vote or action
by the stockholders of the Company. Following the closing of the Offering and
the filing of the Restated Certificate, Preferred Stock could be issued by the
Board of Directors with voting and conversion rights that could adversely affect
the voting power of the holders of the Common Stock. In addition, because the
terms of the Preferred Stock may be fixed by the Board of Directors of the
Company without stockholder action, the Preferred Stock could be issued quickly
with terms calculated to defeat or delay a proposed takeover of the Company, or
to make the removal of the management of the Company more difficult. Under
certain circumstances, this would have the effect of decreasing the market price
of the Common Stock. The Company has no present plans to issue any Preferred
Stock. See "Risk Factors--Availability of Preferred Stock for Issuance;
Anti-Takeover Provisions."
WARRANTS
As of November 1, 1997, there were outstanding warrants to purchase an
aggregate of 253,000 shares of Preferred Stock, which will be exercisable for an
aggregate of 82,288 shares of Common Stock following the Offering.
In connection with a Master Leasing Agreement dated as of November 22, 1993
between the Company and Comdisco, Inc. ("Comdisco"), the Company issued to
Comdisco warrants to purchase up to 153,000 shares of Series A Preferred Stock
(to purchase up to 49,763 shares of Common Stock following the Offering) at an
exercise price of $1.00 per share, which warrants will expire in January 2004.
In February 1996, the Company executed an amendment to the Master Leasing
Agreement with Comdisco under which Comdisco will provide additional equipment
financing to the Company. In connection with this agreement, as of November 1,
1997 the Company had issued to Comdisco warrants to purchase 100,000 shares of
Series C Preferred Stock (to purchase up to 32,525 shares of Common Stock
following the Offering) at an exercise price of $1.80 per share. The warrants to
purchase Series C Preferred Stock will expire in May 2006.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and certain of its securities
holders, 5,540,988 shares of Common Stock (the "Registrable Securities") will be
entitled to certain rights with respect to the registration of the Registrable
Securities under the Securities Act. If the Company receives from the holders of
at least 50% of the Registrable Securities a written request to effect a
registration with respect to all or a part of the Registrable Securities, the
Company must, as soon as practicable, use its best efforts to effect such
registration, for a maximum of two such registrations. Pursuant to this
provision, the holders of the Registrable Securities may choose to distribute
their securities by means of an underwriting, subject to the authority of the
underwriters to limit the number of shares to be underwritten due to marketing
factors. If such an underwriting is undertaken, a security holder's right to
registration is conditioned upon such security holder's participation in the
underwriting.
If the Company registers any of its securities for its own account or
pursuant to the demand of its security holders (other than certain types of
exempted registrations), the Company must include in such registration and any
underwriting relating thereto all the Registrable Securities specified by the
holders thereof for inclusion, subject to the authority of the underwriters to
limit the number of shares to be
55
<PAGE>
underwritten due to marketing factors. If an underwriting is undertaken, a
security holder's right to registration is conditioned upon such security
holder's participation in the underwriting.
The Company has granted certain "piggyback" registration rights to HMR
beginning in April 1998 in connection with the shares of Common Stock
being purchased by HMR in the Private Placement.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Under Section 203 of the Delaware General Corporation Law (the "Delaware
anti-takeover law"), certain "business combinations" between a Delaware
corporation, whose stock generally is publicly traded or held of record by more
than 2,000 stockholders, and an "interested stockholder" are prohibited for a
three-year period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation or bylaws not to be governed by the Delaware anti-takeover law
(the Company has not made such an election), (ii) the business combination was
approved by the board of directors of the corporation before the other party to
the business combination became an interested stockholder, (iii) upon
consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee stock plans in which the
employees do not have a right to determine confidentially whether to tender or
vote stock held by the plan) or (iv) the business combination was approved by
the board of directors of the corporation and ratified by two-thirds of the
voting stock which the interested stockholder did not own. The three-year
prohibition does not apply to certain business combinations proposed by an
interested stockholder following the announcement or notification of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an interested
stockholder, transactions with an interested stockholder involving the assets or
stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who becomes
beneficial owner of 15% or more of a Delaware corporation's voting stock.
Section 203 could have the effect of delaying, deferring or preventing a change
in control of the Company.
The Company's Restated Certificate provides 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 stockholders and may not be effected by any
consent in writing. In addition, special meetings of the stockholders of the
Company may be called only by the Chairman of the Board, the President of the
Company, by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors. These and other provisions
contained in the Restated Certificate and the Company's By-Laws could delay or
make more difficult certain types of transactions involving an actual or
potential change in control of the Company or its management (including
transactions in which stockholders might otherwise receive a premium for their
shares over then current prices) and may limit the ability of stockholders to
remove current management of the Company or approve transactions that
stockholders may deem to be in their best interests and, therefore, could
adversely affect the price of the Common Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (the "DGCL"), relating to prohibited dividends
or distribution or the repurchase or redemption of stock or (iv) for any
transaction
56
<PAGE>
from which the director derives an improper personal benefit. The provision does
not apply to claims against a director for violations of certain laws, including
federal securities laws. If the DGCL is amended to authorize the further
elimination or limitation of directors' liability, then the liability of
directors of the Company shall automatically be limited to the fullest extent
provided by law. The Company's Restated Certificate and By-Laws also contain
provisions requiring the Company to indemnify the directors, officers, employees
or other agents to the fullest extent permitted by the DGCL. In addition, the
Company will enter into indemnification agreements with its current directors
and executive officers. These provisions and agreements may have the practical
effect in certain cases of eliminating the ability of stockholders to collect
monetary damages from directors. The Company believes that these contractual
agreements and the provisions in its Restated Certificate and By-Laws are
necessary to attract and retain qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Securities
Transfer & Trust, Inc., Denver, Colorado.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares or the availability of such shares for sale will have on
the market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the Common Stock
and the ability of the Company to raise capital through a sale of its
securities.
The Company, its executive officers and directors and substantially all of
its stockholders have agreed not to offer, sell, contract to sell, grant any
option to sell, or otherwise dispose of, directly or indirectly, any Common
Stock or securities convertible into or exchangeable for Common Stock or
warrants or other rights to purchase Common Stock, subject to certain limited
exceptions, during the 180 days after the effective date of this Prospectus (the
"Lock-Up Period"), without the prior consent of SBC Warburg Dillon Read Inc.
Commencing at the end of the Lock-Up Period shares will be eligible for
sale in the public market, subject to compliance with Rule 144. Of such shares,
will be eligible for sale, without limitation, pursuant to Rule 144(k).
The remaining shares of Common Stock held by existing stockholders will
become eligible for sale at various times over a period of two years. The
Company has granted to certain security holders demand and piggyback
registration rights covering an aggregate of shares of Common Stock. The
Company expects to file a Registration Statement on Form S-8 registering shares
of Common Stock reserved for issuance upon exercise of options granted under the
Company's 1997 Plan and 1994 Stock Option Plan following completion of the
Offering.
In general, under Rule 144 under the Securities Act as currently in effect,
a person (or persons whose shares are aggregated) who has beneficially owned
restricted securities within the meaning of Rule 144 ("Restricted Securities")
for at least one year, and including the holding period of any prior owner
except an affiliate, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of one percent of the then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock on the National Association of Securities Dealers Automated
Quotation System during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. Any person (or persons whose shares are aggregated) who is not deemed
to have been an affiliate of the Company at any time during the three months
preceding a sale, and who has beneficially owned shares for at least two years
(including any period of ownership of preceding non-affiliated holders), would
be entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements. An "affiliate" is a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or under
common control with, such issuer.
Rule 144A under the Securities Act as currently in effect generally permits
unlimited resales of certain Restricted Securities of any issuer provided that
the purchaser is a qualified institution that owns and invests on a
discretionary basis at least $100 million in securities (and in the case of a
bank or savings and loan association, has a net worth of at least $25 million)
or is a registered broker-dealer that owns and invests on a discretionary basis
at least $10 million in securities. Rule 144A allows certain existing
stockholders of the Company to sell their shares of Common Stock to such
institutions and registered broker-dealers without regard to any volume or other
restrictions. There can be no assurance that the availability of such resale
exemption will not have an adverse effect on the trading price of the Common
Stock.
58
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
SBC Warburg Dillon Read Inc................................................
Volpe Brown Whelan & Company, LLC..........................................
-----------------
Total...............................................................
-----------------
-----------------
</TABLE>
The Managing Underwriters are SBC Warburg Dillon Read Inc. and Volpe Brown
Whelan & Company, LLC.
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters have agreed to purchase all of the shares of Common Stock being
sold pursuant to the Underwriting Agreement if any are purchased (excluding
shares covered by the over-allotment option).
The Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus and
to selected dealers (who may include Underwriters) at such price less a
concession of not more than $ per share. Additionally, the Underwriters
may allow, and such dealers may reallow, a concession of not more than
$ per share to certain other dealers. After the Offering, the public
offering price and other selling terms may be changed by the Managing
Underwriters.
The Company has granted to the Underwriters an option for 30 days from the
date of this Prospectus to purchase up to additional shares of Common
Stock. The Underwriters may exercise such option only to cover over-allotments
of the Common Stock offered hereby, if any. To the extent that the Underwriters
exercise this option, each Underwriter will be obligated, subject to certain
conditions, to purchase the number of additional shares of Common Stock
proportionate to such Underwriter's initial commitment.
The offering of the shares is made for delivery, when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act and to contribute to
payments the Underwriters may be required to make in respect thereof.
The executive officers and directors of the Company and substantially all
certain other stockholders, who in the aggregate own substantially all of shares
of Common Stock, have agreed that they will not, without the prior written
consent of SBC Warburg Dillon Read Inc., offer, sell, contract to sell, grant
any
59
<PAGE>
option to sell or otherwise dispose of, directly or indirectly, any Common Stock
or securities convertible into or exchangeable for Common Stock or warrants or
other rights to purchase Common Stock owned by them during the 180 day period
following the date of this Prospectus. The Company has agreed that it will not,
without the prior written consent of SBC Warburg Dillon Read Inc., offer, sell,
contract to sell, grant any option to sell or otherwise dispose of, directly or
indirectly, any Common Stock or warrants or other rights to purchase Common
Stock during the 180 days following the date of this Prospectus, except that the
Company may issue shares of Common Stock and options to purchase Common Stock
under its 1997 Plan and upon exercise of outstanding options and warrants.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the Common Stock has been
determined by negotiation between the Managing Underwriters and the Company.
Factors considered in determining such price were prevailing market conditions,
the state of the Company's development, the future prospects of the Company and
its industry, market valuations of securities of companies engaged in activities
deemed by the Managing Underwriters to be similar to those of the Company, and
other factors deemed relevant.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate-covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate-covering
transactions involve purchases of the Common Stock in the open market after
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriters to reclaim a selling concession from a
syndicate member when the Common Stock originally sold by such syndicate member
is purchased in a syndicate-covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate-covering transactions and
penalty bids may cause the price of the Common Stock to be higher than it would
otherwise be in the absence of such transactions.
The Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Fulbright & Jaworski L.L.P., New York, New York. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriters by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The financial statements of Scriptgen Pharmaceuticals, Inc. as of December
31, 1995 and 1996 and for each of the three years in the period ended December
31, 1996 included in this Prospectus have been so included in reliance on the
report of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
Certain legal matters with respect to information contained in this
Prospectus under the captions "Risk Factors--Uncertainty of Patents and
Proprietary Rights" and "Business--Patents and Proprietary Technology" have been
reviewed and approved by Darby & Darby P.C., New York, New York, patent counsel
for the Company, as experts in such matters and are included herein in reliance
upon that review and approval.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement, of which this Prospectus constitutes a part, on Form S-1 under the
Securities Act (herein, together with all
60
<PAGE>
amendments and exhibits referred to herein as the "Registration Statement") 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 to the Registration Statement, as certain parts have been omitted in
accordance with rules and regulations of the Commission. For further information
with respect to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part of the Registration Statement. Statements contained in this Prospectus as
to the contents of any contract, agreement or any other document referred to are
not necessarily complete; reference is made in each instance to the copy of such
contract or document filed as an exhibit to the Registration Statement. Each
such statement is qualified in all respects by such reference to such exhibit. A
copy of the Registration Statement, including exhibits and schedules thereto,
may be inspected without charge and obtained at prescribed rates at the Public
Reference Section of the Commission at its principal offices, located at 450
Fifth Street, N.W., Washington, D.C. 20549, and may be inspected without charge
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Registration Statement,
including the exhibits and schedules thereto, is also available at the
Commission's site on the World Wide Web at http://www.sec.gov.
The Company intends to furnish its stockholders annual reports containing
financial statements audited by its independent auditors and quarterly reports
containing unaudited financial information.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheet as of December 31, 1995 and 1996, September 30, 1997 (unaudited) and pro
forma September 30, 1997 (unaudited)................................................ F-3
Statement of Operations for the three years ended December 31, 1996 and for the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited).................... F-4
Statement of Redeemable Preferred Stock and Stockholders' Equity (Deficit) for the
three years ended December 31, 1996 and for the nine months ended September 30, 1997
(unaudited) and pro forma September 30, 1997 (unaudited)............................ F-5
Statement of Cash Flows for the three years ended December 31, 1996 and for the nine
months ended September 30, 1996 (unaudited) and 1997 (unaudited).................... F-7
Notes to Financial Statements......................................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Scriptgen Pharmaceuticals, Inc.
The 1-for-3.07459 reverse stock split described in Note 5 to the financial
statements has not been consummated at September 30, 1997. When it has been
consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related statements
of operations, of redeemable preferred stock and stockholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Scriptgen Pharmaceuticals, Inc. at December 31, 1995
and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted
auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above."
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 31, 1997
F-2
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------ SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
(NOTE 2)
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................. $ 241,352 $ 1,314,305 $ 196,638 $ 196,638
Short-term investments................................ 938,002 3,023,932 867,519 867,519
Accounts receivable................................... 74,559 136,715 144,547 144,547
Prepaid expenses and other current assets............. 33,064 45,203 34,209 34,209
----------- ----------- ------------- -------------
Total current assets.............................. 1,286,977 4,520,155 1,242,913 1,242,913
Property and equipment, net............................. 1,262,842 1,117,714 1,132,338 1,132,338
Other assets, net....................................... 139,348 108,842 102,835 102,835
----------- ----------- ------------- -------------
$ 2,689,167 $ 5,746,711 $ 2,478,086 $ 2,478,086
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of capital lease obligations.......... $ 442,034 $ 559,173 $ 483,891 $ 483,891
Accounts payable...................................... 142,774 252,393 518,347 518,347
Accrued expenses...................................... 409,753 158,256 210,253 210,253
Deferred revenue...................................... 200,000 200,000 1,230,000 1,230,000
----------- ----------- ------------- -------------
Total current liabilities........................... 1,194,561 1,169,822 2,442,491 2,442,491
----------- ----------- ------------- -------------
Capital lease obligations............................... 635,539 423,895 500,736 500,736
----------- ----------- ------------- -------------
Redeemable convertible preferred stock, $.01 par value,
21,500,000 shares authorized; 12,982,411 shares issued
and outstanding at December 31, 1995 and 17,036,265
shares issued and outstanding at December 31, 1996 and
September 30, 1997 (unaudited); none issued and
outstanding on a pro forma basis at September 30, 1997
(unaudited) (liquidating preference of $20,279,348)... 12,982,411 20,279,348 20,279,348 --
----------- ----------- ------------- -------------
Stockholders' deficit:
Common stock, $.01 par value, 6,504,932 shares
authorized at December 31, 1995 and 30,000,000
shares authorized at December 31, 1996 and September
30, 1997 (unaudited); 1,112,330, 1,286,394,
1,373,378, and 6,914,366 issued at December 31, 1995
and 1996, September 30, 1997 (unaudited) and
September 30, 1997 on a pro forma basis (unaudited),
respectively; 814,485, 927,646, 1,014,630, and
6,555,618 shares outstanding at December 31, 1995
and 1996, September 30, 1997 (unaudited) and
September 30, 1997 on a pro forma basis (unaudited),
respectively........................................ 11,124 12,865 13,735 69,145
Additional paid-in capital............................ 219,852 403,208 3,126,457 23,350,395
Unearned compensation................................. -- (93,744) (2,660,542) (2,660,542)
Accumulated deficit................................... (12,308,533) (16,393,533) (21,168,989) (21,168,989)
----------- ----------- ------------- -------------
(12,077,557) (16,071,204) (20,689,339) (409,991)
Treasury stock, at cost, 297,845 shares at December 31,
1995 and 358,748 shares at December 31, 1996,
September 30, 1997 (unaudited) and September 30, 1997
on a pro forma basis (unaudited)...................... (45,787) (55,150) (55,150) (55,150)
----------- ----------- ------------- -------------
Total stockholders' deficit......................... (12,123,344) (16,126,354) (20,744,489) (465,141)
----------- ----------- ------------- -------------
Commitments and contingencies (Note 8)
$ 2,689,167 $ 5,746,711 $ 2,478,086 $ 2,478,086
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenue:
Collaborative agreements............ $ -- $ -- $ 975,000 $ 975,000 $ 467,000
SBIR grants......................... -- 260,415 231,620 221,585 137,784
------------- ------------- ------------- ------------- -------------
-- 260,415 1,206,620 1,196,585 604,784
------------- ------------- ------------- ------------- -------------
Cost of revenue:
Collaborative agreements............ -- -- 174,165 174,165 123,515
SBIR grants......................... -- 260,415 231,620 221,585 137,784
------------- ------------- ------------- ------------- -------------
-- 260,415 405,785 395,750 261,299
------------- ------------- ------------- ------------- -------------
Gross profit........................ -- -- 800,835 800,835 343,485
------------- ------------- ------------- ------------- -------------
Operating expenses:
Research and development............ 3,156,734 3,152,494 3,958,201 2,757,439 4,273,149
General and administrative.......... 998,194 1,298,684 906,452 669,108 830,908
------------- ------------- ------------- ------------- -------------
4,154,928 4,451,178 4,864,653 3,426,547 5,104,057
------------- ------------- ------------- ------------- -------------
Loss from operations................ (4,154,928) (4,451,178) (4,063,818) (2,625,712) (4,760,572)
------------- ------------- ------------- ------------- -------------
Other income (expense):
Interest income..................... 30,662 88,673 160,364 104,215 91,391
Interest expense.................... (174,434) (215,447) (138,878) (90,624) (103,514)
Other, net.......................... (2,274) (975) (1,687) (1,387) (2,761)
------------- ------------- ------------- ------------- -------------
(146,046) (127,749) 19,799 12,204 (14,884)
------------- ------------- ------------- ------------- -------------
Net loss............................ $ (4,300,974) $ (4,578,927) $ (4,044,019) $ (2,613,508) $ (4,775,456)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Pro forma net loss per share
(unaudited)......................... $ (0.59) $ (0.64)
------------- -------------
------------- -------------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited)......................... 6,897,251 7,434,627
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED
STOCK
-----------------------
STOCKHOLDERS' EQUITY (DEFICIT)
REDEEMABLE --------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------- ---------------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1993............. 6,203,325 $ 6,203,325 170,755 $ 1,708 $ 24,542 $ -- $(3,376,234)
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of warrant to purchase Series A
redeemable convertible prefererred
stock................................... 100,000
Issuance of common stock................. 928,310 9,283 93,426
Issuance of Series A redeemable
convertible preferred stock, issuance
costs of $7,764......................... 200,000 200,000 (7,764)
Net loss................................. (4,300,974)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1994............. 6,403,325 6,403,325 1,099,065 10,991 217,968 -- (7,684,972)
Issuance of Series B redeemable
convertible preferred stock, issuance
costs of $44,634........................ 6,579,086 6,579,086 (44,634)
Issuance of common stock................. 13,265 133 1,884
Payment on note receivable from
stockholder.............................
Acquisition of treasury stock............
Net loss................................. (4,578,927)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1995............. 12,982,411 $12,982,411 1,112,330 $ 11,124 $ 219,852 $ -- ($12,308,533)
<CAPTION>
NOTE TOTAL
RECEIVABLE STOCKHOLDERS'
FROM TREASURY EQUITY
STOCKHOLDER STOCK (DEFICIT)
----------- ----------- ------------
Balance at December 31, 1993............. $ -- $ -- $(3,349,984)
<S> <C> <C> <C>
Issuance of warrant to purchase Series A
redeemable convertible prefererred
stock................................... 100,000
Issuance of common stock................. (37,500) 65,209
Issuance of Series A redeemable
convertible preferred stock, issuance
costs of $7,764......................... (7,764)
Net loss................................. (4,300,974)
----------- ----------- ------------
Balance at December 31, 1994............. (37,500) -- (7,493,513)
Issuance of Series B redeemable
convertible preferred stock, issuance
costs of $44,634........................ (44,634)
Issuance of common stock................. 2,017
Payment on note receivable from
stockholder............................. 9,375 9,375
Acquisition of treasury stock............ 28,125 (45,787) (17,662)
Net loss................................. (4,578,927)
----------- ----------- ------------
Balance at December 31, 1995............. $ -- $ (45,787) ($12,123,344)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)(CONTINUED)
<TABLE>
<CAPTION>
REDEEMABLE PREFERRED
STOCK
-----------------------
STOCKHOLDERS' EQUITY (DEFICIT)
REDEEMABLE --------------------------------------------------------------
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------------- ---------------------- PAID-IN UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
---------- ----------- --------- ----------- ---------- ------------ ------------
Issuance of Series C redeemable
convertible preferred stock, issuance
costs of $40,981........................ 4,053,854 $ 7,296,937 $ (40,981)
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock pursuant to
exercise of stock options............... 174,064 $ 1,741 $ 5,018
Acquisition of treasury stock............
Unearned compensation related to common
stock options granted................... 178,338 $ (178,338)
Amortization of unearned compensation.... 84,594
Net loss................................. (4,044,019)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at December 31, 1996............. 17,036,265 20,279,348 1,286,394 12,865 403,208 (93,744) (16,393,533)
Issuance of common stock pursuant to
exercise of stock options (unaudited)... 86,984 870 8,499
Unearned compensation related to common
stock options granted (unaudited)....... 2,714,750 (2,714,750)
Amortization of unearned compensation
(unaudited)............................. 147,952
Net loss (unaudited)..................... (4,775,456)
---------- ----------- --------- ----------- ---------- ------------ ------------
Balance at September 30, 1997
(unaudited)............................. 17,036,265 20,279,348 1,373,378 13,735 3,126,457 (2,660,542) (21,168,989)
Pro forma effect of conversion of
redeemable preferred stock
(unaudited)............................. (17,036,265) (20,279,348) 5,540,988 55,410 20,223,938
---------- ----------- --------- ----------- ---------- ------------ ------------
-- $ -- 6,914,366 $ 69,145 $23,350,395 $(2,660,542) ($21,168,989)
---------- ----------- --------- ----------- ---------- ------------ ------------
---------- ----------- --------- ----------- ---------- ------------ ------------
<CAPTION>
NOTE TOTAL
RECEIVABLE STOCKHOLDERS'
FROM TREASURY EQUITY
STOCKHOLDER STOCK (DEFICIT)
----------- ----------- ------------
Issuance of Series C redeemable
convertible preferred stock, issuance
costs of $40,981........................ $ (40,981)
<S> <C> <C> <C>
Issuance of common stock pursuant to
exercise of stock options............... 6,759
Acquisition of treasury stock............ $ (9,363) (9,363)
Unearned compensation related to common
stock options granted................... --
Amortization of unearned compensation.... 84,594
Net loss................................. (4,044,019)
----------- ----------- ------------
Balance at December 31, 1996............. -- (55,150) (16,126,354)
Issuance of common stock pursuant to
exercise of stock options (unaudited)... 9,369
Unearned compensation related to common
stock options granted (unaudited)....... --
Amortization of unearned compensation
(unaudited)............................. 147,952
Net loss (unaudited)..................... (4,775,456)
----------- ----------- ------------
Balance at September 30, 1997
(unaudited)............................. -- (55,150) (20,744,489)
Pro forma effect of conversion of
redeemable preferred stock
(unaudited)............................. 20,279,348
----------- ----------- ------------
$ -- $ (55,150) $ (465,141)
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................... $(4,300,974) $(4,578,927) $(4,044,019) $(2,613,508) $(4,775,456)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization.................... 319,045 509,214 586,049 423,910 547,877
Amortization of unearned compensation............ -- -- 84,594 -- 147,952
Accrued interest converted to preferred stock.... -- 60,112 -- -- --
Changes in operating assets and liabilities:
Accounts receivable............................ -- (74,559) (62,156) (227,126) (7,832)
Prepaid expenses and other current assets...... 70,563 40,072 (12,139) 40,683 10,994
Other assets................................... (93,789) 20,000 21,518 (7,239) (8,573)
Accounts payable............................... 127,898 (64,191) 109,619 33,991 265,954
Accrued expenses............................... 318 143,801 (251,497) (206,534) 51,997
Deferred revenue............................... -- 200,000 -- -- 1,030,000
---------- ---------- ---------- ---------- ----------
Net cash used for operating activities......... (3,876,939) (3,744,478) (3,568,031) (2,555,823) (2,737,087)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments................. (7,794,213) (1,512,583) (9,300,265) (6,199,133) (3,436,180)
Sale of short-term investments..................... 9,043,301 574,581 7,214,335 3,830,952 5,592,593
Purchase of property and equipment................. (132,657) (29,973) (56,369) (200,910) (65,053)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used for) investing
activities................................... 1,116,431 (967,975) (2,142,299) (2,569,091) 2,091,360
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debt......... 2,100,000 400,000 -- -- --
Sale of common stock............................... 65,209 2,017 6,759 -- 9,369
Repurchase of common stock......................... -- -- (9,363) (9,363) --
Sale of preferred stock, net of issuance costs and
retirement of convertible debt................... 192,236 3,955,366 7,255,956 5,270,096 --
Sale of fixed assets............................... 129,528 38,078 -- -- --
Principal payments on capital lease obligations.... (222,650) (373,143) (470,069) (184,932) (481,309)
Payments from stockholder.......................... -- 9,375 -- -- --
---------- ---------- ---------- ---------- ----------
Net cash provided by (used for) financing
activities..................................... 2,264,323 4,031,693 6,783,283 5,075,801 (471,940)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents...................................... (496,185) (680,760) 1,072,953 (49,113) (1,117,667)
Cash and cash equivalents at beginning of period... 1,418,297 922,112 241,352 241,352 1,314,305
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period......... $ 922,112 $ 241,352 $1,314,305 $ 192,239 $ 196,638
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest........... $ 135,460 $ 135,334 $ 98,599 $ 90,624 $ 103,514
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Assets recorded under capital lease................ 971,455 164,919 375,564 169,304 482,868
Purchase of treasury stock in exchange for accounts
payable.......................................... -- 26,400 -- -- --
Issuance of warrants to lessor..................... 100,000 -- -- -- --
Issuance of common stock in exchange for note
receivable....................................... 37,500 -- -- -- --
Issuance of preferred stock to cancel notes payable
and accrued interest............................. -- 2,579,086 -- -- --
</TABLE>
During 1995, the Company cancelled a note receivable from a stockholder of
$28,125 in exchange for treasury stock of $19,387 and a receivable from a
stockholder of $8,738 (Note 5).
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND ORGANIZATION
Scriptgen Pharmaceuticals, Inc. (the "Company") was incorporated in
September 1992. The Company utilizes its proprietary high throughput
technologies to enable and accelerate the discovery of innovative small molecule
drugs. The Company's technology platform identifies and validates novel gene
targets for therapeutic intervention, and then uses novel assay systems to
rapidly screen compounds against those targets. The Company commercializes its
technology through collaborations with pharmaceutical and technology companies
and the Company's internal development program.
Through 1995, the Company devoted substantially all of its efforts to
research and development, business planning and financings and was considered to
be in the development stage as defined in Statement of Financial Accounting
Standards No. 7, "Accounting and Reporting by Development Stage Enterprises."
The Company is no longer considered to be a development stage enterprise as
planned operations commenced in 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual amounts could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents. The Company invests its
excess cash primarily in short-term marketable securities. Accordingly, these
investments are subject to minimal credit and market risk.
The Company's cash equivalents at December 31, 1995 consisted of
approximately $82,000 in money market funds. The Company's cash equivalents at
December 31, 1996 consisted of approximately $16,000 in money market funds,
$260,000 in time deposits and $720,000 in commercial paper.
Short-term investments at December 31, 1995 consisted of approximately
$938,000 in U.S. Treasury Bills. Short-term investments at December 31, 1996
consisted of approximately $2,286,000 in U.S. Treasury Bills and $738,000 in
U.S. Agency Bonds. These securities are classified as available-for-sale and are
recorded at cost which approximates fair value. Any unrealized gains or losses
are recorded as a separate component of stockholders' equity. Gross unrealized
and realized gains and losses on sales of securities at December 31, 1995 and
1996 and for the years ended December 31, 1994, 1995 and 1996 were not
significant.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
The Company has entered into various collaborative agreements with
pharmaceutical and technology companies. Revenue derived from such collaborative
agreements is recognized as drug discovery activities are performed. Cash
received in advance of activities performed is recorded as deferred revenue.
Certain agreements also provide for payments to the Company upon the achievement
of certain milestones as well as royalties on the net sales of any products
developed resulting from the collaborations, as defined in the
F-8
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
respective agreements. Any revenue related to milestones will be recognized as
the milestones are achieved and revenue related to royalties will be recognized
as earned.
Revenue from Small Business Innovation Research ("SBIR") government grants
to conduct research and development is recognized as eligible costs are incurred
up to the funding limit. Eligible grant-related costs which have been incurred
in advance of cash receipts are recorded as receivables.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade accounts receivable. Management
believes its credit policies are prudent and reflect normal industry terms and
business risk. The Company does not anticipate non-performance by the
counterparties and, accordingly, does not require collateral.
For the years ended December 31, 1995 and 1996, certain customers accounted
for more than 10% of the Company's revenue. One customer accounted for 100% of
revenue in 1995. Two customers accounted for 81% and 19% of revenue,
respectively, in 1996. Two customers accounted for 77% and 23% of revenue,
respectively, in the nine months ended September 30, 1997.
PROPERTY AND EQUIPMENT
Equipment, furniture and fixtures are recorded at cost and are being
depreciated using the straight-line method over estimated useful lives of five
years. Leasehold improvements are stated at cost and are being amortized using
the straight-line method over the term of the lease, which is less than the
estimated useful life of the properties.
PATENT COSTS
Costs associated with patent applications have been expensed as incurred to
date primarily because recovery of these costs is uncertain. However, certain
costs associated with patent applications for products and processes where
recovery is probable will be capitalized and amortized over their estimated
economic life. Through December 31, 1996, capitalizable patent costs have not
been significant and no patent costs have been capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically assesses whether any events or changes in
circumstances have occurred that would indicate that the carrying amount of a
long-lived asset may not be recoverable. When such an event or change in
circumstance occurs, the Company evaluates whether the carrying amount of such
asset is recoverable by comparing the net book value of the asset to estimated
future undiscounted cash flows, excluding interest charges, attributable to such
asset. If it is determined that the carrying amount is not recoverable, the
Company recognizes an impairment loss equal to the excess of the carrying amount
of the asset over the estimated fair value of such asset.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." SFAS 123, which is effective for the Company's 1996
financial statements, defines a fair value based method of accounting
F-9
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for stock-based awards to employees. The Company has elected to account for
stock-based awards to its employees using the intrinsic value based method as
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations and has adopted the provisions of SFAS 123 through
disclosure only (Note 6).
UNAUDITED PRO FORMA NET LOSS PER SHARE AND UNAUDITED PRO FORMA INFORMATION
Unaudited pro forma net loss per share is determined by dividing net loss by
the weighted average number of common shares and common share equivalents
outstanding during the period. Common share equivalents, comprised of common
stock options and warrants and convertible preferred stock, have been excluded
from the calculation as their effect is anti-dilutive, except that, pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common
share equivalents issued and common stock sold at prices below the initial
public offering price in the twelve months preceding the initial filing of the
Company's Registration Statement and through the effective date of the initial
public offering have been included in the calculation as if outstanding for all
periods presented.
As described in Note 5, conversion of all redeemable convertible preferred
stock will occur upon the closing of a qualified public offering of the
Company's common stock. The unaudited pro forma net loss per share information
included in the accompanying statement of operations for the year ended December
31, 1996 and for the nine months ended September 30, 1997 reflects the impact on
unaudited pro forma net loss per share of such conversion as of the beginning of
each period or date of issuance, if later, using the if-converted method.
Historical net loss per share has not been presented on the basis that it is
irrelevant due to the significant change in the Company's capital structure and
resultant loss per share which will result upon conversion of the redeemable
convertible preferred stock.
The unaudited pro forma information at September 30, 1997 included in the
balance sheet and the statement of redeemable preferred stock and stockholders'
equity (deficit) reflects the automatic conversion of each share of the
redeemable convertible preferred stock into 0.32525 shares of common stock upon
the closing of the Company's anticipated initial public offering.
UNAUDITED INTERIM FINANCIAL DATA
The interim financial data as of September 30, 1997 and for the nine months
ended September 30, 1996 and 1997 are unaudited; however, in the opinion of
management, the interim financial data include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
results of operations for these interim periods. The interim financial data are
not necessarily indicative of the results of operations for a full year.
RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." In
September 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Company will implement SFAS No. 128 as required in its 1997
fourth quarter and, at this time, the future adoption is not expected to have a
material effect on net loss per share. Had the Company computed pro forma net
loss per share for the periods ended December 31, 1996 and the nine months ended
September 30, 1997 in accordance with SFAS
F-10
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
No. 128 the pro forma net loss per share would not have been different. The
Company will implement SFAS No. 130 and SFAS No. 131, which require the Company
to report and display certain information related to comprehensive income and
operating segments, respectively, as required in fiscal 1998. Adoption of SFAS
No. 130 and SFAS No. 131 will not impact the Company's financial position or
results of operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
Furniture and fixtures............................................ $ 8,947 $ 8,947
Equipment......................................................... 1,350,895 1,782,828
Leasehold improvements............................................ 677,950 677,950
------------ ------------
2,037,792 2,469,725
Less: Accumulated depreciation and amortization................... 774,950 1,352,011
------------ ------------
$ 1,262,842 $ 1,117,714
------------ ------------
------------ ------------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1994,
1995 and 1996 was $289,557, $498,175 and $577,061, respectively.
At December 31, 1995 and 1996, the costs of equipment and leasehold
improvements held under capital leases amounted to $1,943,932 and $2,319,496,
respectively, and accumulated depreciation relating to such equipment and
leasehold improvements amounted to $485,780 and $1,028,328, respectively.
4. CONVERTIBLE DEBT
In July 1994, the Company entered into a Loan and Stock Purchase Agreement
with certain preferred stockholders to provide bridge financing for the Company.
The agreement made available to the Company up to $2,500,000 in financing.
During 1994 and 1995, the Company issued notes in the aggregate amount of
$2,100,000 and $400,000, respectively, to these investors. The notes were
interest bearing at a rate of 4.25% until December 31, 1994 and 9.50% from
January 1, 1995 until April 19, 1995, when these notes, together with accrued
interest thereon, were converted into shares of Series B Preferred Stock at
$1.00 per share.
5. CAPITALIZATION
REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has authorized 21,500,000 shares of redeemable convertible
preferred stock designated as follows: 5,100,000 shares of Series A redeemable
convertible preferred stock ("Series A Preferred Stock"); 9,700,000 shares of
Series B redeemable convertible preferred stock ("Series B Preferred Stock");
and 6,700,000 shares of Series C redeemable convertible preferred stock ("Series
C Preferred Stock") (collectively as the "Preferred Stock"). The Series A, B and
C Preferred Stock have the following characteristics:
F-11
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITALIZATION (CONTINUED)
CONVERSION
Each share of Preferred Stock is convertible at any time at the option of
the holder into shares of common stock at a ratio of one share of common stock
for 3.07459 shares of Preferred Stock, subject to certain stock split, stock
dividend and other adjustments. All Preferred Stock will automatically convert
to common stock upon the earlier of i) the closing of a public offering of the
Company's common stock involving aggregate proceeds of at least $10,000,000 and
a per share price of not less than $7.00 or ii) the consent of the holders of at
least 85% of the then outstanding shares of Preferred Stock.
The Company has reserved 2,082,660, 2,139,826 and 1,318,502 shares of common
stock for issuance upon the conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, respectively.
DIVIDENDS
Holders of Series C Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors.
Holders of Series B Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors, provided however that no dividends
shall be declared or paid on the Series B Preferred Stock unless the Company
shall simultaneously declare and pay an equal dividend on each outstanding share
of Series C Preferred Stock.
Holders of Series A Preferred Stock are entitled to receive dividends when,
as and if declared by the Board of Directors, provided however that no dividend
shall be declared or paid on the Series A Preferred Stock unless the Company
shall simultaneously declare and pay an equal dividend on each outstanding share
of Series B and Series C Preferred Stock. Through December 31, 1996, no
dividends have been declared or paid by the Company.
REDEMPTION
On January 15, 2004 and 2005, the Company shall redeem 50% of the then
outstanding shares of Preferred Stock at a per share price of $1.80 for each
share of Series C Preferred Stock and $1.00 for each share of Series A Preferred
Stock and Series B Preferred Stock, plus all declared but unpaid dividends,
unless such redemption is waived by holders of 75% of the then outstanding
shares of Preferred Stock.
At December 31, 1996, there are issued and outstanding 6,403,325 shares of
Series A Preferred Stock, 6,579,086 shares of Series B Preferred Stock and
4,053,854 shares of Series C Preferred Stock, which are recorded at redemption
values of $6,403,325, $6,579,086 and $7,296,937, respectively.
LIQUIDATION, DISSOLUTION OR WINDING-UP OF COMPANY
In the event of any liquidation, dissolution, or winding up of the Company,
the holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock will be entitled to receive, in preference to the holders of the
common stock, an amount per share equal to $1.00, $1.00 and $1.80, respectively,
plus any declared but unpaid dividends. If the remaining assets of the Company
are insufficient to pay the preferred stockholders the full amount to which they
are entitled, any distribution of the remaining assets will be in proportion to
the respective amounts which would otherwise be payable if
F-12
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITALIZATION (CONTINUED)
all amounts payable were paid in full. Any assets remaining after the initial
distribution to the holders of the Preferred Stock shall be available for
distribution ratably among the Company's common stockholders.
VOTING RIGHTS
Each holder of the Preferred Stock is entitled to vote the number of shares
of common stock into which such holder's shares are convertible at the date such
vote is taken.
RIGHTS OF FIRST REFUSAL
The holders of the Preferred Stock have the right of first refusal on all
future issuances by the Company of any of its equity securities.
STOCK RESTRICTION AGREEMENTS
The Company has executed stock restriction agreements with certain common
stockholders. Each agreement gives the Company the right to repurchase a certain
number of shares, at the original issuance price, held by such stockholder if he
or she ceases to be a director, employee or consultant, as applicable, of the
Company. The purchase option rights lapse at various dates through July 1998. At
December 31, 1996 and September 30, 1997 (unaudited), 15,395 and 28,963,
respectively, shares of the Company's outstanding common stock were subject to
these repurchase options.
REVERSE COMMON STOCK SPLIT
On , the Board of Directors authorized a 1-for-3.07459
reverse stock split of the Company's common stock which will become effective
prior to the date of the Offering. All shares of common stock, common stock
options and warrants, preferred stock conversion ratios and per share amounts
included in the accompanying financial statements have been adjusted to give
retroactive effect to the reverse stock split for all periods presented.
RELATED PARTY TRANSACTIONS
The Company entered into a stock agreement with an officer of the Company in
February 1994 whereby the Company issued 464,452 shares of common stock and
200,000 shares of Series A Preferred Stock to this individual in exchange for
cash and a promissory note totaling $271,400. Such promissory note was paid in
four quarterly equal installments commencing February 1, 1995.
The underlying stock agreement gave the Company repurchase rights to the
stock in certain increments at a price equal to the price per share paid by this
individual. Such repurchase rights lapsed at certain dates or upon the
occurrence of certain events, as defined in the agreement.
The Company entered into a separation agreement with this officer in
December 1995. Under the separation agreement, the Company was obligated to
extend the officer's salary, for a period of one year from the resignation date
or until the officer accepts full-time employment, whichever occurred first, as
well as other related costs. For the year ended December 31, 1995, the Company
recorded total compensation expense of approximately $275,000 in connection with
this agreement. The unpaid portion of the compensation expense of approximately
$265,000 was reflected in accrued expenses at December 31, 1995 and was paid in
full in 1996.
F-13
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITALIZATION (CONTINUED)
Pursuant to the terms of the separation agreement, in 1995 the Company
exercised its repurchase rights to 297,845 shares of the Company's common stock
issued under the February 1994 stock agreement. The promissory note received in
conjunction with the stock agreement was cancelled. In 1996, the Company
exercised its repurchase rights to the remaining unvested 48,787 shares of the
Company's common stock issued under the February 1994 stock agreement.
6. STOCK PLAN
During 1994, the Company adopted its 1994 Stock Option Plan (the "Plan").
The Plan provides for the issuance of incentive stock options to officers and
other employees of the Company and non-qualified stock options, awards of stock
and direct stock purchase opportunities to directors, officers, employees and
consultants of the Company. The total number of shares which may be issued under
the Plan is 613,090. The options are exercisable at various dates and will
expire no more than ten years from their date of grant, or in the case of
certain non-qualified options, fifteen years from the date of grant. The
exercise price of each option shall be determined by the Board of Directors. In
the case of incentive stock options, the exercise price may not be less than
100% of the fair market value of the share at the time the option is granted.
For holders of more than 10% of the Company's total combined voting power of all
classes of stock, incentive stock options may not be granted at less than 110%
of the fair market value of the Company's common stock at the date of grant and
may not exceed a term of five years.
At December 31, 1996, the Company had one stock option plan, which is
described above. The Company applies APB Opinion No. 25 in accounting for awards
made under the Plan.
Had compensation cost for these awards been determined based on the fair
value of these options at their date of grant consistent with the method
prescribed by SFAS No. 123, the Company's net loss would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
<S> <C> <C>
1995 1996
------------- -------------
Net loss:
As reported................................................... $ (4,578,927) $ (4,044,019)
Pro forma..................................................... (4,578,933) (4,046,130)
</TABLE>
Because the determination of the fair value of all options granted after the
Company becomes a public entity will include an expected volatility factor,
additional option grants are expected to be made subsequent to December 31, 1996
and options vest over several years, the pro forma effects of applying the fair
value method may be material to reported net income or loss in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model to apply the minimum value method with
the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Expected options term (years)................................................ 5 5
Risk-free interest rate...................................................... 7.02% 6.14%
Dividend yield............................................................... 0.00% 0.00%
</TABLE>
F-14
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK PLAN (CONTINUED)
A summary of the status of the Company's fixed stock option plan as of
December 31, 1996 and changes during the three year period ended on that date is
presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1994 1995 1996
----------------------- ----------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.......... -- $ -- 299,015 $ .15 308,155 $ .15
Granted................................... 299,503 .15 9,953 .15 210,207 .15
Exercised................................. (335) .15 (558) .15 (174,064) .15
Forfeited................................. (153) .15 (255) .15 (11,717) .15
---------- ---------- -----------
Outstanding at end of year................ 299,015 $ .15 308,155 $ .15 332,581 $ .15
---------- ---------- -----------
Options available for future grant........ 313,740 304,042 105,552
---------- ---------- -----------
Weighted-average fair value of options
granted whose exercise price of $.15
equals the market price................. $ .03 $ .03 $ .03
---------- ---------- -----------
---------- ---------- -----------
Weighted-average fair value of options
granted whose exercise price of $.15 is
less than the market price.............. $ -- $ -- $ 1.72
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996.
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING
----------------------
WEIGHTED-
AVERAGE OPTIONS
REMAINING EXERCISABLE
CONTRACTUAL -----------
EXERCISE PRICE NUMBER LIFE NUMBER
- ---------------------------------------------------------- --------- ----------- -----------
<S> <C> <C> <C>
$.15...................................................... 332,581 8.8 years 59,890
</TABLE>
UNEARNED COMPENSATION
During October 1996 through December 1996, the Company granted stock options
to purchase 105,461 shares of its common stock at an exercise price of $.15 per
share. The Company recorded unearned compensation totaling $178,338,
representing the difference between the estimated fair market value of the
common stock on the date of grant and the exercise price. Unearned compensation
related to these options is recorded as an increase to stockholders' deficit and
is being amortized over the option vesting period.
F-15
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCK PLAN (CONTINUED)
(Unaudited)
During the nine months ended September 30, 1997, the Company granted options
to purchase 407,859 shares of its common stock at exercise prices of $.15 and
$6.15 per share. The Company recorded unearned compensation totaling $2,714,750
for such options.
7. INCOME TAXES
Deferred tax assets and (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
Net operating loss carryforwards.................................. $ 4,582,000 $ 6,210,000
Research and development credit carryforwards..................... 426,000 604,000
Property and equipment............................................ 194,000 268,000
Accrued expenses.................................................. 123,000 18,000
Deferred start-up expenses........................................ 34,000 17,000
------------ ------------
Deferred tax assets, net.......................................... 5,359,000 7,117,000
Valuation allowance............................................... (5,359,000) (7,117,000)
------------ ------------
$ -- $ --
------------ ------------
------------ ------------
</TABLE>
The Company has generated taxable losses from operations since inception
and, accordingly, has no taxable income available to offset the carryback of net
operating losses. In addition, although management's operating plans anticipate
taxable income in future periods, such plans provide for taxable losses over the
near term and make significant assumptions which cannot be reasonably assured,
including approval of the Company's products by the U.S. Food and Drug
Administration and market acceptance of the Company's products by customers.
Based upon the weight of all available evidence, the Company has provided a full
valuation allowance for its deferred tax assets since, in the opinion of
management, realization of these future benefits is not sufficiently assured
(defined as a likelihood of slightly more than 50 percent).
As of December 31, 1996, the Company has net operating loss carryforwards
and research and development credit carryforwards which may be used to offset
future federal and state taxable income and tax liabilities as follows:
<TABLE>
<CAPTION>
RESEARCH AND
DEVELOPMENT TAX
CREDIT
NET OPERATING ----------------------
YEAR OF EXPIRATION LOSS FEDERAL STATE
- ------------------------------------------------------ ------------- ---------- ----------
<S> <C> <C> <C>
2007.................................................. $ 338,000 $ 22,000 $ 12,000
2008.................................................. 2,708,000 74,000 37,000
2009.................................................. 4,076,000 124,000 62,000
2010.................................................. 4,250,000 66,000 101,000
2011.................................................. 4,085,000 121,000 87,000
------------- ---------- ----------
$ 15,457,000 $ 407,000 $ 299,000
------------- ---------- ----------
------------- ---------- ----------
</TABLE>
F-16
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
As a result of the issuance of redeemable convertible preferred stock (Note
5), a change in ownership has occurred as defined by the Internal Revenue code
which may significantly restrict future annual utilization of the Company's
federal NOL carryforwards. Under the provisions of the Internal Revenue Code,
certain substantial changes in the Company's ownership may limit the amount of
the net operating loss and tax credit carryforwards which could be utilized
annually to offset future taxable income and taxes payable. The amount of the
annual limitation is determined based upon the Company's value prior to an
ownership change. Subsequent significant ownership changes could further affect
the limitation in future years.
8. COMMITMENTS AND CONTINGENCIES
In November 1993, the Company entered into a five-year operating lease for
office and research space. The lease requires the Company to pay a share of real
estate taxes and building operating expenses if such expenses exceed a base
level stipulated in the lease.
In January 1994, the Company entered into a leasing arrangement whereby a
third party will provide up to $1,700,000 in equipment financing. In connection
with this agreement, the Company granted to the lessor warrants to purchase
153,000 shares of Series A Preferred Stock at a price of $1.00 per share. The
warrants expire in January 2004 or five years from the closing of the sale and
issuance of shares of the Company's common stock in an initial public offering,
whichever is later. The Company ascribed a value of $100,000 to such warrants,
which is included in other assets and is being amortized over the life of the
lease financing.
In February 1996, the Company entered into a leasing arrangement with this
same third party who will provide up to $1,436,775 in additional equipment
financing. In connection with this agreement, the Company initially granted to
the lessor warrants to purchase 32,500 shares of Series C Preferred Stock at a
price of $1.80 per share. As of December 31, 1996, the Company is committed to
grant an additional 67,500 warrants upon commencement of certain phases of the
financing. The warrants expire in May 2006 or five years from the closing of the
sale and issuance of the Company's common stock in an initial public offering,
whichever is later. The value ascribed to the warrants granted was not
significant.
Future minimum lease payments required under operating and capital leases as
of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- ------------
<S> <C> <C>
1997................................................................ $ 105,308 $ 628,319
1998................................................................ 87,757 301,656
1999................................................................ -- 129,500
2000................................................................ -- 26,095
---------- ------------
Total minimum lease payments........................................ $ 193,065 1,085,570
----------
----------
Amount representing interest........................................ (102,502)
------------
Present value of minimum lease payments............................. $ 983,068
------------
------------
</TABLE>
Rent expense for the years ended December 31, 1994, 1995 and 1996 was
approximately $185,000, $108,000 and $128,000, respectively.
F-17
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Obligations under capital lease have interest rates which range from 8% to
15% at December 31, 1996.
Under certain licensing and other agreements, the Company is required to
make payments upon the achievement of certain milestones, to pay royalties on
certain drug sales, if any, and to pay other amounts in connection with
sublicenses, if any (collectively "Contingent Payments"). To date, the Company
has not become obligated to make any Contingent Payments under such agreements.
In addition, pursuant to several license and sponsored research agreements, the
Company is obligated to make certain payments through 1998 of up to $300,000.
9. SAVINGS PLAN
The Company has a retirement savings plan for all employees pursuant to
Section 401(k) of the Internal Revenue Code. Employees become eligible to
participate upon completion of six months of service to the Company. Employees
may contribute any whole percentage of their salary, up to a maximum annual
statutory limit. The Company is not required to contribute to this plan and has
made no contributions to date.
10. SUBSEQUENT EVENT
In October 1997, the Company entered into a collaboration agreement with a
pharmaceutical company to identify new fungal targets and antifungal drug
candidates. The agreement requires the pharmaceutical company to pay initial
technology access fees, payments for research and development and upon
attainment of certain milestones, plus royalties on sales of any new drug
resulting from the collaboration. As part of this agreement, the pharmaceutical
company has agreed to purchase shares of common stock having a value of
$3,000,000 (based on the initial public offering price) in a private placement
concurrently with the Company's initial public offering. The Company has granted
certain "piggyback" registration rights to this pharmaceutical company beginning
in April 1998 related to such shares.
F-18
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer contained herein, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company or any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, shares of
Common Stock in any jurisdiction to any person to whom it is not lawful to make
any such offer or solicitation in such jurisdiction or in which the person
making such offer or solicitation is not qualified to do so. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
------------------------------------------------
<TABLE>
<S> <C>
Prospectus Summary.................................................... 4
Risk Factors.......................................................... 8
Use of Proceeds....................................................... 19
Dividend Policy....................................................... 19
Capitalization........................................................ 20
Dilution.............................................................. 21
Selected Financial Data............................................... 22
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 23
Business.............................................................. 27
Management............................................................ 41
Certain Transactions.................................................. 49
Principal Stockholders................................................ 52
Description of Capital Stock.......................................... 54
Shares Eligible for Future Sale....................................... 58
Underwriting.......................................................... 59
Legal Matters......................................................... 60
Experts............................................................... 60
Additional Information................................................ 60
Index to Financial Statements......................................... F-1
</TABLE>
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in the distribution, may be required to deliver a Prospectus. This
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.
PROSPECTUS , 1998
[LOGO]
Shares
SCRIPTGEN
PHARMACEUTICALS, INC.
Common Stock
S B C W A R B U R G DILLON READ INC.
VOLPE BROWN WHELAN & COMPANY
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts shown
are estimated, except the SEC registration fee, the NASD filing fee and the
Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 13,591
NASD Filing Fee................................................... 4,985
Nasdaq National Market Listing Fee................................
Printing Expenses.................................................
Legal Fees and Expenses...........................................
Accounting Fees and Expenses......................................
Blue Sky Expenses and Counsel Fees................................
Transfer Agent and Registrar Fees.................................
Miscellaneous.....................................................
---------
Total......................................................... $
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
("DGCL") provides that a Delaware corporation may indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that despite the adjudication of
liability, such person is fairly and reasonably entitled to be indemnified for
such expenses which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer,
II-1
<PAGE>
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
such Section 145.
Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director: (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from
which the director derived an improper personal benefit.
The Company's Restated Certificate provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL),
relating to prohibited dividends or distribution or the repurchase or redemption
of stock, or (iv) for any transaction from which the director derives an
improper personal benefit. The provision does not apply to claims against a
director for violations of certain laws, including federal securities laws. If
the DGCL is amended to authorize the further elimination or limitation of
directors' liability, then the liability of directors of the Company shall
automatically be limited to the fullest extent provided by law. The Company's
Restated Certificate and By-Laws also contain provisions requiring the Company
to indemnify the directors, officers, employees or other agents to the fullest
extent permitted by the DGCL.
The Company intends to enter into indemnification agreements with its
current directors and executive officers. The Company intends to insure its
directors and officers against losses arising from any claim against them as
such for wrongful acts or omission, subject to certain limitations.
Under Section of the Underwriting Agreement, the underwriters are
obligated, under certain circumstances, to indemnify officers, directors and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement filed as Exhibit 1.1 hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since November 1994, the Company has sold unregistered securities in the
amounts, at the times, and for the aggregate amounts of consideration listed as
follows:
In November 1994, the Company issued a total of 16,262 shares of Common
Stock to certain stockholders of the Company in connection with the Bridge Loan
Transaction at a price of $0.15 per share for total consideration of $2,500 in
cash.
In December 1994, the Company issued a total of 27,646 shares of Common
Stock to certain stockholders of the Company in connection with the Bridge Loan
Transaction at a price of $0.15 per share for total consideration of $4,250 in
cash.
In December 1994, the Company issued a total of 325,248 shares of Common
Stock to the co-chairmen of its Scientific Advisory Board at $0.03 per share for
total consideration of $10,000.
In February 1995, the Company issued a total of 13,010 shares of Common
Stock to certain stockholders of the Company in connection with the Bridge Loan
Transaction at a price of $0.15 per share for total consideration of $2,000 in
cash.
II-2
<PAGE>
In April 1995, the Company issued a total of 6,579,086 shares of Series B
Preferred Stock (convertible into 2,139,826 shares of Common Stock) to certain
investors pursuant to a Series B Stock Purchase Agreement. For 2,579,086 of such
shares, the consideration paid per share was $1.00 of cancelled indebtedness of
the Company for total consideration of $2,579,086 of cancelled indebtedness. For
the remaining 4,000,000 shares, the consideration paid per share was $1.00 in
cash for total consideration of $4,000,000.
In April 1995, the Company issued 82 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $12.50.
In June 1995, the Company issued 175 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $26.75.
In March 1996, the Company issued 517 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $79.40.
In April 1996, the Company issued 320 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $49.15.
In May 1996, the Company issued a total of 2,942,521 shares of Series C
Preferred Stock (convertible into 957,045 shares of Common Stock) to certain
investors pursuant to a Series C Preferred Stock Purchase Agreement. The
consideration paid per share of was $1.80 in cash for total consideration of
$5,296,537.
In May 1996, the Company issued warrants to purchase up to 32,500 shares of
Series C Preferred Stock at an exercise price of $1.80 per share (to purchase up
to 10,571 shares of Common Stock at an exercise price of $5.53 per share
following the Offering) to Comdisco, Inc. ("Comdisco"), in consideration for
Comdisco (i) executing and delivering certain lease agreements and schedules
thereto and (ii) making available $686,775 of lease financing.
In June 1996, the Company issued 310 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $47.55.
In June 1996, the Company issued 216 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $33.20.
In June 1996, the Company issued 7,478 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $1,149.50.
In October 1996, the Company issued 2,602 shares of Common Stock to a
consultant upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $400.
In November 1996, the Company issued 1,111,333 shares of Series C Preferred
Stock (convertible into 361,457 shares of Common Stock) to Lombard, Odier & Cie
at $1.80 per share in cash for total consideration of $2,000,400.
In November 1996, the Company issued a total of 162,624 shares of Common
Stock to the co-chairmen of its Scientific Advisory Board upon the exercise of
options at the exercise price of $0.03 per share for total consideration of
$5,000.
In February 1997, the Company issued 48,787 shares of Common Stock to its
acting President and Chairman of the Board upon the exercise of options at the
exercise price of $0.15 per share for total consideration of $7,500.
In May 1997, the Company issued warrants to purchase up to 22,500 shares of
Series C Preferred Stock at an exercise price of $1.80 per share (to purchase up
to 7,318 shares of Common Stock at an exercise price of $5.53 per share
following the Offering) to Comdisco in consideration for Comdisco
II-3
<PAGE>
(i) executing and delivering certain lease agreements and schedules thereto and
(ii) making available $250,000 of lease financing.
In May 1997, the Company issued 294 shares of Common Stock to a former
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $45.15.
In August 1997, the Company issued 33,956 shares of Common Stock to its
President and Chief Executive Officer upon the exercise of options at the
exercise price of $0.15 per share for total consideration of $5,220.
In October 1997, the Company issued warrants to purchase up to 45,000 shares
of Series C Preferred Stock at an exercise price of $1.80 per share (to purchase
up to 14,636 shares of Common Stock at an exercise price of $5.53 per share
following the Offering) to Comdisco in consideration for Comdisco (i) executing
and delivering certain lease agreements and schedules thereto and (ii) making
available $500,000 of lease financing.
As of November 15, 1997, the Company has outstanding options to purchase an
aggregate of 701,508 shares of Common Stock at exercise prices ranging from
$0.03 to $8.76.
No underwriters were engaged in connection with the foregoing sales of
securities. Such sales of Common Stock and Preferred Stock were made in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act of 1933 and Rule 506 of Regulation D promulgated thereunder for transactions
not involving a public offering, and all purchasers were accredited investors as
such term is defined in Rule 501(a) of Regulation D. Issuances of options to the
Company's employees, directors, consultants and members of its Scientific
Advisory Board were made pursuant to Rule 701 promulgated under the Securities
Act of 1933.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation, as amended
3.2 Form of Amendment to Amended and Restated Certificate of Incorporation*
3.3 By-Laws
3.4 Form of Amended By-Laws*
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Fulbright & Jaworski L.L.P.*
10.1 Stock Purchase Agreement among the Company and the investors listed on the Schedule of Purchasers thereto
dated September 16, 1993
10.2 Loan and Stock Purchase Agreement among the Company and the purchasers listed on Schedule I thereto dated
July 13, 1994
10.3 Series B Stock Purchase Agreement among the Company, the investors listed on the Schedule of Purchasers
thereto, Thomas Bologna and Barry Weinberg dated April 19, 1995
10.4 Series C Stock Purchase Agreement among the Company, the investors listed on the Schedule of Purchasers
thereto, Thomas Bologna and Barry Weinberg dated May 17, 1996
10.5 Subsequent Series C Stock Purchase Agreement among the Company and Lombard, Odier & Cie dated November 15,
1996
10.6 Master Lease Agreement between the Company and Comdisco, Inc. dated November 22, 1993
10.7 Warrant Agreement between the Company and Comdisco, Inc. dated January 17, 1994, as amended
10.8 Warrant Agreement between the Company and Comdisco, Inc. dated May 18, 1996, as amended
10.9 Collaboration and License Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997+
10.10 Stock Purchase Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997
10.11 Registration Rights Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997
10.12 Heads of Agreement between the Company and Hoffmann-La Roche Inc. dated September 22, 1995, as amended+
10.13 Collaboration Agreement between the Company and Eli Lilly and Company dated May 8, 1997+
10.14 Compound Testing and Development Agreement between the Company and Monsanto Company dated November 17,
1997+
10.15 Assignment Agreement between the Company, Andrew Pakula and James Bowie effective March 15, 1994, as
amended+
10.16 Employment Agreement between the Company and Mark T. Weedon dated June 24, 1997
10.17 Employment Agreement between the Company and Dr. Michael G. Palfreyman dated September 10, 1994
10.18 Employment Agreement between the Company and Karen A. Hamlin dated December 14, 1992
10.19 Consulting Agreement between the Company and Dr. Michael R. Green dated January 11, 1993, as amended*
10.20 Consulting Agreement between the Company and Dr. Peter S. Kim dated July 1, 1992, as amended*
10.21 1994 Employee Stock Option Plan
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<S> <C>
10.22 Commercial Real Property Lease between the Company and Cummings Properties Management, Inc. dated November
2, 1993
11.1 Computation of Unaudited Pro Forma Net Loss Per Share
23.1 Consent of Price Waterhouse LLP, Independent Accountants
23.2 Consent of Fulbright & Jaworski L.L.P. (to be included in Exhibit 5.1)*
23.3 Consent of Darby & Darby, P.C.
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* TO BE FILED BY AMENDMENT
+ PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
(b) Financial Statement Schedules. The following financial statement schedules
are filed herewith:
All other schedules are omitted because they are not required or are not
applicable or the information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of 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 Registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that: (1) For purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective. (2) For the purpose of determining any liability under the
Securities Act 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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Medford, State of
Massachusetts, on November 20, 1997.
SCRIPTGEN PHARMACEUTICALS, INC.
BY: /S/ MARK T. WEEDON
-----------------------------------------
Mark T. Weedon
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below and on the following page constitutes and appoints each of Mark T. Weedon,
Barry Weinberg and Karen Hamlin as his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, including post-effective
amendments, and to file the same, with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange Commission, granting
unto each said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, and hereby ratifies and confirms all that any said attorney-in-fact
and agent, each acting alone, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive November 20, 1997
Officer and Director
(Principal Executive
Officer)
/s/ MARK T. WEEDON
- ------------------------------
Mark T. Weedon
Senior Director of November 20, 1997
Operations, Secretary
and Treasurer (Principal
Financial and Accounting
Officer)
/s/ KAREN A. HAMLIN
- ------------------------------
Karen A. Hamlin
/s/ BARRY WEINBERG Chairman of the Board November 20, 1997
- ------------------------------
Barry Weinberg
/s/ DAVID BALTIMORE, PH.D. Director November 20, 1997
- ------------------------------
David Baltimore, Ph.D.
/s/ ALLAN R. FERGUSON Director November 20, 1997
- ------------------------------
Allan R. Ferguson
/s/ JASON S. FISHERMAN, M.D. Director November 20, 1997
- ------------------------------
Jason S. Fisherman, M.D.
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
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<S> <C> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation, as amended
3.2 Form of Amendment to Amended and Restated Certificate of Incorporation*
3.3 By-Laws
3.4 Form of Amended By-Laws*
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Fulbright & Jaworski L.L.P.*
10.1 Stock Purchase Agreement among the Company and the investors listed on the Schedule of
Purchasers thereto dated September 16, 1993
10.2 Loan and Stock Purchase Agreement among the Company and the purchasers listed on Schedule I
thereto dated July 13, 1994
10.3 Series B Stock Purchase Agreement among the Company, the investors listed on the Schedule of
Purchasers thereto, Thomas Bologna and Barry Weinberg dated April 19, 1995
10.4 Series C Stock Purchase Agreement among the Company, the investors listed on the Schedule of
Purchasers thereto, Thomas Bologna and Barry Weinberg dated May 17, 1996
10.5 Subsequent Series C Stock Purchase Agreement among the Company and Lombard, Odier & Cie dated
November 15, 1996
10.6 Master Lease Agreement between the Company and Comdisco, Inc. dated November 22, 1993
10.7 Warrant Agreement between the Company and Comdisco, Inc. dated January 17, 1994, as amended
10.8 Warrant Agreement between the Company and Comdisco, Inc. dated May 18, 1996, as amended
10.9 Collaboration and License Agreement between the Company and Hoechst Marion Roussel dated
October 24, 1997+
10.10 Stock Purchase Agreement between the Company and Hoechst Marion Roussel dated October 24, 1997
10.11 Registration Rights Agreement between the Company and Hoechst Marion Roussel dated October 24,
1997
10.12 Heads of Agreement between the Company and Hoffmann-La Roche Inc. dated September 22, 1995, as
amended+
10.13 Collaboration Agreement between the Company and Eli Lilly and Company dated May 8, 1997+
10.14 Compound Testing and Development Agreement between the Company and Monsanto Company dated
November 17, 1997+
10.15 Assignment Agreement between the Company, Andrew Pakula and James Bowie effective March 15,
1994, as amended+
10.16 Employment Agreement between the Company and Mark T. Weedon dated June 24, 1997
10.17 Employment Agreement between the Company and Dr. Michael G. Palfreyman dated September 10,
1994
10.18 Employment Agreement between the Company and Karen A. Hamlin dated December 14, 1992
10.19 Consulting Agreement between the Company and Dr. Michael R. Green dated January 11, 1993, as
amended*
10.20 Consulting Agreement between the Company and Dr. Peter S. Kim dated July 1, 1992, as amended*
10.21 1994 Employee Stock Option Plan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.22 Commercial Real Property Lease between the Company and Cummings Properties Management, Inc.
dated November 2, 1993
11.1 Computation of Unaudited Pro Forma Net Loss Per Share
23.1 Consent of Price Waterhouse LLP, Independent Accountants
23.2 Consent of Fulbright & Jaworski L.L.P. (to be included in Exhibit 5.1)*
23.3 Consent of Darby & Darby, P.C.
24.1 Power of Attorney (included in signature page)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* TO BE FILED BY AMENDMENT
+ PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTECH PHARMACEUTICALS, INC.
SCRIPTECH PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the Corporation is ScripTech Pharmaceuticals, Inc. The
corporation was originally incorporated under the same name, and the original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on September 17, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of the Corporation as heretofore supplemented or amended.
3. The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
ARTICLE FIRST: The name of the corporation is ScripTech Pharmaceuticals,
Inc. (the "Corporation").
ARTICLE SECOND: The address of the registered office of the Corporation in
the State of Delaware shall be 1209 Orange Street, Wilmington, Delaware 19801
and the name of its registered agent at such address shall be The Corporation
Trust Company.
ARTICLE THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE FOURTH: Capital Stock.
The total number of shares which the Corporation shall have authority to
issue is (i) Fifteen Million (15,000,000) shares of Common Stock, with a par
value of one cent ($.01) per share (the "Common Stock"), and (ii) Six Million
Two Hundred Fifty
<PAGE>
Thousand (6,250,000) shares of Series A Preferred Stock, with a par value of one
cent ($.0l) per share (the "Preferred Stock").
(a) Common Stock.
Section 1. Voting Rights. Except as otherwise required by law, and subject
in all cases to the provisions of Section 4 of subpart (b) to this ARTICLE
FOURTH, the holders of the Common Stock will be entitled to one vote per share
on all matters to be voted on by the Corporation's stockholders.
Section 2. Dividends. When and as dividends are declared on shares of
Common Stock, whether payable in cash, property or securities of the
Corporation, the holders of Common Stock and the holders of Preferred Stock will
be entitled to share ratably in such dividends (with each share of Preferred
Stock being treated for purposes of such dividend as the number of shares of
Common Stock into which such share of Preferred Stock could then be converted).
Section 3. Registration of Transfer. The Corporation will keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of shares of Common Stock. Upon the surrender of
any certificate representing shares of Common Stock at such place, the
Corporation will, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the
surrendered certificate, and the Corporation forthwith will cancel such
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of such class as is requested by
the holder of the surrendered certificate and will be substantially identical in
form to the surrendered certificate.
Section 4. Replacement. Upon receipt of evidence reasonably satisfactory
to the Corporation of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing one or more shares of Common Stock, and
in the case of any such loss, theft or destruction, upon receipt of indemnity
and bond reasonably satisfactory to the Corporation, or, in the case of any such
mutilation upon surrender of such certificate, the Corporation will execute and
deliver in lieu of such certificate a new certificate of like kind representing
the number of shares represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 5. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
-2-
<PAGE>
(b) Preferred Stock.
Section l. Dividends. The holders of the Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of the funds of
the Corporation legally available therefor, cash dividends at the annual rate of
$0.10 per share of Preferred Stock, payable annually on the last day of December
in each year beginning December 31, 1993. The initial dividend paid after the
date of original issuance of any shares of the Preferred Stock shall accrue from
such date of issuance on a pro rata basis. Dividends payable for any period less
than a full year shall be computed on the basis of a 360-day year with 12 equal
months of 30 days. Dividends shall be payable to holders of record, as they
appear on the stock books of the Corporation on such record dates as may be
declared by the Board of Directors, not more than sixty (60) days nor less than
ten (10) days preceding the payment dates of such dividends. If the dividend on
the Preferred Stock is not paid in full, the aggregate deficiency shall not
cumulate, but shall be fully paid or set apart for payment before any dividends
shall be paid or set apart for, or any other distributions paid, or any payments
made on account of the purchase, redemption or retirement of any other
securities of the Corporation.
Section 2. Liquidation Preference.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, then, before any payment shall be
made to or set apart for the holders of Common Stock or the holders of any other
shares of capital stock of the Corporation ranking upon liquidation junior to
the Preferred Stock, the holders of shares of Preferred Stock shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders, a per-share cash amount equal to $1.00 (such amount to be
appropriately adjusted in the event of any stock dividend, stock split or
combination, or similar recapitalization of the Corporation's capital stock)
plus, in the case of each share, a cash amount equal to any declared but unpaid
dividends thereon (the "Preferred Stock Liquidation Preference"). If, upon any
such liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Preferred Stock the full amount to
which they shall be entitled, the holders of Preferred Stock shall share ratably
in any distribution of assets of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the Preferred Stock
Liquidation Preference if all amounts payable on or with respect to said shares
were paid in full.
(b) Any assets of the Corporation remaining after the payments
specified in paragraph (a) above shall be distributed with respect to the
outstanding shares of Preferred Stock (each share of which shall be treated for
purposes of this distribution as the number of shares of Common Stock into which
such share could then be converted) and Common Stock pro rata without regard to
class.
-3-
<PAGE>
(c) For purposes of this Section 2, if any assets distributed
to stockholders upon liquidation of the Corporation consist of property other
than cash, the amount of such distribution shall be deemed to be the fair market
value thereof at the time of such distribution, as determined in good faith by
the Board of Directors of the Corporation.
Section 3. Reorganization.
(a) In the event of a Reorganization (as defined below), each
holder of Preferred Stock shall have the option to either (i) convert his or its
shares of Preferred Stock into Common Stock in accordance with the terms and
provisions of Section 5 of this ARTICLE FOURTH, subpart (b), or (ii) have the
Corporation redeem his or its shares of Preferred Stock in exchange for the
Preferred Stock Liquidation Preference, as hereinafter provided in Section 3(c)
below. For purposes of this Section 3, "Reorganization" shall mean any merger or
consolidation of the Corporation into or with any other corporation or entity,
or a sale, conveyance, mortgage, transfer, license, pledge, lease or other
disposition of all or substantially all of the assets of the Corporation, unless
the stockholders of the Corporation immediately prior thereto shall, immediately
thereafter, hold as a group the right to cast not less than 75% of the votes of
all holders of voting securities of the resulting or surviving corporation or
entity on any matter on which any such holders of voting securities shall be
entitled to vote, in which case, such event shall not be deemed to be a
Reorganization for the purposes of this Section 3.
(b) All holders of record of shares of Preferred Stock will be
given at least 20 but not more than 60 days' prior written notice of the
Reorganization and the date fixed (the "Option Date") and the place designated
for conversion or redemption pursuant to this Section 3. Such notice will be
sent by registered mail, return receipt requested, to each record holder of
Preferred Stock at such holder's address last shown on the records of the
transfer agent for the Preferred Stock (or the records of the Corporation if it
serves as its own transfer agent). Each holder of Preferred Stock shall give
written notice to the Corporation of his or its election (i) to convert his or
its shares of Preferred Stock into Common Stock or (ii) to receive the Preferred
Stock Liquidation Preference, at least 3 days prior to the Option Date. If the
Corporation has not received notice of such election prior to such three-day
period, such holder shall be deemed to have elected to convert his or its shares
of Preferred Stock into Common Stock in accordance with the terms and provisions
of Section 5 of this ARTICLE FOURTH, subpart (b).
(c) If an election to receive the Preferred Stock Liquidation
Preference is made, on or before the Option Date, each holder of shares of
Preferred Stock making such election shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice. If required by the Corporation, certificates surrendered for
redemption shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory
-4-
<PAGE>
to the Corporation, duly executed by the registered holder or his or its
attorney duly authorized in writing. On the Option Date and upon the surrender
of the certificate or certificates representing shares of Preferred Stock, the
Corporation shall pay in full to such holder the Preferred Stock Liquidation
Preference with respect to such shares of Preferred Stock. On and after the
Option Date, all rights with respect to such holders of Preferred Stock who
elected to receive the Preferred Stock Liquidation Preference, including the
rights, if any, to receive notices and vote, will terminate, except only the
rights of the holders thereof, upon surrender of their certificate or
certificates therefor, to receive payment of the Preferred Stock Liquidation
Preference as aforesaid.
(d) All certificates evidencing shares of Preferred Stock
which are required to be surrendered in accordance with this Section 3 shall,
from and after the Option Date, be deemed to have been retired and canceled and
the shares of Preferred Stock represented thereby for all purposes shall also be
deemed retired and canceled, and shall not be reissued, notwithstanding the
failure of the holder or holders thereof to surrender such certificates on or
prior to such date. The Corporation may thereafter take such appropriate action
as may be necessary to reduce accordingly the authorized number of shares of
Preferred Stock.
(e) Notwithstanding anything to the contrary contained in this
Section 3, unless the holders of Preferred Stock shall otherwise notify the
Corporation, no such holder shall be deemed to have elected to convert his or
its shares of Preferred Stock into Common Stock or redeemed his or its shares of
Preferred Stock, as the case may be, as a result of a Reorganization, and no
such conversion or redemption shall be effective, unless and until the
Reorganization referred to in the notice given to holders of record of Preferred
Stock pursuant to Section 3(b) hereof shall have been consummated.
Section 4. Voting.
(a) Each holder of outstanding shares of Preferred Stock shall
be entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Preferred Stock held by such holder are
convertible (as adjusted from time to time pursuant to Section 5 of this ARTICLE
FOURTH, subpart (b)) at the record date for the determination of stockholders
entitled to vote on such matters, or if no such record date is established, at
the date such vote is taken or written consent solicited, at each meeting of
stockholders of the Corporation (and written actions of stockholders in lieu of
meetings) with respect to any and all matters presented to the stockholders of
the Corporation for their action or consideration. Except as provided by law, by
the provisions of paragraphs (b), (c) and (d) below or by the provisions
establishing any other series of Preferred Stock or Common Stock, holders of
Preferred Stock shall vote together with the holders of Common Stock and any
other class or series of stock as a single class.
-5-
<PAGE>
(b) The Corporation shall not, without the written consent or
affirmative vote of the holders of greater than 50% of the then outstanding
shares of Preferred Stock, given in writing or by vote at a meeting, consenting
or voting (as the case may be) separately as a class:
(i) merge with or into or consolidate with any other
corporation, or sell, lease, license or otherwise dispose of all or
substantially all of its properties or assets;
(ii) amend, alter or repeal the preferences, special
rights or other powers of the Preferred Stock or otherwise amend, alter or
repeal any provision of this Certificate of Incorporation, in either such case,
so as to affect adversely the Preferred Stock;
(iii) directly or indirectly redeem, purchase or
otherwise acquire any of the Corporation's equity securities, other than
pursuant to any stock option or agreement entered into by the Corporation and
approved by the directors designated by the holders of Preferred Stock, as
provided in paragraph (d) below;
(iv) directly or indirectly declare or pay any dividends
or make any distributions upon any of its equity securities, other than the
Preferred Stock;
(v) authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any securities having
equity features and which rank on a parity with or senior to the Preferred Stock
upon payment of dividends or upon liquidation or other distribution of assets or
with a conversion price lower than that of the Preferred Stock or terms more
favorable than those of the Preferred Stock;
(vi) make any amendment to the Corporation's By-Laws, or
file any resolution of the board of directors with the Secretary of State of the
State of Delaware containing any provisions, which would adversely affect or
otherwise impair the rights of the holders of the Preferred Stock or the Common
Stock issued or issuable upon conversion of the Preferred Stock; or
(vii) other than the issuance of the Preferred Stock
issued in accordance with the Stock Purchase Agreement, dated on or about August
__, 1993, between the Corporation and the Purchasers named therein (the "Stock
Purchase Agreement"), enter into any transaction the effect of which shall (x)
cause the beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 20% or more of the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors to be held
by any individual, entity or two or more individuals or entities who agree to
act in concert or (y) cause the individuals who constituted the
-6-
<PAGE>
Corporation's Board of Directors on the date immediately succeeding the date at
which shares of Preferred Stock were first issued, to cease to constitute at
least a majority of such Board, or (z) otherwise result in a change in control
of the Corporation; or
(viii) liquidate, dissolve or effect a recapitalization
or reorganization in any form of transaction.
(c) Notwithstanding the provisions of paragraph (b) above,
until the second anniversary of the issuance of the Preferred Stock pursuant to
the Stock Purchase Agreement, the Corporation shall not, without the written
consent or affirmative vote of all the holders of Preferred Stock, given in
writing or by vote at a meeting, consenting or voting (as the case may be) as a
separate class:
(i) merge with or into or consolidate with any other
corporation, or sell, lease, license or otherwise dispose of all or
substantially all of its properties or assets; or
(ii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction.
(d) The holders of the Preferred Stock (i) shall have the
right to designate the nomination of three individuals to serve on the
Corporation's Board of Directors, one of whom shall initially be Barry Weinberg,
and the Corporation shall use its best efforts to cause the election of such
individuals as directors and (ii) shall have additional rights with respect to
the election of directors, as more fully described in the Stock Purchase
Agreement.
Section 5. Optional Conversion. The holders of Preferred Stock shall have
conversion rights as follows:
(a) Right to Convert.
(i) Each share of Preferred Stock shall be convertible,
at the option of the holder thereof, at any time and from time to time into the
number of fully paid and nonassessable shares of Common Stock of the Corporation
as is determined by dividing $1.00 by the Current Conversion Price (as defined
in paragraph (c) below) in effect at the time of conversion. The conversion
price at which shares of Common Stock shall be deliverable upon conversion of
Preferred Stock without the payment of additional consideration by the holder
thereof shall initially be $1.00, subject to adjustment as provided in paragraph
(c) below.
(ii) No fractional shares of Common Stock shall be
issued upon conversion of shares of Preferred Stock. In lieu of any fractional
share to which the holder would otherwise be entitled after determination of the
aggregate full number of shares of Common Stock issuable in respect of the
Preferred Stock then being
-7-
<PAGE>
converted, the Corporation shall pay cash equal to such fraction multiplied by
the then Current Conversion Price.
(b) Mechanics of Conversion.
(i) In order for a holder of Preferred Stock to convert
shares of Preferred Stock into shares of Common Stock, such holder shall
surrender the certificate or certificates for such shares of Preferred Stock, at
the office of the transfer agent for the Preferred Stock (or at the principal
office of the Corporation if the Corporation serves as its own transfer agent),
together with written notice that such holder elects to convert all or any
number of the shares of Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of the
nominees in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date (the "Conversion Date"). The Corporation
shall, as soon as practicable after the Conversion Date, issue and deliver at
such office to such holder of Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of whole shares of Common Stock (and
any shares of Preferred Stock represented by the certificate or certificates
delivered to the Corporation by the holder thereof which are not converted into
Common Stock) issuable upon such conversion in accordance with the provisions
hereof, together with cash in lieu of fractional shares calculated in accordance
with subparagraph (ii) of paragraph (a) above. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of such
surrender of certificates of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on that date.
(ii) The Corporation shall at all times when the
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Preferred Stock, such number of its duly authorized shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock. Before taking any action which would
cause Common Stock, upon the conversion of Preferred Stock, to be issued below
the then par value of the shares of Common Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock to the holders of Preferred Stock. The Corporation will
not close its books against the transfer of the Preferred Stock or of Common
Stock issued or issuable upon conversion of the Preferred Stock in any manner
which interferes with the timely conversion of the Preferred Stock.
-8-
<PAGE>
(iii) All shares of Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any declared and
unpaid dividends thereon. On and as of the Conversion Date, the shares of Common
Stock issuable upon such conversion shall be deemed to be outstanding, and the
holder thereof shall be entitled to exercise and enjoy all rights with respect
to such shares of Common Stock, including the rights, if any, to receive notices
and to vote. All certificates representing shares of Preferred Stock, from and
after the Conversion Date, shall be deemed to have been retired and canceled and
shall not be reissued, and the Corporation may thereafter take such appropriate
action as may be necessary to reduce accordingly the authorized number of shares
of Preferred Stock.
(c) Adjustments to Conversion Price. The initial conversion
price as stated in subparagraph (i) of paragraph (a) above shall be subject to
adjustment from time to time and such conversion price as adjusted shall
likewise be subject to further adjustment, all as hereinafter set forth. The
term "Current Conversion Price" shall mean, as of any time, the conversion price
of the Preferred Stock at that time, as specified in paragraph (a) above in case
no adjustment shall have been required, or such conversion price as adjusted
pursuant to this paragraph (c), as the case may be.
(i) If at any time after the date of issuance of the
Preferred Stock the Corporation shall issue (x) any shares of Common Stock other
than (A) Excluded Stock (as defined in subparagraph (vii) below), (B) Common
Stock issued or issuable upon conversion of the Preferred Stock or (C) by way of
dividend or other distribution on shares of Common Stock referred to in the
foregoing clauses (A) and (B), or (y) any shares of a class or series
convertible into Common Stock, other than the Preferred Stock (collectively,
with the Common Stock, such "Securities"), for a consideration per share (the
consideration in each case to be determined in the manner provided in (E) and
(F) of subparagraph (ii) below) less than the Current Conversion Price in effect
immediately prior to the issuance of such Securities, the Current Conversion
Price in effect immediately prior to each such issuance shall forthwith (except
as provided in subparagraph (ii) below) be adjusted to a Current Conversion
Price obtained by dividing an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including the number of shares of Common Stock into
which the outstanding shares of Preferred Stock and
other securities convertible into Preferred Stock are
then directly or indirectly convertible) immediately
prior to such issuance multiplied by the Current
Conversion Price in effect immediately prior to such
issuance, plus
-9-
<PAGE>
(y) the consideration received by the Corporation upon such
issuance,
by
(z) the total number of shares of Common Stock outstanding
(including the number of shares of Common Stock into
which the outstanding shares of Preferred Stock or other
securities convertible into Preferred Stock are then
directly or indirectly convertible) immediately after
such issuance (including the number of shares of Common
Stock into which such newly issued Securities are then
convertible).
(ii) For the purpose of any adjustment of the Conversion
Price pursuant to subparagraph (c)(i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of options or warrants to purchase or
rights to subscribe for Common Stock other than Excluded Stock
(collectively, "Rights"), the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such Rights shall be
deemed to have been issued at the time such Rights were issued, for
a consideration equal to the consideration (determined in the manner
provided in (E) and (F) below), if any, received by the Corporation
upon the issuance of such Rights, plus the minimum purchase price
provided in such Rights for the Common Stock covered thereby;
provided that such shares of Common Stock deliverable upon the
exercise of such Rights shall not be deemed to have been issued
unless such consideration per share would be less than the Current
Conversion Price in effect on the date of and immediately prior to
such issue. No further adjustment of the Current Conversion Price
adjusted upon the issuance of such Rights shall be made as a result
of the actual issuance of shares of Common Stock deliverable upon
exercise of such Rights.
(B) In the case of the issuance of securities by their terms convertible
into or exchangeable for Common Stock other than Excluded Stock
(collectively, "Convertible Securities"), or options or warrants to
purchase or rights to subscribe for securities by their terms
convertible or exchangeable for Common Stock other than Excluded
Stock (collectively, "Related Rights"), the aggregate maximum number
of shares of Common Stock deliverable upon conversion, exchange or
exercise of any such Convertible Securities or such Related Rights
shall be deemed to have been issued at the time such Convertible
Securities or such Related Rights were issued and for a
consideration equal to the consideration received by the Corporation
upon issuance of such Convertible Securities or such Related Rights
(excluding
-10-
<PAGE>
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion, exchange or
exercise of such Convertible Securities or Related Rights (the
consideration in each case to be determined in the manner provided
in (E) and (F) below); provided that such shares of Common Stock
deliverable upon such conversion, exchange or exercise of such
Convertible Securities or Related Rights shall not be deemed to have
been issued unless such consideration per share would be less than
the Current Conversion Price in effect on the date of and
immediately prior to such issue. No further adjustment of the
Current Conversion Price adjusted upon the issuance of such Related
Rights shall be made as a result of the actual issuance of such
Convertible Securities deliverable upon exercise of such Related
Rights.
(C) On any change in the number of shares of Common Stock deliverable
upon the exercise of such Rights or Related Rights or upon the
conversion, exchange or exercise of such Convertible Securities or
on any change in the minimum purchase price of such Rights, Related
Rights or Convertible Securities other than a change resulting from
the anti-dilution provisions of such Rights, Related Rights or
Convertible Securities, the Conversion Price shall forthwith be
readjusted to such Current Conversion Price as would have been
obtained had the adjustment made upon the issuance of such Rights,
Related Rights or Convertible Securities not converted, exchanged or
exercised prior to such change, been made upon the basis of such
change.
(D) On the expiration of any such Rights, Related Rights or Convertible
Securities, the Current Conversion Price shall forthwith be
readjusted to such Current Conversion Price as would have obtained
had the adjustment made upon the issuance of such Rights or Related
Rights or the conversion, exchange or exercise of any such
Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the conversion,
exchange or exercise of any such Convertible Securities.
(E) In the case of the issuance of such Securities for cash, the
consideration shall be deemed to be the amount of cash paid therefor
(excluding amounts paid for accrued interest or accrued dividends).
(F) In the case of the issuance of such Securities for a consideration
in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors of the Corporation.
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(iii) If the Corporation declares a dividend or other
distribution payable in such Securities or subdivides its outstanding shares of
Common Stock into a larger number or combines its outstanding shares of Common
Stock into a smaller number, then the Current Conversion Price in effect
immediately prior to such dividend, other distribution, subdivision or
combination, as the case may be, shall forthwith be adjusted to that price
determined by multiplying the Current Conversion Price by a fraction (x) the
numerator of which shall be the total number of outstanding shares of such
Securities immediately prior to such dividend, other distribution, subdivision
or combination and (y) the denominator of which shall be the total number of
outstanding shares of such Securities immediately after such dividend, other
distribution, subdivision or combination.
(iv) In case the Corporation shall declare a dividend or
otherwise distribute to the holders of its Common Stock shares of its capital
stock (other than such Securities), stock or other securities of other persons,
evidences of indebtedness issued by the Corporation or other persons, assets
(excluding cash dividends) or options, warrants or rights (excluding such Rights
or Related Rights), then, in each such case, immediately following the record
date fixed for the determination of the holders of Common Stock entitled to
receive such dividend or distribution, the Current Conversion Price in effect
thereafter shall be determined by multiplying the Current Conversion Price in
effect immediately prior to such record date by a fraction (A) the numerator of
which shall be an amount equal to the remainder of (x) the Current Market Price
(as defined in subparagraph (viii) below) determined immediately prior to such
distribution of one share of Common Stock less (y) the fair value (as determined
in good faith by the Corporation's Board of Directors) of the stock, securities,
evidences of indebtedness, assets, options, warrants or rights so dividended or
distributed in respect of one share of Common Stock, as the case may be, and (B)
the denominator of which shall be the Current Market Price of one share of
Common Stock determined immediately prior to such dividend or distribution. Such
adjustment shall be made on the date such dividend or distribution is made, and
shall become effective at the opening of business on the business day following
the record date for the determination of stockholders entitled to such dividend
or distribution.
(v) In the event the Corporation is in arrears with respect to
the payment of any dividend or portion thereof declared but unpaid on shares of
Preferred Stock, at the time a holder elects to convert such shares of Preferred
Stock, the Current Conversion Price in effect immediately prior to such
conversion shall forthwith be reduced (but only with respect to the shares of
Preferred Stock being so converted) by an amount equal to the quotient of (x)
the aggregate arrearage per share of Preferred Stock being converted, divided by
(y) the number of shares of Common Stock into which such share of Preferred
Stock being converted is then convertible; provided, however, that the
application of the foregoing shall not reduce the Current Conversion Price below
$.01.
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(vi) Whenever the Current Conversion Price shall be adjusted
as provided in this Section 5, the Corporation shall forthwith file, at the
office of the transfer agent for the Preferred Stock, at the principal office of
the Corporation or at such other place as may be designated by the Corporation,
a statement, certified by the chief financial officer of the Corporation,
showing in detail the facts requiring such adjustment and the Current Conversion
Price that shall be in effect after such adjustment. The Corporation shall also
cause a copy of such statement to be sent by first class mail, postage prepaid,
to each holder of record of Preferred Stock at such holder's address as shown in
the records of the Corporation.
(vii) As used in this paragraph (c), "Excluded Stock" shall
mean (x) up to [3,200,000] shares (such amount to be appropriately adjusted in
the event of any stock dividend, stock split or combination, or similar
recapitalization affecting the Common Stock) of Common Stock or options for the
purchase thereof issued, sold or granted, in the past or future, by the
Corporation to its employees, directors or consultants pursuant to bona fide
employee stock purchase, option or similar benefit plans or other incentive
programs or compensation arrangements approved by the Board of Directors of the
Corporation, as more fully detailed in Section 7.14 of the Stock Purchase
Agreement.
(viii) For the purpose of any computation pursuant to
subparagraph (iv) above, the "Current Market Price" at any date of one share of
Common Stock shall be deemed to be the average of the daily closing prices for
the 30 consecutive business days ending 15 business days before the date in
question (as adjusted for any stock splits, stock dividends, combinations or
recapitalization that took effect during such 30 business-day period). The
closing price for each day shall be the last reported sales price on such day on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or if not listed or admitted to trading on any national
securities exchange, the average of the last reported bid and asked prices as
reported by the National Association of Securities Dealers Automated Quotation
System, Inc., all as adjusted for stock splits, stock dividends, combinations or
similar recapitalization that took effect during such 30 business-day period;
provided, however, that if the Common Stock is not traded in such a manner that
the quotations referred to in this subparagraph (viii) are available for the
period required hereunder, the Current Market Price shall be deemed to be the
fair value of such Common Stock as determined in good faith by the Board of
Directors of the Corporation.
(ix) If any event occurs of the type contemplated by the
provisions of this Section 5 but not expressly provided for by such provisions,
then the Corporation's Board of Directors will make an appropriate adjustment in
the Current Conversion Price so as to protect the rights of the holders of the
Preferred Stock; provided that no such adjustment will increase the Current
Conversion Price except as otherwise permitted pursuant to subparagraph (iii)
above or subparagraph (c)(ii)(D) of this Section 5 or decrease the number of
shares of Common Stock issuable upon conversion.
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Section 6. Mandatory Conversion.
(a) Upon the earlier to occur of (i) the consummation of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale by the
Corporation of Common Stock to the public at a minimum price per share of $5.00
resulting in aggregate gross proceeds to the Corporation of not less than
$7,500,000, and (ii) the written consent or affirmative vote of the holders of
not less than 66-2/3% of the then outstanding shares of Preferred Stock, given
in writing or by vote at a meeting, all shares of Preferred Stock then
outstanding shall automatically be converted into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $1.00 by the
Current Conversion Price then in effect pursuant to Section 5 of this ARTICLE
FOURTH, subpart (b).
(b) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. In lieu of any fractional share to
which the holder would otherwise be entitled after determination of the
aggregate full number of shares of Common Stock issuable in respect of the
Preferred Stock then being converted, the Corporation shall pay cash equal to
such fraction multiplied by the then Current Conversion Price.
(c) All holders of record of shares of Preferred Stock will be given
at least 10 but not more than 30 days' prior written notice of the date fixed
(the "Mandatory Conversion Date") and the place designated for mandatory
conversion of all shares of Preferred Stock pursuant to this Section 6. Such
notice will be sent by first class or registered mail, postage prepaid, to each
record holder of Preferred Stock at such holder's address last shown on the
records of the transfer agent for the Preferred Stock (or the records of the
Corporation if it serves as its own transfer agent). On or before the Mandatory
Conversion Date, each holder of shares of Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. On and after the Mandatory Conversion Date, all rights with respect to
the Preferred Stock, including the rights, if any, to receive notices and vote,
will terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Preferred Stock has been
converted and payment of any declared but unpaid dividends thereon. As soon as
practicable after the Mandatory Conversion Date and upon the surrender of the
certificate or certificates representing shares of Preferred Stock, the
Corporation shall issue and deliver to such holder, or on his or its written
order, a certificate or certificates for the number of whole shares of Common
Stock issuable under such conversion in accordance with the provisions hereof,
together with cash as provided in
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subparagraph (b) of this Section 6 in respect of any fraction of a share of
Common Stock otherwise issuable upon such conversion.
(d) All certificates evidencing shares of Preferred Stock which are
required to be surrendered in accordance with this Section 6, from and after the
Mandatory Conversion Date, shall be deemed to have been retired and canceled,
and the shares of Preferred Stock represented thereby, converted into Common
Stock, notwithstanding the failure of the holder or holders thereof to surrender
such certificates on or prior to such date. The Corporation may thereafter take
such appropriate action as may be necessary to reduce accordingly the authorized
number of shares of Preferred Stock.
Section 7. Replacement. Upon receipt of evidence reasonably satisfactory
to the Corporation (an affidavit of the registered holder will be satisfactory)
of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing one or more shares of Preferred Stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity and bond
reasonably satisfactory to the Corporation (provided that if the holder is an
institutional investor its own agreement will be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation will
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
ARTICLE FIFTH: The Corporation is to have perpetual existence.
ARTICLE SIXTH: In addition to, and not by way of limitation of, the powers
granted to the Board of Directors by the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal all or any of the by-laws of the Corporation.
ARTICLE SEVENTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation shall so provide.
ARTICLE EIGHTH: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the by-laws of the Corporation.
ARTICLE NINTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any
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receiver or receivers appointed for this Corporation under the provisions of
ss.291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of ss.279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE TENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute and by this Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
ARTICLE ELEVENTH: To the fullest extent permitted by the General
Corporation Law of the State of Delaware as it now exists or may hereafter be
amended, no director of the Corporation shall be personally liable to the
Corporation, any of its stockholders or any other person or entity for monetary
damages for breach of fiduciary duty owed to the Corporation, its stockholders
or such other person or entity owing to such director's position as a director
of the Corporation. Any repeal or modification of this ARTICLE ELEVENTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE TWELFTH: Section 1. Actions, Suits and Proceedings Other Than By
or in the Right of the Corporation. The Corporation shall indemnify each person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was, or has agreed to become,
a director or officer of the Corporation, or is or was serving, or has agreed to
serve, at the request of the Corporation, as a director, officer or trustee of,
or in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan) (all such
persons being referred to hereafter as an "Indemnitee"), or by reason of any
action alleged to have been taken or omitted to have been taken in such
capacity, against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted
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in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Notwithstanding anything to the contrary in this ARTICLE TWELFTH, except as set
forth in Section 6 below, the Corporation shall not indemnify an Indemnitee
seeking indemnification in connection with a proceeding (or part thereof)
initiated by the Indemnitee unless the initiation thereof was approved by the
Board of Directors of the Corporation.
Section 2. Actions or Suits By or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted to have been taken in such
capacity, against all expenses (including attorneys' fees) and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall deem proper.
Section 3. Indemnification for Expenses of Successful Party.
Notwithstanding the other provisions of this ARTICLE TWELFTH, to the extent that
an Indemnitee has been successful, on the merits or otherwise, in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this ARTICLE
TWELFTH, or in defense of any claim, issue or matter therein, or on appeal from
any such action, suit or proceeding, he shall be indemnified against all
expenses (including attorneys' fees) actually and reasonably incurred by him or
on his behalf in connection therewith. Without limiting the foregoing, if any
action, suit or proceeding is disposed of, on the merits or otherwise (including
a disposition without prejudice), without (i) the disposition being adverse to
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the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv)
an adjudication that the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and (v) with respect to any criminal proceeding, an adjudication
that the Indemnitee had reasonable cause to believe his conduct was unlawful,
the Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
Section 4. Notification and Defense of Claim. As a condition precedent to
his right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this ARTICLE TWELFTH. The Corporation shall
not be entitled, without the consent of the Indemnitee, to assume the defense of
any claim brought by or in the right of the Corporation or as to which counsel
for the Indemnitee shall have reasonably made the conclusion provided for in
clause (ii) above.
Section 5. Advance of Expenses. Subject to the provisions of Section 6
below, in the event that the Corporation does not assume the defense pursuant to
Section 4 of this ARTICLE TWELFTH of any action, suit, proceeding or
investigation of which the Corporation receives notice under this ARTICLE
TWELFTH, any expenses (including attorneys' fees) incurred by an Indemnitee in
defending a civil or criminal action, suit, proceeding or investigation or any
appeal therefrom shall be paid by the Corporation in advance of the final
disposition of such matter, provided, however, that the payment of such expenses
incurred by an Indemnitee in advance of the final disposition of such matter
shall be made only upon receipt of an undertaking by or on behalf of the
Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
by the Corporation as authorized in this ARTICLE TWELFTH. Such undertaking may
be
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accepted without reference to the financial ability of such person to make such
repayment.
Section 6. Procedure for Indemnification. In order to obtain
indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of
this ARTICLE TWELFTH, the Indemnitee shall submit to the Corporation a written
request, including in such request such documentation and information as is
reasonably available to the Indemnitee and is reasonably necessary to determine
whether and to what extent the Indemnitee is entitled to indemnification or
advancement of expenses. Any such indemnification or advancement of expenses
shall be made promptly, and in any event within 60 days after receipt by the
Corporation of the written request of the Indemnitee, unless with respect to
requests under Section 1, 2 or 5 the Corporation determines, by clear and
convincing evidence, within such 60-day period, that the Indemnitee did not meet
the applicable standard of conduct set forth in Section 1 or 2, as the case may
be. Such determination shall be made in each instance by (a) a majority vote of
a quorum of the directors of the Corporation consisting of persons who are not
at that time parties to the action, suit or proceeding in question
("disinterested directors"), (b) if no such quorum is obtainable, a majority
vote of a committee of two or more disinterested directors, (c) a majority vote
of a quorum of the outstanding shares of stock of all classes entitled to vote
for directors, voting as a single class, which quorum shall consist of
stockholders who are not at that time parties to the action, suit or proceeding
in question, (d) independent legal counsel (who may be regular legal counsel to
the Corporation) or (e) a court of competent jurisdiction.
Section 7. Remedies. The right to indemnification or advances as granted
by this ARTICLE TWELFTH shall be enforceable by the Indemnitee in any court of
competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within the 60-day period referred to
above in Section 6. Unless otherwise provided by law, the burden of proving that
the Indemnitee is not entitled to indemnification or advancement of expenses
under this ARTICLE TWELFTH shall be on the Corporation. Neither the failure of
the Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 8. Subsequent Amendment. No amendment, termination or repeal of
this ARTICLE TWELFTH or of the relevant provisions of the General Corporation
Law of the State of Delaware or any other applicable laws shall affect or
diminish in any way the rights of any Indemnitee to indemnification under the
provisions hereof with respect to any action, suit, proceeding or investigation
arising out of or relating to any
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actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
Section 9. Other Rights. The indemnification and advancement of expenses
provided by this ARTICLE TWELFTH shall not be deemed exclusive of any other
rights to which an Indemnitee seeking indemnification or advancement of expenses
may be entitled under any law (common or statutory), agreement or vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding office
for the Corporation, and shall continue as to an Indemnitee who has ceased to be
a director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
ARTICLE TWELFTH shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
ARTICLE TWELFTH. In addition, the Corporation may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this ARTICLE TWELFTH.
Section 10. Partial Indemnification. If an Indemnitee is entitled under
any provision of this ARTICLE TWELFTH to indemnification by the Corporation for
some or a portion of the expenses (including attorneys' fees), judgments, fines
or amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with any action, suit, proceeding or investigation and any
appeal therefrom but not, however, for the total amount thereof, the Corporation
shall nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
Section 11. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan) against any
expense, liability or loss incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
Section 12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this ARTICLE TWELFTH with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring prior to the date of such merger or
consolidation.
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Section 13. Savings Clause. If this ARTICLE TWELFTH or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
ARTICLE TWELFTH that shall not have been invalidated and to the fullest extent
permitted by applicable law.
Section 14. Definitions. Terms used herein and defined in Section 145(h)
and Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
Section 15. Subsequent Legislation. If the General Corporation Law of the
State of Delaware is amended after adoption of this ARTICLE TWELFTH to expand
further the indemnification permitted to Indemnitees, then the Corporation shall
indemnify such persons to the fullest extent permitted by the General
Corporation Law of State of Delaware, as so amended.
In accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation was
duly proposed and declared advisable by the Board of Directors of the
Corporation and duly adopted pursuant to a written consent of the stockholders
of the Corporation, given in accordance with Section 228 of the General
Corporation Law of the State of Delaware, and that in accordance with such
Section 228, written notice has been given to those stockholders who have not
consented in writing.
IN WITNESS WHEREOF, SCRIPTECH PHARMACEUTICALS, INC. has caused this
Restated Certificate of Incorporation to be signed by its President and attested
by its Secretary this 16th day of September, 1993.
By: /s/
---------------------------------
President
Attest: /s/
--------------------------------
Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:30 PM 01/14/1994
734014017 - 2309821
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTECH PHARMACEUTICALS, INC.
SCRIPTECH PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That, pursuant to the provisions of Section 141, 151 and 242 of the
General Corporation Law of the State of Delaware, the Board of Directors, by
unanimous written consent dated December 28, 1993, adopted a resolution
increasing the authorized capital stock of the Corporation, which resolution is
as follows:
VOTED: That it is hereby proposed and declared advisable to amend the
Restated Certificate of Incorporation of the Corporation by
changing ARTICLE FOURTH thereof so that, as amended, it shall
read:
ARTICLE FOURTH: Capital Stock.
The total number of shares which the Corporation shall have
authority to issue is (i) Fifteen Million (15,000,000) shares
of Common Stock, with a par value of one cent ($.01) per share
(the "Common Stock"), and (ii) Six Million Four Hundred
Thousand (6,400,000) shares of Series A Preferred Stock, with
a par value of one cent ($.01) per share (the "Preferred
Stock").
SECOND: That the stockholders of the Corporation, in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware, by
written consent dated as of December 28, 1993, approved the amendment of the
Corporation's Restated Certificate of Incorporation set forth above.
TN WITNESS WHEREOF, SCRIPTECH PHARMACEUTICALS, INC. has caused this
Certificate of Amendment to the Restated Certificate of Incorporation to be
signed by its President and attested by its Secretary this 14 day of January,
1994.
By: /s/ [ILLEGIBLE]
--------------------------
President
Attest: /s/ Karen A. Hamlin
-----------------------------
Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:15 PM 05/10/1994
944082840 - 2309821
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTECH PHARMACEUTICALS, INC.
SCRIPTECH PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That, pursuant to the provisions of Sections 141 and 242 of the
General Corporation Law of the State of Delaware, the Board of Directors, by
unanimous written consent dated February 28, 1994, adopted the following
resolution:
VOTED: That it is hereby proposed and declared advisable to amend the
Restated Certificate of Incorporation of the Corporation by
changing ARTICLE FOURTH thereof so that, as amended, it shall read:
ARTICLE FOURTH: Capital Stock
The total number of shares which the Corporation shall have
authority to issue is (i) Fifteen Million (15,000,000) shares of
Common Stock, with a par value of one cent ($.01) per share (the
"Common Stock"), and (ii) Six Million Seven Hundred Thousand
(6,700,000) shares of Series A Preferred Stock, with a par value of
one cent ($.01) per share (the "Preferred Stock").
SECOND: That, pursuant to the provisions of Sections 141 and 242 of the
General Corporation Law of the State of Delaware, the Board of Directors, by
unanimous written consent dated April 14, 1994, adopted the following
resolution:
VOTED: That it is hereby proposed and declared advisable to amend the
Restated Certificate of Incorporation, as amended, of the
Corporation, by deleting the number "3,200,000" appearing in
subsection (c)(vii) of Section 5 of Section (b) of ARTICLE FOURTH
and inserting in its place the number "4,850,000,"
<PAGE>
and, pursuant to such resolution, subsection (c)(vii) of Section 5 of Section
(b) of Article FOURTH of the Corporation's Restated Certificate of
Incorporation shall read as follows:
(vii) As used in this paragraph (c), "Excluded Stock" shall mean (x) up to
4,850,000 shares (such amount to be appropriately adjusted in the
event of any stock dividend, stock split or combination, or similar
recapitalization affecting the Common Stock) of Common Stock or
options for the purchase thereof issued, sold or granted, in the
past or future, by the Corporation to its employees, directors or
consultants pursuant to bona fide employee stock purchase, option or
similar benefit plans or other incentive programs or compensation
arrangements approved by the Board of Directors of the Corporation,
as more fully detailed in Section 7.14 of the Stock Purchase
Agreement.
THIRD: That the stockholders of the Corporation, in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware, by
written consents dated as of March 1, 1994 and April 21, 1994, respectively,
approved the amendments of the Corporation's Restated Certificate of
Incorporation set forth above.
<PAGE>
IN WITNESS WHEREOF, SCRIPTECH PHARMACEUTICALS, INC. has caused this
Certificate of Amendment to the Restated Certificate of Incorporation to be
signed by its President and attested by its Secretary this 10 day of May,
1994.
By: /s/ Thomas A. Bologna
---------------------
President
Attest: /s/ Karen A. Hamlin
-----------------------
Secretary
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:00 PM 11/29/1994
94229622 - 2309821
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTECH PHARMACEUTICALS, INC.
SCRIPTECH PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That, pursuant to the provisions of Sections 141 and 242 of the
General Corporation Law of the State of Delaware, the Board of Directors, by
unanimous written consent dated November 15, 1994, adopted the following
resolution:
VOTED: That it is hereby proposed and declared advisable to amend the
Restated Certificate of Incorporation of the Corporation by
changing ARTICLE FIRST thereof so that, as amended, it shall read:
ARTICLE FIRST: The name of the corporation is SCRIPTGEN
Pharmaceuticals, Inc. (the "Corporation").
SECOND: That the shareholders of the Corporation, in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware, by
written consents dated as of November 15, 1994, approved the amendments of the
Corporation's Restated Certificate of Incorporation set forth above.
IN WITNESS WHEREOF, SCRIPTECH PHARMACEUTICALS, INC. has caused this
Certificate of Amendment to the Restated Certificate of Incorporation to be
signed by its President and attested by its Secretary this 18th day of November,
1994.
By: /s/ Thomas A. Bologna
------------------------
Thomas A. Bologna, President
Attest: /s/ Karen A. Hamlin
--------------------------
Karen A. Hamlin, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTGEN PHARMACEUTICALS, INC.
SCRIPTGEN PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That, pursuant to the provisions of Sections 141 and 242 of the
General Corporation Law of the State of Delaware, the Board of Directors, by
unanimous written consent dated April 12, 1995, adopted the following
resolution:
VOTED: That it is hereby proposed and declared advisable to amend the
Restated Certificate of Incorporation of the Corporation, as
amended, to read substantially in the form attached hereto as
Exhibit A.
SECOND: That the shareholders of the Corporation, in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware,
by written consents dated as of April 12, 1995, approved the amendments of
the Corporation's Restated Certificate of Incorporation, as amended, as set
forth above.
IN WITNESS WHEREOF, SCRIPTECH PHARMACEUTICALS, INC. has caused this
Certificate of Amendment to the Restated Certificate of Incorporation to be
signed by its President and attested by its Secretary this 19th day of
April, 1995.
By: /s/ Thomas A. Bologna
-------------------------------
Thomas A. Bologna, President
Attest: /s/ Karen A. Hamlin
-----------------------------
Karen A. Hamlin, Secretary
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
0F
SCRIPTGEN PHARMACEUTICALS, INC.
SCRIPTCEN PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the Corporation is SCRIPTGEN Pharmaceuticals, 1nc. The
corporation was originally incorporated under the name, ScripTech and the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 17, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of the Corporation as heretofore supplemented or amended.
3 The text of the Restated Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
ARTICLE FIRST: The name of the corporation is SCRIPTGEN Pharmaceuticals,
Inc. (the "Corporation").
ARTICLE SECOND: The address of the registered office of the Corporation in
the State of Delaware shall be 1209 Orange Street, Wilmington, County of New
Castle, Delaware 19801 and the name of its registered agent at such address
shall be The Corporation Trust Company.
ARTICLE THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE FOURTH: The total number of shares which the Corporation shall
have authority to issue is (i) Twenty Million (20,000,000) shares of Common
Stock, with a par value of one cent ($.01) per share (the "Common Stock"), and
(ii) Sixteen Million Four Hundred Thousand (16,400,000) shares of Preferred
Stock, with a par value of one cent ($.01) per share (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more
<PAGE>
series. All shares of any one series of Preferred Stock shall be identical in
all respects. Originally, Nine Million Seven Hundred Thousand (9,700,000) shares
of Preferred Stock shall be designated as Series B Preferred Stock (the "Series
B Preferred Stock") and Six Million Seven Hundred Thousand (6,700,000) shares of
Preferred Stock shall be designated as Series A Preferred Stock (the "Series A
Preferred Stock"). The rights, preferences, privileges and restrictions granted
to and imposed upon the Series B Preferred Stock, the Series A Preferred Stock
and the Common Stock are set forth below in this ARTICLE FOURTH.
1. Dividends.
1.1 Dividends on the Series B Preferred Stock. The holders of the Series B
Preferred Stock shall be entitled to receive dividends when, as and if declared
by the Board of Directors of the Corporation (the "Board of Directors") Out of
funds legally available therefor.
1.2. Dividends on Series A Preferred Stock. The holders of the Series A
Preferred Stock shall be entitled to receive dividends when, as and if declared
by the Board of Directors out of funds legally available therefor; provided,
however, that no dividend shall be declared or paid on the Series A Preferred
Stock unless the Corporation shall simultaneously declare and pay an equal
dividend on each outstanding share of Series B Preferred Stock (as calculated by
assuming the conversion of all shares of Series B Preferred Stock and Series A
Preferred Stock into shares of Common Stock pursuant to the provisions of
Section 4 of this ARTICLE FOURTH immediately prior to the payment of such
dividend).
1.3. Dividends on Common Stock. The holders of the Common Stock shall be
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor; provided, however, that no dividend
shall be declared or paid on the Common Stock unless the Corporation shall
simultaneously declare and pay an equal dividend on each outstanding share of
Series B Preferred Stock and each outstanding share of Series A Preferred Stock
(as calculated by assuming the conversion of all shares of Series B Preferred
Stock and Series A Preferred Stock into shares of Common Stock pursuant to the
provisions of Section 4 of this ARTICLE FOURTH immediately prior to the payment
of such dividend).
2. Liquidation, Dissolution or Winding Up.
2.1. Liquidation Preference. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, distributions
to the stockholders of the Corporation shall be made in the following manner:
(a) The holders of the Series B Preferred Stock shall receive, prior
and in preference to any distribution of any of the assets of the
Corporation to the holders of any other series of Preferred Stock or the
Common Stock, an amount equal to $1.00 per share of Series B Preferred
Stock (which amounts shall be subject to equitable adjustment as determined
in good faith by the Board of Directors whenever there shall occur a stock
-2-
<PAGE>
split, combination, reclassification or other similar event involving the
Series B Preferred Stock) held by each of them, plus an amount equal to
all declared but unpaid dividends on such share of Series B Preferred
Stock, if any, to and including the date full payment of such preferential
amount shall be tendered with respect to such share of Series B Preferred
Stock to the holder of such share of Series B Preferred Stock, in
connection with such liquidation, dissolution or winding up. If the assets
of the Corporation legally available for distribution shall be
insufficient to permit the payment in full to all such holders of the
Series B Preferred Stock of the full aforesaid preferential amounts, then
the entire assets of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series B Preferred
Stock in accordance with the aggregate liquidation preference of the
shares of Series B Preferred Stock held by each of them.
(b) The holders of the Series A Preferred Stock shall receive, prior
and in preference to any distribution of any of the assets of the
Corporation to the holders of any other series of Preferred Stock (other
than the Series B Preferred Stock) or the Common Stock, an amount equal to
$1.00 per share of Series A Preferred Stock (which amounts shall be
subject to equitable adjustment as determined in good faith by the Board
of Directors whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series A Preferred
Sock) held by each of them, plus an amount equal to all declared but
unpaid dividends on such share of Series A Preferred Stock, if any, to and
including the date full payment of such preferential amount shall be
tendered with respect to such share of Series A Preferred Stock to the
holder of such share of Series A Preferred Stock, in connection with such
liquidation, dissolution or winding up. If the assets of the Corporation
legally available for distribution to the holders of the Series A
Preferred Stock shall be insufficient to permit the payment in full to all
such holders of the Series A Preferred Stock of the full aforesaid
preferential amounts, then the entire assets of the Corporation legally
available for such distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in accordance with the aggregate
liquidation preference of the shares of Series A Preferred Stock held by
each of them.
(c) If payment has been made to the holders of the Series B
Preferred Stock and the holders of the Series A Preferred Stock of the
full amount to which they shall be entitled pursuant to Sections 2.1(a)
and (b) of this ARTICLE FOURTH, the holders of the Series A and B
Preferred Stock (each share of which shall be treated for purposes of this
Section 2.1(c) as the number of shares of Common Stock into which such
share could then be converted pursuant to Section 4 of this ARTICLE
FOURTH) and the holders of the Common Stock shall then be entitled to
share ratably in the Corporation's remaining assets, based on the number
of shares of Common Stock held (or deemed to be held) by each of them.
-3-
<PAGE>
2.2. Reorganization.
(a) In the event of a Reorganization (as defined below), each holder
of Preferred Stock shall have the option to either (i) convert his or its shares
of Preferred Stock into Common Stock in accordance with the terms and provisions
of Section 4 of this ARTICLE FOURTH, or (ii) have the Corporation redeem his or
its shares of Preferred Stock in exchange for the Preferred Stock Liquidation
Preference, as hereinafter provided in sub-section(c) below. For purposes of
this Section 2.2, "Reorganization" shall mean any merger or consolidation of the
Corporation into or with any other corporation or entity, or a sale, conveyance,
mortgage, transfer, license, pledge, lease or other disposition of all or
substantially all of the assets of the Corporation, unless the stockholders of
the Corporation immediately prior thereto shall, immediately thereafter, hold as
a group the right to cast not less than 51% of the votes of all holders of
voting securities of the resulting or surviving corporation or entity on any
matter on which any such holders of voting securities shall be entitled to vote,
in which case, such event shall not be deemed to be a Reorganization for the
purposes of this Section 2.2.
(b) All holders of record of shares of Preferred Stock will be given
at least 20 but not more than 60 days' prior written notice of the
Reorganization and the date fixed (the "Option Date") and the place designated
for conversion or redemption pursuant to this Section 2.2. Such notice will be
sent by registered mail, return receipt requested, to each record holder of
Preferred Stock at such holder's address last shown on the records of the
transfer agent for the Preferred Stock (or the records of the Corporation if it
serves as its own transfer agent). Each holder of Preferred Stock shall give
written notice to the Corporation of his or its election (i) to convert his or
its shares of Preferred Stock into Common Stock or (ii) to receive the Preferred
Stock Liquidation Preference, at least 3 days prior to the Option Date. If the
Corporation has not received notice of such election prior to such three-day
period, such holder shall be deemed to have elected to convert his or its shares
of Preferred Stock into Common Stock in accordance with the terms and provisions
of Section 4 of this ARTICLE FOURTH.
(c) If an election to receive the Preferred Stock Liquidation
Preference is made, on or before the Option Date, each holder of shares of
Preferred Stock making such election shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice. If required by the Corporation, certificates surrendered for
redemption shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. On
the Option Date and upon the surrender of the certificate or certificates
representing shares of Preferred Stock, the Corporation shall pay in full to
such holder the Preferred Stock Liquidation Preference with respect to such
shares of Preferred Stock. On and after the Option Date, all rights with respect
to such holders of Preferred Stock who elected to receive the Preferred Stock
Liquidation Preference, including the rights, if any, to receive notices and
vote, will terminate, except only the rights of holders thereof, upon surrender
of their certificate or certificates
-4-
<PAGE>
therefor, to receive payment of the Preferred Stock Liquidation Preference as
aforesaid.
(d) All certificates evidencing shares of Preferred Stock which are
required to be surrendered in accordance with this Section 2.2 shall, from and
after the Option Date, be deemed to have been retired and canceled and the
shares of Preferred Stock represented thereby for all purposes shall also be
deemed retired and canceled, and shall not be reissued, notwithstanding the
failure of the holder or holders thereof to surrender such certificates on or
prior to such date. The Corporation may thereafter take such appropriate action
as may be necessary to reduce accordingly the authorized number of shares of
Preferred Stock.
(e) Notwithstanding anything to the contrary contained in this
Section 2.2, unless the holders of Preferred Stock shall otherwise notify the
Corporation, no such holder shall be deemed to have elected to convert his or
its shares of Preferred Stock into Common Stock or redeemed his or its shares of
Preferred Stock, as the case may be, as a result of a Reorganization, and no
such conversion or redemption shall be effective, unless and until the
Reorganization referred to in the notice given to holders of record of Preferred
Stock pursuant to Section 2.2(b) hereof shall have been consummated.
2.3. Distribution Other Than Cash. Whenever the distribution provided for
in this Section 2 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors, provided, however, that if the holders
of 25% of the then outstanding shares of Series B Preferred Stock voting as a
single class (the "Contesting Holders"), notify the Board of Directors within
five business days after receiving written notification of such determination of
fair market value that they disagree with such determination, then the Board of
Directors and the Contesting Holders shall have 30 days to agree upon a fair
market value of the relevant property. If, by the end of such 30-day period they
are unable to agree on a fair market value, the fair market value shall be
determined by an appraisal to be paid for by the Corporation. All appraisals
shall be undertaken by two appraisers, one selected by the Corporation and one
selected by the Contesting Holders, which selections must be made within 10 days
after the expiration of the 30-day period described above. If one selecting
party fails to timely select its appraiser, the other selecting party shall
select both appraisers. The fair market value shall be the fair market value
arrived at by those appraisers within 60 days following the appointment of the
last appraiser to be appointed. In the event that the two appraisers cannot
agree on such fair market value within such a period of time, (i) if the
appraisers' valuations are within 10% of each other the fair market value shall
be the average of the two valuations and (ii) if the differences in the
valuations are greater, the appraisers shall elect a third appraiser who will
calculate fair market value independently, and, except as provided in the next
sentence, the fair market value of the property shall in each case be the
average of the two fair market values arrived at by the appraisers who are
closest in amount. If one appraiser's valuation is the average of the other two
valuations, the average valuation shall be the fair market value. In the event
that the two original appraisers cannot agree upon a third appraiser within 30
days following the end of the 60-day period referred to above, then the third
appraiser shall be appointed by the American Arbitration Association.
-5-
<PAGE>
3. Voting.
3.1. General. Except as otherwise expressly provided in Section 3.2 of
this ARTICLIE FOURTH, or as required by law, (a) each holder of Common Stock
shall be entitled to vote on all matters and shall be entitled to one vote for
each share of Common Stock standing in such holder's name on the books of the
Corporation, (b) each holder of Series B Preferred Stock and each bolder of
Series A Preferred Stock shall be entitled to vote on all matters and shall be
entitled to that number of votes equal to the number of whole shares of Common
Stock into which such holder's shares of Preferred Stock could then be converted
as of the record date for the determination of stockholders entitled to vote on
such matters (or, if no record date is established, at the date such vote is
taken or written consent solicited) and pursuant to Section 4 of this ARTICLE
FOURTH. Except as otherwise expressly provided herein, or as required by law,
the holders of shares of Common Stock, Series A Preferred Stock, and Series B
Preferred shall vote together as a single class on all matters.
3.2. Certain Transactions. The Corporation shall not, without the written
consent or affirmative vote of the holders of greater than 75% of the then
outstanding shares of Series B Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class:
(i) merge with or into or consolidate with any other
corporation, or sell, lease, license or otherwise dispose of all or
substantially all of its properties or assets;
(ii) amend, alter or repeal the preferences, special rights or
other powers of the Series A Preferred Stock or the Series B Preferred Stock, or
otherwise amend, alter or repeal any provision of this Amended and Restated
Certificate of Incorporation, in either such case, so as to affect adversely the
Series A Preferred Stock or the Series B Preferred Stock;
(iii) directly or indirectly redeem, purchase or otherwise
acquire any of the Corporation's equity securities, other than pursuant to
Section 6 of this ARTICLE FOURTH, or pursuant to any stock option or agreement
entered into by the Corporation and approved by the Corporation's directors
designated by the holders of Preferred Stock;
(iv) directly or indirectly declare or pay any dividends or
make any distributions upon any of its equity securities, other than the
Preferred Stock;
(v) authorize, reclassify, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any securities having
equity features and which rank on a parity with or senior to either the Series A
Preferred Stock or the Series B Preferred Stock with respect to the payment of
dividends or upon liquidation or other distribution of assets, or with a
conversion price lower than that of the Series A Preferred Stock or Series B
Preferred Stock, or having other terms more favorable than those of the Series A
Preferred Stock or Series B Preferred Stock;
-6-
<PAGE>
(vi) make any amendment to the Corporation's By-Laws, or file
any resolution of the Board of Directors with the Secretary of State of the
State of Delaware containing any provisions, which would adversely affect or
otherwise impair the rights of the holders of the Series A Preferred Stock or
Series B Preferred Stock or the Common Stock issued or issuable upon conversion
of such Preferred Stock; or
(vii) other than the issuance of the Series A Preferred Stock
issued in accordance with the Stock Purchase Agreement, dated September 16,
1993, between the Corporation and the Purchasers named therein (the "Series A
Stock Purchase Agreement"), and the issuance of the Series B Preferred Stock
issued in accordance with the Series B Stock Purchase Agreement dated on or
about April __, 1995 between the Corporation and the Purchasers named therein,
enter into any transaction the effect of which shall (x) cause the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 20% or more of the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors to be held by any individual, entity or
two or more individuals or entities who agree to act in concert or (y) cause the
Corporation's Board of Directors to be elected other than as set forth in the
Stockholders' Agreement, or (z) otherwise result in a change in control of the
Corporation;
(viii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(ix) incur, create, assume, become or be liable in any manner
with respect to, or permit to exist, any indebtedness for borrowed money, or any
other indebtedness evidenced by, or liability evidenced by notes, bonds,
debentures or similar obligations or either directly or indirectly guarantee,
endorse or become surety for, or otherwise in any manner become responsible for
the obligations of any other person, other than indebtedness with respect to
trade and operating obligations and other normal accruals in the ordinary course
of business (which will be paid in accordance with customary trade practice) or
with respect to which it is contesting in good faith the amount or validity
thereof by appropriate proceedings, and then only to the extent it has set aside
on its books adequate reserves therefor; and
(x) incur capital expenditures or make commitments for capital
expenditures, services or product development in excess of the greater of
$100,000 or 110% of the amount budgeted in the yearly budget and operating plan
of the Corporation for any such expenditure or commitment.
4. Conversion.
4.1. Optional Conversion The holders of Preferred Stock shall have
conversion rights as follows:
(a) Right to Convert.
-7-
<PAGE>
(i) Each share of Preferred Stock shall be convertible, at the
option of the holder thereof, at any time and from time to time into the number
of fully paid and nonassessable shares of Common Stock of the Corporation as is
determined by dividing $1.00 by the Current Conversion Price (as defined in
paragraph (c) below) in effect at the time of conversion. The conversion price
at which shares of Common Stock shall be deliverable upon conversion of
Preferred Stock without the payment of additional consideration by the holder
thereof shall initially be $1.00, subject to adjustment as provided in paragraph
(c) below.
(ii) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. In lieu of any fractional share to
which the holder would otherwise be entitled after determination of the
aggregate full number of shares of Common Stock issuable in respect of the
Preferred Stock then being converted, the Corporation shall pay cash equal to
such fraction multiplied by the then Current Conversion Price.
(b) Mechanics of Conversion
(i) In order for a holder of Preferred Stock to convert shares
of Preferred Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Preferred Stock, at the office of
the transfer agent for the Preferred Stock (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of Preferred Stock represented by such certificate or certificates. Such
notice shall state such holder's name or the names of the nominees in which such
holder wishes the certificate or certificates for Shares of Common Stock to be
issued. If required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or instruments of
transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or his or its attorney duly authorized in writing. The date of
receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date (the "Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of whole shares of Common Stock (and any shares of
Preferred Stock represented by the certificate or certificates delivered to the
Corporation by the holder thereof which are not converted into Common Stock)
issuable upon such conversion in accordance with the provisions hereof, together
with cash in lieu of fractional shares calculated in accordance with
subparagraph (ii) of paragraph (a) above. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of certificates of Preferred Stock to be converted, and the person or
persons entitled to receive shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on that date.
(ii) The Corporation shall at all times when the Preferred
Stock shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Preferred
Stock, such number of its duly authorized shares of
-8-
<PAGE>
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Preferred Stock. Before taking any action which
would cause Common Stock, upon the conversion of Preferred Stock, to be issued
below the then par value of the shares of Common Stock, the Corporation will
take any corporate action which may, in the opinion of its counsel be, necessary
in order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock to the holders of Preferred Stock. The
Corporation will not close its books against the transfer of the Preferred Stock
or of Common Stock issued or issuable upon conversion of the Preferred Stock in
any manner which interferes with the timely conversion of the Preferred Stock.
(iii) All shares of Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders thereof to receive
shares of Common Stock in exchange therefor and payment of any declared and
unpaid dividends thereon. On and as of the Conversion Date, the shares of Common
Stock issuable upon such conversion shall be deemed to be outstanding, and the
holder thereof shall be entitled to exercise and enjoy all rights with respect
to such shares of Common Stock, including the rights, if any, to receive notices
and to vote. All certificates representing shares of Preferred Stock, from and
after the Conversion Date, shall be deemed to have been retired and canceled and
shall not be reissued, and the Corporation may thereafter take such appropriate
action as may be necessary to reduce accordingly the authorized number of shares
of Preferred Stock.
(c) Adjustments to Conversion Price. The initial conversion price as
stated in subparagraph (i) of paragraph (a) above shall be subject to adjustment
from time to time and such conversion price as adjusted shall likewise be
subject to further adjustment, all as hereinafter set forth. The tern "Current
Conversion Price" shall mean, as of any time, the conversion price of the
Preferred Stock at that time, as specified in paragraph (a) above in case no
adjustment shall have been required, or such conversion price as adjusted
pursuant to this paragraph (c), as the case may be.
(i) If at any time after the date of issuance of the Preferred
Stock the Corporation shall issue (x) any shares of Common Stock other than (A)
Excluded Stock (as defined in subparagraph (vii) below), (B) Common Stock issued
or issuable upon conversion of the Preferred Stock or (C) by way of dividend or
other distribution on shares of Common Stock referred to in the foregoing
clauses (A) and (B), or (y) any shares of a class or series convertible into
Common Stock. other than the Preferred Stock (collectively, with the Common
Stock, such "Securities"), for a consideration per share (the consideration in
each case to be determined in the manner provided in (E) and (F) of subparagraph
(ii) below) less than the Current Conversion Price in effect immediately prior
to the issuance of such Securities, the Current Conversion Price in effect
immediately prior to each such issuance shall forthwith (except as provided in
subparagraph (ii) below) be adjusted to a Current Conversion Price obtained by
dividing an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including the
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number of shares of Common Stock into which the outstanding
shares of Preferred Stock and other securities convertible
into Preferred Stock are then directly or indirectly
convertible) immediately prior to such issuance multiplied by
the Current Conversion Price in effect immediately prior to
such issuance, plus
(y) the consideration received by the Corporation upon such
issuance, by
(z) the total number of shares of Common Stock outstanding
(including the number of shares of Common Stock into which the
outstanding shares of Preferred Stock or other securities
convertible into Preferred Stock are then directly or
indirectly convertible) immediately after such issuance
(including the number of shares of Common Stock into which
such newly issued Securities are then convertible).
(ii)For the purpose of any adjustment of the Conversion Price
pursuant to subparagraph (c)(i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of options or warrants to purchase or
rights to subscribe for Common Stock other than Excluded Stock
(collectively, "Rights"), the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such Rights shall be
deemed to have been issued at the time such Rights were issued, for
a consideration equal to the consideration (determined in the manner
provided in (E) and (F) below), if any, received by the Corporation
on the issuance of such Rights, plus the minimum purchase price
provided in such Rights for the Common Stock covered thereby;
provided that such shares of Common Stock deliverable upon the
exercise of such Rights shall not be deemed to have been issued
unless such consideration per share would be less than the Current
Conversion Price in effect on the date of and immediately prior to
such issue. No further adjustment of the Current Conversion Price
adjusted upon the issuance of such Rights shall be made as a result
of the actual issuance of shares of Common Stock deliverable upon
exercise of such Rights.
(B) In the case of the issuance of securities by their terms convertible
into or exchangeable for Common Stock other than Excluded Stock
(collectively, "Convertible Securities"), or options or warrants to
purchase or rights to subscribe for securities by their terms
convertible or exchangeable for Common Stock other than Excluded
Stock (collectively, "Related Rights"), the aggregate maximum number
of shares of Common Stock deliverable upon conversion, exchange or
exercise of any such Convertible Securities or such Related Rights
shall be deemed to have been issued at the time such Convertible
Securities or such Related Rights
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were issued and for a consideration equal to the consideration
received by the Corporation upon issuance of such Convertible
Securities or such Related Rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the Corporation
upon the conversion, exchange or exercise of such Convertible
Securities or Related Rights (the consideration in each ease to be
determined in the manner provided in (E) and (F) below); provided
that such shares of Common Stock deliverable upon such conversion,
exchange or exercise of such Convertible Securities or Related
Rights shall not be deemed to have been issued unless such
consideration per share would be less than the Current Conversion
Price in effect on the date of and immediately prior to such issue.
No further adjustment of the Current Conversion Price adjusted upon
the issuance of such Related Rights shall be made as a result of the
actual issuance of such Convertible Securities deliverable upon
exercise of such Related Rights.
(C) On any change in the number of shares of Common Stock deliverable
upon the exercise of such Rights or Related Rights or upon the
conversion, exchange or exercise of such Convertible Securities or
on any change in the minimum purchase price of such Rights, Related
Rights or Convertible Securities other than a change resulting from
the anti-dilution provisions of such Rights, Related Rights or
Convertible Securities, the Conversion Price shall forthwith be
readjusted to such Current Conversion Price as would have been
obtained had the adjustment made upon the issuance of such Rights,
Related Rights or Convertible Securities not converted, exchanged or
exercised prior to such change, been made upon the basis of such
change.
(D) On the expiration of any such Rights, Related Rights or Convertible
Securities, the Current Conversion Price shall forthwith be
readjusted to such Current Conversion Price as would have obtained
had the adjustment made upon the issuance of such Rights or Related
Rights or the conversion, exchange or exercise of any such
Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the conversion,
exchange or exercise of any such Convertible Securities.
(E) In the case of the issuance of such Securities for cash, the
consideration shall be deemed to be the amount of cash paid therefor
(excluding amounts paid for accrued interest or accrued dividends).
(F) In the case of the issuance of such securities for a consideration
in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors of the Corporation.
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(iii) If the Corporation declares a dividend or other
distribution payable in such Securities or subdivides its outstanding shares of
Common Stock into a larger number or combines its outstanding shares of Common
Stock into a smaller number, then the Current Conversion price in effect
immediately prior to such dividend, other distribution, subdivision or
combination, as the case may be, shall forthwith be adjusted to that price
determined by multiplying the Current Conversion Price by a fraction (x) the
numerator of which shall be the total number of outstanding shares of such
Securities immediately prior to such dividend, other distribution, subdivision
or combination and (y) the denominator of which shall he the total number of
outstanding shares of such Securities immediately after such dividend, other
distribution, subdivision or combination.
(iv) In case the Corporation shall declare a dividend or
otherwise distribute to the holders of its Common Stock shares of its capital
stock (other than such Securities), stock or other securities of other persons,
evidences of indebtedness issued by the Corporation or other persons, assets
(excluding cash dividends) or options, warrants or rights (excluding such Rights
or Related Rights), then, in each such case, immediately following the record
date fixed for the determination of the holders of Common Stock entitled to
receive such dividend or distribution, the Current Conversion Price in effect
thereafter shall be determined by multiplying the Current Conversion Puce in
effect immediately prior to such record date by a fraction (A) the numerator of
which shall be an amount equal to the remainder of (x) the Current Market Price
(as defined in subparagraph (viii) below) determined immediately prior to such
distribution of one share of Common Stock less (y) the fair value (as determined
in good faith by the Corporation's Board of Directors) of the stock, securities,
evidences of indebtedness, assets, options, warrants or rights so dividended or
distributed in respect of one share of Common Stock, as the case may be, and (B)
the denominator of which shall be the Current Market Price of one share of
Common Stock determined immediately prior to such dividend or distribution. Such
adjustment shall be made on the date such dividend or distribution is made, and
shall become effective at the opening of business on the business day following
the record date for the determination of stockholders entitled to such dividend
or distribution.
(v) In the event the Corporation is in arrears with respect to
the payment of any dividend or portion thereof declared but unpaid on shares of
Preferred Stock, at the time a holder elects to convert such shares of Preferred
Stock, the Current Conversion Price in effect immediately prior to such
conversion shall forthwith be reduced (but only with respect to the shares of
Preferred Stock being so converted) by an amount equal to the quotient of(x) the
aggregate arrearage per share of Preferred Stock being converted, divided by (y)
the number of shares of Common Stock into which such share of Preferred Stock
being converted is then convertible; provided, however, that the application of
the foregoing shall not reduce the Current Conversion Price below $.01.
(vi) Whenever the Current Conversion Price shall be adjusted
as provided in this Section 5, the Corporation shall forthwith file, at the
office of the transfer agent for the Preferred Stock, at the principal office of
the Corporation or at such other place as may be designated by the Corporation,
a statement, certified by the chief financial officer of the Corporation,
showing in detail
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the facts requiring such adjustment and the Current Conversion Price that shall
be in effect after such adjustment. The Corporation shall also cause a copy of
such statement to be sent by first class mail, postage prepaid, to each bolder
of record of Preferred Stock at such holder's address as shown in the records of
the Corporation.
(vii) As used in this paragraph (c), "Excluded Stock" shall
mean (x) up to 4,850,000 shares (such amount to be appropriately adjusted in the
event of any stock dividend, stock split or combination, or similar
recapitalization affecting the Common Stock) of Common Stock or options for the
purchase thereof issued, sold or granted, in the past or future, by the
Corporation to its employees, directors or consultants pursuant to bona fide
employee stock purchase, option or similar benefit plans or other incentive
programs or compensation arrangements approved by the Board of Directors of the
Corporation, as more fully detailed in Section 7.14 of the Stock Purchase
Agreement, dated as of September 16,1993 and as amended among the Company and
the purchasers named therein.
(viii) For the purpose of any computation pursuant to,
subparagraph (iv) above, the "Current Market Price" at any date of one share of
Common Stock shall be deemed to be the average of the daily closing prices for
the 30 consecutive business days ending 15 business days before the data in
question (as adjusted for any stock splits, stock dividends, combinations or
recapitalizaton that took effect during such 30 business-day period). The
closing price for each day shall be the last reported sales price on such day on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or if not listed or admitted to trading national
securities exchange, the average of the last reported bid and asked prices as
reported by the National Association of Securities Dealers Automated Quotation
System, Inc., all as adjusted for stuck splits, stock dividends, combinations or
similar recapitalization that took effect during such 30 business-day period;
provided, however, that if the Common Stock is not traded in such a manner that
the quotations referred to in this subparagraph (viii) are available for the
period required hereunder, the Current Market Price shall be deemed to be the
fair value of such Common Stock as determined in good faith by the Board of
Directors of the Corporation.
(ix) If any event occurs of the type contemplated by the
provisions of this Section 5 but not expressly provided for by such provisions,
then the Directors will make an appropriate adjustment in the Current Conversion
Price as to protect the rights of the holders of the Preferred Stock; provided
that no such adjustment will increase the Current Conversion Price except as
otherwise permitted pursuant to subparagraph (iii) above or subparagraph
(c)(ii)(D) of this Section 5 or decrease the number of shares of Common Stock
issuable upon conversion.
4.2. Mandatory Conversion.
(a) Upon the earlier to occur of (i) the closing of an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale by the
Corporation of Common Stock to the public at a minimum price per share of $5.00
resulting in aggregate gross proceeds to the Corporation of not less than
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$10,000,000, and (ii) the written consent or affirmative vote of the holders of
not less than 85% of the then outstanding shares of Preferred Stock, given in
writing or by vote at a meeting, all shares of Preferred Stock then outstanding
shall automatically be converted into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $1.00 by the
Current Conversion Price then in effect pursuant to Section 4.1 of this ARTICLE
FOURTH, subpart (b).
(b) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. In lieu of any fractional share to
which the bolder would otherwise be entitled after determination of the
aggregate full number of shares of Common Stock issuable in respect of the
Preferred Stock then being conerted, the Corporation shall pay cash equal to
such fraction multiplied by the then Current Conversion Price.
(c) All holders of record of shares of Preferred Stock will be given
at least 10 but not more than 30 days' prior written notice of the date fixed
(the "Mandatory Conversion Date") and the place designated for mandatory
conversion of all shares of Preferred Stock pursuant to this Section 4.2. Such
notice will be sent by first class or registered mail, postage prepaid, to each
record holder of Preferred Stock at such holder's address last shown on the
records of the transfer agent for the Preferred Stock (or the records the
Corporation if it serves as its own transfer agent). On or before the Mandatory
Conversion Date, each holder of shares of Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. On and after the Mandatory Conversion date, all rights with respect to
the Preferred Stock, including the rights, if any, to receive notices and vote,
will terminate, except only the rights of the holders thereof, upon surrender
of their certificate or certificates thereof, to receive certificates for the
number of shares of Common Stock into which such Preferred Stock has been
converted and payment of any declared but unpaid dividends thereon. As soon as
practicable after the Mandatory Conversion Date and upon the surrender of the
certificate or certificates representing shares of Preferred Stock, the
Corporation shall issue and deliver to such holder, or on his or its written
order, a certificate or certificates for the number of whole shares of Common
Stock issuable under such conversion in accordance with the provisions hereof,
together with cash as provided in subparagraph (b) of this Section 4.2 in
respect of any fraction of a share of Common Stock otherwise issuable upon such
conversion.
(d) All certificates evidencing shares of Preferred Stock which are
required to be surrendered in accordance with this Section 4.2, from and after
the Mandatory Conversion Date, shall be deemed to have been retired and
canceled, and the shares of Preferred Stock represented thereby, converted into
Common Stock, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date, The Corporation may then
take such appropriate action as may be necessary to reduce accordingly the
authorized number of shares of Preferred Stock.
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5. Redemption. The shares of Series B Preferred Stock shall be redeemed an
follows:
5.1. Mandatory Redemption. On January 15th in each of the years 2003, and
2004 (each a "Redemption Date"), the Corporation shall redeem 50% of the then
outstanding shares of Series B Preferred Stock at a per share price of $1.00,
plus an amount equal to all declared but unpaid dividends on such shares (the
"Redemption Price") up to and including the date such shares are redeemed,
unless such redemption is waived by the holders of 75% of the then outstanding
shares of Series B Preferred Stock.
5.2. Payment of Redemption Price. On each Redemption Date, the Corporation
will pay to the holders of the Series B Preferred Stock outstanding at the time
of the redemption an amount equal to the Redemption Price with respect to each
of the shares of Series B Preferred Stock redeemed on such date. If on a
Redemption Date the funds of the Corporation legally available for redemption of
shares of Series B Preferred Stock are insufficient to redeem the number of the
outstanding shares of Series B Preferred Stock that are to be redeemed on such
date, those funds which are legally available will he used to redeem, at the
Redemption Price, the maximum possible number of shares of Series B Preferred
Stock on a pro rata basis among the ho1ders thereof. At any time thereafter when
additional funds of the Corporation become legally available for the redemption
of Series B Preferred Stock, such funds will immediately be used to redeem the
balance of the shares of Series B Preferred Stock which the Corporation has
become obligated to redeem but which it has not so redeemed. In addition, any
redemption of Series B Preferred Stock shall be made out (i)of any surplus or
any capital whether or not a reduction of capital is thereby involved, and to
the extent provided by law, the Corporation shall take all necessary action to
effect a reduction of capital if such reduction is necessary to provide funds
legally available for any required redemption of Series B Preferred Stock.
5.3. Equitable Adjustment. The Redemption Price set forth in this Section
5 shall be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
B Preferred Stock.
5.4. Surrender of Certificates. Not less than 60 days before each
Redemption Date, the Corporation shall mail written notice (the "Redemption
Notice"), postage prepaid, to each holder of record of Series B Preferred Stock
at such holder's address as shown on the records of the Corporation; provided,
however, that the Corporation's failure to give such Redemption Notice shall in
no way affect its obligation to redeem the Series B Preferred Stock as provided
in Section 5.1 of this ARTICLE FOURTH. The Redemption Notice shall contain the
following information:
(i) The number of shares of Series B Preferred Stock held by the holder
which shall be redeemed by the Corporation on such Redemption Date pursuant to
the provisions of Sections 5.1 and 5.2 of this ARTICLE FOURTH.
(ii) The Redemption Date for the shares to be redeemed.
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(iii) The address at which the holder may surrender to the Corporation its
certificate or certificates representing shares of Series B Preferred Stock to
be redeemed.
Each holder of shares of Series B Preferred Stock to be redeemed shall
surrender the certificate or certificates representing such shares to the
Corporation at the place specified in the Redemption Notice on or prior to the
Redemption Date designated in the Redemption Notice, and thereupon an amount
equal to the applicable Redemption Price shall be paid to the order of the
person whose name appears on such certificate or certificates. Each surrendered
certificate shall be cancelled and retired.
5.5. Dividends and Conversion after Redemption. From and after the date on
which the Corporation shall have paid in full the Redemption Price with respect
to any shares of Series B Preferred and Series A Preferred, such shares of
Series B Preferred and Series A Preferred thereby redeemed shall not be entitled
to any further dividends pursuant to Section 1 of this ARTICLE FOURTH or to the
conversion provisions set forth in Section 4 of this ARTICLE FOURTH.
6. Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of Common Stock or Preferred Stock, and in the
case of any such loss, theft or destruction, upon receipt of indemnity and bond
reasonably satisfactory to the Corporation (provided that if the holder is an
institutional investor its own agreement will be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation will
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares represented by such
lost, stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
ARTICLE FIFTH: The Corporation is to have perpetual existence.
ARTICLE SIXTH: In addition to, and not by way of limitation of, the powers
granted to the Board of Directors by the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal all or any of by-laws of the Corporation.
ARTICLE SEVENTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation shall so provide.
ARTICLE EIGHTH: Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as
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may be designated from time to time by the Board of Directors or in the by-laws
of the Corporation.
ARTICLE NINTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of ss.291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of ss.279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. if a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholder or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE TENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute and by this Amended and Restated
Certificate of Incorporation, and all rights conferred upon stockholders herein
are granted subject to this reservation.
ARTICLE ELEVENTH: To the fullest extent permitted by the General
Corporation Law of the State of Delaware as it now exists or may hereafter be
amended, no director of the Corporation shall be personally liable to the
Corporation, any of its stockholders or any other person or entity for monetary
damages for breach of fiduciary duty owed to the Corporation, its stockholders
or such other person or entity owing to such director's position as a director
of the Corporation. Any repeal or modification of this ARTICLE ELEVENTH by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE TWELFTH:
1. Actions, Suits and Proceedings Other Than By or in the Right of the
Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil criminal, administrative
or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was, or has agreed to
become. a director or officer of the
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Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any benefit plan) (all such persons being referred to hereafter as an
"Indemnitee"), or by reason of any action alleged to have been taken or omitted
to have been taken in such capacity, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding. had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendre or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this ARTICLE TWELFTH, except as set forth in Section
6 below, the Corporation shall not indemnify an Indemnitee seeking
indemnification in connection with a proceeding (or part thereof) initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the Corporation.
2. Actions or Suits By or in the Right of the Corporation. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving, or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted to have been taken in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses by Successful Party. Notwithstanding the
other provisions of this ARTICLE TWELFTH, to the extent that an Indemnitee has
been successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this ARTICLE TWELFTH, or in
defense of any claim, issue or matter therein, or on appeal from any such
action, suit or proceeding. he shall be indemnified against all expenses
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(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith. Without limiting the foregoing, if any action,
suit or proceeding is disposed of, on the merits or otherwise (including a
disposition, without prejudice), without (i) the disposition being adverse to
the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv)
an adjudication that the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and (v) with respect to any criminal proceedings, an adjudication
that the Indemnitee had reasonable cause to believe his conduct was unlawful,
the Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
4. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of who the Corporation is so notified,
the Corporation will be entitled to participate therein at its own expense
and/or to assume the defense thereof at its own expense, with legal counsel
reasonably acceptable to the Indemnitee. After notice from the Corporation to
the Indemnitee of its election so to assume such defense, the Corporation shall
not be liable to the indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with such claim, other than as video
below in this Section 4. The Indemnitee shall have the right to employ his own
counsel in connection with such claim, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense
thereof shall be at the expense of the Indemnitee unless (i) the employment of
counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel
to the Indemnitee, shall have reasonably concluded that there may be a conflict
of interest or position on any significant issue between the Corporation and the
Indemnitee in the conduct of the defense of an action or (iii) the Corporation
shall not in fact have employed counsel to assume the defense of such action, in
each of which cases the fees and expenses of counsel for the Indemnitee shall be
at the expense of the Corporation, except as otherwise expressly provided by
this ARTICLE TWELFTH. The Corporation shall not be entitled, without the consent
of the Indemnitee, to assume the defense of any claim brought by or in the right
of the Corporation or as to which counsel for the Indemnitee shall have
reasonably made the conclusion provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below, in
the event that the Corporation does not assume the defense pursuant to Section 4
of this ARTICLE TWELFTH of any action, suit, proceeding or investigation of
which the Corporation receives notice under this ARTICLE TWELFTH, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this ARTICLE
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TWELFTH. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this ARTICLE
TWELFTH, the Indemnitee shall submit to the Corporation a written request,
including in such request such documentation and information as is
reasonably available to the Indemnitee and is reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification or advancement of expenses. Any such indemnification or
advancement of expenses shall be made promptly, and in any event within 60
days after receipt by the Corporation of the written request of the
Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period, that the Indemnitee did not meet the applicable standard of conduct
set forth in Section 1 or 2, as the case may be. Such determination shall be
made in each instance by (a) a majority vote of a quorum of the directors of
the Corporation consisting of persons who are not at that time parties to
the action, suit or proceeding in question ("disinterested directors"), (b)
if no such quorum is obtainable, a majority vote of a committee of two or
more disinterested directors, (c) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors
voting as a single class, which quorum shall consist of stockholders who are
not at that time parties to the action, suit, or proceeding in question, (d)
independent legal counsel (who may be regular legal counsel to the
Corporation) or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
this ARTICLE TWELFTH shall be enforceable by the Indemnitee in any court of
competent jurisdiction if the Corporation denies such request, in whole or
in part, or if no disposition thereof is made within the 60-day period
referred to above in Section 6. Unless otherwise provided by law, the burden
of proving that the Indemnitee is not entitled to indemnification or
advancement of expenses under this ARTICLE TWELFTH shall be on the
Corporation. Neither the failure of the Corporation to have made a
determination prior to the commencement of such action that indemnification
is proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation pursuant
to Section 6 that the Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct. The Indemnitee's
expenses (including attorneys' fees) incurred in connection with
successfully establishing his right to indemnification, in whole or in part,
in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment termination or repeal of this
ARTICLE TWELFTH or of the relevant provisions of the General Corporation
Law of the State of Delaware or any other applicable laws shall affect or
diminish in any way the rights of any Indemnitee to indemnification under
the provisions hereof with respect to an action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or
facts occurring prior to the final adoption of such amendment, termination
or repeal.
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9. Other Rights. The indemnification and advancement of expenses provided
by this ARTICLE TWELFTH shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
ARTICLE TWELFTH shall be deemed to prohibit, and the Corporation is specific
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
ARTICLE TWELFTH. In addition, the Corporation may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the Corporation
and such rights may be equivalent to, or greater or less than, those set forth
in this ARTICLE TWELFTH.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this ARTICLE TWELFTH to indemnification by the Corporation for some
or a portion of the expenses (including attorneys' fees), judgments, fines or
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with any action, suit, proceeding or investigation and any
appeal therefrom but not, however, for the total amount thereof, the Corporation
shall nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments. fines, or amounts paid settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at its
expense. to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise (including any benefit plan) against any expense, liability or loss
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the General Corporation Law of the
State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this ARTICLE TWELFTH with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring prior to the date of such merger or
consolidation.
13.Savings Clause. If this ARTICLE TWELFTH or any portion here shall be
invalidated on any ground by any Court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the
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fullest extent permitted by any applicable portion of this ARTICLE TWELFTH that
shall not have be invalidated and to the fullest extent permitted by applicable
law.
14. Definitions. Terms used herein and defined in Section 145(h)
Section 145(i) of the General Corporation Law of the State of Delaware
shall have respective meanings assigned to such terms in such Section
l45(h) and Section 145(i).
15. Subsequent Legislation. If the General Corporation Law of the
State of Delaware is amended after adoption of this ARTICLE TWELFTH to
expand further the indemnification permitted to Indemnitees, then the
Corporation shall indemnify such persons to the fullest extent permitted by
the General Corporation of State of Delaware, as so amended.
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CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTGEN PHARMACEUTICALS, INC.
SCRIPTGEN PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
FIRST: That, pursuant to the provisions of Sections 141 and 242 of the
General Corporation Law of the State of Delaware, the Board of Directors, by
unanimous written consent dated May 13, 1996, adopted the following
resolution:
VOTED: That it is hereby proposed and declared advisable to amend the
Amended and Restated Certificate of Incorporation of the
Corporation, as amended, to read substantially in the form
attached hereto as Exhibit A.
SECOND: That the shareholders of the Corporation, in accordance with
Sections 228 and 242 of the General Corporation Law of the State of Delaware,
by written consents dated as of March 13, 1996, approved the amendments of
the Corporation's Amended and Restated Certificate of Incorporation, as
amended, as set forth above.
IN WITNESS WHEREOF, SCRIPTGEN PHARMACEUTICALS, INC. has caused this
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation to be signed by its Vice President and attested by its
Secretary this 17th day of May, 1996.
By: /s/ Michael G. Palfreyman
----------------------------------------------
Michael G. Palfreyman, Vice President
Attest: /s/ Karen A. Hamlin
-------------------------
Karen A. Hamlin, Secretary
<PAGE>
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SCRIPTGEN PHARMACEUTICALS, INC.
SCRIPTGEN PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), DOES HEREBY CERTIFY AS FOLLOWS:
1. The name of the Corporation is SCRIPTGEN Pharmaceuticals, Inc. The
corporation was originally incorporated under the name ScripTech
Pharmaceuticals, Inc. and the original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
September 17, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Amended and Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Certificate
of Incorporation of the Corporation as heretofore supplemented or amended.
3. The text of the Amended and Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
ARTICLE FIRST: The name of the corporation is SCRIPTGEN Pharmaceuticals,
Inc. (the "Corporation").
ARTICLE SECOND: The address of the registered office of the Corporation
in the State of Delaware shall be 1209 Orange Street, Wilmington, County of
New Castle, Delaware 19801 and the name of its registered agent at such
address shall be The Corporation Trust Company.
ARTICLE THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE FOURTH: The total number of shares which the Corporation shall
have authority to issue is (i) Thirty Million (30,000,000) shares of Common
Stock, with a par value of one cent ($.01) per share (the "Common Stock"),
and (ii) Twenty-One Million Five Hundred Thousand (21,500,000) shares of
Preferred Stock, with a par value of one cent ($.01) per share (the
"Preferred Stock"). The Preferred Stock may be issued from time to time in
one or more series. All shares of any one series of Preferred Stock shall be
identical in all respects. Originally, Five Million One Hundred Thousand
(5,100,000) shares of Preferred Stock shall be designated as Series C
Preferred Stock (the "Series C Preferred Stock"), Nine Million Seven
<PAGE>
Hundred Thousand (9,700,000) shares of Preferred Stock shall be designated as
Series B Preferred Stock (the "Series B Preferred Stock") and Six Million
Seven Hundred Thousand (6,700,000) shares of Preferred Stock shall be
designated as Series A Preferred Stock (the "Series A Preferred Stock"). The
rights, preferences, privileges and restrictions granted to and imposed upon
the Series C Preferred Stock, the Series B Preferred Stock, the Series A
Preferred Stock and the Common Stock are set forth below in this ARTICLE
FOURTH.
1. Dividends.
1.1. Dividends on Series C Preferred Stock. The holders of the Series C
Preferred Stock shall be entitled to receive dividends when, as and if
declared by the Board of Directors of the Corporation (the "Board of
Directors") out of funds legally available therefor.
1.2 Dividends on Series B Preferred Stock. The holders of the Series B
Preferred Stock shall be entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor;
provided, however, that no dividend shall be declared or paid on the Series B
Preferred Stock unless the Corporation shall simultaneously declare and pay
an equal dividend on each outstanding share of Series C Preferred Stock (as
calculated by assuming the conversion of all shares of Series C Preferred
Stock, Series B Preferred Stock and Series A Preferred Stock into shares of
Common Stock pursuant to the provisions of Section 4 of this ARTICLE FOURTH
immediately prior to the payment of such dividend).
1.3. Dividends on Series A Preferred Stock. The holders of the Series A
Preferred Stock shall be entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor;
provided, however, that no dividend shall be declared or paid on the Series A
Preferred Stock unless the Corporation shall simultaneously declare and pay
an equal dividend on each outstanding share of Series C Preferred Stock and
each outstanding share of Series B Preferred Stock (as calculated by assuming
the conversion of all shares of Series C Preferred Stock, Series B Preferred
Stock and Series A Preferred Stock into shares of Common Stock pursuant to
the provisions of Section 4 of this ARTICLE FOURTH immediately prior to the
payment of such dividend).
1.4. Dividends on Common Stock. The holders of the Common Stock shall
be entitled to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefor; provided, however, that no
dividend shall be declared or paid on the Common Stock unless the Corporation
shall simultaneously declare and pay an equal dividend on each outstanding
share of Series C Preferred Stock, each outstanding share of Series B
Preferred Stock and each outstanding share of Series A Preferred Stock (as
calculated by assuming the conversion of all shares of Series C Preferred
Stock, Series B Preferred Stock and Series A Preferred Stock into shares of
Common Stock pursuant to the provisions of Section 4 of this ARTICLE FOURTH
immediately prior to the payment of such dividend).
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2. Liquidation, Reorganization and Distributions.
2.1. Liquidation, Dissolution and Winding-Up. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary
or involuntary, distributions to the stockholders of the Corporation shall be
made in the following manner:
(a) The holders of the Series C Preferred Stock shall receive, prior
and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Stock, an amount equal to $1.80
per share of Series C Preferred Stock (which amounts shall be subject to
equitable adjustment as determined in good faith by the Board of
Directors whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series C Preferred
Stock) held by each of them, plus an amount equal to all declared but
unpaid dividends on such share of Series C Preferred Stock, if any, to
and including the date full payment of such preferential amount shall be
tendered with respect to such share of Series C Preferred Stock to the
holder of such share of Series C Preferred Stock, in connection with such
liquidation, dissolution or winding up (the "Series C Preferential
Amount").
(b) The holders of the Series B Preferred Stock shall receive, prior
and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Stock, an amount equal to $1.00
per share of Series B Preferred Stock (which amounts shall be subject to
equitable adjustment as determined in good faith by the Board of
Directors whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series B Preferred
Stock) held by each of them, plus an amount equal to all declared but
unpaid dividends on such share of Series B Preferred Stock, if any, to
and including the date full payment of such preferential amount shall be
tendered with respect to such share of Series B Preferred Stock to the
holder of such share of Series B Preferred Stock, in connection with such
liquidation, dissolution or winding up (the "Series B Preferential
Amount").
(c) The holders of the Series A Preferred Stock shall receive, prior
and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Stock, an amount equal to $1.00
per share of Series A Preferred Stock (which amounts shall be subject to
equitable adjustment as determined in good faith by the Board of
Directors whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series A Preferred
Stock) held by each of them, plus an amount equal to all declared but
unpaid dividends on such share of Series A Preferred Stock, if any, to
and including the date full payment of such preferential amount shall be
tendered with respect to such share of Series A Preferred Stock to the
holder of such share of Series A Preferred Stock, in connection with such
liquidation, dissolution or winding up (the "Series A Preferential
Amount").
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(d) If the assets of the Corporation legally available for
distribution to the holders of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock shall be insufficient to
permit the payment in full to all such holders of the full aforesaid
preferential amounts, then the entire assets of the Corporation legally
available for such distribution shall be distributed ratably among such
holders in accordance with the aggregate liquidation preference of the
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock held by each of them.
(e) If payment has been made to the holders of the Series C
Preferred Stock, the holders of the Series B Preferred Stock and the
holders of the Series A Preferred Stock of the full amount to which they
shall be entitled pursuant to Sections 2.1(a), (b) and (c) of this
ARTICLE FOURTH, the holders of the Series A, B and C Preferred Stock
(each share of which shall be treated for purposes of this Section 2.1(e)
as the number of shares of Common Stock into which such share could then
be converted pursuant to Section 4 of this ARTICLE FOURTH) and the
holders of the Common Stock shall then be entitled to share ratably in
the Corporation's remaining assets, based on the number of shares of
Common Stock held (or deemed to be held) by each of them.
2.2. Treatment of Reorganizations. In the event of any Reorganization
(as defined below) of the Corporation, each holder of the Corporation's
capital stock shall be entitled to receive for his, her or its shares of such
capital stock the following:
(a) The holders of the Series C Preferred Stock shall receive, prior
and in preference to any payment for any share of Common Stock, the
Series C Preferential Amount, the holders of the Series B Preferred Stock
shall receive, prior and in preference to any payment for any share of
Common Stock, the Series B Preferential Amount and the holders of the
Series A Preferred Stock shall receive, prior and in preference to any
payment for any share of Common Stock, the Series A Preferential Amount.
If the aggregate amount to be paid pursuant to this Section 2.2(a) of
this ARTICLE FOURTH shall be insufficient to permit the payment in full
to all such holders of the full aforesaid preferential amounts, then the
entire amount to be paid pursuant to the Reorganization shall be
distributed ratably among such holders in accordance with the aggregate
preferential amounts for the shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock held by each of them.
(b) If payment has been made to the holders of the Series C
Preferred Stock, the holders of the Series B Preferred Stock and the
holders of the Series A Preferred Stock of the full amount to which they
shall be entitled pursuant to Section 2.2(a) of this ARTICLE FOURTH, the
holders of the Common Stock shall then be entitled to share ratably in
the remaining amount to be paid pursuant to the Reorganization, based on
the number of shares of Common Stock held by each of them, up to an
aggregate amount equal to $1,800,000. If such remaining amount to be
paid pursuant to the Reorganization
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<PAGE>
shall be insufficient to permit the payment in full to all such holders
of the full aforesaid amount of $1,800,000, the entire remaining amount
to be paid pursuant to the Reorganization shall be distributed ratably
among such holders.
(c) If payment has been made to the holders of the Series C
Preferred Stock, the holders of the Series B Preferred Stock and the
holders of the Series A Preferred Stock of the full amount to which they
shall be entitled pursuant to Section 2.2(a) of this ARTICLE FOURTH, and
if payment has been made to the holders of the Common Stock of the full
amount to which they shall be entitled pursuant to Section 2.2(b) of this
ARTICLE FOURTH, the holders of the Series A, B and C Preferred Stock
(each share of which shall be treated for purposes of this Section 2.2(c)
as the number of shares of Common Stock into which such share could then
be converted pursuant to Section 4 of this ARTICLE FOURTH) and the
holders of the Common Stock shall then be entitled to share ratably in
the final remaining amount to be paid pursuant to the Reorganization,
based on the number of shares of Common Stock held (or deemed to be held)
by each of them.
(d) For purposes of this Section 2.2, "Reorganization" shall mean
any merger or consolidation of the Corporation into or with any other
corporation or entity or any sale, lease or exchange of all or
substantially all of the assets of the Corporation, unless the
stockholders of the Corporation immediately prior thereto shall,
immediately thereafter, hold as a group the right to cast not less than
51% of the votes of all holders of voting securities of the resulting or
surviving corporation or entity on any matter on which any such holders
of voting securities shall be entitled to vote, in which case, such event
shall not be deemed to be a Reorganization for the purposes of this
Section 2.2.
2.3. Distribution Other Than Cash. Whenever the distribution provided
for in this Section 2 shall be payable in property other than cash, the value
of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors; provided, however, that
if the holders of 25% of the then outstanding shares of Series C Preferred
Stock voting as a single class (the "Contesting Holders"), notify the Board
of Directors within five business days after receiving written notification
of such determination of fair market value that they disagree with such
determination, then the Board of Directors and the Contesting Holders shall
have 30 days to agree upon a fair market value of the relevant property. If,
by the end of such 30-day period they are unable to agree on a fair market
value, the fair market value shall be determined by an appraisal to be paid
for by the Corporation. All appraisals shall be undertaken by two
appraisers, one selected by the Corporation and one selected by the
Contesting Holders, which selections must be made within 10 days after the
expiration of the 30-day period described above. If one selecting party
fails to timely select its appraiser, the other selecting party shall select
both appraisers. The fair market value shall be the fair market value
arrived at by those appraisers within 60 days following the appointment of
the last appraiser to be appointed. In the event that the two appraisers
cannot agree on such fair market
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value within such a period of time, (i) if the appraisers' valuations are
within 10% of each other the fair market value shall be the average of the
two valuations and (ii) if the differences in the valuations are greater, the
appraisers shall elect a third appraiser who will calculate fair market value
independently, and, except as provided in the next sentence, the fair market
value of the property shall in each case be the average of the two fair
market values arrived at by the appraisers who are closest in amount. If one
appraiser's valuation is the average of the other two valuations, the average
valuation shall be the fair market value. In the event that the two original
appraisers cannot agree upon a third appraiser within 30 days following the
end of the 60-day period referred to above, then the third appraiser shall be
appointed by the American Arbitration Association.
3. Voting.
3.1. General. Except as otherwise expressly provided in Section 3.2 of
this ARTICLE FOURTH, or as required by law, (a) each holder of Common Stock
shall be entitled to vote on all matters and shall be entitled to one vote
for each share of Common Stock standing in such holder's name on the books of
the Corporation, (b) each holder of Series C Preferred Stock, each holder of
Series B Preferred Stock and each holder of Series A Preferred Stock shall be
entitled to vote on all matters and shall be entitled to that number of votes
equal to the number of whole shares of Common Stock into which such holder's
shares of Preferred Stock could then be converted as of the record date for
the determination of stockholders entitled to vote on such matters (or, if no
record date is established, at the date such vote is taken or written consent
solicited) and pursuant to Section 4 of this ARTICLE FOURTH. Except as
otherwise expressly provided herein, or as required by law, the holders of
shares of Common Stock, Series A Preferred Stock, Series B Preferred and
Series C Preferred Stock shall vote together as a single class on all matters.
3.2. Certain Transactions.
(a) The Corporation shall not, without the written consent or
affirmative vote of the holders of at least 75% of the then outstanding
shares of Series C Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class:
(i) Amend, alter or repeal the preferences, special rights or
other powers of the Series C Preferred Stock;
(ii) Amend, alter or repeal the preferences, special rights or
other powers of the Series A Preferred Stock or the Series B Preferred Stock,
or otherwise amend, alter or repeal any provision of the Amended and Restated
Certificate of Incorporation or the Corporation's By-Laws, in either such
case so as to affect adversely the Series C Preferred Stock; and
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(iii) Reclassify any shares of Common Stock into shares having
preference to or special rights and other powers superior to the Series C
Preferred Stock.
(b) The Corporation shall not, without the written consent or
affirmative vote of the holders of at least 75% of the then outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, given in writing or by vote at a meeting, consenting or
voting (as the case may be), voting separately as a single class:
(i) Authorize, reclassify, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any securities having
equity features and which rank on a parity with or senior to any of the
Series A Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock with respect to the payment of dividends or upon liquidation
or other distribution of assets, or with a conversion price lower than that
of the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, or having other terms more favorable than those of the
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock;
(ii) Merge with or into or consolidate with any other
corporation, or sell, lease, license or otherwise dispose of all or
substantially all of its properties or assets;
(iii) Change the size or the election procedure for the Board
of Directors; and
(iv) Directly or indirectly redeem, purchase or otherwise
acquire any of the Corporation's equity securities, other than pursuant to
Section 6 of this ARTICLE FOURTH, or pursuant to any stock option or
agreement entered into by the Corporation and approved by a majority of the
Corporation's directors designated by the holders of Preferred Stock.
4. Conversion.
4.1. Optional Conversion. The holders of Preferred Stock shall have
conversion rights as follows:
(a) Right to Convert.
(i) Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at any time and from time
to time into the number of fully paid and nonassessable shares of Common
Stock of the Corporation as is determined by dividing $1.80 by the Current
Conversion Price (as defined in paragraph (c) below) in effect at the time of
conversion. Each share of Series A Preferred Stock and each share of Series
B Preferred Stock shall be convertible, at the option of the holder thereof,
at any time and from time to time into the number of fully paid and
nonassessable shares of Common Stock of the Corporation as is
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determined by dividing $1.00 by the Current Conversion Price (as defined in
paragraph (c) below) in effect at the time of conversion. The conversion
price at which shares of Common Stock shall be deliverable upon conversion of
Series C Preferred Stock without the payment of additional consideration by
the holder thereof shall initially be $1.80, subject to adjustment as
provided in paragraph (c) below. The conversion price at which shares of
Common Stock shall be deliverable upon conversion of Series B Preferred Stock
and Series A Preferred Stock without the payment of additional consideration
by the holder thereof shall initially be $1.00, subject to adjustment as
provided in paragraph (c) below.
(ii) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. In lieu of any fractional share to
which the holder would otherwise be entitled after determination of the
aggregate full number of shares of Common Stock issuable in respect of the
Preferred Stock then being converted, the Corporation shall pay cash equal to
such fraction multiplied by the then Current Conversion Price.
(b) Mechanics of Conversion.
(i) In order for a holder of Preferred Stock to convert shares
of Preferred Stock into shares of Common Stock, such holder shall surrender
the certificate or certificates for such shares of Preferred Stock, at the
office of the transfer agent for the Preferred Stock (or at the principal
office of the Corporation if the Corporation serves as its own transfer
agent), together with written notice that such holder elects to convert all
or any number of the shares of Preferred Stock represented by such
certificate or certificates. Such notice shall state such holder's name or
the names of the nominees in which such holder wishes the certificate or
certificates for Shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or
his, her or its attorney duly authorized in writing. The date of receipt of
such certificates and notice by the transfer agent (or by the Corporation if
the Corporation serves as its own transfer agent) shall be the conversion
date (the "Conversion Date"). The Corporation shall, as soon as practicable
after the Conversion Date, issue and deliver at such office to such holder of
Preferred Stock, or to his, her or its nominees, a certificate or
certificates for the number of whole shares of Common Stock (and any shares
of Preferred Stock represented by the certificate or certificates delivered
to the Corporation by the holder thereof which are not converted into Common
Stock) issuable upon such conversion in accordance with the provisions
hereof, together with cash in lieu of fractional shares calculated in
accordance with subparagraph (ii) of paragraph (a) above. Such conversion
shall be deemed to have been made immediately prior to the close of business
on the date of such surrender of certificates of Preferred Stock to be
converted, and the person or persons entitled to receive shares of Common
Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on that date.
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(ii) The Corporation shall at all times when the Preferred
Stock shall be outstanding, reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the conversion of the
Preferred Stock, such number of its duly authorized shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock. Before taking any action which would
cause Common Stock, upon the conversion of Preferred Stock, to be issued
below the then par value of the shares of Common Stock, the Corporation will
take any corporate action which may, in the opinion of its counsel be,
necessary in order that the Corporation may validly and legally issue fully
paid and nonassessable shares of Common Stock to the holders of Preferred
Stock. The Corporation will not close its books against the transfer of the
Preferred Stock or of Common Stock issued or issuable upon conversion of the
Preferred Stock in any manner which interferes with the timely conversion of
the Preferred Stock.
(iii) All shares of Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall immediately cease and terminate
on the Conversion Date, except only the right of the holders thereof to
receive shares of Common Stock in exchange therefor and payment of any
declared and unpaid dividends thereon. On and as of the Conversion Date, the
shares of Common Stock issuable upon such conversion shall be deemed to be
outstanding, and the holder thereof shall be entitled to exercise and enjoy
all rights with respect to such shares of Common Stock, including the rights,
if any, to receive notices and to vote. All certificates representing shares
of Preferred Stock, from and after the Conversion Date, shall be deemed to
have been retired and canceled and shall not be reissued, and the Corporation
may thereafter take such appropriate action as may be necessary to reduce
accordingly the authorized number of shares of Preferred Stock.
(c) Adjustments to Conversion Price. The initial conversion prices
as stated in subparagraph (i) of paragraph (a) above shall be subject to
adjustment from time to time and such conversion prices as adjusted shall
likewise be subject to further adjustment, all as hereinafter set forth. The
term "Current Conversion Price" shall mean, as of any time, the conversion
price of the Series C Preferred Stock or the Series A or B Preferred Stock,
as the case may be, at that time, as specified in paragraph (a) above in case
no adjustment shall have been required, or such conversion price as adjusted
pursuant to this paragraph (c), as the case may be.
(i) If at any time after the date of issuance of the Preferred
Stock the Corporation shall issue (x) any shares of Common Stock other than
(A) Excluded Stock (as defined in subparagraph (vii) below), (B) Common Stock
issued or issuable upon conversion of the Preferred Stock or (C) by way of
dividend or other distribution on shares of Common Stock referred to in the
foregoing clauses (A) and (B), or (y) any shares of a class or series
convertible into Common Stock, other than the Preferred Stock (collectively,
with the Common Stock, such
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"Securities"), for a consideration per share (the consideration in each case
to be determined in the manner provided in (E) and (F) of subparagraph (ii)
below) less than the Current Conversion Price in effect immediately prior to
the issuance of such Securities, the Current Conversion Price in effect
immediately prior to each such issuance shall forthwith (except as provided
in subparagraph (ii) below) be adjusted to a Current Conversion Price
obtained by dividing an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including the number of shares of Common Stock into which the
outstanding shares of Preferred Stock and other securities
convertible into Preferred Stock are then directly or
indirectly convertible) immediately prior to such issuance
multiplied by the Current Conversion Price in effect
immediately prior to such issuance, plus
(y) the consideration received by the Corporation upon such
issuance,
by
(z) the total number of shares of Common Stock outstanding
(including the number of shares of Common Stock into which the
outstanding shares of Preferred Stock or other securities
convertible into Preferred Stock are then directly or
indirectly convertible) immediately after such issuance
(including the number of shares of Common Stock into which such
newly issued Securities are then convertible).
(ii) For the purpose of any adjustment of the conversion price
pursuant to subparagraph (c)(i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of options or warrants to purchase or
rights to subscribe for Common Stock other than Excluded Stock
(collectively, "Rights"), the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such Rights shall be
deemed to have been issued at the time such Rights were issued, for
a consideration equal to the consideration (determined in the manner
provided in (E) and (F) below), if any, received by the Corporation
on the issuance of such Rights, plus the minimum purchase price
provided in such Rights for the Common Stock covered thereby;
provided that such shares of Common Stock deliverable upon the
exercise of such Rights shall not be deemed to have been issued
unless such consideration per share would be less than the Current
Conversion Price in effect on the date of and immediately prior to
such issue. No further adjustment of the Current Conversion Price
adjusted upon the issuance of such Rights shall be made as a result
of the actual issuance of shares of Common Stock deliverable upon
exercise of such Rights.
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(B) In the case of the issuance of securities by their terms convertible
into or exchangeable for Common Stock other than Excluded Stock
(collectively, "Convertible Securities"), or options or warrants to
purchase or rights to subscribe for securities by their terms
convertible or exchangeable for Common Stock other than Excluded
Stock (collectively, "Related Rights"), the aggregate maximum number
of shares of Common Stock deliverable upon conversion, exchange or
exercise of any such Convertible Securities or such Related Rights
shall be deemed to have been issued at the time such Convertible
Securities or such Related Rights were issued and for a
consideration equal to the consideration received by the Corporation
upon issuance of such Convertible Securities or such Related Rights
(excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion, exchange or
exercise of such Convertible Securities or Related Rights (the
consideration in each case to be determined in the manner provided
in (E) and (F) below); provided that such shares of Common Stock
deliverable upon such conversion, exchange or exercise of such
Convertible Securities or Related Rights shall not be deemed to have
been issued unless such consideration per share would be less than
the Current Conversion Price in effect on the date of and
immediately prior to such issue. No further adjustment of the
Current Conversion Price adjusted upon the issuance of such Related
Rights shall be made as a result of the actual issuance of such
Convertible Securities deliverable upon exercise of such Related
Rights.
(C) On any change in the number of shares of Common Stock deliverable
upon the exercise of such Rights or Related Rights or upon the
conversion, exchange or exercise of such Convertible Securities or
on any change in the minimum purchase price of such Rights, Related
Rights or Convertible Securities other than a change resulting from
the anti-dilution provisions of such Rights, Related Rights or
Convertible Securities, the Conversion Price shall forthwith be
readjusted to such Current Conversion Price as would have been
obtained had the adjustment made upon the issuance of such Rights,
Related Rights or Convertible Securities not converted, exchanged or
exercised prior to such change, been made upon the basis of such
change.
(D) On the expiration of any such Rights, Related Rights or Convertible
Securities, the Current Conversion Price shall forthwith be
readjusted to such Current Conversion Price as would have obtained
had the adjustment made upon the issuance of such Rights or Related
Rights or the conversion, exchange or exercise of any such
Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the conversion,
exchange or exercise of any such Convertible Securities.
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(E) In the case of the issuance of such Securities for cash, the
consideration shall be deemed to be the amount of cash paid
therefor (excluding amounts paid for accrued interest or accrued
dividends).
(F) In the case of the issuance of such Securities for a consideration
in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as determined in
good faith by the Board of Directors of the Corporation.
(iii) If the Corporation declares a dividend or other
distribution payable in such Securities or subdivides its outstanding shares
of Common Stock into a larger number or combines its outstanding shares of
Common Stock into a smaller number, then the Current Conversion Price in
effect immediately prior to such dividend, other distribution, subdivision or
combination, as the case may be, shall forthwith be adjusted to that price
determined by multiplying the Current Conversion Price by a fraction (x) the
numerator of which shall be the total number of outstanding shares of such
Securities immediately prior to such dividend, other distribution,
subdivision or combination and (y) the denominator of which shall be the
total number of outstanding shares of such Securities immediately after such
dividend, other distribution, subdivision or combination.
(iv) In case the Corporation shall declare a dividend or
otherwise distribute to the holders of its Common Stock shares of its capital
stock (other than such Securities), stock or other securities of other
persons, evidences of indebtedness issued by the Corporation or other
persons, assets (excluding cash dividends) or options, warrants or rights
(excluding such Rights or Related Rights), then, in each such case,
immediately following the record date fixed for the determination of the
holders of Common Stock entitled to receive such dividend or distribution,
the Current Conversion Price in effect thereafter shall be determined by
multiplying the Current Conversion Price in effect immediately prior to such
record date by a fraction (A) the numerator of which shall be an amount equal
to the remainder of (x) the Current Market Price (as defined in subparagraph
(viii) below) determined immediately prior to such distribution of one share
of Common Stock less (y) the fair value (as determined in good faith by the
Corporation's Board of Directors) of the stock, securities, evidences of
indebtedness, assets, options, warrants or rights so dividended or
distributed in respect of one share of Common Stock, as the case may be, and
(B) the denominator of which shall be the Current Market Price of one share
of Common Stock determined immediately prior to such dividend or
distribution. Such adjustment shall be made on the date such dividend or
distribution is made, and shall become effective at the opening of business
on the business day following the record date for the determination of
stockholders entitled to such dividend or distribution.
(v) In the event the Corporation is in arrears with respect to the
payment of any dividend or portion thereof declared but unpaid on shares of
Preferred Stock, at the time a holder elects to convert such shares of
Preferred Stock, the Current Conversion Price in effect
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immediately prior to such conversion shall forthwith be reduced (but only
with respect to the shares of Preferred Stock being so converted) by an
amount equal to the quotient of (x) the aggregate arrearage per share of
Preferred Stock being converted, divided by (y) the number of shares of
Common Stock into which such share of Preferred Stock being converted is then
convertible; provided, however, that the application of the foregoing shall
not reduce the Current Conversion Price below $.01.
(vi) Whenever the Current Conversion Price shall be adjusted as
provided in this Section 4, the Corporation shall forthwith file, at the
office of the transfer agent for the Preferred Stock, at the principal office
of the Corporation or at such other place as may be designated by the
Corporation, a statement, certified by the chief financial officer of the
Corporation, showing in detail the facts requiring such adjustment and the
Current Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent by first
class mail, postage prepaid, to each holder of record of Preferred Stock at
such holder's address as shown in the records of the Corporation.
(vii) As used in this paragraph (c), "Excluded Stock" shall mean
(x) up to 4,850,000 shares (such amount to be appropriately adjusted in the
event of any stock dividend, stock split or combination, or similar
recapitalization affecting the Common Stock) of Common Stock or options for
the purchase thereof issued, sold or granted, in the past or future, by the
Corporation to its employees, directors or consultants pursuant to bona fide
employee stock purchase, option or similar benefit plans or other incentive
programs or compensation arrangements approved by the Board of Directors of
the Corporation, as more fully detailed in Section 7.14 of the Series A Stock
Purchase Agreement and (y) options for the purchase of up to 555,555 shares
(such amount to be appropriately adjusted in the event of any stock dividend,
stock split or combination, or similar recapitalization affecting the Common
Stock) of Common Stock, and the shares of Common Stock issuable upon the
conversion thereof, granted, in the past or future, by the Corporation to its
employees substantially in such form as approved by the Board of Directors of
the Corporation.
(viii) For the purpose of any computation pursuant to, subparagraph
(iv) above, the "Current Market Price" at any date of one share of Common
Stock shall be deemed to be the average of the daily closing prices for the
30 consecutive business days ending 15 business days before the date in
question (as adjusted for any stock splits, stock dividends, combinations or
recapitalization that took effect during such 30 business-day period). The
closing price for each day shall be the last reported sales price on such day
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or if not listed or admitted to trading
national securities exchange, the average of the last reported bid and asked
prices as reported by the National Association of Securities Dealers
Automated Quotation System, Inc., all as adjusted for stock splits, stock
dividends, combinations or similar recapitalization that took effect during
such 30 business-day period; provided, however, that if the Common Stock is
not traded in such a manner that the quotations referred to in this
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subparagraph (viii) are available for the period required hereunder, the
Current Market Price shall be deemed to be the fair value of such Common
Stock as determined in good faith by the Board of Directors of the
Corporation.
(ix) If any event occurs of the type contemplated by the provisions
of this Section 4 but not expressly provided for by such provisions, then the
Directors will make an appropriate adjustment in the Current Conversion Price
as to protect the rights of the holders of the Preferred Stock; provided that
no such adjustment will increase the Current Conversion Price except as
otherwise permitted pursuant to subparagraph (iii) above or subparagraph
(c)(ii)(D) of this Section 4 or decrease the number of shares of Common Stock
issuable upon conversion.
4.2. Mandatory Conversion.
(a) Upon the earlier to occur of (i) the closing of an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale by the
Corporation of Common Stock to the public at a minimum price per share of
$7.00 resulting in aggregate gross proceeds to the Corporation of not less
than $10,000,000, and (ii) the written consent or affirmative vote of the
holders of not less than 85% of the then outstanding shares of Preferred
Stock, given in writing or by vote at a meeting, all shares of Series C
Preferred Stock then outstanding shall automatically be converted into such
number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $1.80 by the Current Conversion Price then in effect
pursuant to Section 4.1 of this ARTICLE FOURTH, subpart (b) and all shares of
Series A Preferred Stock and Series B Preferred Stock then outstanding shall
automatically be converted into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $1.00 by the Current
Conversion Price then in effect pursuant to Section 4.1 of this ARTICLE
FOURTH, subpart (b).
(b) No fractional shares of Common Stock shall be issued upon
conversion of shares of Preferred Stock. In lieu of any fractional share to
which the holder would otherwise be entitled after determination of the
aggregate full number of shares of Common Stock issuable in respect of the
Preferred Stock then being converted, the Corporation shall pay cash equal to
such fraction multiplied by the then Current Conversion Price.
(c) All holders of record of shares of Preferred Stock will be
given at least 10 but not more than 30 days' prior written notice of the date
fixed (the "Mandatory Conversion Date") and the place designated for
mandatory conversion of all shares of Preferred Stock pursuant to this
Section 4.2. Such notice will be sent by first class or registered mail,
postage prepaid, to each record holder of Preferred Stock at such holder's
address last shown on the records of the transfer agent for the Preferred
Stock (or the records the Corporation if it serves as its own transfer
agent). On or before the Mandatory Conversion Date, each holder of shares of
Preferred Stock shall surrender his, her or its certificate or certificates
for all such shares to the Corporation at the place designated in such
notice. If required by the Corporation,
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certificates surrendered for conversion shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or his, her or its
attorney duly authorized in writing. On and after the Mandatory Conversion
Date, all rights with respect to the Preferred Stock, including the rights,
if any, to receive notices and vote, will terminate, except only the rights
of the holders thereof, upon surrender of their certificate or certificates
therefor, to receive certificates for the number of shares of Common Stock
into which such Preferred Stock has been converted and payment of any
declared but unpaid dividends thereon. As soon as practicable after the
Mandatory Conversion Date and upon the surrender of the certificate or
certificates representing shares of Preferred Stock, the Corporation shall
issue and deliver to such holder, or on his, her or its written order, a
certificate or certificates for the number of whole shares of Common Stock
issuable under such conversion in accordance with the provisions hereof,
together with cash as provided in subparagraph (b) of this Section 4.2 in
respect of any fraction of a share of Common Stock otherwise issuable upon
such conversion.
(d) All certificates evidencing shares of Preferred Stock which are
required to be surrendered in accordance with this Section 4.2, from and
after the Mandatory Conversion Date, shall be deemed to have been retired and
canceled, and the shares of Preferred Stock represented thereby, converted
into Common Stock, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date, The
Corporation may then take such appropriate action as may be necessary to
reduce accordingly the authorized number of shares of Preferred Stock.
5. Redemption. The shares of Preferred Stock shall be redeemed as follows:
5.1. Mandatory Redemption. On January 15th in each of the years 2004 and
2005 (each a "Redemption Date"), the Corporation shall redeem 50% of the then
outstanding shares of Preferred Stock at a per share price of $1.80 for each
share of Series C Preferred Stock and $1.00 for each share of Series A
Preferred Stock and Series B Preferred Stock, plus an amount equal to all
declared but unpaid dividends on such shares (the "Redemption Price") up to
and including the date such shares are redeemed, unless such redemption is
waived by the holders of 75% of the then outstanding shares of Preferred
Stock.
5.2. Payment of Redemption Price. On each Redemption Date, the
Corporation will pay to the holders of the Preferred Stock outstanding at the
time of the redemption an amount equal to the Redemption Price with respect
to each of the shares of Preferred Stock redeemed on such date. If on a
Redemption Date the funds of the Corporation legally available for redemption
of shares of Preferred Stock are insufficient to redeem the number of the
outstanding shares of Preferred Stock that are to be redeemed on such date,
those funds which are legally available will be used to redeem, at the
Redemption Price, the maximum possible number of shares of Preferred Stock on
a pro rata basis among the holders thereof based upon the number of shares of
Common Stock into which such shares of Preferred Stock would be converted.
At any time
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thereafter when additional funds of the Corporation become legally available
for the redemption of Preferred Stock, such funds will immediately be used to
redeem the balance of the shares of Preferred Stock which the Corporation has
become obligated to redeem but which it has not so redeemed. In addition,
any redemption of Preferred Stock shall be made out of any surplus or any
capital whether or not a reduction of capital is thereby involved, and to the
extent provided by law, the Corporation shall take all necessary action to
effect a reduction of capital if such reduction is necessary to provide funds
legally available for any required redemption of Preferred Stock.
5.3. Equitable Adjustment. The Redemption Price set forth in this
Section 5 shall be subject to equitable adjustment whenever there shall occur
a stock split, combination, reclassification or other similar event involving
the Preferred Stock.
5.4. Surrender of Certificates. Not less than 60 days before each
Redemption Date, the Corporation shall mail written notice (the "Redemption
Notice"), postage prepaid, to each holder of record of Preferred Stock at
such holder's address as shown on the records of the Corporation; provided,
however, that the Corporation's failure to give such Redemption Notice shall
in no way affect its obligation to redeem the Preferred Stock as provided in
Section 5.1 of this ARTICLE FOURTH. The Redemption Notice shall contain the
following information:
(i) The number of shares of Preferred Stock held by the holder which
shall be redeemed by the Corporation on such Redemption Date pursuant to the
provisions of Sections 5.1 and 5.2 of this ARTICLE FOURTH.
(ii) The Redemption Date for the shares to be redeemed.
(iii) The address at which the holder may surrender to the Corporation
its certificate or certificates representing shares of Preferred Stock to be
redeemed.
Each holder of shares of Preferred Stock to be redeemed shall surrender
the certificate or certificates representing such shares to the Corporation
at the place specified in the Redemption Notice on or prior to the Redemption
Date designated in the Redemption Notice, and thereupon an amount equal to
the applicable Redemption Price shall be paid to the order of the person
whose name appears on such certificate or certificates. Each surrendered
certificate shall be cancelled and retired.
5.5. Dividends and Conversion after Redemption. From and after the date
on which the Corporation shall have paid in full the Redemption Price with
respect to any shares of Preferred Stock, such shares of Preferred Stock
thereby redeemed shall not be entitled to any further dividends pursuant to
Section 1 of this ARTICLE FOURTH or to the conversion provisions set forth in
Section 4 of this ARTICLE FOURTH.
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6. Replacement. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing one or more shares of Common Stock or Preferred Stock,
and in the case of any such loss, theft or destruction, upon receipt of
indemnity and bond reasonably satisfactory to the Corporation (provided that
if the holder is an institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation will (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
number of shares represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
ARTICLE FIFTH: The Corporation is to have perpetual existence.
ARTICLE SIXTH: In addition to, and not by way of limitation of, the
powers granted to the Board of Directors by the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal all or any of by-laws of the Corporation.
ARTICLE SEVENTH: Elections of directors need not be by written ballot
unless the by-laws of the Corporation shall so provide.
ARTICLE EIGHTH: Meetings of stockholders may be held within or without
the State of Delaware, as the by-laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the by-laws of the
Corporation.
ARTICLE NINTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279
of Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value
of the creditors or class of creditors, and/or of the stockholder or class of
stockholders of the Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of the Corporation as a consequence
of such compromise or arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to which the said
application has been made, be
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binding on all the creditors or class of creditors, and/or on the
stockholders or class of stockholders, of the Corporation, as the case may
be, and also on the Corporation.
ARTICLE TENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of
incorporation, in the manner now or hereafter prescribed by statute and by
this Amended and Restated Certificate of Incorporation, and all rights
conferred upon stockholders herein are granted subject to this reservation.
ARTICLE ELEVENTH: To the fullest extent permitted by the General
Corporation Law of the State of Delaware as it now exists or may hereafter be
amended, no director of the Corporation shall be personally liable to the
Corporation, any of its stockholders or any other person or entity for
monetary damages for breach of fiduciary duty owed to the Corporation, its
stockholders or such other person or entity owing to such director's position
as a director of the Corporation. Any repeal or modification of this ARTICLE
ELEVENTH by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or
modification.
ARTICLE TWELFTH:
1. Actions, Suits and Proceedings Other Than By or in the Right of the
Corporation. The Corporation shall indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil criminal, administrative
or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was, or has agreed to
become, a director or officer of the Corporation, or is or was serving, or
has agreed to serve, at the request of the Corporation, as a director,
officer or trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise (including any benefit
plan) (all such persons being referred to hereafter as an"Indemnitee"), or by
reason of any action alleged to have been taken or omitted to have been taken
in such capacity, against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her or on his or her behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
his or her conduct was unlawful. Notwithstanding anything to the contrary in
this ARTICLE TWELFTH, except as set forth in Section 6 below, the Corporation
shall not indemnify an Indemnitee seeking
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indemnification in connection with a proceeding (or part thereof) initiated
by the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the Corporation.
2. Actions or Suits By or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was, or has agreed to become, a
director or officer of the Corporation, or is or was serving, or has agreed
to serve, at the request of the Corporation, as a director, officer or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other enterprise (including any employee benefit
plan), or by reason of any action alleged to have been taken or omitted to
have been taken in such capacity, against all expenses (including attorneys'
fees) and amounts paid in settlement actually and reasonably incurred by him
or her or on his or her behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation, except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of such liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses
(including attorneys' fees) which the Court of Chancery of Delaware or such
other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
the other provisions of this ARTICLE TWELFTH, to the extent that an
Indemnitee has been successful, on the merits or otherwise, in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this ARTICLE
TWELFTH, or in defense of any claim, issue or matter therein, or on appeal
from any such action, suit or proceeding, he shall be indemnified against all
expenses (including attorneys' fees) actually and reasonably incurred by him
or her or on his or her behalf in connection therewith. Without limiting the
foregoing, if any action, suit or proceeding is disposed of, on the merits or
otherwise (including a disposition, without prejudice), without (i) the
disposition being adverse to the Indemnitee, (ii) an adjudication that the
Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo
contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did
not act in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and (v) with respect to any
criminal proceeding, an adjudication that the Indemnitee had reasonable cause
to believe his or her conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with
respect thereto.
4. Notification and Defense of Claim. As a condition precedent to his
or her right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or
investigation involving him for which indemnity will or could
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be sought. With respect to any action, suit, proceeding or investigation of
who the Corporation is so notified, the Corporation will be entitled to
participate therein at its own expense and/or to assume the defense thereof
at its own expense, with legal counsel reasonably acceptable to the
Indemnitee. After notice from the Corporation to the Indemnitee of its
election so to assume such defense, the Corporation shall not be liable to
the Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with such claim, other than as video below in this
Section 4. The Indemnitee shall have the right to employ his or her own
counsel in connection with such claim, but the fees and expenses of such
counsel incurred after notice from the Corporation of its assumption of the
defense thereof shall be at the expense of the Indemnitee unless (i) the
employment of counsel by the Indemnitee has been authorized by the
Corporation, (ii) counsel to the Indemnitee, shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of
an action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and
expenses of counsel for the Indemnitee shall be at the expense of the
Corporation, except as otherwise expressly provided by this ARTICLE TWELFTH.
The Corporation shall not be entitled, without the consent of the Indemnitee,
to assume the defense of any claim brought by or in the right of the
Corporation or as to which counsel for the Indemnitee shall have reasonably
made the conclusion provided for in clause (ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this ARTICLE TWELFTH of any action, suit, proceeding or
investigation of which the Corporation receives notice under this ARTICLE
TWELFTH, any expenses (including attorneys' fees) incurred by an Indemnitee
in defending a civil or criminal action, suit, proceeding or investigation or
any appeal therefrom shall be paid by the Corporation in advance of the final
disposition of such matter, provided, however, that the payment of such
expenses incurred by an Indemnitee in advance of the final disposition of
such matter shall be made only upon receipt of an undertaking by or on behalf
of the Indemnitee to repay all amounts so advanced in the event that it shall
ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Corporation as authorized in this ARTICLE TWELFTH. Such
undertaking may be accepted without reference to the financial ability of
such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this ARTICLE
TWELFTH, the Indemnitee shall submit to the Corporation a written request,
including in such request such documentation and information as is reasonably
available to the Indemnitee and is reasonably necessary to determine whether
and to what extent the Indemnitee is entitled to indemnification or
advancement of expenses. Any such indemnification or advancement of expenses
shall be made promptly, and in any event within 60 days after receipt by the
Corporation of the written request of the Indemnitee, unless with respect to
requests under Section 1, 2 or 5 the Corporation determines, by clear and
convincing evidence, within such 60-day period, that the Indemnitee did not
meet
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the applicable standard of conduct set forth in Section 1 or 2, as the case
may be. Such determination shall be made in each instance by (a) a majority
vote of a quorum of the directors of the Corporation consisting of persons
who are not at that time parties to the action, suit or proceeding in
question ("disinterested directors"), (b) if no such quorum is obtainable, a
majority vote of a committee of two or more disinterested directors, (c) a
majority vote of a quorum of the outstanding shares of stock of all classes
entitled to vote for directors voting as a single class, which quorum shall
consist of stockholders who are not at that time parties to the action, suit
or proceeding in question, (d) independent legal counsel (who may be regular
legal counsel to the Corporation) or (e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
this ARTICLE TWELFTH shall be enforceable by the Indemnitee in any court of
competent jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within the 60-day period referred
to above in Section 6. Unless otherwise provided by law, the burden of
proving that the Indemnitee is not entitled to indemnification or advancement
of expenses under this ARTICLE TWELFTH shall be on the Corporation. Neither
the failure of the Corporation to have made a determination prior to the
commencement of such action that indemnification is proper in the
circumstances because the Indemnitee has met the applicable standard of
conduct, nor an actual determination by the Corporation pursuant to Section 6
that the Indemnitee has not met such applicable standard of conduct, shall be
a defense to the action or create a presumption that the Indemnitee has not
met the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing his or
her right to indemnification, in whole or in part, in any such proceeding
shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment termination or repeal of this
ARTICLE TWELFTH or of the relevant provisions of the General Corporation Law
of the State of Delaware or any other applicable laws shall affect or
diminish in any way the rights of any Indemnitee to indemnification under the
provisions hereof with respect to an action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or
facts occurring prior to the final adoption of such amendment, termination or
repeal.
9. Other Rights. The indemnification and advancement of expenses
provided by this ARTICLE TWELFTH shall not be deemed exclusive of any other
rights to which an Indemnitee seeking indemnification or advancement of
expenses may be entitled under any law (common or statutory), agreement or
vote of stockholders or disinterested directors or otherwise, both as to
action in his or her official capacity and as to action in any other capacity
while holding office for the Corporation, and shall continue as to an
Indemnitee who has ceased to be a director or officer, and shall inure to the
benefit of the estate, heirs, executors and administrators of the Indemnitee.
Nothing contained in this ARTICLE TWELFTH shall be deemed to prohibit, and
the Corporation is specific authorized to enter into, agreements with
officers and directors providing indemnification rights and procedures
different from those set forth in this ARTICLE
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TWELFTH. In addition, the Corporation may, to the extent authorized from
time to time by its Board of Directors, grant indemnification rights to other
employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this ARTICLE TWELFTH.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this ARTICLE TWELFTH to indemnification by the Corporation for
some or a portion of the expenses (including attorneys' fees), judgments,
fines or amounts paid in settlement actually and reasonably incurred by him
or her or on his or her behalf in connection with any action, suit,
proceeding or investigation and any appeal therefrom but not, however, for
the total amount thereof, the Corporation shall nevertheless indemnify the
Indemnitee for the portion of such expenses (including attorneys' fees),
judgments, fines, or amounts paid settlement to which the Indemnitee is
entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust
or other enterprise (including any benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
or her status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
General Corporation Law of the State of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the
surviving corporation, the surviving corporation shall assume the obligations
of the Corporation under this ARTICLE TWELFTH with respect to any action,
suit, proceeding or investigation arising out of or relating to any actions,
transactions or facts occurring prior to the date of such merger or
consolidation.
13. Savings Clause. If this ARTICLE TWELFTH or any portion here shall
be invalidated on any ground by any Court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
in connection any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of
this ARTICLE TWELFTH that shall not have be invalidated and to the fullest
extent permitted by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h)
Section 145(i) of the General Corporation Law of the State of Delaware shall
have respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
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15. Subsequent Legislation. If the General Corporation Law of the State
of Delaware is amended after adoption of this ARTICLE TWELFTH to expand
further the indemnification permitted to Indemnitees, then the Corporation
shall indemnify such persons to the fullest extent permitted by the General
Corporation of State of Delaware, as so amended.
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Exhibit 3.3
BY-LAWS
OF
ScripTech Pharmaceuticals, Inc.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
<PAGE>
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 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
10 days prior to the meeting, at a place within the city 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 of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to
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corporate action in writing without a meeting, may vote or express such consent
or dissent in person or may authorize another person or persons to vote or act
for him by written proxy executed by the stockholder or his authorized agent and
delivered to the Secretary of the corporation. No such proxy shall be voted or
acted upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
1.10 Action without Meeting. Any action required or permitted to be taken
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
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2.2 Number; Election and Qualification. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the stockholders or the Board of Directors, but in no event shall be less
than one. The number of directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased at
any time and from time to time by the stockholders.or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual meeting
and until his successor is elected and qualified, or until his earlier death,
resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in
the Board of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board, may be filled by vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director. A
director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office, and a director chosen to fill a position resulting
from an increase in the number of directors shall hold office until the next
annual meeting of stockholders and until his successor is elected and qualified,
or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
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2.8 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 48 hours in
advance of the meeting, (ii) by sending a telegram or telex, or delivering
written notice by hand, to his last known business or home address at least 48
hours in advance of the meeting, or (iii) by mailing written notice to his last
known business or home address at least 72 hours in advance of the meeting. A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting,
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if all members of the Board or committee, as the case may be, consent to the
action in writing, and the written consents are filed with the minutes of
proceedings of the Board or committee.
2.14 Removal. Except as otherwise provided by the General Corporation Law
of Delaware, any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except that the directors elected by the holders of
a particular class or series of stock may be removed without cause only by vote
of the holders of a majority of the outstanding shares of such class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. 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. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
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ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
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3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the Board
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the President may
from time to time prescribe. In addition, the Secretary shall perform such
duties and have such
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powers as are incident to the office of the secretary, including without
limitation the duty and power to give notices of all meetings of stockholders
and special meetings of the Board of Directors, to attend all meetings of
stockholders and the Board of Directors and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
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ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote
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<PAGE>
with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date 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 to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating to such purpose.
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.
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ARTICLE 5 - General Provisions
5.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January in each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise designate,
the President or Treasurer may waive notice of, and act as, or appoint any
person or persons to act as, proxy or attorney-in-fact for this corporation
(with or without power of substitution) at, any meeting of stockholders or
shareholders of any other corporation or organization, the securities of which
may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
5.6 Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
5.7 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the 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
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<PAGE>
Directors or a committee of the Board of Directors which authorizes the contract
or transaction or solely because his or their votes are counted for such
purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or 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;
(2) The material facts as to his 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
(3) 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 of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
5.8 Severability. Any determination that any provision of these By-Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
5.9 Pronouns. All pronouns used in these By-Laws shall be deemed to refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE 6 - Amendments
6.1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
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6.2 By the Stockholders. These By-Laws may be altered, amended or repealed
or new by-laws may be adopted by the affirmative vote of the holders of a
majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
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Exhibit 10.1
================================================================================
SCRIPTECH PHARMACEUTICALS, INC.
STOCK PURCHASE AGREEMENT
September 16, 1993
================================================================================
<PAGE>
SCRIPTECH PHARMACEUTICALS, INC.
------------------
STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 16th day of September 1993, by and among
SCRIPTECH PHARMACEUTICALS, INC., a Delaware corporation (the "Company") with its
principal place of business at One Kendall Square, Suite 2200, Cambridge,
Massachusetts 02139, and each of the entities and individuals severally listed
on the Schedule of Purchasers attached hereto (collectively, the "Purchasers"
and individually, a "Purchaser").
WHEREAS, the Company desires to issue and sell, and the
Purchasers desire to purchase, certain securities of the Company, upon the terms
and conditions set forth herein; and
WHEREAS, included in such securities are securities to be
issued by the Company as a result of the extension to the Company by certain
Purchasers of $361,000 principal amount of bridge loans (the "Bridge Loans") in
July and August 1993.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and conditions herein contained, the parties hereto agree as follows:
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has, or before
the Closing (as hereinafter defined) will have, authorized the sale and issuance
of 6,203,325 shares of its Series A Preferred Stock, par value $.01 per share
(the "Preferred Stock"), and 575,000 shares of its Common Stock, par value $.01
per share (the "Common Stock"), each such class of stock having the rights,
restrictions, privileges and preferences as set forth in the Restated
Certificate of Incorporation of the Company (the "Certificate of Incorporation")
attached to this Agreement as Exhibit A. The 6,203,325 shares of Preferred Stock
being sold to the Purchasers hereunder, including the 361,000 shares of
Preferred Stock being issued to certain Purchasers in repayment of the principal
amount of the Bridge Loans and the 3,325 shares of Preferred Stock being issued
to such Purchasers in repayment of the interest accrued on the Bridge Loans, are
referred to herein collectively as the "Preferred Shares" and individually as a
"Preferred Share." The 575,000 shares of Common Stock being sold to certain
Purchasers hereunder, consisting of 350,000 shares being issued proportionately
to those Purchasers which extended Bridge Loans to the Company and 225,000
shares being issued to certain Purchasers or persons affiliated with Purchasers,
are referred to herein collectively as the "Common Shares" and individually as a
"Common Share." The Preferred Shares and Common Shares are referred
<PAGE>
to herein collectively as the "Shares" and individually as a "Share."
1.2 Sale of the Shares. Subject to the terms and conditions
hereof and in reliance upon the representations, warranties and agreements
contained herein, the Company will issue and sell to each of the Purchasers,
severally and not jointly, and each of the Purchasers will purchase from the
Company at the Closing, the number of shares of Preferred Stock and/or Common
Stock set forth opposite such Purchaser's name on the Schedule of Purchasers
attached hereto (the "Schedule of Purchasers") under the columns labelled
"Shares of Preferred Stock" and "Shares of Common Stock," respectively, at the
purchase price set forth opposite such Purchaser's name on the Schedule of
Purchasers under the column labelled "Total Investment."
SECTION 2
The Closing
2.1 Closing Date. The closing of the purchase and sale of the
Shares hereunder (the "Closing"), including the delivery to the Purchasers by
the Company of the certificates evidencing all Shares being purchased, shall
take place immediately following the execution and delivery of this Agreement at
the office of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York
10103-3198, or at such other time and place as shall be mutually agreed upon by
the parties (the "Closing Date").
2.2 Delivery. At the Closing, the Company shall deliver to
each Purchaser certificates in such denominations and registered on the books of
the Company in such names as are set forth in the Schedule of Purchasers
attached hereto, representing the number of Preferred Shares or Common Shares,
as the case may be, to be purchased by such Purchaser from the Company, against
payment at the Closing, of the amount set forth opposite such Purchaser's name
in the column labelled "Total Investment" on the Schedule of Purchasers. Payment
for the Shares shall be made by the cancellation of the Bridge Loan indebtedness
(both principal and accrued interest), if any, of the Company to such Purchaser,
as set forth under the column labelled "Bridge Loan Conversion" on the Schedule
of Purchasers and, at the option of the Purchaser, by check or wire transfer, or
any combination thereof, in the amount set forth under the column labelled "$
Payment" on the Schedule of Purchasers.
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<PAGE>
SECTION 3
Representations and Warranties of
the Company
Except as provided herein or as set forth on the "Schedule of
Exceptions" delivered to each Purchaser prior to the execution hereof and
attached hereto, the Company hereby represents and warrants to each Purchaser as
follows:
3.1 Organization and Standing: Articles and By-Laws. The
Company is a corporation duly organized and validly existing and in good
standing under the laws of its state of organization and is qualified to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification, except where the failure to
so qualify would not have a material adverse effect upon the business,
operations or prospects of the Company. The Company has the requisite corporate
power to own properties owned by it and to conduct business as now being
conducted by it and as contemplated by it and possesses all governmental and
other permits, licenses and other authorizations to own its properties as now
owned and to conduct its business as now conducted. The Company has furnished
counsel to the Purchasers with true, correct and complete copies of its
Certificate of Incorporation, By-Laws and all amendments to each to date.
3.2 Corporate Power. The Company has all requisite corporate
power to enter into this Agreement and each of the Exhibits hereto, and will
have at the Closing Date all requisite corporate power to sell the Shares and to
carry out and perform its obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company has no subsidiaries and does not
own of record or beneficially any capital stock or equity interest or investment
in any corporation, association or business entity.
3.4 Capitalization. Immediately prior to the Closing, the
Company's authorized capital stock will consist of (a) 15,000,000 shares of
Common Stock, of which (i) 1,000 shares will be issued and outstanding
immediately prior to the Closing, (ii) 6,203,325 shares will be set aside for
issuance upon conversion of the Preferred Shares to be issued hereunder, (iii)
575,000 shares will be issued to the Purchasers or their affiliates at the
Closing, as provided in Section 1.1 hereof, (iv) 1,960,500 shares are set aside
for issuance upon exercise of stock options and other stock purchase rights,
heretofore or hereafter to be granted, listed on Schedule 3.4 hereto and (v)
1,239,500 shares are set aside for issuance upon exercise of other stock options
and purchase rights which may be granted to employees and consultants of the
Company, as approved by the Company's Board of Directors, and (b) 6,250,000
shares of Preferred Stock, none of which shares are issued and outstanding prior
to the Closing. All the aforesaid issued and outstanding shares of Common Stock
will have been duly authorized and validly issued, will be fully paid and
nonassessable, and will be owned of record and beneficially by the stockholders
of the Company and in the amounts set
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forth in the Schedule of Exceptions, and will have been offered, issued, sold
and delivered by the Company in compliance with applicable Federal and state
securities laws. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding on the
Company for the purchase or acquisition of, or with respect to any shares of its
capital stock, except as listed in Schedule 3.4 hereto. No stockholder has
granted options or other rights to purchase any shares of Common Stock from such
stockholder. Neither the offer, issuance or sale of the Shares nor the
consummation of any transaction contemplated hereby will result in a change in
the price or number of any securities of the Company outstanding at the Closing
under anti-dilution provisions contained in or affecting any such securities.
The Company holds no shares of its capital stock in its treasury.
3.5 Authorization. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement and each of
the Exhibits hereto, and the consummation of the transactions contemplated
herein and therein, and for the authorization, issuance and delivery of the
Shares and the shares of Common Stock issuable upon conversion of the Preferred
Shares has been taken or will be taken prior to the Closing. This Agreement and
each of the Exhibits hereto is a valid and binding obligation of the Company,
enforceable in accordance with its respective terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally and to
general equitable principles. The execution, delivery and performance by the
Company of this Agreement and each of the Exhibits hereto and compliance
herewith and therewith and the issuance and sale of the Shares and the issuance
of Common Stock upon conversion of the Preferred Shares will not (a) result in
any violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, the Company's Certificate of
Incorporation or By-Laws, as amended, any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation or other restriction to
which the Company is a party or by which it is bound or any provision of state
or Federal law to which the Company is subject, or (b) result in 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 (c) result in the suspension,
revocation, impairment, forfeiture or non-renewal of any permit, license,
authorization or approval applicable to the Company's operations or any of its
assets or properties. The Shares, when issued in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable; will be
free of any liens or encumbrances; and will have the rights, privileges and
preferences as set forth in the Certificate of Incorporation. The shares of
Common Stock issuable upon conversion of the Preferred Shares have been duly and
validly reserved and are not subject to any preemptive rights or rights of first
refusal and, upon issuance, will be validly issued, fully paid and
nonassessable.
3.6 Financial Information. The unaudited financial statements
of the Company as of December 31, 1992, and the related notes thereto
(collectively, the "Financial Statements"), and the unaudited financial
statements of the Company as of
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June 30, 1993, including the balance sheet as of June 30, 1993 (the "Balance
Sheet"), all of which unaudited statements are attached as Exhibit B hereto,
present fairly the financial position and results of operations of the Company
at the dates and for the periods to which they relate, have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities of the Company required
to be recorded thereon in accordance with generally accepted accounting
principles as at the dates thereof.
3.7 Absence of Undisclosed Liabilities. Except for the Bridge
Loans, the Company has no material liabilities (fixed or contingent, including
without limitation any tax liabilities due or to become due) which are not fully
reflected or provided for on the Balance Sheet. The Company does not know of any
such material liability of any nature, direct or indirect, contingent or
otherwise, or in any amount not adequately reflected or reserved against in the
Balance Sheet.
3.8 Absence of Certain Changes. At all times since December
31, 1992 up to and including the Closing, there has not been any event or
condition of any character which has materially adversely affected the Company's
business, operations or financial condition, including but not limited to:
(a) any material adverse change in the condition, operating
results, assets, liabilities or business of the Company from that shown on the
Financial Statements;
(b) any damage, destruction or loss of any of the properties
or assets of the Company (whether or not covered by insurance) materially
adversely affecting the assets, properties, financial condition, operating
results, prospects, business or plans of the Company;
(c) any waiver by the Company of a valuable right or of a debt
owed to it;
(d) any material change or material amendments to a contract
or arrangement by which the Company or any of its assets or properties is bound
or subject;
(e) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) any labor trouble.
3.9 Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with the States of Massachusetts and
Delaware and
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(except to the extent that the failure to file would not have a material adverse
effect on the condition or operations of the Company) with all other
jurisdictions where such filing is required by law; and the Company has paid, or
made adequate provision in the Financial Statements for the payment of, all
taxes, interest, penalties, assessments or deficiencies (i) shown to be due or
claimed to be due on or in respect of such tax returns and reports or (ii) on
the income, profits, property or business of the Company. The Company knows of
(i) no other tax returns or reports which are required to be filed which have
not been so filed and (ii) no unpaid assessment for additional taxes for any
fiscal period or any basis therefor. The Company's Federal income tax returns
have not been audited by the Internal Revenue Service.
3.10 Outstanding Debt. Except for the Bridge Loans and as
reflected on the Balance Sheet, the Company has no outstanding indebtedness for
borrowed money and is not a guarantor or otherwise contingently liable for any
indebtedness for borrowed money (including, without limitation, liability by way
of agreement, contingent or otherwise, to purchase, provide funds for payment,
supply funds or otherwise invest in any debtor or otherwise to insure any
creditor against loss). There exists no default under the provisions of any
instrument evidencing any such indebtedness or otherwise or of any agreement
relating thereto, including, without limitation, those included or referred to
in the Schedule of Exceptions and Balance Sheet. No officer, director or
stockholder of the Company or any of their relatives or affiliates, is indebted
to the Company in an amount in excess of $5,000 per person or entity.
3.11 Contracts; Insurance. Except as set forth in the
Financial Statements, the Company has no currently existing contract,
obligation, agreement, plan, arrangement, commitment or the like (written or
oral) of any material nature (involving more than $10,000 in any year or $50,000
over the life of such contract, obligation, agreement, plan, arrangement or
commitment, either individually or in the aggregate if such contracts,
obligations, agreements, plans, arrangements or commitments are of a similar
nature oR with the same party) including without limitation the following:
(a) Employment, bonus or consulting agreements, pension,
profit sharing, deferred compensation, stock bonus, retirement, stock option,
stock purchase, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company and agreements among stockholders
and the Company;
(b) Loan or other agreements, notes, indentures, or
instruments relating to or evidencing indebtedness for borrowed money, or
mortgaging, pledging or granting or creating a lien or security interest or
other encumbrance on any of the Company's property or any agreement or
instrument evidencing any guaranty by the Company of payment of performance by
any other person;
(c) Agreements with dealers, sales representatives, brokers or
other distributors, jobbers, advertisers or sales agencies;
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(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person
for the furnishing or purchase of machinery, equipment, goods or services,
including, without limitation, agreements with processors and subcontractors;
(f) Any indenture, agreement, or other document (including
private placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses to which the Company is a
party;
(h) Agreements expressly limiting the freedom of the Company
to compete in any line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business,
assets or shares of the Company, agreements of merger or consolidation to which
the Company is a party or letters of intent with respect to the foregoing;
(j) Letters of intent or agreements with respect to the
acquisition of the business, assets or shares of any other business;
(k) Insurance policies;
(l) Assignments, licenses or other agreements with respect to
any intangible property (including, without limitation, any patent, trademark,
trade name, copyright, know-how, trade secret, proprietary right or confidential
information);
(m) Any other contract, instrument, commitment, plan,
agreement or arrangement, a copy of which would be required to be filed with the
Securities and Exchange Commission (the "Commission") as an exhibit to a
registration statement on Form S-1 if the Company were registering securities
under the Securities Act of 1933, as amended (the "Securities Act").
The Company has complied with all the material provisions of
all said contracts, obligations, agreements, plans, arrangements, and
commitments and there does not exist any event of default with respect to the
Company under any such agreement or any event which, after notice or lapse of
time or both, would constitute an event of default with respect to the Company
under such agreement. There is no action, suit, proceeding or investigation
pending or, to the best of the Company's knowledge and belief, threatened
against the Company before any court or before any governmental or
administrative agency for the renegotiation of or any other adjustment of any
such agreement.
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<PAGE>
3.12 Litigation and Bankruptcy Proceedings.
(a) There is neither pending nor, to the best of the Company's
knowledge and belief, threatened any action, suit, proceeding or claim or, to
the best of the Company's knowledge, any basis therefor, whether or not
purportedly on behalf of the Company, to which the Company is or may be named as
a party or its property is or may be subject or to which any officer, key
employee or principal stockholder of the Company is subject, and in which an
unfavorable outcome, ruling or finding in any such matter or for all such
matters taken as a whole might have a material adverse effect on the condition,
financial or otherwise, prospects or operations of the Company; and the Company
has no knowledge of any unasserted claim, the assertion of which is likely and
which, if asserted, will seek damages, an injunction or other legal, equitable,
monetary or nonmonetary relief, which claim individually or collectively with
other such unasserted claims if granted would have a material adverse effect on
the condition, financial or otherwise, business or operations of the Company.
(b) The Company has not admitted in writing its inability to
pay its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other similar law or
statute of the United States of America or any other jurisdiction.
3.13 Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority, including the
Secretary of State of the State of Delaware, is required in connection with the
Company's valid execution, delivery or performance of this Agreement or any of
the Exhibits hereto, or the offer, sale or issuance of the Shares by the
Company, the conversion of the Preferred Shares, the issuance of Common Stock
upon conversion of the Preferred Shares or the consummation of any other
transaction contemplated on the part of the Company hereby or pursuant to any
such Exhibit, except for such filings as have been made prior to the Closing.
3.14 Title to Properties; Liens and Encumbrances; Leases. The
Company owns no real property. The Company has good and marketable title to and
a valid and indefeasible ownership interest in all the property and assets owned
by it, free from all mortgages, pledges, liens, security interests, conditional
sale agreements, encumbrances or charges (collectively referred to herein as
"Liens").
Set forth on the Schedule of Exceptions is a correct and
complete list (including the amount of rents called for and a description of the
leased property) of all leases under which the Company is a lessee. The Company
enjoys peaceful and undisturbed possession under all such leases, all of such
leases are valid and subsisting and the Company is not in default under any of
such leases in any material respect.
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3.15 Business of the Company. There is no pending or, to the
best of the Company's knowledge and belief, threatened any claim or litigation
against or affecting the Company contesting its right to perform any of the
services presently conducted by or proposed to be conducted by the Company or to
produce, manufacture, sell or use any product, process, method, substance, part
or other material presently produced, manufactured, sold or used or planned to
be produced, manufactured, sold or used by the Company in connection with the
business and operations of the Company. The Company has no knowledge or belief
that (i) there exists, or there is pending or planned, any patent, invention,
device, application or principle, or any statute, rule, law, regulation,
standard or code which would materially adversely affect the condition,
financial or otherwise, operations or prospects of the Company; or (ii) there is
any other factor (other than fire, flood, accident, act of war or civil
commotion, or any other cause or event beyond the control of the Company) which
materially adversely affects the condition, financial or otherwise, business or
the operations of the Company.
3.16 Permits, Franchises, Licenses, Trademarks, Patents and
Other Rights. The Company has, or when required will have, all permits, licenses
and other similar authority necessary in any material respect for the conduct of
its business as now being conducted by it and as planned to be conducted by it,
and it is not in default under any of such permits, licenses or other similar
authority. The Company possesses all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, trade secrets,
information, proprietary rights and processes necessary to conduct its business
in any material respect as now being conducted and as planned to be conducted
without, to the best of the Company's knowledge and belief, conflict with or
infringement upon any valid rights of others, and has not received any notice of
infringement upon or conflict with the asserted rights of others.
There are no outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is the Company bound by or a party to
any option, license or agreement of any kind with respect to the patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, trade secrets, information, proprietary rights and processes of any
other person or entity. No stockholder, director, officer or employee of the
Company has any interest in any such patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, trade secrets,
information, proprietary rights and processes.
3.17 Issuance Taxes. All taxes imposed by law in connection
with the issuance, sale and delivery of the Shares shall have been fully paid,
and all laws imposing such taxes shall have been fully complied with in all
material respects, prior to the Closing Date.
3.18 Offering. Subject in part to the truth and accuracy of
the Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Shares and the issuance of Common Stock upon conversion of the
Preferred Shares as contemplated by this Agreement are exempt from the
registration requirements of
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the Securities Act and from the registration or qualification requirements of
the laws of any applicable state, and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemption.
3.19 Compliance with Other Instruments. The Company is not in
violation of any term of its Certificate of Incorporation or By-Laws, as
amended. The Company is not in violation of any term of any mortgage, indenture,
contract, agreement, instrument, judgment, decree, order, statute, rule or
regulation to which the Company is subject and a violation of which would have a
material adverse effect on the condition, financial or otherwise, operations or
prospects of the Company.
3.20 Employees. To the best of the Company's knowledge and
belief, no employee or consultant of the Company, is, or is now expected to be,
in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, proprietary information and inventions
agreement or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or any Purchaser to any
liability to a third party. There is neither pending nor, to the best of the
Company's knowledge and belief, threatened any actions, suits, proceedings or
claims, or to its knowledge any basis therefor or threat thereof with respect to
any contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company does not have any collective bargaining agreement covering
any of its employees.
To the best knowledge of the Company, after due inquiry, no
officer or other person designated by the Purchasers on Schedule A hereto as a
"key person" of the Company, has any present intention of terminating his
employment or consulting arrangement with the Company, and the Company has no
present intention of terminating such employment or consulting arrangement.
3.21 Employee Benefit Plan Obligations. The Company does not
have any collective bargaining, labor, profit sharing, pension, retirement,
stock option, incentive, benefit or other similar contract, plan or arrangement.
The Company does not sponsor, nor is it obligated to contribute to, any employee
benefit plan (as such term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")).
3.22 Environmental Matters; Hazardous Waste. There have been
no past and there are no existing violations of Federal, state or local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste (including, but not limited to, asbestos, polychlorinated
biphenyls and petroleum products), relating to the Company or any of its
businesses or operations or assets. No inspection or investigation by the
Environmental Protection Agency or OSHA, or any other federal, state or local
agency has resulted in a letter demanding cleanup of
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hazardous substances or waste, citation, complaint or notice of violation,
pursuant to any law, rule, regulation, ordinance, judgment, decree, order,
injunction or decision of any court or governmental authority in regard to the
Company or any of its businesses or operations or any of its assets and no such
citation, complaint, notice or demand letter is pending or, to the best of the
Company's knowledge and belief, threatened.
To the best of the Company's knowledge and belief, there is no
condition or state of affairs existing on or about any real property owned,
leased, operated or used by the Company or any real property previously owned,
leased, operated or used by the Company (but only to the extent that such
condition or state of affairs existed on the date the Company ceased to own,
lease, operate or use such real property or was attributable to the Company's
ownership, leasing, operation or use of such real property) that would now or in
the immediate future require a closure under the provisions of the Resource,
Conservation and Recovery Act, or remedial or other action under the provisions
of the Resource, Conservation and Recovery Act or the Comprehensive
Environmental Response, Compensation and Liability Act, or the regulations
promulgated under such Acts, or that would constitute a nuisance or violation of
any environmental legislation or regulation under the law of the state in which
such property is located.
3.23 Ability to Comply; Burdensome Restrictions. The Company
has the ability and is presently in a position, legally and otherwise, to comply
with the terms of and perform all its obligations under this Agreement and each
of the Exhibits hereto; and the Company has no present knowledge of or any
present reason to believe that the Company will not have such ability and be in
such a position for so long as any shares of Preferred Stock are outstanding.
The Company is not presently obligated under any contract or
agreement or subject to any charter or other corporate restriction which (i)
materially and adversely affects, or may, in the reasonable opinion of the
Company, be expected to materially and adversely affect, its business,
properties, assets or condition (financial or otherwise) or (ii) will legally or
contractually restrict or impair the ability of the Company to pay any dividends
on or make other distributions with respect to the Preferred Shares pursuant to
the provisions of the Certificate of Incorporation.
3.24 Material Relationships. To the best of the Company's
knowledge and belief, none of the officers, directors or "key persons" (as
designated on Schedule A hereto) of the Company, or their respective spouses, or
relatives, owns directly or indirectly, individually or collectively, a material
interest in any entity which is a competitor, customer or supplier of (or has
any existing contractual relationship with) the Company. For purposes of this
Section 3.24, there may be disregarded any purely passive economic interest
which arises solely from the ownership of less than a 2% equity interest in any
such entity.
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3.25 Registration Rights. Except as provided in this
Agreement, the Company is not under any obligation to register any of its
currently outstanding securities or any of its securities which may hereafter be
issued.
3.26 Brokers' and Finders' Fees. The Company has retained no
broker or finder in connection with the transactions contemplated by this
Agreement and has no liability for any commission or compensation in the nature
of an agent's fee to any broker or finder or any other person.
3.27 Disclosure. This Agreement, the Schedule of Exceptions,
as well as any other document, certificate, schedule, financial, business or
other statement furnished to the Purchasers by or on behalf of the Company in
connection with the transactions contemplated hereby, do not contain any untrue
statement of a material fact and do not omit to state a material fact necessary
in order to make the statements contained therein or herein not misleading in
light of the circumstances under which they were made. The Company has no
current knowledge of any fact or circumstance which materially adversely affects
or in the future reasonably can be expected to materially adversely affect the
condition, financial or otherwise, assets, business or operations of the Company
which has not been disclosed in writing to the Purchasers.
SECTION 4
Representations and Warranties of Purchasers
Each Purchaser, severally and not jointly, represents and
warrants with respect to such Purchaser to the Company as follows:
4.1 Experience. It has such knowledge and experience in
financing and business matters that it is capable of evaluating the merits and
risks of an investment in the Shares and of making an informed decision.
4.2 Investment. It is acquiring the Shares for investment for
its own account and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Shares and, if applicable, the
shares of Common Stock issuable upon conversion of the Preferred Shares have not
been registered under the Securities Act by reason of a specified exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of its investment intent as expressed herein.
4.3 Restrictions on Transfers. It understands and agrees as
follows:
(a) The certificates evidencing the Shares (and the Common
Stock issuable upon conversion of the Preferred Shares), and each certificate
issued in
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transfer of the foregoing, will bear the following legend (or substantially
similar legend):
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION
OR THE DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH DISPOSITION
WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFICATION UNDER ANY
STATE SECURITIES LAWS."
(b) It will not offer, sell, transfer of otherwise dispose of
any of the Shares or, if applicable, any Common Stock issuable upon conversion
of the Preferred Shares, unless (i) an effective registration under the
Securities Act covers the disposition of such securities or (ii) it has
delivered to the Company an opinion of counsel, reasonably satisfactory to the
Company, that such offer, sale, transfer or other disposition will not require
registration of such securities under the Securities Act or qualification under
any state securities laws.
Upon request of a holder of Shares (or Common Stock issued
upon conversion of Preferred Shares), the Company shall remove any such legend
from each certificate evidencing such Shares (or such Common Stock), or shall
issue to such holder a new certificate or certificates for such Shares (or such
Common Stock), which certificate or certificates shall be free of such transfer
legend, provided that with such request, the Company shall have received an
opinion of counsel, which opinion is reasonably satisfactory to the Company, to
the effect that such legend is no longer necessary or required (including,
without limitation, because of the availability of the exemption afforded by
Rule 144 promulgated under the Securities Act).
4.4 Rule 144. It acknowledges that the Shares and the shares
of Common Stock issuable upon conversion of the Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. It has been advised or is aware of the
provisions of Rule 144, which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, and
understands that such Rule may not become available for resale of the Shares.
4.5 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management and has
had the opportunity to review the Company's books, records and facilities.
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4.6 Authorization. If applicable, all corporate or partnership
action on the part of such Purchaser and its directors and stockholders or
partners necessary for the authorization, execution, delivery and performance by
such Purchaser of this Agreement and the Exhibits hereto and the consummation of
the transactions contemplated herein and therein, has been taken or will be
taken prior to the Closing. This Agreement and each of the Exhibits hereto to
which such Purchaser is a party is a valid and binding obligation of such
Purchaser, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally and to
general equitable principles. The execution, delivery and performance by such
Purchaser of this Agreement and each of the Exhibits hereto to which such
Purchaser is a party and compliance herewith and therewith will not result in
any violation of and will not conflict with, or result in a breach of any of the
terms of, or constitute a default under, such Purchaser's Certificate of
Incorporation or By-Laws or Agreement of Limited Partnership, as applicable, or
any judgment, decree, order, rule or regulation to which such Purchaser is
bound.
SECTION 5
Conditions to Closing of Purchasers
The obligation of each Purchaser to purchase the Shares to be
purchased at the Closing is subject to the fulfillment to such Purchaser's
reasonable satisfaction on or prior to the Closing Date of each of the following
conditions:
5.1 Representations and Warranties Correct. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date.
5.2 Performance. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
respects.
5.3 Completion of Due Diligence. The Purchasers or their
representatives shall have completed their due diligence investigation including
but not limited to discussions with the Company's management concerning the
Company's business, management and financial affairs and inspection of the
Company's books, records and facilities.
5.4 Opinion of Company's Counsel and Accountants. The
Purchasers shall have received from Perkins, Smith & Cohen, counsel to the
Company, an opinion addressed to the Purchasers, dated the Closing Date, and in
substantially the form attached as Exhibit C hereto.
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5.5 Legal Investment. At the time of the Closing, the purchase
of the Shares to be purchased by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers and the Company
are subject.
5.6 Compliance Certificate. The Company shall have delivered
to the Purchasers a certificate of the President of the Company, dated the
Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement and such other matters as the Purchasers
may reasonably request.
5.7 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated hereby and all
documents and instruments incident to such transactions shall be satisfactory in
substance and form to the Purchasers and their counsel.
5.8 Securities Law Compliance. All such actions and steps
necessary to assure compliance with applicable Federal and state securities
laws, including all authorizations, approvals or permits, if any, of any
governmental authority or regulatory body in any states where the Shares are
being sold that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement, the conversion of the Preferred Shares
into Common Stock and the issuance of such Common Stock upon such conversion
shall have been duly obtained and shall be effective at and as of the Closing.
5.9 Stockholders' Agreement. The Company, the Purchasers,
Michael Green ("Green"), Peter Kim ("Kim"), Joseph McGuirl ("McGuirl") and each
person holding shares of Common Stock or options or rights to purchase shares of
Common Stock shall have executed and delivered to the Purchasers an agreement
(the "Stockholders' Agreement") in substantially the form attached hereto as
Exhibit D.
5.10 Employment Agreement. The Company shall have entered into
an Employment Agreement with McGuirl in substantially the form attached hereto
as Exhibit E.
5.11 Consulting Agreements. The Company shall have entered
into modifications to the Consulting Agreements with Green and Kim, in
substantially the form attached hereto as Exhibits F and G, respectively.
5.12 Research Budget. The Company shall have received the
research plan and budget referred to in Section 2.1(B) of the Research and
License Agreement, dated as of October 1, 1992, between the University of
Massachusetts and the Company for the fiscal year ended June 30, 1994, in form
and substance satisfactory to and approved by the Purchasers.
5.13 HCV Extension. The Company shall have received an
agreement, in form and substance satisfactory to the Purchasers, pursuant to
which HealthCare Ventures III, L.P. and HealthCare Ventures IV, L.P.
(collectively, "HCV"),
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have extended the date upon which HCV will forebear from taking any action
against the Company from August 3, 1993 to September 22, 1993. In addition, the
Company shall have furnished the Purchasers with evidence satisfactory to the
Purchasers and their counsel that satisfactory arrangements have been made for
all indebtedness to HCV and any security interest granted to HCV to be
extinguished in its entirety.
5.14 HCV Certificate. The Purchasers shall have received from
HCV a certificate substantially in the form of Exhibit H hereto.
5.15 Key-Man Insurance Trust. The Company and CW Group (the
"Trustee") shall have executed and delivered a Trust Agreement substantially in
the form of Exhibit I hereto. Each of the Purchasers of Preferred Shares and the
Trustee shall have executed and delivered a Trust Option Agreement substantially
in the form of Exhibit J hereto.
5.16 Legal Fees. The Company shall have paid the legal fees
and the disbursements and office expenses of Fulbright & Jaworski L.L.P.,
counsel to the Purchasers, with respect to this Agreement and the transactions
contemplated hereby.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell the Shares to be purchased at
the Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 Representations. The representations made by each of the
Purchasers pursuant to Section 4 hereof shall be true and correct when made and
shall be true and correct on the Closing Date.
6.2 Legal Investment. At the time of the Closing, the
conditions set forth in Sections 5.8 and 5.9 shall have occurred and the
purchase of the Shares to be purchased by the Purchasers hereunder shall be
legally permitted by all laws and regulations to which the Purchasers and the
Company are subject.
SECTION 7
Covenants of the Company
The Company hereby covenants and agrees, so long as any
Purchaser owns Shares, to take or refrain from taking any of the actions
specified in this Section 7, without the prior written consent of the
Purchasers' designees to the Board of Directors of the Company:
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I. Affirmative Covenants.
7.1 Basic Financial Information. The Company will furnish the
following reports to the Purchasers (or their representatives):
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (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 retained earnings and of statement of cash flows of the Company and its
subsidiaries, if any (collectively with the balance sheet, the "Investment
Financial Statements"), 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
standing selected by and reporting to the Board of Directors of the Company and
approved by the Purchasers, and including a Company prepared comparison to
budget.
(b) As soon as practicable after the end of each month and
each of the first, second and third quarterly accounting periods in each fiscal
year of the Company, and in any event within thirty (30) days thereafter,
consolidated Investment Financial Statements of the Company and its
subsidiaries, if any, for such period, prepared in accordance with generally
accepted accounting principles consistently applied, subject to changes
resulting from year-end audit adjustments, and setting forth in comparative form
the figures for the corresponding periods of the previous fiscal year, certified
by the principal financial or accounting officer of the Company.
(c) If the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act", which term shall include any successor federal statute), it may in lieu of
the financial information required pursuant to Sections 7.1(a) and (b) hereof
provide copies of its annual reports on Form 10-K and its quarterly reports on
Form 10-Q, respectively, or other then-equivalent report form.
(d) Immediately upon any officer of the Company obtaining
actual knowledge of the occurrence of any material violation or default by the
Company or any of its subsidiaries in the performance of (i) its agreements or
covenants contained herein, (ii) its material agreements or covenants contained
in any other agreement to which the Company or any of its subsidiaries is a
party or (iii) its agreements or covenants contained in the Certificate of
Incorporation or of the occurrence of any condition, event or act which, with or
without notice or lapse of time, or both, would constitute a material violation
or an event of default, a written notice specifying the nature and status
thereof and, what action the Company has taken, is taking and proposes to take
with respect thereto.
(e) Annually (but in any event not later than sixty (60) days
after the commencement of each fiscal year of the Company) the yearly budget and
operating
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plan of the Company, in such manner and form reasonably acceptable to the
Purchasers and as approved by the Board of Directors of the Company, which plan
shall include a projection of income and projected Investment Financial
Statements as of the end of such fiscal year. Any material changes in such plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company.
(f) As soon as practicable after transmission or occurrence
and in any event within ten (10) days thereof, (i) copies of any reports or
communications delivered to any of the Company's securityholders (in their
capacity as such), any governmental entity (excluding ordinary permit
applications or similar types of correspondence and documentation in connection
therewith), any financial institution or member of the financial community
(other than correspondence and documents delivered to such financial
institutions or members in the ordinary course of business which do not
materially adversely impact on the Purchaser's investment in the Company) or to
any other individual or entity who may receive such information by law or
pursuant to a contract or other agreement with the Company (except in the
ordinary course of business), including any filings by the Company, or by any of
its officers or directors relating to the Company, with any securities exchange
or the Commission or the National Association of Securities Dealers, Inc., (ii)
notice of any event which has a material adverse effect on the Company's
business, prospects or condition, financial or otherwise, or on the ability of
the Company to perform its obligations under this Agreement, or under any other
agreement, or on the Purchasers' investment in the Shares or in the Common Stock
issuable upon conversion of the Preferred Shares, and (iii) notice of material
breach or failure to comply with any representation, warranty, covenant or
agreement of the Company contained herein, including the Exhibits hereto.
(g) Immediately upon any principal officer of the Company or
any other officer of the Company involved in its financial administration
obtaining knowledge of the occurrence of any (i) "reportable event", as such
term is defined in section 4043 of ERISA, other than any such event with respect
to which the statutory 30-day notice requirement has been waived by regulation,
or (ii) "prohibited transaction", as such term is defined in section 4975 of the
Code, in connection with any plan or any trust created thereunder, a written
notice specifying the nature thereof, what action the Company has taken, is
taking and proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service or the Pension Benefit
Guaranty Corporation with respect thereto.
(h) With reasonable promptness, such other information and
data with respect to the Company and its subsidiaries, if any, as the Purchasers
may from time to time reasonably request.
(i) The provisions of this Section 7.1 and Section 7.2 shall
not be in limitation of any rights which the Purchasers may have to inspect the
books and records of the Company and its subsidiaries, or to inspect their
properties or discuss their affairs, finances and accounts; and, in the event
that the Company is unable to
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comply with the provisions of Section 7.1 or 7.2, the Board of Directors of the
Company shall, by resolution duly adopted, authorize and cause a firm of
independent public accountants of nationally recognized standing in the United
States to prepare promptly and furnish such information to the Purchasers at the
Company's expense.
7.2 Visitation. The Company will permit the Purchasers (or
representatives of the Purchasers) to visit and inspect any of the properties of
the Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's directors, officers, senior employees and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request. Subject to the provisions of Section 7.15
hereof, any expenses incurred by a Purchaser in connection with any such
visitation and inspection shall be borne by such Purchaser; provided, however,
in the event such visitation is necessitated by or is a result of a material
default hereunder or under the terms of a material contract or arrangement on
the part of the Company, all such expenses shall be borne by the Company.
7.3 Prompt Payment of Taxes, etc. The Company 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 any 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 shall have bonded or set aside on its
books adequate reserves with respect thereto; and provided, further, that the
Company will pay all such taxes, assessments, charges or levies, or otherwise
take any action which has the effect of preventing a foreclosure, forthwith upon
the commencement of proceedings to foreclose any lien which may have attached as
security therefor. The Company will promptly pay or cause to be paid when due
all other indebtedness incident to operations of the Company; provided, however,
that any such indebtedness need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have bonded or set aside on its books adequate reserves with
respect thereto; and provided, further, that the Company will pay all such
indebtedness on or prior to the time when failure to pay would materially
adversely affect the Company.
7.4 Maintenance of Properties and Leases. The Company will keep
its properties and those of its subsidiaries, if any, in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company and its subsidiaries, if any, will at all
times comply with each provision of all leases to which any of them is a party
or under which any of them occupies property if the breach of such lease would
have a material adverse effect on the condition, financial or otherwise,
prospects or operations of the Company.
7.5 Insurance. The Company shall maintain adequate insurance,
by financially sound and reputable insurers, on its properties and assets and
the properties
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and assets of its subsidiaries, if any, which are of an insurable character and
in such amounts and on such terms usually insured by corporations engaged in the
same or similar business and similarly situated, against loss or damage by fire,
explosion and other risks customarily insured against by such corporations which
amounts shall be sufficient to prevent the Company or any such subsidiary from
becoming a co-insurer and not in any event less than 100% of the insurable value
of the property and assets insured; and the Company will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks and liability to persons, property and assets, including without
limitation insurance against claims for personal injury, death or property
damage occurring upon, in, about or in connection with the use of any of the
properties or assets of it or any subsidiary, and in such amounts and on such
terms usually insured by corporations engaged in the same or similar business
and similarly situated, which amounts shall be sufficient to prevent the Company
or any subsidiary from becoming a co-insurer; and the Company will maintain such
other insurance as may be required by law or other agreements to which the
Company is or shall become a party.
7.6 Key Person Life Insurance. The Company shall use its best
efforts to obtain, as soon as possible but in no event later than 30 days from
the Closing Date, with financially sound and reputable insurers acceptable to
the Purchasers, key person term life insurance on the life of each of Green and
Kim, each in the amount of $1,000,000, and shall assign such $1,000,000 policies
to the Trust created under the Trust Agreement and cause each of them to be made
payable to the Trustee thereunder. The Company will cause to be maintained, and
shall contribute to the Trust an amount sufficient to pay all premiums in
connection with, such term life insurance so long as Preferred Shares remain
outstanding.
7.7 Accounts and Records. The Company will keep true records
and books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
7.8 Independent Accountants. The Company will retain
independent public accountants of recognized standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants, so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify the Purchasers and will request the
firm of independent public accountants whose services are terminated to deliver
to the Purchasers a letter of such firm setting forth the reasons for the
termination of their services. In the event of such termination, the Company
will promptly thereafter engage another accounting firm of similar quality. In
its notice to the Purchasers the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors of the
Company.
7.9 Compliance with Requirements of Governmental Authorities.
The Company and all its subsidiaries, if any, shall duly observe and conform in
all
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material respects to all valid requirements of governmental authorities relating
to the conduct of their businesses or to their properties or assets.
7.10 Maintenance of Corporate Existence, etc. The Company
shall maintain and shall cause each subsidiary, if any, to maintain in full
force and effect (i) its corporate existence, rights and franchises and all
licenses, privileges and other rights in or to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and shall obtain and maintain any such right, franchise, license or privilege
deemed by the Company to be necessary on the date hereof or in the future to the
conduct of their business without any conflict with any business in or rights of
others to use such patents, processes, licenses, trademarks, trade names or
copyrights and (ii) its qualification to do business in each jurisdiction in
which the character of its properties (owned, leased or licensed) or the nature
of its business requires such qualification, except where the failure to so
qualify would not have a material adverse effect upon the business or operations
of the Company or such subsidiary, as the case may be.
7.11 Availability of Common Stock for Conversion and Exercise.
The Company will keep such number of shares of Common Stock unissued and
available for issuance in order to permit conversion of all the then outstanding
shares of Preferred Stock.
7.12 Notice of Record Dates. In the event of any taking by the
Company of a record of the holders of any class of securities (other than the
Preferred Stock) for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, the Company shall mail
to the Purchasers at least ten (10) days prior to such record date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution.
7.13 Proprietary Information and Inventions Agreement. The
Company will cause each person employed (now or hereafter) by it or any
subsidiary with access to confidential information to enter into a proprietary
information and inventions agreement in substantially the form attached hereto
as Exhibit K.
7.14 Stock Options and Other Stock Purchase Rights. As soon as
possible after the Closing, the Company shall take all action necessary (a) to
adopt a stock option/stock purchase plan under which shares of Common Stock
shall be available for issuance pursuant to incentive stock options,
non-qualified stock options and stock issuances heretofore or hereafter to be
granted or made to employees and consultants of the Company, upon such terms and
conditions as may be approved by the Company's Board of Directors, and (b) to
issue Common Stock and grant options for the purchase of Common Stock to those
persons listed on Schedule 3.4 hereto, in accordance with their respective
employment or consulting agreements with the Company (copies of which have been
provided to the Purchaser); provided that the maximum number of shares of Common
Stock that will be issued or available for issuance under both clause (a) and
clause (b) above shall be 3,200,000 in the aggregate.
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The Purchasers agree to vote their Shares and take all other action necessary in
furtherance of the foregoing.
7.15 Directors; Meetings of the Board of Directors; and
Director's and Officer's Insurance. The Board of Directors of the Company shall
initially consist of three members. The Company shall use its best efforts to
cause (i) two of such directors to be persons designated by the Purchasers,
which designees shall be Barry Weinberg and Allan Ferguson, and (ii) one of such
directors to be the person serving as the Chief Executive Officer of the
Company. Until a full-time Chief Executive Officer is chosen, McGuirl shall
serve as this third director as long as he is employed as the President of the
Company. Upon notice from either (i) the majority in interest of the Purchasers
or (ii) the Purchasers' then-designees to the Board of Directors, the Board
shall be expanded to four members, the fourth member of which shall be
designated by the Purchasers. As soon as possible thereafter, the Board of
Directors will be expanded to five members, the fifth member of which shall be a
person designated jointly by Green and Kim, with the advice of and subject to
the approval of Messrs. Weinberg and Ferguson (which approval shall not be
unreasonably withheld). The Company shall not give less than ten (10) business
days (72 hours in the case of special meetings) notice of each Board of
Directors' meeting to the representatives of the Purchasers on the Board of
Directors and to the Purchasers, Green and Kim, and shall permit, in addition to
such directors, each Purchaser (or its designee) and Green and Kim (or their
respective designees) to attend meetings of the Board and committees thereof. In
the event any person designated by the Purchasers to be a director of the
Company shall be unable to attend a meeting of the Board, the Purchasers or such
designated director shall in lieu thereof be entitled to designate a substitute
representative to attend and, to the extent permitted by applicable law, to vote
at such meeting. All reasonable travel and out-of-pocket expenses incurred by
the Purchasers (or their respective designees) and by the directors designated
by the Purchasers (or such directors' designees) in connection with attending
the meetings and any special meetings called by the Company will be paid by the
Company. The Company will purchase a reasonable amount of director's and
officer's insurance for directors of the Company, if available at reasonable
cost.
7.16 Meetings of Stockholders. The Purchasers shall be
entitled to call for a stockholders' meeting upon five days notice to the
Company.
7.17 Compliance with ERISA. The Company will file or caused to
be filed on a timely basis each and every return, report, statement, notice,
declaration and other document required by any governmental agency, federal,
state or local authority (including, without limitation, the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty Corporation and
the Commission) with respect to any plan maintained by the Company.
7.18 Environmental Matters. The Company agrees to comply in
all material respects with, and abide by, all federal, state and local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste
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(including, but not limited to, asbestos, polychlorinated byphenyls and
petroleum products) in connection with or relating to the Company or any of its
businesses, operations or assets.
7.19 Scientific Advisory Board Addition.. As soon as
reasonably possible after the Closing, but in no event later than 30 days
thereafter, the Company shall offer to Dr. George Whitesides a position as a
member of the Company's Scientific Advisory Board.
II. Restrictive Covenants.
7.20 Dividends; Share Repurchases. The Company will not pay or
declare any cash dividend or distribution on any shares of capital stock of the
Company, other than the Preferred Stock, or apply any of the Company's assets to
the redemption, retirement, purchase or other acquisition, directly or
indirectly, through subsidiaries or otherwise, of any shares of Common Stock of
the Company, or any rights, options or warrants to purchase, or securities
convertible into, Common Stock of the Company except for (i) any repurchase of
shares by the Company pursuant to any stock option or agreement entered into by
the Company and approved in writing by the Purchasers' representatives on the
Board of Directors, and (ii) the redemption of any shares of Preferred Stock.
7.21 Sales of Securities. The Company will not (i) create or
issue any securities of the Company which have equity features and which rank on
a parity with or senior to the Preferred Stock upon payment of dividends or upon
liquidation or other distribution of assets or with a conversion price lower
than that of the Preferred Stock or terms more favorable than those of the
Preferred Stock or (ii) sell or issue any shares of Common Stock of the Company
for which the consideration is other than cash, except as contemplated herein
with respect to the conversion of the Preferred Stock into Common Stock.
7.22 Foreign Subsidiaries. Except in the ordinary course of
business, the Company will not directly or through any subsidiary create or
acquire any subsidiary or any interest in any corporation, partnership, limited
partnership, joint venture or similar entity located outside, or formed pursuant
to the laws of other than, the United States of America, its territorial
possessions or any political subdivision of any thereof.
7.23 Merger, Consolidation, Sale of Assets. The Company will
not merge, consolidate or dispose of all or substantially all its assets, except
a merger or consolidation pursuant to which the Company is the surviving
corporation. This section shall not in any way limit the ability of the Company
(i) to sell inventory or (ii) to sell other assets, each in the ordinary course
of business.
7.24 Transactions with Officers, Directors and Stockholders.
The Company will not furnish or sell services or products to or acquire or
purchase services
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or products from any corporation, partnership, proprietorship, association,
joint venture or other person or entity in which any officer, director, or 5%
stockholder of the Company, or any affiliate (as such term is defined in Rule
405 under the Securities Act) of any such officer, director, or 5% stockholder
has a material interest or enter into any material contract or arrangement
(excluding employment or option agreements with an employee approved by the
Board of Directors of the Company) with any such officer, director, 5%
stockholder or affiliate which is less than an arms-length transaction or which
transaction has or reasonably can be expected to have a material adverse effect
on the Company. For purposes of this Section 7.24, there may be disregarded any
interest which arises solely from the ownership of less than a 2% equity
interest in a corporation whose voting securities are regularly traded in any
national securities exchange or in the over-the-counter market. The provisions
of this Section 7.24 shall not prohibit any Purchaser from providing any
consulting, legal, accounting, investment banking, managerial, investment
advisory and/or other services to the Company.
7.25 Investments, Loans, Guarantees, Joint Ventures and
Subsidiaries. The Company will not, (i) directly or through any subsidiary
create or acquire any interest in any partnership, limited partnership, joint
venture or similar entity and will not create or acquire any interest in any
subsidiaries of which it does not own all the capital stock or (ii) make any
investments in or loans or advances to or endorse, guarantee or become surety
for the obligations of any person, corporation or other entity except that the
Company may endorse checks for collection or deposit in the ordinary course of
business.
7.26 Certificate of Incorporation and By-Law Amendments. The
Company may not amend its Certificate of Incorporation or By-Laws so as to
affect adversely the Preferred Stock.
7.27 Impairment of Dividends. The Company may not enter into
any contract or agreement which by its terms restricts the Company's ability to
pay dividends on the Preferred Stock or which may otherwise restrict the
Company's ability to comply with and perform the terms of this Agreement or any
of the Exhibits hereto.
7.28 Compliance with ERISA. The Company will not:
(i) engage in any transaction in connection with which the
Company or any of its subsidiaries could be, to the knowledge of the Company,
subject to either a civil penalty assessed pursuant to section 502(i) of ERISA
or a tax imposed by section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), based on existing regulations or published interpretations
in effect from time to time;
(ii) terminate any plan in a manner, or take any other action,
including withdrawal from any plan that is a multiemployer plan, which could
result in any material liability of the Company or any of its subsidiaries to
the Pension Benefit Guaranty Corporation or to such plan;
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(iii) fail to make full payment when due of all amounts which,
under the provisions of any plan, the Company or any of its subsidiaries is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency, whether or not waived, with respect to any plan; or
(iv) permit the current value of all vested accrued benefits
under all plans which are subject to Title IV of ERISA to exceed the current
value of the assets of such plans allocable to such vested accrued benefits.
As used in this Section 7.28, the term "accumulated funding deficiency" has the
meaning specified in section 302 of ERISA and section 412 of the Code, the term
"accrued benefit" has the meaning specified in section 3 of ERISA and the term
"current value" has the meaning specified in section 4062(b)(1)(A) of ERISA and
the term "multiemployer plan" has the meaning specified in section 4001(a)(3) of
ERISA.
7.29 Borrowings. Neither the Company nor any of its
subsidiaries will incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any indebtedness for borrowed money, or any
other indebtedness evidenced by, or liability evidenced by notes, bonds,
debentures or similar obligations or either directly or indirectly guarantee,
endorse or become surety for, or otherwise in any way become responsible for the
obligations of any other person (collectively, the "Indebtedness"), other than
indebtedness with respect to trade and operating obligations and other normal
accruals in the ordinary course of business (which the Company covenants will be
paid in accordance with customary trade practice) or with respect to which it is
contesting in good faith the amount or validity thereof by appropriate
proceedings, and then only to the extent it has set aside on its books adequate
reserves therefor.
7.30 Capital Expenditures; Commitments. The Company shall not,
and shall cause each of its subsidiaries, if any, not to, (i) incur capital
expenditures or make commitments for capital expenditures, services or product
development in excess of the greater of $100,000 or 110% of the amount budgeted
in the yearly budget and operating plan of the Company referred to in Section
7.1(e) hereof, for any such expenditure or commitment.
7.31 Employee Stock Purchase Arrangements. The Company will
not issue any of its capital stock, or grant an option or right to subscribe
for, purchase or acquire any of its capital stock, to any employee, consultant,
director or officer of the Company or a subsidiary thereof, except as provided
in Section 7.14 hereof.
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SECTION 8
Registration of Securities
8.1 Certain Definitions. As used in this Section 8, the
following terms shall have the following respective meanings:
"Registrable Securities" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Preferred Shares and (ii)
any Common Stock issued in respect of the securities issued pursuant to the
conversion of the Preferred Shares, upon any stock split, stock dividend,
recapitalization or similar event.
The terms "register", "registered" and "registration" shall
refer to a registration 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.
"Registration Expenses" shall mean all expenses incurred by
the Company in compliance with Sections 8.2, 8.3 and 8.5 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and expenses,
reasonable fees and disbursements of one counsel for all the selling Holders (as
hereinafter defined) and other security holders for a "due diligence"
examination of the Company, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).
"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 (other than the fees and disbursements
of counsel included in Registration Expenses).
"Holder" shall mean any holder of Registrable Securities which
have not been sold to the public.
8.2 Requested Registration.
(a) Request for Registration. If the Company shall receive
from the Holders of at least fifty percent (50%) or more of the then-outstanding
Registrable Securities, at any time or times, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
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(ii) as soon as practicable, use its diligent best
efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued
under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request given
within thirty (30) days after receipt of such written notice
from the Company; provided that the Company shall not be
obligated to effect, or to take any action to effect, any such
registration pursuant to this Section 8.2, (x) after the
Company has effected two such registrations pursuant to this
Section 8.2(a) and such registrations have been declared or
ordered effective by the Commission and the sale of such
Registrable Securities shall have closed or (y) prior to the
earlier to occur of (i) the fourth anniversary of the Closing
and (ii) three months after the closing of an initial
registered public offering of the Company's securities.
Subject to the foregoing limitation, the Company shall file a
registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after
receipt of the request or requests of the Holders.
The Company may include in the registration statement filed
pursuant to the request of the Holders, subject to the provisions of Section
8.2(b) below, other securities of the Company which are held by officers or
directors of the Company, by Kim, Green or McGuirl, or by other persons who, by
virtue of agreements with the Company, are entitled to include their securities
in any such registration (all the foregoing, except the Holders, collectively
referred to herein as the "Other Stockholders"), but the Company shall have no
right to include any of its securities in any such registration.
(b) Underwriting. If the Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 8.2 and the Company shall include such information in the written notice
referred to in Section 8.2(a)(i) above. The right of any Holder to registration
pursuant to Section 8.2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Holders and such Holder with respect to such participation and inclusion) to
the extent provided herein. A Holder may elect to include in such underwriting
all or a part of the Registrable Securities held by such Holder.
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If Other Stockholders shall request inclusion in any
registration pursuant to Section 8.2, the Holders shall offer to include the
securities of such Other Stockholders in the underwriting and may condition such
offer on their acceptance together with the Holders so participating of the
further applicable provisions of this Agreement. The Company shall (together
with all Holders and Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or representative of the underwriters selected for
such underwriting by a majority in interest of the Holders and reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
8.2, if the underwriters advise the Holders in writing that marketing factors
require a limitation on the number of shares to be underwritten, the Holders
shall so advise all Other Stockholders whose securities would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be allocated in the following manner. The securities of the Company held
by Other Stockholders (other than Registrable Securities) shall be excluded from
such registration and underwriting to the extent required by such limitation and
if a limitation of the number of shares is still required, the number of shares
of Registrable Securities that may be included in the registration shall be
allocated among all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement. No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. In the event that the number
of shares of Registrable Securities of any Holder to be included in any
registration is reduced below 50% of the shares requested to be included in such
registration as a result of allocations pursuant to this Section 8.2(b), then
such registration shall not be deemed a registration for purposes of Section
8.2(a)(ii). If any Holder of Registrable Securities or Other Stockholder who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Holders. The securities
so withdrawn shall also be withdrawn from registration.
8.3 Company Registration.
(a) If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests made by
any Holder within thirty (30) days after receipt of the
written notice from the Company described in clause (i) above,
except as set forth in Section 8.3(b) below. Such written
request may specify all or a part of a Holder's Registrable
Securities to be included in such registration.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.3(a)(i). In such event the right of any Holder to
registration pursuant to Section 8.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and Other Stockholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected by the Company, which
underwriters shall be reasonably acceptable to a majority in interest of the
participating Holders. Notwithstanding any other provision of this Section 8.3,
if the underwriter advises the Company in writing that marketing factors require
a limitation on the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) limit the number of
Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner. The
securities of the Company held by Other Stockholders (other than Registrable
Securities) shall be excluded from such registration and underwriting to the
extent required by such limitation, and if a limitation on the number of shares
is still required, the number of shares of Registrable Securities that may be
included in the registration shall be allocated among all such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities which each Holder had requested to be included in such registration
at the time of filing and which have not already been included in the
registration statement; provided, however, that, except with respect to the
initial public offering of the Company's securities, the number of shares of
Registrable Securities included in the registration shall not constitute less
than 30% of the total securities included in the offering. If any Holder of
Registrable Securities or any Other Stockholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
8.4 Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Agreement. All Selling Expenses
shall be borne by the
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holders, including the Company, of the securities so registered pro rata on the
basis of the number of their shares so registered.
8.5 Registration on Form S-2 or Form S-3. The Company shall
use its best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in accordance
with the provisions of the Exchange Act following the effective date of the
first registration of any securities of the Company on Form S-1 or Form S-18 or
any comparable or successor form or forms. After the Company has qualified for
the use of either Form S-2 or Form S-3 or both, in addition to the rights
contained in the foregoing provisions of this Agreement, the Holders of not less
than 20% of the then outstanding Registrable Securities, having a value of not
less than $500,000, shall have unlimited rights to request from time to time
registrations on Form S-2 or Form S-3 (such requests shall be in writing, shall
state the number of shares of Registrable Securities to be disposed of and the
intended methods of disposition of such shares by such Holder or Holders and
shall be at the Company's sole expense).
8.6 Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder, advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of six
months or until the Holder or Holders have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
provided, however, that in the case of any registration of Registrable
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such six-month period shall be extended, if necessary, to keep
the registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis; and provided further that
applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (z) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (y) and (z)
above to be contained in periodic reports filed pursuant to Section 13 or 15(d)
of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of
securities covered by such registration statement;
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(c) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing, and at the request
of any such seller, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchaser of such shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing;
(e) Cause all such Registrable Securities to be listed
on each securities exchange, if any, on which similar securities issued by the
Company are then listed;
(f) Provide a transfer agent and registrar for all
Registrable Securities and a CUSIP number for all such Registrable Securities,
in each case not later than the effective date of such registration;
(g) Make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney or accountant retained
by any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers and directors to supply all information reasonably requested by any
such seller, underwriter, attorney or accountant in connection with such
registration statement; provided, however, that such seller, underwriter,
attorney or accountant shall agree to hold in confidence and trust all
information so provided;
(h) Furnish to each selling Holder a signed counterpart,
addressed to the selling Holder, of
(i) an opinion of counsel for the Company, dated
the effective date of the registration statement, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and
reported on the Company's financial statements included
in the registration statement, to the extent permitted
by the standards of the AICPA or other relevant
authorities,
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covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities;
(i) Furnish to each selling Holder a copy of all
documents filed with and all correspondence from or to the Commission in
connection with any such offering other than non-substantive cover letters and
the like;
(j) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(k) In connection with any underwritten offering
pursuant to a registration statement filed pursuant to Section 8.2 or 8.3
hereof, the Company will enter into any underwriting agreement reasonably
necessary to effect the offer and sale of Common Stock.
8.7 Indemnification.
(a) The Company will indemnify each Holder, each of its
respective officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter, and their respective counsel against all
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 prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its respective officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses as are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or
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omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein.
(b) Each Holder, officer, director and Other Stockholder
will, if securities held by him or it are included in the securities as to which
such registration, qualification or compliance is being effected (collectively,
an "Including Stockholder"), indemnify the Company, each of its directors and
officers (in their capacity as such) and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Holder and
Including Stockholder and each of their officers, directors and partners, and
each person controlling such Holder or Including 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 such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such
Holders, Including Stockholders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder or Including Stockholder and stated to
be specifically for use therein; provided, however, that the obligations of such
Holders and Including Stockholders hereunder shall be limited to an amount equal
to the net proceeds to each such Holder or Including Stockholder of securities
sold under such registration statement, prospectus, offering circular or other
document as contemplated herein.
(c) Each party entitled to indemnification under this
Section 8.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
8.7, unless such failure to notify shall prove to have been prejudicial to the
Indemnifying Party's ability to defend such an action. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which
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<PAGE>
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
8.8 Information by Holder. Each Holder of Registrable
Securities and each other holder of securities included in any registration,
shall furnish to the Company such information regarding such Holder or other
holder and the distribution proposed by such Holder or other 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 Agreement.
8.9 Limitations on Registration of Issues of Securities. From
and after the date of this Agreement, the Company shall not enter into any
agreement with any holder or prospective holder of any securities of the Company
giving such holder or prospective holder a right (i) to require the Company to
initiate any registration of any securities of the Company or (ii) to require
the Company, upon any registration of any of its securities, to include, among
the securities which the Company is then registering, securities owned by such
holder; which right is superior to the rights given to the holders of Preferred
Shares hereunder.
8.10 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Registrable Securities to the public without registration, the
Company shall agree to:
(a) Use its best efforts to make and keep public
information available as those terms are understood and defined in Rule 144
under the Securities Act, at all times from and after ninety (90) days following
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and
(c) So long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the First
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the
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<PAGE>
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
8.11 Transfer or Assignment of Registration Rights. The rights
to cause the Company to register securities granted to the Purchasers and
holders of Registrable Securities under Sections 8.2, 8.3 and 8.5 may be
transferred or assigned by a holder to a transferee or assignee of any
Registrable Securities, provided 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 said 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 the obligations of such Holder under this Section 8.
SECTION 9
Right of First Refusal
9.1 Right of First Refusal Upon Issuance of New Securities.
(a) The Company hereby grants to the Purchasers (which term, for purposes of
this Section 9.1 only, shall mean the Purchasers of the Preferred Shares) the
right of first refusal to purchase any or all "New Securities" (as hereinafter
defined) on a proportionate basis as defined in Section 9.1(b). For purposes of
this Section 9.1, "New Securities" shall mean any capital stock of the Company
whether now authorized or not, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock and any borrowings, direct or indirect, from
financial institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment endorsed by any type of debt
instrument, but only to the extent such borrowings contain any equity features,
but "New Securities" shall not include (i) securities issued to employees of, or
consultants to, the Company pursuant to Section 7.14, (ii) shares of capital
stock issued upon conversion of the Preferred Stock, (iii) securities issued as
part of the purchase price in connection with the closing of an acquisition by
the Company of all or substantially all the assets or stock of another entity or
person, approved by the Purchasers' designees to the Company's Board of
Directors and (iv) warrants issued in connection with business transactions,
including corporate partnerships, approved by the Purchasers' designees to the
Company's Board of Directors or securities issued pursuant to such warrants.
(b) In the event the Company proposes to undertake an issuance
of New Securities, it shall give the Purchasers written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have thirty
(30) days from the date such notice is given to agree to purchase any or all of
the New Securities up to such Purchaser's proportionate share, for the price and
upon the general terms specified in
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<PAGE>
the notice by giving written notice to the Company and stating the quantity of
New Securities to be purchased. As used in this Section 9.1, and except as
otherwise provided, the term "proportionate share" shall mean, with respect to
each Purchaser who is entitled to receive the particular offer, the total number
of New Securities proposed to be issued, multiplied by a fraction, the numerator
of which shall be the sum of (i) the total number of shares of Common Stock
owned by such Purchaser (prior to such contemplated issuance), but excluding the
Common Shares, if any, owned by such Purchaser and (ii) the total number of
shares of Common Stock into which the shares of Preferred Stock or other
convertible securities, if any, held by such Purchaser (prior to such
contemplated issuance) is convertible, and the denominator of which shall be the
sum of (i) the total number of shares of Common Stock owned by all Purchasers
(prior to such contemplated issuance), but excluding the Common Shares, if any,
owned by all Purchasers and (ii) the total number of shares of Common Stock into
which the Preferred Shares or other convertible securities held by all
Purchasers (prior to such contemplated issuance) is convertible.
(c) Each Purchaser shall have a right of over-allotment such
that if any Purchaser fails to exercise such Purchaser's right hereunder to
purchase such Purchaser's full proportionate share of the New Securities
proposed to be issued (the "Incomplete Purchasers"), the Purchasers purchasing
their full respective proportionate share of such New Securities (the "Complete
Purchasers") may purchase the portion of such New Securities which has not been
purchased by the Incomplete Purchasers as hereinafter provided. The Complete
Purchasers shall have ten (10) days from the date notice is given by the Company
to the Complete Purchasers that such Incomplete Purchasers have rejected or
failed to accept their right to purchase their proportionate share of New
Securities, to agree to purchase up to such Complete Purchaser's proportionate
share of such New Securities not purchased by the Incomplete Purchasers.
Notwithstanding anything in Section 9.1(b) to the contrary, as used in this
Section 9.1(c) with respect to the Complete Purchasers only, each Complete
Purchaser's "proportionate share" shall be calculated by excluding from the
denominator of the fraction the total number of shares of Common Stock of any
Incomplete Purchaser and the total number of shares of Common Stock into which
the shares of such Incomplete Purchaser's Preferred Stock or other convertible
securities, if any, are convertible.
(d) In the event the Purchasers fail to exercise the right of
first refusal and right of over-allotment within said forty (40) day period for
the full amount of New Securities proposed to be issued, the Company shall have
sixty (60) days thereafter to sell or enter into an agreement (pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
sixty (60) days from the date of said agreement) to sell the New Securities
respecting which the Purchasers' options were not exercised, at a price and upon
general terms no more favorable to the purchasers thereof than specified in the
Company's notice to the Purchasers. In the event the Company has not sold within
said 60-day period or entered into an agreement to sell the New Securities
within said 60-day period (or sold and issued New Securities in accordance with
the foregoing within sixty (60) days from the date of said
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<PAGE>
agreement), the Company shall not thereafter issue or sell any New Securities,
without first offering such securities to the Purchasers in the manner provided
above.
(e) The right of first refusal granted under this Section 9.1
shall expire upon, and shall not be applicable to, the first sale of Common
Stock of the Company to the public in an underwritten public offering, effected
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission under the Securities Act covering the offer
and sale of Common Stock for the account of the Company to the public at a
public offering price of at least $5.00 and with net proceeds to the Company of
not less than $7,500,000.
SECTION 10
Confidentiality
10.1 Agreement To Hold in Confidence and Not Disclose
Confidential Information. Notwithstanding any other provision of this Agreement,
and except as otherwise provided in Section 10.2 below, each Purchaser shall
hold in confidence and not disclose to any other person or entity any
Confidential Information (as defined in subsection 10.3 below) of the Company
without the prior written consent of the Company.
10.2 Permitted Disclosure of Confidential Information.
Notwithstanding Section 10.1 above, a Purchaser may disclose Confidential
Information to a Purchaser Representative, the term "Purchaser Representative"
being defined to mean an affiliate of such Purchaser, or any partner, officer,
employee, advisor, legal counsel, consultant or other agent or representative of
or to such Purchaser or such affiliate. The Company hereby acknowledges that the
Purchasers regularly send investment reports and updates to their respective
partners, which reports and updates contain information concerning the
investments made by such Purchaser. Prior to or simultaneously with any such
disclosure to a Purchaser Representative, a Purchaser shall use its good faith
efforts to give to the Purchaser Representative a copy of this Section 10 under
cover of a letter or memo addressed to the Purchaser Representative, or
otherwise indicate to the Purchaser Representative that the information being
disclosed is confidential and subject to restrictions.
10.3 Definition of "Confidential Information". The term
"Confidential Information" means any information of the Company in any medium or
media marked "confidential" or indicated to be confidential in writing or orally
at the time of disclosure, or which a Purchaser or Purchaser Representative knew
to be confidential, and shall include, without limitation, (i) technical,
engineering and other scientific information that has been created, discovered
or developed for, or assigned or entrusted to, the Company which relates to its
products, processes, operations and/or technologies; (ii) inventions,
improvements, materials, articles, equipment, processes, designs and techniques,
whether or not patented or patentable, and expressions
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<PAGE>
protected or protectable by copyright, made or conceived or reduced to practice
or learned by the Company, or by any person for or on behalf of it, which relate
to the business of the Company; (iii) personal privacy data concerning any
employees, consultants or other service providers or testing or survey subjects
of the Company; (iv) financial records, business plans, customer lists and other
books and records of the Company; provided, however, notwithstanding the
foregoing, Confidential Information shall not include information which: (a) was
in a Purchaser's or Purchaser Representative's possession or knowledge or was
known to the public or in published literature prior to the Company's disclosure
or making available of such Confidential Information to such Purchaser, or (b)
subsequent to the time of the Company's disclosure or making available of such
Confidential Information to a Purchaser, becomes known to the public or finds
its way into the published literature through no fault of any Purchaser or
Purchaser Representative, or (c) is lawfully acquired by a Purchaser from a
third party who is not under a confidentiality agreement with the Company with
respect to such information (and who is not a Purchaser, a Purchaser
Representative or an affiliate of any thereof).
10.4 Injunctive Relief. The parties acknowledge and agree
that, without limiting any other rights and remedies they may have, the Company
shall be entitled to immediate injunctive and other equitable relief to prevent
or remedy a breach of any of the provisions of this Section 10 relating to
protection of Confidential Information of the Company, and to obtain the
enforcement of such provisions, and, if any such injunctive or other equitable
relief is sought, the Purchasers will not raise as a defense that there is an
adequate remedy at law.
10.5 Survival. The provisions of this Section 10 relating to
protection of Confidential Information of the Company shall survive, with
respect to each Purchaser, the termination of such Purchaser's interest in the
Company under this Agreement and shall survive the termination of this
Agreement.
SECTION 11
Miscellaneous
11.1 Governing Law; Consent to Jurisdiction. This Agreement
shall be governed in all respects by the laws of the State of New York.
11.2 Survival. The representations and warranties made herein
shall survive the Closing Date for a period of two years, except in the case of
representations and warranties (i) relating to taxes and governmental
assessments and to broker's fees, which shall survive for the applicable statute
of limitations, and (ii) which were knowingly untrue or incorrect when made,
which shall survive forever, and all such representations and warranties and all
covenants and agreements made herein shall be deemed to be material and to have
been relied upon by the parties hereto, notwithstanding any investigation
heretofore or hereafter made by them, or on their
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<PAGE>
respective behalf. Each of the covenants, agreements and indemnifications
contained herein shall survive indefinitely, unless otherwise expressly provided
herein. No claim for recovery of indemnifiable damages may be asserted based
upon a representation or warranty after it has been extinguished; provided, that
any specific claim asserted in writing within the applicable period shall not
thereafter be barred.
11.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto; provided, however, that any successor, assignee or other
such transferee shall assume the obligations of such assignor or transferor
hereunder; and provided, further, that the Company may not assign its rights
hereunder.
11.4 Entire Agreement; Amendment. This Agreement (including
the Schedules and Exhibits hereto) and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the Purchasers holding not less
than 66 2/3% of the outstanding Shares.
11.5 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
first-class mail, postage prepaid, return receipt requested, or delivered either
by hand or by messenger, or sent by overnight courier, addressed (a) if to a
Purchaser, at the address set forth for such Purchaser on the Schedule of
Purchasers attached hereto or at such other address as such Purchaser shall have
furnished to the Company in writing, with a copy to Fulbright & Jaworski L.L.P.,
666 Fifth Avenue, New York, New York 10103-3198 Attention: Sheldon G. Nussbaum,
Esq., or (b) if to any other holder of Shares or any Common Stock issued upon
conversion of Preferred Shares at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder thereof
who has so furnished an address to the Company, or (c) if to the Company, at its
address set forth at the beginning of this Agreement, or at such other address
as the Company shall have furnished to the Purchasers and each such other holder
in writing, with a copy to Perkins, Smith & Cohen, One Federal Street, Boston,
Massachusetts 02110, Attention: Normand F. Smith, III, Esq.
11.6 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to (i) any Purchaser or holder of any Shares,
upon any breach or default of the Company under this Agreement or (ii) the
Company, upon any breach or default of a Purchaser or holder of any Shares under
this Agreement, shall impair any such right, power or remedy of such holder or
the Company nor shall it be construed to be a waiver of any such breach or
default, or an 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
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<PAGE>
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder or the Company of any breach or default
under this Agreement, or any waiver on the part of any holder or the Company of
any provisions or conditions of this Agreement must be made in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder or the Company, shall be cumulative and not alternative.
11.7 Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
11.8 Expenses. The Company shall bear its own expenses and
legal fees incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby, and the Company will pay, at the Closing, the
legal fees, and the disbursements and office expenses, including secretarial
charges, of Fulbright & Jaworski L.L.P., counsel to the Purchasers, with respect
to this Agreement and the transactions contemplated hereby.
11.9 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.
11.10 Counterparts. 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.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement as of the date above written.
SCRIPTECH PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/
------------------------------------------
PURCHASERS:
CW VENTURES II, L.P.
By: /s/
------------------------------------------
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<PAGE>
ACCEL IV L.P.
By: Accel IV Associates L.P., its General
Partner
By: /s/
------------------------------------------
ACCEL JAPAN L.P.
By: Accel IV Associates L.P., its General
Partner
By: /s/
------------------------------------------
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.
By: /s/
------------------------------------------
Allan Ferguson, General Partner
NEW ENTERPRISE ASSOCIATES 5
By: /s/
------------------------------------------
VENROCK ASSOCIATES
By: /s/
------------------------------------------
/s/
---------------------------------------------
Barry Weinberg
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<PAGE>
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Bridge
Name of and Address Shares of Shares of Loan Total
of Purchasers Preferred Stock Common Stock Conversion $ Payment Investment
- --------------- --------------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CW Ventures II, L.P. 1,601,289 124,585 $129,789.00 $1,477,729.25 $1,607,518.25
c/o CW Group, Inc.
1041 Third Avenue
New York, NY 10021
Attn: Mr. Barry Weinberg
Atlas Venture Fund II, L.P. 1,300,971 159,072 113,471.00 1,195,453.60 1,308,924.60
c/o Atlas Venture
222 Berkeley Street
Boston, MA 02116
Attn: Mr. Allan Ferguson
Accel IV L.P. 1,012,327 35,679 37,126.60 976,983.93 1,014,110.53
One Embarcadero Center
San Francisco, CA 94111
Attn: Mr. Luke Evnin
Accel Japan L.P. 88,028 3,102 3,228.40 84,955.12 88,183.52
One Embarcadero Center
San Francisco, CA 94111
Attn: Mr. Luke Evnin
New Enterprise Associates 5 1,100,355 38,781 40,355.00 1,061,939.05 1,102,294.05
c/o New Enterprise Associates
1119 St. Paul Street
Baltimore, MD 21202
Attn: Frank Bonsal, Jr.
Venrock Associates 1,100,355 38,781 40,355.00 1,061,939.05 1,102,294.05
30 Rockefeller Plaza,
Room 5508
New York, NY 10112
Attn: Anthony Evnin
Barry Weinberg --- 125,000 --- 6,250.00 6,250.00
c/o CW Group, Inc.
1041 Third Avenue
New York, NY 10021
[Other Purchaser Bd. --- 50,000 --- 2,500.00 2,500.00
Designee -- to be allocated
at later date]
--------- ------- ----------- ------------- -------------
Total 6,203,325 575,000 $364,325.00 $5,867,750.00 $6,232,075.00
========= ======= =========== ============= =============
</TABLE>
(Assumes 9/16 closing)
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<PAGE>
Schedule A
List of "Key Persons"
Michael Green
Peter Kim
James Lillie
<PAGE>
Exhibit 10.2
LOAN AND STOCK PURCHASE AGREEMENT
Loan and Stock Purchase Agreement ("Agreement") made this 13th day of
July, 1994, by and among ScripTech Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), and the purchasers listed on Schedule 1 attached hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
In consideration of the mutual promises and agreements set forth herein,
the parties hereto hereby agree as follows:
1. Loan.
(a) Subject to the terms and conditions set forth herein, the
Purchasers will make loans (the "Loans") to the Company, in such amounts as the
Company may request, commencing on July 15, 1994 and prior to the first to occur
of (i) December 31, 1994 (the "Expiration Date"), or (ii) conversion of the
indebtedness outstanding under the Loans pursuant to Section 4 of the
Convertible Promissory Notes (individually a "Note" and, collectively, the
"Notes") evidencing the Loans, or (iii) the earlier termination of the financing
arrangement described herein upon the occurrence of an Event of Default pursuant
to Section 3 of the Notes. The aggregate principal amount of the Loans shall not
exceed $2,500,000 (the "Maximum Loan Amount") and each advance made by the
Purchasers to the Company hereunder upon the Company's request shall be in an
amount not less than $250,000 in the aggregate (the "Minimum Advance Amount").
Upon each request by the Company for a Loan hereunder, each Purchaser shall lend
to the Company its pro rata share of the amount of such advance, which shall be
based upon each Purchaser's respective percentage set forth on Schedule 1
attached hereto. Set forth on Schedule 1 is the maximum amount that each
Purchaser is obligated to lend to the Company hereunder.
(b) Each Loan shall be evidenced by a Note in the form attached
hereto as Exhibit A. Interest on the Notes shall be payable at the time and at
the rate provided in the Notes. The Company hereby irrevocably authorizes the
Purchasers or their agent to make or cause to be made, on a schedule attached to
each Note, at or following the time of making each advance under the Notes, an
appropriate notation reflecting such transaction and the then aggregate unpaid
principal balance of the Loan. Failure to make any such notation shall not,
however, affect the obligation of the Company to repay the Loans. All payments
of principal and interest shall be made in the manner provided in the Notes.
(c) The making by the Purchasers of any and all Loans requested by
the Company under this Agreement and the Notes is subject to the following
conditions precedent that, on the date on which each such Loan is made:
<PAGE>
(i) The amount of the Loan requested by the Company shall be
needed to finance the Company's continuing business and operations (and for no
other purpose) for a period not to exceed four (4) months following the date on
which the advance is to made, and
(ii) No event which constitutes, or which with notice or lapse
of time or both would constitute, an Event of Default (as defined in the Notes)
shall have occurred and be continuing.
In no event shall the Company make any request to the Purchasers for a
Loan hereunder unless (i) the Company's cash balance as of the first day of the
month in which the Company makes such a request is not more than $750,000 and
(ii) both of the conditions precedent set forth above have been satisfied. If an
Event of Default has occurred under the Notes, the Company shall give the
Purchaser's Agent (as hereinafter defined) prompt written notice thereof,
describing the nature of the default.
(d) The Company shall repay each Loan in full by the date set forth
in the Note corresponding to such Loan (the "Maturity Date") by delivery of
shares of the Company's capital stock, as set forth in the Notes. The Company
may prepay, at any time and from time to time, without penalty or premium, in
cash, the whole or any portion of the Loans. Any payment by the Company of
principal of and/or interest on the Notes shall be made on a pro rata basis
among the Purchasers, based upon the amount of each Purchaser's Loans as a
percentage of the aggregate amount of the Loans. The Notes shall be convertible
into shares of the Company's capital stock under the circumstances and upon the
terms and conditions set forth in the Notes.
(e) The proceeds of all Loans made by the Purchasers shall be sent,
via wire transfer, to a general deposit account maintained by the Company or by
check to the Company. The proceeds of the Loans shall be used by the Company
solely for working capital purposes.
2. Sale of Shares. In consideration of the Purchasers' agreement to make
the Loans, the Company shall issue, sell and deliver to a Purchaser, upon such
Purchaser making a Loan, that number of shares of Common Stock of the Company
determined by multiplying the aggregate principal amount of such Purchaser's
Loan by .10, at a price of $.05 per share. The Company shall issue and sell a
maximum of 250,000 shares of Common Stock (the "Shares") pursuant to this
Section 2.
3. Representations and Warranties of the Company. The Company represents
and warrants to each of the Purchasers as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company has
full corporate power and authority to own its property and conduct its business
as now conducted, to enter into and perform this Agreement and the Notes and to
issue, sell and deliver the Shares.
2
<PAGE>
(b) The issuance, sale and delivery of the Shares have been duly
authorized by all necessary corporate action on the part of the Company. The
Shares, when issued, will be duly and validly issued, fully paid and
nonassessable and free from any claims, liens or encumbrances. Based in part on
the representations of the Purchasers set forth herein, the offer and sale of
the Notes and the Shares to the Purchasers is exempt from the registration and
qualification requirements of applicable federal and state securities laws.
(c) The execution, delivery and performance by the Company of this
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement and the Notes constitute the
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, subject to applicable
bankruptcy, reorganization, insolvency, fraudulent conveyance and other similar
laws generally affecting the rights and remedies of creditors and to the
exercise of judicial discretion in accordance with general equitable principles.
(d) The execution and delivery of, and performance of the
transactions contemplated by this Agreement and the Notes, will not (i) violate
any material provision of any law or regulation applicable to the Company, (ii)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, the Company's Certificate of
Incorporation or By-laws, each as amended to date, or any material indenture,
lease, mortgage, agreement or other instrument to which the Company is a party
or by which it or any of its properties is bound, or any decree, judgment or
order known to the Company which is applicable to the Company or its properties,
or (iii) result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the assets or properties of the Company.
(e) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in connection with
the execution, delivery and performance of this Agreement and the Notes or the
offer, issuance and sale of the Shares, except such filings as shall have been
made prior to and shall be effective on and as of the date hereof or which may
be made after the date hereof or after the issuance and sale of the Shares in
accordance with applicable federal and state securities laws.
4. Representations of the Purchasers. Each of the Purchasers severally and
only as to itself represents, warrants, acknowledges and covenants to the
Company as follows:
(a) Investment. The Purchasers are acquiring the Notes and the
Shares for their own account for investment and not with a view to, or for sale
in connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and the Purchasers have no present or
contemplated agreement, undertaking, arrangement, obligation or commitment
providing for the disposition thereof.
3
<PAGE>
(b) Authority. The Purchasers have full power and authority to lend
money to the Company in accordance with the terms of this Agreement and the
Notes. Each Purchaser that is a corporation or partnership has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company. The execution, delivery and performance of this
Agreement by each Purchaser that is a corporation or partnership has been duly
authorized by all necessary action on the part of each such Purchaser.
(c) Experience. The Company has made available to the Purchasers any
and all written information concerning the Company which they have requested in
connection with the transactions contemplated by this Agreement. The Purchasers
have adequate net worth and means of providing for their current needs and
contingencies, and to sustain a complete loss of their investment in the
Company. The Purchasers have sufficient business and financial knowledge and
experience so as to be capable of evaluating the merits and risks of their
investment in the Company.
(d) Accredited Investor Status. The Purchasers understand that the
Notes and the Shares have been offered and will be sold in reliance upon the
exemption from the registration requirements of Securities Act of 1933, as
amended (the "Act"), under Section 4(2) thereof and Rule 506 promulgated
thereunder. Each Purchaser represents that such Purchaser is an "accredited
investor", as that term is defined in Rule 501(a) promulgated under the Act.
(e) Legend. The Purchasers understand that the Notes will bear the
following legend:
This Note has not been registered under the Securities Act of 1933,
as amended (the "Act") or under the securities law of any state, and
may not be offered, sold or otherwise transferred in the absence of
such registration or an exemption therefrom under the Act and such
state securities laws.
The certificates representing the Shares shall bear a legend substantially
similar to the legend set forth on the Notes.
(f) The Purchasers acknowledge that the Notes and the Shares must be held
indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available. The Purchasers are aware of the
provisions of Rule 144 under the Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, and understand that the Company has no obligation to make the
provisions of Rule 144 available.
4
<PAGE>
6. Agent of the Purchasers.
(a) Each of the Purchasers hereby appoints and authorizes CW
Ventures II, L.P. (the "Agent") to receive requests for Loans from the Company
and to take such action, as agent on behalf of the Purchasers, to effectuate the
making of each Loan including, without limitation, notifying each Purchaser of
the amount of each Loan required to be made by each Purchaser pursuant to
Section 1 of this Agreement and the date upon which each such Loan shall be
made, and maintaining a record of all Loans made to the Company hereunder. The
Agent shall have such other powers as are reasonably incidental to the
foregoing.
(b) The obligations of the Agent are only those set forth herein.
Without limitation of the foregoing, the Agent shall not be required to take any
action with respect to any Event of Default under the Notes other than to
provide the Purchasers with a copy of any notice of an Event of Default given by
the Company pursuant to Section 1(c) hereof. Neither the Agent nor any of its
general or limited partners nor any of their respective partners, officers,
directors, agents or employees shall be liable for any action taken or not taken
by the Agent, as agent, pursuant to this Section 6.
7. Miscellaneous. This Agreement and the Notes constitute the entire
agreement among the parties with respect to the subject matter hereof. This.
Agreement may not be modified or amended except by an instrument in writing
signed by the holders of a majority in interest of the Notes. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without regard to its provisions
regarding conflicts of law.
SCRIPTECH PHARMACEUTICALS, INC.
By /s/ [ILLEGIBLE]
-----------------------------------------
Its President and Chief Executive Officer
5
<PAGE>
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By: /s/ [ILLEGIBLE] By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accel IV Associates L.P. By: Accel Japan Associates L.P.
Its General Partner Its General Partner
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P.
By: Accel Partners & Co., Inc.
Its General Partner
By: By:
------------------------------ ------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: By:
------------------------------ ------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: By:
------------------------------ ------------------------------
General Partner
6
<PAGE>
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By: By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accel IV Associates L.P. By: Accel Japan Associates L.P.
Its General Partner Its General Partner
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P.
By: Accel Partners & Co., Inc.
Its General Partner
By: By:
------------------------------ ------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: By:
------------------------------ ------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: By:
------------------------------ ------------------------------
General Partner
6
<PAGE>
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accel IV Associates L.P. By: Accel Japan Associates L.P.
Its General Partner Its General Partner
By: /s/ [ILLEGIBLE] By:/s/ [ILLEGIBLE]
------------------------------ ------------------------------
General Partner General Partner
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P.
By: Accel Partners & Co., Inc.
Its General Partner
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: By:
------------------------------ ------------------------------
General Partner
6
<PAGE>
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accel IV Associates L.P. By: Accel Japan Associates L.P.
Its General Partner Its General Partner
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P.
By: Accel Partners & Co., Inc.
Its General Partner
By: By:
------------------------------ ------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: /s/ [ILLEGIBLE] By:
------------------------------ ------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: By:
------------------------------ ------------------------------
General Partner
6
<PAGE>
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accel IV Associates L.P. By: Accel Japan Associates L.P.
Its General Partner Its General Partner
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P.
By: Accel Partners & Co., Inc.
Its General Partner
By: By:
------------------------------ ------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: By:
------------------------------ ------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: /s/ [ILLEGIBLE] By:
------------------------------ ------------------------------
General Partner General Partner
6
<PAGE>
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accel IV Associates L.P. By: Accel Japan Associates L.P.
Its General Partner Its General Partner
By: By:
------------------------------ ------------------------------
General Partner General Partner
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P.
By: Accel Partners & Co., Inc.
Its General Partner
By: By:
------------------------------ ------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: By:
------------------------------ ------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------
General Partner
6
<PAGE>
SCHEDULE I
LIST OF PURCHASERS
Purchaser Percentage Maximum Loan Amount
- --------- ---------- -------------------
CW Ventures II, L.P. 25.81% $645,250.00
c/o CW Group, Inc.
1041 Third Avenue
New York, NY 10021
Atlas Venture Fund II, L.P. 20.97% $524,250.00
c/o Atlas Venture
222 Berkeley Street, 19th Floor
Boston, MA 02116
Accel Japan L.P. 1.42% $35,480.00
One Embarcadero Center (8.0% of 17.74%)
San Francisco, CA 94111
Accel IV L.P. 14.85% $371,210.00
c/o Accel Partners (83.7% of 17.74%)
One Palmer Square
Princeton, NJ 08542
Accel Keiretsu L.P. .32% $7,983.00
(1.8% of 17.74%)
Accel Investors `93 L.P. .66% $16,409.00
(3.7% of 17.74%)
Ellmore C. Patterson Partners .39% $9,757.00
(2.2% of 17.74%)
Prosper Partners .10% $2,661.00
(.6% of 17.74%)
7
<PAGE>
New Enterprise Associates 5 17.74% $443,500.00
c/o New Enterprise Associates
1119 St. Paul Street
Baltimore, MD 21202
Venrock Associates 17.74% $443,500.00
30 Rockefeller Plaza
Room 5508
New York, NY 10112
36011
8
<PAGE>
Exhibit A
Neither this Note nor the shares of Preferred Stock issuable upon
conversion hereof or the shares of Common Stock issuable upon conversion of the
Preferred Stock have been registered under the Securities Act of 1933, as
amended (the "Act") or any applicable state securities laws, and neither this
Note nor such shares may be offered, sold or otherwise transferred in the
absence of such registration or an exemption therefrom under the Act and such
state securities laws.
SCRIPTECH PHARMACEUTICALS, INC.
Convertible Promissory Note
$ __________ , 1994
FOR VALUE RECEIVED, the undersigned SCRIPTECH PHARMACEUTICALS, INC., a
Delaware corporation (the "Maker"), hereby promises to pay on December 31, 1994
(the "Maturity Date"), unless sooner payable under the terms hereof, to
________________ (the "Payee"), or order, the principal amount of
_____________________ Dollars ($ ______) or such portion thereof as may be
advanced by the Payee (the "principal amount") pursuant to Section 1 of the Loan
and Warrant Agreement dated effective as of July 13, 1994 among the Maker and
the Purchasers identified therein (the "Loan Agreement"), with daily interest
from the date hereof, computed on the basis of a 365-day year for the actual
number of days elapsed, on the principal amount from time to time unpaid to and
including the maturity hereof at the rate per annum equal to four and
one-quarter percent (4.25%), all said interest to be calculated monthly on the
last day of each month, in arrears and to be paid on the Maturity Date or, if
sooner, at the time of payment of the principal amount. Payment of the principal
amount and interest accrued thereon, other than upon any accelerated maturity
occurring as a result of any Event of Default, shall be made by conversion of
this Note into shares of the Maker's capital stock in the manner set forth in
Section 4.1 of this Note, except as otherwise permitted by Section 1.2 hereof.
The Maker irrevocably authorizes the Payee to make or cause to be made, on
a schedule attached to this Note, at or following the time of making any Loan
(as defined in the Loan Agreement), an appropriate notation reflecting such
transaction and the then aggregate unpaid principal amount. Failure of the Payee
to make any such notation shall not, however, affect any obligation of the Maker
hereunder or under the Loan Agreement.
This Note is one of a series of the Maker's notes of even date herewith,
each known as its Convertible Promissory Note (collectively referred to as the
"Notes"), all of like tenor except as to the principal amount thereof. The Notes
are in the aggregate principal amount of up to $2,500,000.
1. PAYMENT PROVISIONS. The Maker covenants that so long as any of the Note
is outstanding:
1.1. Payment at Maturity of Note. On the Maturity Date or on any
accelerated maturity (by default or otherwise) of this Note, the Maker will pay
the entire principal
<PAGE>
amount of this Note then outstanding, together with all accrued and unpaid
interest thereon, in the manner required by this Note. Payments of principal and
interest shall be made at the principal office of the Holder (as hereinafter
defined) or at such other place as the Holder may designate to the Maker in
writing. This Note may also be paid by conversion pursuant to Section 4 hereof.
1.2. Optional Prepayments. The Maker may at any time or from time to
time prior to the conversion of this Note pursuant to Section 4 hereof, prepay
all or part of the principal amount of this Note, in cash only, without premium
or penalty.
1.3. Notice of Prepayments. Notice of each prepayment of the Note
pursuant to Section 1.2 shall be given not fewer than five (5) days before the
prepayment date, by mailing to the Holder a notice of prepayment specifying the
date of prepayment, the aggregate amount to be prepaid on such date, and accrued
interest applicable to such prepayment.
2. HOLDER. The term "Holder" shall mean with respect to this Note the
Payee or any person or entity to whom the Note is transferred and the term
"Holders" shall mean, collectively, the Holders of the Notes. In the event of
any transfer, the Holder shall present this Note to the Maker for transfer and
the Maker shall issue a substitute Note to the transferee, subject to compliance
with federal and state securities laws.
3. DEFAULTS.
3.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default under this Note (each
herein referred to as an "Event of Default"):
3.1.1. The Maker shall fail to make any payment in respect of
the principal of this Note or any one of the other Notes or interest on this
Note or any one of the other Notes when due, whether at maturity or by
acceleration or otherwise;
3.1.2. Any representation or warranty made by the Maker in
Loan Agreement or any other document delivered in connection therewith shall
prove to have been misleading or inaccurate in any material respect at the time
it was made;
3.1.3. The Maker shall:
(a) commence a voluntary case under Title 7 or 11 of the
United States Code as from time to time in effect, or authorize, by appropriate
proceedings of its Board of Directors or other governing body, the commencement
of such a voluntary case;
-2-
<PAGE>
(b) have filed against it a petition commencing an
involuntary case under said Title 7 or 11;
(c) seek relief as a debtor under any present or future
applicable law of any jurisdiction relating to the liquidation, dissolution or
reorganization of debtors or other similar relief or to the modification or
alteration of the rights of creditors, or consent to or acquiesce in such
relief;
(d) have entered an order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its creditors, (iii) assuming custody of, or appointing a receiver
or other custodian for, all or a substantial part of its property;
(e) make an assignment for the benefit of, or enter into
a composition with, its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of its property; or
(f) admit in writing its inability to pay its debts as
they become due;
3.1.4. Any default shall exist and remain unwaived or uncured
with respect to any indebtedness of the Maker in excess of $50,000, either
singly or in the aggregate, including the failure to pay any such indebtedness
when due whether by acceleration or otherwise, or any such indebtedness shall
have been declared to be due and payable prior to its stated maturity, or any
event or circumstance shall occur which permits, or with the lapse of time or
giving of notice or both would permit, the acceleration of the maturity of any
such indebtedness by the holders thereof.
3.2. Remedies. Upon the occurrence of an Event of Default:
3.2.1. The Holder may proceed to protect and enforce its
rights under this Note by suit in equity (including without limitation a suit
for rescission), an action at law for damages, and/or other appropriate
proceedings either for specific performance of any provision contained in this
Note or the Loan Agreement, or in aid of the exercise of any power granted to it
in this Note (the Maker hereby acknowledging that the Holder's remedies at law
may be inadequate) and, (unless there shall have occurred an Event of Default
under Section 3.1.3 hereof, in which case the unpaid principal amount of this
Note shall automatically become due and payable without notice or demand), may
by notice to the Maker declare all or any part of the unpaid principal amount of
this Note then outstanding to be forthwith due and payable, and thereupon such
unpaid principal amount or part thereof, together with interest accrued thereon,
shall mature and become so due and payable without presentation, protest or
further demand or notice of any kind, all of which are hereby
-3-
<PAGE>
encumbrances or charges with respect to the issuance thereof. The Maker
covenants and agrees to take all action as may be necessary to amend its
Restated Certificate of Incorporation to create and authorize the shares of
Series B Stock and to authorize, if necessary, and reserve a sufficient number
of shares of Common Stock for the purpose of conversion of the Series B Stock;
provided, however, that this obligation shall be conditioned upon the Maker
receiving from the holders of the Maker's Series A Preferred Stock such
consents, approvals and waivers as may be necessary in order to create,
authorize and issue the Series B Stock. The Holder shall cooperate with the
Maker and take any actions as may reasonably be requested by the Maker to
authorize the Series B Stock and obtain such consents, approvals and waivers
from the holders of the Series A Preferred Stock. The Maker further covenants
and agrees that upon the automatic conversion of this Note pursuant to Section
4.2, it shall have authorized and reserved for the purpose of issue upon
conversion of this Note, a sufficient number of its shares of Preferred Stock
and, for the purpose of conversion of the Preferred Stock, a sufficient number
of shares of its Common Stock. Any shares of Preferred Stock as are issuable
pursuant to this Section 4 will not at the time of issuance be registered for
sale under the Securities Act of 1933, as amended, or any state securities law
and transfer thereof will be restricted to transactions made in compliance
therewith. Conversion under this Section 4 shall be deemed to have been made as
of the (i) the Maturity Date in the event of conversion pursuant to Section 4.1
and (ii) the closing date of the Financing in the event of conversion pursuant
to Section 4.2, and the person or persons entitled to receive the shares of
Preferred Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Preferred Stock as of such
applicable date. Following conversion, the Maker shall promptly deliver to such
person or persons certificates representing all such shares of Preferred Stock
issuable upon conversion.
5. CERTAIN ADJUSTMENTS. In the event of any reclassification,
consolidation or merger of the Maker (other than a merger in which the Maker is
the surviving entity and there is no change in the outstanding shares of the
Maker's capital stock), or subdivision or combination of shares of the Maker's
capital stock, or the payment by the Maker of any stock dividend or declaration
of any stock split, or any other similar event, the number and kind of
securities issuable upon the conversion of this Note and the price per share at
which this Note may be converted, shall be appropriately adjusted by the Maker's
Board of Directors if necessary to equitably protect the rights of the Holder
under this Note.
6. REGISTRATION RIGHTS. The shares of Common Stock issuable upon
conversion of any shares of Series B Stock or Preferred Stock issued upon
conversion of this Note shall be entitled to the registration rights under
Section 8 of that certain Stock Purchase Agreement among the Company and the
Purchasers identified therein dated September 16, 1993, as amended.
7. MISCELLANEOUS. This Note shall be governed by and construed in
accordance with the domestic substantive laws of the Commonwealth of
Massachusetts
-5-
<PAGE>
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the domestic substantive laws of any other
jurisdiction. The parties hereto, including the undersigned Maker and all
guarantors and endorsers, hereby waive presentment demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided herein, and assent to extensions of the time of payment, or forbearance
or other indulgence without notice. No course of dealing and no delay on the
part of the Holder in exercising any right, power or remedy conferred hereby
shall be exclusive of any other right, power or remedy referred to herein or
now or hereafter available.
WITNESS the execution hereof as an instrument under seal as of the day and
year first above written.
SCRIPTECH PHARMACEUTICALS, INC.
By:
-----------------------------------------
Its President and Chief Executive Officer
Duly Authorized
36137
-6-
<PAGE>
Exhibit 10.3
EXECUTION COPY
SCRIPTGEN PHARMACEUTICALS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 19th day of April, 1995, by and among SCRIPTGEN
PHARMACEUTICALS, INC., a Delaware corporation (the "Company") with its principal
place of business at 200 Boston Avenue, Medford, Massachusetts 02155, and each
of the entities and individuals severally listed on the Schedule of Initial
Purchasers attached hereto (collectively, the "Initial Purchasers" and
individually, an "Initial Purchaser"), such other entities as become party to
this Agreement pursuant to Section 10.1 hereto (collectively, the "Subsequent
Purchasers," and individually, a "Subsequent Purchaser", and together with the
Initial Purchasers, collectively the "Purchasers", and individually, a
"Purchaser"), and for purposes of Sections 7.12 and 8.3 only, Thomas A. Bologna
("Bologna") and Barry Weinberg ("Weinberg").
WHEREAS, the Company desires to issue and sell, and the Purchasers desire
to purchase, certain securities of the Company, upon the terms and conditions
set forth herein; and
WHEREAS, included in such securities are securities to be issued by the
Company as a result of the extension to the Company by certain of the Initial
Purchasers of an aggregate of $2,500,000 principal amount of bridge loans (the
"Bridge Loans") between September 7, 1994 and February 27, 1995.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions herein contained, the parties hereto agree as follows:
SECTION I
Authorization and Sale of the Shares
1.1. Authorization of the Shares. The Company has, or before the Initial
Closing (as hereinafter defined) will have, authorized the sale and issuance of
9,700,000 shares of its Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"), such class of stock having the rights,
restrictions, privileges and preferences as set forth in the Restated
Certificate of Incorporation of the Company (the "Certificate of Incorporation")
attached to this Agreement as Exhibit 1.1. The 6,579,086 shares of Series B
Preferred Stock being sold to the Purchasers hereunder, including the 2,500,000
shares of Series B Preferred Stock being issued to certain of the Initial
Purchasers in repayment of the principal amount of the Bridge Loans and the
79,086 shares of Series B Preferred Stock being issued to such Initial
Purchasers in repayment of the interest accrued on the Bridge Loans, are
referred to herein as the "Series B Preferred Shares", or the "Shares".
<PAGE>
1.2. Initial Closing. Subject to the terms and conditions hereof and in
reliance upon the representations, warranties and agreements contained herein,
the Company will issue and sell to each of the Initial Purchasers, severally and
not jointly, and each of the Initial Purchasers will purchase from the Company
at the Initial Closing (as defined below), the number of shares of Series B
Preferred Stock set forth opposite such Initial Purchaser's name on the Schedule
of Initial Purchasers attached hereto (the "Schedule of Initial Purchasers")
under the column labeled "Shares of Series B Preferred Stock", for the aggregate
purchase price set forth opposite such Initial Purchaser's name on the Schedule
of Initial Purchasers under the column labeled "Total Investment." The closing
of the purchase and sale of the Series B Preferred Shares to the Initial
Purchasers (the "Initial Closing"), including the delivery to the Initial
Purchasers by the Company of the certificates evidencing all Series B Preferred
Shares being purchased, shall take place immediately following the execution and
delivery of this Agreement at the office of Ropes & Gray, One International
Place, Boston, Massachusetts 02110 ("Ropes & Gray's Offices") on April 19, 1995,
or at such other time and place as shall be mutually agreed upon by the parties
(the "Initial Closing Date").
1.3. Subsequent Closings. Subject to the terms and conditions hereof and
in reliance upon the representation and warranties and agreements contained
herein, the Company will issue and sell to each Subsequent Purchaser, severally
and not jointly, and each Subsequent Purchaser will purchase from the Company,
the number of shares of Series B Preferred Stock, (which in the aggregate shall
not exceed 2,500,000 shares of Series B Preferred Stock) set forth below each
Subsequent Purchaser's name on the counterpart of this Agreement executed by
such Subsequent Purchaser. The purchase and sale of Series B Preferred Stock to
the Subsequent Purchasers shall occur at one or more closings (each a
"Subsequent Closing", together with the Initial Closing, the "Closings" and each
a "Closing") to be held at Ropes & Gray's Offices at a time and on a date to be
agreed upon by the Company and the Subsequent Purchasers participating in such
Subsequent Closing (each a "Subsequent Closing Date", and together with the
Initial Closing Date, each a "Closing Date").
1.4. Delivery. At each Closing, the Company shall deliver to each
Purchaser certificates in such denominations and registered on the books of the
Company in such names as such Purchaser requests, representing the number of
Series B Preferred Shares to be purchased by such Purchaser from the Company,
against payment at the Closing, in the case of the Initial Purchasers, of the
amount set forth opposite such Initial Purchaser's name in the column labeled
"Total Investment" on the Schedule of Initial Purchasers, and, in the case of
the Subsequent Purchasers, of an amount equal to the number of Series B Shares
to be purchased multiplied by $1.00. Payment for certain of the Series B
Preferred Shares shall be made by the cancellation of the Bridge Loan
indebtedness (both principal and accrued interest), if any, of the Company to
such Purchaser, as set forth under the column labeled "Bridge Loan Conversion"
on the Schedule of Initial Purchasers and, at the option of the Purchaser, by
check or wire transfer, or any combination thereof, for the remainder of any
amount to be paid to the Company.
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SECTION 2
Representations and Warranties of the Company
Except as provided herein or as set forth on the "Schedule of Exceptions"
delivered to each Purchaser prior to the execution hereof and attached hereto
(such Schedule of Exceptions to be updated prior to each Closing), the Company
hereby represents and warrants to each Purchaser as follows:
2.1. Organization and Standing: Articles and By-Laws. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of its state of organization and is qualified to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect upon the business, operations or
prospects of the Company. The Company has the requisite corporate power to own
properties owned by it and to conduct business as now being conducted by it and
as contemplated by it and possesses all governmental and other permits, licenses
and other authorizations to own its properties as now owned and to conduct its
business as now conducted. The Company has furnished counsel to the Purchasers
with true, correct and complete copies of its Certificate of Incorporation,
By-Laws and all amendments to each to date.
2.2. Corporate Power. The Company has all requisite corporate power to
enter into this Agreement and each of the Exhibits hereto, and will have at each
Closing Date all requisite corporate power to sell the Series B Preferred Shares
and to carry out and perform its obligations under the terms of this Agreement.
2.3. Subsidiaries. The Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
2.4. Capitalization. Immediately prior to the Closing, the Company's
authorized capital stock will consist of (a) 20,000,000 shares of Common Stock,
$.01 par value ("Common Stock"), of which (i) 3,419,171 shares will be issued
and outstanding immediately prior to the Closing, (ii) 6,403,325 shares has been
reserved for issuance upon conversion of the outstanding shares of the Company's
Series A Preferred Stock, $.01 par value (the "Series A Preferred Stock"), (iii)
153,000 shares are set aside for issuance upon the exercise of warrants and
other stock purchase rights for Series A Preferred Stock and the conversion
thereof into Common Stock, (iv) 6,579,086 shares will be reserved for issuance
upon conversion of the Series B Preferred Shares to be issued hereunder, (v)
920,579 shares are set aside for issuance upon exercise of stock options and
other stock purchase rights, heretofore or hereafter to be granted, (vi)
2,579,086 shares for issuance upon conversion of the Convertible Promissory
Notes evidencing the Bridge Loans, (which notes will be repaid pursuant to
section 1.1), and (vii) 1,285,250 shares are set aside for issuance upon
exercise of other stock options and purchase rights which may be granted
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to employees and consultants of the Company, as approved by the Company's Board
of Directors, and (b) 16,400,000 shares of Preferred Stock, (1) 6,700,000 of
which have been designated Series A Preferred Stock, of which 6,403,325 are
outstanding as of the Closing, and (2) 6,579,086 of which have been designated
Series B Preferred Stock and will be outstanding after consummation of the
transactions contemplated hereby. All the aforesaid issued and outstanding
shares of Series A Preferred Stock and Common Stock has been, duly authorized
and validly issued, fully paid and nonassessable, and owned of record and
beneficially by the stockholders of the Company and in the amounts set forth in
the Schedule of Exceptions, and has been offered, issued, sold and delivered by
the Company in compliance with applicable Federal and state securities laws. The
Schedule of Exceptions sets forth a complete and accurate list of all holders of
the capital stock of the Company, including options and warrants to purchase
shares of the Company's capital stock, and the class and number of shares, or
shares issuable upon exercise, as the case may be, held by each such holder.
There are no outstanding preemptive, conversion or other rights or agreements
granted or issued by or binding on the Company for the purchase or acquisition
of, or with respect to, any shares of its capital stock. No stockholder has
granted the Company options or other rights to purchase any shares of capital
stock of the Company from such stockholder. Neither the offer, issuance or sale
of the Series B Preferred Shares nor the consummation of any transaction
contemplated hereby will result in a change in the price or number of any
securities of the Company outstanding at the Closing under anti-dilution
provisions contained in or affecting any such securities. The Company holds no
shares of its capital stock in its treasury.
2.5. Authorization. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance by the Company of this Agreement and each of the Exhibits
hereto, and the consummation of the transactions contemplated herein and
therein, and for the authorization, issuance and delivery of the Series B
Preferred Shares and the shares of Common Stock issuable upon conversion of the
Series B Preferred Shares has been taken or will be taken prior to the Closing.
This Agreement and each of the Exhibits hereto are valid and binding obligations
of the Company, enforceable against the Company in accordance with its
respective terms. The execution, delivery and performance by the Company of this
Agreement and each of the Exhibits hereto and compliance herewith and therewith
and the issuance and sale of the Series B Preferred Shares and the issuance of
Common Stock upon conversion of the Series B Preferred Shares will not (a)
result in any violation of, and will not conflict with, or result in a breach of
any of the terms of, or constitute a default under, the Company's Certificate of
Incorporation or By-Laws, as amended, any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation or other restriction to
which the Company is a party or by which it, or any of its assets is bound or
(relying in part on the Purchaser's representations and warranties as set forth
in Section 4) any provision of state or Federal law to which the Company is
subject, or (b) result in 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 (c) result in the suspension, revocation,
impairment, forfeiture or non-renewal of any permit, license, authorization or
approval applicable to the Company's operations or any of its assets or
properties. The Series B Preferred Shares, when
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issued in compliance with the provisions of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable; will be free of any
liens or encumbrances; and will have the rights, privileges and preferences as
set forth in the Certificate of Incorporation. The shares of Common Stock
issuable upon conversion of the Series B Preferred Shares have been duly and
validly reserved and are not subject to any preemptive rights or rights of first
refusal and, upon issuance, will be duly authorized, validly issued, fully paid
and nonassessable.
2.6. Financial Information. Attached hereto as Exhibits 2.6A, 2.6B and
2.6C, respectively, are true copies of: (a) the audited balance sheet of the
Company as at December 31, 1993, together with audited statements of
operations, shareholders equity and cash flows of the Company for the year then
ended (collectively, the "Audited Financial Statements"); and (b) the unaudited
balance sheet of the Company as at December 31, 1994, and the unaudited balance
sheet of the Company as at February 28, 1995 (the "Balance Sheet"), together
with unaudited statements of operations, shareholders' equity and cash flows of
the Company for the 12-month and two-month periods then ended (collectively, the
"Unaudited Financial Statements", and together with the Audited Financial
Statements, the "Financial Statements"). Each of the Audited Financial
Statements and the Unaudited Financial Statements present fairly the financial
position and results of operations of the Company at the dates and for the
periods to which they relate, in accordance with generally accepted accounting
principles consistently applied throughout and across the periods involved
(except as may otherwise be disclosed in the Audited Financial Statements and
the Unaudited Financial Statements) and show all liabilities of the Company
required to be recorded thereon in accordance with generally accepted accounting
principles as at the dates thereof, subject, in the case of the Unaudited
Financial Statements, to normal year-end adjustments.
2.7. Absence of Undisclosed Liabilities. The Company has no material
liabilities (fixed or contingent, including without limitation any tax
liabilities due or to become due) which are not fully reflected or provided for
on the Balance Sheet. The Company does not know of any such material liability
of any nature, direct or indirect, contingent or otherwise, or in any amount not
adequately reflected or reserved against in the Balance Sheet.
2.8. Absence of Certain Changes. At all times since December 31, 1994 up
to and including the Closing, there has not been any event or condition of any
character which has materially adversely affected the Company's business,
operations or financial condition, including but not limited to:
(a) any material adverse change in the condition, operating results, assets,
liabilities or business of the Company from that shown on the Financial
Statements;
(b) any damage, destruction or loss of any of the properties or assets of the
Company (whether or not covered by insurance) materially adversely affecting the
assets, properties, financial condition, operating results, prospects, business
or plans of the Company;
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(c) any waiver by the Company of a valuable right or of a debt owed to it;
(d) any material change or material amendments to a contract or arrangement by
which the Company or any of its assets or properties is bound or subject;
(e) any declaration, setting aside or payment or other distribution in respect
of any of the Company's capital stock, or any direct or indirect redemption,
purchase or other acquisition of any of such stock by the Company; or
(f) any labor trouble.
2.9. Taxes. The Company has filed or will file within the time prescribed
by law (including extensions of time approved by the appropriate taxing
authority) all tax returns and reports required to be filed with the United
States Internal Revenue Service and with The Commonwealth of Massachusetts and
the State of Delaware and (except to the extent that the failure to file would
not have a material adverse effect on the condition or operations of the
Company) with all other jurisdictions where such filing is required by law; and
the Company has paid, or made adequate provision in the Financial Statements for
the payment of, all taxes, interest, penalties, assessments or deficiencies (i)
shown to be due or claimed to be due on or in respect of such tax returns and
reports or (ii) on the income, profits, property or business of the Company. The
Company knows of (i) no other tax returns or reports which are required to be
filed which have not been so filed and (ii) no unpaid assessment for additional
taxes for any fiscal period or any basis therefor. The Company's Federal income
tax returns have not been audited by the Internal Revenue Service.
2.10. Outstanding Debt. Except for the Bridge Loans and as reflected on
the Balance Sheet, the Company has no outstanding indebtedness for borrowed
money and is not a guarantor or otherwise contingently liable for any
indebtedness for borrowed money (including, without limitation, liability by way
of agreement, contingent or otherwise, to purchase, provide funds for payment,
supply funds or otherwise invest in any debtor or otherwise to insure any
creditor against loss). There exists no default under the provisions of any
instrument evidencing any such indebtedness or otherwise or of any agreement
relating thereto, including, without limitation, those included or referred to
in the Schedule of Exceptions and Balance Sheet. No officer, director or
stockholder of the Company or any of their relatives or affiliates, is indebted
to the Company in an amount in excess of $5,000 per person or entity.
2.11. Contracts: Insurance. The Company has no currently existing
contract, obligation, agreement, plan, arrangement, commitment or the like
(written or oral) of any material nature (involving more than $10,000 in any
year or $50,000 over the life of such contract, obligation, agreement, plan,
arrangement, or commitment, either individually or in the aggregate if such
contracts, obligations, agreements, plans, arrangements or commitments are of a
similar nature or with the same party) including without limitation the
following:
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(a) Employment, bonus or consulting agreements, pension, profit sharing,
deferred compensation, stock bonus, retirement, stock option, stock purchase,
phantom stock or similar plans, including agreements evidencing rights to
purchase securities of the Company and agreements among stockholders and the
Company;
(b) Loan or other agreements, notes, indentures, or instruments relating to or
evidencing indebtedness for borrowed money, or mortgaging, pledging or granting
or creating a lien or security interest or other encumbrance on any of the
Company's property or any agreement or instrument evidencing any guaranty by the
Company of payment of performance by any other person;
(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining organization or
other labor agreements;
(e) Any contract or series of contracts with the same person for the furnishing
or purchase of machinery, equipment, goods or services, including, without
limitation, agreements with processors and subcontractors;
(f) Any indenture, agreement, or other document (including private placement
brochures) relating to the sale or repurchase of shares of the Company's capital
stock;
(g) Any joint venture contract or arrangement or other agreement involving a
sharing of profits or expenses to which the Company is a party;
(h) Agreements expressly limiting the freedom of the Company to compete in any
line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or shares of
the Company, agreements of merger or consolidation to which the Company is a
party or letters of intent with respect to the foregoing;
j) Letters of intent or agreements with respect to the acquisition of the
business, assets or shares of any other business;
(k) Insurance policies;
(l) Assignments, licenses or other agreements with respect to any intangible
property (including, without limitation, any patent, trademark, trade name,
copyright, know-how, trade secret, proprietary right or confidential
information);
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(m) Any other contract, instrument, commitment, plan, agreement or arrangement,
a copy of which would be required to be filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to a registration statement on Form
S-1 if the Company were registering securities under the Securities Act of
1933, as amended (the "Securities Act").
The Company has complied with all the material provisions of all said
contracts, obligations, agreements, plans, arrangements, and commitments and
there does not exist any event of default with respect to the Company under any
such agreement or any event which, after notice or lapse of time or both, would
constitute an event of default with respect to the Company under such agreement.
There is no action, suit, proceeding or investigation pending or, to the best of
the Company's knowledge and belief, threatened against the Company before any
court or before any governmental or administrative agency for the renegotiation
of or any other adjustment of any such agreement.
2.12. Litigation and Bankruptcy Proceedings.
(a) There is neither pending nor, to the best of the Company's knowledge and
belief, threatened any action, suit, proceeding or claim or, to the best of the
Company's knowledge, any basis therefor, whether or not purportedly on behalf of
the Company, to which the Company is or may be named as a party or to which its
property is or may be subject or to which any officer, key employee or principal
stockholder of the Company is subject, and (i) in which an unfavorable outcome,
ruling or finding in any such matter or for all such matters taken as a whole
might have a material adverse effect on the condition, financial or otherwise,
prospects or operations of the Company, or (ii) in which a third party seeks
damages from the Company based on the Company's previous use of name
"Scriptech"; and the Company has no knowledge of any unasserted claim, the
assertion of which is likely and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or nonmonetary relief, which
claim individually or collectively with other such unasserted claims if granted
would have a material adverse effect on the condition, financial or otherwise,
business or operations of the Company.
(b) The Company has not admitted in writing its inability to pay its debts
generally as they become due, filed or consented to the filing against it of a
petition in bankruptcy or a petition to take advantage of any insolvency act,
made an assignment for the benefit of creditors, consented to the appointment of
a receiver for itself or for the whole or any substantial part of its property,
or had a petition in bankruptcy filed against it, been adjudicated a bankrupt,
or filed a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other similar law or statute of the United States
of America or any other jurisdiction.
2.13. Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority, including the
Secretary of State of the State of Delaware, is required in connection with the
Company's valid execution, delivery or performance of this Agreement or any of
the Exhibits hereto, or the offer, sale or issuance of the Series B Preferred
Shares by the Company, the issuance of Common Stock upon the conversion of the
Series B
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Preferred Shares and for the Series A Preferred Stock, or the consummation of
any other transaction contemplated on the part of the Company hereby or pursuant
to any such Exhibit, except for such filings as have been made prior to the
Closing.
2.14. Title to Properties; Liens and Encumbrances; Leases. The Company
owns no real property. The Company has good and marketable title to and a valid
and indefeasible ownership interest in all the property and assets owned by it,
free from all mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges (collectively referred to herein as
"Liens").
Set forth on the Schedule of Exceptions is a correct and complete list
(including the amount of rents called for and a description of the leased
property) of all leases under which the Company is a lessee. The Company enjoys
peaceful and undisturbed possession under all such leases, all of such leases
are valid and subsisting and the Company is not in default under any of such
leases in any material respect.
2.15. Business of the Company. There is no pending or, to the best of the
Company's knowledge and belief, threatened claim or litigation against or
affecting the Company contesting its right to perform any of the services
presently conducted by or proposed to be conducted by the Company or to produce,
manufacture, sell or use any product, process, method, substance, part or other
material presently produced, manufactured, sold or used or planned to be
produced, manufactured, sold or used by the Company in connection with the
business and operations of the Company. The Company has no knowledge or belief
that (i) there exists, or there is pending or planned, any patent, invention,
device, application or principle, or any statute, rule, law, regulation,
standard or code which would materially adversely affect the condition,
financial or otherwise, operations or prospects of the Company; (ii) there is
any other factor (other than fire, flood, accident, act of war or civil
commotion, or any other cause or event beyond the control of the Company) which
materially adversely affects the condition, financial or otherwise, business or
the operations of the Company.
2.16. Permits, Franchises, Licenses, Trademarks, Patents and Other Rights.
The Company has, or when required will have, all permits, licenses and other
similar authority necessary in any material respect for the conduct of its
business as now being conducted by it and as planned to be conducted by it, and
the Company is not in default under any of such permits, licenses or other
similar authority. The Schedule of Exceptions includes a list of all patents
owned by or which are licensed to the Company. The Company possesses all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, trade secrets, information, proprietary rights and processes
necessary to conduct its business in any material respect as now being conducted
and as planned to be conducted without, to the best of the Company's knowledge
and belief, conflict with, or infringement upon, any valid rights of others, and
with respect to such patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, trade secrets, information, proprietary
rights and processes has not received any notice of infringement upon or
conflict with the rights of others.
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There are no outstanding options, license or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any option,
license or agreement of any kind with respect to the patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights, trade
secrets, information, proprietary rights and processes of any other person or
entity. No stockholder, director, officer or employee of the Company has any
interest in any such patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, trade secrets, information, proprietary
rights and processes.
2.17. Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Series B Preferred Shares shall have been
fully paid, and all laws imposing such taxes shall have been fully complied with
in all material respects, prior to the Closing Date.
2.18. Offering. Subject in part to the truth and accuracy of the
Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Series B Preferred Shares and the issuance of Common Stock upon
conversion of the Series B Preferred Shares as contemplated by this Agreement
are exempt from the registration requirements of the Securities Act and from the
registration or qualification requirements of the laws of any applicable state,
and neither the Company nor anyone acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.19. Compliance with Other Instruments. The Company is not in violation
of any term of its Certificate of Incorporation or By-Laws, as amended. The
Company is not in violation of any term of any mortgage, indenture, contract,
agreement, instrument, judgment, decree, order, statute, rule or regulation to
which the Company is subject and a violation of which would have a material
adverse effect on the condition, financial or otherwise, operations or prospects
of the Company.
2.20. Employees. To the best of the Company's knowledge and belief, no
employee or consultant of the Company, is, or is now expected to be, in
violation of any term of any employment contract, patent, disclosure agreement,
non-competition agreement, proprietary information and inventions agreement or
any other contract or agreement or any restrictive covenant or any other common
law obligation to a former employer relating to the right of any such employee
to be employed by the Company because of the nature of the business conducted or
to be conducted by the Company or to the use of trade secrets or proprietary
information of others, and the employment of the Company's employees does not
subject the Company or any Purchaser to any liability to a third party. There is
neither pending nor, to the best of the Company's knowledge and belief,
threatened, any actions, suits, proceedings or claims, or, to its knowledge, any
basis therefor or threat thereof with respect to any contract, agreement,
covenant or obligation referred to in the preceding sentence. The Company does
not have any collective bargaining agreement covering any of its employees.
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To the best knowledge of the Company, after due inquiry, neither Kim nor
Green, nor any Ph.D. qualified employee nor any officer of the Company
(collectively, "key persons"), has any present intention of terminating his
employment or consulting arrangement with the Company, and the Company has no
present intention of terminating such employment or consulting arrangement.
2.21. Employee Benefit Plan Obligations. The Company does not have any
collective bargaining, labor, profit sharing, pension, retirement, stock option,
incentive, benefit or other similar contract, plan or arrangement. The Company
does not sponsor, nor is it obligated to contribute to, any employee benefit
plan (as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")).
2.22. Environmental Matters; Hazardous Waste. There have been no past and
there are no existing violations of Federal, state or local laws or regulations
relating to environmental protection or to the storage or disposal of hazardous
waste (including, but not limited to, asbestos, polychlorinated biphenyls and
petroleum products), relating to the Company or any of its businesses or
operations or assets. No inspection or investigation by the Environmental
Protection Agency or OSHA, or any other federal, state or local agency has
resulted in a letter demanding cleanup of hazardous substances or waste,
citation, complaint or notice of violation, pursuant to any law, rule,
regulation, ordinance, judgment, decree, order, injunction or decision of any
court or governmental authority in regard to the Company or any of its
businesses or operations or any of its assets and no such citation, complaint,
notice or demand letter is pending or, to the best of the Company's knowledge
and belief, threatened.
To the best of the Company's knowledge and belief, there is no condition
or state of affairs existing on or about any real property owned, leased,
operated or used by the Company or any real property previously owned, leased,
operated or used by the Company (but only to the extent that such condition or
state of affairs existed on the date the Company ceased to own, lease, operate
or use such real property or was attributable to the Company's ownership,
leasing, operation or use of such real property) that would now or in the
immediate future require a closure under the provisions of the Resource,
Conservation and Recovery Act, or remedial or other action under the provisions
of the Resource, Conservation and Recovery Act or the Comprehensive
Environmental Response, Compensation and Liability Act, or the regulations
promulgated under such Acts, or that would constitute a nuisance or violation of
any environmental legislation or regulation under the law of the state in which
such property is located.
2.23. Ability to Comply; Burdensome Restrictions. The Company has the
ability and is presently in a position, legally and otherwise, to comply with
the terms of and perform all its obligations under this Agreement and each of
the Exhibits hereto; and the Company has no present knowledge of or any present
reason to believe that the Company will not have such ability and be in such a
position for so long as any shares of Series B Preferred Stock are outstanding.
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The Company is not presently obligated under any contract or agreement or
subject to any charter or other corporate restriction which (i) materially and
adversely affects, or may, in the reasonable opinion of the Company, be expected
to materially and adversely affect, its business, properties, assets or
condition (financial or otherwise) or (ii) will legally or contractually
restrict or impair the ability of the Company to pay any dividends on or make
other distributions with respect to the Series B Preferred Shares pursuant to
the provisions of the Certificate of Incorporation.
2.24. Material Relationships. Except for investments held by entities
affiliated with Allan Ferguson or Weinberg, to the best of the Company's
knowledge and belief, none of the officers, directors or key persons of the
Company, or their respective spouses, or relatives, owns directly or indirectly,
individually or collectively, a material interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) the Company. For purposes of this Section 2.24, there may be
disregarded any purely passive economic interest which arises solely from the
ownership of less than a 2% equity interest in any such entity.
2.25. Registration Rights. Except as provided in this Agreement, the
Company is not under any obligation to register any of its currently outstanding
securities or any of its securities which may hereafter be issued.
2.26. Brokers' and Finders' Fees. The Company has retained no broker or
finder in connection with the transactions contemplated by this Agreement and
has no liability for any commission or compensation in the nature of an agent's
fee to any broker or finder or any other person.
2.27. Patents, Copyrights and Trademarks. The Company owns and possesses
or is licensed under all patents, patent applications, licenses, trademarks,
trade names, brand names, inventions and federally registered copyrights
necessary for the operation of its business as now conducted and as proposed to
be conducted, including without limitation, the United States patents listed in
the Schedule of Exceptions, in each case, the Company is not obligated or under
any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner, licensor of, or other claimant to any patent, trademark,
trade name, copyright or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business (as now conducted and as
proposed to be conducted), or otherwise; and there have been no claims made, or,
to best knowledge of the Company after due inquiry, threatened, against the
Company for the assertion of the invalidity, abuse, misuse or unenforceability
of any of its patent, trademark, copyright, trade secret or other proprietary
rights and there are no grounds for the same.
2.28. Proprietary Information of Third Parties. No third party has
claimed, has reason to claim or has requested information to suggest that any
person employed by or affiliated with the
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Company has (a) violated or may be violating any of the terms or conditions of
his employment, consulting, non-competition or non-disclosure agreement with
such third party, (b) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
third party, or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present employees. To the
best knowledge of the Company, after due inquiry, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any other person in
connection with the conduct of the Company's business (as now conducted and as
proposed to be conducted).
SECTION 3
Representations and Warranties of Purchasers
Each Purchaser, severally and not jointly, represents and warrants with
respect to such Purchaser to the Company as follows:
3.1. Experience. It (or, in the event any such Purchaser has been formed
for the specific purpose of acquiring the securities of the Company, each of the
equity owners of such Purchaser) has such knowledge and experience in financing
and business matters that it is capable of evaluating the merits and risks of an
investment in the Series B Preferred Shares and of making an informed decision.
It (or, in the event any such Purchaser has been formed for the specific purpose
of acquiring the securities of the Company, each of the equity owners of such
Purchaser) is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.
3.2. Investment. It is acquiring the Series B Preferred Shares, and will
be acquiring the shares of Common Stock issuable upon conversion of the Series B
Shares, for investment for its own account and not with the view to, or for
resale in connection with, any distribution thereof. It understands that the
Series B Preferred Shares and the shares of Common Stock issuable upon
conversion of the Series B Preferred Shares have not been registered under the
Securities Act by reason of a specified exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of its investment intent as expressed herein.
3.3. Restrictions On Transfers. It understands and agrees as follows:
(a) The certificates evidencing the Series B Preferred Shares (and the
Common Stock issuable upon conversion of the Series B Preferred Shares), and
each certificate issued in transfer of the foregoing, will bear the following
legend (or substantially similar legend):
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR
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QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT SUCH
REGISTRATION OR THE DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
DISPOSITION WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFICATION UNDER ANY
STATE SECURITIES LAWS."
(b) It will not offer, sell, transfer or otherwise dispose of any of the Series
B Preferred Shares or any Common Stock issuable upon conversion of the Series B
Preferred Shares, unless (i) an effective registration under the Securities Act
covers the disposition of such securities or (ii) it has delivered to the
Company an opinion of counsel, reasonably satisfactory to the Company, that such
offer, sale, transfer or other disposition will not require registration of such
securities under the Securities Act or qualification under any state securities
laws.
Upon request of a holder of Series B Preferred Shares (or Common Stock
issued upon conversion of Series B Preferred Shares), the Company shall remove
any such legend from each certificate evidencing such Series B Preferred Shares
(or such Common Stock), or shall issue to such holder a new certificate or
certificates for such Series B Preferred Shares (or such Common Stock), which
certificate or certificates shall be free of such transfer legend, provided that
with such request, the Company shall have received an opinion of counsel, which
opinion is reasonably satisfactory to the Company, to the effect that such
legend is no longer necessary or required (including, without limitation,
because of the availability of the exemption afforded by Rule 144 promulgated
under the Securities Act).
3.4. Rule 144. It acknowledges that the Series B Preferred Shares and the
shares of Common Stock issuable upon conversion of the Series B Preferred Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. It has been
advised or is aware of the provisions of Rule 144, which permits limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, and understands that such Rule may not become available for
resale of the Series B Preferred Shares or the shares of Common Stock issuable
upon conversion of the Series B Preferred Stock.
3.5. Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with its management and has had the
opportunity to review the Company's books, records and facilities.
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3.6. Authorization. If applicable, all corporate or partnership action on
the part of such Purchaser and its directors and stockholders or partners
necessary for the authorization, execution, delivery and performance by such
Purchaser of this Agreement and the Exhibits hereto and the consummation of the
transactions contemplated herein and therein, has been taken or will be taken
prior to the Closing. This Agreement and each of the Exhibits hereto to which
such Purchaser is a party is a valid and binding obligation of such Purchaser,
enforceable in accordance with its terms. The execution, delivery and
performance by such Purchaser of this Agreement and each of the Exhibits hereto
to which such Purchaser is a party and compliance herewith and therewith will
not result in any violation of and will not conflict with, or result in a breach
of any of the terms of, or constitute a default under, such Purchaser's charter
or By-Laws or Agreement of Limited Partnership, as applicable, or any judgment,
decree, order, rule or regulation to which such Purchaser is bound.
3.7. Brokers' and Finders' Fees. It, individually or with any person, has
retained no broker or finder in connection with the transactions contemplated by
the Agreement and has no liability for any commission or compensation in the
nature of an agent's fee to any broker or finder or any other person.
SECTION 4
Conditions to Closing of Purchasers
The obligation of each Purchaser to purchase the Series B Preferred Shares
to be purchased at a Closing is subject to the fulfillment to such Purchaser's
reasonable satisfaction on or prior to the relevant Closing Date of each of the
following conditions:
4.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2 hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
4.2. Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all material
respects.
4.3. Completion of Due Diligence. The Purchasers or their representatives
shall have completed their due diligence investigation including but not limited
to discussions with the Company's management concerning the Company's business,
management and financial affairs and inspection of the Company's books, records
and facilities.
4.4. Opinion of Company's Counsel and Accountants. The Purchasers shall
have received from Nutter, McClennen & Fish, counsel to the Company, an opinion
addressed to the
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Purchasers, dated the Closing Date, and in substantially the form attached as
Exhibit 4.4 hereto (appropriately updated for each Subsequent Closing).
4.5. Legal Investment. At the time of the Closing, the purchase of the
Series B Preferred Shares to be purchased by the Purchasers hereunder shall be
legally permitted by all laws and regulations to which the Purchasers and the
Company are subject.
4.6. Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the President of the Company, dated the Closing
Date, certifying on behalf of the Company to the fulfillment of the conditions
specified in Sections 4.1 and 4.2 of this Agreement.
4.7. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers and their counsel.
4.8. Securities Law Compliance. All such actions and steps necessary to
assure compliance with applicable Federal and state securities laws, including
all authorizations, approvals or permits, if any, of any governmental authority
or regulatory body in any states where the Series B Preferred Shares are being
sold, that are required in connection with the lawful issuance and sale of the
Series B Preferred Shares pursuant to this Agreement, the conversion of the
Series B Preferred Shares into Common Stock and the issuance of such Common
Stock upon such conversion shall have been duly obtained and shall be effective
at and as of the Closing.
4.9. Interim Stockholders' Agreement. The Company, the Purchasers', each
other holder of the Company's Series A Preferred Stock, and Kim and Green shall
have executed the Interim Stockholders' Agreement agreement (the "Interim
Stockholders' Agreement") in substantially the form attached hereto as Exhibit
4.9.
4.10. Key-Man Insurance Trust. The Company and CW Group (the "Trustee")
shall have executed and delivered an Amended and Restated Trust Agreement
substantially in the form of Exhibit 4.10A hereto. Each of the Purchasers and
the Trustee shall have executed and delivered an Amended and Restated Trust
Option Agreement substantially in the form of Exhibit 4.10B hereto.
4.11. Legal Fees. The Company shall have paid the legal fees and the
disbursements and office expenses of Ropes & Gray, counsel to the Purchasers,
with respect to this Agreement and the transactions contemplated hereby in
accordance with the provisions of Section 10.9 of this Agreement.
4.12. Election of Director. Jason Fisherman shall have been elected to the
Board of Directors of the Company.
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SECTION 5
Conditions to Closing of Company
The Company's obligation to sell the Series B Preferred Shares to be
purchased at each Closing is subject to the fulfillment to its satisfaction on
or prior to the relevant Closing Date of each of the following conditions:
5.1. Representations. The representations made by each of the Purchasers
pursuant to Section 3 hereof shall be true and correct when made and shall be
true and correct on the relevant Closing Date.
5.2. Legal Investment. At the time of the Closing, the conditions set
forth in Sections 4.8 and 4.9 shall have occurred and the purchase of the Series
B Preferred Shares to be purchased by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers and the Company
are subject.
SECTION 6
Covenants of the Company
The Company hereby covenants and agrees, so long as any Purchaser owns
Series B Preferred Shares, to take or refrain from taking any of the actions
specified in this Section 6, without the prior written consent of the holders of
75% of the issued and outstanding Series B Preferred Shares:
I. Affirmative Covenants.
6.1. Basic Financial Information. The Company will furnish the following
reports to the Purchasers (or their representatives):
(a) As soon as practicable after the end of each fiscal year of the Company, and
in any event within one hundred twenty (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 retained earnings and of
statement of cash flows of the Company and its subsidiaries, if any
(collectively with the balance sheet, the "Investment Financial Statements"),
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 nationally recognized standing
selected by and reporting to the Board of Directors of the Company and approved
by the Purchasers, and including a Company prepared comparison to budget.
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(b) As soon as practicable after the end of each month and each of the first,
second and third quarterly accounting periods in each fiscal year of the
Company, and in any event within thirty (30) days thereafter, consolidated
Investment Financial Statements of the Company and its subsidiaries, if any, for
such period, prepared in accordance with generally accepted accounting
principles consistently applied, subject to changes resulting from year-end
audit adjustments, and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, certified by the principal
financial or accounting officer of the Company.
(c) If the Company becomes subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act", which term
shall include any successor federal statute), it may in lieu of the financial
information required pursuant to Sections 6.1 (a) and (b) hereof provide copies
of its annual reports on Form 10-K and its quarterly reports on Form 10-Q,
respectively, or other then-equivalent report form.
(d) Immediately upon any officer of the Company obtaining actual knowledge of
the occurrence of any material violation or default by the Company or any of its
subsidiaries in the performance of (i) its agreements or covenants contained
herein, (ii) its material agreements or covenants contained in any other
agreement to which the Company or any of its subsidiaries is a party or (iii)
its agreements or covenants contained in the Certificate of Incorporation or of
the occurrence of any condition, event or act which, with or without notice or
lapse of time, or both, would constitute a material violation or an event of
default, a written notice specifying the nature and status thereof and, what
action the Company has taken, is taking and proposes to take with respect
thereto.
(e) Annually, but in any event no later than sixty (60) days after the
commencement of each fiscal year of the Company, the yearly budget and operating
plan of the Company, in such manner and form reasonably acceptable to the
Purchasers and as approved by the Board of Directors of the Company, which plan
shall include a projection of income and projected Investment Financial
Statements as of the end of such fiscal year. Any material changes in such plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company.
(f) As soon as practicable after transmission or occurrence and in any event
within ten (10) days thereof, (i) copies of any reports or communications
delivered to any of the Company's securityholders (in their capacity as such),
any governmental entity (excluding ordinary permit applications or similar types
of correspondence and documentation in connection therewith), any financial
institution or member of the financial community (other than correspondence and
documents delivered to such financial institutions or members in the ordinary
course of business which do not materially adversely impact on the Purchaser's
investment in the Company) or to any other individual or entity who may receive
such information by law or pursuant to a contract or other agreement with the
Company (except in the ordinary course of business), including any filings by
the Company, or by any of its officers or directors relating to the Company,
with any securities exchange or the Commission or the National Association of
Securities Dealers, Inc.,
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(ii) notice of any event which has a material adverse effect on the Company's
business, prospects or condition, financial or otherwise, or on the ability of
the Company to perform its obligations under this Agreement, or under any other
agreement, or on the Purchasers' investment in the Series B Preferred Shares or
in the Common Stock issuable upon conversion of the Series B Preferred Shares,
and (iii) notice of material breach or failure to comply with any
representation, warranty, covenant or agreement of the Company contained herein,
including the Exhibits hereto.
(g) Immediately upon any principal officer of the Company or any other officer
of the Company involved in its financial administration obtaining knowledge of
the occurrence of any (i) "reportable event", as such term is defined in section
4043 of ERISA, other than any such event with respect to which the statutory
30-day notice requirement has been waived by regulation, or (ii) "prohibited
transaction", as such term is defined in section 4975 of the Code, in connection
with any plan or any trust created thereunder, a written notice specifying the
nature thereof, what action the Company has taken, is taking and proposes to
take with respect thereto, and, when known, any action taken or threatened by
the Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect thereto.
(h) With reasonable promptness, such other information and data with respect to
the Company and its subsidiaries, if any, as the Purchasers may from time to
time reasonably request.
(i) The provisions of this Section 6.1 and Section 6.2 shall not be in
limitation of any rights which the Purchasers may have to inspect the books and
records of the Company and its subsidiaries, or to inspect their properties or
discuss their affairs, finances and accounts; and, in the event that the Company
is unable to comply with the provisions of Section 6.1 or 6.2, the Board of
Directors of the Company shall, by resolution duly adopted, authorize and cause
a firm of independent public accountants of nationally recognized standing in
the United States to prepare promptly and furnish such information to the
Purchasers at the Company's expense.
6.2. Visitation. The Company will permit the Purchasers (or
representatives of the Purchasers) to visit and inspect any of the properties of
the Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's directors, officers, senior employees and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request. Subject to the provisions of Section 6.15
hereof, any expenses incurred by a Purchaser in connection with any such
visitation and inspection shall be borne by such Purchaser; provided, however,
in the event such visitation is necessitated by or is a result of a material
default hereunder or under the terms of a material contract or arrangement on
the part of the Company, all such expenses shall be borne by the Company.
6.3. Prompt Payment of Taxes, etc. The Company 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
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Company or any 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 shall have
bonded or set aside on its books adequate reserves with respect thereto; and
provided, further, that the Company will pay all such taxes, assessments,
charges or levies, or otherwise take any action which has the effect of
preventing a foreclosure, forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor. The Company
will promptly pay or cause to be paid when due all other indebtedness incident
to operations of the Company; provided, however, that any such indebtedness need
not be paid if the validity thereof shall currently be contested in good faith
by appropriate proceedings and if the Company shall have bonded or set aside on
its books adequate reserves with respect thereto; and provided, further, that
the Company will pay all such indebtedness on or prior to the time when failure
to pay would materially adversely affect the Company.
6.4. Maintenance of Properties and Leases. The Company will keep its
properties and those of its subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries, if any, will at all times comply
with each provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such lease would have a material
adverse effect on the condition, financial or otherwise, prospects or operations
of the Company.
6.5. Insurance. The Company shall maintain adequate insurance, by
financially sound and reputable insurers, on its properties and assets and the
properties and assets of its subsidiaries, if any, which are of an insurable
character and in such amounts and on such terms usually insured by corporations
engaged in the same or similar business and similarly situated, against loss or
damage by fire, explosion and other risks customarily insured against by such
corporations which amounts shall be sufficient to prevent the Company or any
such subsidiary from becoming a co-insurer and not in any event less than 100%
of the insurable value of the property and assets insured; and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons, property and assets, including
without limitation insurance against claims for personal injury, death or
property damage occurring upon, in, about or in connection with the use of any
of the properties or assets of it or any subsidiary, and in such amounts and on
such terms usually insured by corporations engaged in the same or similar
business and similarly situated, which amounts shall be sufficient to prevent
the Company or any subsidiary from becoming a co-insurer; and the Company will
maintain such other insurance as may be required by law or other agreements to
which the Company is or shall become a party.
6.6. Key Person Life Insurance. The Company shall use its best efforts to
obtain, as soon as possible but in no event later than 30 days from the Closing
Date, with financially sound and reputable insurers acceptable to the
Purchasers, key person term life insurance on the life of Bologna in the amount
of $1,000,000, and shall assign such $1,000,000 policy to the Trust
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created under the Amended and Restated Trust Agreement and cause such policy to
be made payable to the Trustee thereunder. The Company will cause to be
maintained, and shall contribute to the Trust an amount sufficient to pay all
premiums in connection with, such policy and the $ 1,000,000 term life insurance
policies currently insuring the life of each of Peter S. Kim ("Kim") and Michael
R. Green ("Green") so long as any Series B Preferred Shares remain outstanding.
6.7. Accounts and Records. The Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
6.8. Independent Accountants. The Company will retain independent public
accountants of nationally recognized standing who shall certify the Company's
financial statements at the end of each fiscal year. In the event the services
of the independent public accountants, so selected, or any firm of independent
public accountants hereafter employed by the Company are terminated, the Company
will promptly thereafter notify the Purchasers and will request the firm of
independent public accountants whose services are terminated to deliver to the
Purchasers a letter of such firm setting forth the reasons for the termination
of their services. In the event of such termination, the Company will promptly
thereafter engage another accounting firm of similar quality. In its notice to
the Purchasers the Company shall state whether the change of accountants was
recommended or approved by the Board of Directors of the Company.
6.9. Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries, if any, shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of their businesses or to their properties or assets.
6.10. Maintenance of Corporate Existence, etc. The Company shall maintain
and shall cause each subsidiary, if any, to maintain in full force and effect
(i) its corporate existence, rights and franchises and all licenses, privileges
and other rights in or to use patents, processes, licenses, trademarks, trade
names or copyrights owned or possessed by it or any subsidiary and shall obtain
and maintain any such right, franchise, license or privilege deemed by the
Company to be necessary on the date hereof or in the future to the conduct of
their business without any conflict with any business in or rights of others to
use such patents, processes, licenses, trademarks, trade names or copyrights and
(ii) its qualification to do business in each jurisdiction in which the
character of its properties (owned, leased or licensed) or the nature of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect upon the business or operations of the
Company or such subsidiary, as the case may be.
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6.11. Availability of Common Stock for Conversion and Exercise. The
Company will keep such number of shares of Common Stock unissued and available
for issuance in order to permit conversion of all the then outstanding shares of
Series B Preferred Stock.
6.12. Notice of Record Dates. In the event of any taking by the Company of
a record of the holders of any class of securities (other than the Series B
Preferred Stock) for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, the Company shall mail
to the Purchasers at least ten (10) days prior to such record date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution.
6.13. Proprietary Information and Inventions Agreement. The Company will
cause each person currently or hereafter employed by it or any subsidiary with
access to confidential information to enter into a proprietary information and
inventions agreement in substantially the form attached hereto as Exhibit 6.13.
6.14. [Intentionally Omitted]
6.15. Directors; Meetings of the Board of Directors; and Director's and
Officer's Insurance. The Company shall not give less than ten (10) business days
(72 hours in the case of special meetings) notice of each Board of Directors'
meeting to the designees of the Series A Purchasers (as defined in the
Stockholders' Agreement), the designee of the Advent Series B Purchasers (as
defined in the Stockholders' Agreement) and the designee of Kim and Green, and
shall permit, in addition to such directors, each Purchaser (or its designee)
and Green and Kim (or their respective designees) to attend meetings of the
Board and committees thereof. In the event any such designee shall be unable to
attend a meeting of the Board, the Purchasers designating such designee or such
designated director shall in lieu thereof be entitled to designate a substitute
representative to attend and, to the extent permitted by applicable law, to vote
at such meeting. All reasonable travel and out-of-pocket expenses incurred by
the directors designated by the Purchasers (or such directors' designees) in
connection with attending the meetings and any special meetings called by the
Company will be paid by the Company. The Company will obtain and maintain, on
reasonable business terms, director's and officer's insurance for directors of
the Company providing coverage for each director of at least $1,000,000 per
occurrence, provided that such insurance can be obtained on commercially
reasonable terms as determined by the Board of Directors. The Purchasers
acknowledge that as of the date of the Initial Closing, the Company has not
obtained directors' and officers' insurance.
6.16. Meetings of Stockholders. The Purchasers shall be entitled to call
for a stockholders' meeting upon five days notice to the Company.
6.17. Compliance with ERISA. The Company will file or caused to be filed
on a timely basis each and every return, report, statement, notice, declaration
and other document required by any governmental agency, federal, state or local
authority (including, without limitation, the
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Internal Revenue Service, the Department of Labor, the Pension Benefit Guaranty
Corporation and the Commission) with respect to any plan maintained by the
Company.
6.18. Environmental Matters. The Company agrees to comply in all material
respects with, and abide by, all federal, state and local laws or regulations
relating to environmental protection or to the storage or disposal of hazardous
waste (including, but not limited to, asbestos, polychlorinated byphenyls and
petroleum products) in connection with or relating to the Company or any of its
businesses, operations or assets.
6.19. Amended and Restated Stockholders' Agreement. The Company agrees to
use reasonable efforts to have all holders of (i) the Company's capital stock,
and (ii) any other securities of the Company which are excercisable for, or
convertible into, shares of the Company's capital stock execute and deliver the
Amended and Restated Stockholders' Agreement substantially in the form of
Exhibit 6.19.
II. Restrictive Covenants.
6.20. Dividends; Share Repurchases. The Company will not pay or declare
any cash dividend or distribution on any shares of capital stock of the Company,
other than the Series A Preferred Stock and the Series B Preferred Stock, or
apply any of the Company's assets to the redemption, retirement, purchase or
other acquisition, directly or indirectly, through subsidiaries or otherwise, of
any shares of Common Stock of the Company, or any rights, options or warrants to
purchase, or securities convertible into, Common Stock of the Company except for
(i) any repurchase of shares by the Company pursuant to any stock option or
restricted stock agreement with an employee of, or consultant to the Company
entered into by the Company and approved by the Board of Directors of the
Company, and (ii) the redemption of any shares of Series B Preferred Stock.
6.21. Sales of Securities. The Company will not (i) create or issue any
securities of the Company which have equity features and which rank on a parity
with or senior to the Series B Preferred Stock with respect to the payment of
dividends or upon liquidation or other distribution of assets or with a
conversion price lower than that of the Series B Preferred Stock or terms more
favorable than those of the Series B Preferred Stock or (ii) sell or issue any
shares of Common Stock of the Company for which the consideration is other than
cash, except as contemplated herein with respect to the conversion of the Series
A and B Preferred Stock into Common Stock.
6.22. Foreign Subsidiaries. Except in the ordinary course of business, the
Company will not directly or through any subsidiary create or acquire any
subsidiary or any interest in any corporation, partnership, limited partnership,
joint venture or similar entity located outside, or formed pursuant to the laws
of other than, the United States of America, its territorial possessions or any
political subdivision of any thereof.
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6.23. Merger, Consolidation, Sale of Assets. The Company will not merge,
consolidate or dispose of all or substantially all its assets, except a merger
or consolidation pursuant to which the Company is the surviving corporation.
This section shall not in any way limit the ability of the Company (i) to sell
inventory or (ii) to sell other assets, each in the ordinary course of business.
6.24. Transactions with Officers, Directors and Stockholders. The Company
will not furnish or sell services or products to or acquire or purchase services
or products from any corporation, partnership, proprietorship, association,
joint venture or other person or entity in which any officer, director, or 5%
stockholder of the Company, or any affiliate (as such term is defined in Rule
405 under the Securities Act) of any such officer, director, or 5% stockholder
has a material interest or enter into any material contract or arrangement
(excluding employment or option agreements with an employee approved by the
Board of Directors of the Company) with any such officer, director, 5%
stockholder or affiliate which is less than an arms-length transaction or which
transaction has or reasonably can be expected to have a material adverse effect
on the Company. For purposes of this Section 6.24, there may be disregarded any
interest which arises solely from the ownership of less than a 2% equity
interest in a corporation whose voting securities are regularly traded in any
national securities exchange or in the over-the-counter market. The provisions
of this Section 6.24 shall not prohibit any Purchaser from providing any
consulting, legal, accounting, investment banking, managerial, investment
advisory and/or other services to the Company.
6.25. Investments, Loans, Guarantees, Joint Ventures and Subsidiaries. The
Company will not, (i) directly or through any subsidiary create or acquire any
interest in any partnership, limited partnership, joint venture or similar
entity and will not create or acquire any interest in any subsidiaries of which
it does not own all the capital stock or (ii) make any investments in or loans
or advances to or endorse, guarantee or become surety for the obligations of any
person, corporation or other entity except that the Company may endorse checks
for collection or deposit in the ordinary course of business.
6.26. Certificate of Incorporation and By-Law Amendments. The Company may
not amend its Certificate of Incorporation or By-Laws so as to affect adversely
the Series B Preferred Stock.
6.27. Impairment of Dividends. The Company may not enter into any contract
or agreement which by its terms restricts the Company's ability to pay dividends
on the Series B Preferred Stock or which may otherwise restrict the Company's
ability to comply with and perform the terms of this Agreement or any of the
Exhibits hereto.
6.28. Compliance with ERISA. The Company will not:
(i) engage in any transaction in connection with which the Company
or any of its subsidiaries could be, to the knowledge of the Company or
any of its subsidiaries could
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be, to the knowledge of the Company, subject to either a civil penalty
assessed pursuant to section 502(i) of ERISA or a tax imposed by section
4975 of the Internal Revenue Code of 1986, as amended (the "Code"), based
on existing regulations or published interpretations in effect from time
to time;
(ii) terminate any plan in a manner, or take any other action,
including withdrawal from any plan that is a multiemployer plan, which
could result in any material liability of the Company or any of its
subsidiaries to the Pension Benefit Guaranty corporation or to such plan;
(iii) fail to make full payment when due of all amounts which, under
the provisions of any plan, the Company or any of its subsidiaries is
required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency, whether or not waived, with respect to any
plan; or
(iv) permit the current value of all vested accrued benefits under
all plans which are subject to Title IV of ERISA to exceed the current
value of the assets of such plans allocable to such vested accrued
benefits.
As used in this Section 6.28 the term "accumulated funding deficiency" has the
meaning specified in section 302 of ERISA and section 412 of the Code, the term
"accrued benefit" has the meaning specified in section 3 of ERISA and the term
"current value" has the meaning specified in section 4062(b)(1)(A) of ERISA and
the term "multiemployer plan" has the meaning specified in section 4001(a)(3) of
ERISA.
6.29. Borrowings. Neither the Company nor any of its subsidiaries will
incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any indebtedness for borrowed money, or any other indebtedness
evidenced by, or liability evidenced by notes, bonds, debentures or similar
obligations or either directly or indirectly guarantee, endorse or become surety
for, or otherwise in any manner become responsible for the obligations of any
other person (collectively, the "Indebtedness"), other than indebtedness with
respect to trade and operating obligations and other normal accruals in the
ordinary course of business (which the Company covenants will be paid in
accordance with customary trade practice) or with respect to which it is
contesting in good faith the amount or validity thereof by appropriate
proceedings, and then only to the extent it has set aside on its books adequate
reserves therefor.
6.30. Capital Expenditures; Commitments. The Company shall not, and shall
cause each of its subsidiaries, if any, not to, (i) incur capital expenditures
or make commitments for capital expenditures, services or product development in
excess of the greater of $100,000 or 110% of the amount budgeted in the yearly
budget and operating plan of the Company referred to in Section 6.1(e) hereof,
for any such expenditure or commitment.
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6.31. Employee Stock Purchase Arrangements. The Company will not issue any
of its capital stock, or grant an option or right to subscribe for, purchase or
acquire any of its capital stock, to any employee, consultant, director or
officer of the Company or a subsidiary thereof, except as provided in Section
7.14 of the Series A Purchase Agreement (as defined below), without giving
effect to any amendment thereto.
III. Termination
6.32. Termination Event. The provisions of this Section 6 shall terminate
as to any Purchaser at such time as such Purchaser owns less than twenty-five
percent (25%) of the Series B Preferred Shares purchased by it pursuant to this
Agreement.
SECTION 7
Registration of Securities
7.1. Certain Definitions. As used in this Section 7, the following terms
shall have the following respective meanings:
"Registrable Securities" shall mean (i) shares of Common Stock issued or
issuable pursuant to the conversion of the Series B Preferred Shares, (ii)
shares of Common Stock issued or issuable pursuant to the conversion of the
Series A Preferred Stock (the "Series A Preferred Shares") issued pursuant to
the Stock Purchase Agreement dated September 16, 1993 among the Company, certain
of the Purchasers and the other individuals named therein (the "Series A
Purchase Agreement"), (iii) shares of Common Stock issued pursuant to the Bridge
Loans (as that term is defined in the Series A Purchaser Agreement), (iv) shares
of Common Stock issued pursuant to the Bridge Loans (as defined herein) and (v)
any Common Stock issued in respect of the securities issued pursuant to the
conversion of the Series A Preferred Shares and the Series B Preferred Shares,
upon any stock split, stock dividend, recapitalization or similar event.
The terms "register," "registered" and "registration" shall refer to a
registration 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.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Sections 7.2, 7.3 and 7.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for all the selling Holders (as hereinafter
defined) and other security holders for a "due diligence" examination of the
Company, and the expense of any special audits incident to or required by any
such registration
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(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
"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 (other than the fees and disbursements of counsel
included in Registration Expenses).
"Holder" shall mean any holder of Registrable Securities which have not
been sold to the public.
7.2. Requested Registration.
(a) Request for Registration. If the Company shall receive from the Holders of
at least fifty percent (50%) or more of the then-outstanding Registrable
Securities, at any time or times, a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act) as
may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request given within thirty (30) days after
receipt of such written notice from the Company; provided that the Company
shall not be obligated to effect, or to take any action to effect, any
such registration pursuant to this Section 7.2, (x) after the Company has
effected two such registrations pursuant to this Section 7.2(a) and such
registrations have been declared or ordered effective by the Commission
and the sale of such Registrable Securities shall have closed or (y) prior
to the earlier to occur of (i) September 16, 1997, and (ii) three months
after the closing of an initial registered public offering of the
Company's securities. Subject to the foregoing limitation, the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
The Company may include in the registration statement filed pursuant to
the request of the Holders, subject to the provisions of Section 7.2(b) below,
other securities of the Company which are held by officers, including the Chief
Executive Officer of the Company or such person
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acting in that capacity, or directors of the Company, by Kim and Green, or by
other persons who, by virtue of agreements with the Company, are entitled to
include their securities in any such registration (all the foregoing, except the
Holders, collectively referred to herein as the "Other Stockholders"), but the
Company shall have no right to include any of its securities in any such
registration.
(b) Underwriting. If the Holders intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 7.2 and the Company
shall include such information in the written notice referred to in Section
7.2(a)(i) above. The right of any Holder to registration pursuant to Section 7.2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Holders and
such Holder with respect to such participation and inclusion) to the extent
provided herein. A Holder may elect to include in such underwriting all or a
part of the Registrable Securities held by such Holder.
If Other Stockholders shall request inclusion in any registration pursuant
to Section 7.2, the Holders shall offer to include the securities of such Other
Stockholders in the underwriting and may condition such offer on their
acceptance together with the Holders so participating of the further applicable
provisions of this Agreement. The Company shall (together with all Holders and
Other Stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or representative of the underwriters selected for such underwriting
by a majority in interest of the Holders and reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 7.2, if the
underwriters advise the Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the Holders shall so
advise all Other Stockholders whose securities would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated in the following manner. The securities of the Company held by Other
Stockholders (other than Registrable Securities) shall be excluded from such
registration and underwriting to the extent required by such limitation and if a
limitation of the number of shares is still required, the number of shares of
Registrable Securities that may be included in the registration shall be
allocated among all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement. No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. In the event that the number
of shares of Registrable Securities of any Holder to be included in any
registration is reduced below 50% of the shares requested to be included in such
registration as a result of allocations pursuant to this Section 7.2(b), then
such registration shall not be deemed a registration for purposes of Section
7.2(a)(ii). If any Holder of Registrable Securities or Other Stockholder who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to
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the Company, the underwriter and the Holders. The securities so withdrawn shall
also be withdrawn from registration.
7.3. Company Registration.
(a) If the Company shall determine to register any of its securities either for
its own account or the account of a security holder or holders exercising their
respective demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a Commission
Rule 145 transaction, or a registration on any registration form which does not
permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made by any Holder within thirty (30) days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 7.3(b) below. Such written request may specify all or
a part of a Holder's Registrable Securities to be included in such
registration.
(b) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
7.3(a)(i). In such event the right of any Holder to registration pursuant to
Section 7.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
Other Stockholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company, which underwriters shall be reasonably
acceptable to a majority in interest of the participating Holders.
Notwithstanding any other provision of this Section 7.3, if the underwriter
advises the Company in writing that marketing factors require a limitation on
the number of shares to be underwritten, the underwriter may (subject to the
allocation priority set forth below) limit the number of Registrable Securities
to be included in the registration and underwriting. The Company shall so advise
all holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following manner. The securities of the Company held
by Other Stockholders (other than Registrable Securities) shall be excluded from
such registration and underwriting to the extent required by such limitation,
and if a limitation on the number of shares is still required, the number of
shares of Registrable
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Securities that may be included in the registration shall be allocated among all
such Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities which each Holder had requested to be included in such
registration at the time of filing and which have not already been included in
the registration statement; provided, however, that, except with respect to the
initial public offering of the Company's securities, the number of shares of
Registrable Securities included in the registration shall not constitute less
than 30% of the total securities included in the offering. If any Holder of
Registrable Securities or any Other Stockholder disapprove of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
7.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Agreement. All Selling Expenses shall be borne by
the holders, including the Company, of the securities so registered pro rata on
the basis of the number of their shares so registered.
7.5. Registration on Form S-2 or Form S-31. The Company shall use its best
efforts to qualify for registration on Form S-2 and Form S-3 or any comparable
or successor form or forms; and to that end the Company shall register (whether
or not required by law to do so) the Common Stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), in accordance with the provisions
of the Exchange Act following the effective date of the first registration of
any securities of the Company on Form S-1 or Form S-18 or any comparable or
successor form or forms. After the Company has qualified for the use of either
Form S-2 or Form S-3 or both, in addition to the rights contained in the
foregoing provisions of this Agreement, the Holders of not less than 20% of the
then outstanding Registrable Securities, having a value of not less than
$500,000, shall have unlimited rights to request from time to time registrations
on Form S-2 or Form S-3 (such requests shall be in writing, shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders and shall be at
the Company's sole expense).
7.6. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep each Holder,
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of six months or until the
Holder or Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs; provided, however, that in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such six-month period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis; and provided further that
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applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a)(3) of the
Securities Act or (z) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (y) and
(z) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of securities covered by such
registration statement;
(c) Furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as a Holder from
time to time may reasonably request;
(d) Notify each seller of Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances than existing;
(e) Cause all such Registrable Securities to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed;
(f) Provide a transfer agent and registrar for all Registrable Securities and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration;
(g) Make available for inspection by any seller of Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney or accountant retained by any such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers and directors to
supply all information reasonably requested by any such seller, underwriter,
attorney or accountant in connection with such registration statement; provided,
however, that such seller, underwriter, attorney or accountant shall agree to
hold in confidence and trust all information so provided;
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(h) Furnish to each selling Holder a signed counterpart, addressed to the
selling Holder, of
(i) an opinion of counsel for the Company, dated the effective date
of the registration statement, and
(ii) "comfort" letters signed by the Company's independent public
accountants who have examined and reported on the Company's financial
statements included in the registration statement, to the extent permitted
by the standards of the AICPA or other relevant authorities, covering
substantially the same matters with respect to the registration statement
(and the prospectus included therein) and (in the case of the accountants'
"comfort" letters) with respect to events subsequent to the date of the
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the
underwriters in underwritten public offerings of securities;
(i) Furnish to each selling Holder a copy of all documents filed with and all
correspondence from or to the Commission in connection with any such offering
other than non-substantive cover letters and the like;
(j) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(k) In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 7.2 or 7.3 hereof, the Company will enter
into any underwriting agreement reasonably necessary to effect the offer and
sale of Common Stock.
7.7. Indemnification.
(a) The Company will indemnify each Holder, each of its respective officers,
directors and partners, and each person controlling such Holder, with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, and their respective counsel against all 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 prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Securities Act or any rule or regulation
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 Holder, each of its respective officers, directors and
partners, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses as are reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein.
(b) Each Holder, officer, director and Other Stockholder will, if securities
held by him or it are included in the securities as to which such registration,
qualification or compliance is being effected (collectively, an "Including
Stockholder"), indemnify the Company, each of its directors and officers (in
their capacity as such) and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of the Securities Act and the
rules and regulations thereunder, each other such Holder and Including
Stockholder and each of their officers, directors and partners, and each person
controlling such Holder or Including 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 such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders,
Including Stockholders, directors, officers, partners, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder or Including Stockholder and stated to
be specifically for use therein; provided, however, that the obligations of such
Holders and Including Stockholders hereunder shall be limited to an amount equal
to the net proceeds to each such Holder or Including Stockholder of securities
sold under such registration statement, prospectus, offering circular or other
document as contemplated herein.
(c) Each party entitled to indemnification under this Section 7.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
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Indemnifying Party of its obligations under this Section 8.7, unless such
failure to notify shall prove to have been prejudicial to the Indemnifying
Party's ability to defend such an action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7.8. Information by Holder. Each Holder of Registrable Securities and each
other holder of securities included in any registration, shall furnish to the
Company such information regarding such Holder or other holder and the
distribution proposed by such Holder or other 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
Agreement.
7.9. Limitations on Registration of Issues of Securities. From and after
the date of this Agreement, the Company shall not enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder a right (i) to require the Company to initiate any
registration of any securities of the Company or (ii) to require the Company,
upon any registration of any of its securities, to include, among the securities
which the Company is then registering, securities owned by such holder; which
right is superior to the rights given hereunder to the holders of Series A
Preferred Shares and Series B Preferred Shares.
7.10. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company shall
agree to:
(a) Make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act, at all times from and after ninety
(90) days following the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(b) File with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act at any
time after it has become subject to such reporting requirements; and
(c) So long as a Holder owns any Registrable Securities, furnish to the Holder
forthwith upon request a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 (at any time from and after ninety
(90) days following the effective date of the first registration statement filed
by the Company for an offering of it securities to the general public), and of
the Securities Act and the Exchange Act (at any time after it has become subject
to such
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reporting requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
7.11. Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to the Purchasers and holders of
Registrable Securities under Sections 7.2, 7.3 and 7.5 may be transferred or
assigned by a holder to a transferee or assignee of any Registrable Securities,
provided 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 said 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 the obligations
of such Holder under this Section 7.
7.12. Termination of Registration Rights Set Forth In Series A Purchase
Agreement. The Company, Bologna and Weinberg, and such of the Purchasers as are
party to the Series A Purchase Agreement, constituting all of the parties to the
Series A Purchase Agreement and the holders of all of the securities issued
pursuant thereto, hereby amend the Series A Purchase Agreement by deleting
therefrom Section 8 in its entirety. Any and all registration rights granted by
the Company to such Purchasers, Bologna and Weinberg are as set forth in this
Section 7.
SECTION 8
Right of First Offer
8.1. Right of First Offer Upon Issuance of New Securities.
(a) The Company hereby grants to the Purchasers the right of first offer to
purchase any or all "New Securities" (as hereinafter defined) on a proportionate
basis as defined in Section 8.1 (b). For purposes of this Section 8.1, "New
Securities" shall mean any capital stock of the Company whether now authorized
or not, and rights, options or warrants to purchase capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock and any borrowings, direct or indirect, from financial
institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment endorsed by any type of debt
instrument, but only to the extent such borrowings contain any equity features,
but "New Securities" shall not include (i) securities issued to employees of, or
consultants to, the Company as permitted by Section 7.14 of the Series A
Purchase Agreement, (ii) shares of capital stock issued upon conversion of the
Series A or Series B Preferred Shares, (iii) securities issued as part of the
purchase price in connection with the closing of an acquisition by the Company
of all or substantially all the assets or stock of another entity or person,
approved by the Company's Board of Directors, (iv) warrants issued in connection
with business transactions, including corporate partnerships, approved by the
Company's Board of Directors or securities issued pursuant to such warrants and
(v) the sale of Series B Preferred Shares pursuant to this Agreement.
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(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Purchasers written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have thirty
(30) days from the date such notice is given to agree to purchase any or all of
the New Securities up to such Purchaser's proportionate share, for the price and
upon the general terms specified in the notice by giving written notice to the
Company and stating the quantity of New Securities to be purchased. As used in
this Section 8.1, and except as otherwise provided, the term "proportionate
share" shall mean, with respect to each Purchaser who is entitled to receive the
particular offer, the total number of New Securities proposed to be issued,
multiplied by a fraction, the numerator of which shall be the sum of (i) the
total number of shares of Common Stock owned by such Purchaser (prior to such
contemplated issuance), but excluding the Common Shares (as defined in the
Series A Purchase Agreement), if any, owned by such Purchaser and (ii) the total
number of shares of Common Stock into which the shares of Series A Preferred
Stock, Series B Preferred Stock or other convertible securities of the Company,
if any, held by such Purchaser (prior to such contemplated issuance) are
convertible, and the denominator of which shall be the sum of (i) the total
number of shares of Common Stock owned by all Purchasers (prior to such
contemplated issuance), but excluding the Common Shares (as defined in the
Series A Purchase Agreement), if any, owned by all Purchasers and (ii) the total
number of shares of Common Stock into which the Shares of Series A Preferred
Stock, Series B Preferred Stock, or other convertible securities of the Company
held by all Purchasers (prior to such contemplated issuance) are convertible.
(c) Each Purchaser shall have a right of over-allotment such that if any
Purchaser fails to exercise such Purchaser's right hereunder to purchase such
Purchaser's full proportionate share of the New Securities proposed to be issued
(the "Incomplete Purchasers"), the Purchasers purchasing their full respective
proportionate share of such New Securities (the "Complete Purchasers") may
purchase the portion of such New Securities which has not been purchased by the
Incomplete Purchasers as hereinafter provided. The Complete Purchasers shall
have fifteen (15) days from the date notice is given by the Company to the
Complete Purchasers that such Incomplete Purchasers have rejected or failed to
accept their right to purchase their proportionate share of New Securities, to
agree to purchase up to such Complete Purchaser's proportionate share of such
New Securities not purchased by the Incomplete Purchasers. Notwithstanding
anything in Section 8.1 (b) to the contrary, as used in this Section 8.1 (c)
with respect to the Complete Purchasers only, each Complete Purchaser's
"proportionate share" shall be calculated by excluding from the denominator of
the fraction the total number of shares of Common Stock of any Incomplete
Purchaser and the total number of shares of Common Stock of any Incomplete
Purchaser and the total number of shares of Common Stock into which the shares
of such Incomplete Purchaser's Series A and Series B Preferred Stock or other
convertible securities, if any, are convertible.
(d) In the event the Purchasers fail to exercise the right of first offer and
right of over-allotment within said forty-five (45) day period for the full
amount of New Securities proposed to be
-36-
<PAGE>
issued, the Company shall have sixty (60) days thereafter to sell or enter into
an agreement (pursuant to which the sale of New Securities covered thereby shall
be closed, if at all, within sixty (60) days from the date of said agreement) to
sell the New Securities respecting which the Purchasers' options were not
exercised, at a price and upon general terms no more favorable to the purchasers
thereof than specified in the Company's notice to the Purchasers. In the event
the Company has not sold within said 60-day period or entered into an agreement
to sell the New Securities within said 60-day period (or sold and issued New
Securities in accordance with the foregoing within sixty (60) days from the date
of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Purchasers in the
manner provided above.
(e) The right of first offer granted under this Section 8.1 shall expire upon,
and shall not be applicable to, the first sale of Common Stock of the Company to
the public in an underwritten public offering, effected pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act covering the offer and sale of
Common Stock for the account of the Company to the public at a public offering
price of at least $5.00 which results in net proceeds to the Company of not less
than $10,000,000.
8.2. Termination of Rights of First Offer. If in connection with an
offering of New Securities in which the Purchasers have the right, pursuant to
Section 8.1 above, to purchase their proportionate share of such New Securities,
any Purchaser declines to purchase such Purchaser's full proportionate share of
such New Securities, then such Purchaser's rights pursuant to Section 8.1 shall
terminate as to any subsequent offering of New Securities.
8.3. Termination of Section 9.1 of the Series A Purchase Agreement. The
Company, Bologna, Weinberg and such of the Purchasers as are party to the Series
A Purchase Agreement (together with Bologna and Weinberg, the "Series A
Purchasers"), constituting all of the parties to the Series A Purchase
Agreement, hereby amend the Series A Purchase Agreement by deleting therefrom
Section 9.1 in its entirety. Except as specifically set forth in Section 7.12
above and this Section 8.3, the Series A Purchase Agreement shall remain in full
force and effect. In addition, each Series A Purchaser hereby waives any
preemptive right it may have to purchase the Series B Preferred Shares to be
issued pursuant hereto.
SECTION 9
Confidentiality
9.1. Agreement to Hold in Confidence and Not Disclose Confidential
Information. Notwithstanding any other provision of this Agreement, and except
as otherwise provided in Section 9.2 below, each Purchaser shall hold in
confidence and not disclose to any other person or entity any Confidential
Information (as defined in subsection 9.3 below) of the Company without the
prior written consent of the Company.
-37-
<PAGE>
9.2. Permitted Disclosure of Confidential Information. Notwithstanding
Section 9.1 above, a Purchaser may disclose Confidential Information to a
Purchaser Representative, the term "Purchaser Representative" being defined to
mean an affiliate of such Purchaser, or any partner, officer, employee, advisor,
legal counsel, consultant or other agent or representative of or to such
Purchaser or such affiliate. The Company hereby acknowledges that the Purchaser
regularly send investment reports and updates to their respective partners,
which reports and updates contain information concerning the investments made by
such Purchaser. Prior to or simultaneously with any such disclosure to a
Purchaser Representative, a Purchaser shall use its good faith efforts to give
the Purchaser Representative a copy of this Section 9 under cover of a letter or
memo addressed to the Purchaser Representative, or otherwise indicate to the
Purchaser Representative that the information being disclosed is confidential
and subject to restrictions.
9.3. Definition of "Confidential Information". The term "Confidential
Information" means any information of the Company in any medium or media marked
"confidential" or indicated to be confidential in writing or orally at the time
of disclosure, or which a Purchaser or Purchaser Representative knew to be
confidential, and shall include, without limitation, (i) technical, engineering
and other scientific information that has been created, discovered or developed
for, or assigned or entrusted to, the Company which relates to its products,
processes, operations and/or technologies; (ii) inventions, improvements,
materials, articles, equipment, processes, designs and techniques whether or not
patented or patentable, and expressions protected or protectable by copyright,
made or conceived or reduced to practice or learned by the Company, or by any
person for or on behalf of it, which relate to the business of the Company;
(iii) personal privacy data concerning any employees, consultants or other
service providers or testing or survey subjects of the Company; (iv) financial
records, business plans, customer lists and other books and records of the
Company; provided, however, notwithstanding the foregoing, Confidential
Information shall not include information which: (a) was in a Purchaser's or
Purchaser Representative's possession or knowledge or was known to the public or
in published literature prior to the Company's disclosure or making available of
such Confidential Information to such Purchaser, or (b) subsequent to the time
of the Company's disclosure or making available of such Confidential Information
to a Purchaser, becomes known to the public or finds its way into the published
literature through no fault of any Purchaser or Purchaser Representative, or (c)
is lawfully acquired by a Purchaser from a third party who is not under a
confidentiality agreement with the Company with respect to such information (and
who is not a Purchaser, a Purchaser Representative or an affiliate of any
thereof).
9.4. Injunctive Relief. The parties acknowledge and agree that, without
limiting any other rights and remedies they may have, the Company shall be
entitled to immediate injunctive and other equitable relief to prevent or remedy
a breach of any of the provisions of this Section 9 relating to protection of
Confidential Information of the Company, and to obtain the enforcement of such
provisions, and, if any such injunctive or other equitable relief is sought, the
Purchasers will not raise as a defense that there is an adequate remedy at law.
-38-
<PAGE>
9.5. Survival. The provisions of this Section 9 relating to protection of
Confidential Information of the Company shall survive, with respect to each
Purchaser, the termination of such Purchaser's interest in the Company under
this Agreement and shall survive the termination of this Agreement.
SECTION 10
Miscellaneous
10.1. Additional Parties. Any other person or entity desiring to purchase
shares of Series B Preferred Stock hereunder may, with the written consent of
the Company and the Board of Directors of the Company, become a party to this
Agreement by executing a counterpart of this Agreement indicating the number of
shares of Series B Preferred Stock such entity intends to purchase, whereby such
entity agrees, subject to the terms and conditions of this Agreement, to
purchase such shares of Series B Preferred Stock, and to be bound as a
Subsequent Purchaser to all of the terms and conditions of this Agreement, as
this Agreement may be amended from time to time in accordance with its terms,
and thereafter such Subsequent Purchaser shall have all the rights and
obligations of a Subsequent Purchaser hereunder.
10.2. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed in all respects by the laws of The Commonwealth of Massachusetts.
10.3. Survival. The representations and warranties made herein shall
survive the Closing Date indefinitely, and all such representations and
warranties and all covenants and agreements made herein shall be deemed to be
material and to have been relied upon by the parties hereto, notwithstanding any
investigation hereto or hereafter made by them, or on their respective behalf.
Each of the covenants, agreements and indemnifications contained herein shall
survive indefinitely, unless otherwise expressly provided herein.
10.4. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that any successor, assignee or other such
transferee shall assume the obligations of such assignor or transferor
hereunder; and provided, further, that the Company may not assign its rights
hereunder.
10.5. Entire Agreement; Amendment. This Agreement (including the Schedules
and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and Purchasers holding not less than
75% of the outstanding Series B Preferred Shares held by Purchasers.
-39-
<PAGE>
10.6. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, return receipt requested, or delivered either by hand or by
messenger, or sent by overnight courier, addressed (a) if to a Initial
Purchaser, at the address set forth for such Initial Purchaser on the Schedule
of Purchasers attached hereto or at such other address as such Initial Purchaser
shall have furnished to the Company in writing, with a copy to Ropes & Gray, One
International Place, Boston, Massachusetts 02110, Attention: Patrick O'Brien,
Esq., or (b) if to any other holder of Series B Preferred Shares or any Common
Stock issued upon conversion of Series B Preferred Shares at such address as
such holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder thereof who has so furnished an address to the Company, or (c) if to
the Company, at its address set forth at the beginning of this Agreement, or at
such other address as the Company shall have furnished to the Purchasers and
each such other holder in writing, with a copy to Nutter, McClennen & Fish, One
International Place, Boston, Massachusetts 02110, Attention: Constantine
Alexander, Esq.
10.7. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to (i) any Purchaser or holder of any Series B
Preferred Shares, upon any breach or default of the Company under this Agreement
or (ii) the Company, upon any breach or default of a Purchaser or holder of any
Series B Shares under this Agreement, shall impair any such right, power or
remedy of such holder or the Company nor shall it be construed to be a waiver of
any such breach or default, or an 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 any holder or the Company of any breach or default
under this Agreement, or any waiver on the part of any holder or the Company of
any provisions or conditions of this Agreement must be made in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder or the Company, shall be cumulative and not alternative.
10.8. Separability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.9. Expenses. The Company shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby, and the Company will pay, at the Closing, the legal fees
and the disbursements and office expenses, including secretarial charges, of
Ropes & Gray, counsel to the Purchasers, with respect to this Agreement and the
transactions contemplated hereby, up to a maximum of $15,000.
10.10. 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.
-40-
<PAGE>
10.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all material of which
together shall constitute one instrument.
10.12. Remedies. In the event of a breach of the representations and
warranties set forth in Section 2 above which has the effect of materially and
adversly affecting the Company's business, operations or financial condition as
represented in said Section 2, each Purchaser shall, in addition to any other
remedy available under applicable law, be entitled to rescind such Purchaser's
purchase of the Series B Preferred Shares hereunder.
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Thomas A. Bologna
----------------------------------
Thomas A. Bologna, President
PURCHASERS:
CW VENTURES II, L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL IV L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL INVESTORS '93 L.P.
By:
----------------------------------
Title:
-------------------------------
Title:
-------------------------------
-42-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By:
----------------------------------
Thomas A. Bologna, President
PURCHASERS:
CW VENTURES II, L.P.
By City Partners III, L.P.
By: /s/ Barry Weinberg
----------------------------------
Print Name: Barry Weinberg
--------------------------
Title: General Partner
-------------------------------
ACCEL IV L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL INVESTORS '93 L.P.
By:
----------------------------------
Title:
-------------------------------
Title:
-------------------------------
-42-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By:
----------------------------------
Thomas A. Bologna, President
PURCHASERS:
CW VENTURES II, L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL IV L.P.
By: /s/ Luke Evnin
----------------------------------
Print Name: Luke Evnin
--------------------------
Title: General Partner
-------------------------------
ACCEL INVESTORS '93 L.P.
By:
----------------------------------
Title:
-------------------------------
Title:
-------------------------------
-42-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/ Thomas A. Bologna
----------------------------------
Thomas A. Bologna, President
PURCHASERS:
CW VENTURES II, L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL IV L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL INVESTORS '93 L.P.
BY: /s/ [illegible]
---------------------------------
GENERAL PARTNER
-42-
<PAGE>
ACCEL JAPAN L.P.
BY: ACCEL JAPAN ASSOCIATES L.P.
ITS GENERAL PARTNER
BY: /s/ [illegible]
------------------------------------
GENERAL PARTNER
ACCEL KEIRETSU L.P.
BY: ACCEL PARTNERS & CO., INC.
ITS GENERAL PARTNER
BY: /s/ [illegible]
------------------------------------
Ellmore C. Patterson Partners
By: /s/ Arthur C. Patterson
--------------------------
Arthur C. Patterson
General Partner
PROSPER PARTNERS
BY: /s/ [illegible]
------------------------
ATTORNEY-IN-FACT
ATLAS VENTURE FUND II, L.P.
By:
------------------------
Print Name:
----------------
Title:
---------------------
-43-
<PAGE>
ACCEL JAPAN L.P.
By:
------------------------
Print Name:
----------------
Title:
---------------------
ACCEL KEIRETSU L.P.
By:
------------------------
Print Name:
----------------
Title:
---------------------
ELLMORE C. PATTERSON PARTNERS
By:
------------------------
Print Name:
----------------
Title:
---------------------
PROSPER PARTNERS
By:
------------------------
Print Name:
----------------
Title:
---------------------
ATLAS VENTURE FUND II, L.P.
by Atlas Venture Associates II, L.P., its general
partner
By: /s/ Allan R. Ferguson
---------------------------
Print Name: Allan R. Ferguson
-------------------
Title: General Partner
------------------------
-43-
<PAGE>
NEW ENTERPRISE ASSOCIATES 5
By: /s/ Nancy Dorman
------------------------
Print Name: Nancy Dorman
----------------
Title: General Partner
---------------------
VENROCK ASSOCIATES
By:
------------------------
Print Name:
----------------
Title:
---------------------
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By:
------------------------------------
Jason S. Fisherman, Senior Investment
Manager
-44-
<PAGE>
NEW ENTERPRISE ASSOCIATES 5
By:
------------------------
Print Name:
----------------
Title:
---------------------
VENROCK ASSOCIATES
By: /s/ Anthony B. Envin
-------------------------
Print Name: Anthony B. Envin
-----------------
Title: General Partner
----------------------
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By:
------------------------------
Jason S. Fisherman, Senior Investment
Manager
-44-
<PAGE>
NEW ENTERPRISE ASSOCIATES 5
By:
------------------------
Print Name:
----------------
Title:
---------------------
VENROCK ASSOCIATES
By:
-------------------------
Print Name:
-----------------
Title:
----------------------
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By: /s/ J.S. Fisherman
------------------------------
Jason S. Fisherman, Senior Investment
Manager
-44-
<PAGE>
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By: /s/ J.S. Fisherman
------------------------------
Jason S. Fisherman, Senior Investment
Manager
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By: /s/ J.S. Fisherman
------------------------------
Jason S. Fisherman, Senior Investment
Manager
SCRIPT PARTNERS LIMITED PARTNERSHIP
By:
------------------------
Print Name:
----------------
Title:
---------------------
SUBSEQUENT PURCHASER:
Name:
By:
------------------------
Title:
--------------------
Address:
--------------------
Shares of Series B Preferred Stock to be purchased
at Subsequent Closing:
-45-
<PAGE>
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
its General Partner
By: Advent International Corporation,
its General Partner
By:
--------------------------------------
Jason S. Fisherman, Senior Investment
Manager
ADVENT INTERNATIONAL INVESTORS
LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By:
--------------------------------------
Jason S. Fisherman, Senior Investment
Manager
SCRIPT PARTNERS LIMITED PARTNERSHIP
By: /s/ Ansbert S. Gadicke
------------------------
Print Name: Ansbert S. Gadicke
----------------
Title: President
---------------------
SUBSEQUENT PURCHASER:
Name:
By:
------------------------
Title:
-------------------
Title:
---------------------
Shares of Series B Preferred Stock to be purchased
at Subsequent Closing:
-45-
<PAGE>
For purposes of Section 7.12 and 8.3 only:
/s/ Thomas A. Bologna
----------------------------------
Thomas A. Bologna
/s/ Barry Weinberg
----------------------------------
Barry Weinberg
-46-
<PAGE>
For purposes of Section 7.12 and 8.3 only:
-----------------------------
Thomas Bologna
/s/ Barry Weinberg
-----------------------------
Barry Weinberg
-46-
<PAGE>
Exhibit 10.4
SCRIPTGEN PHARMACEUTICALS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT, dated the 17th day of May 1996, by and among SCRIPTGEN
PHARMACEUTICALS, INC., a Delaware corporation (the "Company") with its
principal place of business at 200 Boston Avenue, Suite 3000, Medford,
Massachusetts 02155, and each of the entities and individuals severally
listed on the Schedule of Initial Purchasers attached hereto (collectively,
the "Initial Purchasers" and individually, an "Initial Purchaser"), such
other entities as become party to this Agreement pursuant to Section 10.1
hereto (collectively, the "Subsequent Purchasers," and individually, a
"Subsequent Purchaser," and together with the Initial Purchasers,
collectively the "Purchasers," and individually, a "Purchaser"), and for
purposes of Sections 7.12 and 8.3 only, Thomas A. Bologna ("Bologna") and
Barry Weinberg ("Weinberg").
WHEREAS, the Company desires to issue and sell, and the Purchasers desire
to purchase, certain securities of the Company, upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions herein contained, the parties hereto agree as follows:
SECTION 1
Authorization and Sale of the Shares
1.1. Authorization of the Shares. The Company has, or before the
Initial Closing (as hereinafter defined) will have, authorized the sale and
issuance of 5,100,000 shares of its Series C Preferred Stock, par value $.01
per share (the "Series C Preferred Stock"), such class of stock having the
rights, restrictions, privileges and preferences as set forth in the Amended
and Restated Certificate of Incorporation of the Company (the "Certificate of
Incorporation") attached to this Agreement as Exhibit 1.1. The 2,942,521
shares of Series C Preferred Stock being sold to the Initial Purchasers
hereunder and any of the 2,157,479 shares of Series C Preferred Stock that
may be sold pursuant to Section 10.1 of this Agreement to one or more
Subsequent Purchasers are referred to herein as the "Series C Preferred
Shares" or the "Shares".
1.2. Initial Closing. Subject to the terms and conditions hereof and
in reliance upon the representations, warranties and agreements contained
herein, the Company will issue and sell to each of the Initial Purchasers,
severally and not jointly, and each of the Initial Purchasers will purchase from
the Company at the Initial Closing (as defined below), the number of shares of
Series C Preferred Stock set forth opposite such Initial Purchaser's name on the
Schedule of Initial Purchasers attached hereto (the "Schedule of Initial
Purchasers") under the column labeled "Shares of Series C Preferred Stock," for
the aggregate purchase price set forth opposite such Initial Purchaser's name on
the Schedule of Initial Purchasers under the column labeled "Total Investment."
The closing of the purchase and sale of those Series C Preferred Shares to the
Initial Purchasers (the "Initial Closing"), including the delivery to the
Initial Purchasers by the
<PAGE>
Company of the certificates evidencing all Series C Preferred Shares being
purchased, shall take place immediately following the execution and delivery of
this Agreement at the office of Nutter, McClennen & Fish, LLP, One International
Place, Boston, Massachusetts 02110 ("NM&F's Offices") on May 17, 1996, or at
such other time and place as shall be mutually agreed upon by the parties (the
"Initial Closing Date").
1.3. Subsequent Closings. Subject to the terms and conditions hereof
and in reliance upon the representation and warranties and agreements contained
herein, the Company will issue and sell to each Subsequent Purchaser, severally
and not jointly, and each Subsequent Purchaser will purchase from the Company,
the number of shares of Series C Preferred Stock, (which in the aggregate shall
not exceed 2,057,479 shares of Series C Preferred Stock) set forth below each
Subsequent Purchaser's name on the counterpart of this Agreement executed by
such Subsequent Purchaser. The purchase and sale of Series C Preferred Stock to
the Subsequent Purchasers shall occur at one or more closings (each a
"Subsequent Closing," together with the Initial Closing, each a "Closing") to be
held at NM&F's Offices at a time and on a date to be agreed upon by the Company
and the Subsequent Purchasers participating in such Subsequent Closing (together
with the Initial Closing Date, each a "Closing Date").
1.4. Delivery. At each Closing, the Company shall deliver to each
Purchaser certificates in such denominations and registered on the books of the
Company in such names as such Purchaser requests, representing the number of
Series C Preferred Shares to be purchased by such Purchaser from the Company,
against payment at the Closing, in the case of the Initial Purchasers, of the
amount set forth opposite such Initial Purchaser's name in the column labeled
"Total Investment" on the Schedule of Initial Purchasers, and, in the case of
the Subsequent Purchasers, of an amount equal to the number of Series C
Preferred Shares to be purchased multiplied by $1.80. Payment for the Series C
Preferred Shares shall be made, at the option of the Purchaser, by check or wire
transfer, or any combination thereof, for any amount to be paid to the Company.
SECTION 2
Representations and Warranties of the Company
Except as provided herein or as set forth on the "Schedule of Exceptions"
delivered to each Purchaser prior to the execution hereof and attached hereto
(such Schedule of Exceptions to be updated prior to each Closing), the Company
hereby represents and warrants to each Purchaser as follows:
2.1. Organization and Standing: Articles and By-Laws. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of its state of organization and is qualified to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect upon the business, operations or
prospects
-2-
<PAGE>
of the Company. The Company has the requisite corporate power to own properties
owned by it and to conduct business as now being conducted by it and as
contemplated by it and possesses all governmental and other permits, licenses
and other authorizations to own its properties as now owned and to conduct its
business as now conducted. The Company has furnished counsel to the Purchasers
with true, correct and complete copies of its Certificate of Incorporation,
By-Laws and all amendments to each to date.
2.2. Corporate Power. The Company has all requisite corporate power to
enter into this Agreement and each of the Exhibits hereto, and will have at each
Closing Date all requisite corporate power to sell the Series C Preferred Shares
and to carry out and perform its obligations under the terms of this Agreement.
2.3. Subsidiaries. The Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
2.4. Capitalization. Immediately prior to the Initial Closing, the
Company's authorized capital stock will consist of (a) 30,000,000 shares of
Common Stock, $.01 par value ("Common Stock"), of which (i) 3,422,547 shares
will be issued and outstanding immediately prior to the Initial Closing, (ii)
6,403,325 shares have been reserved for issuance upon conversion of the
outstanding shares of the Company's Series A Preferred Stock, $.01 par value
(the "Series A Preferred Stock"), (iii) 153,000 shares are set aside for
issuance upon the exercise of warrants and other stock purchase rights for
Series A Preferred Stock and the conversion thereof into Common Stock, (iv)
6,579,086 shares have been reserved for issuance upon conversion of the
outstanding shares of the Company's Series B Preferred Stock, $.01 pay value
(the "Series B Preferred Stock," and together with the Series A Preferred Stock
and the Series C Preferred Stock, the "Preferred Stock"), (v) 2,942,521 shares
will be reserved for issuance upon conversion of those Series C Preferred Shares
to be issued to the Initial Purchasers hereunder, (vi) 100,000 shares are set
aside for issuance upon the exercise of warrants and other stock purchase rights
for Series C Preferred Stock and the conversion thereof into Common Stock, (vii)
2,057,479 shares will be reserved for issuance upon conversion of any shares of
Series C Preferred Stock sold to Subsequent Purchasers, (viii) 1,071,850 shares
are set aside for issuance upon exercise of stock options and other stock
purchase rights, heretofore or hereafter to be granted, (ix) 1,368,705 shares
are set aside for issuance upon exercise of other stock options and purchase
rights which may be granted to employees and consultants of the Company, as
approved by the Company's Board of Directors, and (x) 1,103,002 shares are held
by the Company in its treasury and (b) 21,500,000 shares of Preferred Stock, (1)
6,700,000 shares of which have been designated Series A Preferred Stock, of
which 6,403,325 shares are outstanding as of the Closing, (2) 9,700,000 shares
of which have been designated Series B Preferred Stock, of which 6,579,086
shares are outstanding as of the Closing, and (3) 5,100,000 shares of which have
been designated Series C Preferred Stock, of which 2,942,521 shares will be
outstanding after consummation of the transactions with the Initial Purchasers
contemplated hereby. All the aforesaid issued and outstanding shares of Series
A Preferred Stock, Series B Preferred Stock and Common Stock have been duly
authorized and validly issued, fully paid and are
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nonassessable, and owned of record and beneficially by the stockholders of the
Company and in the amounts set forth in the Schedule of Exceptions, and has been
offered, issued, sold and delivered by the Company in compliance with applicable
Federal and state securities laws. The Schedule of Exceptions sets forth a
complete and accurate list of all holders of the capital stock of the Company,
including options and warrants to purchase shares of the Company's capital
stock, and the class and number of shares, or shares issuable upon exercise, as
the case may be, held by each such holder. There are no outstanding preemptive,
conversion or other rights or agreements granted or issued by or binding on the
Company for the purchase or acquisition of, or with respect to, any shares of
its capital stock. No stockholder has granted the Company options or other
rights to purchase any shares of capital stock of the Company from such
stockholder. Neither the offer, issuance or sale of the Series C Preferred
Shares nor the consummation of any transaction contemplated hereby will result
in a change in the price or number of any securities of the Company outstanding
at the Closing under anti-dilution provisions contained in or affecting any such
securities. The Company holds no shares of its Preferred Stock in its treasury.
2.5. Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the authorization, execution,
delivery and performance by the Company of this Agreement and each of the
Exhibits hereto, and the consummation of the transactions contemplated herein
and therein, and for the authorization, issuance and delivery of the Series C
Preferred Shares and the shares of Common Stock issuable upon conversion of the
Series C Preferred Shares has been taken or will be taken prior to the Closing.
This Agreement and each of the Exhibits hereto are valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms. The execution, delivery and performance by the Company of
this Agreement and each of the Exhibits hereto and compliance herewith and
therewith and the issuance and sale of the Series C Preferred Shares and the
issuance of Common Stock upon conversion of the Series C Preferred Shares will
not (a) result in any violation of, and will not conflict with, or result in a
breach of any of the terms of, or constitute a default under, the Company's
Certificate of Incorporation or By-Laws, as amended, any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which the Company is a party or by which it, or any of its assets
is bound or (relying in part on the Purchaser's representations and warranties
as set forth in Section 4) any provision of state or Federal law to which the
Company is subject, or (b) result in 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 (c) result in the suspension, revocation,
impairment, forfeiture or non-renewal of any permit, license, authorization or
approval applicable to the Company's operations or any of its assets or
properties. The Series C Preferred Shares, when issued in compliance with the
provisions of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable; will be free of any liens or encumbrances; and will have
the rights, privileges and preferences as set forth in the Certificate of
Incorporation. The shares of Common Stock issuable upon conversion of the
Series C Preferred Shares have been duly and validly reserved and are not
subject to any preemptive rights or rights of first refusal and, upon issuance,
will be duly authorized, validly issued, fully aid and nonassessable.
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2.6. Financial Information. Attached hereto as Exhibits 2.6A and 2.6B,
respectively, are true copies of: (a) the audited balance sheet of the Company
as at December 31, 1994, together with audited statements of operations,
shareholders equity and cash flows of the Company for the year then ended
(collectively, the "Audited Financial Statements"); and (b) the unaudited
balance sheets of the Company as at December 31, 1995 and April 30, 1996
(collectively, the "Balance Sheet"), together with unaudited statements of
operations, shareholders' equity and cash flows of the Company for the 12-month
and the 4-month periods then ended, respectively (collectively, the "Unaudited
Financial Statements," and together with the Audited Financial Statements, the
"Financial Statements"). Each of the Financial Statements presents fairly the
financial position and results of operations of the Company at the dates and for
the periods to which they relate, in accordance with generally accepted
accounting principles consistently applied throughout and across the periods
involved (except as may otherwise be disclosed in the Financial Statements) and
show all liabilities of the Company required to be recorded thereon in
accordance with generally accepted accounting principles as at the dates
thereof, subject, in the case of the Unaudited Financial Statements, to normal
year-end adjustments.
Absence of Undisclosed Liabilities. The Company has no material
liabilities (fixed or contingent, including without limitation any tax
liabilities due or to become due) which are not fully reflected or provided for
on the Balance Sheet. The Company does not know of any such material liability
of any nature, direct or indirect, contingent or otherwise, or in any amount not
adequately reflected or reserved against in the Balance Sheet.
2.7. Absence of Certain Changes. At all times since December 31, 1995
up to and including the Closing, there has not been any event or condition of
any character which has materially adversely affected the Company's business,
operations or financial condition, including but not limited to:
(a) Any material adverse change in the condition, operating results,
assets, liabilities or business of the Company from that shown on the
Financial Statements;
(b) Any damage, destruction or loss of any of the properties or assets
of the Company (whether or not covered by insurance) materially adversely
affecting the assets, properties, financial condition, operating results,
prospects, business or plans of the Company;
(c) Any waiver by the Company of a valuable right or of a debt owed to
it;
(d) Any material change or material amendments to a contract or
arrangement by which the Company or any of its assets or properties is bound
or subject;
(e) Any declaration, setting aside or payment or other distribution in
respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) Any labor trouble.
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2.8. Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with The Commonwealth of
Massachusetts and the State of Delaware and (except to the extent that the
failure to file would not have a material adverse effect on the condition or
operations of the Company) with all other jurisdictions where such filing is
required by law; and the Company has paid, or made adequate provision in the
Financial Statements for the payment of, all taxes, interest, penalties,
assessments or deficiencies (i) shown to be due or claimed to be due on or in
respect of such tax returns and reports or (ii) on the income, profits, property
or business of the Company. The Company knows of (i) no other tax returns or
reports which are required to be filed which have not been so filed and (ii) no
unpaid assessment for additional taxes for any fiscal period or any basis
therefor. The Company's Federal income tax returns have not been audited by the
Internal Revenue Service.
2.9. Outstanding Debt. Except as reflected on the Balance Sheet, the
Company has no outstanding indebtedness for borrowed money and is not a
guarantor or otherwise contingently liable for any indebtedness for borrowed
money (including, without limitation, liability by way of agreement, contingent
or otherwise, to purchase, provide funds for payment, supply funds or otherwise
invest in any debtor or otherwise to insure any creditor against loss). There
exists no default under the provisions of any instrument evidencing any such
indebtedness or otherwise or of any agreement relating thereto, including,
without limitation, those included or referred to in the Schedule of Exceptions
and Balance Sheet. No officer, director or stockholder of the Company or any of
his, her or its relatives or affiliates, is indebted to the Company in an amount
in excess of $5,000 per person or entity.
2.10. Contracts; Insurance. The Company has no currently existing
contract, obligation, agreement, plan, arrangement, commitment or the like
(written or oral) of any material nature (involving more than $10,000 in any
year or $50,000 over the life of such contract, obligation, agreement, plan,
arrangement, or commitment, either individually or in the aggregate if such
contracts, obligations, agreements, plans, arrangements or commitments are of a
similar nature or with the same party) including without limitation the
following:
(a) Employment, bonus or consulting agreements, pension, profit sharing,
deferred compensation, stock bonus, retirement, stock option, stock purchase,
phantom stock or similar plans, including agreements evidencing rights to
purchase securities of the Company and agreements among stockholders and the
Company;
(b) Loan or other agreements, notes, indentures, or instruments relating
to or evidencing indebtedness for borrowed money, or mortgaging, pledging or
granting or creating a lien or security interest or other encumbrance on any
of the Company's property or any agreement or instrument evidencing any
guaranty by the Company of payment of performance by any other person;
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(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining organization or
other labor agreements;
(e) Any contract or series of contracts with the same person for the furnishing
or purchase of machinery, equipment, goods or services, including, without
limitation, agreements with processors and subcontractors;
(f) Any indenture, agreement, or other document (including private placement
brochures) relating to the sale or repurchase of shares of the Company's capital
stock;
(g) Any joint venture contract or arrangement or other agreement involving a
sharing of profits or expenses to which the Company is a party;
(h) Agreements expressly limiting the freedom of the Company to compete in any
line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or shares of
the Company, agreements of merger or consolidation to which the Company is a
party or letters of intent with respect to the foregoing;
(j) Letters of intent or agreements with respect to the acquisition of the
business, assets or shares of any other business;
(k) Insurance policies;
(l) Assignments, licenses or other agreements with respect to any intangible
property (including, without limitation, any patent, trademark, trade name,
copyright, know-how, trade secret, proprietary right or confidential
information); or
(m) Any other contract, instrument, commitment, plan, agreement or arrangement,
a copy of which would be required to be filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to a registration statement on Form
S-1 if the Company were registering securities under the Securities Act of 1933,
as amended (the "Securities Act").
The Company has complied with all the material provisions of all said
contracts, obligations, agreements, plans, arrangements, and commitments and
there does not exist any event of default with respect to the Company under
any such agreement or any event which, after notice or lapse of time or both,
would constitute an event of default with respect to the Company under such
agreement. There is no action, suit, proceeding or investigation pending or,
to the best of the Company's knowledge and belief, threatened against the
Company before
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any court or before any governmental or administrative agency for the
renegotiation of or any other adjustment of any such agreement.
2.11. Litigation and Bankruptcy Proceedings.
(a) There is neither pending nor, to the best of the Company's knowledge
and belief, threatened any action, suit, proceeding or claim or, to the best
of the Company's knowledge, any basis therefor, whether or not purportedly on
behalf of the Company, to which the Company is or may be named as a party or
to which its property is or may be subject or to which any officer, key
employee or principal stockholder of the Company is subject, and (i) in which
an unfavorable outcome, ruling or finding in any such matter or for all such
matters taken as a whole might have a material adverse effect on the
condition, financial or otherwise, prospects or operations of the Company, or
(ii) in which a third party seeks damages from the Company based on the
Company's previous use of name "ScripTech;" and the Company has no knowledge
of any unasserted claim, the assertion of which is likely and which, if
asserted, will seek damages, an injunction or other legal, equitable,
monetary or nonmonetary relief, which claim individually or collectively with
other such unasserted claims if granted would have a material adverse effect
on the condition, financial or otherwise, business or operations of the
Company.
(b) The Company has not admitted in writing its inability to pay its debts
generally as they become due, filed or consented to the filing against it of a
petition in bankruptcy or a petition to take advantage of any insolvency act,
made an assignment for the benefit of creditors, consented to the appointment of
a receiver for itself or for the whole or any substantial part of its property,
or had a petition in bankruptcy filed against it, been adjudicated a bankrupt,
or filed a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other similar law or statute of the United States
of America or any other jurisdiction.
2.12. Consents. Subject in part to the truth and accuracy of the
representations set forth in Sections 3.8 and 3.9 of this Agreement, no consent,
approval, qualification, order or authorization of, or filing with, any
governmental authority, including the Secretary of State of the State of
Delaware, is required in connection with the Company's valid execution, delivery
or performance of this Agreement or any of the Exhibits hereto, or the offer,
sale or issuance of the Series C Preferred Shares by the Company, the issuance
of Common Stock upon the conversion of the Series C Preferred Shares or the
consummation of any other transaction contemplated on the part of the Company
hereby or pursuant to any such Exhibit, except for such filings as have been
made prior to the Closing.
2.13. Title to Properties; Liens and Encumbrances; Leases. The Company
owns no real property. The Company has good and marketable title to and a valid
and indefeasible ownership interest in all the property and assets owned by it,
free from all mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges.
Set forth on the Schedule of Exceptions is a correct and complete list
(including the amount of rents called for and a description of the leased
property) of all leases under which the
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Company is a lessee. The Company enjoys peaceful and undisturbed possession
under all such leases, all of such leases are valid and subsisting and the
Company is not in default under any of such leases in any material respect.
2.14. Business of the Company. There is no pending or, to the best of
the Company's knowledge and belief, threatened claim or litigation against or
affecting the Company contesting its right to perform any of the services
presently conducted by or proposed to be conducted by the Company or to produce,
manufacture, sell or use any product, process, method, substance, part or other
material presently produced, manufactured, sold or used or planned to be
produced, manufactured, sold or used by the Company in connection with the
business and operations of the Company. The Company has no knowledge or belief
that (i) there exists, or there is pending or planned, any patent, invention,
device, application or principle, or any statute, rule, law, regulation,
standard or code which would materially adversely affect the condition,
financial or otherwise, operations or prospects of the Company; or (ii) there is
any other factor (other than fire, flood, accident, act of war or civil
commotion, or any other cause or event beyond the control of the Company) which
materially adversely affects the condition, financial or otherwise, business or
the operations of the Company.
2.15. Permits, Franchises, Licenses, Trademarks, Patents and Other
Rights. The Company has, or when required will have, all permits, licenses and
other similar authority necessary in any material respect for the conduct of its
business as now being conducted by it and as planned to be conducted by it, and
the Company is not in default under any of such permits, licenses or other
similar authority. The Schedule of Exceptions includes a list of all patents
owned by or which are licensed to the Company. The Company possesses all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, trade secrets, information, proprietary rights and processes
necessary to conduct its business in any material respect as now being conducted
and as planned to be conducted without, to the best of the Company's knowledge
and belief, conflict with, or infringement upon, any valid rights of others, and
with respect to such patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, trade secrets, information, proprietary
rights and processes has not received any notice of infringement upon or
conflict with the rights of others.
There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party to any option,
license or agreement of any kind with respect to the patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights, trade
secrets, information, proprietary rights and processes of any other person or
entity. No stockholder, director, officer or employee of the Company has any
interest in any such patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, trade secrets, information, proprietary
rights and processes.
2.16. Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Series C Preferred Shares shall have been
fully paid, and all laws imposing such taxes shall have been fully complied with
in all material respects, prior to the Closing Date.
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2.17. Offering. Subject in part to the truth and accuracy of the
Purchasers' representations set forth in this Agreement, the offer, sale and
issuance of the Series C Preferred Shares and the issuance of Common Stock upon
conversion of the Series C Preferred Shares as contemplated by this Agreement
are exempt from the registration requirements of the Securities Act and from the
registration or qualification requirements of the laws of any applicable
jurisdiction, and neither the Company nor anyone acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
2.18. Compliance with Other Instruments. The Company is not in
violation of any term of its Certificate of Incorporation or By-Laws, as
amended. The Company is not in violation of any term of any mortgage,
indenture, contract, agreement, instrument, judgment, decree, order, statute,
rule or regulation to which the Company is subject and a violation of which
would have a material adverse effect on the condition, financial or otherwise,
operations or prospects of the Company.
2.19. Employees. To the best of the Company's knowledge and belief,
no employee or consultant of the Company, is, or is now expected to be, in
violation of any term of any employment contract, patent, disclosure agreement,
non-competition agreement, proprietary information and inventions agreement or
any other contract or agreement or any restrictive covenant or any other common
law obligation to a former employer relating to the right of any such employee
to be employed by the Company because of the nature of the business conducted or
to be conducted by the Company or to the use of trade secrets or proprietary
information of others, and the employment of the Company's employees does not
subject the Company or any Purchaser to any liability to a third party. There
is neither pending nor, to the best of the Company's knowledge and belief,
threatened, any actions, suits, proceedings or claims, or, to its knowledge, any
basis therefor or threat thereof with respect to any contract, agreement,
covenant or obligation referred to in the preceding sentence. The Company does
not have any collective bargaining agreement covering any of its employees.
To the best knowledge of the Company, after due inquiry, neither Kim nor
Green, nor any Ph.D. qualified employee nor any officer of the Company
(collectively, "key persons"), has any present intention of terminating his
employment or consulting arrangement with the Company, and the Company has no
present intention of terminating such employment or consulting arrangement.
2.20. Employee Benefit Plan Obligations. The Company does not have any
collective bargaining, labor, profit sharing, pension, retirement, stock option,
incentive, benefit or other similar contract, plan or arrangement. The Company
does not sponsor, nor is it obligated to contribute to, any employee benefit
plan (as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")).
2.21. Environmental Matters; Hazardous Waste. There have been no past
and there are no existing violations of Federal, state or local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste (including, but not limited to,
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asbestos, polychlorinated biphenyls and petroleum products), relating to the
Company or any of its businesses or operations or assets. No inspection or
investigation by the Environmental Protection Agency or OSHA, or any other
federal, state or local agency has resulted in a letter demanding cleanup of
hazardous substances or waste, citation, complaint or notice of violation,
pursuant to any law, rule, regulation, ordinance, judgment, decree, order,
injunction or decision of any court or governmental authority in regard to the
Company or any of its businesses or operations or any of its assets and no such
citation, complaint, notice or demand letter is pending or, to the best of the
Company's knowledge and belief, threatened.
To the best of the Company's knowledge and belief, there is no condition or
state of affairs existing on or about any real property owned, leased, operated
or used by the Company or any real property previously owned, leased, operated
or used by the Company (but only to the extent that such condition or state of
affairs existed on the date the Company ceased to own, lease, operate or use
such real property or was attributable to the Company's ownership, leasing,
operation or use of such real property) that would now or in the immediate
future require a closure under the provisions of the Resource, Conservation and
Recovery Act, or remedial or other action under the provisions of the Resource,
Conservation and Recovery Act or the Comprehensive Environmental Response,
Compensation and Liability Act, or the regulations promulgated under such acts,
or that would constitute a nuisance or violation of any environmental
legislation or regulation under the law of the state in which such property is
located.
2.22. Ability to Comply; Burdensome Restrictions. The Company has the
ability and is presently in a position, legally and otherwise, to comply with
the terms of and perform all its obligations under this Agreement and each of
the Exhibits hereto; and the Company has no present knowledge of or any present
reason to believe that the Company will not have such ability and be in such a
position for so long as any shares of Series C Preferred Stock are outstanding.
The Company is not presently obligated under any contract or agreement or
subject to any charter or other corporate restriction which (i) materially and
adversely affects, or may, in the reasonable opinion of the Company, be expected
to materially and adversely affect, its business, properties, assets or
condition (financial or otherwise) or (ii) will legally or contractually
restrict or impair the ability of the Company to pay any dividends on or make
other distributions with respect to the Series C Preferred Shares pursuant to
the provisions of the Certificate of Incorporation.
2.23. Material Relationships. Except for investments held by entities
affiliated with Allan Ferguson or Weinberg, to the best of the Company's
knowledge and belief, none of the officers, directors or key persons of the
Company, or their respective spouses or relatives, owns directly or indirectly,
individually or collectively, a material interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) the Company. For purposes of this Section 2.24, there may be
disregarded any purely passive
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economic interest which arises solely from the ownership of less than a 2%
equity interest in any such entity.
2.24. Registration Rights. Except as provided in this Agreement, the
Company is not under any obligation to register any of its currently outstanding
securities or any of its securities which may hereafter be issued.
2.25. Brokers' and Finders' Fees. The Company has retained no broker
or finder in connection with the transactions contemplated by this Agreement and
has no liability for any commission or compensation in the nature of an agent's
fee to any broker or finder or any other person. The Company will indemnify any
Purchaser for any such commission or compensation for which such Purchaser may
be held liable.
2.26. Patents, Copyrights and Trademarks. The Company owns and
possesses or is licensed under all patents, patent applications, licenses,
trademarks, trade names, brand names, inventions and federally registered
copyrights necessary for the operation of its business as now conducted and as
proposed to be conducted, including without limitation, the United States
patents listed in the Schedule of Exceptions, in each case, the Company is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner, licensor of, or other claimant to any
patent, trademark, trade name, copyright or other intangible asset, with respect
to the use thereof or in connection with the conduct of its business (as now
conducted and as proposed to be conducted), or otherwise; and there have been no
claims made, or, to best knowledge of the Company after due inquiry, threatened,
against the Company for the assertion of the invalidity, abuse, misuse or
unenforceability of any of its patent, trademark, copyright, trade secret or
other proprietary rights and there are no grounds for the same.
2.27. Proprietary Information of Third Parties. No third party has
claimed, has reason to claim or has requested information to suggest that any
person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his employment, consulting,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party, or (c) interfered
or may be interfering in the employment relationship between such third party
and any of its present employees. To the best knowledge of the Company, after
due inquiry, no person employed by or affiliated with the Company has employed
or proposes to employ any trade secret or any information or documentation
proprietary to any other person in connection with the conduct of the Company's
business (as now conducted and as proposed to be conducted).
2.28. Untrue Statements and Omissions. This Section 2 does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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SECTION 3
Representations and Warranties of Purchasers
Part I Representations and Warranties of All Purchasers.
Each Purchaser, severally and not jointly, represents and warrants with
respect to such Purchaser to the Company as follows:
3.1. Experience. It (or, in the event any such Purchaser has been
formed for the specific purpose of acquiring the securities of the Company, each
of the equity owners of such Purchaser) has such knowledge and experience in
financing and business matters that it is capable of evaluating the merits and
risks of an investment in the Series C Preferred Shares and of making an
informed decision. It (or, in the event any such Purchaser has been formed for
the specific purpose of acquiring the securities of the Company, each of the
equity owners of such Purchaser) is an "accredited investor" within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act.
3.2. Investment. It is acquiring the Series C Preferred Shares, and
will be acquiring the shares of Common Stock issuable upon conversion of the
Series C Shares, for investment for its own account and not with the view to, or
for resale in connection with, any distribution thereof. It understands that
the Series C Preferred Shares and the shares of Common Stock issuable upon
conversion of the Series C Preferred Shares have not been registered under the
Securities Act by reason of a specified exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of its investment intent as expressed herein.
3.3. Restrictions on Transfers. It understands and agrees as follows:
(a) The certificates evidencing the Series C Preferred Shares (and the
Common Stock issuable upon conversion of the Series C Preferred Shares), and
each certificate issued in transfer of the foregoing, will bear the following
legend (or substantially similar legend):
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THE SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF WITHOUT SUCH REGISTRATION OR THE
DELIVERY TO THE COMPANY OF AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH DISPOSITION WILL NOT REQUIRE
REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
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QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
OTHER JURISDICTION."
(b) It will not offer, sell, transfer or otherwise dispose of any of the
Series C Preferred Shares or any Common Stock issuable upon conversion of the
Series C Preferred Shares, unless (i) an effective registration under the
Securities Act covers the disposition of such securities or (ii) it has
delivered to the Company an opinion of counsel, reasonably satisfactory to
the Company, that such offer, sale, transfer or other disposition will not
require registration of such securities under the Securities Act or
qualification under any the securities laws of any other jurisdiction.
Upon request of a holder of Series C Preferred Shares (or Common Stock
issued upon conversion of Series C Preferred Shares), the Company shall
remove any such legend from each certificate evidencing such Series C
Preferred Shares (or such Common Stock), or shall issue to such holder a new
certificate or certificates for such Series C Preferred Shares (or such
Common Stock), which certificate or certificates shall be free of such
transfer legend, provided that with such request, the Company shall have
received an opinion of counsel, which opinion is reasonably satisfactory to
the Company, to the effect that such legend is no longer necessary or
required (including, without limitation, because of the availability of the
exemption afforded by Rule 144 promulgated under the Securities Act).
3.4. Rule 144. It acknowledges that the Series C Preferred Shares and
the shares of Common Stock issuable upon conversion of the Series C Preferred
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available. It has
been advised or is aware of the provisions of Rule 144, which permits limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, and understands that such Rule may not become available for
resale of the Series C Preferred Shares or the shares of Common Stock issuable
upon conversion of the Series C Preferred Stock.
3.5. Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management and has
had the opportunity to review the Company's books, records and facilities.
3.6. Authorization. If applicable, all corporate or partnership action
on the part of such Purchaser and its directors and stockholders or partners
necessary for the authorization, execution, delivery and performance by such
Purchaser of this Agreement and the Exhibits hereto and the consummation of the
transactions contemplated herein and therein, has been taken or will be taken
prior to the Closing. This Agreement and each of the Exhibits hereto to which
such Purchaser is a party is a valid and binding obligation of such Purchaser,
enforceable in accordance with its terms. The execution, delivery and
performance by such Purchaser of this Agreement and each of the Exhibits hereto
to which such Purchaser is a party and compliance herewith and therewith will
not result in any violation of and will not conflict with, or result in
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a breach of any of the terms of, or constitute a default under, such Purchaser's
charter or By-Laws or Agreement of Limited Partnership, as applicable, or any
judgment, decree, order, rule or regulation to which such Purchaser is bound.
3.7. Brokers' and Finders' Fees. It, individually or with any person,
has retained no broker or finder in connection with the transactions
contemplated by the Agreement and has no liability for any commission or
compensation in the nature of an agent's fee to any broker or finder or any
other person. It will indemnify the Company for any such commission or
compensation for which the Company may be held liable.
Part II. Special Representations and Warranties of Lombard Odier & Cie. and
Bernard Mach
Each of Lombard Odier & Cie. and Bernard Mach, severally and not jointly
with any other Purchaser, represents and warrants to the Company as follows:
3.8. The offer, sale and issuance of the Series C Preferred Shares
and the issuance of Common Stock upon conversion of the Series C Preferred
Shares as contemplated by this Agreement are exempt from the registration or
qualification requirements of the laws, rules or procedures of, of any entity
in or having jurisdiction over, the Switzerland Confederation, including the
Canton of Zurich, the Swiss Nationalbank and any stock exchange, and neither
Lombard Odier & Cie. nor Bernard Mach nor anyone acting on its or his behalf
will take any action hereafter that would cause the loss of such exemption.
3.9. No consent, approval, qualification, order or authorization of, or
filing with, any governmental authority in or having jurisdiction over the
Switzerland Confederation, including the Canton of Zurich and the Swiss
Nationalbank, is required in connection with the Company's valid execution,
delivery or performance of this Agreement or any of the Exhibits hereto, or the
offer, sale or issuance of the Series C Preferred Shares by the Company, the
issuance of Common Stock upon the conversion of the Series C Preferred Shares or
the consummation of any other transaction contemplated on the part of the
Company hereby or pursuant to any such Exhibit, except for such filings as have
been made by the Company at the direction of Lombard Odier & Cie. and Bernard
Mach or their counsel prior to the Closing.
SECTION 4
Conditions to Closing of Purchasers
The obligation of each Purchaser to purchase the Series C Preferred Shares
to be purchased at a Closing is subject to the fulfillment to such Purchaser's
reasonable satisfaction on or prior to the relevant Closing Date of each of the
following conditions:
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4.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2 hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
4.2. Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all material
respects.
4.3. Completion of Due Diligence. The Purchasers or their
representatives shall have completed their due diligence investigation including
but not limited to discussions with the Company's management concerning the
Company's business, management and financial affairs and inspection of the
Company's books, records and facilities.
4.4. Opinion of Company's Counsel and Accountants. The Purchasers
shall have received from Nutter, McClennen & Fish, LLP, counsel to the Company,
an opinion addressed to the Purchasers, dated the Closing Date, and in
substantially the form attached as Exhibit 4.4 hereto (appropriately updated for
each Subsequent Closing).
4.5. Legal Investment. At the time of the Closing, the purchase of the
Series C Preferred Shares to be purchased by the Purchasers hereunder shall be
legally permitted by all laws and regulations to which the Purchasers and the
Company are subject.
4.6. Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate of the President or Vice President of the Company,
dated the Closing Date, certifying on behalf of the Company to the fulfillment
of the conditions specified in Sections 4.1 and 4.2 of this Agreement.
4.7. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers and their counsel.
4.8. Securities Law Compliance. All such actions and steps necessary
to assure compliance with applicable Federal and the securities laws of any
other jurisdiction, including all authorizations, approvals or permits, if any,
of any governmental authority or regulatory body in any jurisdiction where the
Series C Preferred Shares are being sold, that are required in connection with
the lawful issuance and sale of the Series C Preferred Shares pursuant to this
Agreement, the conversion of the Series C Preferred Shares into Common Stock and
the issuance of such Common Stock upon such conversion shall have been duly
obtained and shall be effective at and as of the Closing.
4.9. Amended and Restated Stockholders' Agreement. The Company, the
Purchasers, each holder of the Company's Series A Preferred Stock and the
Company's Series B Preferred
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Stock, and Peter S. Kim ("Kim") and Michael R. Green ("Green") shall have
executed the Amended and Restated Stockholders' Agreement (the "Stockholders'
Agreement") in substantially the form attached hereto as Exhibit 4.9.
4.10. Key-Man Insurance Trust. The Company and CW Group (the
"Trustee") shall have executed and delivered an Amended and Restated Trust
Agreement substantially in the form of Exhibit 4.10A hereto (the "Amended Trust
Agreement"). Each of the Purchasers, Bologna and the Trustee shall have
executed and delivered an Amended and Restated Trust Option Agreement
substantially in the form of Exhibit 4.10B hereto.
SECTION 5
Conditions to Closing of Company
The Company's obligation to sell the Series C Preferred Shares to be
purchased at each Closing is subject to the fulfillment to its satisfaction on
or prior to the relevant Closing Date of each of the following conditions:
5.1. Representations. The representations made by each of the
Purchasers pursuant to Section 3 hereof shall be true and correct when made and
shall be true and correct on the relevant Closing Date.
5.2. Legal Investment. At the time of the Closing, the conditions set
forth in Sections 4.8 and 4.9 shall have occurred and the purchase of the Series
C Preferred Shares to be purchased by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers and the Company
are subject.
SECTION 6
Covenants of the Company
The Company hereby covenants and agrees, so long as any Purchaser owns at
least twenty-five percent (25%) of the Series C Preferred Shares purchased by it
pursuant to this Agreement and except as provided below, to take or refrain from
taking any of the actions specified in this Section 6, without the prior written
consent of the holders of 75% of the issued and outstanding Series C Preferred
Shares:
Part I. Affirmative Covenants.
6.1. Basic Financial Information. The Company will furnish the
following reports to the Purchasers (or their representatives):
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(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (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
retained earnings and of statement of cash flows of the Company and its
subsidiaries, if any (collectively with the balance sheet, the "Investment
Financial Statements"), 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
nationally recognized standing selected by and reporting to the Board of
Directors of the Company and approved by the Purchasers, and including a
Company prepared comparison to budget.
(b) As soon as practicable after the end of each month and each of the
first, second and third quarterly accounting periods in each fiscal year of
the Company, and in any event within thirty (30) days thereafter,
consolidated Investment Financial Statements of the Company and its
subsidiaries, if any, for such period, prepared in accordance with generally
accepted accounting principles consistently applied, subject to changes
resulting from year-end audit adjustments, and setting forth in comparative
form the figures for the corresponding periods of the previous fiscal year,
certified by the principal financial or accounting officer of the Company.
(c) If the Company becomes subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act," which term
shall include any successor federal statute), it may in lieu of the financial
information required pursuant to Sections 6.1(a) and (b) hereof provide
copies of its annual reports on Form 10-K and its quarterly reports on Form
10-Q, respectively, or other then-equivalent report form.
(d) Immediately upon any officer of the Company obtaining actual
knowledge of the occurrence of any material violation or default by the
Company or any of its subsidiaries in the performance of (i) its agreements
or covenants contained herein, (ii) its material agreements or covenants
contained in any other agreement to which the Company or any of its
subsidiaries is a party or (iii) its agreements or covenants contained in the
Certificate of Incorporation or of the occurrence of any condition, event or
act which, with or without notice or lapse of time, or both, would constitute
a material violation or an event of default, a written notice specifying the
nature and status thereof and, what action the Company has taken, is taking
and proposes to take with respect thereto.
(e) Annually, but in any event no later than sixty (60) days after the
commencement of each fiscal year of the Company, the yearly budget and
operating plan of the Company, in such manner and form reasonably acceptable
to the Purchasers and as approved by the Board of Directors of the Company,
which plan shall include a projection of income and projected Investment
Financial Statements as of the end of such fiscal year. Any material changes
in such plan shall be submitted as promptly as practicable after such changes
have been approved by the Board of Directors of the Company.
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(f) As soon as practicable after transmission or occurrence and in any
event within ten (10) days thereof, (i) copies of any reports or
communications delivered to any of the Company's security holders (in their
capacity as such), any governmental entity (excluding ordinary permit
applications or similar types of correspondence and documentation in
connection therewith), any financial institution or member of the financial
community (other than correspondence and documents delivered to such
financial institutions or members in the ordinary course of business which do
not materially adversely impact on the Purchaser's investment in the Company)
or to any other individual or entity who may receive such information by law
or pursuant to a contract or other agreement with the Company (except in the
ordinary course of business), including any filings by the Company, or by any
of its officers or directors relating to the Company, with any securities
exchange or the Commission or the National Association of Securities Dealers,
Inc., (ii) notice of any event which has a material adverse effect on the
Company's business, prospects or condition, financial or otherwise, or on the
ability of the Company to perform its obligations under this Agreement, or
under any other agreement, or on the Purchasers' investment in the Series C
Preferred Shares or in the Common Stock issuable upon conversion of the
Series C Preferred Shares, and (iii) notice of material breach or failure to
comply with any representation, warranty, covenant or agreement of the
Company contained herein, including the Exhibits hereto.
(g) Immediately upon any principal officer of the Company or any other
officer of the Company involved in its financial administration obtaining
knowledge of the occurrence of any (i) "reportable event," as such term is
defined in section 4043 of ERISA, other than any such event with respect to
which the statutory 30-day notice requirement has been waived by regulation,
or (ii) "prohibited transaction," as such term is defined in section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code"), in connection
with any plan or any trust created thereunder, a written notice specifying
the nature thereof, what action the Company has taken, is taking and proposes
to take with respect thereto, and, when known, any action taken or threatened
by the Internal Revenue Service or the Pension Benefit Guaranty Corporation
with respect thereto.
(h) With reasonable promptness, such other information and data with
respect to the Company and its subsidiaries, if any, as the Purchasers may
from time to time reasonably request.
(i) The provisions of this Section 6.1 and Section 6.2 shall not be in
limitation of any rights which the Purchasers may have to inspect the books
and records of the Company and its subsidiaries, or to inspect their
properties or discuss their affairs, finances and accounts; and, in the event
that the Company is unable to comply with the provisions of Section 6.1 or
6.2, the Board of Directors of the Company shall, by resolution duly adopted,
authorize and cause a firm of independent public accountants of nationally
recognized standing in the United States to prepare promptly and furnish such
information to the Purchasers at the Company's expense.
6.2. Visitation. The Company will permit the Purchasers (or
representatives of the Purchasers) to visit and inspect any of the properties
of the Company, including its books of
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account and other records (and make copies thereof and take extracts therefrom),
and to discuss its affairs, finances and accounts with the Company's directors,
officers, senior employees and its independent public accountants, all at such
reasonable times and as often as any such person may reasonably request.
Subject to the provisions of Section 6.15 hereof, any expenses incurred by a
Purchaser in connection with any such visitation and inspection shall be borne
by such Purchaser; provided, however, in the event such visitation is
necessitated by or is a result of a material default hereunder or under the
terms of a material contract or arrangement on the part of the Company, all such
expenses shall be borne by the Company.
6.3. Prompt Payment of Taxes, etc. The Company 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 any 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 shall have bonded or set aside on its books
adequate reserves with respect thereto; and provided, further, that the Company
will pay all such taxes, assessments, charges or levies, or otherwise take any
action which has the effect of preventing a foreclosure, forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor. The Company will promptly pay or cause to be paid when due
all other indebtedness incident to operations of the Company; provided, however,
that any such indebtedness need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have bonded or set aside on its books adequate reserves with
respect thereto; and provided, further, that the Company will pay all such
indebtedness on or prior to the time when failure to pay would materially
adversely affect the Company.
6.4. Maintenance of Properties and Leases. The Company will keep its
properties and those of its subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries, if any, will at all times comply
with each provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such lease would have a material
adverse effect on the condition, financial or otherwise, prospects or operations
of the Company.
6.5. Insurance. The Company shall maintain adequate insurance, by
financially sound and reputable insurers, on its properties and assets and the
properties and assets of its subsidiaries, if any, which are of an insurable
character and in such amounts and on such terms usually insured by corporations
engaged in the same or similar business and similarly situated, against loss or
damage by fire, explosion and other risks customarily insured against by such
corporations which amounts shall be sufficient to prevent the Company or any
such subsidiary from becoming a co-insurer and not in any event less than 100%
of the insurable value of the property and assets insured; and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons, property and assets, including
without limitation insurance against claims for personal injury, death or
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property damage occurring upon, in, about or in connection with the use of any
of the properties or assets of it or any subsidiary, and in such amounts and on
such terms usually insured by corporations engaged in the same or similar
business and similarly situated, which amounts shall be sufficient to prevent
the Company or any subsidiary from becoming a co-insurer; and the Company will
maintain such other insurance as may be required by law or other agreements to
which the Company is or shall become a party.
6.6. Key Person Life Insurance. The Company will cause to be
maintained, and shall contribute to the Trust created under the Amended Trust
Agreement an amount sufficient to pay all premiums in connection with, the
$1,000,000 term life insurance policies currently insuring the life of each of
Kim and Green so long as any Series C Preferred Shares remain outstanding.
6.7. Accounts and Records. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
6.8. Independent Accountants. The Company will retain independent
public accountants of nationally recognized standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants, so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify the Purchasers and will request the
firm of independent public accountants whose services are terminated to deliver
to the Purchasers a letter of such firm setting forth the reasons for the
termination of their services. In the event of such termination, the Company
will promptly thereafter engage another accounting firm of similar quality. In
its notice to the Purchasers the Company shall state whether the change of
accountants was recommended or approved by the Board of Directors of the
Company.
6.9. Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries, if any, shall duly observe and conform in all
material respects to all valid requirements of governmental authorities relating
to the conduct of their businesses or to their properties or assets.
6.10. Maintenance of Corporate Existence, etc. The Company shall
maintain and shall cause each subsidiary, if any, to maintain in full force and
effect (i) its corporate existence, rights and franchises and all licenses,
privileges and other rights in or to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and shall obtain and maintain any such right, franchise, license or privilege
deemed by the Company to be necessary on the date hereof or in the future to the
conduct of their business without any conflict with any business in or rights of
others to use such patents, processes, licenses, trademarks, trade names or
copyrights and (ii) its qualification to do business in each jurisdiction in
which the character of its properties (owned, leased or licensed) or the nature
of its business requires such qualification, except where the failure to so
qualify would not have a material
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adverse effect upon the business or operations of the Company or such
subsidiary, as the case may be.
6.11. Availability of Common Stock for Conversion and Exercise; Certain
Stock Options.
(a) The Company will keep such number of shares of Common Stock unissued and
available for issuance in order to permit conversion of all the then outstanding
shares of Series C Preferred Stock.
(b) As soon as possible after the Initial Closing, the Company shall take all
action necessary to make available for issuance stock options to purchase shares
of Common Stock, to be granted or made to directors, officers, employees,
consultants and advisers of the Company upon such terms and conditions as may be
approved by resolution the Company's Board of Directors, and to issue such
options and shares of Common Stock from time to time in accordance with the
terms of such resolution; provided, that the maximum number of shares of Common
Stock that will be issued or available for issuance under this Section 6.11(b)
shall be 555,555 in the aggregate and, further provided, that such options shall
terminate no later than upon the close of an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale by the Company of shares of Common Stock. The
Purchasers agree to vote their Shares and take all other action necessary in
furtherance of the foregoing.
6.12. Notice of Record Dates. In the event of any taking by the
Company of a record of the holders of any class of securities (other than the
Series C Preferred Stock) for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, the Company shall
mail to the Purchasers at least ten (10) days prior to such record date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend or distribution.
6.13. Proprietary Information and Inventions Agreement. The Company
will cause each person currently or hereafter employed by it or any subsidiary
with access to confidential information to enter into a proprietary information
and inventions agreement in substantially the form attached hereto as Exhibit
6.13.
6.14. Directors; Meetings of the Board of Directors; and Director's and
Officer's Insurance; Election of Director.
(a) The Company shall not give less than ten (10) business days (72 hours in
the case of special meetings) notice of each Board of Directors' meeting to the
designees of the Series A Purchasers (as defined in the Stockholders'
Agreement), to the designee of each of the Purchasers and the Advent Series B
Purchasers (as defined in the Stockholders' Agreement) and the designee of Kim
and Green, and shall permit, in addition to such directors, each Purchaser (or
its designee) and Green and Kim (or their respective designee) to attend
meetings of the
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Board and committees thereof. In the event any such designee shall be unable to
attend a meeting of the Board, the Purchasers designating such designee or such
designated director shall in lieu thereof be entitled to designate a substitute
representative to attend and, to the extent permitted by applicable law, to vote
at such meeting. All reasonable travel and out-of-pocket expenses incurred by
the directors designated by the Purchasers (or such directors' designees) in
connection with attending the meetings and any special meetings called by the
Company will be paid by the Company. The Company will obtain and maintain, on
reasonable business terms, director's and officer's insurance for directors of
the Company providing coverage for each director of at least $1,000,000 per
occurrence, provided that such insurance can be obtained on commercially
reasonable terms as determined by the Board of Directors. The Purchasers
acknowledge that as of the date of the Initial Closing, the Company has not
obtained directors' and officers' insurance.
(b) The director nominee of the Purchasers shall be elected to the Board of
Directors of the Company.
6.15. Meetings of Stockholders. The Purchasers shall be entitled to
call for a stockholders' meeting upon five days notice to the Company.
6.16. Compliance with ERISA. The Company will file or caused to be
filed on a timely basis each and every return, report, statement, notice,
declaration and other document required by any governmental agency, federal,
state or local authority (including, without limitation, the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty Corporation and
the Commission) with respect to any plan maintained by the Company.
6.17. Environmental Matters. The Company agrees to comply in all
material respects with, and abide by, all Federal, state and local laws or
regulations relating to environmental protection or to the storage or disposal
of hazardous waste (including, but not limited to, asbestos, polychlorinated
byphenyls and petroleum products) in connection with or relating to the Company
or any of its businesses, operations or assets.
Part II. Restrictive Covenants.
6.18. Dividends; Share Repurchases. The Company will not pay or
declare any cash dividend or distribution on any shares of capital stock of the
Company, other than the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock, or apply any of the Company's assets to the
redemption, retirement, purchase or other acquisition, directly or indirectly,
through subsidiaries or otherwise, of any shares of Common Stock of the Company,
or any rights, options or warrants to purchase, or securities convertible into,
Common Stock of the Company, except for (i) any repurchase of shares by the
Company pursuant to any stock option or restricted stock agreement with an
employee of, or consultant to the Company entered into by the Company and
approved by the Board of Directors of the Company, and (ii) the redemption of
any shares of Series C Preferred Stock.
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6.19. Sales of Securities. The Company will not (i) create or issue
any securities of the Company which have equity features and which rank on a
parity with or senior to the Series C Preferred Stock with respect to the
payment of dividends or upon liquidation or other distribution of assets or with
a conversion price lower than that of the Series C Preferred Stock or terms more
favorable than those of the Series C Preferred Stock or (ii) sell or issue any
shares of Common Stock of the Company for which the consideration is other than
cash, except as contemplated herein with respect to the conversion of the Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock into
Common Stock.
6.20. Foreign Subsidiaries. Except in the ordinary course of business,
the Company will not directly or through any subsidiary create or acquire any
subsidiary or any interest in any corporation, partnership, limited partnership,
joint venture or similar entity located outside, or formed pursuant to the laws
of other than, the United States of America, its territorial possessions or any
political subdivision of any thereof.
6.21. Merger, Consolidation, Sale of Assets. The Company will not
merge, consolidate or dispose of all or substantially all its assets, except a
merger or consolidation pursuant to which the Company is the surviving
corporation. This section shall not in any way limit the ability of the Company
(i) to sell inventory or (ii) to sell other assets, each in the ordinary course
of business.
6.22. Transactions with Officers, Directors and Stockholders. The
Company will not furnish or sell services or products to or acquire or purchase
services or products from any corporation, partnership, proprietorship,
association, joint venture or other person or entity in which any officer,
director or 5% stockholder of the Company or any affiliate (as such term is
defined in Rule 405 under the Securities Act) of any such officer, director, or
5% stockholder has a material interest or enter into any material contract or
arrangement (excluding employment or option agreements with an employee approved
by the Board of Directors of the Company) with any such officer, director, 5%
stockholder or affiliate which is less than an arms-length transaction or which
transaction has or reasonably can be expected to have a material adverse effect
on the Company. For purposes of this Section 6.24, there may be disregarded any
interest which arises solely from the ownership of less than a 2% equity
interest in a corporation whose voting securities are regularly traded in any
national securities exchange or in the over-the-counter market. The provisions
of this Section 6.24 shall not prohibit any Purchaser from providing any
consulting, legal, accounting, investment banking, managerial, investment
advisory and/or other services to the Company.
6.23. Investments, Loans, Guarantees, Joint Ventures and Subsidiaries.
The Company will not, (i) directly or through any subsidiary create or acquire
any interest in any partnership, limited partnership, joint venture or similar
entity and will not create or acquire any interest in any subsidiaries of which
it does not own all the capital stock or (ii) make any investments in or loans
or advances to or endorse, guarantee or become surety for the obligations of any
person, corporation or other entity except that the Company may endorse checks
for collection or deposit in the ordinary course of business.
[cad 217]
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6.24. Certificate of Incorporation and By-Law Amendments;
Reclassification of Common Stock; Changes to Series C Preferred Stock. The
Company may not amend its Certificate of Incorporation or By-Laws so as to
affect adversely the Series C Preferred Stock. The Company may not
reclassify any shares of its Common Stock into shares having preference or
priority to dividends or assets which are superior to the preferences and
priorities of the Series C Preferred Stock. The Company may not make any
change to the rights, preferences or privileges of the Series C Preferred
Stock so as to affect adversely the Series C Preferred Stock.
6.25. Impairment of Dividends. The Company may not enter into any
contract or agreement which by its terms restricts the Company's ability to
pay dividends on the Series C Preferred Stock or which may otherwise restrict
the Company's ability to comply with and perform the terms of this Agreement
or any of the Exhibits hereto.
6.26. Compliance with ERISA. The Company will not:
(i) Engage in any transaction in connection with which the Company or
any of its subsidiaries could be, to the knowledge of the Company or any of
its subsidiaries could be, to the knowledge of the Company, subject to
either a civil penalty assessed pursuant to section 502(i) of ERISA or a
tax imposed by section 4975 of the Code, based on existing regulations or
published interpretations in effect from time to time;
(ii) Terminate any plan in a manner, or take any other action,
including withdrawal from any plan that is a multiemployer plan, which
could result in any material liability of the Company or any of its
subsidiaries to the Pension Benefit Guaranty corporation or to such plan;
(iii) Fail to make full payment when due of all amounts which,
under the provisions of any plan, the Company or any of its subsidiaries is
required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency, whether or not waived, with respect to any
plan; or
(iv) Permit the current value of all vested accrued benefits under all
plans which are subject to Title IV of ERISA to exceed the current value of
the assets of such plans allocable to such vested accrued benefits.
As used in this Section 6.28 the term "accumulated funding deficiency" has the
meaning specified in section 302 of ERISA and section 412 of the Code, the term
"accrued benefit" has the meaning specified in section 3 of ERISA, the term
"current value" has the meaning specified in section 4062(b)(1)(A) of ERISA and
the term "multiemployer plan" has the meaning specified in section 4001(a)(3) of
ERISA.
6.27. Borrowings. Neither the Company nor any of its subsidiaries will
incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any indebtedness
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for borrowed money, or any other indebtedness evidenced by, or liability
evidenced by notes, bonds, debentures or similar obligations or either directly
or indirectly guarantee, endorse or become surety for, or otherwise in any
manner become responsible for the obligations of any other person, other than
indebtedness with respect to trade and operating obligations and other normal
accruals in the ordinary course of business (which the Company covenants will be
paid in accordance with customary trade practice) or with respect to which it is
contesting in good faith the amount or validity thereof by appropriate
proceedings, and then only to the extent it has set aside on its books adequate
reserves therefor.
6.28. Capital Expenditures; Commitments. The Company shall not, and
shall cause each of its subsidiaries, if any, not to, (i) incur capital
expenditures or make commitments for capital expenditures, services or product
development in excess of the greater of $100,000 or 110% of the amount budgeted
in the yearly budget and operating plan of the Company referred to in Section
6.1(e) hereof, for any such expenditure or commitment.
6.29. Employee Stock Purchase Arrangements. The Company will not issue
any of its capital stock to, or grant an option or right to subscribe for any of
its capital stock to, or purchase or acquire any of its capital stock from, any
employee, consultant, director or officer of the Company or a subsidiary
thereof, except as provided in Section 7.14 of the Series A Purchase Agreement
(as defined below) or 6.11(b) of this Agreement, without giving effect to any
amendment thereto.
PART III. Termination
6.30. Termination Event. The provisions of this Section 6 shall
terminate as to any Purchaser at such time as such Purchaser owns less than
twenty-five percent (25%) of the Series C Preferred Shares purchased by it
pursuant to this Agreement.
SECTION 7
Registration of Securities
7.1. Certain Definitions. As used in this Section 7, the following
terms shall have the following respective meanings:
"Registrable Securities" shall mean (i) shares of Common Stock issued or
issuable pursuant to the conversion of the Series C Preferred Shares, (ii)
shares of Common Stock issued or issuable pursuant to the conversion of the
Series B Preferred Stock (the "Series B Preferred Shares") issued pursuant to
the Series B Stock Purchase Agreement dated April 19, 1995 among the Company,
certain of the Purchasers and the other individuals named therein (the "Series B
Purchase Agreement"), (iii) shares of Common Stock issued or issuable pursuant
to the conversion of the Series A Preferred Stock (the "Series A Preferred
Shares") issued pursuant to the Stock Purchase Agreement dated September 16,
1993 among the Company, certain of the Purchasers and the other individuals
named therein (the "Series A Purchase Agreement"), and
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(iv) any Common Stock issued in respect of the securities issued pursuant to the
conversion of the Series A Preferred Shares, the Series B Preferred Shares and
the Series C Preferred Shares, upon any stock split, stock dividend,
recapitalization or similar event.
The terms "register," "registered" and "registration" shall refer to a
registration 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.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Sections 7.2, 7.3 and 7.5 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements of one counsel for all the selling Holders (as hereinafter
defined) and other security holders for a "due diligence" examination of the
Company, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"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 (other than the fees and disbursements of counsel
included in Registration Expenses).
"Holder" shall mean any holder of Registrable Securities which have not
been sold to the public.
7.2. Requested Registration.
(a) Request for Registration. If the Company shall receive from the
Holders of at least fifty percent (50%) or more of the then-outstanding
Registrable Securities, at any time or times, a written request that the
Company effect any registration with respect to all or a part of the
Registrable Securities, the Company will:
(i) Promptly give written notice of the proposed registration to all
other Holders; and
(ii) As soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act) as
may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as
are specified in a written request given within thirty (30) days after
receipt of such written notice from the Company; provided that the
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Company shall not be obligated to effect, or to take any action to effect,
any such registration pursuant to this Section 7.2, (x) after the Company
has effected two such registrations pursuant to this Section 7.2(a) and
such registrations have been declared or ordered effective by the
Commission and the sale of such Registrable Securities shall have closed or
(y) prior to the earlier to occur of (i) September 16, 1997, and (ii) three
months after the closing of an initial registered public offering of the
Company's securities. Subject to the foregoing limitation, the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
The Company may include in the registration statement filed pursuant to the
request of the Holders, subject to the provisions of Section 7.2(b) below, other
securities of the Company which are held by officers, including the Chief
Executive Officer of the Company or such person acting in that capacity, or
directors of the Company, by Kim and Green, or by other persons who, by virtue
of agreements with the Company, are entitled to include their securities in any
such registration (all the foregoing, except the Holders, collectively referred
to herein as the "Other Stockholders"), but the Company shall have no right to
include any of its securities in any such registration.
(b) Underwriting. If the Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to Section 7.2 and
the Company shall include such information in the written notice referred to in
Section 7.2(a)(i) above. The right of any Holder to registration pursuant to
Section 7.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Holders and such Holder with respect to such participation and inclusion) to the
extent provided herein. A Holder may elect to include in such underwriting all
or a part of the Registrable Securities held by such Holder.
If Other Stockholders shall request inclusion in any registration pursuant
to Section 7.2, the Holders shall offer to include the securities of such Other
Stockholders in the underwriting and may condition such offer on their
acceptance together with the Holders so participating of the further applicable
provisions of this Agreement. The Company shall (together with all Holders and
Other Stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or representative of the underwriters selected for such underwriting
by a majority in interest of the Holders and reasonably acceptable to the
Company. Notwithstanding any other provision of this Section 7.2, if the
underwriters advise the Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the Holders shall so
advise all Other Stockholders whose securities would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated in the following manner. The securities of the Company held by Other
Stockholders (other than Registrable Securities) shall be excluded from such
registration and underwriting to the extent required by such limitation and if a
limitation of the
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number of shares is still required, the number of shares of Registrable
Securities that may be included in the registration shall be allocated among all
such Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities and other securities which they had requested to be
included in such registration at the time of filing the registration statement.
No Registrable Securities or any other securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. In the event that the number of shares of Registrable Securities
of any Holder to be included in any registration is reduced below 50% of the
shares requested to be included in such registration as a result of allocations
pursuant to this Section 7.2(b), then such registration shall not be deemed a
registration for purposes of Section 7.2(a)(ii). If any Holder of Registrable
Securities or Other Stockholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Holders. The securities so withdrawn shall also be withdrawn from
registration.
7.3. Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on
any registration form which does not permit secondary sales, the Company will:
(i) Promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) Include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests made by any Holder within thirty (30) days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 7.3(b) below. Such written request may specify all or
a part of a Holder's Registrable Securities to be included in such
registration.
(b) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as a part of the written notice given pursuant to
Section 7.3(a)(i). In such event the right of any Holder to registration
pursuant to Section 7.3 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company and Other Stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected by the Company,
which underwriters shall be reasonably acceptable to a majority in interest
of the participating Holders. Notwithstanding any
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other provision of this Section 7.3, if the underwriter advises the Company in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the underwriter may (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the
registration and underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated in the following manner. The securities of the Company held by Other
Stockholders (other than Registrable Securities) shall be excluded from such
registration and underwriting to the extent required by such limitation, and if
a limitation on the number of shares is still required, the number of shares of
Registrable Securities that may be included in the registration shall be
allocated among all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities which each Holder had requested to
be included in such registration at the time of filing and which have not
already been included in the registration statement; provided, however, that,
except with respect to the initial public offering of the Company's securities,
the number of shares of Registrable Securities included in the registration
shall not constitute less than 30% of the total securities included in the
offering. If any Holder of Registrable Securities or any Other Stockholder
disapprove of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
7.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Agreement. All Selling Expenses shall be borne by
the holders, including the Company, of the securities so registered pro rata on
the basis of the number of their shares so registered.
7.5. Registration on Form S-2 or Form S-3. The Company shall use its
best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act, in accordance with the provisions of the Exchange Act following
the effective date of the first registration of any securities of the Company on
Form S-1 or Form S-18 or any comparable or successor form or forms. After the
Company has qualified for the use of either Form S-2 or Form S-3 or both, in
addition to the rights contained in the foregoing provisions of this Agreement,
the Holders of not less than 20% of the then outstanding Registrable Securities,
having a value of not less than $500,000, shall have unlimited rights to request
from time to time registrations on Form S-2 or Form S-3 (such requests shall be
in writing, shall state the number of shares of Registrable Securities to be
disposed of and the intended methods of disposition of such shares by such
Holder or Holders and shall be at the Company's sole expense).
7.6. Registration Procedures. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will:
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(a) Keep such registration effective for a period of six months or until
the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; provided,
however, that in the case of any registration of Registrable Securities on
Form S-3 which are intended to be offered on a continuous or delayed basis,
such six-month period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis; and provided further
that applicable rules under the Securities Act governing the obligation to
file a post-effective amendment permit, in lieu of filing a post-effective
amendment which (y) includes any prospectus required by Section 10(a)(3) of
the Securities Act or (z) reflects facts or events representing a material or
fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (y) and (z) above to be contained in periodic reports filed
pursuant to Section 13 or 15(d) of the Exchange Act in the registration
statement;
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of securities covered by such
registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or incomplete in the light of the circumstances then existing, and
at the request of any such seller, prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchaser of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances than existing;
(e) Cause all such Registrable Securities to be listed on each
securities exchange, if any, on which similar securities issued by the
Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities and a CUSIP number for all such Registrable Securities, in each
case not later than the effective date of such registration;
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(g) Make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney or accountant retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers and
directors to supply all information reasonably requested by any such seller,
underwriter, attorney or accountant in connection with such registration
statement; provided, however, that such seller, underwriter, attorney or
accountant shall agree to hold in confidence and trust all information so
provided;
(h) Furnish to each selling Holder a signed counterpart, addressed to
the selling Holder, of
(i) An opinion of counsel for the Company, dated the effective date
of the registration statement, and
(ii) "Comfort" letters signed by the Company's independent public
accountants who have examined and reported on the Company's financial
statements included in the registration statement, to the extent permitted
by the standards of the AICPA or other relevant authorities, covering
substantially the same matters with respect to the registration statement
(and the prospectus included therein) and (in the case of the accountants'
"comfort" letters) with respect to events subsequent to the date of the
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters
in underwritten public offerings of securities;
(i) Furnish to each selling Holder a copy of all documents filed with
and all correspondence from or to the Commission in connection with any such
offering other than non-substantive cover letters and the like;
(j) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(k) In connection with any underwritten offering pursuant to a registration
statement filed pursuant to Section 7.2 or 7.3 hereof, the Company will enter
into any underwriting agreement reasonably necessary to effect the offer and
sale of Common Stock.
7.7. Indemnification.
(a) The Company will indemnify each Holder, each of its respective
officers, directors and partners, and each person controlling such Holder,
with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter, and their respective counsel against all
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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 prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each such Holder,
each of its respective officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses as are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder, officer, director and Other Stockholder will, if
securities held by him or it are included in the securities as to which such
registration, qualification or compliance is being effected (collectively, an
"Including Stockholder"), indemnify the Company, each of its directors and
officers (in their capacity as such) and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such
Holder and Including Stockholder and each of their officers, directors and
partners, and each person controlling such Holder or Including 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 such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
the Company and such Holders, Including Stockholders, directors, officers,
partners, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to the Company by such
Holder or Including Stockholder and stated to be specifically for use
therein; provided, however, that the obligations of such Holders and
Including Stockholders hereunder shall be limited to an amount equal to the
net proceeds to each such Holder or Including Stockholder of securities sold
under such registration statement, prospectus, offering circular or other
document as contemplated herein.
(c) Each party entitled to indemnification under this Section 7.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party")
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promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the
defense of such claim or any litigation resulting therefrom, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section 7.7, unless such failure to
notify shall prove to have been prejudicial to the Indemnifying Party's
ability to defend such an action. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
7.8. Information by Holder. Each Holder of Registrable Securities
and each other holder of securities included in any registration, shall
furnish to the Company such information regarding such Holder or other holder
and the distribution proposed by such Holder or other 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 Agreement.
7.9. Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any
agreement with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder a right (i) to require the
Company to initiate any registration of any securities of the Company or (ii)
to require the Company, upon any registration of any of its securities, to
include, among the securities which the Company is then registering,
securities owned by such holder; which right is superior to the rights given
hereunder to the holders of Series A Preferred Shares, Series B Preferred
Shares and Series C Preferred Shares.
7.10. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit
the sale of the Registrable Securities to the public without registration,
the Company shall agree to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act at any time after it has become subject to such reporting requirements;
and
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(c) So long as a Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of it securities to the
general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents so filed as the Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Holder to
sell any such securities without registration.
7.11. Transfer or Assignment of Registration Rights. The rights to
cause the Company to register securities granted to the Purchasers and
holders of Registrable Securities under Sections 7.2, 7.3 and 7.5 may be
transferred or assigned by a holder to a transferee or assignee of any
Registrable Securities, provided 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 said 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 the obligations of such Holder under this Section 7.
7.12. Termination of Registration Rights Set Forth In Series A
Purchase Agreement and Series B Purchase Agreement. The Company, Bologna and
Weinberg, and such of the Purchasers as are party to the Series A Purchase
Agreement, constituting all of the parties to the Series A Purchase Agreement
and the holders of all of the securities issued pursuant thereto, hereby
amend the Series A Purchase Agreement by deleting therefrom Section 8 in its
entirety. Any and all registration rights granted by the Company to such
Purchasers, Bologna and Weinberg are as set forth in this Section 7. The
Company and such of the Purchasers as are party to the Series B Purchase
Agreement, constituting all of the parties to the Series B Purchase Agreement
and the holders of all of the securities issued pursuant thereto, hereby
amend the Series B Purchase Agreement by deleting therefrom Section 7 in its
entirety. Any and all registration rights granted by the Company to such
Purchasers are as set forth in this Section 7.
SECTION 8
Right of First Offer
8.1. Right of First Offer Upon Issuance of New Securities.
(a) The Company hereby grants to the Purchasers the right of first offer
to purchase any or all "New Securities" (as hereinafter defined) on a
proportionate basis as defined in Section 8.1(b). For purposes of this
Section 8.1, "New Securities" shall mean any capital stock of the Company
whether now authorized or not, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock and any borrowings, direct or indirect, from
financial institutions or other persons by the
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Company, whether or not presently authorized, including any type of loan or
payment endorsed by any type of debt instrument, but only to the extent such
borrowings contain any equity features, but "New Securities" shall not
include (i) securities issued to employees, directors or officers of, or
consultants to, the Company as permitted by Section 7.14 of the Series A
Purchase Agreement or 6.11(b) of this Agreement, (ii) shares of capital stock
issued upon conversion of the Series A Preferred Shares, Series B Preferred
Shares or Series C Preferred Shares, (iii) securities issued as part of the
purchase price in connection with the closing of an acquisition by the
Company of all or substantially all the assets or stock of another entity or
person, approved by the Company's Board of Directors, (iv) warrants issued in
connection with business transactions, including corporate partnerships,
approved by the Company's Board of Directors or securities issued pursuant to
such warrants and (v) the sale of Series C Preferred Shares pursuant to this
Agreement.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Purchasers written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Purchaser shall have
thirty (30) days from the date such notice is given to agree to purchase any
or all of the New Securities up to such Purchaser's proportionate share, for
the price and upon the general terms specified in the notice by giving
written notice to the Company and stating the quantity of New Securities to
be purchased. As used in this Section 8.1, and except as otherwise provided,
the term "proportionate share" shall mean, with respect to each Purchaser who
is entitled to receive the particular offer, the total number of New
Securities proposed to be issued, multiplied by a fraction, the numerator of
which shall be the sum of (i) the total number of shares of Common Stock
owned by such Purchaser (prior to such contemplated issuance), but excluding
the Common Shares (as defined in the Series A Purchase Agreement), if any,
owned by such Purchaser and (ii) the total number of shares of Common Stock
into which the shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and other convertible securities of the Company, if
any, held by such Purchaser (prior to such contemplated issuance) are
convertible, and the denominator of which shall be the sum of (i) the total
number of shares of Common Stock owned by all Purchasers (prior to such
contemplated issuance), but excluding the Common Shares (as defined in the
Series A Purchase Agreement), if any, owned by all Purchasers and (ii) the
total number of shares of Common Stock into which the shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and other
convertible securities of the Company held by all Purchasers (prior to such
contemplated issuance) are convertible.
(c) Each Purchaser shall have a right of over-allotment such that if any
Purchaser fails to exercise such Purchaser's right hereunder to purchase such
Purchaser's full proportionate share of the New Securities proposed to be
issued (the "Incomplete Purchasers"), the Purchasers purchasing their full
respective proportionate share of such New Securities (the "Complete
Purchasers") may purchase the portion of such New Securities which has not
been purchased by the Incomplete Purchasers as hereinafter provided. The
Complete Purchasers shall have fifteen (15) days from the date notice is
given by the Company to the Complete Purchasers that such Incomplete
Purchasers have rejected or failed to accept their right to purchase their
proportionate
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<PAGE>
share of New Securities, to agree to purchase up to such Complete Purchaser's
proportionate share of such New Securities not purchased by the Incomplete
Purchasers. Notwithstanding anything in Section 8.1(b) to the contrary, as
used in this Section 8.1(c) with respect to the Complete Purchasers only,
each Complete Purchaser's "proportionate share" shall be calculated by
excluding from the denominator of the fraction the total number of shares of
Common Stock of any Incomplete Purchaser and the total number of shares of
Common Stock of any Incomplete Purchaser and the total number of shares of
Common Stock into which the shares of such Incomplete Purchaser's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock or
other convertible securities, if any, are convertible.
(d) In the event the Purchasers fail to exercise the right of first
offer and right of over-allotment within said forty-five (45) day period for
the full amount of New Securities proposed to be issued, the Company shall
have sixty (60) days thereafter to sell or enter into an agreement (pursuant
to which the sale of New Securities covered thereby shall be closed, if at
all, within sixty (60) days from the date of said agreement) to sell the New
Securities respecting which the Purchasers' options were not exercised, at a
price and upon general terms no more favorable to the purchasers thereof than
specified in the Company's notice to the Purchasers. In the event the
Company has not sold within said 60-day period or entered into an agreement
to sell the New Securities within said 60-day period (or sold and issued New
Securities in accordance with the foregoing within sixty (60) days from the
date of said agreement), the Company shall not thereafter issue or sell any
New Securities, without first offering such securities to the Purchasers in
the manner provided above.
(e) The right of first offer granted under this Section 8.1 shall expire
upon, and shall not be applicable to, the first sale of Common Stock of the
Company to the public in an underwritten public offering, effected pursuant
to a registration statement filed with, and declared effective by, the
Commission under the Securities Act covering the offer and sale of Common
Stock for the account of the Company to the public at a public offering price
of at least $7.00 which results in net proceeds to the Company of not less
than $10,000,000.
8.2. Termination of Rights of First Offer. If in connection with an
offering of New Securities in which the Purchasers have the right, pursuant
to Section 8.1 above, to purchase their proportionate share of such New
Securities, any Purchaser declines to purchase such Purchaser's full
proportionate share of such New Securities, then such Purchaser's rights
pursuant to Section 8.1 shall terminate as to any subsequent offering of New
Securities.
8.3. Termination of Section 9.1 of the Series A Purchase Agreement
and Sections 8.1 and 8.2 of the Series B Purchase Agreement. The Company,
Bologna, Weinberg and such of the Purchasers as are party to the Series A
Purchase Agreement (together with Bologna and Weinberg, the "Series A
Purchasers"), constituting all of the parties to the Series A Purchase
Agreement, hereby amend the Series A Purchase Agreement by deleting therefrom
Section 9.1 in its entirety. The Company and such of the Purchasers as are
party to the Series B Purchase Agreement (the "Series B Purchasers"),
constituting all of the parties to the Series B Purchase Agreement, hereby
amend the Series B Purchase Agreement by deleting therefrom Sections 8.1
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and 8.2 in their entirety. Except as specifically set forth in Section 7.12
above and this Section 8.3, each of the Series A Purchase Agreement and the
Series B Purchase Agreement shall remain in full force and effect. In
addition, each Series A Purchaser and each Series B Purchaser hereby waives
any preemptive right it may have to purchase the Series C Preferred Shares to
be issued pursuant hereto.
SECTION 9
Confidentiality
9.1. Agreement to Hold in Confidence and Not Disclose Confidential
Information. Notwithstanding any other provision of this Agreement, and
except as otherwise provided in Section 9.2 below, each Purchaser shall hold
in confidence and not disclose to any other person or entity any Confidential
Information (as defined in subsection 9.3 below) of the Company without the
prior written consent of the Company.
9.2. Permitted Disclosure of Confidential Information.
Notwithstanding Section 9.1 above, a Purchaser may disclose Confidential
Information to a Purchaser Representative, the term "Purchaser
Representative" being defined to mean an affiliate of such Purchaser, or any
partner, officer, employee, advisor, legal counsel, consultant or other agent
or representative of or to such Purchaser or such affiliate. The Company
hereby acknowledges that the Purchaser regularly sends investment reports and
updates to his, her or its respective partners, which reports and updates
contain information concerning the investments made by such Purchaser. Prior
to or simultaneously with any such disclosure to a Purchaser Representative,
a Purchaser shall use its good faith efforts to give the Purchaser
Representative a copy of this Section 9 under cover of a letter or memo
addressed to the Purchaser Representative, or otherwise indicate to the
Purchaser Representative that the information being disclosed is confidential
and subject to restrictions.
9.3. Definition of "Confidential Information." The term
"Confidential Information" means any information of the Company in any medium
or media marked "confidential" or indicated to be confidential in writing or
orally at the time of disclosure, or which a Purchaser or Purchaser
Representative knew to be confidential, and shall include, without
limitation, (i) technical, engineering and other scientific information that
has been created, discovered or developed for, or assigned or entrusted to,
the Company which relates to its products, processes, operations and/or
technologies; (ii) inventions, improvements, materials, articles, equipment,
processes, designs and techniques whether or not patented or patentable, and
expressions protected or protectable by copyright, made or conceived or
reduced to practice or learned by the Company, or by any person for or on
behalf of it, which relate to the business of the Company; (iii) personal
privacy data concerning any employees, consultants or other service providers
or testing or survey subjects of the Company; (iv) financial records,
business plans, customer lists and other books and records of the Company;
provided, however, notwithstanding the foregoing, Confidential Information
shall not include information which: (a) was in a
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<PAGE>
Purchaser's or Purchaser Representative's possession or knowledge or was
known to the public or in published literature prior to the Company's
disclosure or making available of such Confidential Information to such
Purchaser, or (b) subsequent to the time of the Company's disclosure or
making available of such Confidential Information to a Purchaser, becomes
known to the public or finds its way into the published literature through no
fault of any Purchaser or Purchaser Representative, or (c) is lawfully
acquired by a Purchaser from a third party who is not under a confidentiality
agreement with the Company with respect to such information (and who is not a
Purchaser, a Purchaser Representative or an affiliate of any thereof).
9.4. Injunctive Relief. The parties acknowledge and agree that,
without limiting any other rights and remedies they may have, the Company
shall be entitled to immediate injunctive and other equitable relief to
prevent or remedy a breach of any of the provisions of this Section 9
relating to protection of Confidential Information of the Company, and to
obtain the enforcement of such provisions, and, if any such injunctive or
other equitable relief is sought, the Purchasers will not raise as a defense
that there is an adequate remedy at law.
9.5. Survival. The provisions of this Section 9 relating to
protection of Confidential Information of the Company shall survive, with
respect to each Purchaser, the termination of such Purchaser's interest in
the Company under this Agreement and shall survive the termination of this
Agreement.
9.6. Confidentiality of Indentity of Lombard Odier & Cie. The
Company will not use the name "Lombard Odier & Cie." in any of its public
communications without the prior written consent of Lombard Odier & Cie.
Notwithstanding the foregoing, the Company may, without Lombard Odier &
Cie.'s prior written consent, (a) refer to Lombard Odier & Cie. in its books,
records and internal communications to Directors, officers and employees of
the Company and to the Company's independent auditors and legal counsel, (b)
publicly identify "RYCO & Co." as a stockholder of the Company provided that
no other reference to the name "Lombard Odier & Cie." is made in conjunction
therewith, (c) refer to or publicly disclose the name "Lombard Odier & Cie."
when the Company has been advised by its counsel that it is legally compelled
to do so, whether by law, governmental order, subpoena, rule or regulation,
provided, that to the extent practicable prior to such disclosure (but in any
event promptly after such disclosure), the Company shall give notice to
Lombard Odier & Cie. of the Company's obligation to disclose such information
so that Lombard Odier & Cie. may seek confidential treatment, a protective
order or other appropriate remedy, and (d) make certain of the Company's
books, records and communications, including those books, records and
communications that have references to Lombard Odier & Cie., available to
persons who are obligated to keep such books, records and communications
confidential.
SECTION 10
Miscellaneous
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<PAGE>
10.1. Additional Parties. Any other person or entity desiring to
purchase shares of Series C Preferred Stock hereunder may, with the written
consent of the Company and the Board of Directors of the Company, become a
party to this Agreement by executing a counterpart of this Agreement
indicating the number of shares of Series C Preferred Stock such entity
intends to purchase, whereby such entity agrees, subject to the terms and
conditions of this Agreement, to purchase such shares of Series C Preferred
Stock, and to be bound as a Subsequent Purchaser to all of the terms and
conditions of this Agreement, as this Agreement may be amended from time to
time in accordance with its terms, and thereafter such Subsequent Purchaser
shall have all the rights and obligations of a Subsequent Purchaser hereunder.
10.2. Governing Law; Consent to Jurisdiction. This Agreement shall be
governed in all respects by the laws of The Commonwealth of Massachusetts.
10.3. Survival. The representations and warranties made herein shall
survive the Closing Date indefinitely, and all such representations and
warranties and all covenants and agreements made herein shall be deemed to be
material and to have been relied upon by the parties hereto, notwithstanding
any investigation hereto or hereafter made by them, or on their respective
behalf. Each of the covenants, agreements and indemnifications contained
herein shall survive indefinitely, unless otherwise expressly provided herein.
10.4. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that any successor, assignee or other such
transferee shall assume the obligations of such assignor or transferor
hereunder; and provided, further, that the Company may not assign its rights
hereunder.
10.5. Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated, except by a written instrument signed by the Company and
Purchasers holding not less than 75% of the outstanding Series C Preferred
Shares held by Purchasers.
10.6. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class
mail, postage prepaid, return receipt requested, or delivered either by hand
or by messenger, or sent by overnight courier, addressed (a) if to a Initial
Purchaser, at the address set forth for such Initial Purchaser on the
Schedule of Purchasers attached hereto or at such other address as such
Initial Purchaser shall have furnished to the Company in writing or (b) if to
any other holder of Series C Preferred Shares or any Common Stock issued upon
conversion of Series C Preferred Shares at such address as such holder shall
have furnished the Company in writing, or, until any such holder so furnishes
an address to the Company, then to and at the address of the last holder
thereof who has so furnished an address to the Company, or (c) if to the
Company, at its address set forth at the beginning of this Agreement, or at
such other address as the Company shall have
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<PAGE>
furnished to the Purchasers and each such other holder in writing, with a
copy to Nutter, McClennen & Fish, LLP, One International Place, Boston,
Massachusetts 02110, Attention: Constantine Alexander, Esquire.
10.7. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to (i) any Purchaser or holder of any Series
C Preferred Shares, upon any breach or default of the Company under this
Agreement or (ii) the Company, upon any breach or default of a Purchaser or
holder of any Series C Shares under this Agreement, shall impair any such
right, power or remedy of such holder or the Company nor shall it be
construed to be a waiver of any such breach or default, or an 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 any
holder or the Company of any breach or default under this Agreement, or any
waiver on the part of any holder or the Company of any provisions or
conditions of this Agreement must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement or by law or otherwise afforded to any holder or
the Company, shall be cumulative and not alternative.
10.8. Separability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
10.9. Expenses. Each of the Company and the Purchasers shall bear
its own expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby.
10.10. 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.
10.11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all material of which
together shall constitute one instrument.
10.12. Remedies. In the event of a breach of the representations and
warranties set forth in Section 2 above which has the effect of materially
and adversely affecting the Company's business, operations or financial
condition as represented in said Section 2, each Purchaser shall, in addition
to any other remedy available under applicable law, be entitled to rescind
such Purchaser's purchase of the Series C Preferred Shares hereunder.
10.13. Pronouns. Words of the neuter gender shall be deemed and
construed to include correlative words of the masculine and feminine genders
unless the context shall otherwise indicate.
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<PAGE>
Rest of Page Intentionally Left Blank
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date above written.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/
--------------------------------
Michael G. Palfreyman, Vice President
PURCHASERS:
CW VENTURES II, L.P.
By: CW Partners III, L.P., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
ACCEL IV L.P.
By: Accel IV Associates, L.P., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
ACCEL INVESTORS '93 L.P.
By: /s/
--------------------------------
Title:
-----------------------------
General Partner
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<PAGE>
ACCEL JAPAN L.P.
By: Accel Japan Associates, L.P., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc., its General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
ELLMORE C. PATTERSON PARTNERS
By: /s/
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
PROSPER PARTNERS
By: /s/
--------------------------------
Print Name:
-----------------------
Attorney-in-Fact
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P., its
General Partner
By: /s/
--------------------------------
Print Name:
-----------------------
General Partners
NEW ENTERPRISE ASSOCIATES 5
By: /s/
--------------------------------
Print Name:
-----------------------
General Partner
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<PAGE>
VENROCK ASSOCIATES
By: /s/
--------------------------------
Print Name:
-----------------------
General Partners
VENROCK ASSOCIATES II, L.P.
By: /s/
--------------------------------
Print Name:
-----------------------
General Partners
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its General
Partner
By: Advent International Corporation, its General Partner
By: /s/
--------------------------------
Jason S. Fisherman, Senior Investment
Manager
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its
General Partner
By: Advent International Corporation, its General
Partner
By: /s/
--------------------------------
Jason S. Fisherman, Senior
Investment Manager
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation, its
General Partner
By: /s/
--------------------------------
Jason S. Fisherman, Senior
Investment Manager
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<PAGE>
ADVENT PERFORMANCE MATERIALS LIMITED PARTNERSHIP
By: Advent International Limited Partnership, its
General Partner
By: Advent International Corporation, its
General Partner
By: /s/
--------------------------------
Jason S. Fisherman, Senior
Investment Manager
LOMBARD ODIER & CIE.
By: /s/
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
/s/
----------------------------------
Bernard Mach
For purposes of Section 7.12 and 8.3 only:
/s/
----------------------------------
Thomas A. Bologna
/s/
----------------------------------
Barry Weinberg
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<PAGE>
SUBSEQUENT PURCHASER:
Name:
By:
--------------------------------
Title:
----------------------------
Address:
----------------------------
Shares of Series C Preferred Stock to be purchased
at Subsequent Closing:
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<PAGE>
Exhibit 10.5
SUBSEQUENT PURCHASE AGREEMENT
AGREEMENT, dated this 5th day of November 1996, by and between SCRIPTGEN
Pharmaceuticals, Inc. (the "Company"), a Delaware corporation with its principal
place of business at 200 Boston Avenue, Suite 3000, Medford, Massachusetts
02155, and Lombard Odier & Cie (the "Purchaser"), a Swiss company with its
principal place of business at 11 rue de la Corraterie, 1204 Geneva,
Switzerland.
WHEREAS, the Company desires to issue and sell, and the Purchaser desires
to purchase, 1,111,333 shares of the Series C Preferred Stock of the Company,
upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions herein contained, the parties hereto agree as follows:
1. Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company previously has
authorized the sale and issuance of 5,100,000 shares of its Series C Preferred
Stock, par value $.01 per share (the "Series C Preferred Stock"), such class of
stock having the rights, restrictions, privileges and preferences set forth in
the Amended and Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"). Such prior authorization covers the 1,111,333
shares of Series C Preferred Stock being sold to the Purchaser hereunder (the
"Series C Preferred Shares"), with respect to which shares the Purchaser will be
considered a Subsequent Purchaser pursuant to and in accordance with Section
10.1 of the Series C Stock Purchase Agreement dated as of May 17, 1996 by and
among the Company and the persons listed on Exhibit 1 thereto (the "Original
Series C Agreement").
1.2 Closing. Subject to the terms and conditions of and in reliance
upon the representations and warranties and agreements contained in the Original
Series C Agreement, as modified herein, the Company will issue and sell to the
Purchaser, and the Purchaser will purchase, the Series C Preferred Shares. The
purchase and sale of the Series C Preferred Shares shall occur at a closing (the
"Closing") to be held (whether via facsimile or otherwise) at the offices of
Nutter, McClennen & Fish, LLP, One International Place, Boston, Massachusetts
02110, at a time and on a date to be agreed upon by the Company and the
Purchaser (the "Closing Date"). The Closing shall be considered both a
"Closing" and a "Subsequent Closing" as those terms are defined in the Original
Series C Agreement.
1.3 Delivery. At the Closing, the Company shall deliver to the
Purchaser a certificate evidencing the Series C Preferred Shares, registered on
the books of the Company in such names as the Purchaser requests, and the
Purchaser shall make payment to the Company in the amount of $2,000,399.40.
Such payment shall be made, at the option of the Purchaser, by check, wire
transfer or any combination thereof. Pursuant to Section 1.3 of the Original
Series C Agreement, at the Closing, the Purchaser shall deliver to the Company
an executed counterpart of the Original Series C Agreement.
<PAGE>
1.4 Option. The Company hereby grants the Purchaser an option (the
"Option") to purchase up to 1,111,111 (but no less than 555,555) additional
shares of Series C Preferred Stock at a purchase price of $1.80 per share, such
option to be exercised by written notice given in accordance with Section 10.6
of the Original Series C Agreement and received by the Company on or prior to
December 31, 1996. Upon exercise of the Option, the Company shall increase the
number of authorized preferred stock by 900,000 shares, all of which shall be
designated Series C Preferred Stock.
2. Restated Representations and Warranties
and Schedule of Exceptions of the Company
The Company hereby modifies and restates the representations and warranties
and the Schedule of Exceptions contained in the Original Series C Agreement. As
so modified and restated, the representations and warranties contained herein,
and the Schedule of Exceptions attached hereto as Schedule 1, are true, complete
and correct as of the date hereof.
2.1 Organization and Standing: Articles and By-Laws. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of its state of organization and is qualified to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification, except where the failure to so qualify
would not have a material adverse effect upon the business, operations or
prospects of the Company. The Company has the requisite corporate power to own
properties owned by it and to conduct business as now being conducted by it and
as contemplated by it and possesses all governmental and other permits, licenses
and other authorizations to own its properties as now owned and to conduct its
business as now conducted. The Company has furnished the Purchaser with true,
correct and complete copies of its Certificate of Incorporation, By-Laws and all
amendments to each to date.
2.2 Corporate Power. The Company has all requisite corporate power to
enter into this Agreement, and will have at the Closing Date all requisite
corporate power to sell the Series C Preferred Shares and to carry out and
perform its obligations under the terms of this Agreement.
2.3 Subsidiaries. The Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
2.4 Capitalization. Immediately prior to the Closing, the Company's
authorized capital stock will consist of (a) 30,000,000 shares of Common Stock,
$.01 par value ("Common Stock"), of which (i) 3,447,152 shares will be issued
and outstanding immediately prior to the Closing, (ii) 6,403,325 shares have
been reserved for issuance upon conversion of the outstanding shares of the
Company's Series A Preferred Stock, $.01 par value (the "Series A Preferred
Stock"), (iii) 153,000 shares are set aside for issuance upon the exercise of
warrants and other stock purchase rights for Series A Preferred Stock and the
conversion thereof into
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<PAGE>
Common Stock, (iv) 6,579,086 shares have been reserved for issuance upon
conversion of the outstanding shares of the Company's Series B Preferred Stock,
$.01 par value (the "Series B Preferred Stock," and together with the Series A
Preferred Stock and the Series C Preferred Stock, the "Preferred Stock"), (v)
1,634,733 shares have been reserved for issuance upon conversion of those shares
of Series C Preferred Stock issued to the Initial Purchasers pursuant to the
Original Series C Agreement, (vi) 55,555 shares are set aside for issuance upon
the exercise of warrants and other stock purchase rights for Series C Preferred
Stock and the conversion thereof into Common Stock, (vii) 617,407 shares have
been reserved for issuance upon conversion of the Series C Preferred Shares to
be issued to the Purchaser hereunder, (viii) 617,283 shares have been reserved
for issuance upon the conversion of Series C Preferred Stock issuable to the
Purchaser pursuant to the option described in Section 1.4 hereunder, (ix)
1,280,100 shares are set aside for issuance upon exercise of outstanding stock
options and other stock purchase rights, (x) 1,543,784 shares are issued and
outstanding, subject to forfeiture, pursuant to restricted stock agreements
between the Company and certain of its employees and consultants, and (xi)
1,103,002 shares are held by the Company in its treasury and (b) 21,500,000
shares of Preferred Stock, (1) 6,700,000 shares of which have been designated
Series A Preferred Stock, of which 6,403,325 shares are outstanding as of the
Closing, (2) 9,700,000 shares of which have been designated Series B Preferred
Stock, of which 6,579,086 shares are outstanding as of the Closing, and (3)
5,100,000 shares of which have been designated Series C Preferred Stock, of
which 2,942,521 shares will be outstanding prior to the Closing and 4,053,854
shares will be outstanding after consummation of the transactions contemplated
hereby. All the aforesaid issued and outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock have
been duly authorized and validly issued, fully paid and are nonassessable, and
owned of record and beneficially by the stockholders of the Company and in the
amounts set forth in the Schedule of Exceptions, and has been offered, issued,
sold and delivered by the Company in compliance with applicable Federal and
state securities laws. The Schedule of Exceptions sets forth a complete and
accurate list of all holders of the capital stock of the Company, including
options and warrants to purchase shares of the Company's capital stock, and the
class and number of shares, or shares issuable upon exercise, as the case may
be, held by each such holder. There are no outstanding preemptive, conversion
or other rights or agreements granted or issued by or binding on the Company for
the purchase or acquisition of, or with respect to, any shares of its capital
stock. No stockholder has granted the Company options or other rights to
purchase any shares of capital stock of the Company from such stockholder.
Neither the offer, issuance or sale of the Series C Preferred Shares nor the
consummation of any transaction contemplated hereby will result in a change in
the price or number of any securities of the Company outstanding at the Closing
under anti-dilution provisions contained in or affecting any such securities.
The Company holds no shares of its Preferred Stock in its treasury.
2.5 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the authorization, execution,
delivery and performance by the Company of this Agreement, and the consummation
of the transactions contemplated herein, and for the authorization, issuance and
delivery of the Series C Preferred Shares and the shares of Common Stock
issuable upon conversion of the Series C Preferred Shares, has been taken or
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will be taken prior to the Closing. This Agreement constitutes the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms. The execution, delivery and performance by the
Company of this Agreement and compliance herewith and the issuance and sale of
the Series C Preferred Shares and the issuance of Common Stock upon conversion
of the Series C Preferred Shares will not (a) result in any violation of, and
will not conflict with, or result in a breach of any of the terms of, or
constitute a default under, the Company's Certificate of Incorporation or
By-Laws, both as amended, any mortgage, indenture, agreement, instrument,
judgment, decree, order, rule or regulation or other restriction to which the
Company is a party or by which it, or any of its assets, is bound, or any
provision of state or Federal law to which the Company is subject, or (b) result
in 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 (c) result
in the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Company's
operations or any of its assets or properties. The Series C Preferred Shares,
when issued in compliance with the provisions of this Agreement: (i) will be
duly authorized, validly issued, fully paid and nonassessable; (ii) will be free
of any liens or encumbrances; and (iii) will have the rights, privileges and
preferences as set forth in the Certificate of Incorporation. The shares of
Common Stock issuable upon conversion of the Series C Preferred Shares have been
duly and validly reserved and are not subject to any preemptive rights or rights
of first refusal and, upon issuance, will be duly authorized, validly issued,
fully paid and nonassessable.
2.6 Financial Information. Attached hereto as Exhibits 2.6A and
2.6B, respectively, are true copies of: (a) the audited balance sheet of the
Company as at December 31, 1995, together with audited statements of operations,
shareholders' equity and cash flows of the Company for the year then ended
(collectively, the "Audited Financial Statements"); and (b) the unaudited
balance sheet of the Company as at September 30, 1996 (the "Balance Sheet"),
together with unaudited statements of operations and cash flows of the Company
for the 9-month period then ended (collectively, the "Unaudited Financial
Statements," and together with the Audited Financial Statements, the "Financial
Statements"). Each of the Financial Statements presents fairly the financial
position and results of operations of the Company at the dates and for the
periods to which they relate, in accordance with generally accepted accounting
principles consistently applied throughout and across the periods involved
(except as may otherwise be disclosed in the Financial Statements) and show all
liabilities of the Company required to be recorded thereon in accordance with
generally accepted accounting principles as at the dates thereof, subject, in
the case of the Unaudited Financial Statements, to normal year-end adjustments.
The Company has no material liabilities (fixed or contingent, including without
limitation any tax liabilities due or to become due) which are not fully
reflected or provided for on the Balance Sheet. The Company does not know of
any such material liability of any nature, direct or indirect, contingent or
otherwise, or in any amount not adequately reflected or reserved against in the
Balance Sheet.
2.7 Absence of Certain Changes. At all times since December 31, 1995
up to and including the Closing, there has not been any event or condition of
any character which has
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materially adversely affected the Company's business, operations or financial
condition, including but not limited to:
(a) Any material adverse change in the condition, operating results,
assets, liabilities or business of the Company from that shown on the
Financial Statements;
(b) Any damage, destruction or loss of any of the properties or assets of the
Company (whether or not covered by insurance) materially adversely affecting
the assets, properties, financial condition, operating results, prospects,
business or plans of the Company;
(c) Any waiver by the Company of a valuable right or of a debt owed to
it;
(d) Any material change or material amendments to a contract or
arrangement by which the Company or any of its assets or properties is bound
or subject;
(e) Any declaration, setting aside or payment or other distribution in
respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the
Company; or
(f) Any labor trouble.
2.8 Taxes. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by the appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with The Commonwealth of
Massachusetts and the State of Delaware and (except to the extent that the
failure to file would not have a material adverse effect on the condition or
operations of the Company) with all other jurisdictions where such filing is
required by law; and the Company has paid, or has made adequate provision in
the Financial Statements for the payment of, all taxes, interest, penalties,
assessments or deficiencies (i) shown to be due or claimed to be due on or in
respect of such tax returns and reports or (ii) on the income, profits,
property or business of the Company. The Company knows of (i) no other tax
returns or reports which are required to be filed which have not been so
filed and (ii) no unpaid assessment for additional taxes for any fiscal
period or any basis therefor. The Company's Federal income tax returns have
not been audited by the Internal Revenue Service.
2.9 Outstanding Debt. Except as reflected on the Balance Sheet,
the Company has no outstanding indebtedness for borrowed money and is not a
guarantor or otherwise contingently liable for any indebtedness for borrowed
money (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds
or otherwise invest in any debtor or otherwise to insure any creditor against
loss). There exists no default under the provisions of any instrument
evidencing any such indebtedness or otherwise or of any agreement relating
thereto, including, without limitation, those included or referred to in the
Schedule of Exceptions and on the Balance Sheet. No officer, director or
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stockholder of the Company or any of his, her or its relatives or affiliates is
indebted to the Company in an amount in excess of $5,000 per person or entity.
2.10 Contracts; Insurance. Except as disclosed in the Schedule of
Exceptions, the Company has no currently existing contract, obligation,
agreement, plan, arrangement, commitment or the like (whether written or oral)
of any material nature (involving more than $10,000 in any year or $50,000 over
the life of such contract, obligation, agreement, plan, arrangement, or
commitment, either individually or in the aggregate if such contracts,
obligations, agreements, plans, arrangements or commitments are of a similar
nature or with the same party) including without limitation the following:
(a) Employment, bonus or consulting agreements, pension, profit sharing,
deferred compensation, stock bonus, retirement, stock option, stock purchase,
phantom stock or similar plans, including agreements evidencing rights to
purchase securities of the Company and agreements among stockholders and the
Company;
(b) Loans or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the Company's property or any agreement or instrument
evidencing any guaranty by the Company of payment for performance by any
other person;
(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person for the
furnishing or purchase of machinery, equipment, goods or services, including,
without limitation, agreements with processors and subcontractors;
(f) Any indenture, agreement, or other document (including private
placement brochures) relating to the sale or repurchase of shares of the
Company's capital stock;
(g) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a party;
(h) Agreements expressly limiting the freedom of the Company to compete
in any line of business or in any geographic area or with any person;
(i) Agreements providing for the disposition of the business, assets or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
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(j) Letters of intent or agreements with respect to the acquisition of the
business, assets or shares of any other business;
(k) Insurance policies;
(l) Assignments, licenses or other agreements with respect to any
intangible property (including, without limitation, any patent, trademark,
trade name, copyright, know-how, trade secret, proprietary right or
confidential information); or
(m) Any other contract, instrument, commitment, plan, agreement or
arrangement, a copy of which would be required to be filed with the
Securities and Exchange Commission (the "Commission") as an exhibit to a
registration statement on Form S-1 if the Company were registering securities
under the Securities Act of 1933, as amended (the "Securities Act").
The Company has complied with all the material provisions of all said
contracts, obligations, agreements, plans, arrangements and commitments and
there does not exist any event of default with respect to the Company under
any such agreement or any event which, after notice or lapse of time or both,
would constitute an event of default with respect to the Company under such
agreement. There is no action, suit, proceeding or investigation pending or,
to the best of the Company's knowledge and belief, threatened against the
Company before any court or before any governmental or administrative agency
for the renegotiation of or any other adjustment of any such agreement.
2.11 Litigation and Bankruptcy Proceedings.
(a) There is neither pending nor, to the best of the Company's knowledge and
belief, threatened any action, suit, proceeding or claim or, to the best of the
Company's knowledge, any basis therefor, whether or not purportedly on behalf of
the Company, to which the Company is or may be named as a party or to which its
property is or may be subject or to which any officer, key employee or principal
stockholder of the Company is subject, and (i) in which an unfavorable outcome,
ruling or finding in any such matter or for all such matters taken as a whole
might have a material adverse effect on the condition, financial or otherwise,
prospects or operations of the Company, or (ii) in which a third party seeks
damages from the Company based on the Company's previous use of the name
"ScripTech;" and the Company has no knowledge of any unasserted claim, the
assertion of which is likely and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or nonmonetary relief, which
claim individually or collectively with other such unasserted claims if granted
would have a material adverse effect on the condition, financial or otherwise,
business or operations of the Company.
(b) The Company has not admitted in writing its inability to pay its debts
generally as they become due, filed or consented to the filing against it of a
petition to take advantage of any
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insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other similar law or
statute of the United States of America or any other jurisdiction.
2.12 Consents. Subject in part to the continuing truth and accuracy
of the representations set forth in Sections 3.8 and 3.9 of the Original Series
C Agreement, no consent, approval, qualification, order or authorization of, or
filing with, any governmental authority, including the Secretary of State of the
State of Delaware, is required in connection with the Company's valid execution,
delivery or performance of this Agreement, or the offer, sale or issuance of the
Series C Preferred Shares by the Company, the issuance of Common Stock upon the
conversion of the Series C Preferred Shares or the consummation of any other
transaction contemplated on the part of the Company hereby, except for such
filings as will have been made prior to the Closing.
2.13 Title to Properties; Liens and Encumbrances; Leases. The Company
owns no real property. The Company has good and marketable title to and a valid
and indefeasible ownership interest in all the property and assets owned by it,
free from all mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges.
Set forth on the Schedule of Exceptions is a correct and complete list of
all leases under which the Company is a lessee. The Company enjoys peaceful and
undisturbed possession under all such leases, all of such leases are valid and
subsisting and the Company is not in default under any of such leases in any
material respect.
2.14 Business of the Company. There is no pending or, to the best of
the Company's knowledge and belief, threatened claim or litigation against or
affecting the Company contesting its right to perform any of the services
presently conducted or proposed to be conducted by the Company or to produce,
manufacture, sell or use any product, process, method, substance, part or other
material presently produced, manufactured, sold or used or planned to be
produced, manufactured, sold or used by the Company in connection with the
business and operations of the Company. The Company has no knowledge or belief
that (i) there exists, or there is pending or planned, any patent, invention,
device, application or principle, or any statute, rule, law, regulation,
standard or code which would materially adversely affect the condition,
financial or otherwise, operations or prospects of the Company; or (ii) there is
any other factor (other than fire, flood, accident, act of war or civil
commotion, or any other cause or event beyond the control of the Company) which
materially adversely affects the condition, financial or otherwise, business or
the operations of the Company.
2.15 Permits, Franchises, Licenses, Trademarks, Patents and Other
Rights. The Company has, or when required will have, all permits, licenses and
other similar authority necessary in any material respect for the conduct of its
business as now being conducted by it and as planned to be conducted by it, and
the Company is not in default under any of such
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permits, licenses or other similar authority. The Schedule of Exceptions
includes a list of all patents owned by or licensed to the Company. The Company
possesses (whether as a licensee or otherwise) all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights, trade
secrets, information, proprietary rights and processes necessary to conduct its
business in any material respect as now being conducted and as planned to be
conducted without, to the best of the Company's knowledge and belief, conflict
with, or infringement upon, any valid rights of others, and with respect to such
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, trade secrets, information, proprietary rights and processes
has not received any notice of infringement upon or conflict with the rights of
others.
Except as disclosed in the Schedule of Exceptions, there are no outstanding
options, licenses or agreements of any kind relating to the foregoing, and no
stockholder, director, officer or employee of the Company has any interest in
any such patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, trade secrets, information, proprietary rights
and processes.
2.16 Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Series C Preferred Shares shall have been
fully paid, and all laws imposing such taxes shall have been fully complied with
in all material respects prior to the Closing.
2.17 Offering. Subject in part to the continuing truth and accuracy
of the Purchaser's representations set forth in the Original Series C Agreement,
the offer, sale and issuance of the Series C Preferred Shares and the issuance
of Common Stock upon conversion of the Series C Preferred Shares as contemplated
by this Agreement are exempt from the registration requirements of the
Securities Act, and from the registration or qualification requirements of the
laws of any applicable jurisdiction, and neither the Company nor anyone acting
on its behalf will take any action hereafter that would cause the loss of such
exemption.
2.18 Compliance with Other Instruments. The Company is not in
violation of any term of its Certificate of Incorporation or By-Laws, as
amended. The Company is not in violation of any term of any mortgage,
indenture, contract, agreement, instrument, judgment, decree, order, statute,
rule or regulation to which the Company is subject and a violation of which
would have a material adverse effect on the condition, financial or otherwise,
operations or prospects of the Company.
2.19 Employees. To the best of the Company's knowledge and belief, no
employee or consultant of the Company is, or is now expected to be, in violation
of any term of any employment contract, patent, disclosure agreement,
non-competition agreement, proprietary information and inventions agreement or
any other contract or agreement or any restrictive covenant or any other common
law obligation to a former employer relating to the right of any such employee
to be employed by the Company because of the nature of the business conducted or
to be conducted by the Company or to the use of trade secrets or proprietary
information of others, and the employment of the Company's employees does not
subject the Company or any
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Purchaser to any liability to a third party. There is neither pending nor, to
the best of the Company's knowledge and belief, threatened, any actions, suits,
proceedings or claims, or, to its knowledge, any basis therefor or threat
thereof with respect to any contract, agreement, covenant or obligation referred
to in the preceding sentence. The Company does not have any collective
bargaining agreement covering any of its employees.
To the best of the Company's knowledge and belief, after due inquiry,
neither Peter S. Kim nor Michael R. Green, nor any Ph.D.-qualified employee nor
any officer of the Company has any present intention of terminating his
employment or consulting arrangement with the Company, and the Company has no
present intention of terminating such employment or consulting arrangement.
2.20 Employee Benefit Plan Obligations. Except as otherwise disclosed
in the Schedule of Exceptions, the Company does not have any collective
bargaining, labor, profit sharing, pension, retirement, stock option, incentive,
benefit or other similar contract, plan or arrangement. The Company does not
sponsor, nor is it obligated to contribute to, any employee benefit plan (as
such term is defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")).
2.21 Environmental Matters; Hazardous Waste. Except as otherwise
disclosed in the Schedule of Exceptions, there have been no past and there are
no existing violations of Federal, state or local laws or regulations relating
to environmental protection or to the storage or disposal of hazardous waste
(including, but not limited to, asbestos, polychlorinated biphenyls and
petroleum products) relating to the Company or any of its businesses or
operations or assets. No inspection or investigation by the Environmental
Protection Agency or OSHA, or any other federal, state or local agency, has
resulted in a letter demanding cleanup of hazardous substances or waste,
citation, complaint or notice of violation, pursuant to any law, rule,
regulation, ordinance, judgment, decree, order, injunction or decision of any
court or governmental authority in regard to the Company or any of its
businesses or operations or any of its assets and no such citation, complaint,
notice or demand letter is pending or, to the best of the Company's knowledge
and belief, threatened.
To the best of the Company's knowledge and belief, there is no condition or
state of affairs existing on or about any real property owned, leased, operated
or used by the Company or any real property previously owned, leased, operated
or used by the Company (but only to the extent that such condition or state of
affairs existed on the date the Company ceased to own, lease, operate or use
such real property or was attributable to the Company's ownership, leasing,
operation or use of such real property) that would now or in the immediate
future require a closure under the provisions of the Resource, Conservation and
Recovery Act, or remedial or other action under the provisions of the Resource,
Conservation and Recovery Act or the Comprehensive Environmental Response,
Compensation and Liability Act, or the regulations promulgated under such acts,
or that would constitute a nuisance or violation of any environmental
legislation or regulation under the law of the state in which such property is
located.
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2.22 Ability to Comply; Burdensome Restrictions. The Company has the
ability and is presently in a position, legally and otherwise, to comply with
the terms of and perform all its obligations under this Agreement; and the
Company has no present knowledge of or any present reason to believe that the
Company will not have such ability and be in such a position for so long as any
shares of Series C Preferred Stock are outstanding.
The Company is neither presently obligated under any contract or agreement
nor subject to any corporate restriction which (i) materially and adversely
affects, or may, in the reasonable opinion of the Company, be expected to
materially and adversely affect, its business, properties, assets or condition
(financial or otherwise) or (ii) will legally or contractually restrict or
impair the ability of the Company to pay any dividends on or make other
distributions with respect to the Series C Preferred Shares pursuant to the
provisions of the Certificate of Incorporation.
2.23 Material Relationships. Except for investments held by entities
affiliated with Allan Ferguson or Barry Weinberg, to the best of the Company's
knowledge and belief, none of the officers, directors or key persons of the
Company, or their respective spouses or relatives, owns directly or indirectly,
individually or collectively, a material interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) the Company. For purposes of this Section 2.23, there may be
disregarded any purely passive economic interest which arises solely from the
ownership of less than a 2% equity interest in any such entity.
2.24 Registration Rights. Except as provided in the Original Series C
Agreement, the Company is not under any obligation to register any of its
currently outstanding securities or any of its securities which may hereafter be
issued.
2.25 Brokers' and Finders' Fees. The Company has retained no broker
or finder in connection with the transactions contemplated by this Agreement and
has no liability for any commission or compensation in the nature of an agent's
fee to any broker or finder or any other person. The Company will indemnify the
Purchaser for any such commission or compensation for which the Purchaser may be
held liable.
2.26 Untrue Statements and Omissions. This Section 2 does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Except as otherwise modified herein, the transactions contemplated between
the parties hereto shall be governed in their entirety by the terms and
conditions of the Original Series C Agreement. By signing below, the Purchaser
(i) represents and warrants that the representations and warranties made in
Section 3 of the Original Series C Agreement remain true, complete and correct
with respect to the Purchaser as of the date hereof, and (ii) acknowledges that
the Company is relying on the same in executing this Agreement and consummating
the transactions contemplated hereby.
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IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the
day and year first above written.
SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/
--------------------------------
Name:
Title:
LOMBARD ODIER & CIE
By: /s/
--------------------------------
Name:
Title:
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Exhibit 10.6
MASTER LEASE AGREEMENT
COMDISCO, INC. - LESSOR
MASTER LEASE AGREEMENT dated November 22, 1993 by and between COMDISCO,
INC. ("Lessor") and SCRIPTECH PHARMACEUTICALS, INC. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties
agree as follows (all capitalized terms are defined in Section 14.19):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Schedule.
In the event of a conflict, the terms of a Schedule prevail over this Master
Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment,
will be bound to its rental obligations for each item of Equipment and the term
of a Schedule will begin and continue through the Initial Term and thereafter
until terminated by either party upon prior written notice received during the
Notice Period. No termination may be effective prior to the expiration of the
Initial Term.
3. Rent and Payment.
Rent is due and payable in advance, in immediately available funds, on the
first day of each Rent Interval to the payee and at the location specified in
Lessor's invoice. Interim Rent is due and payable when invoiced. If any
payment is not made when due, Lessee will pay interest at the Overdue Rate.
Upon Lessee's execution of each Schedule, Lessee will pay Lessor the Advance
specified on the Schedule. The Advance will be credited towards the final Rent
payment if Lessee is not then in default. No interest will be paid on the
Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that,
so long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Schedule any manufacturer's warranties for the Equipment. LESSOR MAKES NO OTHER
WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS
<PAGE>
FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability, claim,
loss, damage or expense of any kind (including strict liability in tort) caused
by the Equipment except for any loss or damage caused by the negligent acts of
Lessor. In no event is Lessor responsible for special, incidental or
consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the
rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee
authorizes Lessor, as Lessee's agent, to prepare, execute and file in Lessee's
name precautionary Uniform Commercial Code financing statements showing the
interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Schedules as appropriate. Lessee
will, at its expense, keep the Equipment free and clear from any liens or
encumbrances of any kind (except any caused by Lessor) and will indemnify and
hold Lessor, Owner, any Assignee and Secured Party harmless from and against any
loss caused by Lessee's failure to do so.
5.2 Relocation and Sublease. Upon prior written consent, Lessee may
relocate Equipment to any location within the continental United States provided
(i) the Equipment will not be used by an entity exempt from federal income tax,
(ii) all additional costs (including any administrative fees, additional taxes
and insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor
and the Secured Party. Such consent to sublease will be granted if: (i) Lessee
meets the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) the sublease is
not to a leasing entity affiliated with the manufacturer of the Equipment
described on the Schedule. Lessor acknowledges Lessee's right to sublease for a
term which extends beyond the expiration of the Initial Term. If Lessee
subleases the Equipment for a term extending beyond the expiration of such
Initial Term of the applicable Schedule, Lessee will remain obligated upon the
expiration of the Initial Term to return such Equipment, or, at Lessor's sole
discretion to (i) return Like Equipment or (ii) negotiate mutually acceptable
lease extension or purchase. If the parties cannot mutually agree upon the
terms of an extension or purchase, the term of the Schedule will extend upon the
original terms and conditions until terminated pursuant to Section 2.
No relocation or sublease will relieve Lessee from any of its obligations
under this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have
been fixed by Lessor in order to permit Lessor to sell and/or assign or transfer
its interest or grant a security interest in each Schedule and/or the Equipment
to a Secured Party or Assignee.
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In that event, the term Lessor will mean the Assignee and any Secured Party.
However, any assignment, sale, or other transfer by Lessor will not relieve
Lessor of its obligations to Lessee and will not materially change Lessee's
duties or materially increase the burdens or risks imposed on Lessee. The
Lessee consent to and will acknowledge such assignments in a written notice
given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights,
but will not be obligated to perform any of the obligations of Lessor. The
Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense or
claim;
(c) Subject to and without impairment of Lessee's Leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Schedule constitutes a net lease. Lessee's obligation
to pay Rent and all other amounts is absolute and unconditional and is not
subject to any abatement, reduction, set-off, defense, counterclaim,
interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state and local taxes on the
capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Attachments and Reconfigurations; and Inspection
by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available, Lessee will
maintain in force a standard maintenance contract with the manufacturer of the
Equipment, or another party acceptable to Lessor, and will provide Lessor with a
complete copy of the contract. IF Lessee has the Equipment maintained by a
party other than the manufacturer, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then
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current release, revision and engineering change levels, and to re-certify the
Equipment as eligible for manufacturer's maintenance at the expiration of the
lease term. The lease term will continue upon the same terms and conditions
until recertification has been obtained.
7.2 Attachments and Reconfigurations. Upon receiving the prior written
consent of Lessor, Lessee may reconfigure and install Attachments on the
Equipment. In the event of such a Reconfiguration or Attachment, Lessee will,
upon return of the Equipment, at its expense, restore the Equipment to the
original configuration specified on the Schedule in accordance with the
manufacturer's specifications an din the same operating order, repair and
appearance as when installed (normal wear and tear excluded). IF any parts of
the Equipment are removed during a Reconfiguration or Attachment, Lessor may
require Lessee to provide additional security, satisfactory to the Lessor, in
order to ensure performance of Lessee's obligations set forth in this
subsection. Neither Attachments nor parts installed on Equipment in the course
of Reconfiguration will be accessions to the Equipment.
7.3 Inspection by Lessor. Upon request, Lessee, during reasonable business
hours and subject to Lessee's security requirements, will make the Equipment and
its related log and maintenance records available to Lessor for inspection.
8. Representation and Warranties of Lessee. Lessee hereby represents,
warrants and covenants that with respect to the Master Lease and each Schedule
executed hereunder;
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, locate) where its ownership or lease of property
or the conduct of its business requires such qualification; and has full
corporate power and authority to hold property under the Master Lease and each
Schedule and to enter into and perform its obligations under such Lease.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Certificate of
Incorporation or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Master Lease and each Schedule constitute legal, valid and binding agreements of
the Lessee, enforceable in accordance with their terms.
(c) There are no actions, suits, proceedings or patent claims pending or,
to the knowledge of the Lessee, threatened against or affecting the Lessee in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a
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material adverse effect on the ability of the Lessee to perform its obligations
under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations when have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee
is a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject tot he effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Schedule, Lessee shall,
pursuant to Lessor's instructions and at Lessee's full expense (including,
without limitation, expenses of transportation and in-transit insurance), return
the Equipment to Lessor in the same operating order, repair, condition and
appearance as when received, less normal depreciation and wear and tear. Lessee
shall return the Equipment to Lessor at its address set forth herein or at such
other address within the continental United States as directed by Lessor,
provided, however, that Lessee's expense shall be limited to the cost of
returning the equipment to Lessor's address as set forth herein. During the
period subsequent to receipt of a notice under Section 2, Lessor may demonstrate
the Equipment's operation in place and Lessee will supply any of its personnel
as may reasonably be required to assist in the demonstration.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest.
Lessee will keep all Equipment free from any other marking or labeling which
might be interpreted as a claim or ownership.
11. Indemnity.
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Lessee will indemnify and hold Lessor, any Assignee and any Secured Party
harmless from and against any and all claims, costs, expenses, damages and
liabilities, including reasonable Attorneys' fees, arising out of the ownership
(for strict liability in tort only), selection, possession, leasing, operation,
control, use, maintenance, delivery, return or other disposition of the
Equipment. However, Lessee is not responsible to a party indemnified hereunder
for any claim, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relives
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each
item of Equipment in an amount not less that the Casualty Value. All policies
for such insurance will name the Lessor and any Secured Party as additional
insured and as loss payee, and will provide for at least thirty (30 days prior
written notice of violation by Lessee of any representation, warranty or
condition contained in such policies and will be primary without right of
contribution from any insurance effected by Lessor. Upon the execution of any
Schedule, the lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such
Equipment has suffered a Casualty Loss. Within fifteen (15) days of a Casualty
Loss, Lessee will provide written notice of that loss to Lessor and Lessee will,
at Lessor's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically in Lessor or (b)
pay the Casualty Value and after that payment and the payment of all other
amounts due and owing, Lessee's obligation to pay further Rent for the item of
Equipment will cease.
13. Default, Remedies and Mitigation.
13.1. Default. The occurrence of any one or more of the following Events
of Default constitutes a default under a Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when
due if that failure continues for five (5) days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the Lessee
in the Schedule or in any document or certificate furnished to the Lessor
hereunder if that failure or inaccuracy continues for ten (10) days after
written notice; or
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(c) Any assignment by Lessee for the benefit of its creditors, the failure
by Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any petition under any bankruptcy or
insolvency law or for the appointment of a trustee or other officer with similar
powers, the adjudication of Lessee as insolvent, the liquidation of Lessee, or
the taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule or other
agreement between Lessee and Lessor or is Assignee or Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law of in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and recover
and present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of a law and in compliance with Lessee's
security requirements, Lessor may enter on Lessee's premises to remove and
repossess the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by
Law, are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of
Section 13.2, Lessor will use its best efforts in accordance with its normal
business procedures (and without obligation to give any priority to such
Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH
IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY
STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY
ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or
otherwise dispose of all or any part of the Equipment at a public or private
sale for cash or credit with the privilege of purchasing the Equipment. The
proceeds from any sale, lease or other disposition of the Equipment are defined
as either:
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(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
(b) if leased, the present value (discounted at three points over the prime
rate as referenced in the Wall Street Journal at the time of the mitigation) of
the rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14.1 Board Attendance. Lessor or its duly appointed representative will
have the right to attend Lessee's corporate Board of Directors meetings and
Lessee will give Lessor reasonable notice in advance of any special Board of
Directors meeting, which notice will provide an agenda of the subject matter to
be discussed at such board meeting. Lessee will provide Lessor with a certified
copy of the minutes of each Board of Directors meeting within thirty (30) days
following the date of such meeting held during the term of this Lease.
14.2 Financial Statements. Lessee will provide to Lessor the financial
statements specified in this Section, prepared in accordance with generally
accepted accounting principles, consistently applied (the "Financial
Statements"); provided, however, after the effective date of the initial
registration statement covering a public offering of Lessee's securities, the
term "Financial Statements" will be deemed to refer to only those statements
required by the securities and Exchange Commission, to be provided no less
frequently than quarterly. Lessee will provide to Lessor (i) as soon as
practicable (within thirty (30) days) after the end of each month, the same
information which Lessee provides to is Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows, certified by Lessee's Chief Executive or Financial Officer to be
true and correct; and (ii) as soon as practicable (and in any event within
ninety (90) days) after the end of each fiscal year, audited balance sheets as
of the end of such year (consolidated if applicable), and related statements of
income or loss, retained earnings or deficit any changes in the financial
position and capital structure of Lessee for such year, setting forth in
comparative form the corresponding figures for the preceding fiscal year, and
accompanied by an audit report and opinion of the independent certified public
accountants selected by Lessee. Lessee will promptly furnish to Lessor any
additional information (including but not limited to tax returns, income
statements, balance sheets, and names or principal creditors) as Lessor
reasonably believes necessary to evaluate Lessee's continuing ability to meet
financial obligations.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee,
Lessor will not be obligated to lease any Equipment which would have a
Commencement Date after said notice if: (i) Lessee is in default under this
Master Lease or any Schedule; (ii)
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Lessee is in default under any loan agreement, the result of which would allow
the lender or any secured party to demand immediate payment of the indebtedness;
(iii) there is a material adverse change in Lessee's credit standing; or (iv)
Lessor determines (in reasonable good faith) that Lessee will be unable to
perform its obligations under this Master Lease.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Master Lease
and all relevant documentation provided by Lessor. If Lessor elects to
terminate the Master Lease and all relevant Schedules, then Lessee will pay
Lessor all amounts then due and owing and a termination fee equal to the present
value (discounted at 6%) of the remaining Rent for the balance of the Initial
Term(s) of all Schedules, and will return the Equipment in accordance with
Section 9.
14.5 Entire Agreement. This Master Lease and associated Schedules
supersede all other oral or written agreements or understandings between the
parties concerning the Equipment including, for example, purchase orders. ANY
AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY ONLY BE ACCOMPLISHED BY A
WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to
constitute a waiver of compliance with any representative, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but
not limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule or in any document delivered in
connection with those agreements are for the benefit of Lessor and any Assignee
or Secured Party and survive and execution, delivery, expiration or termination
of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party
by the other will be given in writing and deemed received upon the earlier of
actual receipt or three days after mailing if mailed postage prepaid by regular
or airmail to Lessor (to the attention of "Lease Administrator") or Lessee, at
the address set out in the Schedule or, one day after it is sent by courier or
on the same day as sent via facsimile transmission, provided that the original
is sent by personal delivery or mail by the receiving party.
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14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE
WILL HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11. Severability. If any one or more of the provisions of this
Master Lease or any Schedule is for any reason held invalid, illegal or
unenforceable, the remaining provisions of this Master Lease and any such
Schedule will be unimpaired, and the invalid, illegal or unenforceable provision
replaced by a mutually acceptable valid, legal and enforceable provision that is
closest to the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed
in any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument. If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate".
14.13 Nonspecified Features and Licensed Products. If the Equipment is
supplied from Lessor's inventory and contains any features not specified in the
Schedule, Lessee grants Lessor the right to remove any such features. Any
removal will be performed by the manufacturer or another party acceptable to
Lessee, upon the request of lessor, at a time convenient to Lessee, provided
that Lessee will not unreasonably delay the removal of such features.
Lessee will obtain no title to Licensed Products which will at all times remain
the property of owner of the Licensed Products. A license from the owner may be
required and it is Lessee's responsibility to obtain any required license before
the use of the Licensed Products. Lessee agrees to treat the Licensed Products
as confidential information of the owner, to observe all copyright restrictions,
and not to reproduce or sell the Licensed Products.
14.14 Additional Documents. Lessee will, upon execution of this Master
Lease and as may be requested thereafter, provide Lessor with a secretary's
certificate of incumbency and authority and any other documents reasonably
requested by Lessor. Upon the execution of each Schedule with a purchase price
in excess of $1,000,000, Lessee will provide Lessor with an opinion from
Lessee's counsel in a form acceptable to Lessor regarding the representations
and warranties in Section 8.
14.15 Electronic Communications. Each of the parties may communicate
with the other by electronic means under mutually agreeable terms.
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14.16 Lessor's Right to Match. Lessee's rights under Section 5.2 and
7.2 are subject to Lessor's right to match any sublease or upgrade proposed by a
third party. Lessee will provide Lessor with the terms of the third party offer
and Lessor will have three (3) business days to match the offer. Lessee will
obtain such upgrade from or sublease the Equipment to Lessor if Lessor has
timely matched the third party offer.
14.17 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with
a Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be
in a form satisfactory to Lessor.
14.18 Equipment Procurement Charges/Progress Payments. Lessee hereby
agrees that Lessor shall not, by virtue of its entering into this Lease, be
required to remit any payments to any manufacturer or other third party until
Lessee accepts the Equipment subject to this Lease.
14.19 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution
of each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights
as owner and Lessor of Equipment.
Attachment - means any accessory, equipment or device and the installation
thereof that does not impair the original function or use of the Equipment and
is capable of being removed without causing material damage to the Equipment and
is not an accession tot he Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
Casualty Value - means the greater of the aggregate Rent remaining to be paid
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Certificate - means the Lessor provided certificate which must
be signed by Lessee within ten (10) days of the Commencement date as requested
by Lessor.
Commencement Date - is defined in each Schedule.
Default Costs - means reasonable attorney's fees and remarketing costs
resulting from a Lessee default or Lessor's enforcement of its remedies.
Equipment - means the property described on a Schedule and any replacement
for that property required or permitted by this Master Lease or a Schedule but
not including any Attachment.
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Event of Default - means the events described in Subsection 13.1.
Fair Market Value - means the aggregate amount which would be obtainable in
an arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the
first full Rent Interval following the Commencement Date for all items of
Equipment and continuing for the number of Rent Intervals indicated on as
Schedule.
Installation Date - means the day on which Equipment is installed and
qualified for a commercially available manufacturer's standard maintenance
contract or warranty coverage, if available.
Interim Rent - means the pro-rata portion of Rent due for the period from
the Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
Licensed Products - means any software or other licensed products attached
to the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the
same model, type, configuration and manufacture as Equipment.
Like Part - means a substituted part which is lien free and of the same
manufacturer and part number as the removed part, and which when installed on
the Equipment will be eligible for maintenance coverage with the manufacturer of
the Equipment.
Merger - means any consolidation or merger of the Lessee with or into any
other corporation or entity, any sale or conveyance of all or substantially all
of the assets of the Lessee to any other person or entity or any stock
acquisition of the Lessee by any other person or entity.
Notice Period - means the time period described in a Schedule during which
Lessee may give Lessor notice of the termination of the term of that Schedule.
Overdue Rate - means the lesser of five percent (5%) of the payment due or the
maximum rate permitted by the law of the state where the Equipment is located.
Owner - means the owner of Equipment.
Reconfiguration - means any change to Equipment that would upgrade or
downgrade the performance capabilities of the Equipment in any way.
Rent - means the rent, including Interim Rent, Lessee will pay for each
item of Equipment expressed in a Schedule either as a specific amount or an
amount equal to the
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amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
Schedule.
Schedule - means an Equipment Schedule which incorporates all of the terms
and conditions of this Master Lease and, for purposes of Section 14.12, its
associated Commencement Certificate(s).
Secured Party - means an entity to whom Lessor has granted a security
interest in a Schedule and related Equipment for the purposes of securing a
loan.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on
or as of the day and year first above written.
SCRIPTECH PHARMACEUTICALS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ [signature illegible] By: /s/[signature illegible]
Title: Secretary Title: [title illegible]
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Exhibit 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, TRANSFERRED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
WARRANT AGREEMENT
To Purchase Shares of the Preferred Stock of
SCRIPTECH PHARMACEUTICALS, INC.
Dated as of January 17, 1994 (the "Effective Date")
WHEREAS, ScripTech Pharmaceuticals, Inc., a Delaware corporation (the
"Company") has entered into a Master Lease Agreement dated as of November 22,
1993, Equipment Schedule No. VL-1, and related Schedules (the "Leases") with
Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 153,000 fully paid and
non-assessable shares of the Company's Series A Preferred Stock ("Preferred
Stock") at a purchase price of $1.00 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall terminate on the later of (i) 5:00 PM
Eastern Standard Time on January 16, 2004 or (ii) five (5) years from the
closing of the sale and issuance of shares of Common Stock of the Company in the
Company's initial public offering, whichever is longer.
<PAGE>
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth In this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
Notice of Exercise indicating the number of shares which remain subject to
future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean with
respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the SEC, then the initial "Price to Public"
specified in the final prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering:
(a) if traded on a securities exchange or listed on NASDAQ, the fair
market value shall be deemed to be the average of the closing prices
over a twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being determined;
or
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(b) if traded over-the-counter, the fair market value shall be
deemed to be the average of the closing bid and asked prices quoted
on the NASDAQ system (or similar system) over the twenty-one (21)
day period ending three days before the day the current fair market
value of the securities is being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the price per share
which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board
of Directors, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not
the surviving party, in which case the fair market value of Common Stock
shall be deemed to be the per share value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing.If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
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<PAGE>
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to collectively as a "Merger Event"), then, as a
part of such Merger Event, lawful provision shall be made so that the
Warrantholder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent to that which
would have been issuable if Warrantholder had exercised this Warrant immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange of securities or otherwise (other than
as provided in Section 8(c)), change any of the securities as to which purchase
rights under this Warrant Agreement exist into the same or a different number of
securities of any other class or classes, this Warrant Agreement shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
Agreement immediately prior to such combination, reclassification, exchange or
other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution.
-4-
<PAGE>
The Warrantholder shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. The antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which has been provided to Warrantholder. The Company shall
promptly provide the Warrantholder with any restatement, amendment, modification
or waiver of the Charter. The Company shall provide Warrantholder with prior
written notice of any issuance of its stock or other equity security to occur
after the Effective Date of this Warrant Agreement, as may be required pursuant
to Article Forth, Section (b)(5)(c)(vi) of the Company's Certificate of
Incorporation.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event; or
(iv) there shall be any voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in connection with each such event, the Company
shall send to the Warrantholder: (A) at least twenty (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, subscription rights (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying 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 Merger
Event, dissolution, liquidation or winding up). In the case of a public
offering, the Company shall give Warrantholder at least twenty (20) days written
notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i)
the applicable event, (ii) the amount of the adjustment, if any, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date the notice is deemed to be effectively given pursuant to Section
12(e).
-5-
<PAGE>
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth on Schedule A attached hereto, the Company hereby
represents and warrants as follows:
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable. The Company has made available to
the Warrantholder true, correct and complete copies of its Charter and Bylaws,
as amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene in any
material regard any law or governmental rule, regulation or order applicable to
it, do not and will not contravene any provision of, or constitute a default
under, any material Indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Leases and this Warrant Agreement
constitute legal, valid and binding agreements of the Company, enforceable in
accordance with their respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of (A) 15,000,000
shares of Common Stock, of which 524,000 shares are issued and outstanding, and
(B) 6,400,000 shares of preferred stock, of which 6,203,325 shares are issued
and outstanding and are convertible into 6,203,325 shares of Common Stock as of
the Effective Date.
(ii) The Company has reserved (A) 3,200,000 shares of Common Stock
for issuance under its Stock Option Plan, under which options and right to
purchase an aggregate of 1,960,500 shares of Common Stock are outstanding. There
are no other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any
-6-
<PAGE>
authorized but unissued shares of the Company's capital stock or other
securities of the Company, except as set forth on Schedule A.
(iii) Under the Company's Certificate of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. The Company is not, pursuant
to the terms of any other agreement currently in existence, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued, except as set forth on
Schedule A.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the registration requirements of the Illinois Corporate
Securities Law of 1953, in reliance upon Section 4 [5/4] thereof.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten (10) days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. This Warrant and the Preferred Stock issuable upon
exercise of the Warrantholder's rights contained herein are being and will be
acquired for investment and not with a view to the sale or distribution of any
part thereof, and the Warrantholder has no present intention of selling or
engaging in any public distribution of the same.
(b) The Warrantholder understands (i) that neither this Warrant nor the
Preferred Stock issuable upon exercise of this Warrant is being registered under
the 1933 Act or qualified under applicable state securities laws in reliance
upon exemptions therefrom, and (ii) that the Company's reliance on such
exemption is predicated on the representations set forth in this Section 10.
-7-
<PAGE>
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition this Warrant or of any of its rights to acquire
Preferred Stock or Preferred Stock issuable upon exercise of such rights unless
and until (i) it shall have notified the Company of the proposed disposition,
and (ii) if requested by the Company, it shall have furnished the Company with
an opinion of counsel (which counsel may either be inside or outside counsel to
the Warrantholder) satisfactory to the Company and its counsel to the effect
that (A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of this Warrant or of any of its rights to acquire Preferred
Stock or Preferred Stock issuable on the exercise of such rights do not apply to
transfers from the beneficial owner of any of the aforementioned securities to
its nominee or from such nominee to its beneficial owner, and shall terminate as
to any particular share of Preferred Stock when (1) such security shall have
been effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action shall
be recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof and
applicable federal and state securities laws, this Warrant Agreement and all
rights hereunder are transferable in whole or in part by the Warrantholder and
any successor transferee, provided, however, in no
-8-
<PAGE>
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit II (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
12. MISCELLANEOUS.
(a) The provisions of this Warrant Agreement shall be construed and shall
be given effect in all respects as if it had been executed and delivered by the
Company on the date hereof. This Warrant Agreement shall be binding upon any
successors or assigns of the Company.
(b) Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Delaware.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Leasing Director, cc: Legal Department, (and/or, if by facsimile, (708)
518-5465) and (ii) to the Company at Joslin Diabetes Center, One Joslin Place,
Boston, Massachusetts 02215, (and/or if by facsimile, (617) 739-8659) or at such
other address as any such party may subsequently designate by written notice to
the other party.
(f) In the event of any default hereunder, the non-defaulting party may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including but not limited to an action for damages as a result of
any such default, and/or an action for specific performance for any default
where Warrantholder will not have an adequate remedy at law and where damages
will not be readily ascertainable.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
-9-
<PAGE>
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with an officer's certificate with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000.00, the Company will also provide Warrantholder with an
opinion from the Company's counsel in a form mutually acceptable to
Warrantholder and such counsel. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: SCRIPTECH PHARMACEUTICALS, INC.
By: /s/ Karen A. Hamlin
-----------------------------
Title: Secretary
--------------------------
Warrantholder: COMDISCO, INC.
By: /s/ James P. Labe
-----------------------------
Title: President, Venture Lease Division
---------------------------------
1/28/94
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<PAGE>
EXHIBIT I
Notice of Exercise
To: _______________________
(1) The undersigned Warrantholder hereby elects to purchase ______
shares of the Preferred Stock of SCRIPTECH PHARMACEUTICALS, INC.
pursuant to the terms of the Warrant Agreement dated the _____ day
of _____________, 19__ (the "Warrant Agreement") between SCRIPTECH
PHARMACEUTICALS, INC. and the Warrantholder, and tenders herewith
payment of the purchase price for such shares in full, together with
all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock of
SCRIPTECH PHARMACEUTICALS, INC., the undersigned hereby confirms and
acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares
of Preferred Stock in the name of the undersigned or in such other
name as is specified below.
--------------------------------------
(Name)
--------------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
--------------------------------
Title:
--------------------------------
Date:
--------------------------------
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<PAGE>
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from COMDISCO, INC., to purchase ____ shares
of the Preferred Stock of SCRIPTECH PHARMACEUTICALS, INC., pursuant to the terms
of the Warrant Agreement, and further acknowledges that ______ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company:
By:
----------------------------------
Title:
----------------------------------
Date:
--------------------------------
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<PAGE>
EXHIBIT II
Transfer Notice
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to________________________
________________________________________________________________________________
____________________________________________
(Please Print)
whose address is
________________________________________________________________________________
________________________________________________________________________________
___________________
Dated_____________________________________________
Holder's Signature________________________________
Holder's Address__________________________________
Signature Guaranteed:_____________________________
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
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<PAGE>
SCHEDULE A
<PAGE>
Exceptions to Representations and Warranties
1. Exceptions to Section 9, paragraph (d), subparagraph (ii):
Each of the following persons has been granted an option or other right to
purchase the number of shares of Common Stock stated opposite such
person's name:
================================================================================
Name Number of Options or Shares
- --------------------------------------------------------------------------------
Ms. Raksha Acharya 1,500
- --------------------------------------------------------------------------------
Ms. Barbara Brooks 1,500
- --------------------------------------------------------------------------------
Ms. Julianne Bryan-Rhadfi 1,500
- --------------------------------------------------------------------------------
Dr. Gary R. Gustafson 5,000
- --------------------------------------------------------------------------------
Dr. Karen A. Hamlin 35,000
- --------------------------------------------------------------------------------
Dr. Kelvin Lam 5,000
- --------------------------------------------------------------------------------
Dr. James Lillie 62,000
- --------------------------------------------------------------------------------
Ms. Maureen McCaffrey 2,000
- --------------------------------------------------------------------------------
Mr. Joseph F.X. McGuirl 200,000
- --------------------------------------------------------------------------------
Dr. Andrew Pakula 35,000
- --------------------------------------------------------------------------------
Dr. David G. Powers 5,000
- --------------------------------------------------------------------------------
Dr. Karen Silber 5,000
- --------------------------------------------------------------------------------
Mr. Matthew Tomlinson 1,500
- --------------------------------------------------------------------------------
Dr. Michael R. Green 750,000
- --------------------------------------------------------------------------------
Dr. Peter S. Kim 750,000
- --------------------------------------------------------------------------------
Thomas Alber 10,000
- --------------------------------------------------------------------------------
James Bowie 6,500
- --------------------------------------------------------------------------------
Michael Carey 1,000
- --------------------------------------------------------------------------------
Fred E. Cohen 32,000
- --------------------------------------------------------------------------------
Carol Prives 15,000
- --------------------------------------------------------------------------------
Robert T. Sauer 10,000
- --------------------------------------------------------------------------------
Kevin Struhl 15,000
- --------------------------------------------------------------------------------
Dr. Jamie Williamson 1,000
- --------------------------------------------------------------------------------
Dr. Maria Zapp 10,000
- --------------------------------------------------------------------------------
Total Number of Options or Shares: 1,960,500
================================================================================
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<PAGE>
2. Exception to Section 9, paragraph (f):
The Company has granted registration rights to certain investors In the
Company under Section 8 of a Stock Purchase Agreement dated September
16,1993 among the Company and the persons identified as Purchasers
therein. The Company has also granted registration rights to certain
stockholders pursuant to consulting and other similar agreements.
-15-
<PAGE>
AMENDMENT NO. 1
TO
WARRANT AGREEMENT
To Purchase Shares of the Preferred Stock of
SCRIPTGEN PHARMACEUTICALS, INC.
This AMENDMENT NO. 1 ("Amendment") amends the WARRANT AGREEMENT, dated as
of January 17, 1994 (the "Agreement"), by and among Scriptgen Pharmaceuticals,
Inc. (the "Company") and Comdisco, Inc. (the "Warrantholder").
WHEREAS, the parties hereto desire to amend the Agreement;
NOW, THEREFORE, the Company and the Warrantholder do hereby agree to amend
the Agreement as follows:
1. There is hereby added to the end of Section 8(b) the following:
In the event that a mandatory conversion of shares of Preferred
Stock pursuant to the Company's Amended and Restated Certificate of
Incorporation occurs prior to the exercise of this Warrant, then all
references to "Series A Preferred Stock" and "Preferred Stock"
herein shall thereafter be deemed references to "Common Stock."
This Amendment may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute a single
instrument.
Company: SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/ Karen A. Hamlin
--------------------------------------
Name: Karen A. Hamlin
Title: Senior Director of Operations
Date:
Warrantholder: COMDISCO, INC.
By: /s/ Jill C. Hanses
--------------------------------------
Name: Jill C. Hanses
Title: AVP / Venture
Date:
<PAGE>
Exhibit 10.8
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF l933
OR QUALIFIED UNDER ANY STATE SECURITIES LAW. THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, TRANSFERRED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION APPLICATION RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW.
WARRANT AGREEMENT
To Purchase Shares of the Preferred Stock of
SCRIPTGEN PHARMACEUTICALS, INC.
Dated as of May 18, 1996 (the "Effective Date")
WHEREAS, SCRIPTGEN Pharmaceuticals, Inc., a Delaware corporation (the
"Company") has entered into a Master Lease Agreement dated as of November 22,
1993, Equipment Schedule No. VL-2 dated as of February 19, 1996, and related
Schedules (the "Leases") with Comdisco, Inc., a Delaware corporation (the
"Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 32,500 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $1.80 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
In the event Warrantholder makes available any or all of the lease
financing as set forth in Phase II of Equipment Schedule VL-2 to the Master
Lease Agreement, then the number of shares of the Company's Preferred Stock
which the Warrantholder shall be entitled to purchase hereunder shall be
increased by 22,500 shares.
In the event Warrantholder makes available any or all of the lease
financing as set forth in Phase III of Equipment Schedule VL-2 to the Master
Lease Agreement, then the number of shares of the Company's Preferred Stock
which the Warrantholder shall be entitled to purchase hereunder shall be
increased by an additional 22,500 shares.
<PAGE>
In the event Warrantholder makes available any or all of the lease
financing as set forth in Phase IV of Equipment Schedule VL-2 to the Master
Lease Agreement, then the number of shares of the Company's Preferred Stock
which the Warrantholder shall be entitled to purchase hereunder shall be
increased by an additional 22,500 shares.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall terminate on the later of (i) 5:00 PM
Eastern Standard Time on May 18, 2006 or (ii) five (5) years from the closing of
the sale and issuance of shares of Common Stock of the Company in the Company's
initial public offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
Notice of Exercise indicating the number of shares which remain subject to
future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y= the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean with
respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the SEC, then the initial "Price to Public"
specified in the final prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering:
(a) if traded on a securities exchange or listed on NASDAQ, the fair
market value shall be deemed to be the average of the closing prices
over a twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being determined;
or
<PAGE>
(b) if traded over-the-counter, the fair market value shall be
deemed to be the average of the closing bid and asked prices quoted
on the NASDAQ system (or similar system) over the twenty-one (21)
day period ending three days before the day the current fair market
value of the securities is being determined;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the price per share
which the Company could obtain from a willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by its Board
of Directors, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not
the surviving party, in which case the fair market value of Common Stock
shall be deemed to be the per share value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered, listed or approved for listing on such domestic securities exchange,
as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE.
(a) This Warrant Agreement does not entitle the Warrantholder to any
voting rights or other rights as a shareholder of the Company prior to the
exercise of the Warrant.
(b) Upon full or partial exercise of the purchase rights set forth in this
Warrant Agreement, (i) the Warrantholder shall become a party to the
Stockholders' Agreement dated May 17, 1996 (the "Stockholders' Agreement") among
the Company and stockholders listed in the schedules attached thereto, as it may
be amended from time to time in accordance with its terms, and shall be deemed
to be a "Subsequent Stockholder", as that term is defined in the Stockholders'
Agreement, (ii) the Warrantholder shall have all of the rights and be subject to
the obligations of a Subsequent Stockholder under the Stockholders' Agreement,
and (iii) the term "Securities" as used in the Stockholders' Agreement shall be
deemed to include the shares of the Series C Preferred Stock issuable upon
exercise of the purchase rights set forth in this Warrant Agreement and the
shares of Common Stock issuable upon
<PAGE>
conversion of such shares of Series C Preferred Stock. Upon and after any
exercise of the purchase rights set forth in this Warrant Agreement, the
Warrantholder shall execute and deliver such other agreements and instruments as
may be necessary from time to time to effect the intent and purposes of this
Section 6(b).
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to collectively as a "Merger Event"), then, as a
part of such Merger Event, lawful provision shall be made so that the
Warrantholder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent to that which
would have been issuable if Warrantholder had exercised this Warrant immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange of securities or otherwise (other than
as provided in Section 8(c)), change any of the securities as to which purchase
rights under this Warrant Agreement exist into the same or a different number of
securities of any other class or classes, this Warrant Agreement shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
Agreement immediately prior to such combination, reclassification, exchange or
other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
<PAGE>
(e) Antidilution Rights. The antidilution rights applicable to the
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which has been provided to Warrantholder. The Company shall
promptly provide the Warrantholder with any restatement, amendment, modification
or waiver of the Charter. The Company shall provide Warrantholder with prior
written notice of any issuance of its stock or other equity security to occur
after the Effective Date of this Warrant Agreement, as may be required pursuant
to Article Fourth of the Company's Certificate of Incorporation.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event; or
(iv) there shall be any voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in connection with each such event, the Company
shall send to the Warrantholder: (A) at least twenty (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, subscription rights (specifying
the date on which the holders of Preferred Stock shall be entitled thereto) or
for determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying 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 Merger
Event, dissolution, liquidation or winding up). In the case of a public
offering, the Company shall give Warrantholder at least twenty (20) days written
notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i)
the applicable event, (ii) the amount of the adjustment, if any, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date the notice is deemed to be effectively given pursuant to Section
12(e).
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
Except as set forth on Schedule A attached hereto, the Company hereby
represents and warrants as follows:
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable. The Company has made available to
the Warrantholder true, correct and complete copies of its Charter and Bylaws,
as amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock. The Company shall not be required to pay any tax which may
be payable in respect of any transfer involved and the issuance and delivery of
any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the
<PAGE>
Company, and the Leases and this Warrant Agreement are not inconsistent with the
Company's Charter or Bylaws, do not contravene in any material regard any law or
governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any material
indenture, mortgage, contract or other instrument to which it is a party or by
which it is bound, and the Leases and this Warrant Agreement constitute legal,
valid and binding agreements of the Company, enforceable in accordance with
their respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) (1) 30,000,000 shares of Common Stock, $.01 par value ("Common
Stock"), of which 3,422,547 shares are issued and outstanding immediately prior
to the Initial Closing, (2) 6,403,325 shares have been reserved for issuance
upon conversion of the outstanding shares of the Company's Series A Preferred
Stock, $.0l par value (the "Series A Preferred Stock"), (3) 153,000 shares are
set aside for issuance upon the exercise of warrants and other stock purchase
rights for Series A Preferred Stock and the conversion thereof into Common
Stock, (4) 100,000 shares are set aside for issuance upon the exercise of
warrants and other stock purchase rights for Series C Preferred Stock and the
conversion thereof into Common Stock, (5) 6,579,086 shares have been reserved
for issuance upon conversion of the outstanding shares of the Company's Series B
Preferred Stock, $0.1 pay value (the "Series B Preferred Stock", and together
with the Series A Preferred Stock and the Series C Preferred Stock, the
"Preferred Stock"), (6) 2,942,521 shares will be reserved for issuance upon
conversion of those Series C Preferred Shares to be issued to the Initial
Purchasers hereunder, (7) 2,057,479 shares will be reserved for issuance upon
conversion of any shares of Series C Preferred Stock sold to Subsequent
Purchasers, (8) 1,071,850 shares are set aside for issuance upon exercise of
stock options and other stock purchase rights, heretofore or hereafter to be
granted, (9) 1,368,705 shares are set aside for issuance upon exercise of other
stock options and purchase rights which may be granted to employees and
consultants of the Company, as approved by the Company's Board of Directors, and
(10) 1,103,002 shares are held by the Company in its treasury, and
(ii) 21,500,000 shares of Preferred Stock (I) 6,700,000 shares of
which have been designated Series A Preferred Stock, of which 6,403,325 shares
are outstanding as of the Closing, (II) 9,700,000 shares of which have been
designated Series B Preferred Stock, of which 6,579,086 shares are outstanding
as of the Closing, and (III) 5,100,000 shares of which have been designated
Series C Preferred Stock, of which 2,942,521 shares will be outstanding after
consummation of the transactions with the Initial Purchasers contemplated
hereby.
(iii) Under the Company's Certificate of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances of
the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. The Company is not, pursuant
to the terms of any other agreement currently in existence, under any obligation
to register under the 1933 Act any of its presently outstanding securities or
any of its securities which may hereafter be issued, except the Company has
granted
<PAGE>
registration rights to certain investors in the Company under Section 8 of a
Stock Purchase Agreement dated September 16, 1993 among the Company and the
persons identified as Purchasers therein.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the Illinois Corporate
Securities Law of 1953, in reliance upon Section 4[5/4] thereof.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten (10) days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder
(a) Investment Purpose. This Warrant and the Preferred Stock issuable upon
exercise of the Warrantholder's rights contained herein are being and will be
acquired for investment and not with a view to the sale or distribution of any
part thereof, and the Warrantholder has no present intention of selling or
engaging in any public distribution of the same.
(b) Private Issue. The Warrantholder understands (i) that neither this
Warrant nor the Preferred Stock issuable upon exercise of this Warrant is being
registered under the 1933 Act or qualified under applicable state securities
laws in reliance upon exemptions therefrom, and (ii) that the Company's reliance
on such exemption is predicated on the representations set forth in this Section
10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition this Warrant or of any of its rights to acquire
Preferred Stock or Preferred Stock issuable upon exercise of such rights unless
and until (i) it shall have notified the Company of the proposed disposition,
and (ii) if requested by the Company, it shall have furnished the Company with
an opinion of counsel (which counsel may either be inside or outside counsel to
the Warrantholder) satisfactory to the Company and its counsel to the effect
that (A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of this Warrant or of any of its rights to acquire Preferred
Stock or Preferred Stock issuable on the exercise of such rights do not apply to
transfers from the beneficial owner of any of the aforementioned securities to
its nominee or from such nominee to its beneficial owner, and shall terminate as
to any particular share of Preferred Stock when (1) such security shall have
been effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action shall
be recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
<PAGE>
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Section 11 and applicable federal and state securities laws, this Warrant
Agreement and all rights hereunder are transferable in whole or in part by the
Warrantholder and any successor transferee, provided, however, in no event shall
the number of transfers of the rights and interests in all of the Warrants
exceed three (3) transfers, and provided that the Warrantholder shall cause any
transferee to sign an agreement requiring such transferee to become a party to
the Stockholders' Agreement upon exercise of the purchase rights set forth in
this Agreement. The transfer shall be recorded on the books of the Company upon
receipt by the Company of a notice of transfer in the form attached hereto as
Exhibit II (the "Transfer Notice"), at its principal offices and the payment to
the Company of all transfer taxes and other governmental charges imposed on such
transfer. The Company will not be required to recognize any transferee of this
Warrant Agreement and the rights and obligations therein unless the transfer
notice is accompanied by an agreement executed by the transferee requiring the
transferee to become a party to the Stockholders' Agreement upon exercise of the
purchase rights set forth in this Agreement.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorneys' Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Delaware.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Leasing Director, cc: Legal Department, (and/or, if by facsimile, (708)
518-5465) and (ii) to the Company at Suite 3000, 200 Boston Avenue, Medford,
Massachusetts 02155 (and/or if by facsimile, (617)
<PAGE>
396-1028) or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms, of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with an officer's certificate with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000.00, the Company will also provide Warrantholder with an
opinion from the Company's counsel in a form mutually acceptable to
Warrantholder and such counsel. The Company shall also supply such other
documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: SCRIPTGEN PHARMACEUTICALS ,INC.
By: /s/ Karen A. Hamlin
-----------------------------
Title: Sr. Director of Operations
--------------------------
Warrantholder: COMDISCO, INC.
By: /s/ James P. Labe
-----------------------------
Title: James P. Labe, President
Venture Lease Division
--------------------------
<PAGE>
EXHIBIT I
Notice of Exercise
To: _____________________________
(1) The undersigned Warrantholder hereby elects to purchase ______
shares of the Preferred Stock of SCRIPTGEN PHARMACEUTICALS, INC.
pursuant to the terms of the Warrant Agreement dated the _____ day
of _______________ 19__ (the "Warrant Agreement") between SCRIPTGEN
PHARMACEUTICALS, INC. and the Warrantholder, and tenders herewith
payment of the purchase price for such shares in full, together with
all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Preferred Stock SCRIPTGEN
PHARMACEUTICALS, INC., the undersigned hereby confirms the
investment representations and warranties made in Section 10 of the
Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares
of Preferred Stock in the name of the undersigned or in such other
name as is specified below.
____________________________________________________
(Name)
____________________________________________________
(Address)
Warrantholder COMDISCO, INC.
By: _______________________________
Title: _______________________________
Date: _______________________________
<PAGE>
ACKNOWLEDGMENT OF EXERCISE
The undersigned ______________________________________. hereby acknowledge
receipt of the "Notice of Exercise" from COMDISCO, INC., to purchase _______
shares of the Preferred Stock of SCRIPTGEN PHARMACEUTICALS, INC., pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement
Company:
By: ____________________________________________
Title: _________________________________________
Date: __________________________________________
<PAGE>
EXHIBIT II
Transfer Notice
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to________________________
________________________________________________________________________________
(Please Print)
whose address is________________________________________________________________
________________________________________________________________________________
Dated_________________________________________________
Holder's Signature____________________________________
Holder's Address
______________________________________________________
______________________________________________________
Signature Guaranteed__________________________________
NOTE: The signature to this Transfer Notice must correspond with the name
as it appears on the face of the Warrant Agreement, without
alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the
foregoing Warrant Agreement.
<PAGE>
ORIGINAL
EXHIBIT A
(MULTIPLE QUARTER DELIVERY)
SCHEDULE NO. VL-2 DATED AS OF February 19, 1996
TO MASTER LEASE AGREEMENT DATED AS OF November 22, 1993 ("MASTER LEASE")
LESSEE: SCRIPTGEN PHARMACEUTICALS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------- ------------------------
Ms. Karen A. Hamlin 6111 North River Road
Senior Director of Operations Rosemont, Illinois 60018
(617) 393-8000 Attn.: Capital Equipment Lease
Administration
Address for Notices:
- --------------------
Suite 3000
200 Boston Avenue
Medford, Massachusetts 02155
Central Billing Location: PAYING AGENT:
- ------------------------- -------------
Same as above. Comdisco, Inc.
P.O. Box 91744
Lessee Reference No.:________________ Chicago, Illinois 60693
(24 digits maximum)
Location of Equipment: Initial Term: 42 months
- ---------------------- ------------- ----------
Attn.: Lease Rate Factor: 2.742%
------------------ ----------
EQUIPMENT (as defined below): Advance: $7,238.88
-------- ----------
Less Commitment Deposit
- 3,000.00
Net Advance $4,238.88
---------
Item Machine Type/ Serial
No. Qty. Manufacturer Feature Description Number Rent
- --- ---- ------------ ------------ ----------- ------ ----
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period February 1, 1996 through February 1,
1998, for which Lessor receives vendor invoices approved for payment, up
to an aggregate purchase price of $686,774.65 ("Phase I"); however, Lessee
shall have the option to request from Lessor three additional Phases of
$250,000.00 ("Phase II", "Phase III" and "Phase IV") of lease financing
where each Phase shall be subject to a review of Lessee by Lessor, not
including upgrades thereto and further excluding custom use equipment,
leasehold improvements, installation costs and delivery costs, rolling
stock, special tooling, custom equipment, "stand-alone" software,
application software bundled into computer hardware, hand held items,
molds and fungible items.
<PAGE>
1. Notice Period
Not less than ninety (90) days nor more than twelve (12) months prior to
the expiration of the lease term.
2. Equipment Purchase
Lessee acknowledges that it has either received or approved Lessor's
purchase documentation for the Equipment. The aggregate purchase price referred
to on the face of this Schedule shall include all Equipment purchased by Lessor,
consisting of amounts financed under Sections (i), (ii) and (iii) below.
(i) NEW EQUIPMENT. Lessor will purchase new Equipment which is
specifically approved by Lessor.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the
"Sale-Leaseback Transaction"). Any request for a Sale-Leaseback
Transaction must be submitted to Lessor in writing (along with
accompanying evidence of Lessee's Equipment ownership satisfactory
to Lessor for all Equipment submitted) no later than March 30,
1996*. Lessor will not perform a Sale-Leaseback Transaction for any
request or accompanying Equipment ownership documents which arrive
after the date marked above by an asterisk (*). Further, any
sale-leaseback Equipment will be placed on lease subject to: (1)
Lessor prior approval of the Equipment; and (2) if approved, at
Lessor's actual net appraised Equipment value pursuant to the
schedule below:
ORIGINAL EQUIPMENT MANUFACTURER'S PERCENT OF ORIGINAL MANUFACTURER'S
SHIP DATE NET EQUIPMENT COST PAID BY LESSOR
--------------------------------- ----------------------------------
Between 12/31/95 and 3/30/96 100%
Between 10/31/95 and 12/30/95 80%
Between 7/31/95 and 10/30/95 70%
Between 5/1/95 and 7/30/95 65%
Between 1/31/95 and 4/30/95 60%
(iii) USED EQUIPMENT. Lessor will purchase "used" Equipment which is
obtained from a third party by Lessee for its use subject to: (1)
Lessor's prior approval of the Equipment; and (2) for Equipment that
costs $125,000.00 or less, Lessor shall pay the actual purchase
price paid by Lessee for the Equipment, and for Equipment costing
more than $125,000.00, at Lessor's appraised value for such used
Equipment.
3. Commencement Date
The Commencement Date for each item of Equipment will be its Installation
Date. Lessee agrees to confirm the Commencement Date by providing Lessor with
invoices containing the Equipment location, description, serial number and cost,
the Installation Date and Lessee's signature. Lessor will summarize all invoices
and/or IAF's received in the same calendar quarter into a Commencement
Certificate in the form attached to this Schedule as Exhibit 1 and the Initial
Term will begin the first day of the calendar quarter thereafter. Each
Commencement Certificate will incorporate the terms and conditions of the Master
Lease and this Schedule and will constitute a separate Schedule. Notwithstanding
the foregoing, if the Equipment pertains to Sale-Leaseback Equipment, the
Commencement Date will be the date Lessor tenders the purchase price for the
Equipment.
4. Option to Extend
So long as no Event of Default shall have occurred and be continuing,
Lessee will have the right to extend the Initial Term of this Schedule for a
period of one (1) year (the "Option Year") by giving Lessor at least ninety (90)
days written notice prior to the expiration of the Initial Term. In such event,
the rent to be paid during the Option Year shall be mutually agreed upon and if
the parties cannot mutually agree, then the Lease shall continue in full force
and effect pursuant to the existing terms and conditions until terminated by
either party upon not less than ninety (90) days prior written notice. This
Schedule will continue in affect following the Option Year until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the Rent Interval next following receipt.
5. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than one
hundred and twenty (120) days prior to the expiration of the Initial Term,
Lessee will have the option at the expiration of the Initial Term of this
Schedule to purchase all, but not less than all, of the Equipment listed herein
for a purchase price and upon terms and conditions to be mutually agreed upon by
the parties following Lessee's written notice, plus any taxes applicable at time
of purchase. Said purchase price shall be paid to Lessor upon the expiration
date of the Initial Term. Title to the Equipment shall automatically pass to
Lessee upon payment in full of the purchase price but, in no event, earlier than
the expiration of the fixed Initial Term. If the parties are unable to agree on
the purchase price or the terms and conditions with respect to said purchase,
then the Lease with respect to this Equipment shall remain in full force and
effect until terminated by either party upon not less than ninety (90) days
prior written notice. It is agreed and understood that Lessor is retaining a
purchase money security interest in the Equipment listed herein and this
Schedule shall constitute a Security Agreement under the Uniform Commercial Code
of the state in which the Equipment is located. Lessor and Lessee agree that for
purposes of this paragraph, any licensed software will not be considered part of
the Equipment.
6. Special Terms
The terms and conditions of the Master Lease Agreement as they pertain to
this Schedule are hereby modified and amended as follows:
a) Section 2, "Term"
-2-
<PAGE>
In line 3 after the words "Term and", add the words "may be
extended"; after the word "thereafter", delete the rest of the
sentence and replace with the words "pursuant to the terms of the
Notice Period of the applicable Schedule".
b) Section 3, "Rent and Payment"
In line 1 after the word "Rent", add the parenthetical phrase
"(excluding Interim Rent)"; after the word "advance", delete the
words "in immediately available funds" and replace with the words
"by check".
In line 2, change the second sentence to read as follows:
"Interim Rent is due and payable within thirty (30) days of
the invoice date".
c) Section 4.2, "Warranty and Disclaimer of Warranties"
In line 2 before the word "Lessor", insert the word "neither"; after
the word "Lessor", add the words "nor any Secured Party, Owner or
Assignee".
d) Section 5.2, "Relocation or Sublease"
In line 1 of the first paragraph after the word "consent", add the
words "which shall not be unreasonably withheld or delayed".
In line 3 of this same paragraph before the word "administrative",
insert the word "reasonable".
e) Section 5.3, "Assignment by Lessor"
In line 6 before the words "will acknowledge", insert the words, "at
Lessor's expense,"; delete the word "given" and replace with the
word "provided".
f) Section 6.2, "Taxes and Fees"
In line 2 after the word "Lessor", add the words, "Owner, Assignee
or Secured Party".
In line 4 after the word "Lessor", add the words, "Owner, Assignee
or Secured Party".
g) Section 7.1, "Care, Use and Maintenance"
In line 4 after the before the word "acceptable", insert the word
"reasonably".
In line 5, replace the words "the Equipment" with "any Equipment";
after the word "Equipment", add the words "for which a
manufacturer's maintenance contract is available".
h) Section 7.2, "Attachments and Reconfigurations"
In line 1 after the word "Lessor", add the words "which shall not be
unreasonably withheld or delayed".
i) Section 8, "Representations and Warranties of Lessee"
In line 4 of subparagraph (b) after the words "to it", add the words
"in any material respect".
In line 5 of this same subparagraph before the word "indenture",
insert the word "material".
To the end of this subparagraph, add the following words:
", subject to applicable bankruptcy and other laws affecting
the rights of creditors generally, and the rules of law
concerning equitable remedies".
Delete subparagraph (d) in its entirety.
Change subparagraphs "(e), (f) and (g)" to subparagraphs "(d), (e)
and (f)" respectively.
j) Section 9, "Delivery and Return of Equipment"
In line 9 after the word "supply", add the words, "at Lessor's
expense,".
To the end of this Section, add the words "and provide that any such
demonstration shall be upon three (3) days prior notice, will not
interfere with Lessee's normal business, and all visitors shall sign
confidentiality agreements."
k) Section 10, "Labeling"
In line 1 after the word "interest", add the words "with all marks
of identification as may be provided by Lessor".
l) Section 12, "Risk of Loss"
In line 3 of the second paragraph, delete the words "Lessor's
option" and replace with the words "Lessee's option".
-3-
<PAGE>
In line 4 of this paragraph after the word "Lessor", add the words,
"in which case Lessee shall be entitled to receive all insurance
proceeds", after the words " Casualty Value", add the parenthetical
phrase "(less the amount of any insurance proceeds received by
Lessor)".
m) Section 13.1, "Default"
In line 5 of subsection (c) after the word "foregoing", add the
words, "provided, however, that Lessee shall have thirty (30) days
to obtain a dismissal of any involuntary petition or appointment".
In line 1 of subsection (d) after the word "Default", add the
parenthetical "(after any applicable grace or cure period)".
n) Section 13.2, "Remedies"
In line 1 of subsection (C) before the word "due", insert the word
"then".
In line 5 of this same subsection, delete the word "currently" and
replace with the word "then".
o) Section 14.1, "Board Attendance"
Delete this section entirely and replace with the following:
"Within thirty (30) days following a meeting of the Board of
Directors, Lessee shall provide Lessor with a summary of the
minutes of said meeting. If an Event of Default occurs and is
continuing on the part of Lessee, then Lessor shall have the
right to appoint a representative to attend meetings of
Lessee's Board of Directors, which representative shall be
entitled to advance notice of all such meetings."
p) Section 14.2 "Financial Statement"
In line 10, delete the word "ninety (90)" and replace with the words
"one hundred and twenty (120)".
To the end of this Section, add the words "hereunder and under the
Schedules".
q) Section 14.3, "Obligation to Lease Additional Equipment"
In line 3 before the words "loan agreement", insert the word
"material".
In line 4 before "(iii)", insert the word "and".
In line 5 after the word "standing", delete the semi-colon and
replace with a period; and delete clause (iv) in its entirety.
r) Section 14.4, "Merger and Sale Provisions"
In line 7 after the parenthetical, insert "of .5%".
s) Section 14.7, "Binding Nature"
To the end of this Section, add the following words:
"WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, WHICH SHALL NOT BE
UNREASONABLY WITHHELD OR DELAYED".
t) Section 14.8, "Survival of Obligations"
In line 4 after the word "execution", add the word "and"; after the
word "delivery", add the words "of this Master Lease and the
obligations set forth in Sections 6.2, 9 and 11 shall survive".
u) Section 14.16, "Lessor's right to Match"
Delete this Section in its entirety and replace with the following:
"Lessee's rights under Sections 5.2 and 7.2 are subject to
Lessor's right to bid on any sublease or upgrade that Lessee
intends to make. Lessee agrees to give consideration to any
such bid made by Lessor, but is under no obligation to accept
such bid."
v) Section 14.17, "Landlord/Mortgagee Waiver"
In line 1 after the word "to", add the words "use diligent efforts
to".
In line 2 before the word "satisfactory", insert the word
"reasonably".
x) Section 14.19, "Definitions"
In the definition "Default Costs" before the word "remarketing",
insert the word "reasonable".
-4-
<PAGE>
In line 1 of the definition "Merger" after the word "entity", add
the words "in which, after the merger, the Company is not the
surviving entity".
In line 2, delete the word "stock".
In line 3 after the word "acquisition", add the words "of more than
fifty percent (50%) of the outstanding shares of capital stock".
y) New Section 14.20, "Confidentiality"
Any person or entity receiving information under Section 14.1 or
Section 14.2 or exercising rights of visitation or inspection
granted hereunder shall maintain confidentiality of all financial,
confidential and proprietary information of the Lessee acquired by
them in exercising such rights. Notwithstanding the preceding
sentence, Lessor may: (a) disclose such information when required by
law or governmental order or regulation, or when required by
subpoena or other process, or (b) disclose such information to its
attorneys, accountants, financial institutions, consultants, and
other professionals to the extent necessary to obtain their services
in connection with its investment in the Lessee, provided that the
requirements of this Section shall in turn be binding on any such
attorney, accountant, financial institution, consultant or other
professional."
Master Lease: This Schedule is issued pursuant to the Master Lease identified on
page 1 of this Schedule. All of the terms and conditions of the Master Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Master Lease (including, without limitation, the
representations and warranties set forth in Section 8) except as modified herein
by this Schedule. This Schedule may not be amended or rescinded except by a
writing signed by both parties.
SCRIPTGEN PHARMACEUTICALS, INC. COMDISCO, INC.,
As Lessee as Lessor
By: /s/ Karen A. Hamlin By: /s/ James P. Labe
------------------------------ ----------------------------
Title: Sr. Director of Operations Title: JAMES P. LABE, PRESIDENT
VENTURE LEASE DIVISION
Date: 6/6/96 Date: _____________________
DRS; 2/20/96
-5-
<PAGE>
EXHIBIT 1
Commencement Certificate
This Certificate dated _______________ is executed pursuant to Schedule
No. VL-2 to the Master Lease Agreement dated November 22, 1993 between COMDISCO,
INC. ("Lessor") and SCRIPTGEN PHARMACEUTICALS, INC. ("Lessee"). All of the
terms, conditions, representations and warranties of the Master Lease and
Schedule No. VL-2 are incorporated herein and made a part hereof and this
Commencement Certificate constitutes a Schedule for the Equipment described
below.
1. Equipment:
Equipment
Qty. Mfgr. Type/Model Serial No. Location
---- ----- ---------- ---------- --------
2. Installation Date: (See attached Invoices)
3. Initial Term Starts on:
4. Total Equipment Cost:
5. Rent:
6. Representations of Lessee:
Each item of Equipment has been delivered to the location indicated above,
tested, inspected, found to be in good working order and accepted by the
Lessee on its Installation Date.
-6-
<PAGE>
AMENDMENT NO. 1
TO
WARRANT AGREEMENT
To Purchase Shares of the Preferred Stock of
SCRIPTGEN PHARMACEUTICALS, INC.
This AMENDMENT NO. 1 ("Amendment") amends the WARRANT AGREEMENT, dated as
of May 18, 1996 (the "Agreement"), by and among Scriptgen Pharmaceuticals, Inc.
(the "Company") and Comdisco, Inc. (the "Warrantholder").
WHEREAS, the parties hereto desire to amend the Agreement;
NOW, THEREFORE, the Company and the Warrantholder do hereby agree to amend
the Agreement as follows:
1. There is hereby added to the end of Section 8(b) the following:
In the event that a mandatory conversion of shares of Preferred
Stock pursuant to the Company's Amended and Restated Certificate of
Incorporation occurs prior to the exercise of this Warrant, then all
references to "Series C Preferred Stock" and "Preferred Stock"
herein shall thereafter be deemed references to "Common Stock."
This Amendment may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute a single
instrument.
Company: SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/ Karen A. Hamlin
--------------------------------------
Name: Karen A. Hamlin
Title: Senior Director of Operations
Date:
Warrantholder: COMDISCO, INC.
By: /s/ Jill C. Hanses
--------------------------------------
Name: Jill C. Hanses
Title: AVP / Venture
Date:
<PAGE>
Exhibit 10.9
COLLABORATION AND LICENSE AGREEMENT
between
HOECHST MARION ROUSSEL
and
SCRIPTGEN PHARMACEUTICALS, INC.
October 24, 1997
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY
[***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF OF CONTENTS
1. DEFINITIONS........................................................-1-
1.1. "Affiliate"................................................-1-
1.2 "Back-Up Compound".........................................-1-
1.3 "Collaboration Program"....................................-1-
1.4 "Committees"...............................................-1-
1.5 "Confidential Information".................................-2-
1.6 "Contract Year"............................................-2-
1.7 "Effective Date"...........................................-2-
1.8 "Existing Compounds".......................................-2-
1.9 "Existing Targets".........................................-2-
1.10 "Field"....................................................-2-
1.11 "First Commercial Sale"....................................-2-
1.12 "HMR Owned Technology".....................................-2-
1.13 "HMR Patent Rights"........................................-2-
1.14 "IND"......................................................-2-
1.15 "IPO"......................................................-2-
1.16 "Joint Compound Library"...................................-2-
1.17 "Joint Patent Rights"......................................-2-
1.18 "Joint Technology".........................................-3-
1.19 "License Term".............................................-3-
1.20 "Licensed Compound"........................................-3-
1.21 "Licensed Compound Notice".................................-3-
1.22 "Licensed Product".........................................-3-
1.23 "NDA"......................................................-3-
1.24 "Net Sales"................................................-3-
1.25 "Non-Selected Compounds"...................................-4-
1.26 "Non-Selected Targets".....................................-4-
1.27 "Party" and "Parties"......................................-4-
1.28 "Patent Rights"............................................-4-
1.29 "Scientific Committee".....................................-4-
1.30 "SCRIPTGEN Indemnitees"....................................-4-
1.31 "SCRIPTGEN Owned Technology"...............................-4-
1.32 "SCRIPTGEN Patent Rights"..................................-4-
1.33 "SCRIPTGEN Screening Technology"...........................-4-
1.34 "Securities Act"...........................................-4-
1.35 "Steering Committee".......................................-5-
1.36 "Target"...................................................-5-
1.37 "Technology"...............................................-5-
1.38 "Work Plan"................................................-5-
2. COLLABORATION PROGRAM..............................................-5-
2.1 Implementation of Collaboration Program....................-5-
<PAGE>
2.2 Committees.................................................-6-
2.3 Term of Collaboration Program..............................-8-
2.4 Allocation of Tasks for Collaboration Program..............-8-
2.5 License Option.............................................-9-
2.6 Commercialization Rights..................................-10-
2.7 Non-Selected Targets and Non-Selected Compounds...........-11-
2.8 Existing Compounds and Existing Targets...................-12-
3. FUNDING...........................................................-13-
3.1 Up-Front Payments as a Technology Access Fee..............-13-
3.2 Funding of Collaboration Program..........................-13-
3.3 Milestone Payments........................................-13-
3.4 Determination that Milestones have been achieved..........-14-
4. INTELLECTUAL PROPERTY RIGHTS......................................-14-
4.1 Disclosure of Inventions..................................-14-
4.2 Ownership.................................................-14-
5. PROVISIONS CONCERNING THE FILING, PROSECUTION AND
MAINTENANCE OF PATENT RIGHTS....................................-15-
5.1 Filing of Patents.........................................-15-
5.2 Expenses..................................................-16-
5.3 Right to Prosecute Abandoned Rights.......................-16-
6. LICENSE RIGHTS....................................................-17-
6.1 License Grant.............................................-17-
6.2 Term of License...........................................-17-
6.3 Sublicenses...............................................-17-
6.4 Payment of Royalties and Share of Other Amounts;
Payment Dates; Accounting; Records; Other................-18-
6.5 Infringement..............................................-20-
6.6 Claimed Infringement......................................-21-
6.7 Warranty Disclaimer.......................................-22-
6.8 Limited Liability.........................................-22-
7. CONFIDENTIAL INFORMATION..........................................-22-
7.1 Treatment of Confidential Information.....................-22-
7.2 Release from Restrictions.................................-23-
7.3 Publication...............................................-23-
8. REPRESENTATION AND WARRANTIES.....................................-24-
8.1 Mutual Representations....................................-24-
8.2 HMR Representation........................................-25-
-ii-
<PAGE>
9. INDEMNIFICATION...................................................-25-
10. TERMINATION......................................................-25-
10.1 Term......................................................-25-
10.2 Termination for Insolvency or Breach......................-25-
10.3 Disposition of Licensed Products..........................-26-
10.4 Survival of Obligations; Return of
Confidential Information.................................-26-
11. EQUITY INVESTMENT................................................-26-
11.1 Timing and Amount.........................................-26-
11.2 SCRIPTGEN Representations.................................-27-
12. MISCELLANEOUS....................................................-27-
12.1 Payment Method............................................-27-
12.2 Publicity.................................................-27-
12.3 Overdue Payments..........................................-27-
12.4 Prohibition on Hiring.....................................-27-
12.5 Assignment................................................-28-
12.6 Governing Law.............................................-28-
12.7 Force Majeure.............................................-28-
12.8 Waiver....................................................-28-
12.9 Notices...................................................-29-
12.10 No Agency.................................................-29-
12.11 Entire Agreement..........................................-29-
12.12 Headings..................................................-30-
12.13 Severability..............................................-30-
12.14 Successors and Assigns....................................-30-
12.15 Counterparts..............................................-30-
12.16 Interpretation............................................-30-
12.17 Export Controls...........................................-30-
-iii-
<PAGE>
COLLABORATION AND LICENSE AGREEMENT
This COLLABORATION AND LICENSE AGREEMENT (the "Agreement") is entered
into as of October 24, 1997 by and between Hoechst Marion Roussel, a French
corporation ("HMR"), and SCRIPTGEN Pharmaceuticals, Inc., a Delaware
corporation ("SCRIPTGEN").
WHEREAS, HMR has known-how in the research and development, manufacturing
and marketing of pharmaceutical products;
WHEREAS, SCRIPTGEN has know-how and technology for discovery of
[***] pharmaceutical products; and
WHEREAS, HMR and SCRIPTGEN desire to cooperate in the discovery and
subsequent development of [***] products for the human health
market;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, HMR and SCRIPTGEN
hereby agree as follows:
1. DEFINITIONS
Whenever used in this Agreement with an initial capital letter, the terms
defined in this Section 1 shall have the meanings specified.
1.1. "Affiliate" means any corporation, firm, limited liability company,
partnership or other entity which directly or indirectly controls or is
controlled by or is under common control with a Party to this Agreement.
"Control" means ownership, directly or through one or more Affiliates, of fifty
percent (50%) or more of the shares of stock entitled to vote for the election
of directors, in the case of a corporation, or fifty percent (50%) or more of
the equity interests in the case of any other type of legal entity, status as a
general partner in any partnership, or any other arrangement whereby a Party
controls or has the right to control the Board of Directors or equivalent
governing body of a corporation or other entity.
1.2 [***]
1.3 "Collaboration Program" means the program and associated activities
contemplated by Section 2 of this Agreement.
1.4 "Committees" mean the Scientific Committee and the Steering Committee
and "Committee" means either the Scientific Committee or the Steering Committee.
<PAGE>
1.5 "Confidential Information" means any technical or business information
furnished by one Party to the other in connection with this Agreement.
Confidential Information may include, without limitation, the identity of a
compound and its chemical structure and biological profile, the use of a
compound, trade secrets, know-how, inventions, technical data or specifications,
testing methods, business or financial information, research and development
activities, product and marketing plans, manufacturing plans, formulations,
financing plans and activities, and customer and supplier information, and any
information supplied pursuant to Section 2.8.
1.6 "Contract Year" means each twelve (12) month period beginning after
the Effective Date.
1.7 "Effective Date" means October 24, 1997.
1.8 [***]
1.9 [***]
1.10 "Field" means the human healthcare market.
1.11 "First Commercial Sale" means the date of the first sale of a Licensed
Product in the ordinary course of business in any country by HMR or an Affiliate
of HMR or licensee or sublicensee of HMR or an HMR Affiliate.
1.12 "HMR Owned Technology" has the meaning set forth in Section 4.2.2.
1.13 "HMR Patent Rights" means Patent Rights with respect to HMR Owned
Technology.
1.14 "IND" means an Investigational New Drug permit, as defined by U.S.
federal regulations, or the equivalent in any other country.
1.15 "IPO" means the first underwritten public offering of shares of
capital stock of SCRIPTGEN declared effective under the Securities Act after the
Effective Date.
1.16 "Joint Compound Library" means all Non-Selected Compounds as to which
HMR has performed discovery chemistry during the Collaboration as identified on
page 4 of the Work Plan.
1.17 "Joint Patent Rights" means Patent Rights with respect to Joint
Technology.
-2-
<PAGE>
1.18 "Joint Technology" has the meaning set forth in Section 4.2.3.
1.19 "License Term" means the time period referenced in Section 6.2.
1.20 "Licensed Compound" means any compound (including Back-Up Compounds)
selected for licensing and development by HMR pursuant to the provisions of
Sections 2.5, 2.7(c) and 2.7(d) hereof regardless of which Party was the source
of the compound.
1.21 "Licensed Compound Notice" has the meaning set forth in Section 2.5.1.
1.22 "Licensed Product" means any product which incorporates or utilizes a
Licensed Compound (including analogs, derivatives or modifications thereof), and
any product which is discovered in whole or in part as a result of the
Collaboration Program.
1.23 "NDA" means a New Drug Application, as defined by U.S. federal
regulations, or the equivalent in any other country.
1.24 [***]
-3-
<PAGE>
1.25 [***]
1.26 [***]
1.27 "Party" and "Parties" means HMR or SCRIPTGEN singularly or HMR and
SCRIPTGEN collectively, respectively.
1.28 "Patent Rights" means the rights and interests in and to issued
patents, pending patents and pending patent applications in any country,
including, but not limited to, all provisional applications, substitutions,
continuations, continuations-in-part, divisions, renewals, reissues or
extensions, whether owned solely or jointly by a Party or licensed in by a Party
with the right to sublicense.
1.29 "Scientific Committee" means the Scientific Committee established
pursuant to Section 2.2 of this Agreement.
1.30 "SCRIPTGEN Indemnitees" has the meaning set forth in Section 9.
1.31 "SCRIPTGEN Owned Technology" has the meaning set forth in
Section 4.2.1.
1.32 "SCRIPTGEN Patent Rights" means Patent Rights with respect to
SCRIPTGEN Owned Technology.
1.33 "SCRIPTGEN Screening Technology" means the proprietary Any Target
Ligand Affinity Screen (ATLAS) technology and the proprietary Screen for
Compounds with Affinity for Nucleic Acid (SCAN) technology owned by SCRIPTGEN
for the screening of compounds and the proprietary high-throughput functional
technologies owned by SCRIPTGEN.
1.34 "Securities Act" means the U.S. Securities Act of 1933, as amended.
-4-
<PAGE>
1.35 "Steering Committee" means the Steering Committee established pursuant
to Section 2.2 of this Agreement.
1.36 [***] Target Identification, Validation and Prioritization have the
meanings set forth in Appendix 1.
1.37 "Technology" means and includes all inventions, discoveries,
improvements, proprietary materials and biological substances, data, know-how
and trade secrets, whether or not patentable, including any negative results.
1.38 "Work Plan" means the Work Plan attached to this Agreement as Appendix
1.
2. COLLABORATION PROGRAM
2.1 Implementation of Collaboration Program.
2.1.1 Basic Provisions.
The Collaboration Program shall aim at the synergistic interaction
between HMR and SCRIPTGEN for the identification of [***] drug
candidates for development and commercialization through the activities outlined
in the [***]. The Collaboration Program shall continue for a period of three
(3) Contract Years (subject to extension or earlier termination as provided in
Section 2.3) and each Party shall use reasonable efforts to perform such
tasks as are set forth to be performed by it as contemplated by this
Agreement. All work performed hereunder or in connection herewith shall be
performed in a good and workmanlike manner using proper and accepted
scientific procedures, and in accordance with all applicable laws.
2.1.2 Cooperation.
Each Party shall keep the Steering Committee fully informed about
the status of the Collaboration Program, and scientists at SCRIPTGEN and HMR
shall cooperate in the performance of the Collaboration Program and, subject
to any confidentiality obligations to third parties, shall exchange
information and materials as necessary to carry out the Collaboration
Program, subject to the provisions of Sections 4, 5 and 7 hereof.
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2.1.3 Ownership and Use of SCRIPTGEN Screening Technology.
HMR hereby acknowledges that it has no claim of ownership or rights
to the SCRIPTGEN Screening Technology (including any improvements thereto)
and, as between HMR and SCRIPTGEN, the SCRIPTGEN Screening Technology
(including any improvements thereto) is owned solely by SCRIPTGEN and shall
remain the exclusive property of SCRIPTGEN, and that no license or other
rights therein or to the use thereof are hereby granted to HMR.
2.2 Committees.
2.2.1 Establishment and Functions.
SCRIPTGEN and HMR shall establish a Scientific Committee and a
Steering Committee.
(a) The Scientific Committee shall [***]
(b) The Steering Committee shall [***]
2.2.2 Membership.
SCRIPTGEN and HMR each shall appoint [***]
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2.2.3 Meetings.
The Scientific Committee shall interact on an ongoing basis using
mail, telephone, fax, E-mail and videoconferencing and shall meet [***] with
such meetings to be held, alternately, in Medford, Massachusetts, U.S.A., and
Romainville, France, unless the Parties agree otherwise. The Steering
Committee shall meet [***] with such meetings to be held, alternately, in
Medford, Massachusetts, U.S.A. and Romainville, France, unless the Parties
agree otherwise. Any additional Committee meetings shall be held on an as
needed basis at places and on dates selected by the appropriate Committee.
In addition, a Committee may act without a formal meeting by a written
memorandum signed by that number of members required to take the action if a
meeting in person had been held.
2.2.4 Minutes.
The Committees shall keep accurate minutes of its deliberations
which record all proposed decisions and all actions recommended or taken.
The Scientific Committee shall provide the Steering Committee with minutes of
all of its meetings and advise the Steering Committee in writing of all
recommendations of the Scientific Committee made pursuant to Section 2.2.1.
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2.2.5 Quorum; Voting; Decisions.
At each meeting of a Committee, at least one member appointed by
each Party shall constitute a quorum. Each member of a Committee shall have
one vote on all matters before the Committee, provided that the member or
members of each Party present at a meeting of the Committee shall have the
authority to cast the votes of any of such Party's members on the Committee
who are absent from the meeting. All decisions of a Committee shall be made
by majority vote of all of the members so long as the affirmative vote of at
least one member selected by each Party is included in the majority vote.
2.2.6 Expenses.
[***]
2.3 Term of Collaboration Program.
The Collaboration Program [***]
2.4 Allocation of Tasks for Collaboration Program.
[***]
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2.4.2 Follow-on Tasks.
The additional tasks required for the Collaboration Program as
specified in the [***] shall be the primary responsibility of
the Party designated in said [***]. Any task as to which no
one Party is designated as having primary responsibility shall be the joint
responsibility of the Parties. The Party with primary responsibility (and
each Party, as to tasks as to which no single Party has primary
responsibility) shall periodically, but no less often than quarterly, report
to the Scientific Committee its activities and the results of its activities
under this Section 2.4.2.
2.5 License Option.
2.5.1 Identification of Candidates.
HMR shall review the data and information developed during the
Collaboration Program and shall notify SCRIPTGEN in writing any time during
the term of the Collaboration Program of its decision to proceed
[***]
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2.5.2 Cooperation; Reports.
SCRIPTGEN shall cooperate fully with HMR in its efforts to develop
the Licensed Compounds by providing to HMR any information reasonably
available to SCRIPTGEN which relates to SCRIPTGEN's work hereunder. HMR
shall keep SCRIPTGEN informed about the status of the development of each
Licensed Compound. In particular, without limitation, HMR shall report to
SCRIPTGEN in reasonable detail no less frequently than semi-annually
concerning all aspects of such development activities.
2.6 Commercialization Rights.
[***]
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3. FUNDING
[***]
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3.4 Determination that Milestones have been achieved.
HMR shall promptly notify SCRIPTGEN of the achievement of each milestone.
In the event that SCRIPTGEN believes any milestone has been achieved and it
has not received timely notice from HMR, it shall so notify HMR in writing
and shall provide to HMR the basis for its belief. Within thirty (30) days,
HMR shall review the information provided by SCRIPTGEN and shall certify in
writing whether or not the milestone has been achieved. Any negative
determination shall be accompanied by a detailed explanation of the reasons
therefor. If HMR does not take action within such thirty (30) day period,
the milestone shall be deemed to have been achieved.
4. INTELLECTUAL PROPERTY RIGHTS
4.1 Disclosure of Inventions.
Each Party shall promptly inform the other and the Committees of all
inventions that are conceived, made or developed in the course of carrying
out the Collaboration Program by employees or consultants of either of them
or their Affiliates alone or jointly with employees or consultants of the
other Party or its Affiliates. The following provisions shall apply to
rights in the intellectual property developed by SCRIPTGEN or HMR, or both,
during the course of carrying out the Collaboration Program.
4.2 Ownership.
4.2.1 SCRIPTGEN Intellectual Property Rights.
SCRIPTGEN shall have sole and exclusive ownership of all right,
title and interest on a worldwide basis in and to any Technology developed or
created by
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employees, consultants or assignors of SCRIPTGEN or through the use of any
Technology of SCRIPTGEN hereunder (including, without limitation, the
SCRIPTGEN Screening Technology) (collectively, the "SCRIPTGEN Owned
Technology"), with full rights to license or sublicense, subject to HMR's
rights hereunder. Without limiting the foregoing, subject to the licenses
granted in Sections 2.7 and 6 hereof, SCRIPTGEN shall be the sole owner of
all Patent Rights, all trade secret rights and any other intellectual
property rights in the SCRIPTGEN Owned Technology.
4.2.2 HMR Intellectual Property Rights.
Subject to the provisions of Section 4.2.3, HMR shall have sole and
exclusive ownership of all right, title and interest on a worldwide basis in
and to any Technology solely developed by employees, consultants or assignors
of HMR or through the use of any Technology of HMR hereunder ("HMR Owned
Technology"), with full rights to license or sublicense, subject to
SCRIPTGEN's rights hereunder. Without limiting the foregoing, subject to the
licenses granted under this Agreement, HMR shall be the sole owner of all
Patent Rights, all trade secret rights and any other intellectual property
rights in any HMR Owned Technology.
4.2.3 Joint Technology.
HMR and SCRIPTGEN shall jointly own all Technology jointly
conceived, reduced to practice or developed jointly by employees, consultants
or assignors of both SCRIPTGEN and HMR in the Collaboration Program (the
"Joint Technology") and shall jointly own all Joint Patent Rights. Joint
Technology also includes the Joint Compound Library.
5. PROVISIONS CONCERNING THE FILING, PROSECUTION
AND MAINTENANCE OF PATENT RIGHTS
The following provisions relate to the filing, prosecution and
maintenance of Patent Rights during the term of this Agreement:
5.1 Filing of Patents.
In consultation with the Scientific Committee, SCRIPTGEN will determine
what patents will be filed on SCRIPTGEN Owned Technology and HMR will
determine what patents will be filed on HMR Owned Technology. Each Party
will be responsible for the prosecution (including the defense of
interferences and similar proceedings) of patent protection for its owned
Technology, provided that the other Party will have the opportunity to
provide substantive review and comment on any such prosecution.
Responsibility for prosecution of patent protection (including the defense of
interferences and similar proceedings) on Joint Technology will be determined
by the Committees as provided in Section 2.2.1.
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5.2 Expenses.
[***]
5.3 Right to Prosecute Abandoned Rights.
If either Party at any time elects not to seek or continue to seek, use
or maintain patent protection on any Technology owned by it relating to
Licensed Compounds in any country, the other Party shall have the exclusive
right, at its expense, to file, procure, maintain and enforce in such
countries patents on such Technology. Each Party agrees to advise the other
Party of all decisions taken in a timely manner in order to allow a Party to
protect its rights under this Section 5.3 If a Party elects not to file a
patent application or application for a certificate of invention, not to
maintain a patent or certificate of invention, or to abandon a pending patent
application or application for a certificate of invention, it shall advise
the other Party of such election in a timely manner, and the other Party
shall have the right, at the expense of the other Party, of filing such
application, maintaining such patent or certificate of invention or
continuing to attempt to obtain protection on the subject matter disclosed in
such pending application.
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6. LICENSE RIGHTS
6.1 License Grant.
(a) During the License Term, SCRIPTGEN hereby grants to HMR a
worldwide exclusive license, including the right to grant sublicenses, to
develop, have developed, make, have made, use, distribute for sale, offer for
sale, sell, import and have imported Licensed Products in the Field under
Patent Rights and Technology covering such Licensed Compound or Licensed
Product now or hereafter owned by or licensed (with the right to grant
sublicenses) to SCRIPTGEN.
(b) For the avoidance of doubt, it is acknowledged that, pursuant
to the terms of this Agreement (i) HMR shall have no license from SCRIPTGEN
under, access to or right to use, any Patent Rights or Technology owned by or
licensed to SCRIPTGEN, for any purpose other than those expressly set forth
in subsection (a) and (ii) SCRIPTGEN shall have no license from HMR under,
access to or right to use, any Patent Rights or Technology owned by or
licensed to HMR, for any purpose other than those expressly set forth in
Section 2.6 hereof.
6.2 Term of License.
The License Term as to each Licensed Product shall commence upon the
issuance of the relevant Licensed Compound Notice. The License Term for each
Licensed Product [***] The license for each Licensed Product
shall be deemed a license separate and severable from licenses to other
Licensed Products.
6.3 Sublicenses.
If HMR grants a sublicense to a third party, HMR guarantees that such
sublicensee will fulfill all of HMR's obligations under this Agreement, and
HMR shall not be relieved of its obligations pursuant to this Agreement as a
result of such sublicense.
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6.4 Payment of Royalties and Share of Other Amounts; Payment Dates;
Accounting; Records; Other.
6.4.1 Payment of Royalties and Share of Other Amounts.
[***]
6.4.2 Payment Dates and Reports.
(a) Royalties shall be paid by HMR to SCRIPTGEN on Net Sales
within [***] after the end of each calendar quarter in which
such Net Sales are made. Such payment shall be accompanied by a report
showing (a) the gross sales of the Licensed Product sold by HMR, its
Affiliates and any licensee or sublicensee of HMR or its Affiliates in each
country during the reporting period and the calculation of Net Sales from such
gross sales, (b) the royalty due thereon, (c) withholding taxes, if any,
required by law to be deducted in respect of such royalties, and (d) the
exchange rates used in determining the amount of U.S. dollars. If no royalty
is due for any calendar quarter, HMR shall so report.
(b) All amounts due SCRIPTGEN from HMR pursuant to Section
6.4.1(b) shall be paid to SCRIPTGEN by HMR within sixty (60) days after
receipt by HMR of the payment to HMR in respect of which payment is due
SCRIPTGEN under Section 6.4.1(b).
(c) All amounts due SCRIPTGEN under Sections 6.4.1(a) and
6.4.1(b) shall be paid without deduction or offset, except as otherwise
provided in Section 6.4.6.
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(d) HMR shall not solicit, authorize or accept any
consideration for or in connection with the sale of Licensed Products other
than as will be accurately reflected in Net Sales.
6.4.3 Accounting.
All amounts due SCRIPTGEN under Sections 6.4.1(a) and 6.4.1(b) shall
be computed and paid in U.S. dollars. For purposes of determining the
amounts due SCRIPTGEN, the amount of Net Sales in any foreign currency and
the amount of any payment received by HMR in respect of which a payment is
due SCRIPTGEN under Section 6.4.1(b) shall be computed by converting such
amounts into U.S. dollars at the prevailing commercial rate of exchange for
purchasing dollars with such foreign currency as reported in The Wall Street
Journal on the last business day of the period to which a royalty payment
relates or on the business day on which payment was received by HMR in
respect of which a payment is due SCRIPTGEN under Section 6.4.1(b), as the
case may be.
6.4.4 Records.
HMR and its Affiliates and the licensees and sublicensees of HMR and
its Affiliates shall keep for [***] years from the date of
each payment of royalties complete and accurate records of sales by HMR and
its Affiliates and its and their licensees and sublicensees of each Licensed
Product in sufficient detail to allow the accruing royalties to be determined
accurately. SCRIPTGEN shall have the right for a period of
[***] years after receiving any report or statement with
respect to royalties due and payable to appoint an independent certified
public accountant reasonably acceptable to HMR to inspect the relevant records
of HMR and its Affiliates and its or their licensees and sublicensees to
verify such report or statement. HMR and its Affiliates and its and their
licensees and sublicensees shall each make its records available for
inspection by such independent certified public accountant during regular
business hours at such place or places where such records are customarily
kept, upon reasonable notice from SCRIPTGEN, solely to verify the accuracy of
the reports and payments. Such inspection right shall not be exercised more
than once in any Fiscal Year nor more than once with respect to sales of any
Licensed Product in any given payment period. SCRIPTGEN agrees to hold in
strict confidence all information concerning royalty payments and reports,
and all information learned in the course of any audit or inspection, except
to the extent necessary for SCRIPTGEN to reveal such information in order to
enforce its rights under this Agreement or if disclosure is required by law or
judicial process. The results of each inspection, if any, shall be binding on
both Parties. SCRIPTGEN shall pay for such inspections, except that in the
event there is any upward adjustment in aggregate royalties payable for any
calendar quarter shown by such inspection of more than [***]
of the amount paid, HMR shall pay for such inspection.
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6.4.5 Single Royalty per Licensed Product.
Only one royalty shall be due with respect to each sale of a
Licensed Product.
6.4.6 Foreign Royalties.
Where royalties are due hereunder for sales of Licensed Products in
a country where, by reason of currency regulations or taxes of any kind, it
is impossible or illegal for HMR, and Affiliates or sublicensee to transfer
royalty payments to SCRIPTGEN for Net Sales in that country, such royalties
shall be deposited in whatever currency is allowable by the person or entity
not able to make the transfer for the benefit or credit of SCRIPTGEN in an
accredited bank in that country that is acceptable to SCRIPTGEN.
[***]
6.5 Infringement.
(a) Each Party shall promptly report in writing to the other Party
during the term of this Agreement any known infringement or suspected
infringement of any Patent Rights covering Licensed Compounds or Licensed
Products by a third party of which it becomes aware, and shall provide the
other Party with all available evidence supporting said infringement or
suspected infringement.
(b) Except as provided in paragraph (d) below, HMR shall have the
right to initiate an infringement or other appropriate suit against any third
party who at any time has infringed, or is suspected of infringing, any
Patent Rights covering Licensed Compounds or Licensed Products. HMR shall
give SCRIPTGEN sufficient advance notice of its intent to file said suit and
the reasons therefor, and shall provide SCRIPTGEN with an opportunity to make
suggestions and comments regarding such suit. HMR shall keep SCRIPTGEN
properly informed, and shall from time to time consult with SCRIPTGEN,
regarding the status of any such suit.
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(c) HMR shall have the sole and exclusive right to select counsel
for any suit referred to in paragraph (b) above and shall pay all expenses of
the suit, including without limitation attorneys' fees and court costs. Any
damages, royalties, settlement fees or other consideration received by HMR or
any of its Affiliates shall be divided [***] to HMR [***] to SCRIPTGEN [***].
If necessary, SCRIPTGEN shall join as a party to the suit but shall be under
no obligation to participate except to the extent that such participation is
required as the result of being a named party to the suit. SCRIPTGEN shall
offer reasonable assistance to HMR in connection therewith at no charge to
HMR except for reimbursement of reasonable out-of-pocket expenses (not
including salaries of SCRIPTGEN personnel) incurred in rendering such
assistance. SCRIPTGEN shall have the right to participate and be represented
in any such suit by its own counsel at its own expense. HMR shall not settle
any such suit involving rights of SCRIPTGEN without obtaining the prior
written consent of SCRIPTGEN, which consent shall not be unreasonably
withheld.
(d) In the event that HMR elects not to initiate an infringement or
other appropriate suit pursuant to paragraph (b) above, HMR shall promptly
advise SCRIPTGEN of its intent not to initiate such suit, and SCRIPTGEN shall
have the right, at the expense of SCRIPTGEN, of initiating an infringement or
other appropriate suit against any third party who at any time has infringed,
or is suspected of infringing, any Patent Rights covering Licensed Compounds
or Licensed Products. In exercising its rights pursuant to this paragraph
(d), SCRIPTGEN shall have the sole and exclusive right to select counsel and
shall pay all expenses of the suit, including without limitation, attorneys'
fees and court costs, and shall be entitled to receive and retain any
damages, royalties, settlement fees or other consideration. If necessary,
HMR shall join as a party to the suit but shall be under no obligation to
participate except to the extent that such participation is required as a
result of being a named party of the suit. At SCRIPTGEN's request, HMR shall
offer reasonable assistance to SCRIPTGEN at no charge to SCRIPTGEN except for
reimbursement of reasonable out-of-pocket expenses (not including salaries of
HMR personnel) incurred in rendering such assistance. HMR shall have the
right to participate and be represented in any such suit by its own counsel
at its own expense.
6.6 Claimed Infringement.
Notwithstanding anything to the contrary in this Agreement, in the event
that any action, suit or proceeding is brought against SCRIPTGEN or any
Affiliate of SCRIPTGEN or HMR or any Affiliate, licensee or sublicensee of
HMR alleging the infringement of the intellectual property rights of a third
party by reason of the discovery, development, manufacture, use, sale,
importation or offer for sale of a Licensed Product by HMR or its Affiliates
or its or their licensees or sublicensees, HMR will have the obligation to
defend itself and SCRIPTGEN and its Affiliates in
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such action, suit or proceeding at HMR's expense. SCRIPTGEN shall have the
right to separate counsel at its own expense in any such action or
proceeding. The Parties will cooperate with each other in the defense of any
such suit, action or proceeding. The Parties will give each other prompt
written notice of the commencement of any such suit, action or proceeding or
claim or infringement and will furnish each other a copy of each
communication relating to the alleged infringement, but the failure to do so
shall not affect HMR's obligations under this Section and under Section 9
except to the extent HMR is actually damaged thereby. HMR shall not
compromise, litigate, settle or otherwise dispose of any such suit, action or
proceeding which involves the use of SCRIPTGEN Owned Technology, Joint
Technology, SCRIPTGEN Patent Rights or Joint Patent Rights without
SCRIPTGEN's advice and prior written consent, provided that SCRIPTGEN shall
not unreasonably withhold its consent to any settlement which will provide an
unconditional release of SCRIPTGEN and its Affiliates.
6.7 Warranty Disclaimer.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY
MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR
OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OR
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.
6.8 Limited Liability.
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER
SCRIPTGEN NOR HMR WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY FOR (i) ANY DIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOST PROFITS OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES.
7. CONFIDENTIAL INFORMATION
7.1 Treatment of Confidential Information.
Each Party shall maintain the Confidential Information of the other Party
in confidence, and shall not disclose, divulge or otherwise communicate such
Confidential Information to others, or use it for any purpose, except
pursuant to, and in order to carry out, the terms and objectives of this
Agreement, and hereby agrees to exercise every reasonable precaution to
prevent and restrain the unauthorized disclosure of such Confidential
Information by any of its directors, officers, employees,
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consultants, subcontractors, sublicensees, agents or Affiliates. Without
limiting the foregoing, each Party agrees not to make any disclosure of the
other Party's Confidential Information which will impair the other Party's
ability to obtain U.S. or foreign patents on any patentable invention or
discovery described in such Confidential Information. The Confidential
Information of each Party includes information about third parties disclosed
by one Party to this Agreement to the other Party to this Agreement.
7.2 Release from Restrictions.
The provisions of Section 7.1 shall not apply to any Confidential
Information disclosed hereunder which:
(a) was known or used by the receiving Party prior to its date of
disclosure to the receiving Party, as evidenced by the prior written
records of the receiving Party; or
(b) either before or after the date of this disclosure to the
receiving Party is lawfully disclosed to the receiving Party by an
independent, unaffiliated third party rightfully in possession of the
Confidential Information; or
(c) either before or after the date of the disclosure to the
receiving Party becomes published or generally known to the public through
no fault or omission on the part of the receiving Party or its Affiliates
and under no obligation of confidentiality; or
(d) is independently developed by a Party without use of the
Confidential Information of the other Party, as evidenced by the written
records of the developing Party; or
(e) is required to be disclosed by the receiving Party to comply with
applicable laws, to defend or prosecute litigation or to comply with
governmental regulations, provided that the receiving Party provides prior
written notice of such disclosure to the other Party and takes reasonable
and lawful actions to avoid and/or minimize the degree of such disclosure.
7.3 Publication.
It is expected that each Party may wish to publish the results of its
research and development program under this Agreement. In order to safeguard
intellectual property rights, the Party wishing to publish or otherwise
publicly disclose the results of its research hereunder shall first submit a
draft of the proposed manuscripts to the Scientific Committee during the term
of the Collaboration Program or otherwise to
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the other Party for review, comment and consideration of appropriate patent
action at least [***] weeks prior to any submission for
publication or other public disclosure. Within [***] days of
receipt of the prepublication materials, the Scientific Committee or the other
Party will advise the Party seeking publication as to whether a patent
application will be prepared and filed or whether trade secret protection
should be pursued and, if so, the Scientific Committee or the other Party
will, in cooperation with both Parties, determine the appropriate timing and
content of any such publications. In all events, there shall be deleted from
any such publication any information reasonably determined by a Party hereto to
constitute its Confidential Information.
8. REPRESENTATION AND WARRANTIES
8.1 Mutual Representations.
SCRIPTGEN and HMR each represents and warrants as follows:
8.1.1 Organization.
It is a corporation duly organized, validly existing and is in good
standing under the laws of the State of Delaware and of the country of
France, respectively, is qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the performance of its
obligations hereunder requires such qualification and has all requisite power
and authority, corporate or otherwise, to conduct its business as now being
conducted, to own, lease and operate its properties and to execute, deliver
and perform this Agreement.
8.1.2 Authorization.
The execution, delivery and performance by it of this Agreement has
been duly authorized by all necessary corporate action and does not and will
not (a) require any consent or approval of its stockholders or (b) violate
any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to it or any provision of its charter documents or any
agreement or other instrument or obligation to which it is bound or its
assets are subject.
8.1.3 Binding Agreement.
This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and conditions.
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8.1.4 No Inconsistent Obligation.
It is not under any obligation to any person, or entity, contractual
or otherwise, that is conflicting or inconsistent in any respect with the
terms of this Agreement or that would impede the diligent and complete
fulfillment of its obligations.
8.2 HMR Representation.
HMR represents to SCRIPTGEN that no withholding tax is due on any payment
required to be made hereunder and that HMR will not withhold any amounts on
account of any tax or withholding, except for withholding, if any, required
by French tax authorities on payments of royalties pursuant to Section 6.4.6.
9. INDEMNIFICATION
HMR shall indemnify, defend and hold harmless SCRIPTGEN and its
Affiliates and its and their respective directors, officers, employees, and
agents and their respective successors, heirs and assigns (the "SCRIPTGEN
Indemnitees"), against any liability, damage, loss or expense (including
reasonable attorneys' fees and expenses of litigation) incurred by or imposed
upon the SCRIPTGEN Indemnitees, or any of them, in connection with any
claims, suits, actions, demands or judgments of third parties, including
without limitation, personal injury and product liability matters (except in
cases where such claims, suits, actions, demands or judgments result from
willful misconduct, gross negligence or material breach of this Agreement on
the part of SCRIPTGEN) arising out of the development, testing, production,
manufacture, promotion, import, sale or use by any person of any Licensed
Product manufactured or sold by HMR or by an Affiliate, licensee,
sublicensee, distributor or agent of HMR or its Affiliates. HMR shall have no
obligation under this Section 9 with respect to incidental, indirect, or
consequential damages or lost profits of Scriptgen.
10. TERMINATION
10.1 Term.
This Agreement shall remain in effect until terminated in accordance with
the provisions of this Section 10 or until the last to expire of the licenses
and rights granted under this Agreement.
10.2 Termination for Insolvency or Breach.
Each Party shall be entitled to terminate this Agreement by written
notice to the other Party (a) upon the bankruptcy, insolvency, dissolution or
winding up of the other Party or (b) in the event that the other Party shall
be in default of any of its
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obligations hereunder, and shall fail to remedy any such default within sixty
(60) days (ten (10) days in the case of failure to make payments when due)
after notice thereof by the non-breaching Party. Upon termination of this
Agreement pursuant to this Section 10.2, neither Party shall be relieved of
any obligations incurred prior to such termination and all other rights and
remedies of the terminating Party shall not be affected by such termination.
10.3 Disposition of Licensed Products.
Upon any termination of this Agreement pursuant to Section 10, HMR shall
within [***] days of the effective date of such termination
notify SCRIPTGEN in writing of the amount of Licensed Products which HMR, its
Affiliates and sublicensees then have completed on hand, the sale of which
would, but for the termination, be subject to royalty, and HMR, its Affiliates
and sublicensees shall thereupon be permitted during the [***]
months following such termination to sell that amount of Licensed Products,
provided that HMR shall pay the aggregate royalty thereon at the conclusion of
the earlier of the last such sale or such [***] month period.
Except as provided above, all sublicenses granted by HMR shall forthwith
terminate upon the termination of this Agreement.
10.4 Survival of Obligations; Return of Confidential Information.
Notwithstanding any termination of this Agreement, the obligations of the
Parties under Sections 6, 7, 8 and 9 shall survive and continue to be
enforceable. Upon any termination of this Agreement pursuant to Section 10,
each Party shall promptly destroy all written Confidential Information, and
all copies thereof.
11. EQUITY INVESTMENT
11.1 Timing and Amount.
Provided the IPO is closed no later than [***] years from
the Effective Date, concurrently with the closing of the IPO, HMR shall
purchase from SCRIPTGEN pursuant to a private placement [***]
(U.S.) of common stock of SCRIPTGEN at a price per share equal to the gross
price per share at which shares are sold to the underwriter(s) of the IPO
prior to deduction for underwriting commissions and discounts. HMR
acknowledges and agrees that such shares shall not be registered under the
Securities Act and shall be deemed to be "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act. As a condition of
such purchase, HMR and SCRIPTGEN shall enter into a written agreement that
provides [***] on customary terms with respect to such shares
satisfactory to both Parties, to be exercisable whenever the provisions of
Sections (c), (e), (f) and (h) of Rule 144 promulgated under the Securities
Act would apply to any sale of such shares in the public market.
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<PAGE>
11.2 SCRIPTGEN Representations.
SCRIPTGEN represents and warrants that the shares of common stock which
HMR will purchase pursuant to Section 11.1 will be duly authorized, validly
issued and fully paid and non-assessable.
12. MISCELLANEOUS
12.1 Payment Method.
Each payment to SCRIPTGEN under this Agreement shall be paid by HMR in
U.S. currency by wire transfer of funds to an account of SCRIPTGEN in
accordance with instructions provided by SCRIPTGEN.
12.2 Publicity.
Neither Party may disclose the existence of terms of this Agreement
without the prior written consent of the other Party; provided, however, that
either Party may make such a disclosure to the extent required by law or
judicial process and that SCRIPTGEN may make a disclosure of the existence
and terms of this Agreement (i) in the registration statement relating to the
IPO or (ii) to investors, prospective investors, lenders and other financing
sources and parties which have entered into a confidentiality agreement with
SCRIPTGEN and with which SCRIPTGEN may enter into a commercial arrangement.
The Parties, upon the execution of this Agreement, will discuss the
possibility of a mutually acceptable news release for publication in general
circulation periodicals and newswire.
12.3 Overdue Payments.
Payments due hereunder which are not paid when due shall bear interest at
a rate of [***] per month from the due date until paid in full. Payment of
such interest shall be in addition to any other rights and remedies to which
the Party to which the payment is due may be entitled for failure to make
timely payment.
12.4 Prohibition on Hiring.
Neither Party nor its Affiliates shall, during the term of the
Collaboration Program, but in any event for at least [***] years from the
Effective Date, hire any person who was employed by the other Party or its
Affiliates during such period, whether such person is hired as an employee,
investigator, independent contractor or otherwise; provided that a person who
was employed by a Party or its Affiliates as a consultant or independent
contractor may be employed as a consultant or independent contractor by the
other Party or its Affiliates to perform services in
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<PAGE>
furtherance of the Collaboration Program or for activities unrelated to the
collaboration contemplated by this Agreement.
12.5 Assignment.
Neither this Agreement nor any of the rights or obligations hereunder may
be assigned by either Party without the prior written consent of the other
Party, except to a Party who acquires all or substantially all of the
business of the assigning Party by merger, sale of assets or otherwise.
12.6 Governing Law.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Delaware with regard to conflicts of law principles.
The rights and obligations of the Parties under this Agreement shall not be
governed by the provisions of the U.N. Convention on Contracts for the
International Sale of Goods.
12.7 Force Majeure.
In the event that either Party is prevented from performing or is unable
to perform any of its obligations under this Agreement (other than the
payment of money) due to any act of God; fire; casualty; flood; war; strike;
lockout; failure of public utilities; injunction or any act, exercise,
assertion or requirement of governmental authority, including any
governmental law, order or regulation permanently or temporarily prohibiting
or reducing the level of research, development or production work hereunder
or the manufacture, use or sale of Licensed Products; epidemic; destruction
of production facilities; riots; insurrection; inability to procure or use
materials, labor, equipment, transportation or energy sufficient to meet
experimentation or manufacturing needs; or any other cause beyond the
reasonable control of the Party invoking this Section 12.7, such Party shall
give notice to the other Party in writing promptly, and thereupon if such
Party shall have used its best efforts to avoid such occurrence, the affected
Party's performance shall be excused and the time for performance shall be
extended for the period of delay or inability to perform due to such
occurrence.
12.8 Waiver.
The waiver by either Party of a breach or a default of any provision of
this Agreement by the other Party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of either Party to exercise or avail itself of any
right, power or privilege that it has or may have hereunder operate as a
waiver of any right, power or privilege by such Party.
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<PAGE>
12.9 Notices.
Any notice or other communication in connection with this Agreement must
be in writing and by mail, certified, return receipt requested, by electronic
facsimile transmission or courier service, and shall be effective when
delivered to the addressee at the address listed below or such other address
as the addressee shall have specified in a notice actually received by the
addressor.
If to SCRIPTGEN:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Suite 3000
Medford, MA 02155
Attn: President
If to HMR:
Hoechst Marion Roussel
102, Route de Noisy
93235 Romainville Cedex
FRANCE
Attn: General Counsel
12.10 No Agency.
Nothing herein shall be deemed to constitute either Party as the agent or
representative of the other Party, or both Parties as joint venturers or
partners for any purpose. SCRIPTGEN shall be an independent contractor, not
an employee or partner of HMR, and the manner in which SCRIPTGEN renders its
services under this Agreement shall be within SCRIPTGEN's sole discretion.
Neither Party shall be responsible for the acts or omissions of the other
Party, and neither Party will have authority to speak for, represent or
obligate the other Party in any way without prior written authority from the
other Party.
12.11 Entire Agreement.
This Agreement and the Appendix and Exhibits hereto contain the full
understanding of the Parties with respect to the subject matter hereof and
supersede all prior understandings and writing relating thereto. No waiver,
alteration or modification of any of the provisions hereof shall be binding
unless made in writing and signed by the Parties by their respective officers
thereunto duly authorized.
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<PAGE>
12.12 Headings.
The headings contained in this Agreement are for convenience of reference
only and shall not be considered in construing this Agreement.
12.13 Severability.
In the event that any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable because it is invalid or in
conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the rights and obligations of
the Parties shall be construed and enforced as if the Agreement did not
contain the particular provisions held to be unenforceable.
12.14 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their successors and permitted assigns.
12.15 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.
12.16 Interpretation.
The Parties acknowledge and agree that: (i) each Party and its counsel
reviewed and negotiated the terms and provisions of this Agreement and has
contributed to its revision; (ii) the rule of construction to the effect that
any ambiguities are resolved against the drafting Party shall not be employed
in the interpretation of this Agreement; and (iii) the terms and provisions
of this Agreement shall be construed fairly as to all Parties hereto and not
in favor of or against any Party, regardless of which Party was generally
responsible for the preparation of this Agreement.
12.17 Export Controls.
This Agreement is made subject to any restrictions concerning the export
of Licensed Products or SCRIPTGEN Owned Technology from the United States
which may be imposed upon or related to either Party to this Agreement from
time to time by the Government of the United States. HMR will not export,
directly or indirectly, any SCRIPTGEN Owned Technology or any Licensed
Products utilizing such Technology to any countries for which the United
States Government or any agency
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<PAGE>
thereof at the time of export requires an export license or other
governmental approval, without first obtaining the written consent to do so
from the Department of Commerce or other agency of the United States
Government when required by the applicable statute or regulation.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized representatives.
HOECHST MARION ROUSSEL
By /s/
-------------------------------------------
(Print name)
Title:
Date:
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/
-------------------------------------------
(Print name)
Title:
Date:
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<PAGE>
EXHIBIT A
[***]
<PAGE>
EXHIBIT B
[***]
<PAGE>
Appendix 1-WORK PLAN
[***]
<PAGE>
EXHIBIT 10.10
CONFIDENTIAL
STOCK PURCHASE AGREEMENT
Effective October 24, 1997, SCRIPTGEN Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and Hoeschst Marion Roussel, a French corporation
("HMR"), hereby act and agree as follows:
ARTICLE ONE
Sale and Purchase of Shares; Closing
1.1 Sale and Purchase of Common Stock. On the Closing Date (as hereinafter
defined) and subject to the terms and conditions hereof, the Company shall sell,
transfer, grant, convey and deliver to HMR, and HMR shall purchase and accept
delivery of, such number of shares of Common Stock of the Company (the "Shares")
as is obtained by dividing three million dollars ($3,000,000) (U.S.) (the
"Purchase Price") by a price per share ("Per Share Price") equal to the gross
price per share at which shares of Common Stock of the Company are sold to the
underwriter(s) in the first underwritten public offering of shares of capital
stock of the Company declared effective under the U.S. Securities Act of 1933,
as amended (the "Act"), after the date of this Agreement (the "IPO"). The price
per Share at which the Shares shall be sold to HMR shall be the Per Share Price.
1.2 Closing. The closing of the transaction contemplated by this Agreement
(the "Closing") shall take place at the principal office of the Company at 10:00
A.M., Boston time, on the first business day following the date the registration
statement for the IPO is declared effective under the Act (the "Closing Date")
or at such other place or time or on such other date as may be mutually agreed
upon by the Company and HMR. At the Closing, the Company shall deliver to HMR or
HMR's nominee a certificate representing the Shares, registered in the name of
HMR or its nominee, against receipt by the Company of the Purchase Price in U.S.
dollars by wire transfer of immediately available funds. All proceedings to be
taken and all documents to be executed at the Closing shall be deemed to have
been taken, delivered and executed simultaneously, and no proceeding shall be
deemed to have been taken nor documents deemed executed and delivered until all
have been taken, delivered and executed. At the Closing, the Company shall
deposit the Purchase Price in an escrow account with a bank reasonably
satisfactory to HMR. If the closing of the IPO has not occurred within five (5)
business days after the Closing Date, the escrow agent shall be instructed to
wire transfer the Purchase Price to HMR against return to the Company of the
certificate representing the Shares, duly endorsed for transfer to the Company.
Following such wire transfer and return, the transactions contemplated by this
Agreement shall continue in full force and effect subject to the provisions of
Section 1.4.
1.3 Closing Conditions. The obligations of each party to consummate the
transactions contemplated by this Agreement is subject to the satisfaction or
waiver by the other party at or prior to the Closing Date of the condition that
the
<PAGE>
representations and warranties of each party set forth in this Agreement are
true and correct in all material respects as of the Closing Date as though made
on and as of the Closing Date. Each party shall have received a certificate
signed on behalf of the other party by an officer of the other party to the
foregoing effect.
1.4 Termination. This Agreement may be terminated at any time prior to the
Closing by either party if the Closing shall not have occurred on or before two
years from the date hereof.
1.5 Registration Rights Agreement. Concurrently with the execution and
delivery hereof, the parties have executed a Registration Rights Agreement in
the form attached hereto as Exhibit A (the "Registration Rights Agreement").
ARTICLE TWO
Investment Representations of HMR.
HMR hereby represents and warrants to the Company that:
(a) HMR is acquiring the Shares for its own account, for investment, and
not with a view to any "distribution" thereof within the meaning of the Act.
(b) HMR understands that because the Shares have not been registered under
the Act, it cannot dispose of any or all of the Shares unless such Shares are
subsequently registered under the Act or exemptions from such registration are
available. HMR acknowledges and understands that it has no independent right to
require the Company to register the Shares except as provided in the
Registration Rights Agreement. HMR understands that each certificate
representing the Shares will bear a restrictive legend.
(c) HMR is able to bear the economic risk of loss of its investment in the
Company, has been granted the opportunity to make a thorough investigation of
the affairs of the Company, and has availed itself of such opportunity either
directly or through its authorized representatives.
(d) HMR has been advised that the Shares have not been and are not being
registered under the Act or under the "blue sky" laws of any jurisdiction and
that the Company is issuing the Shares relying upon, among other things, the
representations and warranties of HMR contained in this Article Two in
concluding that such issuance is a "private offering" and does not require
compliance with the registration provisions of the Act or qualification or
registration under provisions of applicable "blue sky" laws.
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<PAGE>
ARTICLE THREE
Representations and Warranties of the Company
The Company hereby represents and warrants to HMR as follows:
3.1 Corporate Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own or lease all its
properties and assets and to carry on its business as it is now being conducted,
and to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
3.2 Authorization. The execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms.
3.3 No Conflicts. The execution, delivery and performance of this
Agreement by the Company do not and will not violate, conflict with, result in a
breach of or constitute a default under (or an event which with due notice or
lapse of time, or both, would constitute a breach of or default under) or result
in the creation of any lien, security interest or other encumbrance under (a)
the corporate charter or By-laws of the Company, as amended to date, (b) any
note, agreement, contract, license, instrument, lease or other obligation to
which the Company is a party or by which it is bound, (c) any judgment, order,
decree, ruling or injunction or (d) any statute, law, regulation or rule of any
governmental agency or authority.
ARTICLE FOUR
Representations and Warranties of HMR.
HMR hereby represents and warrants to the Company as follows:
4.1 Corporate Organization. HMR is a corporation duly organized, validly
existing and in good standing under the laws of France. HMR has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and to execute, deliver and
perform this Agreement and to consummate the transactions contemplated hereby.
-3-
<PAGE>
4.2 Authorization. The execution, delivery and performance of this
Agreement has been duly and validly authorized by all necessary corporate action
on the part of HMR. This Agreement has been duly executed and delivered by HMR
and constitutes the legal, valid and binding obligations of HMR enforceable
against HMR in accordance with their its terms.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement by HMR do not and will not violate, conflict with, result in a breach
of or constitute a default under (or an event which with due notice or lapse of
time, or both, would constitute a breach of or default under) or result in the
creation of any lien, security interest or other encumbrance under (a) the
corporate charter or By-laws of HMR, as amended to date, (b) any note,
agreement, contract, license, instrument, lease or other obligation to which HMR
is a party or by which it is bound, (c) any judgment, order, decree, ruling or
injunction or (d) any statute, law, regulation or rule of any governmental
agency or authority.
ARTICLE FIVE
Miscellaneous
5.1 Survival. The provisions of Articles Two, Three and Four hereof shall
survive completion of the transaction contemplated thereby.
5.2 Non-Waiver. No term or provision of this Agreement, including without
limitation, the terms and provisions contained in this sentence, shall be deemed
waived, modified or altered so as to impose any additional obligation or grant
any additional obligation or grant any additional right, and no custom, payment,
act, knowledge, extension of time, favor or indulgence, gratuitous or otherwise,
or words or silence at any time, shall grant any additional right or impose any
additional obligation, or be deemed a waiver or release of any obligation,
except as set forth in a written instrument properly executed and expressly
stating that it is and the extent to which it is intended to be so effective.
5.3 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the respective successors and assigns of the parties.
5.4 Captions. The heading preceding the text of sections of this Agreement
are for convenience only and shall not be deemed part of this Agreement.
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<PAGE>
5.5 Publicity. Neither party may disclose the existence of terms of this
Agreement without the prior written consent of the other party; provided,
however, that either party may make such a disclosure to the extent required by
law or judicial process and that the Company may make a disclosure of the
existence and terms of this Agreement (i) in the registration statement relating
to the IPO or (ii) to investors, prospective investors, lenders and other
financing sources and parties which have entered into a confidentiality
agreement with the Company and with which the Company may enter into a
commercial arrangement. The parties, upon the execution of this Agreement, will
discuss the possibility of a mutually acceptable news release for publication in
general circulation periodicals and newswire.
5.6 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware with regard to conflicts of
law principles.
5.7 Notices. Any notice or other communication in connection with this
Agreement must be in writing and by mail, certified, return receipt requested,
by electronic facsimile transmission or courier service, and shall be effective
when delivered to the addressee at the address listed below or such other
address as the addressee shall have specified in a notice actually received by
the addressor.
If to SCRIPTGEN:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Suite 3000
Medford, MA 02155
Attn: President
If to HMR:
Hoechst Marion Roussel
102, Route de Noisy
93235 Romainville Cedex
FRANCE
Attn: General Counsel
-5-
<PAGE>
5.8 Interpretation. The parties acknowledge and agree that: (i) each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and has contributed to its revision; (ii) the rule of construction to
the effect that any ambiguities are resolved against the drafting party shall
not be employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to all parties hereto
and not in favor of or against any party, regardless of which party was
generally responsible for the preparation of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
HOECHST MARION ROUSSEL
By /s/ [ILLEGIBLE]
-----------------------
Title: Member of the Board
Date: October 24, 1997
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ [ILLEGIBLE]
-----------------------
Title: President & CEO
Date: October 24, 1997
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<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
Effective October 24, 1997, SCRIPTGEN Pharmaceuticals, Inc., a Delaware
corporation ("the "Company"), and Hoechst Marion Roussel, a French corporation
("HMR"), hereby act and agree as follows:
1. Definitions. As used herein:
(a) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act and the automatic effectiveness
or the declaration or ordering of effectiveness of such registration statement
or document.
(b) The term "Registrable Securities" means the shares of Common
Stock of the Company beneficially owned by HMR as of the date hereof and any
additional shares of Common Stock of the Company issued in respect thereof as a
result of any stock split, stock dividend, combination or recapitalization but
shall not include any shares of capital stock which (i) have been effectively
registered under the 1933 Act and disposed of in accordance with a registration
statement covering such securities, (ii) have been distributed to the public
pursuant to Rule 144 or (iii) have been transferred or disposed of in a
transaction as to which the registration rights granted hereunder have not or
may not be transferred.
(c) The term "Holder" means HMR and any transferee of Registrable
Securities from a Holder provided such transfer complies with Section 8 of this
Agreement.
(d) The terms "Form S-1", "Form S-2", "Form S-3", "Form S-4 and
"Form S-8" mean such respective forms under the 1933 Act as in effect on the
date hereof or any successor registration forms to Form S-3, Form S-4 and Form
S-8, respectively, under the 1933 Act subsequently adopted by the SEC.
(e) The term "1933 Act" shall mean the Securities Act of 1933, as
amended.
(f) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
(h) The term "Violation" shall have the meaning given in Section
6(a).
<PAGE>
(i) The term "Non-Qualifying Registration" shall mean a registration
on Form S-1, Form S-2 or Form S-3 relating solely to the offer and sale by the
Company of non-convertible investment grade securities or investment grade
asset-backed securities, securities issuable upon the exercise of outstanding
rights granted by the Company and securities issuable pursuant to a dividend or
interest reinvestment plan; a registration on Form S-8; or a registration on
Form S-4.
(j) The term "Rule 144" shall mean Rule 144 promulgated by the SEC
under the 1933 Act or any subsequent rule pertaining to the disposition of
securities without registration.
2. Piggyback Registration Rights. (a) If the Company proposes to register
any of its securities under the 1933 Act at any time after six months from the
date hereof (other than a Non-Qualifying Registration) in connection with a
public offering of such securities solely for cash, the Company shall, at each
such time, promptly give written notice of such registration to each Holder.
Upon the written request of any Holder given within 15 days after mailing of
such notice by the Company, the Company shall, subject to the provisions of this
Section 2, use its best efforts to include in such registration all of the
Registrable Securities that each such Holder has requested to be registered. The
Company shall be under no obligation to complete any offering of its securities
it proposes to make under this Section 2 and shall incur no liability to any
Holder for its failure to do so. Holders shall be permitted to withdraw all or
any part of the Registrable Securities of such Holders from any registration
under this Section 2 at any time prior to the effective date of such
registration.
(b) In connection with any registration covered by Section 2
involving any underwriting of securities, the Company shall not be required to
include any Holder's Registrable Securities in such registration unless such
Holder accepts the terms of the underwriting as agreed upon between the Company
(or other persons who have the right to agree upon the underwriting terms
relating to such offering) and the underwriters selected by the Company (or
other persons who have the right to select such underwriter). Notwithstanding
any other provision of this Section 2, if the underwriter of such registration
advises the Company in writing with a copy to the Holders that marketing factors
require a limitation of the number of shares of Common Stock to be underwritten,
the Company shall so advise all Holders, and the number of shares of Common
Stock including Registrable Securities that may be included in such registration
shall be apportioned pro rata based on the number of shares requested to be
included in such registration by the Holders and by all other holders of shares
of Common Stock participating in such registration (other than the Company).
-2-
<PAGE>
3. Registration Mechanics. (a) Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Furnish to counsel selected by the Holders of a majority
of the Registrable Securities covered by such registration statement
copies of all such documents proposal to be filed at a reasonable
time prior to the filing of such registration statement, the
prospectus used in connection with such registration statement, or
any amendment or supplement thereto.
(ii) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
in connection with such registration statement as may be necessary
to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration
statement.
(iii) Furnish to the Holders whose Registrable Securities are
covered by such registration such numbers of copies of the
prospectus, conformed copies of the registration statement
(including amendments or supplements thereto and, in each case, all
exhibits and all documents incorporated by reference), and such
other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such blue
sky or other state securities laws as shall be reasonably requested
by the Holders whose Registrable Securities are covered by such
registration statement, provided that the Company shall not be
required in connection therewith or as a condition thereto to
qualify to do business or subject itself to taxation or to file a
general consent to service of process in any such states.
(v) Notify each Holder of Registrable Securities covered by
such registration statement any time when a prospectus relating
thereto is required to be delivered under the 1933 Act upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(b) In connection with any offering of Registrable Securities to be
registered pursuant to Section 2, each Holder of Registrable Securities included
or to be included in such registration shall:
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<PAGE>
(i) Enter into and perform its obligations under any
underwriting agreement to which it is a party.
(ii) Upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (v) of
subsection (a) above, forthwith discontinue its disposition of
Registrable Securities pursuant to the registration statement
relating thereto until its receipt of the copies of the supplemented
or amended prospectus and, if so directed by the Company, deliver to
the Company all copies then in its possession of the prospectus
relating to such Registrable Securities current at the time of
receipt of such notice.
(iii) At the end of any period during which the Company is
obligated to keep any registration statement current and effective,
discontinue sales of shares pursuant to such registration statement
upon receipt of notice from the Company of its intention to remove
from registration the shares covered by such registration statement
which remain unsold, and notify the Company of the number of shares
registered which remain unsold promptly after receipt of such notice
from the Company.
4. Cooperation. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company all such information and materials and shall take all such action as
may be reasonably required in order to permit the Company to comply with the
applicable requests of the 1933 Act and the SEC and to obtain any desired
acceleration of the effective date of such registration statement. The failure
of any prospective selling Holder of Registrable Securities to furnish any
information or materials or to take any action in accordance with this Section 4
shall not affect the obligations of the Company under this Agreement to any
remaining selling Holders who furnish such information and materials and who
take such action unless, in the reasonable opinion of counsel to the Company or
the underwriters, such failure impairs or may impair the viability of the
offering or the legality of the registration statement or the underlying
offering.
5. Expenses. Selling Holders shall bear a pro rata portion of all expenses
incurred in connection with each of the registrations, filings or qualifications
pursuant to Section 2, including without limitation all registration, printing
and accounting fees and fees and disbursements of counsel to the Company, based
upon the respective market values of the securities to be sold by the Company,
selling Holders and any other persons participating in such offering, except
that underwriting discounts and commissions relating to the Registrable
Securities and the fees and disbursements of counsel and accountants for the
selling Holders shall be borne and paid by the selling Holders.
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<PAGE>
6. Indemnification.
In the event any Registrable Securities are included in a registration
statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will and
hereby does indemnify and hold harmless each selling Holder, the officers,
directors, shareholders and partners of such Holder and each person, if any, who
controls such Holder within the meaning of the 1933 Act or the 1934 Act against
any losses, claims, damages or liabilities (joint or several) to which they may
become subject under the 1933 Act, the 1934 Act or other federal or state law or
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (each a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (including in any prospectus or preliminary prospectus
included therein), unless such untrue statement or alleged untrue statement or
omission or alleged omission was contained in or omitted from a preliminary
prospectus and corrected in a final or amended prospectus and the seller failed
to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the same of the registered securities to the persons asserting
any such loss, claim, damage or liability in the case where such delivery is
required by the 1933 Act, or (ii) any other violation by the Company of the 1933
Act or any other securities law or any rule or regulation promulgated
thereunder. The Company will reimburse each such selling Holder, officer,
director, partner, agent, employee, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Company, nor shall the
Company be liable to a Holder in any such case for any such loss, claim,,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for inclusion in such registration by or on
behalf of such Holder or controlling person.
(b) To the fullest extent permitted by law, each selling Holder will
and hereby does indemnify and hold harmless the Company, each of its directors,
each of its officers who sign the registration statement, each person, if any,
who controls the Company within the meaning of the 1933 Act, each agent and any
other selling Holder selling securities in such registration statement and any
of its directors, officers or partners or any person who controls such selling
Holder, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the 1933 Act, the 1934 Act or other federal
or state or common law, insofar as such losses,
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<PAGE>
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by or on behalf of such Holder expressly for
inclusion in such registration statement; and each such selling Holder will
reimburse any legal or other expenses reasonably incurred by (i) the Company or
any such director, officer, agent, controlling person of the Company, or (ii)
other selling Holder, officer, director, partner or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action. The indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
selling Holder nor, in the case of a sale directly by the Company of its
securities (including a sale of such securities through any underwriter retained
by the Company to engage in a distribution solely on behalf of the Company)
shall the selling Holder be liable to the Company in any case in which such
untrue statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final or amended
prospectus, and the Company failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of the sale of the securities to the
person asserting any such loss, claim, damage or liability in any case where
such delivery is required by the 1993 Act.
(c) Each indemnified party or parties shall give reasonably prompt
notice to each indemnifying party or parties of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party or parties shall not relieve it or
them from any liability which it or they may have under this Section 6, except
to the extent that the indemnifying party is materially prejudiced by such
failure to give notice. If the indemnifying party or parties so elects within a
reasonable time after receipt of such notice, the indemnifying party or parties
may assume the defense of such action or proceeding at such indemnifying party's
or parties' expense with counsel chosen by the indemnifying party or parties and
approved by the indemnified party defendant in such action or proceeding which
approval shall not be unreasonably withheld; provided, however, that if such
indemnified party or parties determine in good faith that a conflict of interest
exists and that therefore it is advisable for such indemnified party or parties
to be represented by separate counsel or that, upon advice of counsel, there may
be legal defenses available to it or them which are different from or in
addition to those available to the indemnifying party, then the indemnifying
party or parties shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to separate counsel at the
indemnifying party's or parties' expense. If an indemnifying party or parties is
not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence of
this subsection, the indemnifying party or parties will pay the reasonable fees
and expenses of counsel for the indemnified party or parties. Notwithstanding
the foregoing, the indemnifying party shall not be obligated
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<PAGE>
to pay the reasonable fees and expenses of more than one counsel for the
indemnified parties with respect to any claim, unless in the reasonable judgment
of counsel to any indemnified party, expressed in a writing delivered to the
indemnifying party, a conflict of interest may exist between such indemnified
party and any other indemnified party with respect to such claim, in which event
the indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels (which shall be limited to one
counsel per indemnified party). If an indemnifying party is entitled to assume,
and assumes, the defense of such action or proceeding in accordance with this
paragraph, such indemnifying party or parties shall not, except as otherwise
provided in this subsection (c), be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action
or proceeding.
(d) If the indemnification provided for in this Section 6 is
unavailable to a party that would have been an indemnified party under this
Section 6 in respect of any claims referred to herein, then each party that
would have been an indemnifying party hereunder shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such claims in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and such indemnified party on the other in connection with the
action, statement or omission which resulted in such claims, as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each selling Holder of registered securities agrees that it
would not be just and equitable if contribution pursuant to this subsection were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection. The amount paid or payable by an indemnified party as a result of
the claims referred to above in this subsection shall Include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim.
(e) Without the prior written consent of the indemnified party, no
indemnifying party shall consent to entry or judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release of all
liability in respect of such claim.
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<PAGE>
(f) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of fraudulent misrepresentation within the meaning
of such Section 11(f).
(g) Notwithstanding the foregoing provisions of this Section 6, to
the extent that the provisions on indemnification contained in the underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
7. Availability of Rule 144. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the 1933 Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its best efforts:
(a) to make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after ninety (90) days from
the date hereof;
(b) to file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and (at any time after it
has become subject to the reporting requirements thereof) the 1934 Act; and
(c) to furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time after ninety days from the date hereof), the 1933 Act and the 1934 Act (at
any time after it has become subject to such reporting requirements) or as to
its qualification as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing the Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
8. Transfer of Registration Rights. The registration rights of a Holder
under this Agreement may be transferred to any transferee who acquires 50% or
more shares of the Registrable Securities as of the date of this Agreement
(adjusted for any stock splits, stock dividends, contributions or receipt
obligations), provided that (i) the Company is given written notice by the
transferor at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to
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<PAGE>
which the rights under this Agreement are being assigned and (ii) the transferee
agrees in writing to acquire and hold such securities subject to the provisions
of this Agreement.
9. "Market Stand-Off' Agreement. Each holder of Registrable Securities
hereby agrees that, during the period of duration (not to extend more than 7
days prior to, and beyond 180 days after, the effectiveness of the registration
statement described below) specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the filing date of a
registration statement of the Company filed under the 1933 Act, it shall not, to
the extent requested by the Company and such 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 it at any time during such period except
Common Stock included in such registration, provided that all officers and
directors of the Company and all persons, if any, exercising registration rights
with respect to such registration (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the securities of each Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section shall be binding upon each holder of Registrable Securities then
outstanding, each future holder of all such securities and the Company.
11. Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in, and the Company shall have no obligation
pursuant to, this Agreement at such time as the Holder's Registrable Securities
may be sold in the public trading markets pursuant to Rule 144.
12. Miscellaneous. (a) All notices, requests, demands and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon receipt when transmitted by telecopy or telex or after
dispatch by certified or registered first class mail, postage prepaid, return
receipt requested, or Federal Express, to the party to whom the same is so given
or made:
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<PAGE>
If to SCRIPTGEN:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Suite 3000
Medford, MA 02155
Attn: President
If to HMR:
Hoechst Marion Roussel
102, Route de Noisy
93235 Romainville Cedex
FRANCE
Attn: General Counsel
or to such other person at such other place as either shall designate to the
other in writing.
(b) This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, representations, warranties,
statements, promises and understandings, whether written or oral, with respect
to the subject matter thereof, and cannot be changed or terminated orally. No
party hereto shall be bound by or charged with any written or oral agreements,
representations, warranties, statements, promises, or understandings not
specifically set forth in this Agreement.
(c) The section and other headings contained in this Agreement are
for reference purposes only and shall not be deemed to be part of this Agreement
or to affect the meaning or interpretation of this Agreement.
(d) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
(e) All questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
laws of the State of Delaware without regard to conflicts of laws principles.
(f) If any term or provision of this Agreement shall to any extent
be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
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<PAGE>
(g) This Agreement may be executed in any number of counterparts,
each of which, when executed, shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(h) This Agreement shall be binding on and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed and signed as of the day and year first
above written.
SCRIPTGEN PHARMACEUTICALS, INC.
By
------------------------------
Its
HOECHST MARION ROUSSEL
By
------------------------------
Its
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<PAGE>
EXHIBIT 10.11
CONFIDENTIAL
REGISTRATION RIGHTS AGREEMENT
Effective October 24, 1997, SCRIPTGEN Pharmaceuticals, Inc., a Delaware
corporation ("the "Company"), and Hoechst Marion Roussel, a French corporation
("HMR"), hereby act and agree as follows:
1. Definitions. As used herein:
(a) The terms "register", "registered", and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act and the automatic effectiveness
or the declaration or ordering of effectiveness of such registration statement
or document.
(b) The term "Registrable Securities" means the shares of Common
Stock of the Company beneficially owned by HMR as of the date hereof and any
additional shares of Common Stock of the Company issued in respect thereof as a
result of any stock split, stock dividend, combination or recapitalization but
shall not include any shares of capital stock which (i) have been effectively
registered under the 1933 Act and disposed of in accordance with a registration
statement covering such securities, (ii) have been distributed to the public
pursuant to Rule 144 or (iii) have been transferred or disposed of in a
transaction as to which the registration rights granted hereunder have not or
may not be transferred.
(c) The term "Holder" means HMR and any transferee of Registrable
Securities from a Holder provided such transfer complies with Section 8 of this
Agreement.
(d) The terms "Form S-1", "Form S-2", "Form S-3", "Form S-4 and
"Form S-8" mean such respective forms under the 1933 Act as in effect on the
date hereof or any successor registration forms to Form S-3, Form S-4 and Form
S-8, respectively, under the 1933 Act subsequently adopted by the SEC.
(e) The term "1933 Act" shall mean the Securities Act of 1933, as
amended.
(f) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
(h) The term "Violation" shall have the meaning given in Section
6(a).
<PAGE>
(i) The term "Non-Qualifying Registration" shall mean a registration
on Form S-1, Form S-2 or Form S-3 relating solely to the offer and sale by the
Company of non-convertible investment grade securities or investment grade
asset-backed securities, securities issuable upon the exercise of outstanding
rights granted by the Company and securities issuable pursuant to a dividend or
interest reinvestment plan; a registration on Form S-8; or a registration on
Form S-4.
(j) The term "Rule 144" shall mean Rule 144 promulgated by the SEC
under the 1933 Act or any subsequent rule pertaining to the disposition of
securities without registration.
2. Piggyback Registration Rights. (a) If the Company proposes to register
any of its securities under the 1933 Act at any time after six months from the
date hereof (other than a Non-Qualifying Registration) in connection with a
public offering of such securities solely for cash, the Company shall, at each
such time, promptly give written notice of such registration to each Holder.
Upon the written request of any Holder given within 15 days after mailing of
such notice by the Company, the Company shall, subject to the provisions of this
Section 2, use its best efforts to include in such registration all of the
Registrable Securities that each such Holder has requested to be registered. The
Company shall be under no obligation to complete any offering of its securities
it proposes to make under this Section 2 and shall incur no liability to any
Holder for its failure to do so. Holders shall be permitted to withdraw all or
any part of the Registrable Securities of such Holders from any registration
under this Section 2 at any time prior to the effective date of such
registration.
(b) In connection with any registration covered by Section 2
involving any underwriting of securities, the Company shall not be required to
include any Holder's Registrable Securities in such registration unless such
Holder accepts the terms of the underwriting as agreed upon between the Company
(or other persons who have the right to agree upon the underwriting terms
relating to such offering) and the underwriters selected by the Company (or
other persons who have the right to select such underwriter). Notwithstanding
any other provision of this Section 2, if the underwriter of such registration
advises the Company in writing with a copy to the Holders that marketing factors
require a limitation of the number of shares of Common Stock to be underwritten,
the Company shall so advise all Holders, and the number of shares of Common
Stock including Registrable Securities that may be included in such registration
shall be apportioned pro rata based on the number of shares requested to be
included in such registration by the Holders and by all other holders of shares
of Common Stock participating in such registration (other than the Company).
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<PAGE>
3. Registration Mechanics. (a) Whenever required under this Agreement to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Furnish to counsel selected by the Holders of a majority of the
Registrable Securities covered by such registration statement copies of
all such documents proposal to be filed at a reasonable time prior to the
filing of such registration statement, the prospectus used in connection
with such registration statement, or any amendment or supplement thereto.
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by such registration statement.
(iii) Furnish to the Holders whose Registrable Securities are
covered by such registration such numbers of copies of the prospectus,
conformed copies of the registration statement (including amendments or
supplements thereto and, in each case, all exhibits and all documents
incorporated by reference), and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such blue sky or other state
securities laws as shall be reasonably requested by the Holders whose
Registrable Securities are covered by such registration statement,
provided that the Company shall not be required in connection therewith or
as a condition thereto to qualify to do business or subject itself to
taxation or to file a general consent to service of process in any such
states.
(v) Notify each Holder of Registrable Securities covered by such
registration statement any time when a prospectus relating thereto is
required to be delivered under the 1933 Act upon discovery that, or upon
the happening of any event as a result of which, the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(b). In connection with any offering of Registrable Securities to be
registered pursuant to Section 2, each Holder of Registrable Securities included
or to be included in such registration shall:
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<PAGE>
(i) Enter into and perform its obligations under any underwriting
agreement to which it is a party.
(ii) Upon receipt of any notice from the Company of the happening of
any event of the kind described in subdivision (v) of subsection (a)
above, forthwith discontinue its disposition of Registrable Securities
pursuant to the registration statement relating thereto until its receipt
of the copies of the supplemented or amended prospectus and, if so
directed by the Company, deliver to the Company all copies then in its
possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
(iii) At the end of any period during which the Company is obligated
to keep any registration statement current and effective, discontinue
sales of shares pursuant to such registration statement upon receipt of
notice from the Company of its intention to remove from registration the
shares covered by such registration statement which remain unsold, and
notify the Company of the number of shares registered which remain unsold
promptly after receipt of such notice from the Company.
4. Cooperation. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company all such information and materials and shall take all such action as
may be reasonably required in order to permit the Company to comply with the
applicable requests of the 1933 Act and the SEC and to obtain any desired
acceleration of the effective date of such registration statement. The failure
of any prospective selling Holder of Registrable Securities to furnish any
information or materials or to take any action in accordance with this Section 4
shall not affect the obligations of the Company under this Agreement to any
remaining selling Holders who furnish such information and materials and who
take such action unless, in the reasonable opinion of counsel to the Company or
the underwriters, such failure impairs or may impair the viability of the
offering or the legality of the registration statement or the underlying
offering.
5. Expenses. Selling Holders shall bear a pro rata portion of all expenses
incurred in connection with each of the registrations, filings or qualifications
pursuant to Section 2, including without limitation all registration, printing
and accounting fees and fees and disbursements of counsel to the Company, based
upon the respective market values of the securities to be sold by the Company,
selling Holders and any other persons participating in such offering, except
that underwriting discounts and commissions relating to the Registrable
Securities and the fees and disbursements of counsel and accountants for the
selling Holders shall be borne and paid by the selling Holders.
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<PAGE>
6. Indemnification.
In the event any Registrable Securities are included in a registration
statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will and
hereby does indemnify and hold harmless each selling Holder, the officers,
directors, shareholders and partners of such Holder and each person, if any, who
controls such Holder within the meaning of the 1933 Act or the 1934 Act against
any losses, claims, damages or liabilities (joint or several) to which they may
become subject under the 1933 Act, the 1934 Act or other federal or state law or
common law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (each a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (including in any prospectus or preliminary prospectus
included therein), unless such untrue statement or alleged untrue statement or
omission or alleged omission was contained in or omitted from a preliminary
prospectus and corrected in a final or amended prospectus and the seller failed
to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the same of the registered securities to the persons asserting
any such loss, claim, damage or liability in the case where such delivery is
required by the 1933 Act, or (ii) any other violation by the Company of the 1933
Act or any other securities law or any rule or regulation promulgated
thereunder. The Company will reimburse each such selling Holder, officer,
director, partner, agent, employee, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
The indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Company, nor shall the
Company be liable to a Holder in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for inclusion in such registration by or on
behalf of such Holder or controlling person.
(b) To the fullest extent permitted by law, each selling Holder will
and hereby does indemnify and hold harmless the Company, each of its directors,
each of its officers who sign the registration statement, each person, if any,
who controls the Company within the meaning of the 1933 Act, each agent and any
other selling Holder selling securities in such registration statement and any
of its directors, officers or partners or any person who controls such selling
Holder, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the 1933 Act, the 1934 Act or other federal
or state or common law,
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<PAGE>
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by or on behalf of such Holder
expressly for inclusion in such registration statement; and each such selling
Holder will reimburse any legal or other expenses reasonably incurred by (i) the
Company or any such director, officer, agent, controlling person of the Company,
or (ii) other selling Holder, officer, director, partner or controlling person
in connection with investigating or defending any such loss, claim, damage,
liability or action. The indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
selling Holder nor, in the case of a sale directly by the Company of its
securities (including a sale of such securities through any underwriter retained
by the Company to engage in a distribution solely on behalf of the Company)
shall the selling Holder be liable to the Company in any case in which such
untrue statement or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final or amended
prospectus, and the Company failed to deliver a copy of the final or amended
prospectus at or prior to the confirmation of the sale of the securities to the
person asserting any such loss, claim, damage or liability in any case where
such delivery is required by the 1993 Act.
(c) Each indemnified party or parties shall give reasonably prompt
notice to each indemnifying party or parties of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party or parties shall not relieve it or
them from any liability which it or they may have under this Section 6, except
to the extent that the indemnifying party is materially prejudiced by such
failure to give notice. If the indemnifying party or parties so elects within a
reasonable time after receipt of such notice, the indemnifying party or parties
may assume the defense of such action or proceeding at such indemnifying party's
or parties' expense with counsel chosen by the indemnifying party or parties and
approved by the indemnified party defendant in such action or proceeding, which
approval shall not be unreasonably withheld; provided, however, that if such
indemnified party or parties determine in good faith that a conflict of interest
exists and that therefore it is advisable for such indemnified party or parties
to be represented by separate counsel or that, upon advice of counsel, there may
be legal defenses available to it or them which are different from or in
addition to those available to the indemnifying party, then the indemnifying
party or parties shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to separate counsel at the
indemnifying party's or parties' expense. If an indemnifying party or parties is
not so entitled to assume the defense of such action or does not assume such
defense, after having received the notice referred to in the first sentence of
this subsection, the indemnifying party or parties will pay the reasonable fees
and expenses of counsel for the indemnified party or parties. Notwithstanding
the foregoing, the indemnifying party shall not be obligated
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<PAGE>
to pay the reasonable fees and expenses of more than one counsel for the
indemnified parties with respect to any claim, unless in the reasonable judgment
of counsel to any indemnified party, expressed in a writing delivered to the
indemnifying party, a conflict of interest may exist between such indemnified
party and any other indemnified party with respect to such claim, in which event
the indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels (which shall be limited to one
counsel per indemnified party). If an indemnifying party is entitled to assume,
and assumes, the defense of such action or proceeding in accordance with this
paragraph, such indemnifying party or parties shall not, except as otherwise
provided in this subsection (c), be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action
or proceeding.
(d) If the indemnification provided for in this Section 6 is
unavailable to a party that would have been an indemnified party under this
Section 6 in respect of any claims referred to herein, then each party that
would have been an indemnifying party hereunder shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such claims in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or parties
on the one hand and such indemnified party on the other in connection with the
action, statement or omission which resulted in such claims, as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or such indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and each selling Holder of registered securities agrees that it
would not be just and equitable if contribution pursuant to this subsection were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
subsection. The amount paid or payable by an indemnified party as a result of
the claims referred to above in this subsection shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation or defending any such action or claim.
(e) Without the prior written consent of the indemnified party, no
indemnifying party shall consent to entry or judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release of all
liability in respect of such claim.
-7-
<PAGE>
(f) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of fraudulent misrepresentation within the meaning
of such Section 11(f).
(g) Notwithstanding the foregoing provisions of this Section 6, to
the extent that the provisions on indemnification contained in the underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall be controlling.
7. Availability of Rule 144. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the 1933 Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Company to the public without registration, the Company agrees
to use its best efforts:
(a) to make and keep public information available, as those terms
are understood and defined in Rule 144, at all times after ninety (90) days from
the date hereof;
(b) to file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and (at any time after it
has become subject to the reporting requirements thereof) the 1934 Act; and
(c) to furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 (at any
time after ninety days from the date hereof), the 1933 Act and the 1934 Act (at
any time after it has become subject to such reporting requirements) or as to
its qualification as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested in availing the Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
8. Transfer of Registration Rights. The registration rights of a Holder
under this Agreement may be transferred to any transferee who acquires 50% or
more shares of the Registrable Securities as of the date of this Agreement
(adjusted for any stock splits, stock dividends, contributions or receipt
obligations), provided that (i) the Company is given written notice by the
transferor at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which the rights under
this Agreement are being assigned and (ii) the
-8-
<PAGE>
transferee agrees in writing to acquire and hold such securities subject to the
provisions of this Agreement.
9. "Market Stand-Off" Agreement. Each holder of Registrable Securities
hereby agrees that, during the period of duration (not to extend more than 7
days prior to, and beyond 180 days after, the effectiveness of the registration
statement described below) specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the filing date of a
registration statement of the Company filed under the 1933 Act, it shall not, to
the extent requested by the Company and such 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 it at any time during such period except
Common Stock included in such registration, provided that all officers and
directors of the Company and all persons, if any, exercising registration rights
with respect to such registration (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the securities of each Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
10. Amendment of Registration Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section shall be binding upon each holder of Registrable Securities then
outstanding, each future holder of all such securities and the Company.
11. Termination of Registration Rights. No Holder shall be entitled to
exercise any right provided for in, and the Company shall have no obligation
pursuant to, this Agreement at such time as the Holder's Registrable Securities
may be sold in the public trading markets pursuant to Rule 144.
12. Miscellaneous. (a) All notices, requests, demands and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon receipt when transmitted by telecopy or telex or after
dispatch by certified or registered first class mail, postage prepaid, return
receipt requested, or Federal Express, to the party to whom the same is so given
or made:
-9-
<PAGE>
If to SCRIPTGEN:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Suite 3000
Medford, MA 02155
Attn: President
If to HMR:
Hoechst Marion Roussel
102, Route de Noisy
93235 Romainville Cedex
FRANCE
Attn: General Counsel
or to such other person at such other place as either shall designate to the
other in writing.
(b) This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, representations, warranties,
statements, promises and understandings, whether written or oral, with respect
to the subject matter thereof, and cannot be changed or terminated orally. No
party hereto shall be bound by or charged with any written or oral agreements,
representations, warranties, statements, promises, or understandings not
specifically set forth in this Agreement.
(c) The section and other headings contained in this Agreement are
for reference purposes only and shall not be deemed to be part of this Agreement
or to affect the meaning or interpretation of this Agreement.
(d) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
(e) All questions concerning the construction, validity and
interpretation of this Agreement and the schedule hereto will be governed by the
laws of the State of Delaware without regard to conflicts of laws principles.
(f) If any term or provision of this Agreement shall to any extent
be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
-10-
<PAGE>
(g) This Agreement may be executed in any number of counterparts,
each of which, when executed, shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(h) This Agreement shall be binding on and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed and signed as of the day and year first
above written.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ [ILLEGIBLE]
-----------------------------
Its OCTOBER 24, 1997
---------------------------
HOECHST MARION ROUSSEL
By /s/ [ILLEGIBLE]
-----------------------------
Its October 24, 1997
---------------------------
<PAGE>
Exhibit 10.12
[Hoffmann-La Roche Letterhead]
November 2, 1995
Mr. Thomas A. Bologna
President and Chief
Executive Officer
ScriptGen Pharmaceuticals
Medford, Massachussetts 02155
Re: September 22, 1995 Heads of Agreement between ScriptGen and
Hoffmann-La Roche Inc.(Roche)
Dear Mr. Bologna:
This letter amends the above Heads, as agreed to in your October 30,
1995 telephone conference with [***] and [***]. I understand that two
amendments were discussed, specifically that Roche would pay ScriptGen [***]
before the end of the year, and that Roche would have the option to replace
[***] of Roche's choice. Accordingly, the amendments below are made to the
Heads.
The first three lines of Paragraph 7 of the Heads (ending with the word
"individually") is replaced with the following language:
"ROCHE shall pay SCRIPTGEN the sum of [***] during the SCREENING
period. A first payment of [***] (PAYMENT 1) will be made to
SCRIPTGEN before December 31, 1995, at a time convenient to ROCHE. After
this date, [***] subsequent payments [***] of [***] each
shall individually" (the remainder of paragraph 7 remains unchanged).
The following language is added to the end of Paragraph 3 [***]:
", or may have another activity of interest to be designated by ROCHE."
The following language is added to Paragraph 4, line 1 (after the word
"activity"):
"designated by ROCHE, for example the activity"
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
<PAGE>
The following language is added to Paragraph 4, line 3 (after the words
"another TARGET"):
"designated by ROCHE [***], or an additional TARGET"
The following language is added to the second paragraph of Paragraph 9,
after the word [***]:
"or the TARGET designated by ROCHE to [***],"
In addition, Paragraph 8 is corrected to refer to "TARGET" instead of
"ROCHE TARGET".
Thank you for your cooperation in making these amendments.
Please sign both originals of this letter on behalf of ScriptGen, retain
one, and return one fully executed original to Michael Koch.
Sincerely,
/s/ Michael Steinmetz
HOFFMANN-LA ROCHE INC.
Dr. Michael Steinmetz
Vice President
AGREED AND ACCEPTED:
SCRIPTGEN PHARMACEUTICALS
By: /s/ Thomas A. Bologna
-----------------------------
Date: 11/6/95
---------------------------
-2-
<PAGE>
HEADS OF AGREEMENT
1. PARTIES
This document sets forth the principal terms of a basic understanding
between Hoffmann-La Roche Inc. (hereinafter "ROCHE") and Scriptgen
Pharmaceuticals, Inc. (hereinafter "SCRIPTGEN")
2. DEFINITIONS
FIELD shall mean the treatment of [***].
LIBRARY shall mean ROCHE's proprietary collection of approximately [***]
compounds suitable for screening for a biological activity designated by ROCHE.
COMPOUND shall mean a compound which is part of the LIBRARY.
ROCHE PRODUCT shall mean a COMPOUND or derivative or analogue thereof
identified under this agreement as a candidate for use in the FIELD.
TECHNOLOGY shall mean SCRIPTGEN's proprietary ATLAS system for screening
for interaction with a given target protein, and does not include the target
protein.
TARGET shall mean a protein which is selected and provided by ROCHE to be
added to TECHNOLOGY to make it possible to use TECHNOLOGY as a screen for a
compound having the activity of interacting with that protein.
SCREENING shall mean the screening of the LIBRARY by SCRIPTGEN under this
agreement.
NET SALES shall mean [***].
3. BACKGROUND
SCRIPTGEN possess expertise in screening for compounds which interact with
a target protein. ROCHE possesses expertise in the discovery, development, and
marketing of pharmaceutical agents, and owns the LIBRARY, a selected number of
COMPOUNDS in which ROCHE has reason to believe may be effective in [***].
4. PURPOSE
ROCHE wishes to have identified COMPOUNDS which have the desired
activity of interfering with [***] and SCRIPTGEN is willing to screen the
LIBRARY with TECHNOLOGY, using [***] which is a TARGET, or another TARGET
desired.
<PAGE>
5. CONDITION
ROCHE will enter into a final agreement with SCRIPTGEN based on the
understandings set forth herein, however the obligation of ROCHE to enter
into said final agreement is contingent on ROCHE's concluding arrangements
with [***] to obtain [***] for use in SCREENING as described in paragraph 3
above.
6. SCREENING PERIOD
SCREENING will begin upon on the date of receipt by SCRIPTGEN of [***],
and will be completed [***] after said date of receipt.
7. PAYMENT
[***]
8. ROCHE'S UNDERTAKINGS
[***]
9. SCRIPTGEN'S UNDERTAKINGS
As soon as reasonably possible, SCRIPTGEN shall begin SCREENING with
TARGET. [***]
2
<PAGE>
10. COMMERCIALIZATION
A. ROCHE, at its sole discretion, may develop and market or license to third
parties any ROCHE PRODUCT anywhere in the world and without any obligations, to
SCRIPTGEN other than those payments provided below.
B. In consideration of ROCHE's payments under this agreement, any results and
inventions, patentable or not, and any resulting patent filings emanating
therefrom with regard to COMPOUNDS shall be owned exclusively by ROCHE, no
matter with which party the inventors of such inventions may be affiliated.
SCRIPTGEN agrees [***] disclose any such results or inventions to ROCHE and
further agrees to assign any right, title, or interest in and to any such
invention in the U.S. and in all foreign countries to ROCHE. The parties
agree to cooperate in the filing and prosecution of such patent filings, at
ROCHE's expense and request. Roche agrees to reasonably compensate SCRIPTGEN
for any costs related to such cooperation.
11. FEES AND ROYALTIES
[***]
12. ADDITIONAL PROVISIONS
The full Agreement shall contain customary and usual provisions for
agreements of this nature for pharmaceutical products including further
definitions, confidentiality, warranties, indemnification, assignment, royalty
computation and reports, reporting inventions, patent provisions, term and
termination and survival provisions and the like.
3
<PAGE>
13. PUBLICITY
No public announcement or other disclosure to other parties concerning the
existence of or the terms of this understanding or of the final agreement
entered into based on this understanding shall be made, either directly or
indirectly, by either party to this understanding or to said final agreement,
except to a third party bound by a confidentiality agreement and as may be
required by any laws or government regulations or by the rules of any stock
exchange of any country, without first informing the other party of the proposed
announcement or other disclosure within a reasonable time prior to release and
obtaining the other party's written approval of the nature and text of such
announcement or disclosure.
IN WITNESS WHEREOF, ROCHE and SCRIPTGEN have executed this Heads of
Agreement on the later of the two dates written below.
SCRIPTGEN PHARMACEUTICALS, INC. HOFFMANN-LA ROCHE INC.
By: /s/ Thomas A. Bologna By: /s/ Michael Steinmetz
---------------------------- -----------------------------
Title: President & CEO Title: Vice President
------------------------- --------------------------
Date: 8/22/95 Date: 9/22/95
-------------------------- ---------------------------
<PAGE>
Exhibit 10.13
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
[Letterhead of Eli Lilly and Company]
October 8, 1997
Ms. Karen Hamlin
Senior Director of Operations
Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford. MA 02155
Re: Amendment to ATLAS Screen Agreement
Dear Ms. Hamlin:
Pursuant to the agreement dated effective as of May 8, 1997 (the
"Agreement"), by and between Scriptgen Pharmaceuticals, Inc. ("Scriptgen"),
and Eli Lilly and Company ("Lilly"), the parties entered into a
collaboration, whereby Scriptgen, among other things, would run the ATLAS
Screens for each of the Initial Target Proteins [***] compounds for each
initial Target Protein.
Scriptgen and Lilly have recently discussed whether Lilly was interested in
running the ATLAS Screens for each of the Initial Target Proteins using
additional compounds above the initial [***] compounds set forth in the
Agreement. As you know, Lilly has determined that it is interested in using
additional compounds for such purpose. Accordingly, so that Scriptgen may
expeditiously commence running the ATLAS Screen with respect to such
additional compounds, the Parties agree as follows:
A. Section 1.22.
The parties hereby amend Section 1.22 in its entirety to read as
follows:
Section 1.22. "Project Phase II" means the phase of the Project that
follows Project Phase I which utilizes ATLAS Screening to establish the
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 2
optimal conditions for the specific high throughput screen for each Initial
Target Protein. This phase will result in the assay being fully validated and
standard deviations established for a sub set of compounds and controls.
Assay sensitivity will also be established, during this phase, so as to
determine the Initial Target Protein requirements for the screening,
Except as otherwise provided in this Section 1.22, up to [***] Lilly
Compounds selected by Lilly shaIl be used for Project purposes as
contemplated hereunder. [***] Scriptgen Compounds will be provided by
Scriptgen for Project purposes including, without limitation, screening and
validation, [***] If Scriptgen Compounds are requested by Lilly for Project
purposes above the [***] limitation described above or for replacement of any
of the [***] described above, Lilly will be [***]. Lilly shall be given an
opportunity to select all available Scriptgen Compounds from the Scriptgen
Library prior to the commencement of Project Phase III including a reasonable
opportunity to review and screen such Scriptgen Compounds prior to such
selection, although Lilly will use its best efforts to complete the selection
process within [***]. Except as otherwise provided for in this Agreement,
such selection process shall be at no additional cost to Lilly provided Lilly
selects Scriptgen Compounds on a plate by plate basis (each plate contains
[***]). In the event, Lilly desires to select Scriptgen Compounds not on a
plate by plate basis, [***]
At the commencement of this phase, Lilly will provide to Scriptgen,
approximately [***] of each Initial Target Protein or as otherwise mutually
agreed to by the parties. This phase will take [***] (i.e., a total of [***])
to complete provided antibodies are furnished by Lilly. In the event
antibodies are not furnished by Lilly, this phase will take approximately
[***] to complete and a total of [***] For avoidance of any doubt, if Lilly
does not furnish the antibodies necessary for the Project or portions
thereof, Scriptgen shall bear the ultimate responsiblity and obligation for
furnishing the antibodies necessary for the Project at its sole expense.
Project Phase II is more fully described in the Project Plan.
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 3
B. Section 1.23.
The parties hereby amend Section 1.23 in its entirety to read as
follows:
Section 1.23. "Project Phase III means the phase of the Project that
follows Project Phase II and involves running the ATLAS Screens for each of
the Initial Target Proteins using at Lilly's sole discretion up to [***]
and/or Natural Products for each Initial Target Protein, These compounds
and/or Natural Products will be furnished by either Lilly or the Scriptgen
Library as more fully described in Section 1.22 of this Agreement or as the
parties may otherwise mutually agree in writing. At the commencement of this
phase, Lilly will provide to Scriptgen, approximately [***] of each Initial
Target Protein or as otherwise mutually agreed to by the parties. During this
phase, Scriptgen will [***] for each compound, and determine an [***].
Scriptgen estimates that this phase will take [***] and [***]. Project Phase
III is more fully described in the Project Plan.
In addition, Scriptgen will use the ATLAS assay to evaluate [***]
samples supplied by Lilly for up to 10 Natural Product Successful Compound
extracts per Target Protein. These samples will be produced at Lilly in the
initial phases of [***] of the Natural Product extracts called [***]. The
testing of these samples may occur after the Final Comprehensive Report has
been. sent to Lilly, but in no event any later than six (6) months after
receipt by Lilly of the Final Comprehensive Report.
C. Section 2.1.
The parties hereby amend Section 2.1 in its entirety to read as
follows:
Section 2.1. Commencement and Reasonable Efforts. Upon execution of
this Agreement, Lilly and Scriptgen shall commence work on the Project that
is generally described in the Project Plan. Both parties will carry out their
respective roles and use reasonable efforts in conducting work on the Project
in order to achieve the research contemplated in this Agreement. Except as
the parties may otherwise agree in writing or as otherwise
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 4
provided in this Agreement, Scriptgen shall use its reasonably commercial
efforts to complete the Project with respect to the Initial Target Proteins
within [***] after it receives the Initial Target Proteins. The parties
hereby acknowledge that the time period outlined in the preceding sentence
may need to be extended as may be applicable depending upon the number of
Initial Target Proteins that are substituted under Section 1.21 of this
Agreement.
D. Section 2.6.
The parties hereby amend Section 2.6 in its entirety to read as
follows:
Section 2.6 Additional Target Proteins. In the event that Proof of
Principle is achieved (either (a) or (b) as defined in Section 1.25) and
Lilly has received the Final Comprehensive Report for the last Initial Target
Protein within at least nintey (90) days after the expiration of the timeline
set forth in the last sentence of Section 2.1 of this Agreement (provided
that such period shall be extended to the extent that any delay beyond such
period was caused by Lilly), Lilly and Scriptgen hereby agree to expand the
Project to include two (2) additional Target Proteins for ATLAS Screening
(the "Additional Target Proteins") under exactly the same terms as are
applicable to the Initial Target Proteins under this Agreement except that:
(a) the Research Fee described in Section 3.1 shall be [***] for both of the
Additional Target Proteins as opposed to the [***] Research Fee that applies
to the Initial Target Proteins; (b) the first installment payment of such
Research Fee under Section 3.2 hereof, for the Additional Target Proteins
shall be paid within [***] as opposed to thirty (30) days after the execution
of this Agreement; (c) the original terms set forth in Section 1.22, 1.23 and
2.1 of the Agreement shall continue to be applicable with respect to the
Additional Target Proteins as opposed to the amended versions of Section
1.22, 1.23 and 2.1 as described in this Amendment unless Lilly elects, at its
sole discretion, to exercise its Additional Compound Option (as defined below
in this Section 2.6); and (d) Section 3.4 of this Amendment shall not be
applicable with respect to the Additional Target Proteins unless Lilly
elects, at its sole discretion, to exercise its Additional Compound Option
(as defined below in this Section 2.6) For avoidance of any doubt the second
installment payment of the Research Fee shall be paid within [***] with
respect to the Additional Target Proteins.
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 5
Lilly may, at its sole discretion, elect to increase the compounds screened
against the Additional Target Proteins pursuant to the same terms that apply
to the Initial Target Proteins as described in Sections 1.22, 1.23, 2.1 and
3.4 of this Amendment except that the first payment installment under Section
3.4 with respect to the Additional Target Proteins shall be within ten (10)
days of Lilly exercising the Additional Compound Option as opposed to ten
(10) days within execution of this Amendment ("Additional Compound Option").
In order for Lilly to elect to exercise its Additional Compound Option, Lilly
shall provide Scriptgen with written notice of the same prior to the
commencement of Project Phase III with respect to the Additional Target
Proteins.
E. Section 3.4.
The parties hereby amend the Agreement to add the following Section
3.4:
In consideration for the additional screening services and use of
Scriptgen Compounds for Project purposes as described herein, Lilly hereby
agrees to pay Scriptgen [***] in two (2) equal installments. The first
payment shall be made within ten (10) days of execution of this Amendment.
The second payment shall be made within thirty (30) days after Lilly's
receipt of the Final Comprehensive Report.
F. Effect of Amendment. Except for the foregoing set forth in this letter
amendment, the rights and obligations of the parties under the Agreement
shall remain unaltered.
<PAGE>
Ms. Karen Hamlin
October 8, 1997
Page 6
To acknowledge Scriptgen's acceptance of the agreed terms as described
herein, please sign in the space provided below, and return a signed copy of
this letter to David P. Trummel.
Very truly yours,
/s/ August M. Watanabe
----------------------
August M. Watanabe
Executive Vice President
aw
cc. Dr. A. J. Weinstein
Mr. Rajiv Gulati
Mr. D. P. Trummel
ACCEPTED AND AGREED:
SCRIPTGEN PHARMACEUTICALS, INC
By /s/ Karen Hamlin
----------------------
Karen Hamlin
Senior Director of Operations
Date October 14, 1997
----------------
<PAGE>
AGREEMENT
This Agreement (the "Agreement") effective as of the last date of
signature hereto, (the "Effective Date") is entered into by and between Eli
Lilly And Company, an Indiana Corporation having its principal place of
business at Lilly Corporate Center, Indianapolis, Indiana 46285 (collectively
with its Affiliates "Lilly") and Scriptgen Pharmaceuticals Inc., a Delaware
Corporation, having its principal place of business at 200 Boston Avenue,
Medford MA 02155 ("Scriptgen"), agree as follows:
Recitals
1. Lilly is in the business of developing, manufacturing and marketing
pharmaceutical and veterinary agents.
2. Scriptgen is in business of, among other things, discovering and
developing pharmaceutical agents and conducting scientific research on
proteins utilizing screens developed through ATLAS Screening.
3. Lilly is interested in funding and collaborating with Scriptgen on a
research project to be carried out by Scriptgen involving certain target
proteins of Lilly and two (2) screens developed by Scriptgen.
4. Scriptgen is willing to undertake such research project aimed at,
among other things, identifying and validating [***] drug candidates in the
[***] areas.
NOW, THEREFORE, it is agreed by and between the parties
Article I
Definitions
When used in this Agreement, each of the following terms shall have the
meaning set forth in this Article. Defined terms may be used in the singular
or plural form.
Section 1.1. "Additional Target Protein" shall have the meaning as set
forth in Section 2.6 of this Agreement.
Section 1.2. "Affiliate" means (a) any corporation or business entity
of which Lilly, at the time in question, directly or indirectly owns or
controls fifty percent (50%) or more of the stock having the right to vote
for directors thereof or otherwise controls the management of the corporation
or business
<PAGE>
2
entity, or (b) any corporation, individual or business entity which now or
hereafter directly or indirectly owns or controls fifty percent (50%) or more
of the stock of Lilly having the right to vote for directors thereof or
otherwise controls the management of Lilly, or (c) any corporation,
individual or business entity which now or hereafter is under common control
with Lilly.
SECTION 1.3, "ATLAS Screening" (Any Target Ligand Affinity Screen)
means the process used to develop a screen utilizing Scriptgen's patented
proprietary high throughput screening technology which enables efficient
screening of a large library of compounds for binding affinity to a
particular protein of interest. ATLAS Screening is more fully described in
the attached Exhibit B, incorporated herein by reference. "ATLAS Screen"
means a screen developed through ATLAS Screening.
SECTION 1.4. "Confidential Information" means all non-public
information, data and materials, including, without limitation, proprietary
information and materials (whether or not patentable) regarding a party's
technology, products, business information or objectives.
SECTION 1.5. "Field" shall mean discovery of compounds for the
development of [***].
SECTION 1.6. "Final Comprehensive Report" shall have the meaning as set
forth in Section 4.1 of this Agreement.
SECTION 1.7. "Initial Target Proteins" shall mean the first two (2)
Target Proteins, or substitutes thereof, provided by Lilly to Scriptgen for
the Project.
SECTION 1.8. "Know-How" means all unpatented and unpatentable
information, data or materials, including without limitation: instructions;
processes; formulae; biological materials; and chemical, pharmacological,
toxicological, pharmaceutical, physical and analytical, clinical, safety,
manufacturing and quality control data and information related to compounds,
Target Proteins, Successful Compounds and other similar or related items
within the scope of the Project. Know-How does not include rights to ATLAS
Screening.
SECTION 1.9. "Lilly Compound means those compounds, Target Proteins
and Natural Products furnished by Lilly for Project purposes as described
under this Agreement.
SECTION 1.10. "Lilly Patent Right(s)" means a Patent Right(s) owned or
controlled by Lilly.
<PAGE>
3
SECTION 1.11. "Major Markets" shall mean the United States, United
Kingdom, Germany, France, Italy and Japan.
SECTION 1.12. "Natural Products" means natural product extracts.
SECTION 1.13. "Net Sales" means, with respect to a Product, the gross
amount invoiced by Lilly or a Lilly Affiliate or sublicensee to unrelated
third parties for the Product, in the territory, less:
[***]
SECTION 1.14. "Patent Right(s)" means a patent or patent application
and all divisions, continuations, continuations-in-part, reissues,
extensions, Supplementary Protection Certificates, foreign counterparts
thereof, and any similar intellectual
<PAGE>
4
property that is owned or controlled by Scriptgen or by Lilly, at least one
claim of which covers the making, using or selling of a Successful Compound
or Product, or methods, assays, or substances useful in discovering the
Successful Compound or Product. For avoidance of any doubt, "Patent Right(s)"
does not include rights related to Atlas Screening.
SECTION 1.15. "Phase II Clinical Trials" means human clinical trials
conducted in patients to establish proof of concept in the particular
indication tested and clinical trials conducted in patients to achieve a
statistically significant indication of efficacy in the particular indication
tested, as well as to obtain some indication of the dosage regimen required.
SECTION 1.16. "Phase III Clinical Trials" means large scale human
clinical trials conducted in patients to establish Product efficacy in the
particular indication tested and required to obtain Product registration with
health regulatory authorities.
SECTION 1.17. "Product" means any pharmaceutical composition comprising
of a Successful Compound for use as a human therapeutic in the Field.
SECTION 1.18. "Product Decision" means a decision made [***]
SECTION 1.19. "Project" means the research program to be conducted by
Scriptgen in connection with this Agreement. The Project is described more
fully in the Project Plan attached hereto as Exhibit A, and incorporated by
reference.
SECTION 1.20."Project IP-Rights" means (1) Patent Rights, (2) Know-How
and (3) patentable and unpatentable, information and inventions conceived in
the course of and within the scope of the Project and, in the case of
patentable inventions, are reduced to practice within the course of the
Project or within twelve (12) months after its expiration or termination. For
avoidance of any doubt, "Project IP-Rights" does not include rights related
to Atlas Screening.
SECTION 1.21. "Project Phase I" means the phase of the Project which
involves preliminary characterization for assay configuration for each
Initial Target Protein. Except as the parties may otherwise agree, during
this phase, Lilly will provide Scriptgen approximately [***] of each Initial
Target Proteins from which Scriptgen shall determine the technical
requirements for ATLAS Screening of each Initial Target Protein by
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5
characterizing the unfolding of each Initial Target Protein. In the event
that an Initial Target Protein's unfolding behavior is such that it is not
amenable to Atlas Screening, Lilly will be allowed up to [***] for each of
the Initial Target Proteins at [***] until such Initial Target Proteins are
amenable to Atlas Screening. If Lilly so desires, it may substitute Initial
Target Proteins in excess of the [***] described in the preceding sentence,
provided that it pays an additional fee of [***] to Scriptgen for each
substitution that exceeds [***] Initial Target Protein substitution. This
phase will take [***]. Scriptgen will configure the necessary assays for each
of the Initial Target Proteins received from Lilly simultaneously, provided
that Scriptgen receives each of the Initial Target Proteins from Lilly on or
about the same time. Project Phase I is more fully described in the Project
Plan. In the event Lilly substitutes Initial Target Protein as specified
above, this phase will take an additional [***] or [***] to complete for each
Initial Target Protein substituted.
SECTION 1.22. "Project Phase II" means the phase of the Project that
follows Project Phase I which utilizes ATLAS Screening to establish the
optimal conditions for the specific high throughput screen for each Initial
Target Protein. This phase will result in the assay being fully validated and
standard deviations established for a sub set of compounds and controls.
Assay sensitivity will also be established, during this phase, so as to
determine the Initial Target Protein requirements for the screening. At
Lilly's option and upon its request, up to [***] will be provided for Project
purposes including validation, [***]. If Scriptgen Compounds are requested by
Lilly for Project purposes above the [***] limitation described above, Lilly
will be charged a fee of [***]. In the event Lilly requests the use of
Scriptgen Compounds for Project purposes as described above, Lilly may select
such Scriptgen Compounds from any such Scriptgen Compounds within the
Scriptgen Library and, furthermore, shall have a reasonable opportunity to
review and screen such Scriptgen Compounds prior to such selection, although
Lilly win use its best efforts to complete the selection process within [***].
Except as otherwise provided for in this Agreement, such selection process
shall be [***] to Lilly provided Lilly selects Scriptgen Compounds on a plate
by plate basis (each plate contains [***]). In the event, Lilly desires to
select Scriptgen Compounds not on a plate by plate basis, [***]. At the
commencement of this phase, Lilly will provide to Scriptgen, approximately
[***] of each Initial Target Protein or as otherwise mutually agreed
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6
to by the parties. [***] to complete provided antibodies are furnished by
Lilly. In the event antibodies are not furnished by Lilly, this phase will
take approximately [***]. For avoidance of any doubt, if Lilly does not
furnish the antibodies necessary for the Project or portions thereof,
Scriptgen shall bear the ultimate responsibility and obligation for
furnishing the antibodies necessary for the Project at its sole expense.
Project Phase II is more fully described in the Project Plan.
SECTION 1.23. "Project Phase III" means the phase of the Project that
follows Project Phase II and involves running the ATLAS Screens for each of
the Initial Target Proteins using [***] compounds for each Initial Target
Protein. At Lilly's option as describe in Section 1.22 above, the compounds
and/or Natural Products will be furnished by either Lilly or the Scriptgen
Library or as the parties may otherwise mutually agree. At the commencement
of this phase, Lilly will provide to Scriptgen, approximately [***] of each
Initial Target Protein or as otherwise mutually agreed to by the parties.
During this phase, Scriptgen will [***] for each compound, and determine an
[***]. Scriptgen estimates that this phase will take [***]. Project Phase III
is more fully described in the Project Plan.
In addition, Scriptgen will use the Atlas assay to evaluate [***]
supplied by Lilly for up to [***]. These samples will be produced at Lilly in
the initial phases of fractionation and purification of the Natural Product
extracts called novelty and fingerprint determination. The testing of these
samples may occur after the Final Comprehensive Report has been sent to
Lilly, but in no event any later than six (6) months after receipt by Lilly
of the Final Comprehensive Report.
SECTION 1.24. "Project Plan" means the written plan attached hereto as
Exhibit A and incorporated by reference.
SECTION 1.25. "Proof of Principle" means that ATLAS Screening is deemed
successful with respect to the Initial Target Proteins because either: [***]
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7
SECTION 1.26. "PTAC" means the point in Lilly's development program
[***]
SECTION 1.27. "Scriptgen Compound" shall mean a compound or Natural
Product furnished by Scriptgen from its Scriptgen Library for Project
purposes as described under this Agreement.
SECTION 1.28. "Scriptgen FTEs" means a full time equivalent scientific
person week or a total of [***] of scientific work on or directly related to
the Project, carried out by a Scriptgen employee, having at least [***].
SECTION 1.29. "Scriptgen Library" means a library of approximately
250,000 compounds and 15,000 Natural Products owned and controlled by
Scriptgen.
SECTION 1.30. "Scriptgen Patent Right" means a Patent Right owned or
controlled by Scriptgen.
SECTION 1.3 1. "Successful Compound" means any compound and/or Natural
Product screened for Lilly by Scriptgen which is identified by Scriptgen
through ATLAS Screening or otherwise within the scope of the Project and
determined by Lilly as a potential pharmaceutical drug candidate.
SECTION 1.32. "Target Protein" means a purified target protein
furnished to Scriptgen by Lilly for purposes of Project research as
contemplated in this Agreement.
SECTION 1.33. "Valid Claims" means (a) any claim(s) pending in a patent
application or in an unexpired patent which has not been held unenforceable,
unpatentable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been admitted to be invalid or unenforceable
through reissue or disclaimer, or (b) a claim of a pending patent application
which claim was filed in good faith and has not been abandoned or finally
disallowed without the possibility of appeal or refiling of said application.
If in any country there should be two or more such decisions conflicting with
respect to the validity of the same claim, the decision of the higher or
highest tribunal shall thereafter control; however, should the tribunals be
of equal rank, then the decision or decisions upholding the claim shall
prevail when the decisions are equal in number, and the majority of decisions
shall prevail when the conflicting decisions are unequal in number.
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8
ARTICLE II
STAFFING, PLANNING AND EXECUTION OF PROJECT
SECTION 2.1. COMMENCEMENT AND REASONABLE EFFORTS. Upon execution of
this Agreement, Lilly and Scriptgen shall commence work on the Project that
is generally described in the Project Plan. Both parties will carry out their
respective roles and use reasonable efforts in conducting work on the Project
in order to achieve the research contemplated in this Agreement. Except as
the parties may otherwise agree in writing or as otherwise provided in this
Agreement, Scriptgen shall use its reasonably commercial efforts to complete
the Project with respect to the Initial Target Proteins within 28 to 34 weeks
after it receives the Initial Target Proteins. The parties hereby acknowledge
that the time period outlined in the preceding sentence may need to be
extended as may be applicable depending upon the number of Initial Target
Proteins that are substituted under Section 1.21 of this Agreement.
SECTION 2.2. SCRIPTGEN EFFORT ON THE PROJECT. Except as the parties may
otherwise agree, for each Initial Target Protein provided by Lilly to
Scriptgen in accordance with the Project Plan, Scriptgen shall, subject to
increases caused by the substitution of Initial Target Proteins as described
in Section 1.21, devote at least [***] to the Project distributed by project
phase as follows:
(a) Project Phase I [***]
(b) Project Phase II [***]
(c) Project Phase III [***]
Upon a reasonable request by Lilly that a specific scientist be
assigned to the Project as part of the Scriptgen FTE's, Scriptgen will use
reasonable efforts to assign such person to the project for at least [***].
The names of the Scriptgen employees who are initially scheduled to work on
the Project are set forth in Exhibit C.
SECTION 2.3. CONDUCT OF STUDIES. All work done in connection with the
Project shall be carried out in compliance with any federal, state, or local
laws, regulations, or guidelines governing the conduct of research at the
site where such work is being conducted. In addition, any laboratory animals
covered by this Agreement shall be provided humane care and treatment in
accordance with the most acceptable current veterinary practices.
SECTION 2.4. TREATMENT OF CHEMICAL AND BIOLOGICAL MATERIALS. Each party
agrees that it will not permit any third party to observe or have access
<PAGE>
9
to the other party's chemical or biological materials unless a duly
authorized representative of the other party agrees in writing.
SECTION 2.5. SAFETY CONCERNS. Each party agrees to provide the other
with handling instructions, including all safety information known to such
party relating to chemical and biological material.
SECTION 2.6. ADDITIONAL TARGET PROTEINS. In the event that Proof of
Principle is achieved (either (a) or (b) as defined in Section 1.25) and
Lilly has received the Final Comprehensive Report for the last Initial Target
Protein within at least ninety (90) days after the expiration of the timeline
set forth in the last sentence of Section 2.1 of this Agreement (provided
that such period shall be extended to the extent that any delay beyond such
period was caused by Lilly), Lilly and Scriptgen hereby agree to expand the
Project to include two (2) additional Target Proteins for ATLAS Screening
(the "Additional Target Proteins") under exactly the same terms as are
applicable to the Target Proteins under this Agreement except that: (a) the
Research Fee described in Section 3.1 shall be [***] for both of the
Additional Target Proteins as opposed to the [***] Research Fee that applies
to the Initial Target Proteins; and (b) the first installment payment of such
Research Fee under Section 3.2 hereof, for the Additional Target Proteins
shall be paid within thirty (30) days of Lilly's receipt of the Final
Comprehensive Report for the last Initial Target Protein as opposed to thirty
(30) days after the execution of this Agreement. For avoidance of any doubt
the second installment payment of the Research Fee shall be paid within
thirty (30) days after Lilly's receipt of the Final Comprehensive Report with
respect to the Additional Target Proteins.
SECTION 2.7. CONSULTATION AND VISITATION. From time to time Lilly
personnel, may consult with Scriptgen personnel regarding matters relevant to
the Project and may also at reasonable times and upon reasonable prior notice
visit the facilities being used for the Project to permit observation of
procedures being employed.
ARTICLE III
FUNDING OF PROJECT
SECTION 3.1. AMOUNT OF RESEARCH FEE. In consideration for the research
to be conducted by Scriptgen as contemplated in this Agreement, Lilly shall
pay Scriptgen a research fee in the amount of [***] (the "Research Fee").
Section 3.2. Manner of Payments. The Research Fee shall be in U.S.
Dollars and payable in [***]. The first payment shall be
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10
made within thirty (30) days of execution of this Agreement. The second
payment shall be made within thirty (30) days after Lilly's receipt of the
Final Comprehensive Report.
SECTION 3.3. ACCOUNTING. Scriptgen shall maintain complete records of
all monies Lilly pays to Scriptgen for research under the Project and shall,
within sixty (60) days after the end of the calendar year during the Project
and at the end of the Project, provide Lilly with a report, stating: a) the
dollar amount of funds Lilly supplied for that year; b) the research
activities conducted during the year which account for such support, using
Scriptgen's standard project accounting procedures; and c) any supporting
details as are reasonably required by Lilly. To the extent permitted by law,
Lilly shall be entitled to any tax credits due on account of research and
development expenses for the funds paid by Lilly.
ARTICLE IV
RESULTS OF PROJECT
SECTION 4.1. RESULTS AND REPORTS. Scriptgen shall provide to Lilly
written bi-monthly reports which describes the results and progress of the
Project. Upon completion of the Project or termination of this Agreement,
Scriptgen shall promptly provide Lilly with a comprehensive written final
report describing the results of the Project with respect to each Target
Protein including, but not limited to, an [***] for all Successful Compounds
(the "Final Comprehensive Report"). A Final Comprehensive Report shall not be
complete unless, to the extent commercially reasonably possible, the
structures of Scriptgen Compounds that are Successful Compounds are revealed
and confirmed in such report and, in any event, notwithstanding Scriptgen's
commercially reasonable efforts, if Scriptgen Compounds are the only
Successful Compounds identified in the Project, at least the structure of one
such compound must be revealed and confirmed in such report (Scriptgen shall
have the primary responsibility for identifying the structure of such
compounds, however, Lilly hereby agrees to provide reasonable assistance to
Scriptgen with respect to identifying the structure of such compounds).
Furthermore, Scriptgen shall use its best efforts to provide Lilly with
reference samples [***] of all Successful Compounds that were not furnished
by Lilly for purposes of the Project. These reference samples shall be
provided to Lilly in sufficient quantity so as to enable Lilly to reasonably
replicate such Successful Compounds for development and other purposes as it
may deem appropriate. Scriptgen shall also reasonably cooperate with Lilly in
transferring Scriptgen's Know-how and other information related to the
Successful Compounds to the extent provided in Article V and subject to the
provisions of Article VIII.
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11
SECTION 4.2. OWNERSHIP. Subject to the licenses granted hereunder, an
Project IP-Rights shall be owned by the inventor of such patentable
invention, such inventorship, to be determined by the laws of inventorship,
under the United States. However, notwithstanding the foregoing, any Project
IP-Rights related to Lilly Compounds shall be owned by Lilly and Scriptgen
shall assign any and all interests that it may have in such Project IP-Rights
to Lilly. Scriptgen shall execute such documents and perform such acts as may
be reasonably necessary to convey any interest that it may have in Project
IP-Rights related to Lilly Compounds.
SECTION 4.3. JOINTLY OWNED PATENTABLE INVENTIONS. Except for Project
IP-Rights related to Lilly Compounds as described in Section 4.2, if any
Project IP-Rights are determined under Section 4.2, to be jointly invented by
Lilly and Scriptgen ("Joint Inventions"), Lilly and Scriptgen shall jointly
own such invention and shall discuss that Joint Invention and the
desirability of filing a United States patent application covering the
invention, as well as any foreign counterparts. If no decision is made
regarding whether to file and prosecute the application covering such Joint
Invention, Lilly shall make the decision. Such patent applications (including
filing, prosecution and maintenance thereof) shall be handled by a third
party mutually acceptable to both parties (such mutual acceptance shall not
be unreasonably withheld).
SECTION 4.4. SCRIPTGEN COMPOUND INVENTIONS. Except for IP-Rights
related to Lilly Compounds as described in Section 4.2, if any Project
IP-Rights are determined under Section 4.2, to be solely invented by
Scriptgen and are related to a Scriptgen Compound ("Scriptgen Compound
Invention"), Scriptgen shall own such invention and Lilly and Scriptgen shall
discuss that Scriptgen Compound Invention and the desirability of filing a
United States patent application covering the invention, as well as any
foreign counterparts. If no decision is made regarding whether to file and
prosecute the application covering such Scriptgen Compound Invention,
Scriptgen shall make the decision. Such patent applications (including
filing, prosecution and maintenance thereof) shall be handled by a third
party mutually acceptable to both parties (such mutual acceptance shall not
be unreasonably withheld).
SECTION 4.5. REVIEW AND COMMENT. In connection with any Joint
Inventions or Scriptgen Compound Inventions, each party shall provide the
other party with a copy of any patent application which first discloses any
specific invention within the scope of the Project or other relevant Project
IP-Rights and information prior to first filing the first of such
applications in any jurisdiction, if possible, for review and comment by each
party, or its respective designees, Each party and designees thereof shall
maintain any such patent application in confidence pursuant to Article VIII.
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12
SECTION 4.6. NOTICE OF DECISION If a party decides not to file,
prosecute or maintain an application or patent (including the prosecution of
any interference proceedings with respect thereto) with respect to a Joint
Invention or Scriptgen Compound Invention (the "Non-Prosecuting Party"), in
any country, it shall give the other party reasonable notice to this effect.
After such notice, the other party shall have the sole discretion to file or
maintain the application or patent with respect to such Joint Invention or
Scriptgen Compound Invention. If such other party elects to file or maintain
such application or patent, the Non-Prosecuting Party shall assign any and
all ownership rights in such invention to such other party. Furthermore, the
Non-Prosecuting Party shall execute such documents and perform such acts as
may be reasonably necessary to convey such ownership rights and for the other
party to continue prosecution or maintenance of any intellectual property
rights related thereto.
SECTION 4.7. THIRD PARTY INFRINGEMENT Scriptgen and Lilly each agrees
to take reasonable actions to protect Know-How from unauthorized use, when,
from its own knowledge or upon notice by the other party, the party with
knowledge or receiving notice becomes aware of the reasonable probability
that such unauthorized use exists.
SECTION 4.8. COOPERATION If within sixty (60) days of becoming aware of
the reasonable probability of an interference or infringement of Project
IP-Rights with respect to a Joint Invention or Scriptgen Compound Invention,
the owner (or one of the joint-owners) refuses to institute an infringement
suit or take other appropriate action (the "Non-Action Party") that the other
party feels is reasonably required to protect the Project IP-Rights, the
other party shall have the right at its sole discretion to institute such
suit or other appropriate action in the name of either or both parties. In
such event, the Non-Action Party shall cooperate with the other party to the
extent reasonably possible.
SECTION 4.9. NOTICE OF CERTIFICATION Scriptgen and Lilly each shall
immediately give notice to the other of any certification filed under the
U.S. "Drug Price Competition and Patent Term Restoration Act of 1984"
claiming that Project IP-Rights (or any portion thereof) are invalid or that
any infringement will not arise from the manufacture, use or sale of any
product that is competitive with a Product within the scope of this Agreement
by a third party. If Lilly decides not to bring infringement proceedings
against the entity making such a certification, Lilly shall give notice to
Scriptgen of its decision not to bring suit within sixty (60) days after
receipt of notice of such certification. Scriptgen may then, but is not
required to, bring suit against the party that filed the certification. Any
suit by Lilly or Scriptgen shall either be in the name of Lilly or in the
name of Scriptgen, or jointly by Lilly and Scriptgen, as may be required by
law. For this purpose, the party
<PAGE>
13
not bringing suit shall execute such legal papers necessary for the
prosecution of such suit as may be reasonably requested by the party bringing
suit. Notwithstanding the foregoing, this Section 4.9 shall not apply to
matters regarding Lilly Compounds or Atlas Screening and/or the intellectual
property rights related thereto.
SECTION 4.10. COSTS AND EXPENSES Lilly shall bear costs of filing,
prosecuting, maintaining and extending any Lilly Patent Rights and Scriptgen
shall bear the costs of filing, prosecuting, maintaining and extending any
Scriptgen Patent Rights. Lilly and Scriptgen shall equally bear the cost of
filing, prosecuting, maintaining and extending any Project IP-Rights related
to Joint Inventions.
SECTION 4.11. NOTICE OF INFRINGEMENT If the activities of either party
in connection with the Project or as the result of making, using or selling a
Product result in a claim of patent infringement or other violation of the
intellectual property rights of any third party, the party to this Agreement
first having notice of that claim shall promptly notify the other party in
writing. The notice shall set forth the facts of the claim in reasonable
detail. Except as otherwise provided herein, Lilly shall have the primary
right, in its sole discretion, to defend against said claim (whether or not
it arises as a counterclaim in any infringement action commenced by Scriptgen
hereunder) and to prosecute any counterclaims, or any other claims that may
arise in connection with such litigation. Scriptgen shall cooperate with
Lilly in such defense and prosecution and shall have the right to be
represented by counsel of its own choice. If Lilly shall fail to diligently
commence and continue defense against such claim (or prosecution of any claim
or counterclaim), Scriptgen may assume the primary right for such defense or
prosecution, and Lilly shall cooperate with Scriptgen and shall have the
right to be represented by counsel of its own choice. Notwithstanding the
foregoing, if the claim involves an allegation of a violation of the trade
secret rights of a third party, the party accused of such violation shall
have the obligation to defend against such claim and shall indemnify the
other party against all costs associated with such claim. Furthermore,
notwithstanding the foregoing, this Section 4.11 shall not apply to matters
regarding Lilly Compounds or Atlas Screening and/or the intellectual property
rights related thereto.
SECTION 4.12. LITIGATION EXPENSES Each party shall assume and pay all
of its own out-of-pocket costs incurred in connection with an litigation
described in this Article IV, including without limitation, the fees and
expenses of that party's counsel.
SECTION 4.13. SETTLEMENT APPROVAL Neither party shall settle any such
proceeding described in this Article IV without the approval of the other
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14
party, which approval shall not be unreasonably withheld. Notwithstanding the
foregoing, this Section 4.13 shall not apply to matters regarding Lilly
Compounds or Atlas Screening and/or the intellectual property rights related
thereto.
SECTION 4.14. RECOVERY Any recovery obtained by any party as a result
of any proceeding directly related to a Product (or a Successful Compound
within the Field) during the term that royalties are paid to Scriptgen
hereunder, by settlement or otherwise, shall be applied in the following
order of priority:
(a) first, to reimburse each party for all litigation costs in
connection with such proceeding paid by that party under Section
4.13 and not otherwise recovered; and
(b) second, [***]
SECTION 4.15. PATENT TERM EXTENSIONS The parties shall cooperate with
each other in gaining patent term extension wherever applicable to Project
IP-Rights covering Successful Compounds or Products. Lilly shall determine
which patents shall be extended. All filings for such extension shall be made
by Lilly provided, however, that in the event that Lilly elects not to file
for an extension, Lilly shall (i) inform Scriptgen of its intention not to
file and (ii) grant Scriptgen the right to file for such extension.
ARTICLE V
LICENSE
Subject to Section 6.9 of this Agreement, Scriptgen hereby grants to
Lilly a perpetual, exclusive (even as to Scriptgen), worldwide,
non-cancelable license, with the right to grant sublicenses, under
Scriptgen's interests in Project IP-Rights for all purposes including, but
not limited to, to make, have made, use, have used, import, offer for sale,
and have sold any Successful Compound and/or Product for any and all purposes
subject to Scriptgen retaining the rights to its ATLAS Screening technology
and retaining any rights that it may have outside the Field with respect to
Scriptgen Compounds as described in Section 6.9 of this Agreement.
ARTICLE VI
COMMERCIAL TERMS
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15
section 6.1. Milestones. As consideration for the licenses granted
hereunder, Lilly shall pay to Scriptgen within forty-five (45) days of the
occurrence of a milestone event the following milestone payments [***]
*Notwithstanding the foregoing, [***]
Regardless of the number of indications or products that may be
developed by Lilly under this Agreement, [***]. In other words, [***].
Furthermore, any milestone payment made under this Section 6.1 shall [***] of
this Agreement. For avoidance of any doubt, Lilly shall [***] of this
Agreement.
SECTION 6.2. ROYALTY PAYMENTS TO SCRIPTGEN ON PRODUCTS. As additional
consideration for the licenses granted hereunder, except as otherwise
provided in this Agreement, Lilly shall pay to Scriptgen a royalty equal to
[***] of the Net Sales of Products. Royalties shall be reported and paid
quarterly in accordance with Section 6.4 of this Agreement.
SECTION 6.3. TERM OF ROYALTY PAYMENTS BY LILLY. Royalties under Section
6.2 shall be paid on a country-by-country basis from the date of the
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16
first commercial sale of each Product in a particular country [***].
SECTION 6.4. ROYALTY PAYMENT AND REPORTS. Royalty payments under this
Agreement shall be made to Scriptgen within ninety (90) days following the
end of each calendar quarter for which royalties are due. Each royalty
payment shall be accompanied by a statement summarizing the Net Sales and
royalty by United States and outside the United States showing: (i) the Net
Sales of the Products sold by Lilly, its Affiliates, and its sublicensees
during the reporting period; (ii) the royalty due thereon; and (iii)
withholding taxes, if any, required by law to be deducted in respect of such
royalties. If no royalty is due for any royalty period hereunder, Lilly shall
so report. Lilly shall keep complete and accurate records in sufficient
detail to properly reflect all gross sales and Net Sales and to enable the
royalties payable hereunder to be determined.
SECTION 6.5. TAXES. Any and all taxes levied on account of royalties
accruing under this Article shall be paid by Scriptgen. If Lilly is required
by the United States government or other authorities to withhold any tax on
the amounts payable by Lilly to Scriptgen under this Agreement, Lilly shall
be allowed to do so, and shall in such case remit royalty payments to
Scriptgen net of such withheld amount, provided that Lilly furnishes
Scriptgen with proof of payment annually within ninety (90) days following
December 31 of each year in order that Scriptgen may use the withholding tax
paid as a tax credit.
SECTION 6.6. EXCHANGE RATES All payments to be made by Lilly to
Scriptgen under this Agreement shall be made in United States dollars. In the
case of sales outside the United States by Lilly, the rate of exchange to be
used in computing the amount of currency equivalent in United States dollars
due Scriptgen shall be made using Lilly's then current standard exchange rate
methodology, which methodology shall be in conformity with generally accepted
accounting principles.
SECTION 6.7. AUDITS. Upon the written request of Scriptgen, Lilly shall
permit an independent public accountant selected by Scriptgen and acceptable
to Lilly, which acceptance shall not be unreasonably withheld or delayed, to
have access during normal business hours to such records of Lilly as may be
reasonably necessary to verify the accuracy of the royalty reports described
herein, in respect of any fiscal year ending not more than thirty-six (36)
months prior to the date of such request. All such verifications shall be
conducted at Scriptgen's expense and not more than once in each calendar
year. In the event such Scriptgen representative concludes that additional
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17
royalties were owed to Scriptgen during such period, the additional royalty
shall be paid by Lilly within thirty (30) days of the date Scriptgen delivers
to Lilly such representative's written report so concluding unless Lilly
objects thereto, specifying in writing the basis for its objection in
reasonable detail. The fees charged by such representative shall be paid by
Scriptgen unless the audit discloses that the royalties payable by Lilly for
the audited period are incorrect by more than [***], in which case Lilly
shall pay the reasonable fees and expenses charged by such representative.
Scriptgen agrees that all information subject to review under this Section
6.7 is confidential and that is representative shall only disclose to
Scriptgen the royalty amount determined from such audit and that Scriptgen
shall cause its representative to retain all such information in confidence.
SECTION 6.8. INTEREST ON LATE PAYMENTS. Any payments by Lilly to
Scriptgen that are not paid on or before the fifth day after the date such
payments are due under this Agreement shall bear interest, to the extent
permitted by applicable law, [***] above the Prime Rate of interest declared
from time to time by The First National Bank of Boston in Boston, Massachusetts,
calculated on the number of days payment is delinquent. The right to receive
interest shall be in addition to any other rights and remedies of Scriptgen.
[***]
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19
ARTICLE VII
SAMPLES
SECTION 7.1. SUPPLY OF SAMPLES AND OTHER COMPOUNDS. Lilly shall retain
ownership in any Initial Target Proteins, compounds, Natural Product and
similar items (or portions thereof) that it supplies to Scriptgen under this
Agreement whether contained in cassettes form or otherwise (the "Samples").
Unless otherwise agreed by the parties in writing, the Samples shall be
supplied blinded.
SECTION 7.2. SAMPLE MAINTENANCE AND STRUCTURE DETERMINATION. Scriptgen
hereby agrees that it (i) [***] (ii) will, upon Lilly's request, return or
dispose of unused Samples; (iii) will not [***] except as contemplated under
this Agreement; (iv) will not attempt to determine the structures of the
Samples; and (v) will not attempt to replicate the Samples without Lilly's
prior written permission. Scriptgen, further, agrees that Lilly shall have
the ability to [***] under this Section 7.2 at such times and intervals as is
reasonably convenient to both parties.
ARTICLE VIII
CONFIDENTIALITY AND PUBLICATION
SECTION 8.1. CONFIDENTIALITY. Except as otherwise provided in writing
by the parties, both parties shall use their best efforts to retain in
confidence and not use, except as provided in this Agreement, all information
relating to the Project. Such information may, however, be disclosed insofar
as such disclosure is necessary (where possible, with adequate safeguards for
confidentiality) to allow either party to institute or defend against
litigation with a third-party, to file and prosecute patent applications or
to comply with governmental regulations, provided neither party shall use the
other party's information in any patent application without written approval
from the other party.
This obligation of confidentiality and non-use shall not apply to
information which (i) is in the public domain, (ii) comes into the public
domain through no fault of the receiving party, (iii) was known by the
receiving party prior to disclosure under this Agreement or under the prior
confidentiality agreement between Lilly and Scriptgen, (iv) is disclosed to
the receiving party without an obligation of confidentiality by a third party
having a lawful right to make the disclosure, or (v) is disclosed under the
provisions of Section 8.2 of this Agreement.
<PAGE>
20
In furtherance of the objectives of the Project and with the approval
of the parties, either party may disclose confidential information obtained
or generated under this Agreement to a third party who has agreed in writing
to be bound by the same or similar obligations of confidence set forth in
this Section, provided the third party agrees not to use the confidential
information without authorization from the party owning the information,
except that such authorization shall not be required in connection with the
exercise of the rights granted under any license granted under this Agreement.
All obligations of confidentiality and non-use imposed upon the parties
under this Agreement shall expire on the later of (i) the date [***]; or (ii)
the expiration of all obligations to pay royalties under Section 6.3 of this
Agreement.
Lilly agrees to mark all Lilly Information provided to Scriptgen in
documentary form as "Confidential". If such Lilly Information is provided to
Scriptgen in oral form, Lilly shall thereafter summarize the disclosure in
writing, mark it as "Confidential," and provide a copy to Scriptgen within
thirty (30) days of the oral disclosure. In the same manner, Scriptgen agrees
to mark all Scriptgen Information provided to Lilly in documentary form as
"Confidential." If such Scriptgen Information is provided to Lilly in oral
form, Scriptgen shall thereafter summarize the disclosure in writing, mark it
"Confidential," and provide a copy to Lilly within thirty (30) days of the
oral discussion.
SECTION 8.2. PUBLICATIONS. Lilly and Scriptgen agree that, during the
term of the Project and for [***] thereafter, neither party shall publish the
results of studies carried out under this Agreement without the opportunity
for prior review by the other party. During the term of the Project and for
[***], each party agrees to provide the other party the opportunity to
review any proposed abstracts or manuscripts which relate to the Project at
least [***] prior to their intended submission for publication and agrees,
upon request, not to submit such an abstract or manuscript for publication
until the other party is given a reasonable period of time to secure patent
protection for any material in such publication which it believes to be
patentable. Upon request, confidential information of the non-disclosing
party shall be removed from such proposed publication. Nothing contained in
this Section shall prohibit the inclusion of information necessary for a
patent application, provided the non-filing party is given a reasonable
opportunity to review the information to be included. During the term of the
Project and for [***] thereafter, the parties agree that all publications
relating to the results of studies carried out under this Agreement shall be
submitted for review and approval by each Party to ensure that, to the
<PAGE>
21
extent appropriate, scientific credit is given to researchers at both Lilly
and Scriptgen.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY LILLY. Lilly agrees to indemnify, defend
and hold Scriptgen harmless from and against any losses, including product
liability, which arise from any claim, lawsuit or other action by a third
party arising out of the manufacture and sales of Products, the execution by
Lilly of this Agreement, the performance or breach by Lilly of its warranties
or obligations under this Agreement, or the negligence or willful misconduct
of Lilly, its employees or its agents within the scope of this Agreement,
except to the extent such losses result from (i) the breach by Scriptgen of
its warranties or obligations hereunder or (ii) the negligence or willful
misconduct of Scriptgen, its employees or its agents within the scope of this
Agreement.
SECTION 9.2 INDEMNIFICATION BY SCRIPTGEN. Scriptgen agrees to
indemnify, defend and hold Lilly harmless from and against any losses which
arise from any claim, lawsuit or other action by a third party arising out of
the execution by Scriptgen of this Agreement, the performance or breach by
Scriptgen of its warranties or obligations under this Agreement, or the
negligence or willful misconduct of Scriptgen, its employees or its agents
within the scope of this Agreement, except to the extent such losses result
from (i) the breach by Lilly of its warranties or obligations hereunder or
(ii) the negligence or- willful misconduct of Lilly, its employees or its
agents within the scope of this Agreement.
SECTION 9.3 INDEMNIFICATION PROCEDURES. A party seeking indemnification
pursuant to this Article shall notify, in writing, the other party within
thirty (30) days of the assertion of any claim or discovery of any fact upon
which the party intends to base a claim for indemnification. A party's
failure to so notify the indemnifying party shall not, however, relieve such
indemnifying party from any liability under this Agreement to the indemnified
party with respect to such claim except to the extent that such indemnifying
party is actually prejudiced by such failure. The party from whom
indemnification is being sought, while reserving the right to contest its
obligation to indemnify, shall be responsible for the defense of any claim,
demand, lawsuit or other proceeding in connection with which the other party
claims indemnification hereunder. The indemnified party shall have the right
at its own expense to participate jointly with the indemnifying party in the
defense of any such claim, demand, lawsuit or other proceeding, but with
respect to any issue involved in such claim, demand, lawsuit or
<PAGE>
22
other proceeding with respect to which the indemnifying party has
acknowledged its obligation to indemnify the other party hereunder, the
indemnifying party shall have the sole right to select counsel, settle, try
or otherwise dispose of or handle such claim, demand, lawsuit or other
proceeding on such terms as the indemnifying party, in its sole discretion
shall deem appropriate.
ARTICLE X
DISPUTE RESOLUTION
SECTION 10.1 GOOD FAITH NEGOTIATIONS. The parties will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement promptly by negotiations between the following senior executives of
the parties who have authority to settle the controversy (and who do not have
direct responsibility for administration of this agreement):
(i) For Lilly - Vice President of Infectious Diseases or similar
position
(ii) For Scriptgen - its Chief Executive Officer
SECTION 10.2 NOTICE AND MEETING. The disputing party(ies) shall give
the other party(ies) written notice of the dispute. Within ten (10) days
after receipt of said notice, the receiving party(ies) shall submit to the
other(s) a written response. The notice and response shall include (a) a
statement of supporting its position, and (b) the name and title of the
executive who will represent that party. The executives shall meet at a
mutually acceptable time and place within ten (10) days of the date of the
disputing party's notice and thereafter as often as they reasonably deem
necessary to exchange relevant information and to attempt to resolve the
dispute.
SECTION 10.3 LITIGATION. If the matter has not been resolved within
[***] of the disputing party's notice, or if the party receiving said notice
will not meet within [***] either party may initiate litigation upon [***]
written notice to the other party.
SECTION 10.4 DEADLINES. All deadlines specified in this Article X may
be extended by mutual agreement.
SECTION 10.5 NON-EXCLUSIVE PROCEDURES. The procedures specified in this
Article X shall be non-exclusive procedures for the resolution of disputes
between the parties arising out of or relating to this Agreement. Without
limitation of the foregoing, any party may seek a preliminary injunction or
other preliminary judicial relief if in its judgment such action is necessary
to avoid irreparable damage. Despite such action, the parties will continue to
<PAGE>
23
participate in good faith in the procedures specified in this Article X. All
applicable statutes of limitation shall be tolled while the procedures
specified in this Article X are pending. The parties will take such action,
if any, required to effectuate such tolling.
ARTICLE XI
TERM AND TERMINATION
SECTION 11.1. TERM. Except as otherwise provided for herein, this
Agreement shall become effective as of the date hereof and shall remain in
effect until the expiration of all obligations of Confidentiality under
Article VIII.
SECTION 11.2. TERM AND EXTENSION OF PROJECT. Except as otherwise
provided for herein, the Project term shall begin as of the date hereof and
continue until completion of Project Phase III for each Initial Target
Protein and Additional Target Protein and until Lilly has received the Final
Comprehensive Report for each Initial Target Protein and Additional Target
Protein.
SECTION 11.3. TERMINATION FOR DEFAULT. If either party is in default of
any of its material obligations under this Agreement and fails to remedy that
default within ninety (90) days after the other party sends written notice of
the default (thirty (30) days in the event of failure to pay monies when due)
the party not in default may terminate the Project immediately by giving
written notice of the termination. The termination date shall be the date of
the notice of termination. If either party has materially defaulted and such
default has not been cured as described herein, the licenses and royalty
obligations hereunder shall survive; however, a termination under this
Section 11.3 is neither a waiver nor will it prejudice the non-defaulting
party from seeking a legal or equitable remedy against the defaulting party
for such material default.
SECTION 11.4. TERMINATION DUE TO ASSIGNMENT. In the event Scriptgen
assigns this Agreement, pursuant to Section 15.6, to an acquiring third-party
which is a pharmaceutical or biotechnology company, Lilly may terminate the
Project upon thirty (30) days notice without terminating the licenses (and
associated royalty obligations) granted to Lilly under this Agreement.
SECTION 11.5. RESIDUAL RIGHTS. Upon expiration or termination of this
Agreement, except as provided herein to the contrary, all rights and
obligations of the parties shall cease, except as follows:
<PAGE>
24
(a) Obligations to pay royalties and other sums accruing hereunder up to
the date of termination;
(b) The obligation (if any) to pay milestones as achieved and royalties
with respect to Products;
(c) All provisions regarding confidentiality shall continue in full
force and effect;
(d) Obligations of defense and indemnity;
(e) Obligations set forth in Article XV, but only with respect to those
causes of action which accrued prior to such termination;
(f) Any cause of action or claim of Scriptgen or Lilly accrued or to
accrue because of any breach or default by the other party
hereunder;
(g) All license and audit rights granted hereunder; and
(h) All other terms, provisions, representations, rights and obligations
contained in this Agreement that by their sense and context are
intended to survive until performance thereof by either or both
parties.
ARTICLE XII
DISCLOSURE OF AGREEMENT
SECTION 12.1. DISCLOSURE OF AGREEMENT. Except as provided below,
neither Scriptgen nor Lilly shall release any information to any third party
with respect to the existence and terms of this Agreement without the prior
written consent of the other, which shall not be unreasonably withheld. This
prohibition includes, but is not limited to, press releases, educational and
scientific conferences, promotional materials, governmental filings, and
discussions with lenders, investment bankers, public officials, and the media
provided, however, that Scriptgen may disclose the existence of the Agreement
to its lenders, investors and potential investors and the existence and terms
of the Agreement to its attorneys and accountants on a confidential basis.
SECTION 12.2. RELEASES REQUIRED BY LAW. If either party determines a
release of further information is required by law or governmental regulation,
it shall notify the other in writing at least thirty (30) days (or such
shorter time where legally required) before the time of the proposed release.
The notice shall include the exact text of the proposed release and the time
and manner of the release.
If requested, the party seeking to release information shall furnish to
the other an opinion of counsel that the release of that information is
required by law. At the other party's request, and before the release, the
party desiring to release further information shall consult with the other
<PAGE>
25
party on the necessity for the disclosure and the text of the proposed
further release. In no event shall a release include further information
regarding the existence or terms of this Agreement that is not required by
law or governmental regulation.
ARTICLE XIII
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS
SECTION 13.1. WARRANTY OF TITLE. Scriptgen hereby warrants that it has
the unencumbered right to enter into this Agreement and to grant the
license(s) contained herein. Lilly hereby warrants that it has the
unencumbered right to enter into this Agreement and to perform its
obligations hereunder.
SECTION 13.2. WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT, (A) NEITHER PARTY MAKES ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, (B) NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY THAT EXERCISE OF THE RIGHTS GRANTED IN THIS
AGREEMENT WILL NOT INFRINGE ANY THIRD PARTY PATENT OR OTHER PROPRIETARY
RIGHT, AND (C) NEITHER PARTY ASSUMES ANY RESPONSIBILITIES WHATSOEVER WITH
RESPECT TO PROJECT IP-RIGHTS.
SECTION 13.3. LIMITATIONS. Nothing in this Agreement shall be construed
as:
(a) a warranty or representation by either party as to the validity or
scope of any Project IP-Rights.
(b) a warranty or representation that anything made, used, sold or
otherwise disposed of under the rights granted in this Agreement is or will
be free from infringement of a third-party patent or other proprietary right;
or
(c) conferring by implication, estoppel or otherwise any license or
other right under any patents or technology of either party except as
otherwise expressly provided in this Agreement.
ARTICLE XIV
GOVERNMENTAL CONTROL
<PAGE>
26
SECTION 14.1. AUTHORITY. This Agreement is made subject to any
restrictions concerning the export of products or technical information from
the United States of America which may be imposed upon or related to
Scriptgen or Lilly from time to time by the government of the United States
of America.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1. NO AGENCY. It is understood and agreed that Scriptgen
shall have the status of an independent contractor under this Agreement and
that nothing in this Agreement shall be construed as authorization for either
Lilly or Scriptgen to act as agent for the other.
SECTION 15.2. FORCE MAJEURE. Both parties to the Agreement shall be
excused from the performance of their obligations under this Agreement if
such performance is prevented by Force Majeure and the nonperforming party
promptly provides notice of the prevention to the other party. Such excuse
shall be continued so long as the condition constituting Force Majeure
continues and the nonperforming party takes reasonable efforts to remove the
condition.
For purposes of this Agreement, Force Majeure shall include, but not
limited to, conditions beyond the control of the parties, including without
limitation, an act of God, voluntary or involuntary compliance with any
regulation, law or order of any government, war, civil commotion, epidemic,
failure or default of public utilities or common carriers, destruction of
production facilities or materials by fire, earthquake, storm or like
catastrophe.
SECTION 15.3. AMENDMENT. This Agreement may not be amended,
supplemented, or otherwise modified except by an instrument in writing signed
by both parties.
SECTION 15.4. NOTICES. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes if mailed by first class certified or
registered mail, postage prepaid. Unless otherwise specified in writing, the
mailing addresses of the parties shall be as described below.
For Scriptgen: Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Karen A. Hamlin
<PAGE>
27
For Lilly: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Attention: General Counsel
SECTION 15.5. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Indiana, excluding any
choice of law rules which may direct the application of the law of any other
jurisdiction. Questions effecting the construction and effect of any Project
IP-Rights shall be determined by the laws of the country in which the Project
IP-Rights have been applied for and granted.
SECTION 15.6. ASSIGNMENT. Neither party may assign its rights and
obligations under this Agreement without the prior written consent of the
other, except a party may make such an assignment without the other party's
consent in connection with any merger, reorganization or sale of all or
substantially all of its assets to which this Agreement relates. This
Agreement shall be binding upon and shall inure to the benefit of the
successors and permitted assigns of the parties.
SECTION 15.7. CONSENTS NOT UNREASONABLY WITHHELD. Whenever provision is
made in this Agreement for either party to secure the consent or approval of
the other, that consent or approval shall not unreasonably be withheld, and
whenever in this Agreement provisions are made for one party to object to or
disapprove a matter, such objection or disapproval shall not unreasonably be
exercised.
SECTION 15.8. NO STRICT CONSTRUCTION. This Agreement has been prepared
jointly and shall not be strictly construed against either party.
SECTION 15.9. HEADINGS. The captions or headings of the Sections or
other subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.
SECTION 15.10. SEVERANCE OF CLAUSES/INSOLVENCY. Each party agrees that,
should any provision of this Agreement be determined by a court of competent
jurisdiction to violate or contravene any applicable law or policy, such
provision will be severed or modified by the court to the extent necessary to
comply with the applicable law or policy, and such modified provision and the
remainder of the provisions hereof will continue in full force and effect. In
addition the parties hereto intend that the Agreement shall not be deemed an
executory contract under the Bankruptcy/Insolvency laws of the United States.
<PAGE>
28
SECTION 15.11. NO WAIVER. The waiver of a breach hereunder may be
effected only by a writing signed by the waiving party and shall not
constitute a waiver of any other breach.
SECTION 15.12. ENTIRE AGREEMENT. The Agreement institutes the entire
agreement of the parties relating to the subject matter, and may not be
amended, modified or canceled except by written instrument executed by both
Scriptgen and Lilly.
SECTION 15.13. COUNTERPARTS. This Agreement has been executed in two
(2) counterparts, all of which shall constitute an original, but which
together shall constitute are and the same instrument.
IN WITNESS WHEREOF, the parties by their respective authorized
officers, have executed this Agreement.
SCRIPTGEN ELI LILLY AND COMPANY
PHARMACEUTICALS, INC
By: /s/ Karen L. Hamlin By: /s/ August M. Watanabe
------------------------- -------------------------
Karen L. Hamlin August M. Watanabe
Title: Senior Director of Operations Title: Executive Vice President
Date: May 8, 1997 Date: May 7, 1997
<PAGE>
Exhibit A
ATLAS Set Up and Screening Plan: Two Eli Lilly Bacterial Targets
[***]
<PAGE>
Exhibit B
[TEXT OF UNITED STATES PATENT NUMBER 5,585,277]
[***]
<PAGE>
Exhibit C
Exhibit C: Staff involved in ATLAS application to Eli Lilly targets.
[***]: Overall supervision and project contact:
ALAN CORIN, PH.D., SENIOR RESEARCH FELLOW: Biophysical chemist with sixteen
years of industrial and academic postdoctoral experience.
JULIE BRYAN, ASSOCIATE SCIENTIST II: Biochemist with four years experience in
ATLAS technology implementation.
IAN GLOMSKI: ASSISTANT SCIENTIST: Biochemist with two years ATLAS experience.
JILL HEIL, ASSISTANT SCIENTIST: One year experience in ATLAS assay
establishment and high throughput screening.
<PAGE>
Exhibit 10.14
COMPOUND TESTING AND DEVELOPMENT AGREEMENT
between
SCRIPTGEN PHARMACEUTICALS, INC.
and
MONSANTO COMPANY
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE
DENOTED BY [***]. THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
COMPOUND TESTING AND DEVELOPMENT AGREEMENT
This Agreement, dated as of November 17, 1997, is between Scriptgen
Pharmaceuticals, Inc. ("Scriptgen"), a Delaware corporation, and Monsanto
Company ("Monsanto"), a Delaware corporation.
RECITALS
[***]
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, the parties hereby agree as follows:
1. Definitions.
"Additional Equipment" shall mean a certain amount of scientific
equipment required to complete the work contemplated under this Agreement as set
forth in Section 3.3.
"Advanced Field Trials" shall mean advanced testing trials conducted
by or for Monsanto in a manner representative of actual agricultural or
industrial practices including (i) determining the performance or safety of a
Development Compound or (ii) greenhouse, growth chamber or laboratory testing
using a radio-labeled analog of an active compound and associated testing,
advanced toxicity, environmental fate, and toxicity on non-target species
including mammals and/or assembling field information necessary to obtain an
EUP.
<PAGE>
"Agreement" shall mean this Compound Testing and Development
Agreement.
[***]
"Compound" shall mean any chemical molecule that is provided by
Monsanto to Scriptgen in the [***] for screening and development as described
below.
"Confidential Information" shall have the meaning set forth in
Section 8.1.
"Derivative Compound" shall mean a chemical compound structurally
derived in one or more steps from a Compound or another Derivative Compound by a
process of modification (either through manipulation of a compound or synthesis
from structural information provided hereunder) or partial substitution of at
least one component wherein at least one structural feature is retained at each
process step. The number of intermediate steps or compounds is not relevant to
the classification of a compound as a Derivative Compound. A compound need not
have structural similarity to another Compound or Derivative Compound in order
to be classified as a Derivative Compound.
"Development Compound" shall mean any Compound or Derivative
Compound which exhibits [***] in the Monsanto Field or Scriptgen Field and with
respect to which the Research Committee has elected to conduct Preliminary Field
Trials, with respect to Monsanto, or phase I clinical trials with respect to
Scriptgen.
"Development Homolog" shall mean any Derivative Compound that
exhibits substantial homology with a Development Compound, as determined by the
Research Committee.
"Disclosing Party" shall mean that Party disclosing Confidential
Information to the other Party under Section 8.
"Effective Date" shall mean the date of execution of this Agreement
by the Parties hereto, at which time this Agreement shall become effective.
"EPA" shall mean the Environmental Protection Agency (or its foreign
equivalent responsible for approval of commercial use of Development Compounds).
"EUP or Experimental Use Permit" shall mean a permit for field
application issued by the EPA prior to label approval or the foreign equivalent
thereof.
2
<PAGE>
"Monsanto Field" shall mean all uses or applications of a
Development Compound not included within the Scriptgen Field.
"Monsanto Patent Rights" shall mean all [***] thereof owned by
Monsanto pursuant to Section 5.1 and [***]
[***]
"Open Pool" shall have the meaning assigned in Section 3.5.
"Party" means Scriptgen or Monsanto or their respective Primary
Affiliates.
"Parties" means Scriptgen and Monsanto and their respective Primary
Affiliates.
"Preliminary Field Trials" shall mean, with respect to any
Development Compound, preliminary testing first conducted by or for Monsanto to
determine efficacy conducted under anticipated use conditions, generally in an
external environment. Preliminary Field Trials does not include primary testing,
which includes greenhouse, growth chamber or
3
<PAGE>
laboratory testing including associated testing for environmental fate,
toxicity, and toxicity on non-target species including mammals.
"Primary Affiliate" shall mean, with respect to Monsanto or
Scriptgen, as the case may be, any corporation 50% or more of whose outstanding
equity securities entitled to vote in the election of Directors is owned
directly or indirectly by Monsanto or Scriptgen, as the case may be, and any
entity which is not a corporation 50% or more of whose net assets or profits is
owned directly or indirectly by Monsanto or Scriptgen, as the case may be.
"Product Team" shall mean a group of Monsanto employees formed to
facilitate product development analysis following successful completion of
Advanced Field Trials.
"Receiving Party" shall mean that Party receiving Confidential
Information under Section 8.1.
"Research Committee" shall have the meaning set forth in Section
2.1.
"Research Period" shall mean the period during the term of this
Agreement.
"Restricted Pool" shall have the meaning assigned in Section 3.5.
[***]
"Scriptgen Patent Rights" shall mean all [***] thereof owned by
Scriptgen pursuant to Section 5.1 and [***]
"Secondary Affiliate" shall mean, with respect to Monsanto or
Scriptgen, as the case may be, any corporation 20% or more of whose outstanding
equity securities entitled to vote in the election of Directors is owned
directly or indirectly by Monsanto or Scriptgen, as the case
4
<PAGE>
may be, and any entity which is not a corporation 20% or more of whose net
assets or profits is owned directly or indirectly by Monsanto or Scriptgen, as
the case may be.
[***]
"Sublicensee" shall mean any third party (not including a Secondary
Affiliate) licensed by a Party to make, use (except where the implied right to
use accompanies the sale to the third party of any Royalty-Bearing Product by a
Party or its Secondary Affiliates or Sublicensees), sell, import, export,
advertise, promote and otherwise commercialize any Royalty-Bearing Product.
"Target" shall mean any biological system or biologically derived or
relevant system within the Assays as well as biological targets used for
purposes of toxicity testing, relevant to the respective field of each Party.
"Valid Claim" shall mean a claim of [***] or other tribunal of
competent jurisdiction in any unappealable or unappealed decision the time for
appeal of which has expired.
The above definitions are intended to encompass the defined terms in
both the singular and plural tenses.
2. Management of Research Program.
2.1. Composition of Research Committee. The Parties hereby establish a
Research Committee comprised of [***] members, with [***] representatives
appointed by each Party. The initial members of the Research Committee shall be
as follows:
Scriptgen Representatives Monsanto Representatives
------------------------- ------------------------
[***] [***]
A Party may change one or more of its representatives to the Research Committee
at any time upon notice to the other Party. Each Party will designate one of its
representatives as its team leader.
5
<PAGE>
2.2. Duties of the Research Committee. The Research Committee shall direct
and administer the screening undertaken pursuant to this Agreement. The Research
Committee shall review test reports provided by Scriptgen [***]
2.3. Meetings of the Research Committee. The Research Committee shall
[***], or at such other times and locations as the Research Committee
determines. If a designated representative of a Party cannot attend any
meeting of the Research Committee, such Party may designate a different
representative for that meeting without notice to the other Party, and the
substitute member will have full power to vote on behalf of the permanent
member. All actions and decisions of the Research Committee will require the
unanimous consent of all of its members. If the Research Committee fails to
reach agreement upon any matter, the dispute will be resolved in accordance
with the procedures set forth in Section 12.5 below. [***] following each
quarterly meeting of the Research Committee, the Research Committee shall
prepare and delivers to both Parties, a written report describing the
decisions made, conclusions and actions agreed upon.
2.4. Visits to Facilities. Members of the Research Committee shall have
reasonable access to the facilities of each Party where activities under this
Agreement are in progress, but only during normal business hours and with
reasonable prior notice. Each Party shall bear its own expenses in connection
with such site visits.
2.5 Reports to Research Committee. Scriptgen shall deliver to the Research
Committee quarterly reports disclosing the Targets screened for the previous
quarter and planned for [***] in the Scriptgen Field and Monsanto Field in the
following quarter.
3. Fees and Delivery of Compounds
[***]
3.3 Capital Costs. In recognition of the additional scientific equipment
required by Scriptgen to perform its obligations hereunder (as set forth on
Exhibit A, "Additional Equipment"), subject to the terms and conditions herein
Monsanto shall reimburse Scriptgen for the price paid by Scriptgen for such
equipment (net of any discounts or allowances), not to
6
<PAGE>
exceed [***] Prior to acquiring or making a commitment to acquire any Additional
Equipment, Scriptgen shall present to Monsanto a notice containing a detailed
list of such items proposed for acquisition, the vendor from whom Scriptgen
proposes to acquire the Additional Equipment, and the price at which Scriptgen
proposes to acquire the Additional Equipment. Monsanto shall have ten (10) days
from the date of receipt of such notice to present to Scriptgen alternative
vendors and lower prices for the acquisition of such Additional Equipment. If
alternative vendors and lower prices are identified by Monsanto, and all other
material terms of the equipment and the purchase are equal to those originally
proposed by Scriptgen, then Scriptgen shall acquire such Additional Equipment
from the alternative vendors. All Additional Equipment shall be the sole
property of Scriptgen.
[***]
7
<PAGE>
[***]
8
<PAGE>
4. License Grants; Diligence.
4.1. Evaluation Licenses.
[***]
4.2. Commercialization Licenses.
[***]
9
<PAGE>
[***]
(b) Limitation of Licenses. No provision of this Agreement shall be deemed
to grant any license to a Compound or Derivative Compound to Scriptgen outside
of the Scriptgen Field.
4.3. Termination of Licenses. The licenses granted by Scriptgen to
Monsanto pursuant to Sections 4.1 and 4.2 shall continue in perpetuity unless
this Agreement is terminated by Scriptgen pursuant to Sections 11.4 or 11.5. The
licenses granted by Monsanto to Scriptgen pursuant to Sections 4.1 and 4.2 shall
continue in perpetuity unless this Agreement is terminated by Monsanto pursuant
to Sections 11.4 or 11.5.
4.4. Commercialization of Development Compounds. Monsanto shall have the
sole and absolute discretion to make all decisions relating to the research,
development, marketing and other commercialization activities with respect to
any Development Compound or any Royalty-Bearing Product derived therefrom in the
Monsanto Field. Scriptgen shall have the sole and absolute discretion to make
all decisions relating to the research, development, marketing and other
commercialization activities with respect to any Development Compound or any
Royalty-Bearing Product derived therefrom in the Scriptgen Field.
5. Intellectual Property Rights.
5.1 Intellectual Property Ownership. Regardless of whether such patents,
inventions and/or discoveries are made by Monsanto or Scriptgen: (a) all
compound patents and composition of matter patents and all know-how and
intellectual property rights relating to the Compounds or Derivative Compounds
outside of the Scriptgen Field shall belong to Monsanto; (b) all compound
patents and composition of matter patents and all know-how and intellectual
property rights relating to the Compounds or Derivative Compounds inside the
Scriptgen Field shall belong to Scriptgen; (c) all method of making patents and
use patents and associated other intellectual property rights relating to the
Compounds or Derivative Compounds inside of the Scriptgen Field shall belong to
Scriptgen; (d) all method of making patents and use patents and associated other
intellectual property rights relating to the Compounds or Derivative Compounds
outside of the Scriptgen Field shall belong to Monsanto; and (e) know-how not
covered by (a), (b), (c) or (d) above will be owned by the party which develops
the know-how, and know-how jointly developed will be jointly owned.
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5.2 Filing Patents.
(a) Monsanto shall have the sole and exclusive right to file
and maintain all compound patents, composition of matter patents, method
of making patents and method of use patents relating to the Compounds or
Derivative Compounds outside of the Scriptgen Field. Scriptgen shall have
the sole and exclusive right to file and maintain all compound patents,
composition of matter patents, method of making patents and method of use
parents relating to the Compounds or Derivative Compounds in the Scriptgen
Field.
(b) Patent application drafting, filing and prosecution for
jointly owned inventions will be carried out by Monsanto; provided that if
Monsanto is not interested in filing or prosecuting any patent application
or maintaining a patent for a joint invention arising from the activities
undertaken pursuant to this Agreement, Monsanto shall notify Scriptgen in
a written form. Scriptgen shall then be entitled to file or prosecute the
patent application or maintain the patent, as the case may be, at its own
responsibility and own expense. The party filing the patent shall bear all
costs of filing, prosecution and maintenance of such patent applications
and resulting patents. The non-filing party shall be kept informed of all
substantive matters relating to the preparation and prosecution of patent
applications related to any and all joint inventions. The filing party
will promptly provide the other party with copies of all material
prosecution and maintenance documentation and correspondence so that the
non-filing party will be currently and promptly informed of the continuing
prosecution and maintenance of material patent applications relating to
joint inventions.
5.3. Cooperation of the Parties. Each Party agrees to cooperate fully in
the preparation, filing, and prosecution of any patent rights under this
Agreement. Such cooperation includes, but is not limited to:
(a) executing all papers and instruments, or using reasonable
efforts to cause its employees or agents, to execute such papers and
instruments, so as to effectuate the ownership of intellectual property
rights set forth in Section 5.1 above and to enable the other Party to
apply for and to prosecute patent applications in any country;
(b) promptly informing the other Party of any matters coming
to such Party's attention that may affect the preparation, filing, or
prosecution of any such patent applications; and
(c) undertaking no actions that are potentially deleterious to
the preparation, filing, or prosecution of such patent applications.
5.4. Infringement by Third Parties. Scriptgen and Monsanto shall each
promptly notify the other in writing of any alleged or threatened infringement
by a third party of any Monsanto Patent Rights or Scriptgen Patent Rights of
which they become aware.
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(a) Each Party shall promptly report in writing to the other
Party during the term of this Agreement any known infringement or
suspected infringement of any Monsanto Patent Rights or Scriptgen Patent
Rights in the Monsanto Field or the Scriptgen Field, respectively,
covering a Development Compound or a Royalty Bearing Product by a third
party of which it becomes aware, and shall provide the other Party with
all available evidence supporting said infringement or suspected
infringement.
(b) Except as provided in paragraph (d) below, Monsanto shall
have the right to initiate an infringement or other appropriate suit
against any third party who at any time has infringed, or is suspected of
infringing, any Monsanto Patent Rights or Scriptgen Patent Rights covering
a Development Compound or a Royalty Bearing Product. Monsanto shall give
Scriptgen sufficient advance notice of its intent to file said suit and
the reasons therefor, and shall provide Scriptgen with an opportunity to
make suggestions and comments regarding such suit. Monsanto shall keep
Scriptgen properly informed, and shall from time to time consult with
Scriptgen regarding the status of any such suit and shall provide
Scriptgen with copies of all documents filed in such suit.
(c) Monsanto shall have the sole and exclusive right to select
counsel for any suit referred to in paragraph (b) above and shall pay all
expenses of the suit, including without limitation attorneys' fees and
court costs. Any damages, royalties, settlement fees or other
consideration received by Monsanto shall be divided between Monsanto and
Scriptgen based on the relative value that the intellectual property
rights of a Party which are the subject of the suit have to the value of
the intellectual property rights of the other Party which are also the
subject of the suit, if any, with respect to the infringing product sold,
after all expenses of the litigation are deducted. If necessary, Scriptgen
shall join as a party to the suit but shall be under no obligation to
participate except to the extent that such participation is required as
the result of being a named party to the suit. Scriptgen shall offer
reasonable assistance to Monsanto in connection therewith at no charge to
Monsanto. Scriptgen shall have the right to participate and be represented
in any such suit by its own counsel at its own expense. Monsanto shall not
settle any such suit involving rights of Scriptgen without obtaining the
prior written consent of Scriptgen, provided that Scriptgen shall not
withhold its consent to any settlement which will provide an unconditional
release of Scriptgen and its Secondary Affiliates and which does not have
a material adverse effect on Scriptgen or Scriptgen's business.
(d) In the event that Monsanto elects not to initiate an
infringement or other appropriate suit pursuant to paragraph (b) above,
Monsanto shall promptly advise Scriptgen of its intent not to initiate
such suit, and Scriptgen shall have the right, at the expense of
Scriptgen, of initiating an infringement or other appropriate suit against
any third party who at any time has infringed, or is suspected of
infringing, any Monsanto Patent Rights or Scriptgen Patent Rights covering
a Development Compound or a Royalty Bearing Product. In exercising its
rights pursuant to this paragraph (d), Scriptgen shall have the sole and
exclusive right to select counsel for any suit referred to in paragraph
(b) above and shall pay all expenses of the suit, including without
limitation attorneys' fees and court costs. Any damages, royalties,
settlement fees or other consideration received
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by Scriptgen shall be [***] if any, with respect to the infringing product
sold, after all expenses of the litigation are deducted. If necessary,
Monsanto shall join as a party to the suit but shall be under no
obligation to participate except to the extent that such participation is
required as the result of being a named party to the suit. At Scriptgen's
request, Monsanto shall offer reasonable assistance to Scriptgen in
connection therewith at no charge to Scriptgen. Monsanto shall have the
right to participate and be represented in any such suit by its own
counsel at its own expense. Scriptgen shall not settle any such suit
involving rights of Monsanto without obtaining the prior written consent
of Monsanto, provided that Monsanto shall not withhold its consent to any
settlement which will provide an unconditional release of Monsanto and its
Secondary Affiliates and which does not have a material adverse effect on
Monsanto or Monsanto's business.
5.5 Claimed Infringement. In the event that any action, suit or proceeding
is brought against Scriptgen, Monsanto or any Secondary Affiliate, licensee or
Sublicensee of Scriptgen or Monsanto, alleging the infringement of the
intellectual property rights of a third party by reason of the discovery,
development, manufacture, use, sale, importation or offer for sale of a
Development Compound or a Royalty Bearing Product by Monsanto or its Secondary
Affiliates or its or their licensees or Sublicensees, Monsanto will have the
obligation to defend itself and its Secondary Affiliates and Scriptgen and its
Secondary Affiliates and the licensees and Sublicensees of Scriptgen and
Monsanto, in such action, suit or proceeding at Monsanto's expense. Scriptgen
shall have the right to separate counsel at its own expense in any such action
or proceeding and Monsanto will reimburse Scriptgen for all reasonable
expenditures incurred in connection therewith.
In the event that any action, suit or proceeding is brought against
Scriptgen, Monsanto or any Secondary Affiliate, licensee or Sublicensee of
Scriptgen or Monsanto, alleging the infringement of the intellectual property
rights of a third party by reason of the discovery, development, manufacture,
use, sale, importation or offer for sale of a Development Compound or a Royalty
Bearing Product by Scriptgen or its Secondary Affiliates or its or their
licensees or Sublicensees, Scriptgen will have the obligation to defend itself
and its Secondary Affiliates and Monsanto and its Secondary Affiliates and the
licensees and Sublicensees of Scriptgen and Monsanto, in such action, suit or
proceeding at Scriptgen's expense. Monsanto shall have the right to separate
counsel at its own expense in any such action or proceeding and Scriptgen will
reimburse Monsanto for all reasonable expenditures incurred in connection
therewith.
Notwithstanding any other provision of this Agreement, in the event that a
third party shall bring (i) any action, suit or proceeding against Monsanto or
any Secondary Affiliate, licensee or Sublicensee of Monsanto and (ii) any
action, suit or proceeding against Scriptgen or any Secondary Affiliate,
licensee or Sublicensee of Scriptgen, both of which actions, suits or
proceedings arise from or relate to the same facts or circumstances, Monsanto
and Scriptgen shall each have the sole and exclusive right, at their own
expense, to select counsel to represent it or its
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Secondary Affiliate, licensee or Sublicensee with respect to any such action,
suit or proceeding. Expenses, costs and damages imposed on Monsanto or Scriptgen
in such action, suit or proceeding shall be shared by Monsanto and Scriptgen
based on the relative fault of each party as determined at the final outcome of
such suit, action or proceeding.
The Parties will cooperate with each other in the defense of any such
suit, action or proceeding. The Parties will give each other prompt written
notice of the commencement of any such suit, action or proceeding or claim or
infringement and will furnish each other a copy of each communication relating
to the alleged infringement, but the failure to do so shall not affect the
Parties obligations under this Section and under Section 9 except to the extent
a Party is actually damaged thereby. Neither shall not compromise, litigate,
settle or otherwise dispose of any such suit, action or proceeding which
involves the use of patent rights of the other Party without that Other Party's
advice and prior written consent, provided that such other Party shall not
unreasonably withhold its consent to any settlement which will provide an
unconditional release of that other Party and which does not have a material
adverse effect on that other Party's business.
6. Ownership of Compounds.
Monsanto shall have all ownership rights to Compounds and Derivative
Compounds, to the extent not licensed to Monsanto by a third party.
7. Payments, Reports, and Records.
[***]
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8. Confidential Information.
8.1. Definition of Confidential Information. Confidential Information
shall mean any technical or business information, whether orally or in writing,
furnished by the Disclosing Party to the Receiving Party in connection with this
Agreement. Such Confidential Information may include, without limitation, the
existence and terms of this Agreement, the identity of a compound, the use of a
compound, trade secrets, know-how, inventions, technical data or specifications,
testing methods, business or financial information, research and development
activities, product and marketing plans, and customer and supplier information,
including, but not limited to, such items that become known to a Party during
visits to the facilities of the other Party.
8.2. Obligations. The Receiving Party agrees that it shall:
(a) maintain all Confidential Information in strict
confidence, except that the Receiving Party may disclose or permit the
disclosure of any Confidential Information to its, and its Primary
Affiliates, directors, officers, employees, consultants, and advisors who
are obligated to maintain the confidential nature of such Confidential
Information and who need to know such Confidential Information for the
purposes set forth in this Agreement;
(b) use all Confidential Information solely for the purposes
set forth in, or as permitted by, this Agreement; and
(c) allow its Primary Affiliates, directors, officers,
employees, consultants, and advisors to reproduce the Confidential
Information only to the extent necessary to effect the purposes set forth
in this Agreement, with all such reproductions being considered
Confidential Information.
Each Party shall be responsible for any breaches of this Section 8.2 by any of
its directors, officers, employees, consultants, and advisors.
8.3. Exceptions. The obligations of the Receiving Party under Section 8.2
above shall not apply to any specific Confidential Information to the extent
that the Receiving Party can demonstrate that such Confidential Information:
(a) was in the public domain prior to the time of its
disclosure under this Agreement;
(b) entered the public domain after the time of its disclosure
under this Agreement through means other than an unauthorized disclosure
resulting from an act or omission by the Receiving Party or its Primary
Affiliates, directors, officers, employees, consultants, advisors or
agents;
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(c) was independently developed or discovered by the Receiving
Party without use of the Confidential Information, and which can be
demonstrated by written record;
(d) is or was disclosed to the Receiving Party at any time,
whether prior to or after the time of its disclosure under this Agreement,
by a third party having no fiduciary relationship with the Disclosing
Party and having no obligation of confidentiality to the Disclosing Party
with respect to such Confidential Information; or
(e) is required to be disclosed to comply with applicable laws
or regulations (such as disclosure to the SEC, the EPA, the FDA, or the
United States Patent and Trademark Office or to their foreign
equivalents), or to comply with a court or administrative order, provided
that the Disclosing Party receives prior written notice of such disclosure
and that the Receiving Party takes all reasonable and lawful actions to
obtain confidential treatment for such disclosure and, if possible, to
minimize the extent of such disclosure.
8.4. Survival of Obligations. The obligations set forth in this Article
shall remain in effect after termination or expiration of this Agreement for a
period of [***]
9. Representations and Warranties.
9.1. Authorization. Each Party represents and warrants to the other that
it has the legal right and power to enter into this Agreement, to extend the
rights and licenses granted to the other in this Agreement, and to fully perform
its obligations hereunder, and that the performance of such obligations will not
conflict with its charter documents or any agreements, contracts, or other
arrangements to which it is a party.
9.2. Non-Infringement. Each Party represents that to its knowledge the
conduct of its business as it is currently being conducted or as it is proposed
to be conducted pursuant to this Agreement does not conflict with or infringe on
the intellectual property of any other person, and each Party has not received
any claim or notice from any person to such effect which is still pending. Each
Party has no knowledge of any claim or fact that would give rise to a claim that
any of their respective Patents is invalid or unenforceable. To their knowledge,
each Party's Patents are not infringed by any third party.
10. Indemnification.
10.1. Indemnification. Each Party (the "Indemnitor") shall indemnify,
defend, and hold harmless the other Party and its Primary Affiliates and their
directors, officers, employees, and agents and their respective successors,
heirs and assigns (the "Indemnitees"), against any liability, damage, loss, or
expense (except to the extent otherwise provided in Section 5.5) incurred by or
imposed upon the Indemnitees or any one of them in connection with any claims,
settlements, suits, actions, demands, or judgments arising out of (i) any theory
of product liability (including, but not limited to, actions in the form of
tort, warranty, or strict liability) concerning any product
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(or any process or service) that is made, used, or sold by the Indemnitor
pursuant to any right or license granted under this Agreement and (ii)
infringement of third party rights, including claims relating to compounds
produced by a party pursuant to methods of making disclosed to that party by the
other party; provided, however, that such indemnification right shall not apply
to any liability, damage, loss, or expense to the extent directly attributable
to the negligent activities, reckless misconduct, or intentional misconduct of
the Indemnitees. An indemnified party shall not be entitled to indemnification
for the settlement of any claim pursuant to this Agreement unless it obtains the
prior written consent of the indemnifying party to such settlement.
10.2. Procedures. Any Indemnitee that intends to claim indemnification
under Section 10.1 shall promptly notify the appropriate Indemnitor of any claim
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel mutually
satisfactory to the Parties; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses of no more than
law firm representing all Indemnitees in the proceeding or related proceeding,
to be paid by the Indemnitor, if representation of such Indemnitee by the
counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
represented by such counsel in such proceedings. The indemnity agreement in
Section 10.1. shall not apply to amounts paid in settlement of any loss, claim,
liability or action if such settlement is effected without the consent of the
Indemnitor. The failure to deliver notice to the Indemnitor within a reasonable
time after the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve the Indemnitor of any liability to the
Indemnitee under Section 10.1. Each party and its Primary Affiliates and their
employees and agents shall cooperate fully with the other party and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.
11. Term and Termination.
11.2. Termination by the Parties Upon Completion of Screening. Upon
completion of [***]
11.3. Termination by the Parties Upon Mutual Consent. This Agreement may
be terminated [***] by mutual written agreement of the Parties.
11.4. Breach of Payment Obligations. In the event that a Party fails to
make timely payment of any amounts due under this Agreement within [***]
business days after demand therefor, the other Party may [***] given following
the time interest begins to accrue pursuant to Section 7.5, unless the
non-paying Party cures such breach by paying all past-due amounts within such
thirty-day notice period,
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provided that a Party shall be entitled to use such cure provision no more than
once in any 12 month period.
11.5. Material Breach. In the event that either Party commits a material
breach of any of its obligations under this Agreement (other than as provided in
Section 11.3) and such Party fails (i) to remedy that breach within ninety (90)
days after receiving written notice thereof from the other Party or (ii) to
commence dispute resolution pursuant to Section 12.5, within ninety (90) days
after receiving written notice of that breach from the other Party, the other
Party may immediately terminate this Agreement upon written notice to the
breaching Party.
11.6. Disposition of Confidential Information. In the event of termination
or expiration of this Agreement, the Parties shall return or destroy all forms
of Confidential Information provided to them under this Agreement, within thirty
(30) days after such termination or expiration, provided that each party may
retain one copy of such Confidential Information for the sole purpose of use in
any litigation resulting from this Agreement or the activities undertaken
pursuant to this Agreement.
11.7. Effect of Termination. Termination of this Agreement shall not
relieve the parties of any obligation accruing prior to such termination. The
provisions of Article 4, Article 5, Article 6 and Article 7 (with respect only
to milestone payments and royalties accrued at the time of termination but not
yet paid), Article 8, Article 9, Article 10 and Article 12 shall survive the
expiration or termination of this Agreement. Termination of this Agreement
pursuant to Sections 11.2, 11.3, or 11.4 shall not limit any other rights and
remedies of the terminating party.
12. Miscellaneous.
12.1. Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the parties. No party shall incur any debts or make
any commitments for the other, except to the extent, if at all, specifically
provided herein.
12.2. Publicity. Neither party shall use the name of the other party or
reveal the existence of or terms of this Agreement in any publicity or
advertising without the prior written approval of the other party, except that
(i) either party may use the text of a written statement approved in advance by
both parties without further approval, and (ii) either party shall have the
right to identify the other party and to disclose the terms of this Agreement as
required by applicable securities laws or other applicable law or regulation,
provided that the receiving party takes reasonable and lawful actions to
avoid/minimize the degree of such disclosure.
12.3. Non-Solicitation. During the term of this Agreement and thereafter
for a period of two (2) years, each Party agrees not to seek to persuade or
induce any employee of the other Party to discontinue his or her employment with
that Party, or to hire any such employee.
12.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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12.5 Dispute Resolution Procedures.
(a) The parties hereby agree that they will attempt in good
faith to resolve any controversy, claim or dispute ("Dispute") arising out
of or relating to this Agreement promptly by negotiations. Any such
Dispute which is not settled by the parties within [***] days after notice
of such Dispute is given by one party to the other in writing shall be
referred to the President of Scriptgen and the Vice President, Discovery
of Monsanto who are authorized to settle such Disputes on behalf of their
respective companies ("Senior Executives"). The Senior Executives will
meet for negotiations within [***] days of the end of the [***]
negotiation period referred to above, at a time and place mutually
acceptable to both Senior Executives. If the Dispute has not been resolved
within [***] days after the end of the [***] negotiation period referred
to above (which period may be extended by mutual agreement), unless
otherwise specifically provided for herein, any Dispute will be settled
first by non-binding mediation and thereafter by arbitration as described
in subsections (b) and (c) below.
(b) Any Dispute which is not resolved by the parties within
the time period described in subsection (a) shall be submitted to an
alternative dispute resolution process ("ADR"). Within [***] after the
expiration of the [***] period set forth in subsection (a), each party
shall select for itself a representative with the authority to bind such
party and shall notify the other party in writing of the name and title of
such representative. Within [***] days after the date of delivery of such
notice, the representatives shall schedule a date for engaging in
non-binding ADR with a neutral mediator or dispute resolution firm
mutually acceptable to both representatives. Any such mediation shall be
held in Boston, Massachusetts if brought by Monsanto and St. Louis,
Missouri if brought by Scriptgen. Thereafter, the representatives of the
parties shall engage in good faith in an ADR process under the auspices of
such individual or firm. If the representatives of the parties have not
been able to resolve the Dispute within [***] days after the conclusion of
the ADR process, or if the representatives of the parties fail to schedule
a date for engaging in non-binding ADR within the [***] day period set
forth above, the Dispute shall be settled by binding arbitration as set
forth in subsection (c) below. If the representatives of the parties
resolve the dispute within the [***] day period set forth above, then such
resolution shall be binding upon the parties. If either party fails to
abide by such resolution, the other party can immediately refer the matter
to arbitration under Section 13.5(c).
(c) If the parties have not been able to resolve the Dispute
as provided in subsections (a) and (b) above, the Dispute shall be finally
settled by binding arbitration. Any arbitration hereunder shall be
conducted under rules of the American Arbitration Association. The
arbitration shall be conducted before three arbitrators chosen according
to the following procedure: each of the parties shall appoint one
arbitrator and the two so nominated shall choose the third, provided that
in the case of a dispute as to decisions of the Research Committee each
party shall designate one (1) neutral having the following
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minimum scientific qualifications: a Ph.D. degree in chemistry or life
sciences and/or an M.D. degree plus at least ten (10) years of relevant
business or scientific research experience. These two(2) neutrals shall
select a third neutral having the same minimum scientific qualifications
within fourteen (14) days of the appointment of the first two (2)
neutrals. None of the neutrals shall be an employee, director or
shareholder of either Party or any of their subsidiaries, Secondary
Affiliates or otherwise have a materially conflicting interest in the
outcome of such proceeding. If the arbitrators chosen by the parties
cannot agree on the choice of the third arbitrator within a period of
thirty (30) days after their appointment, then the third arbitrator with
such requisite qualifications shall be appointed by the Court of
Arbitration of the American Arbitration Association. Any such arbitration
shall be held in Boston, Massachusetts if brought by Monsanto and St.
Louis, Missouri if brought by Scriptgen or such other location as the
arbitrators may agree. The arbitrators shall have the authority to grant
specific performance, and to allocate between the parties the costs of
arbitration in such equitable manner as they determine. The arbitral award
(i) shall be final and binding upon the parties; and (ii) may be entered
in any court of competent jurisdiction.
(d) Nothing contained in this Section or any other provisions
of this Agreement shall be construed to limit or preclude a party from
bringing any action in any court of competent jurisdiction for injunctive
or other provisional relief to compel the other party to comply with its
obligations hereunder before or during the pendency of mediation or
arbitration proceedings. The parties hereby irrevocably consent to submit
to the jurisdiction of the federal courts located within the Commonwealth
of Massachusetts and the state of Missouri and agree that venue is proper
in any such court and will not seek to alter or contest such venue.
12.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
12.7. Headings. All headings in this Agreement are for convenience only
and shall not affect the meaning of any provision hereof.
12.8. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Parties, their Primary Affiliates, and their respective lawful
successors and assigns.
12.9. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, except that either party
may assign this Agreement to a successor in connection with the merger,
consolidation, spin-off or sale of all or substantially all of its assets or
that portion of its business pertaining to the subject matter of this Agreement.
Monsanto has the right to extend its rights and benefits under this Agreement to
any Primary Affiliate.
12.10. Notices. All notices, requests, demands and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have
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been duly given upon the date of receipt if delivered by hand, recognized
international overnight courier, confirmed facsimile transmission, or registered
or certified mail, return receipt requested, postage prepaid to the following
addresses or facsimile numbers:
If to Monsanto: If to Scriptgen:
Monsanto Company Scriptgen, Inc.
700 Chesterfield Parkway North 200 Boston Avenue
St. Louis, Missouri 63198 Medford, MA 02155
Attention: [***] Attention: [***]
with a copy to: with a copy to:
[***]
Bryan Cave LLP Constantine Alexander
One Metropolitan Sq., Suite 3600 Nutter, McClennen & Fish, LLP
St. Louis, Missouri 63102 One International Place
[***] [***]
Either party may change its designated address and facsimile number by notice to
the other party in the manner provided in this Section.
12.11. Amendment and Waiver. This Agreement may be amended, supplemented,
or otherwise modified only by means of a written instrument signed by both
parties. Any waiver of any rights or failure to act in a specific instance shall
relate only to such instance and shall not be construed as an agreement to waive
any rights or fail to act in any other instance, whether or not similar.
12.12. Severability. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other provision hereof,
and the parties shall negotiate in good faith to modify the Agreement to
preserve (to the extent possible) their original intent.
12.13. Entire Agreement. This Agreement and the attached Exhibits A and B
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior agreements or understandings between the
parties relating to the subject matter hereof.
12.14. Force Majeure. Neither party shall be held liable or responsible to
the other party, nor be deemed to be in breach of this Agreement, for failure or
delay in fulfilling or performing any provisions of this Agreement when such
failure or delay is caused by or results from any cause whatsoever outside the
reasonable control of the party concerned including, but not limited to, fire,
explosion, breakdown of plant, strike, lock-out, labor disputes, casualty or
accident, lack
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or failure of transportation facilities, flood, lack or failure of sources of
supply or of labor, raw materials or energy, civil commotion, embargo, any law,
regulation, decision, demand or requirement of any national or local government
or authority. The party claiming relief shall, without delay, notify the other
party by registered airmail or by telefax of the interruption and cessation
thereof and shall use its best efforts to remedy the effects of such hindrance
with all reasonable dispatch. The onus of proving that any such Force Majeure
event exists shall rest upon the party so asserting. During the period that one
party is prevented from performing its obligations under this Agreement due to a
Force Majeure event, the other party may, in its sole discretion, suspend any
obligations that relate thereto. Upon cessation of such Force Majeure event the
parties hereto shall use their best efforts to make up for any suspended
obligations. If such Force Majeure event is anticipated to continue, or has
existed for nine (9) consecutive months or more, this Agreement may be forthwith
terminated by either party by registered airmail or by telefax. In case of such
termination the terminating party will not be required to pay to the other party
any indemnity whatsoever.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.
MONSANTO COMPANY SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/ By: /s/
-------------------------------- ----------------------------------
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EXHIBIT A
ADDITIONAL EQUIPMENT
[***]
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EXHIBIT B
FORM OF MATERIALS TRANSFER AGREEMENT
This Agreement, dated as of _______, __, _____, is between Scriptgen
Pharmaceuticals, Inc. ("Scriptgen"), a Delaware corporation, and Monsanto
Company ("Monsanto"), a Delaware corporation and ________________, a
___________________ ("Recipient").
WHEREAS, Monsanto and Scriptgen have entered into a Compound Testing And
Development Agreement pursuant to which Monsanto and Scriptgen have agreed to
provide the other with certain compounds for [***] on the terms and subject to
the conditions set forth in such agreement and to perform certain other compound
development activities; and
WHEREAS, pursuant to the Compound Testing And Development Agreement,
Scriptgen and Monsanto are permitted to deliver such compounds to third parties
such as Recipient, provided such parties execute and deliver this Agreement to
__________________.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and conditions contained herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. SUPPLY OF MATERIALS: Within ____ days after receiving an original of
this Agreement executed by all parties, [Monsanto/Scriptgen] will supply
Recipient with the compounds set forth on Exhibit 1 (the "Materials"). Upon
written request, [Monsanto/Scriptgen] may provide the Recipient with additional
quantities of such Materials or with additional compounds, which compounds shall
also be considered Materials for the purposes of this Agreement.
2. USE AND TRANSFER RESTRICTIONS: Recipient acknowledges and agrees that
the Materials may be proprietary to and owned by Monsanto and/or Scriptgen and
are or may be covered by claims of U.S. and international patents or patent
applications of Monsanto and/or Scriptgen Recipient agrees to use the Materials
solely to screen them for _______________________ use. Recipient agrees (i) not
to transfer such Materials to any third party without the prior written consent
of [Monsanto/Scriptgen], (ii) to permit access to the Materials only to its
employees and consultants requiring such access, (iii) to inform such employees
and consultants of the proprietary nature of the Materials, (iv) to take
reasonable precautions, at least as stringent as those observed by Recipient to
protect its own proprietary materials, to ensure that such employees and
consultants observe the obligations of Recipient pursuant to this Section and
(v) to execute and deliver any documents of assignment or conveyance that may be
necessary to effectuate the ownership rights of Monsanto and/or Scriptgen in the
Materials. Upon the expiration of this Agreement, Recipient shall, at the
instruction of the party providing the Materials, either destroy or return any
unused Materials.
3. COMPLIANCE WITH LAW: Recipient agrees to comply with all federal,
state, and
25
<PAGE>
local laws and regulations applicable to the use, testing, storage, disposal,
and transfer of the Materials. Recipient assumes sole responsibility for any
violation of such laws or regulations by Recipient or any of its affiliates or
sublicensees.
4. TERMINATION: This Agreement shall commence on the date last written
below and continue for a period of ____ months. Sections 3, 6 and 7 shall
survive termination of this Agreement.
5. NO WARRANTIES: Any Materials delivered pursuant to this Agreement are
understood to be experimental in nature and may have hazardous properties.
Recipient should assume that the Materials are dangerous and should use
appropriate precautions. NEITHER MONSANTO NOR SCRIPTGEN MAKES ANY
REPRESENTATIONS, OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE COMPOUNDS. THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE
USE OF THE MATERIALS WILL NOT INFRINGE ANY PATENT RIGHTS OF OTHERS.
6. ASSIGNMENT OF INVENTIONS: Recipient agrees promptly to disclose to
[Monsanto/Scriptgen] any and all ideas, concepts, discoveries, inventions,
developments, improvements, trade secrets, technical data, know-how or other
materials that are conceived, devised, invented, developed or reduced to
practice or tangible medium by Recipient, or any of its agents, employees or
contractors, or under its direction, during the term of this Agreement and which
arise out of its screening or evaluation of the Materials (hereinafter
"Inventions"). Recipient hereby assigns to [Monsanto/Scriptgen] all of its
right, title and interest in and to the Inventions and any and all related
patent rights, copyrights and applications and registrations therefor. During
and after the expiration of this Agreement, Recipient shall cooperate with
[Monsanto/Scriptgen], at [Monsanto/Scriptgen] expense, in obtaining proprietary
protection for the Inventions and shall execute all documents which
[Monsanto/Scriptgen] shall reasonably request in order to perfect
[Monsanto/Scriptgen] rights in the Inventions. To the extent the terms of this
Agreement conflict or are inconsistent with the terms of the Compound Testing
and Development Agreement, the Compound Testing and Development Agreement shall
control, provided that such outcome will not result in the breach of an
agreement with a third party holding a right to or interest in the Materials.
7. INDEMNIFICATION: Recipient assumes all liability for, and agrees to
indemnify, defend, and hold harmless Scriptgen and Monsanto and their respective
directors, officers, representatives, employees, and agents against, all losses,
expenses (including without limitation any legal fees and expenses), claims,
demands, damages, judgments, suits, or other actions arising from the use,
testing, storage, or disposal of the Materials by Recipient and its agents,
employees or contractors, or from any breach of its obligations under Section 2
of this Agreement.
8. MISCELLANEOUS: This Agreement shall not be assigned or otherwise
transferred by Recipient without the prior written consent of Scriptgen and
Monsanto. This Agreement shall be governed by the laws of the State of New York.
This Agreement constitutes the entire
26
<PAGE>
understanding of the parties and supersedes all prior agreements, written or
oral, with respect to the subject matter hereof.
ACCEPTED AND AGREED:
Scriptgen Pharmaceuticals, Inc.
/s/
-----------------------------------------
Date:
ACCEPTED AND AGREED:
-----------------------------------------
Name:
Title:
Date:
ACCEPTED AND AGREED:
Monsanto Company
/s/
-----------------------------------------
27
<PAGE>
Exhibit 10.15
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE
CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY [***]. THE
CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
ASSIGNMENT AGREEMENT
Effective March 15, 1994, Andrew Pakula, of Lexington,
Massachusetts, and James Bowie, of Culver City, California (the "Assignors"),
and ScripTech Pharmaceuticals, Inc., a Delaware corporation ("ScripTech"),
hereby act and agree as follows:
1. Definitions.
"Affiliate" means any individual, partnership, corporation or other
legal entity that directly, or indirectly through one of more intermediaries,
controls, is controlled by, or is under common control with, the party of which
it is stated to be an Affiliate.
"Control" means possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of another entity
or person, whether through the beneficial or record ownership of securities, by
contract or otherwise.
"First Commercial Sale" shall mean in each country, the first
manufacture, use or sale of any Screened Product by ScripTech, its Affiliates or
licensees, following approval of its marketing by the appropriate governmental
agency for the country in which the sale is to be made and when governmental
approval is not required, the first manufacture, use or sale in that country.
"Improvement" shall mean any invention which constitutes an
improvement of a Screening Procedure which is not Publicly Available.
"Know How" means all information, knowledge and data of the
Assignors which is necessary to practice any invention claimed by the Screening
Patent Rights or for the use of any Screening Procedure, including, but not
limited to, materials, formulations, processes, drawings, designs, test data and
results, concepts and ideas.
"Net Sales" means [***]
"Publicly Available" as to one or more Screening Procedures shall
mean that the Screening Procedure (i) has been disclosed fully and adequately
for practice thereof in a publicly
<PAGE>
available document or (ii) has been described to third parties fully and
adequately for practice thereof without being covered by an obligation of
confidentiality and, as a result of such disclosure, is in use by other(s) in
competition with ScripTech and/or its Affiliates and/or their licensees.
"Screened Product" means any product which was identified by the use
of a Screening Procedure or which is an analog or derivative of a product which
was identified by the use of a screening Procedure.
"Screening Patent Rights" means the patent applications set forth on
Exhibit A attached hereto, the inventions claimed thereby, any patents issuing
from any such patent applications, all applications for patents filed under the
laws of countries other than the United States and all patents issuing thereon
which applications and patents cover and/or claim any invention corresponding to
any invention claimed by any patent application set forth on Exhibit A attached
hereto, any continuations, continuations-in-part, divisions, reissues,
extensions and renewals of any of the foregoing, and any Improvements.
"Screening Procedure" means any screening procedure(s) described on
Exhibit B attached hereto.
"Valid Claim" shall mean a claim of an issued and unexpired patent
or a pending patent application owned by or licensed to ScripTech or any of its
Affiliates which has not been held permanently revoked, unenforceable or invalid
by a decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, or which has not
been admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.
2. Conveyance.
2.1 Assignors hereby sell, assign, convey and transfer to ScripTech,
and ScripTech hereby acquires from Assignors, all of Assignors' right, title and
interest in and to the Screening Patent Rights and Know How and the Screening
Procedure. In consideration therefor, ScripTech shall [***]
-2-
<PAGE>
2.2 Upon request, Assignors will sign all applications, assignments,
instruments and papers and perform all acts reasonably requested by ScripTech to
assign all the Screening Patent Rights, Know How and Screening Procedure fully
and completely to ScripTech and to enable ScripTech, its successors, assigns and
nominees, to secure and enjoy the full and exclusive benefits and advantages
thereof. In the event ScripTech is unable to secure, after reasonable efforts,
an Assignor's signature on any letters patent, copyrights or other analogous
protection relating to a Screening Patent Right, Know How or Screening Procedure
for any reason whatsoever, each Assignor hereby irrevocably designates and
appoints ScripTech and its duly authorized officers and agents as the Assignor's
agent and attorney-in-fact, to act for and in behalf and stead of the Assignor
to execute and file any such application or applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters
patent, copyright or other analogous protection thereon with the same legal
force and effect as if executed by the Assignor.
3. Representations and Warranties.
Assignors represent and warrant that they are the lawful owner
of all of the Screening Patent Rights, Know How and Screening Procedure; that
they have good and undivided title to the same and the absolute right to sell,
transfer and assign the same to ScripTech pursuant to this Agreement, free and
clear of all license, encumbrances, restrictions, rights, title or interest in
others, whether written or oral or express or implied and whether or not
relating in any way to credit or the borrowing of money (but subject to
applicable laws requiring the payment of fees in connection with the issuance or
maintenance of patents); that they are not a party to or bound by any agreement,
instrument, arrangement, contract, obligation, commitment or understanding of
any character, whether written or oral, express or implied, other than this
Agreement, relating to the Screening Patent Rights, Know How or Screening
Procedure; and that they do not have any knowledge of any material
misrepresentation in connection with the procurement of the Screening Patent
Rights.
4. Royalties.
4.1 ScripTech shall pay to Assignors a royalty of (a) [***] of
Net Sales of any Screened Product sold by ScripTech and its Affiliates (i)
the making, use or sale of which by an unlicensed third party would
constitute an infringement of a Valid Claim pertaining to the Screened
Product in the country where the Screened Product was made, used or sold and
(ii) which has been identified through a Screening Procedure (A) not Publicly
Available as of the date of the identification thereof or (B) covered by a
Valid Claim of an issued and unexpired patent or pending patent application
in the country of sale included in
-3-
<PAGE>
the Screening Patent Rights; (b) [***] of Net Sales of any Screened Product
sold by ScripTech and its Affiliates (i) the making, use or sale of which by
an unlicensed third party would not constitute an infringement of a Valid
Claim pertaining to the Screened Product in the country where the Screened
Product was made, used or sold and (ii) which has been identified through a
Screening Procedure (A) not Publicly Available as of the date of the
identification thereof or (B) covered by a Valid Claim of an issued and
unexpired patent or pending patent application in the country of sale
included in the Screening Patent Rights; and (c) [***] of Net Sales of any
Screened Product sold by ScripTech and its Affiliates (i) the making, use or
sale of which by an unlicensed third party would constitute an infringement
of a Valid Claim pertaining to the Screened Product in the country where the
Screened Product was made, used or sold and (ii) which has been identified
through a Screening Procedure (A) Publicly Available as of the date of the
identification thereof and (B) not covered by a Valid Claim of an issued and
unexpired patent or pending patent application in the country of sale
included in the Screening Patent Rights.
4.2 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to make, use or sell a Screened
Product, ScripTech shall pay to the Assignors the greater of (a) [***] of all
royalties received by ScripTech from the licensee and/or sublicensee pursuant
to such license or sublicense and (b) the amount Assignors would have been
entitled to receive pursuant to Section 4.1 if the Screened Product had been
sold by ScripTech and/or its Affiliates; provided, however, that for the
purposes of (a) above, royalties paid to ScripTech by one of its Affiliates
in respect of a Screened Product shall not be counted if such Affiliate is
receiving royalties from a sublicensee in respect of the same Screened
Product.
4.3 In the event ScripTech or its Affiliate licenses, and/or
sublicenses to a third party the right to use the Screening Procedure,
ScripTech shall pay to Assignors the greater of (a) [***] of all royalties
received by ScripTech or its Affiliate from the licensee and/or sublicensee
pursuant to such license or sublicense and (b) the amount Assignors would
have been entitled to receive pursuant to Section 4.1 if a Screened Product
identified by the licensed Screening Procedure had been sold by ScripTech
and/or its Affiliates; provided, however, that for the purposes of (a) above,
royalties paid to ScripTech by one of its Affiliates in respect of a
Screening Procedure shall not be counted if such Affiliate is receiving
royalties from a sublicensee in respect of the same Screeninq Procedure.
4.4 All payments by ScripTech hereunder shall be paid [***] to
Andrew Pakula and [***] to
-4-
<PAGE>
James Bowie. There shall be but a single royalty obligation under this Agreement
for each unit of product sold, and in no event shall ScripTech be obligated to
make payments under this Agreement aggregating in excess of [***]
4.5 (a) All payments provided for in this Section 4 shall be paid in
United States dollars by ScripTech within [***] following the
termination of each calendar quarter (the first such quarter to be that in which
payments first accrue pursuant to this Section 4) in an amount equal to the
payment accruing during that calendar quarter measured in currency of the
country in which sales shall have been made and converted into United States
dollars at the noon buying rate in New York City for cable transfers in such
foreign currency as announced by the Federal Reserve Bank of New York for
customs purposes on the last day of such calendar quarter.
(b) The payments shall be accompanied by reports which shall
indicate the sales by party for the previous calendar quarter and shall show the
amounts due with sufficient information to enable confirmation by Assignors of
the following:
(i) Quantity of Screened Product subject to royalty sold (by country) by
ScripTech and its Affiliates and licensees;
(ii) Total receipts for each Screened Product subject to royalty payments
hereulder (by country) and a breakdown as to whether such royalty is
payable pursuant to Section 4.1(a), 4.1(b) or 4.1(c)
hereunder;
(iii) Total royalties payable to Assignors;
(iv) Royalties received from licensees and sublicensees and data
equivalent to (i) and (ii) above as to licensee activity;
(v) All other revenue realized by ScripTech, its Affiliates and their
licensees from commercial exploitation of Screening Procedures,
Screened Products and/or Screening Patent Rights; and
(vi) Calculation of the basis of any foreign currency conversion required
hereunder in connection with each calendar quarterly payment.
ScripTech shall maintain, and shall cause its Affiliates and their licensees to
maintain, accurate books of account containing such information as may be
necessary to allow Assignors to confirm the calculations of royalties payable
hereunder. Such
-5-
<PAGE>
books of account shall be kept at the respective principal places of business
of ScripTech, its Affiliates and their licensees and shall be available for
audit (solely for the purpose of confirming the accuracy of payments
hereunder), not more often than once in any period of eleven consecutive
months, by a firm of certified public accountants designated by Assignors at
reasonable times for three years following the end of the calendar year
during which the royalties in respect of the sales recorded in such books of
account are paid hereunder. Such audits shall be at the sole expense of
Assignors, provided that if any audit shows under-reporting of any calendar
quarter payment by more than [***] ScripTech shall reimburse Assignors for
the full cost of such audit. If Assignors do not elect within [***] of the
close of any calendar year to have the records of ScripTech and its
Affiliates audited, Assignors shall be deemed to have agreed that such
payments made by ScripTech for the preceding calendar year were complete and
accurate in all respects. Assignors agree that all information obtained
pursuant to this Section 4 shall be kept confidential.
4. 6 If by law, regulation, or fiscal policy of a particular
country, conversion or transfer into United States Dollars is restricted or
forbidden, notice thereof in writing shall be given by ScripTech to Assignors
and the payments in question shall be made through such lawful means or
methods as ScripTech may determine. If ScripTech shall fail to designate a
lawful means or method of payment within [***] after such notice is given to
ScripTech, the payment by ScripTech shall be made by the deposit thereof in
local currency to the credit of Assignors in a recognized local banking
institution designated by ScripTech. When, in any country, the laws or
regulations prohibit both the transmittal and deposit of royalties on sales
in such country, payments shall be suspended for as long as such prohibition
is in effect and, as soon as such prohibition ceases to be in effect, all
royalties that ScripTech would have been required to transmit or deposit, but
for the prohibition, shall forthwith be transmitted or deposited promptly to
the extent allowable as the case may be. An accounting of royalties due on
sales in any country where royalty payments are suspended as aforesaid shall
be provided by ScripTech to Assignors upon request, but not more frequently
than quarterly.
4.7 All turnover and other taxes levied on account of royalty
payments under this Agreement shall be borne and paid by Assignors for their own
account, including taxes levied thereon as income to Assignors and for which
provision is made in law or by regulation for withholding, in which event such
taxes shall be deducted from such payments, paid by ScripTech to the proper
taxing authority, and a receipt of payment of the tax obtained and sent to
Assignors.
-6-
<PAGE>
4.8 Notwithstanding the provisions of this Section 4, Assignors
agree to reconsider and to renegotiate in good faith the provisions hereof from
time to time at the request of ScripTech if ScripTech can demonstrate that
despite its commercially reasonable efforts the then current royalty rates
effectively and materially diminish the capability of ScripTech and its
Affiliates and licensees to exploit any product for which a payment may be due
and owing hereunder or to respond to competitive conditions in the market(s) for
any such product. Nothing contained in this Section 4.8, however, shall obligate
the Assignors to agree to any reduction in the current royalty rates hereunder.
5. ScripTech's Efforts.
ScripTech will use reasonable commercial efforts, consistent with
its financial resources and corporate objectives as conclusively determined by
its Board of Directors, to develop, sell and market Screened Products, but no
assurances can be given that ScripTech will be successful in this regard.
6. Payment Term.
The obligation of ScripTech to make payments pursuant to Section
4 shall terminate on a country-by-country basis on the earlier of (a) such
time as there no longer exists any Valid Claim pertaining to the Screened
Product in such country or (b) [***] from the date of the First Commercial
Sale of a Screened Product in such country.
7. Arbitration; Governing Law.
7.1 Failing settlement, all disputes arising in connection with this
Agreement may only be resolved by arbitration in Boston, Massachusetts, under
the Commercial Arbitration Rules of the American Arbitration Association before
three arbitrators appointed in accordance with said Rules. The decision of the
arbitrators shall be final, binding and conclusive upon the parties and they
shall comply with such decision in good faith, provided that the arbitrators
shall have set forth in writing to the parties the reasons for their findings
and shall award the prevailing party, in addition to any other damages awarded,
the costs and expenses of the prevailing party in the arbitration, including
counsel fees. Each party hereby submits itself to the jurisdiction of the
federal district courts of the place where the arbitration is held for the entry
of judgment with respect to any arbitration hereunder. Notwithstanding the
foregoing, judgment upon the award may be entered in any court having
jurisdiction over the parties.
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<PAGE>
7.2 This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts without regard to
conflicts-of-law principles.
8. Force Majeure.
Except for the obligations relating to the payment of money, neither
party shall be liable for any loss, damage or penalty resulting from delays or
failures in performance resulting from acts of God or other causes beyond its or
his control. Each party agrees to notify the other party of any circumstance
delaying its or his performance and to resume performance as soon thereafter as
is reasonably practicable.
9. Joint and Several.
The representations, warranties, agreements and obligations of the
Assignors under this Agreement shall be joint and several.
10. Waiver.
No waiver, alteration or modification of any of the provisions
hereof shall be binding unless made in writing and executed by all of the
parties hereto. No waiver of any one or more defaults in the performance of any
provision of this Agreement shall operated as a waiver of any future default
whether of a like character or not.
11. No Present intention
ScripTech represents and warrants to Assignors that it has no
present intentention to cause the Screening Procedures to become Publicly
Available.
12. Notices.
All notices, requests, demands and other communications which are
required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed duly given when delivered by hand or mailed by
certified or registered mail, postage prepaid and return receipt requested, as
follows:
If to ScripTech, to: One Joslin Place
Boston, MA 02215
Attn: President
If to Andrew Pakula, to: 26 Normandy Road
Lexington, MA 02173
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<PAGE>
If to James Bowie, to 4243 Le Bourget Avenue
Culver City, California 90232
13. Entire Agreement
This Agreement embodies the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
14. Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective personal. representatives, successors
and assigns.
IN WITNESS WHEREOF, each of the parties has caused this Agreement,
to be executed and duly sealed by its duly authorized representative as of the
date hereof.
SCRIPTECH PHARMACEUTICALS, INC.
By /s/ Thomas A. Bologna
----------------------
Its President & CEO
----------------------
Andrew Pakula
/s/ James Bowie
----------------------
James Bowie
-9-
19108
<PAGE>
EXHIBIT A
UNITED STATES PATENT APPLICATION
Filing Date Serial No. Title
- ----------- ---------- -----
6/21/93 08/080,829 "A SCREENING METHOD FOR IDENTIFYING
LIGANDS FOR TARGET PROTEINS"
19108/99
<PAGE>
Exhibit B
Screening Procedure:
The screening procedures known collectively as ATLAS are based upon the
principle that [***] The Procedure involves the following steps:
[***]
<PAGE>
AMENDMENT AGREEMENT
Reference is made to that Assignment Agreement effective March 15, 1994 by
and among Andrew Pakula, James Bowie and ScripTech Pharmaceuticals, Inc. (the
"Agreement").
1. Section 4.2 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.2 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to make, use or sell a Screened
Product, ScripTech shall pay to the Assignors [***] of all royalties
received by ScripTech or its Affiliate from the licensee and/or
sublicensee pursuant to such license and/or sublicense."
2. Section 4.3 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.3 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to use the Screening Procedure,
ScripTech shall pay to Assignors [***] of all royalties received by
ScripTech or its Affiliate from the licensee and/or sublicensee pursuant
to such license and/or sublicense."
3. Except as hereby amended, the Agreement shall continue in full force
and effect.
WITNESS the execution hereof as an instrument under seal as of this 10th
day of June, 1994.
/s/ Andrew Pakula
----------------------
Andrew Pakula
----------------------
James Bowie
SCRIPTECH PHARMACEUTICALS, INC.
By /s/ Thomas A. Bologna
----------------------
Its President & CEO
44221
<PAGE>
AMENDMENT AGREEMENT
Reference is made to that Assignment Agreement effective March 15, 1994 by
and among Andrew Pakula, James Bowie and ScripTech Pharmaceuticals, Inc. (the
"Agreement").
1. Section 4.2 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.2 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to make, use or sell a Screened
Product, ScripTech shall pay to the Assignors [***] of all royalties
received by ScripTech or its Affiliate from the licensee and/or
sublicensee pursuant to such license and/or sublicense."
2. Section 4.3 of the Agreement is hereby deleted in its entirety and
the following is substituted therefor:
"4.3 In the event ScripTech or its Affiliate licenses and/or
sublicenses to a third party the right to use the Screening Procedure,
ScripTech shall pay to Assignors [***] of all royalties received by
ScripTech or its Affiliate from the licensee and/or sublicensee pursuant
to such license and/or sublicense."
5. Except as hereby amended, the Agreement shall continue in full force
and effect.
WITNESS the execution hereof as in instrument under seal as of this 10th
day of June, 1994.
---------------------------
Andrew Pakula
/s/ James Bowie
---------------------------
James Bowie
SCRIPTECH PHARMACEUTICALS, INC.
/s/ Thomas A. Bologna
---------------------------
Its President & CEO
44221
<PAGE>
Exhibit 10.16
[LOGO]
SCRIPTGEN
June 19, 1997
Mr. Mark T. Weedon
23 Boulters Gardens
Maidenhead Berkshire
United Kingdom SL6 8TR
1628-33230
Dear Mark:
On behalf of the Board of Directors of Scriptgen Pharmaceuticals, I am pleased
to extend the following offer of employment to you:
Position: President and CEO reporting to Board of Directors; a member of
the Board of Directors.
Start Date: Promptly after your receipt of H1B Visa from U.S. Immigration.
Anticipate that you will receive U.S. Visa between July 14 to
July 21, 1997, and that you will commence to perform your
duties as President and CEO promptly after receipt of U.S.
Visa.
Term: Employment may be terminated by either party upon thirty (30)
days notice.
Initial Stock: Options to purchase 5% (approximately 1,044,000 shares of
common stock) of the Company's fully diluted capitalization at
a price of $.05 per share, The options will vest over a four
(4) year period at a rate of 1/48 of the total each month,
Each option will be exercisable at any time from and after
date of vesting. Eligible for additional option grants in the
future as determined by the Board of directors. All options
vest if Company is sold for a price of at least $5.00 per
share based on the Company's current capitalization. All
vested stock options will remain
<PAGE>
exercisable by you during a period of one (1) year
following termination.
Salary: $230,000 annually, to be reviewed at end of first year.
Bonus: Guaranteed $25,000 payable no later than first anniversary.
Additional $25,000 if Company completes an IP0 before first
anniversary.
Expenses: All expenses incurred on behalf of the Company, including
expenses for business travel, as well as a house hunting trip
for your spouse, up to ninety (90) days of reasonable
temporary living expenses, and relocation, will be reimbursed
by the Company. In addition, the Company will reimburse you
for up to a maximum of $5,000 for costs and expenses
(including legal fees and disbursements) incurred by you in
connection with your efforts to effectuate and complete this
employment agreement and all related employment arrangements
with the Company.
Benefits: Current Scriptgen benefits package. The Board would be willing
to consider recommended changes to current package.
Severance: Nine (9) months of salary and benefits while remaining
unemployed if terminated without cause in the first year of
employment, six months if terminated thus in the second year,
and four months thereafter.
Other: You will sign Scriptgen's standard employee invention and
non-disclosure agreement. You will also enter into a one (1)
year non-competition agreement. upon the terms contained in
the Company's Agreement for Science Employees.
<PAGE>
Public
Announcement We and you agree that no public announcements concerning this
Letter of Agreement or the employment arrangements
contemplated hereby will be made, and that every reasonable
effort will be made by us and by you to preserve the privacy
and confidentiality of this Letter of Agreement and the
related employment arrangements, until you have received your
U.S. H1B Visa or until such earlier date as may be mutually
agreed by us and you.
We acknowledge that, promptly upon your acceptance of this Letter of Agreement
and in reliance upon our offer of employment, you will take immediate steps to
terminate your employment with your present employer, Glaxo Wellcome.
If you are in agreement with the forgoing Letter of Agreement, please sign the
form of acceptance and return a signed counterpart of this Letter of Agreement
to us, whereupon this Letter of Agreement and all provisions thereof shall,
effective as of the date hereof, become a legally binding agreement of
employment between Scriptgen Pharmaceuticals, Inc. and you.
Sincerely yours,
/s/ Barry Weinberg
By: Barry Weinberg
Chairman of the Board
The foregoing Letter of Agreement is hereby accepted and agreed to by the
undersigned, and the undersigned agrees to be bound, effective as of the date of
the foregoing Letter of Agreement, by all of the terms thereof.
/s/ Mark T. Weedon Date: June 24, 1997
- ---------------------------
Mark T. Weedon
<PAGE>
Exhibit 10.17
ScripTech Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
September 7, 1994 [CONFIDENTIAL STAMP]
Dr. Michael G. Palfreyman
11515 Applejack Court
Cincinnati, Ohio 45249
Dear Dr. Palfreyman:
On behalf of myself, the Board, our investors, the scientific co-founders, and
the employees at ScripTech, we would very much like you to become part of the
ScripTech organization as our Vice President of Research and Development. Based
on discussions held by you and I, as well as John Caplan, I would like to offer
the following elements of an employment offer, subject to Board approval:
TITLE:
Vice President of Research and Development. You will be responsible for
directing all of ScripTech's R&D programs and activities.
SALARY:
$7,291.66 paid 24 times per year, which if annualized, amounts to $175,000
annually. Performance reviews are conducted annually at the anniversary
date of your employment.
EQUITY:
An option to purchase 165,000 shares of ScripTech common stock at a
purchase price of approximately $0.05 per share. The final price is
determined by the Board of Directors and is equal to market value at your
time of hire. These options will vest over a period of four years
commencing on the first day of your employment.
PERFORMANCE BONUS
Annual bonus of up to 20% of your January salary for the year in which the
bonus is earned. This bonus will be based on the successful completion of
agreed upon goals and objectives.
<PAGE>
HEALTH BENEFITS:
Participation for you and your family in ScripTech's group medical and
dental program as provided by Guardian Life. Your contribution to the cost
of this coverage is $5.00 per month for family or individual coverage. You
will also be eligible to enroll in ScripTech's group plan for life
insurance (1x annual salary) and for long term disability coverage. All
remaining premiums for the benefits listed above are paid for by
ScripTech.
VACATION TIME:
Three (3) weeks vacation per year as consistent with ScripTech policy.
Accrued vacation may be carried over for up to three (3) months after your
anniversary date.
RELOCATION EXPENSE:
ScripTech will pay for normal expenses related to your move to the Boston
area. This would include reasonable and customary closing costs on the
sale of your home in Ohio, including attorney's fees, title searches, home
inspections, mortgage loan application fees, etc.; the packing and
movement of your personal belongings and household goods including up to
two (2) vehicles. We will also provide temporary storage of your goods in
the event that you were delayed from moving into your new home for up to a
period of two (2) months. Relocation will also include up to $3,000 of
your closing costs in the Boston area.
TEMPORARY LIVING:
As part of our offer, we will provide you with up to $1,500 per month to
cover reasonable and customary expenses, such as rent, telephone, etc.,
for a furnished or unfurnished apartment in the Boston area through
September 1995, or until your family relocates, whichever comes first.
ScripTech will also cover the cost to ship one of your personal vehicles
to Boston, and will provide you with a rental car until that can be
arranged, as well as cover any hotel expenses during your first few weeks
of employment until temporary housing is finalized. During your temporary
living period, ScripTech will pay for up to two (2) weekend trips per
month for you to return home to Ohio or for your spouse to join you in
Boston. Should your relocation to Boston extend beyond September 1995,
ScripTech will re-consider your temporary living situation in a fair and
open manner.
HOUSING ALLOWANCE:
During the first three (3) years of your employment with ScripTech, we
will provide you with a housing allowance of $20,000 in year one, $15,000
in year two, and $9,000 in year three, This allowance will begin after you
relocate to the Boston area and will be paid out in equal monthly
installments based on the respective yearly allowance.
<PAGE>
SEVERANCE PAY:
ScripTech would provide severance pay at the following scale, provided
that your termination would be without cause:
Up to one year of service 6 months salary
After one year 3 months salary
OTHER COMPENSATION:
To compensate you for lost bonus wages at Marion Merrill Dow, ScripTech
will pay you a one-time, additional compensation of $30,000 as long as you
are actively employed by the Company. This compensation will be made in
two payments as follows: (1) $15,000 on May 1, 1995, and (2) $15,000 when
you and your family permanently relocate to the Boston area.
The above offer is subject to your signing a non-disclosure, invention
assignment and con-compete agreement with the Company and the Company's review
of any agreements you may have with former employers to insure there isn't any
conflict. This offer has been extended and is valid up until September 15, 1994
after which time it will expire. Please acknowledge your agreement of these
terms by signing a copy of this letter and returning it to me.
I am extremely pleased to extend this offer to you on behalf of ScripTech
Pharmaceuticals, Inc. On a personal note, we will make a great team and
together, with our investors, co-founders and outstanding employees, we will
"take ScripTech all the way."
Please give my regards to Liz and Matthew.
Sincerely yours,
/s/ Thomas A. Bologna
Thomas A. Bologna
President & Chief Executive Officer
Accepted Terms as Stated Above:
/s/ Michael G. Palfreyman
- ------------------------------
Michael G. Palfreyman
Sept. 10, 1994
<PAGE>
Exhibit 10.18
[Letterhead of HealthCare Investment Corporation]
December 8, 1992
Dr. Karen Hamlin
12-2 Deer Path
Maynard, MA 01754
VIA FEDERAL EXPRESS
Dear Karen:
This confirms our discussion offering you a position at ScripTech
Pharmaceuticals, Inc. in Cambridge, Massachusetts.
General terms for your employment, assuming a start date of December 21, 1992,
are suggested as follows:
TITLE: Senior Director of Operations
SIGNING BONUS: $15,000.00 upon acceptance of this letter, and first
day of employment.
BASE SALARY: $3,125.00 paid 24 times per year which if annualized
amounts to $75,000 annually. The cost of health
insurance will be added to this base pay.
HEALTH BENEFITS: Medical, life insurance and vacation benefits as
consistent with SPI policy.
SEVERENCE: Six months of base salary for involuntary termination of
employment by the company without cause.
EQUITY: Founders stock of 35,000 shares at $0.01 per share with
3,500 shares vesting as of your first day of employment
and the remainder vesting in equal amounts over a five
year period commencing on the first anniversary of your
employment. The above will be subject to a restrictive
stock agreement.
The above is subject to your signing a non-disclosure, invention assignment and
non-compete agreement with the Company and the Company's review of any
agreements you may have with former employers to insure that such do not
conflict with your employment with the company.
<PAGE>
Dr. Karen Hamlin
December 8, 1992
Page Two
I am delighted to extend this offer to you on behalf of ScripTech
Pharmaceuticals, Inc. Please acknowledge your agreement of these terms by
signing a copy of this letter and returning it to me.
Sincerely,
/s/ Joseph F.X. McGuirl
Joseph F.X. McGuirl
Chairman of the Board
ScripTech Pharmaceuticals, Inc.
JFXM/jt
ACCEPTED TERMS AS STATED ABOVE:
/s/ Dr. Karen Hamlin 12/14/92
- ----------------------------------
Dr. Karen Hamlin
<PAGE>
Exhibit 10.21
SCRIPTECH PHARMACEUTICALS, INC.
1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of the ScripTech Pharmaceuticals, Inc. 1994 Stock Option Plan
(the "Plan") is to further the growth and development of ScripTech
Pharmaceuticals, Inc. (the "Company") by granting to those persons referred to
in Section 5, as an incentive and encouragement to stock ownership, options to
purchase shares of Common Stock of the Company (the "Stock") and thereby obtain
a proprietary interest in the enterprise and a more direct stake in the
Company's continuing welfare.
Options granted pursuant to the Plan may be incentive stock options as
defined under the Internal Revenue Code of 1986, as from time to time amended
(the "Code") (any option that is intended to qualify as an incentive stock
option being referred to herein as an "incentive option"), or options that do
not qualify as incentive options ("nonstatutory options"), or both.
2. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board") of
the Company. The Board shall have authority, not inconsistent with the express
provisions of the Plan, (a) to grant options to such persons as the Board may
select; (b) to determine the time or times when options shall be granted, when
they shall be exercisable and the number of shares of Stock subject to each
option; (c) to determine whether to grant incentive options or nonstatutory
options or both; (d) to determine the terms and conditions of each option; (e)
to prescribe the form or forms of instruments evidencing options and any other
instruments required under the Plan and to change such forms from time to time;
(f) to adopt, amend and rescind rules and regulations for the administration of
the Plan; and (g) to interpret the Plan and to decide any questions and settle
all controversies and disputes that may arise in connection with the Plan. Such
determinations of the Board shall be conclusive and shall bind all parties.
Subject to Section 9, the Board shall also have the authority, both generally
and in particular instances, to waive compliance by a participant with any
obligation to be performed by him or her under an option and to waive any
condition or provision of an option.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is approved
by the shareholders of the Company. Grants of options under the Plan may be made
prior to that date (but after adoption of the Plan by the Board), subject to
approval of the Plan by such shareholders.
No option shall be granted under the Plan after the completion of ten
years from the date on which the Plan was adopted by the Board, but options
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section 4(c),
the aggregate number of shares of Stock that may be delivered upon the exercise
of options granted under the Plan shall be 1,885,000. If any option granted
under the Plan terminates without having been exercised in full, the number of
shares of Stock as to which such option was not exercised shall be available for
future grants within the limits set forth in this Section 4(a).
<PAGE>
(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides, previously issued
Stock acquired by the Company and held in treasury. No fractional shares of
Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, recapitalization, increase or decrease in the number of
issued shares of capital stock effected without receipt of consideration by the
Company, or other similar change in the Company's capital stock, the number and
kind of shares of stock or securities of the Company subject to options then
outstanding or subsequently granted under the Plan, the maximum number of shares
or securities that may be delivered under the Plan, the exercise price, and
other relevant provisions shall be appropriately adjusted by the Board;
provided, however, that any fractional shares resulting from such adjustment
shall be eliminated. Any determination by the Board of Directors under this
Section 5 shall be binding on all persons.
The Board may also, in its discretion, adjust the number of shares subject
to outstanding options, the exercise price of outstanding options and the terms
of outstanding options, to take into consideration material changes in
accounting practices or principles, consolidations or mergers (except those
described in Section 7), acquisitions or dispositions of stock or property or
any other event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan.
5. ELIGIBILITY
Persons eligible to receive options under the Plan shall be those
employees, officers, directors (including without limitation non-employee
directors) and consultants of the Company and its subsidiaries who, in the
opinion of the Board, are in a position to make a significant contribution to
the success of the Company or such subsidiaries. A subsidiary for purposes of
the Plan shall be a corporation in which the Company owns, directly or
indirectly, stock possessing 50% or more of the total combined voting power of
all classes of stock.
Incentive options shall be granted only to "employees" as defined in the
provisions of the Code or regulations thereunder applicable to incentive
options. Receipt of options under the Plan or of awards under any other employee
benefit plan of the Company or any of its subsidiaries shall not preclude a
person from receiving options or additional options under the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Limitations. As a condition of exercising an option, the Board may
require the individual exercising the option to be subject to restrictions on
transfer on the shares of Stock acquired by the individual upon exercise of the
option.
(b) Exercise Price. The exercise price of each option shall be determined
by the Board. In the case of incentive options such price shall not be less than
100% (110%, in the case of an incentive option granted to a ten percent
shareholder) of the fair market value per share of the Stock at the time the
option is granted. For this purpose, "fair market value" in the case of
incentive options shall have the same meaning as it does in the provisions of
the Code arid the regulations thereunder applicable to incentive options; and
"ten-percent shareholder" shall mean any employee who at the time of grant owns
directly, or is deemed to own by reason of the attribution rules set forth in
the Code relating to incentive options, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of any of
its parent or subsidiary corporations.
(c) Duration of Options. An option shall be exercisable during such period
or periods as the Board may specify. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be
-2-
<PAGE>
the date which is ten years (five years, in the case of an incentive option
granted to a "ten-percent shareholder" as defined in (b) above) from the date
the option was granted or, in the case of nonstatutory options fifteen years
from the date the option was granted, or such earlier date as may be specified
by the Board at the time the option is granted.
(d) Exercise of Options.
(1) The period for exercising an option shall be determined by the
Board in each instance. In the case of an option not
immediately exercisable in full, the Board may at any time
accelerate the time at which all or any part of the option may
be exercised.
(2) The award forms or other instruments evidencing incentive
options shall contain such provisions relating to exercise and
other matters as are required of incentive options under the
applicable provisions of the Code and the regulations
thereunder, as from time to time in effect.
(3) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (a) the option certificate and any other
documents required by the Board and (b) payment in full for
the number of shares for which the option is exercised.
(4) In the case of a nonstatutory option, the Board shall have the
right to require that the individual exercising the option
remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax requirements (or make
other arrangements satisfactory to the Company with regard to
such taxes) prior to the delivery of any Stock pursuant to the
exercise of the option. In the case of an incentive option, if
at the time the option is exercised the Board determines that
under applicable law and regulations the Company could be
liable for the withholding of any federal or state tax with
respect to a disposition of the Stock received upon exercise,
the Board may require as a condition of exercise that the
individual exercising the option agree (i) to inform the
Company promptly of any disposition (within the meaning of the
Code and the regulations thereunder relating to incentive
options and Stock received upon exercise, and (ii) to give
such security as the Board deems adequate to meet the
potential liability of the Company for the withholding of tax,
and to augment such security from time to time in any amount
reasonably deemed necessary by the Board to preserve the
adequacy of such security.
The Board may provide that, if and to the extent withholding
of any federal, state or local tax is required in connection
with the exercise of an option, the option holder may elect,
at such time and in such manner as the Board shall prescribe,
to have the Company hold back from the shares to be delivered
Stock having a value calculated to satisfy such withholding
obligation.
(5) If an option is exercised by the executor or administrator of
a deceased participant, or by the person or persons to whom
the option has been transferred by the participant's will or
the applicable laws of descent and distribution, the Company
shall be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of
the person or persons exercising the option.
-3-
<PAGE>
(e) Payment for and Delivery of Stock. Full payment for Stock purchased
under the Plan shall be made at the tune of exercise in cash or by check, bank
draft or money order payable to Company or, if so permitted by the Board, (i)
through the delivery of shares of Stock having a fair market value on the last
business day preceding the date of exercise equal to the exercise price or (ii)
by a combination of cash and Stock or (iii) by delivery of a promissory note of
the option holder to the Company, such note to be payable on such terms as are
specified by the Board, or by a combination of cash (or cash and Stock) and the
option holder's promissory note; provided, that if the Stock delivered upon
exercise of the option is an original issue of authorized Stock, at least so
much of the exercise price as represents the par value of such Stock shall be
paid in cash or by a combination of cash and Stock.
An option holder shall not have the rights of a shareholder with regard to
awards under the Plan except as to Stock actually received by him or her under
the Plan.
The Company shall not be obligated to deliver any shares of Stock (i)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (ii) if the outstanding Stock is
at the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance, and (iii) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the Stock to be issued upon exercise of an option has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the option, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
(f) Nontransferability of Options. No option may be transferred other than
by will or by the laws of descent and distribution and during a participant's
lifetime an option may be exercised only by him or her.
(g) Death. If a participant dies during the period when his or her option
is exercisable, each option held by the participant immediately prior to death
may be exercised, to the extent set forth below, by his or her executor or
administrator, or by the person or persons to whom the option is transferred by
will or the applicable laws of descent and distribution, at any time within
twelve (12) months following his or her death (subject, however, to the
limitations of Section 6(c) regarding the maximum exercise period for such
option). During such period, the option shall be exercisable only to the extent
the option was exercisable at the time of the participant's death.
(h) Termination of Employment For Cause. If a participant's employment or
service with the Company and its subsidiaries is terminated for cause, no option
may be exercised after the participant has ceased to be employed by or to render
services to the Company. For purposes of this Section 6, "cause" is defined as
follows: (i) the participant's conviction for the commission of a felony, (ii)
the participant's excessive absence from work for reasons other than illness,
(iii) the participant's use of alcohol, illegal drugs or any other illegal
substance in such a manner as to interfere with the performance of his or her
duties, (iv) the participant's refusal to follow reasonable directives from his
or her superior, or (v) the participant's failure to perform any material duty
and such failure has continued for thirty days after the participant has been
notified in writing by the Company of the specific nature of his or her failure
to perform. Any determination by the Board that the employment or services to
the Company of any participant were terminated by reason of dismissal without
cause for the purposes of the Plan shall have no effect upon any determination
of the rights or obligations of the Company or a participant for any other
purpose.
(i) Other Termination of Employment. If a participant's employment with
the Company and its subsidiaries terminates for any reason other than
termination for cause or death, all options held by the participant shall be
exercisable by him or her only during the thirty (30) days following termination
of his or her employment but in no event after the Final Exercise Date and only
as to the number of shares, if any, as
-4-
<PAGE>
to which it was exercisable immediately prior to termination. For purposes of
this Section 6(i), employment shall not be considered terminated (i) in the case
of sick leave or other bona fide leave of absence approved for purposes of the
Plan by the Board, so long as the participant's right to re-employment is
guaranteed either by statute or by contract, or (ii) in the case of a transfer
of employment between the Company and a subsidiary or between subsidiaries or to
the employment of a corporation (or a parent or subsidiary corporation of such
corporation) issuing or assuming a stock option in a transaction to which
Section 424(a) of the Code applies.
7. MERGER. COMBINATION OR SALE OF ASSETS.
In the event of a merger or consolidation to which the Company is a party
(other than a merger or consolidation in which shareholders of the Company
immediately prior to the merger or consolidation shall immediately following
such merger or consolidation own securities in the resulting corporation having
the right to cast more than 50% of the votes necessary to elect a majority of
the Directors of the resulting corporation), or in the event of a sale or
transfer of all or substantially all of the Company's assets (each a "covered
transaction"), all outstanding options under the Plan shall terminate as of the
effective date of the covered transaction, provided that the Board may, in its
sole discretion:
(a) make each outstanding option exercisable in full prior to the
effective date of the covered transaction, or
(b) cause the surviving or acquiring corporation to replace
outstanding options with options which shall give the grantees the right, upon
any subsequent exercise of such replacement options, to acquire the same kind
and amount of securities and property which such grantees would have acquired if
such grantees had exercised their options under the Plan immediately before the
effective date of the covered transaction and continued as shareholders of the
Company, or
(c) take any other action which the Board shall deem appropriate.
The Board shall give each holder of an outstanding option at least 30 days
prior notice of the effective date of any covered transaction. Any decision made
by the Board under this Section 7 shall be final and binding.
8. EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of options shall confer
upon any person any right to continued employment with the Company or any parent
or subsidiary or affect in any way the right of the Company or parent or
subsidiary to terminate the employment of a person at any time.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of options to a person shall
affect the Company's right to grant to such person options that are not subject
to the Plan, to issue to such person Stock as a bonus or otherwise, or to adopt
other plans or arrangements under which Stock may be issued.
The Board may at any time discontinue granting options under the Plan. The
Board may at any time alter, terminate, discontinue, suspend or amend the Plan.
The Board may not, however, without the requisite shareholder approval,
increase the maximum number of shares subject to the Plan or alter the class of
persons eligible to participate in the Plan, or, without the consent of the
participant, alter or impair any option previously granted to a participant
under the Plan, except as provided in Sections 2 and 7.
-5-
<PAGE>
Exhibit 10.22
CUMMINGS PROPERTIES MANAGEMENT, INC. 893480-RED-A
STANDARD FORM
COMMERCIAL LEASE
In consideration of the covenants herein contained, Cummings Properties
Management, Inc., hereinafter called LESSOR, does hereby lease to ScripTech
Pharmaceuticals, Inc. (a DE corp.) One Kendall Square, Cambridge, MA 02139
hereinafter called LESSEE, the following described premises, hereinafter called
the leased premises: approximately 15,440 square feet (including 9.6% common
area) at 200 Boston Avenue, Suites 3000 & G600, Medford, MA.
TO HAVE AND HOLD the leased premises for a term of five (5) years commencing at
noon on November 1, 1993 and ending at noon on October 30, 1998 unless sooner
terminated as herein provided. LESSOR and LESSEE now covenant and agree that the
following terms and conditions shall govern this lease during the term hereof
and for such further time as LESSEE shall hold the leased premises.
1. RENT. LESSEE shall pay to LESSOR base rent at the rate of one hundred
five thousand three hundred eight (105,308.00) U.S. dollars per year, payable in
advance in monthly installments of $8,775.66 on the first day in each calendar
month in advance, the first monthly payment to be made upon LESSEE's execution
of this lease, including payment in advance of appropriate fractions of a
monthly payment for any portion of a month at the commencement or end of said
lease term. All payments shall be made to LESSOR or agent at 200 West Cummings
Park, Woburn, Massachusetts 01801, or at such other place as LESSOR shall from
time to time in writing designate. If the "Cost of Living" has increased as
shown by the Consumer Price Index (Boston, Massachusetts, all items, all urban
consumers), U.S. Bureau of Labor Statistics, the amount of base rent due during
each calendar year of this lease and any extensions thereof shall be annually
adjusted in proportion to any increase in the Index. All such adjustments shall
take place with the rent due on January 1 of each year during the lease term.
The base month from which to determine the amount of each increase in the Index
shall be January 1994, which figure shall be compared with the figure for
November 1994, and each November thereafter to determine the percentage increase
(if any) in the base rent to be paid during the following calendar year. In the
event that the Consumer Price Index as presently computed is discontinued as a
measure of "Cost of Living" changes, any adjustment shall then be made on the
basis of a comparable index then in general use.
2. SECURITY DEPOSIT. LESSEE shall pay to LESSOR a security deposit in the
amount of seventeen thousand (17,000.00) dollars upon the execution of this
lease by LESSEE, which shall be held as security for LESSEE's performance as
herein provided and refunded to LESSEE without interest at the end of this lease
subject to LESSEE's satisfactory compliance with the conditions hereof. In the
event of any default or breach of this lease by LESSEE, LESSOR shall immediately
apply the security deposit first to any unamortized improvements completed for
LESSEE'S occupancy, then to offset any outstanding Invoice or other payment due
to LESSOR, with the balance applied to outstanding rent. If all or any portion
of the security deposit is applied to cure a default or breach during the term
of the lease, LESSEE shall be responsible for restoring said deposit forthwith
and failure to do so shall be considered a substantial default under the lease.
LESSEE's failure to remit the full security deposit or any portion thereof when
due shall also constitute a substantial lease default.
3. USE OF PREMISES. LESSEE shall use the leased premises only for the
purpose of executive and administratives, office research and testing laboratory
and laboratory research facility uses, including biotechnology and
pharmaceutical laboratory research facilities.
4. ADDITIONAL RENT. LESSEE shall pay to LESSOR as additional rent a
proportionate share (7.13%) (based on square footage leased by LESSEE as
compared with the total leaseable square footage of the building of which the
leased premises are a part) of any increase in the real estate taxes levied
against the land and building of which the leased premises are a part, whether
such increase is caused by an increase in the tax rate, or the assessment on the
property, or a change In the method of determining real estate taxes. LESSOR
agrees to make payments on account of any tax assessment or betterment assess
over the longest period permissible by law. In no event shall LESSEE be
responsible for payments on account of any estate, inheritance, or income taxes.
LESSEE shall make payment within thirty (30) days of written notice from LESSOR
that such increased taxes are payable, and any additional rent shall be prorated
should the lease terminate before the end of any tax year. The base from which
to determine the amount of any increase in taxes shall be the rate and the
assessment in effect as of July 1, 1993. In the event that the building of which
the leased premises are a part was not assessed as a completed building as of
the aforementioned date, then the base assessment shall be as of the first date
when the building is assessed as a completed structure.
LESSEE shall pay interest at an annual rate of twelve (12) percent, from
the date due, for any installment of rent or other payment which is not received
by LESSOR within fifteen days of any rent due date or of the mailing of any
invoice.
5. UTILITIES. LESSOR shall provide equipment per LESSOR's building
standard specifications to heat the leased premises in season. Equipment will be
provided per LESSOR's building standard specifications to cool all office areas
between May 1 and November 1. LESSEE shall pay all charges for heat and
electricity used on the leased premises. LESSEE shall pay LESSOR for the cost of
all water and sewer use as determined either by separate a water meter serving
the leased premises, or as a proportionate share of water and sewer charges for
the entire building of which the leased premises are a part if not separately
metered. No plumbing, construction or electrical work of any type shall be done
without LESSOR's prior written approval and the appropriate municipal permit,
which approval by LESSOR shall not be unreasonably withheld or delayed.
6. COMPLIANCE WITH LAWS. LESSEE acknowledges that no trade, occupation, or
activity shall be conducted in the leased premises or made thereof which may be
unlawful, improper, noisy or offensive, or contrary to any statute, regulation,
or ordinance in force in the city or town in which the leased premises are
situated. LESSEE shall keep all employees working in the leased premises covered
with Worker's Compensation Insurance and shall obtain any licenses and permits
necessary for LESSEE's occupancy except for Certificate of Occupancy for
LESSOR's Work as described herein which shall be LESSOR's responsibility. LESSEE
shall be responsible for causing the leased premises (except for LESSOR's
[illegible]) and any work conducted therein to be in full compliance with the
Occupational Safety and Health Act of 1970 and any amendments thereof.
7. FIRE INSURANCE. LESSEE shall not permit any use of the leased premises
which will adversely affect or make voidable any insurance on the property of
which the leased premises are a part, or on the contents of said property, or
which shall be contrary to any law or regulation from time to time established
by the Insurance Services Office (or successor), local Fire Department, LESSOR's
insurer, or any similar body. LESSEE shall on demand reimburse LESSOR, and all
other tenants, all extra insurance premiums caused by LESSEE's use of the leased
premises. LESSOR expressly agrees, however, that LESSEE shall not be obligated
to pay any such extra insurance premiums in connection with LESSEE's use of the
premises for the uses described in Section 3 of this lease.
<PAGE>
8. MAINTENANCE OF PREMISES. LESSOR will be responsible for all structural
maintenance of the leased premises, including, without limitation, [illegible]
structural floor slabs and columns, and exterior windows, and for all
maintenance and repair of the common areas of the building, all space heating
(b. illegible)and cooling equipment, sprinklers, doors, locks, plumbing, and
electrical wiring, but specifically excluding damage caused by the careless,
malicious, willful, or negligent acts of LESSEE, chemical, water or corrosion
damage from any source,(c. illegible) and maintenance of any non "building
standard" leasehold improvements. LESSEE agrees to maintain at its expense all
other non-structural aspects of the leased premises in the same condition as
they are at the commencement of the term or as they may be put in during the
term of this lease, normal wear and tear and damage by fire or other casualty
only excepted, and whenever necessary, to replace light bulbs, plate glass and
other glass therein, acknowledging that the leased premises are now in good
order and the light bulbs and glass whole. LESSEE will properly control or vent
all solvents, degreasers, smoke, odors, etc. and shall not cause the area
surrounding the leased premises to be in anything other than a neat and clean
condition, depositing all waste in appropriate receptacles. LESSEE shall be
solely responsible for any damage to plumbing equipment, sanitary lines, or any
other portion of the building which results from the discharge or use of any
acid or corrosive substance by LESSEE. LESSEE shall not permit the leased
premises to be overloaded, damaged, stripped or defaced, nor suffer any waste,
and will not keep animals within the leased premises. If the leased premises
includes any wooden mezzanine type space, the floor capacity of such space is
suitable only for office use, light storage or assembly work. If the leased
premises are carpeted or partially carpeted, LESSEE will protect carpet with
plastic or masonite chair pads under any rolling chairs. Unless heat is provided
at LESSOR's expense, LESSEE shall maintain sufficient heat to prevent freezing
of pipes or other damage subject to LESSOR's obligations to maintain and repair
the heating system. Any increase in air conditioning equipment or electrical
capacity or any installation and/or maintenance of equipment which is
necessitated by some specific aspect of LESSEE's use of the leased premises
shall be at LESSEE's expense. All maintenance and repair provided by LESSOR
shall be during LESSOR's normal business hours.
9. ALTERATIONS. LESSEE shall not make structural alterations or additions
of any kind to the leased premises, but may make nonstructural alterations
provided LESSOR consents thereto in writing which consent shall not be
unreasonably withheld or delayed. All such allowed alterations shall be at
LESSEE's expense and shall conform with LESSOR's construction specifications. If
LESSOR performs any services or maintenance for LESSEE in connection with such
alterations or otherwise, any just invoice will be promptly paid. LESSEE shall
not permit any mechanics' liens, or similar liens, to remain upon the leased
premises in connection with work of any character performed or claimed to have
been performed at the direction of LESSEE and shall cause any such lien to be
released or removed within thirty (30) days of receiving notice of such lien
without cost to LESSOR. Any alterations or additions shall become part of the
leased premises and the property of LESSOR. Any alterations completed by LESSOR
shall be LESSOR's "building standard" unless noted otherwise. LESSOR shall have
the right at any time to change the arrangement of parking areas, stairs,
walkways or common areas at the building of which the leased are part.(c.
illegible)
10. ASSIGNMENT OR SUBLEASING. LESSEE shall not assign this lease or sublet
or allow any other firm or individual to occupy the whole or any part of the
leased premises without LESSOR's prior written consent which consent shall not
be unreasonably withheld or delayed. Notwithstanding such assignment or
subleasing, LESSEE shall remain liable to LESSOR for the payment of all rent and
for the full performance of the covenants and conditions of this lease. LESSEE
shall pay LESSOR promptly for legal reasonable expenses incurred by LESSOR in
connection with any consent requested hereunder by LESSEE.
11. SUBORDINATION. This lease shall be subject and subordinate to any and
all mortgages and instruments in the nature of a mortgage now or at any time
hereafter, and LESSEE shall, when requested, promptly execute and deliver such
written instruments as shall be necessary to show the subordination of this
lease to said mortgages or other such instruments in the nature of a mortgage.
12. LESSOR'S ACCESS. LESSOR or agents of LESSOR may at reasonable times
upon reasonable advance notice and upon reasonable intervals enter to view the
leased premises, may remove any signs not approved and affixed as herein
provided, may make repairs and alterations as LESSOR should elect to do and
repairs which LESSEE is required but has failed to do, and may show the leased
premises to others, provided that in exercising any of such rights, LESSEE shall
use diligent efforts not to unreasonably interfere with LESSEE'S operations in
the leased premises.
13. SNOW REMOVAL. The landscaping of all grounds surrounding the leased
premises and the plowing of snow from all roadways, accessways and unobstructed
parking and loading areas shall be the sole responsibility of and at the sole
expense of LESSOR. The control of snow and ice on all steps serving the leased
premises and all other areas not readily accessible to plows shall be the sole
responsibility of LESSOR. Notwithstanding the foregoing, however, LESSEE shall
hold LESSOR and OWNER harmless from any and all claims by LESSEE's agents,
representatives, employees, callers or invitees for damage or personal injury
resulting in any way from snow or ice on any area serving the leased premises,
except for claims arising out of the LESSOR's negligence.
14. ACCESS AND PARKING. LESSEE shall have the right without additional
charge to use parking facilities provided for the leased premises in common with
others entitled to the use thereof. Said parking areas plus any stairs,
walkways, elevators or other common areas shall in all cases, be considered a
part of the leased premises to the extent that they are utilized by LESSEE, or
LESSEE's employees, agents, callers or invitees, except LESSEE shall not be
responsible for maintaining such areas. LESSEE will not obstruct in any manner
any portion of the building or the walkways or approaches to said building, and
will conform to all reasonable rules now or hereafter made by LESSOR for
parking, and for the care, use, or alteration of the building, its facilities
and approaches. LESSEE further warrants that LESSEE will not permit any employee
or visitor to violate this or any other covenant or obligation of LESSEE. No
vehicle shall be stored or left in any parking area for more than three
consecutive nights without LESSOR's prior written approval. From December 1
through March 30 annually, however, all unattended parking will be prohibited
between 7:00 PM and 7:00 AM except in those areas specifically designated for
assigned overnight parking. Unregistered or disabled vehicles, or storage
trailers of any type, may not be parked overnight at any time. LESSOR may tow,
at LESSEE'S sole risk and expense, any misparked vehicle belonging to LESSEE or
LESSEE's agents, employees, invitees or callers, at any time.
15. LESSEE'S LIABLITY AND INSURANCE Except for death, personal injuries or
property damage directly resulting from the negligence of LESSOR, or breach of
LESSOR's obligations hereunder to maintain such area, LESSEE shall be solely
responsible as between LESSOR and LESSEE for deaths or personal injuries to all
persons whomsoever occurring in or on the leased premises (but limited to
LESSEE's employees, agents, invitees or callers in extension thereof) from
whatever cause arising, and damage to property to whomsoever belonging arising
out of the use, control, condition or occupation of the leased premises by
LESSEE; and LESSEE agree to indemnify and save harmless LESSOR and OWNER from
any and all liability, including but not limited to expenses, damage, causes of
action, suits, claims or judgments caused by or in any way growing out of any
matters aforesaid. LESSEE will secure and carry at its own expense a
comprehensive general liability policy insuring LESSEE, LESSOR and OWNER against
any claims based on bodily injury (including death) or property damage arising
out of the condition of the leased premises or their use by LESSEE, such policy
to insure LESSEE, LESSOR and OWNER against any claim up to One Million
(1,000,000) Dollars in the case of any one accident involving bodily injury
(including death), and up to One Million (1,000,000) Dollars against any claim
for damage property. LESSOR and OWNER shall be included in each such policy as
additional insurers. LESSEE will file with LESSOR prior to occupancy,
certificates showing that such insurance is in force, and thereafter will file
renewal certificates prior to the expiration of any such policies. All such
insurance certificates shall provide that such policies shall not be cancelled
without (10) days prior written notice to each insured.
16. FIRE, CASUALTY, EMINENT DOMAIN. Should a substantial portion (20% or
more) of the leased premises, or of the property of which they are a part, be
substantially damaged by fire or other casualty, or be taken by eminent domain,
LESSOR may elect to terminate this lease. When such fire, casualty or taking
renders the leased premises substantially unsuitable for their intended use, a
just and proportionate abatement of rent shall be made, and LESSEE may elect to
terminate this lease if: (a) LESSOR fails to give written notice within thirty
(30) days of intention to restore the leased premises or (b) LESSOR fails to
restore the leased premises to a condition substantially suitable for their
intended use within ninety (90) days of said fire, casualty or taking. LESSOR
reserves all rights for damages or injury to the leased premises for any taking
by eminent domain, except for damage to LESSEE's property or equipment.
17. BROKERAGE. LESSEE warrants and represents to LESSOR that LESSEE has
dealt with no broker except Robert Richards of Fallen Hines & O'Connor or third
person with respect to this lease and LESSEE agrees to indemnify LESSOR against
any brokerage claims arising by virtue of this lease. LESSOR warrants and
represents to LESSEE that LESSOR has employed no exclusive broker or agent in
connection with the letting of the leased premises.
18. SIGNS. LESSOR authorizes, and LESSEE at LESSEE's expense agrees to
erect, one exterior metal letters sign on the front of the leased premises,
consistent in style, size, location, etc. with other signs of nearby tenants.
LESSOR also authorizes LESSEE, if desired, to display one sign on the office
entrance door consistent with similar signs of other tenants. LESSEE shall
obtain the written consent of LESSOR before erecting any other sign on the
leased premises, and shall obtain prior written approval as to size, wording,
and location of all authorized signs. LESSOR may remove and dispose of any sign
not approved, erected or displayed in conformance with this provision.
<PAGE>
19. DEFAULT AND ACCELERATION OF RENT. In the event that: (a) LESSEE shall
default in the observance or performance of any of LESSEE's covenants,
agreements, or obligations hereunder, other than monetary payments as provided
below, and such default shall not be corrected within [Illegible] days after
written notice thereof, [Illegible]... then LESSOR shall have the right
thereafter, while such default continues and without demand or further notice,
to re-enter and take possession of the leased premises, to declare the term of
this lease ended, and to remove LESSEE's effects, without being guilty of any
manner of trespass, and without prejudice to any remedies which might be
otherwise used for arrears of rent or other default or breach of the lease. If
LESSEE shall default in the payment of the security deposit, rent, taxes, or any
substantial invoice for goods and/or services or other sum herein specified, and
such default shall continue for ten (10) days after written notice thereof, and,
because both parties agree that nonpayment of said sums when due is a
substantial breach of the lease, and, because the payment of rent in monthly
installments is for the sole benefit and convenience of LESSEE, then in addition
to the foregoing remedies, an amount equal to the lesser of one year's rent at
the then current rate or the amount of rent due through the remainder of the
then current lease term shall become immediately due and payable as liquidated
damages. LESSOR, without being under any obligation to do so and without thereby
waiving any default, may remedy same for the account and at the expense of
LESSEE, except for rental payments. If LESSOR pays or incurs any obligations for
the payment of money in connection therewith, such sums paid or obligations
incurred plus interest and costs, shall be paid to LESSOR by LESSEE as
additional rent. Any sums received by LESSOR from or on behalf of LESSEE at any
time shall be applied first to any unamortized improvements completed for
LESSEE's occupancy, then to offset any outstanding invoice or other payment due
to LESSOR, with the balance applied to outstanding rent. LESSEE agrees to pay
reasonable attorney's fees and/or administrative costs incurred by LESSOR in
enforcing any or all obligations of LESSEE under this lease at any time.
20. NOTICE. Any notice from LESSOR to LESSEE relating to the leased
premises or to the occupancy thereof shall be deemed duly served when served by
constable, or sent to the leased premises by certified mail, return receipt
requested, postage prepaid, addressed to LESSEE. Any notice from LESSEE to
LESSOR relating to the leased premises or to the occupancy thereof shall be
deemed duly served when served by constable, or delivered to LESSOR by certified
mail, return receipt requested, postage prepaid, addressed to LESSOR at 200 West
Cummings Park, Woburn, MA 01801 or at LESSOR's last designated address. No oral
notice or representation shall have any force or effect. Time is of the essence
in service of any notice.
21. OCCUPANCY. In the event that LESSEE takes possession of said leased
premises prior to the start of said term, LESSEE will perform and observe all of
LESSEE's covenants from the date upon which LESSEE takes possession except the
obligation for the payment of extra rent for any period of less than one month.
LESSEE shall not remove LESSEE's goods or property from the leased premises
other than in the ordinary and usual course of business, without having first
paid and satisfied LESSOR for all rent which may become due during the entire
term of this lease. In the event that LESSEE continues to occupy or control all
or any part of the leased premises after the agreed termination of this lease
without the written permission of LESSOR, then all other terms of this lease
shall continue to apply except that rent shall be due in full monthly
installments at a rate of one hundred seventy five (175) percent of that which
would otherwise be due under this lease, it being understood between the parties
that such extended occupancy is as a tenant at sufferance and is solely for the
benefit and convenience of LESSEE and as such has greater rental value. LESSEE's
control or occupancy of all or any part of the leased premises beyond noon on
the last day of any monthly rental period shall constitute LESSEE's occupancy
for an entire additional month, and increased rent as provided in this section
shall be due and payable immediately in advance. LESSOR's acceptance of any
payments from LESSEE during such extended occupancy shall not alter LESSEE's
status as a tenant at sufferance.
22. FIRE PREVENTION. LESSEE agrees to use every reasonable precaution
against fire and agrees to provide and maintain approved, labeled fire
extinguishers, emergency lighting equipment, and exit signs and complete any
other modifications within the leased premises as required or recommended by the
Insurance Services Office (or successor organization), OSHA, the local Fire
Department, or any similar body.
23. OUTSIDE AREA. No goods, equipment, or things of any type or
description shall be held or stored outside the leased premises at any time
without prior written consent from LESSOR. Any goods, equipment or things left
outside the leased premises without LESSOR's prior written consent shall be
deemed abandoned and may be removed at LESSEE's expense without notice by
LESSOR. A single two-yard capacity dumpster is hereby authorized for the
disposal of trash, provided that the location of said receptacle is approved by
LESSOR. LESSEE agrees to have said container provided and serviced at its
expense by whichever disposal firm may from time to time be designated by
LESSOR. If a dumpster is provided on a shared cost basis, LESSEE shall pay its
proportionate share of the costs associated with said dumpster.
24. ENVIRONMENT. LESSEE will so conduct and operate the leased premises as
not to interfere in any way with the use and enjoyment at other portions of the
same or neighboring buildings by others by reason of odors, smoke, smells,
noise, pets, accumulation of garbage or trash, vermin or other pests, or
otherwise, and will at its expense employ a professional pest control service if
necessary. LESSEE agrees to maintain efficient and effective devices for
preventing damage to heating equipment from solvents, degreasers, cutting oils,
propellants, etc. which may be present at the leased premises. Except in
connection with LESSEE's operations in the leased premises, provided that LESSEE
complies, no hazardous materials or wastes shall be stored, disposed of, or
allowed to remain at the leased premises at any time, and LESSEE shall be solely
responsible for any and all corrosion or other damage associated with the use,
storage and/or disposal of same by LESSEE.
25. RESPONSIBILITY. Except in the case of LESSOR's negligence, willful
misconduct or default in its obligations under this lease, neither LESSOR nor
OWNER shall be held liable to anyone for loss or damage caused in any way by the
use, leakage, seepage or escape of water from any source, or for the cessation
of any service rendered customarily to said premises or buildings, or agreed to
by the terms of this lease, due to any accident, the making of repairs,
alterations or improvements, labor difficulties, weather conditions, mechanical
breakdowns, trouble or scarcity in obtaining fuel, electricity, service or
supplies from the sources from which they are usually obtained for said
building, or any cause beyond LESSOR's immediate control.
26. SURRENDER. LESSEE shall at the termination of this lease remove all of
LESSEE's goods and effects from the teased premises. LESSEE shall deliver to
LESSOR the leased premises and all keys and locks thereto, all fixtures and
equipment connected therewith, and all alterations, addition and improvements
made to or upon the leased premises, including but not limited to any offices,
partitions, window blinds, floor coverings (including computer floors). plumbing
and plumbing fixtures, air conditioning equipment and ductwork of any type,
exhaust fans or heaters, water coolers. burglar alarms, telephone wiring, air or
gas distribution piping, compressors, overhead cranes, hoists, trolleys or
conveyors, counters shelving or signs attached to walls or floors, all
electrical work, including but not limited to lighting fixtures of any type,
wiring, conduit, EMT, transformers, distribution panels, bus ducts, raceways,
outlets and disconnects, and furnishings or equipment which have been bolted,
welded, nailed, screwed, glued or otherwise attached to any wall, floor or
ceiling, or which have been directly wired to any portion of the electrical
system or which have been plumbed to the water supply, drainage or venting
systems serving the leased premises, and LESSEE shall deliver the leased
premises sanitized from any chemicals or other contaminants, and broom clean and
in the same condition as they were at the commencement of this lease or any
prior lease between the parties for the leased premises, or as they were
modified during said term, reasonable wear and tear and damage by fire or other
casualty only excepted. In the event of LESSEE's failure to remove any of
LESSEE's property from the leased premises upon termination of the lease, LESSOR
is hereby authorized, without liability to LESSEE for loss or damage thereto,
and at the sole risk of LESSEE, to remove and store any such property at
LESSEE's expense, or to retain same under LESSOR's control, or to sell at public
or private sale, upon notice to Lessee, any or all of the property not so
removed and to apply the net proceeds of such sale to the payment of any sum due
hereunder, or to destroy such abandoned property. In no case shall the leased
premises be deemed surrendered to LESSOR until the termination date provided
herein or such other date as may be specified in a written agreement between the
parties, notwithstanding the delivery of any keys to LESSOR.
<PAGE>
27. GENERAL. (a) The invalidity of any provision of this lease [illegible]
provision hereof. (b) The obligations of this lease shall run with the land, and
this lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that LESSOR and OWNER shall
be liable only for obligations occurring while lessor, owner, or master lessee
of the premises. (c) Any action or proceeding arising out of the subject matter
of this lease shall be brought by LESSEE within two years after the cause of
action has occurred except for any third party actions by LESSEE against LESSOR
and only in a court of the Commonwealth of Massachusetts. (d) If LESSOR is
acting under or as agent for any trust or corporation, the obligations of LESSOR
shall be binding upon the trust or corporation, but not upon any trustee,
officer, director, shareholder, or beneficiary of the trust or corporation
individually. (e) If LESSOR is not the owner (OWNER) of the leased premises,
LESSOR represents that said OWNER as identified below has agreed to be bound by
the terms of this lease. (f) This lease is made and delivered in the
Commonwealth of Massachusetts, and shall be interpreted, construed, and enforced
in accordance with the laws thereof. (g) This lease was the result of
negotiations between parties of equal bargaining strength, and when executed by
both parties shall constitute the entire agreement between said parties. No
other oral or written representation shall have any effect hereon, and this
agreement may not be altered, extended or amended except by written agreement
attached hereto or as otherwise provided herein. (h) Notwithstanding any other
statements herein, LESSOR makes no warranty, express or implied, concerning the
suitability of the leased premises for LESSEE's intended use. (i) LESSEE agrees
that if LESSOR does not deliver possession of the leased premises as herein
provided for any reason, LESSOR shall not be liable for any damages to LESSEE
for such failure, but LESSOR agrees to use due diligence to obtain possession
for LESSEE at the earliest possible date, and a proportionate abatement of rent
for such time as LESSEE may be deprived of possession of said leased premises
shall be LESSEE's sole remedy. (j) Neither the submission of this lease form,
nor the prospective acceptance of the security deposit and/or rent shall
constitute a reservation of or option for the leased premises, or an offer to
lease, it being expressly understood and agreed that this lease shall not bind
either party in any manner whatsoever until it has been executed by both
parties. (k) LESSEE shall not be entitled to exercise any option contained
herein if LESSEE is in default of any terms or conditions hereof. (l) The
headings in this lease are for convenience only and shall not be considered part
of the terms hereof. (m) No endorsement by LESSEE on any check shall bind LESSOR
in any way.
28. SECURITY AGREEMENT.
This Paragraph Does Not Apply
29. WAIVERS, ETC. No consent or waiver, express or implied, by LESSOR, to
or of any breach of any covenant, condition or duty of LESSEE shall be construed
as a consent or waiver to or of any other breach of the same or any other
covenant, condition or duty. If LESSEE is several persons, several corporations
or a partnership, LESSEE's obligations are joint or partnership and also
several. Unless repugnant to the context, "LESSOR" and "LESSEE" mean the person
or persons, natural or corporate, named above as LESSOR and as LESSEE
respectively, and their respective heirs, executors, administrators, successors
and assigns.
30. AUTOMATIC FIVE-YEAR EXTENSIONS.
This Paragraph Does Not Apply
31. ADDITIONAL PROVISIONS. (Continued on attached rider if necessary.)
- See Attached Rider -
IN WITNESS WHEREOF, LESSOR AND LESSEE have hereunto set their hands and common
seals and intend to be legally bound hereby this 2nd day of November, 1993.
LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC. LESSEE: SCRIPTECH
PHARMACEUTICALS, INC.
as agent for BEAUTYREST PROPERTY, INC. & WRB, INC.
By: /S/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
-------------------- -------------------
President President
GUARANTY
This Paragraph Does Not Apply
<PAGE>
CUMMINGS PROPERTIES MANAGEMENT, INC.
STANDARD FORM
RIDER TO LEASE
The following additional provisions are incorporated into and made a part of the
attached lease:
A. LESSOR, if requested to do so by LESSEE, and at LESSEE's sole expense,
shall complete up to $624,870.00 in alterations necessitated by LESSEE's
use of the leased premises according to a plan and at a cost to be
mutually agreed upon by both parties. LESSEE shall pay LESSOR $208,000.00
of the agreed cost prior to the commencement of said work. At LESSEE's
request, the balance of the cost of said alterations up to the agreed
maximum may be incorporated into the lease by separate amendment to be
attached hereto, amortized and then paid for by LESSEE in the same manner
as base rent which shall otherwise be due.
B. Notwithstanding the provisions of Section 1 hereinabove, LESSEE shall pay
to LESSOR upon LESSEE's execution of this lease the sum of $105,308.00 as
pre-paid rent to be applied in equal monthly installments of $8,775.67
each to LESSEE's monthly rental payments during the first year of the
lease term. In addition, LESSEE shall pay any "Cost of Living" adjustment
on the base rent set forth in Section 1 for the period January 1, 1994
through October 31, 1994 within ten (10) days following notice from LESSOR
of any such adjustment.
C. Notwithstanding the commencement date herein, the parties acknowledge that
the leased premises will not be available for LESSEE's occupancy until
after the commencement date. Notwithstanding the delay in delivery of the
leased premises, LESSEE's obligation to pay rent in full accordance with
Section 1 shall commence November 1, 1993.
D. * Provided LESSEE is not then in default of this lease or in arrears of
any rent or invoice payment, LESSEE shall have the right to extend this
lease, including all terms, conditions, escalations, etc., for one
additional period of five (5) years ("the extended lease term") by serving
LESSOR with written notice of its desire to so extend the lease. The time
for serving such written notice shall be not more than twelve (12) months
or less than six (6) months prior to the expiration of the initial lease
term. Time is of the essence.
E. Rent during the extended lease term shall be paid in full accordance with
Section 1, including all "Cost of Living" adjustments.
F. With respect to Section 8, LESSOR shall perform its maintenance and
repairs with duly qualified contractors, which will be deemed to include
LESSOR's employees.
G. With respect to Section 9, if the cost of any non-structural alteration
does not, in an individual situation, exceed $10,000.00, LESSOR's consent
shall not be required provided said alteration conforms with LESSOR's
construction specifications.
H. Notwithstanding the provisions of Section 10, LESSEE may, without the
requirement of obtaining LESSOR's consent but upon written notice to
LESSOR, assign this lease or sublease all or any portion of the leased
premises to any entity which is the parent of LESSEE, a majority-owned
subsidiary of LESSEE, an entity under common control with LESSEE or any
entity with which LESSEE may merge or consolidate or to which LESSEE may
sell all or substantially all of its assets as a going concern, including,
without limitation, any joint venture of which LESSEE is a partner.
I. LESSOR represents that the leased premises are not presently encumbered by
any mortgage of record.
J. * LESSEE's agreement to subordinate this lease to any and all mortgages
and/or other instruments in the nature of a mortgage, now or at any time
hereafter, is conditional upon the mortgagee's agreement that LESSEE's
possession will not thereafter be disturbed so long as LESSEE is not in
default in the payment of rent or other covenants or obligations thereof.
K. Notwithstanding any terms or provisions of this lease to the contrary, in
the event the leased premises shall lack any services (including repairs)
required to be provided by LESSOR hereunder for any cause within LESSOR's
reasonable control and such lack of service shall continue for seven (7)
consecutive days, and LESSEE shall be unable to use any material portion
of the leased premises on account thereof, thereafter there shall be a
proportionate abatement of the rent and additional rent hereunder,
according to the extent of such loss of use, until such service shall
resume.
L. If LESSOR elects to accelerate the rent on account of a substantial breach
of the lease and full liquidated damages are paid by LESSEE pursuant to
Section 19 of the lease, then the lease will terminate without further
recourse by the parties for any further rent due.
M.(1) During the initial term of this lease (only), LESSEE shall have a
continuing right (the "Option Right") to lease space contiguous to the
leased premises (the "Contiguous Space") (it being agreed that the
Contiguous Space shall include all space contiguous to the leased premises
on the same floor as the leased premises and all space contiguous to the
leased premises on the floors immediately above and immediately below the
leased premises, all as shown on the attached plan marked as Exhibit A) in
the building of which the leased premises are a part as such space becomes
available for leasing directly from LESSOR, subject to the rights of
lessees of such space to extend or otherwise renegotiate their leases.
LESSOR shall notify LESSEE of the availability of any Contiguous Space
within a reasonable time after the same becomes available for leasing
directly from LESSOR. LESSEE shall have seven (7) days from receipt of
each notice from LESSOR regarding the availability of such space to
execute an amendment to this lease in order to add such additional space
to the leased premises hereunder at the base rent set forth below. LESSEE
may extend said seven-day period for an additional seven days (only) by
serving LESSOR with written notice to that effect prior to the end of the
initial seven-day period.
(2) If, after receiving notice of the availability of such space from LESSOR,
LESSEE does not elect to lease such space and LESSOR does not lease such
space to others within the nine (9) month period after LESSOR's notice to
LESSEE that such space is available for leasing, then LESSOR shall
renotify LESSEE of the availability of such space upon the expiration of
such nine (9) month period whereupon LESSEE's rights to lease such space
set forth above shall be revived, it being agreed that such obligation to
notify LESSEE of the availability of such space shall be renewed every
nine (9) month period thereafter unless and until such space is leased to
others. Notwithstanding the foregoing, for the first nine (9) month period
of the lease term from November 1, 1993 through July 31, 1994, the Option
Right shall not apply to any portion of the Contiguous Space that is both
presently vacant and
<PAGE>
available for leasing directly by LESSOR to others until after such space
is next leased to others.
(3) If at any time during the initial lease term, LESSEE elects to lease any
portion of the Contiguous Space, LESSEE shall be entitled to lease it at
the following base rent: (i) if the space is unimproved, LESSEE shall have
the right to lease the Contiguous Space at the same base rent set forth
for the leased premises in Section 1 of this lease; or (ii) if the space
is finished (i.e., it has been improved with tenant improvements), the
base rent shall be an average of the base rent agreed to by LESSOR in the
last three (3) lease transactions entered into by LESSOR immediately prior
to LESSOR's then current notice to LESSEE of the availability of the
Contiguous Space, it being agreed, however, that the lease transactions
that are used to calculate such average must be for space that is
similarly improved to that of the finished Contiguous Space then available
for leasing by LESSEE.
N. Commencing November 1, 1993, and continuing during the initial lease term
(only), in consideration for the Option Right, LESSEE shall be obligated
to pay to LESSOR on an annual basis a fee (the "Option Fee") of $10,000,
payable quarterly in advance in equal installments on the first day of
each November, February, May and August, except that the first quarterly
installment shall be due upon LESSEE's execution of this lease. LESSEE's
failure to pay any installment within ten (10) days of its due date
automatically void the Option Right without the requirement of any notice
from LESSOR.
0. Notwithstanding the foregoing provisions of Paragraph M above, LESSEE
shall have the right, exercisable at any time during the initial lease
term, to revoke the Option Right by written notice (the "Revocation
Notice") to LESSOR, whereupon as of the end of the next full paid quarter
following LESSOR's receipt of the Revocation Notice, LESSEE shall no
longer have the Option Right and shall no longer have any obligation to
pay the Option Fee.
P. Nothwithstanding the provisions of Section 26, LESSEE may remove the
following items supplied by LESSEE prior to the termination date of the
lease provided LESSEE has satisfactorily complied with all other
conditions of this lease, is not in default of the lease or in arrears of
any rent or invoice payments, repairs any and all damage resulting from
such removal and otherwise restores the leased premises to its condition
prior to installation of said items:
(1) Hoods, including cabinets and integral countertop below;
(2) Acid Neutralization System (entire system only);
(3) Cold Room
(4) Vacuum Pump
(5) Air Compressor
(6) DI Water System (entire system only)
(7) Emergency Generator (including transfer switch)
Q. The leased premises consist of 14,440 square feet (including 9.6% common
area) at Suite 3000 and 1,000 square feet including 9.6% common area) at
Suite G600.
LESSOR: LESSEE:
CUMMINGS PROPERTIES MANAGEMENT, INC. SCRIPTECH PHARMACEUTICALS, INC.
as agent for BEAUTYREST PROPERTY, INC.
& WRB, INC.
By: /s/ [Illegible] By: /s/ Barry Weinberg
----------------------------- ----------------------------
President Barry Weinberg, President
Date: 11/2/93
---------------------------
<PAGE>
CUMMINGS PROPERTIES MANAGEMENT, INC. 893481-FDK
STANDARD FORM
AMENDMENT TO LEASE #1
In connection with a lease currently in effect between the parties at 200
Boston Avenue, Suites 3000 & G600, Medford, Massachusetts, commencing on
November 1, 1993 and terminating October 30, 1998, and in consideration of
the mutual benefits to be derived herefrom, Cummings Properties
Management, Inc., LESSOR, and ScripTech Pharmaceuticals, Inc., LESSEE,
hereby agree to amend said lease as follows:
1. LESSOR, at LESSEE's sole cost and expense, shall complete alterations and
improvements within the leased premises in accordance with the mutually
agreed upon plan and specifications attached hereto ("LESSOR's work"). The
total cost of LESSOR's work as set forth therein shall be $624,870.00.
LESSEE shall pay $208,000.00 of the total cost ("the Initial Work
Payment") upon LESSEE's execution of this Amendment, and LESSOR shall
amortize the balance on a straight line basis (including interest) as
additional rent as provided below. All plans for LESSOR's work shall be
prepared at LESSOR's sole cost and expense.
2. If any agreed changes or additions to the scope of work requested by
LESSEE result in increased cost, LESSEE shall pay the cost of said changes
or additions immediately upon substantial completion of LESSOR's work.
Upon receipt of LESSEE's request for said changes or additions, LESSOR
shall promptly notify LESSEE of LESSOR's estimate of the cost (if any) to
make such change or additions.
3. LESSOR shall perform LESSOR's work in a good and workmanlike manner.
LESSOR shall deliver the leased premises to LESSEE in compliance with all
laws including, without limitation, the Americans With Disabilities Act,
including all regulations promulgated pursuant thereto.
4. Notwithstanding anything to the contrary contained in the lease, LESSEE's
obligation to reimburse LESSOR for the $416,870.00 advanced by LESSOR
shall survive the termination of the lease for any cause whatsoever, and
shall be in addition to any remedies available to LESSOR under the lease
or any other damages due LESSOR in the event of any default by LESSEE
under the lease. Notwithstanding anything to the contrary contained in
this Amendment, LESSEE shall have the right to prepay such $416,870.00
amount without any penalty or premium, either in total or in part, at any
time during the lease term.
5. During the first year of the lease term, in addition to the pre-paid rent
provided for in Paragraph B of the Rider to Lease, LESSEE shall pay to
LESSOR $9,904.80 per month as additional rent in accordance with Section 1
for the amortized cost of improvements as provided herein. The first such
monthly payment shall be due upon LESSEE's execution of this lease
amendment.
6. LESSOR shall use reasonable efforts to substantially complete, and to
deliver to LESSEE possession of, the office portion of the leased premises
within four (4) weeks following the later of (a) November 1, 1993 and (b)
full execution of this Amendment, approval of final plans and
specifications and full payment of the amounts due under Paragraph B of
the Rider to Lease and Paragraph 1 above, and the laboratory portion
within an additional sixteen (16) weeks thereafter. LESSEE my have access
to the office and laboratory portions of the leased premises prior to
their respective completion in order to ready them for LESSEE's occupancy,
provided that LESSEE does not in any way interfere with or delay LESSOR's
work. If for any reason other than delay requested or caused by LESSEE,
LESSOR's work is not substantially completed within the aforesaid twenty
(20) week period, then LESSEE shall be entitled to receive from LESSOR a
rent abatement in an amount equal to one day's rent (less that portion of
the rent added hereinbelow for the amortized improvements) for each day
beyond such twenty week period that LESSOR's substantial completion of
LESSOR's work is delayed.
7. Upon substantial completion of both the office portion and the laboratory
portion of LESSOR's work, LESSOR and LESSEE shall compile a separate
punchlist of incomplete items (which are minor in nature) for each
portion, and LESSOR shall use reasonable efforts to complete such items
within thirty (30) days thereafter for each portion.
8. If LESSOR's work is not completed and a certificate of occupancy for the
entire leased premises is not obtained by LESSOR within one (1) year after
the commencement date of the lease, LESSEE shall have the right to
terminate the lease without recourse to the parties, except that upon such
termination LESSOR shall return to LESSEE (a) any unused portion of the
Initial Work Payment and (b) the balance, if any, of pre-paid rent (paid
pursuant to Paragraph B of the Rider to Lease) remaining after deduction
of any accrued rent and any costs incurred by LESSOR for LESSOR's work in
excess of the Initial Work Payment.
All other terms, conditions and covenants of the present lease shall
continue to apply except that adjusted base rent during the initial
five-year term of the lease shall be increased by $118,857.60 annually,
from a total of $105,308.00 to a new annual total of $224,165.60, or
$18,680.47 per month. Annual base rent for purposes of computing any
future "Cost of Living" escalations thereon shall be $105,308.00. This
amendment shall be effective immediately and shall continue through the
balance of the lease and any extensions thereof unless further modified by
written amendment(s).
In Witness Whereof, LESSOR and LESSEE have hereunto set their hands
and common seals this 2nd day of November 1993.
LESSOR: LESSEE:
CUMMINGS PROPERTIES MANAGEMENT, INC. SCRIPTECH PHARMACEUTICALS, INC.
as agent for BEAUTYREST PROPERTY, INC.
& WRB, INC.
By: /s/ [Illegible] By: /s/ Barry Weinberg
----------------------------- ----------------------------
Barry Weinberg, President
<PAGE>
EXHIBIT 11.1
SCRIPTGEN PHARMACEUTICALS, INC.
COMPUTATION OF UNAUDITED PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- -----------------
<S> <C> <C>
Net loss........................................................................ $ (4,044,019) $ (4,775,456)
Weighted average shares outstanding:
a. Shares attributable to common stock outstanding............................ 1,142,114 1,325,514
b. Shares attributable to certain common stock options, warrants and
redeemable convertible preferred stock (1).................................. 929,582 929,582
c. Shares attributable to the assumed conversion of Series A, B and C
redeemable convertible preferred stock outstanding upon closing of initial
public offering............................................................. 4,825,555 5,179,531
------------- -----------------
Unaudited pro forma weighted average common and common equivalent shares
outstanding................................................................... 6,897,251 7,434,627
------------- -----------------
------------- -----------------
Unaudited pro forma net loss per share.......................................... $ 0.59 $ 0.64
------------- -----------------
------------- -----------------
</TABLE>
- ------------------------
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common stock, common stock options, warrants and redeemable convertible
preferred stock issued during the twelve months prior to the Company's
initial Registration Statement on Form S-1 have been included in the above
computation as if outstanding for the entire period, even if such impact is
anti-dilutive.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated October 31, 1997,
relating to the financial statements of Scriptgen Pharmaceuticals, Inc., which
appears in such Prospectus. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Prospectus. However, it
should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Financial Data."
[Signature]
Price Waterhouse LLP
Boston, Massachusetts
November 19, 1997
<PAGE>
[LETTERHEAD]
Exhibit 23.3
CONSENT OF DARBY & DARBY P.C.
We hereby consent to being named under the heading "Experts" in the
Prospectus constituting part of this Registration statement on Form S-1 with
respect to information contained under the captions "Risk Factors--Uncertainty
of Patents and Proprietary Rights" and "Business--Patents and Proprietary
Technology."
/s/ Peter Ludwig
- -------------------------
Darby & Darby, P.C.
New York, New York
November 19, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 1,314,305 196,638
<SECURITIES> 3,023,932 867,519
<RECEIVABLES> 136,715 144,547
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 4,520,155 1,242,913
<PP&E> 2,469,725 3,017,646
<DEPRECIATION> 1,352,011 1,885,308
<TOTAL-ASSETS> 5,476,711 2,478,086
<CURRENT-LIABILITIES> 1,169,822 2,442,491
<BONDS> 0 0
20,279,348 20,279,348
0 0
<COMMON> 12,865 13,735
<OTHER-SE> (16,084,069) (20,703,074)
<TOTAL-LIABILITY-AND-EQUITY> 5,746,711 2,478,086
<SALES> 1,206,620 604,784
<TOTAL-REVENUES> 1,206,620 604,784
<CGS> 800,835 261,299
<TOTAL-COSTS> 800,835 261,299
<OTHER-EXPENSES> 4,844,854 5,118,941
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 138,878 103,514
<INCOME-PRETAX> (4,044,019) (4,775,456)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,044,019) (4,775,456)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,044,019) (4,775,456)
<EPS-PRIMARY> (0.59) (0.64)
<EPS-DILUTED> (0.59) (0.64)
</TABLE>
