<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1998
REGISTRATION NO. 333-40687
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
------------------------
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 January 8, 1998
- --------------------------------------------------------------------------------
3,000,000 Shares
[LOGO]
SCRIPTGEN PHARMACEUTICALS, INC.
Common Stock
------------------------------------------------------------
All of the 3,000,000 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
$11.00 and $13.00 per share. See "Underwriting" for the factors to be considered
in determining the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National Market
under the symbol "SCRP."
Concurrent with the Offering, Hoechst Marion Roussel has agreed to purchase
250,000 shares of Common Stock directly from the Company (assuming an initial
public offering price of $12.00), 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 7-17.
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 Commissions(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 $1,050,000.
(3) THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
450,000 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'S DRUG DISCOVERY PROCESS
GATE IDENTIFIES AND VALIDATES
GENE TARGETS
[GRAPHICAL DEPICTION OF TARGET RNA
AND TARGET PROTEIN]
ATLAS AND SCAN RAPIDLY SCREEN
LARGE COMPOUND LIBRARIES
[GRAPHICAL DEPICTION OF COMPOUND LIBRARY]
ATLAS AND SCAN IDENTIFY
COMPOUNDS THAT BIND TO
TARGET RNA TARGET PROTEIN
[GRAPHICAL DEPICTIONS OF COMPOUNDS
BINDING TO TARGETS]
BIOLOGICAL ASSAYS IDENTIFY LEAD
COMPOUNDS FOR DEVELOPMENT AS
DRUG CANDIDATES
[GRAPHICAL DEPICTIONS OF LEAD
COMPOUNDS]
Scriptgen's present and future drug candidates will require marketing approval
from the FDA.
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."
2
<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, SERIES C PREFERRED STOCK AND SERIES D 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 targets'
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 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
3
<PAGE>
receive payments when and if certain milestones are achieved and
royalties on the sales of any new drug resulting from the collaboration.
BIOCHEM PHARMA INC. Scriptgen is using its technology platform to
identify drug candidates which are (i) active against the Hepatitis B
virus (the "HBV Program") and (ii) which act as small molecule mimics of
therapeutic proteins (the "Dimerescent Program"). Scriptgen will be
responsible for all aspects of drug discovery. BioChem Pharma Inc.
(together with its wholly owned subsidiary, BioChem Pharma Holdings
Inc., "BioChem") will be responsible for pre-clinical and clinical
development, and will retain worldwide commercialization rights. The
Company will receive milestone payments when and if BioChem exercises
options on drug candidates in the Dimerescent Program. The companies
will share any profits generated by the HBV Program or the Dimerescent
Program according to the terms of the agreement. In addition, BioChem
acquired $20 million of preferred stock of Scriptgen and a warrant to
purchase shares of Common Stock.
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 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.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......................... 3,000,000 shares
Common Stock to be outstanding after the Offering........... 11,665,976 shares (1)(2)
Use of proceeds............................................. To fund research and
development and for general
corporate purposes, including
working capital.
Nasdaq National Market Symbol............................... SCRP
</TABLE>
- --------------
(1) Includes an aggregate of 250,000 shares of Common Stock (based on an assumed
initial public offering price of $12.00 per share) to be issued to HMR in
the Private Placement. Excludes: (i) 792,877 shares of Common Stock issuable
upon exercise of outstanding options at a weighted average exercise price of
$1.75 per share, (ii) 464,537 shares of Common Stock issuable at an exercise
price of $13.47 per share upon exercise of an outstanding warrant (the
"BioChem Warrant"), (iii) 49,763 shares of Common Stock issuable upon
exercise of an outstanding warrant at an exercise price of $3.07 per share
and 32,525 shares of Common Stock issuable upon exercise of an outstanding
warrant at an exercise price of $5.53 per share and (iv) 1,950,000 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 1997
Equity Incentive Plan (the "1997 Plan") and Non-Employee Directors Stock
Plan (the "Directors' Plan"). See "Certain Transactions--BioChem Offering,"
"Management--Employment Agreements," "--Stock Options," "--Employee Benefit
Plans--1997 Equity Incentive Plan," "--Non-Employee Directors Stock Plan"
and "--1994 Stock Option Plan," "Description of Capital Stock--Warrants" and
Notes 6, 8 and 10 of Notes to Financial Statements.
(2) In the event that the initial public offering price is less than $10.76 per
share, the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of Common Stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145. See "Certain Transactions--BioChem Offering."
------------------------
"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>
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)
------ --------- --------- --------- --------- ----------- -----------
------ --------- --------- --------- --------- ----------- -----------
Net loss per share (1).................. $ (0.21) $ (0.98) $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------ --------- --------- --------- --------- ----------- -----------
------ --------- --------- --------- --------- ----------- -----------
Weighted average common and common
equivalent shares outstanding (1)..... 2,556 2,607 3,435 3,591 3,360 3,374 3,528
------ --------- --------- --------- --------- ----------- -----------
------ --------- --------- --------- --------- ----------- -----------
Pro forma net loss per share (unaudited)
(1)................................... $ (0.49) $ (0.53)
--------- -----------
--------- -----------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited) (1)....................... 8,186 9,069
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
--------- ------------- --------------
BALANCE SHEET DATA:
Cash and cash equivalents............................................... $ 197 $ 20,858 $ 56,288
Working capital......................................................... (1,200) 18,800 54,230
Total assets............................................................ 2,478 22,478 57,908
Noncurrent portion of capital lease obligations......................... 501 501 501
Redeemable convertible preferred stock.................................. 20,279 -- --
Accumulated deficit..................................................... (21,169) (23,436) (23,436)
Total stockholders' equity (deficit).................................... (20,744) 19,535 54,965
</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) Pro forma to give effect to the issuance of Series D Preferred Stock
(convertible into 1,858,145 shares of Common Stock) to BioChem for
consideration of $20 million (the "BioChem Offering") and the application of
the proceeds therefrom, the value of the BioChem Warrant, the retirement of
358,748 shares of treasury stock and the conversion of the Series A, B, C
and D Preferred Stock into shares of Common Stock upon the closing of the
Offering. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) Adjusted to give effect to: (i) the sale of 3,000,000 shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price
of $12.00 per share) and the application of the net proceeds therefrom and
(ii) the sale of 250,000 shares of Common Stock (at an assumed offering
price of $12.00 per share) to HMR in the Private Placement and the
application of the net proceeds therefrom. See "Use of Proceeds."
6
<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
7
<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
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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, the Private Placement and the
BioChem 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."
RISK OF EXPANDING OPERATIONS AND 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 AND ANNUAL 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.
Furthermore, the Company expects to incur a non-cash charge in the fourth
quarter of 1997, and may incur an additional non-cash charge in the first
quarter of 1998, resulting from the issuance of the BioChem Warrant. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 6 and 10 of Notes to Financial Statements.
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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 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
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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
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."
USE OF 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.
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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. 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 $32,430,000 ($37,452,000 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 and the Private
Placement, together with the proceeds from the BioChem 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. The Common Stock has been approved for quotation
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
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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."
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 $7.29 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 (assuming that a
representative of BioChem is elected to the Board of Directors following
completion of the Offering as contemplated in a stockholders' agreement) will
beneficially own approximately 42.2% 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.
BioChem has agreed with the Company that for a period of five years following
the closing of the BioChem Offering, BioChem will not own securities
representing more than 25% of the votes entitled to be cast generally for the
election of directors or to take, or to assist in taking, steps to effect a
change in control of the Company. See "Management," "Principal Stockholders" and
"Certain Transactions--BioChem Offering."
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
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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 Common Stock in the public market or the
availability of such shares for future sale could adversely affect the market
price of the 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 11,665,976 shares of Common Stock
outstanding (assuming no exercise of outstanding options or warrants). Of these
shares, the 3,000,000 shares sold pursuant to the 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 8,665,976 shares (the "Restricted Shares") (including the 250,000
shares of Common Stock, based on an assumed initial public offering price of
$12.00 per share, sold in the Private Placement and the 1,858,145 shares sold
pursuant to the BioChem Offering) 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 holders of
substantially all of the Common Stock 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, approximately 6,517,737 Restricted Shares will be eligible for sale in
the public market, subject to compliance with Rule 144. Of such shares,
approximately 5,155,584 will be eligible for sale, without limitation, pursuant
to Rule 144(k) or Rule 701 promulgated under the Securities Act, including
approximately 69,789 shares of Common Stock not subject to lock-up agreements
which will be eligible for sale following the Offering. The remaining
approximately 2,148,239 Restricted Shares will become eligible for sale at
various times over a period of six months from the end of the Lock-Up Period. In
addition, any shares issued upon exercise of the Company's outstanding warrants
may be eligible for sale pursuant to Rule 144 at various times following the
expiration of the Lock-Up Period. The Company has granted to certain
securityholders demand and/or piggyback registration rights covering an
aggregate of 8,113,670 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,
Directors' Plan and 1994 Stock Option Plan following completion of the Offering.
See "Shares Eligible for Future Sale" and "Underwriting."
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $12.00 per share, and after deducting underwriting discounts
and commissions and other estimated offering expenses, are estimated to be
approximately $32,430,000 ($37,452,000 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, the Private
Placement and the BioChem Offering 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, the Private
Placement and the BioChem Offering. 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.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1997, (ii) pro forma to give effect to the issuance of the shares
of Series D Preferred Stock and the value of the BioChem Warrant, the retirement
of 358,748 shares of treasury stock, the conversion of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock into shares of Common Stock and the amendment of the Company's Restated
Certificate of Incorporation and (iii) pro forma as adjusted to reflect the sale
by the Company of the 3,000,000 shares of Common Stock offered hereby and the
250,000 shares of Common Stock offered pursuant to the Private Placement
(assuming an initial public offering price of $12.00 per share). 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> <C>
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED(2)(3)
---------- ----------- ----------------
(IN THOUSANDS)
Capital lease obligations, less current portion (1).................... $ 501 $ 501 $ 501
Redeemable convertible preferred stock, $0.01 par value; 21,500,000
shares authorized and 17,036,265 shares issued and outstanding,
actual; 27,250,000 shares authorized and no shares issued and
outstanding, pro forma and pro forma 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, pro forma and pro forma 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;
35,000,000 shares authorized and 8,413,763 shares issued and
outstanding, pro forma; 35,000,000 shares authorized and 11,663,763
shares issued and outstanding, pro forma as adjusted............... 14 84 117
Additional paid-in capital........................................... 3,126 45,547 80,944
Accumulated deficit.................................................. (21,169) (23,436) (23,436)
Unearned compensation................................................ (2,660) (2,660) (2,660)
Treasury stock, at cost (358,748 shares at actual, none pro forma and
pro forma as adjusted)............................................. (55) -- --
---------- ----------- --------
Total stockholders' equity (deficit)............................... (20,744) 19,535 54,965
---------- ----------- --------
Total capitalization............................................. $ 36 $ 20,036 $ 55,466
---------- ----------- --------
---------- ----------- --------
</TABLE>
- --------------
(1) See Note 8 of Notes to Financial Statements for a description of the
Company's capital lease obligations.
(2) Excludes: (i) 792,877 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $1.75 per share,
(ii) 464,537 shares of Common Stock issuable at an exercise price of $13.47
per share upon exercise of the BioChem Warrant, (iii) 49,763 shares of
Common Stock issuable upon exercise of an outstanding warrant at an exercise
price of $3.07 per share and 32,525 shares of Common Stock issuable upon
exercise of an outstanding warrant at an exercise price of $5.53 per share
and (iv) 1,950,000 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 1997 Plan and the Directors' Plan. See "Certain
Transactions-- BioChem Offering," "Management--Employment Agreements,"
"--Stock Options," "Employee Benefit Plans--1997 Equity Incentive Plan,"
"--Non-Employee Directors Stock Plan" and "--1994 Stock Option Plan,"
"Description of Capital Stock-- Warrants" and Notes 6, 8 and 10 of Notes to
Financial Statements.
(3) In the event that the initial public offering price is less than $10.76 per
share, the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of Common Stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145. See "Certain Transactions--BioChem Offering."
19
<PAGE>
DILUTION
As of September 30, 1997, the pro forma net tangible book value of the
Company was approximately $19,535,000, or $2.32 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 (giving effect to the
BioChem Offering). 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 $12.00 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
$54,965,000, or $4.71 per share. This amount represents an immediate increase in
pro forma net tangible book value of $2.39 per share to existing stockholders
and an immediate dilution in net tangible book value of $7.29 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..................... $ 12.00
Pro forma net tangible book value per share as of September 30,
1997............................................................ $ 2.32
Increase per share attributable to new investors(1)............... 2.39
---------
Pro forma net tangible book value per share after the Offering and
the Private Placement............................................. 4.71
---------
Dilution per share to new investors................................. $ 7.29
---------
---------
</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 (giving
effect to the BioChem Offering), 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 $12.00 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...................... 8,413,763 72.1% $ 43,416,000 52.7% $ 5.16
New investors.............................. 3,250,000 27.9 39,000,000 47.3 12.00
------------ ----- ------------- -----
Total...................................... 11,663,763 100.0% $ 82,416,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- --------------
(1) If exercised, the Underwriters' over-allotment option to purchase
450,000 additional shares will further reduce the percentage held by
existing stockholders to 69.5% and increase the percentage held by new
investors to 30.5%.
The foregoing tables exclude as of December 31, 1997: (i) 792,877 shares of
Common Stock issuable upon exercise of outstanding options at a weighted average
exercise price of $1.75 per share, (ii) 464,537 shares of Common Stock issuable
at an exercise price of $13.47 per share upon exercise of the BioChem Warrant,
(iii) 49,763 shares of Common Stock issuable upon exercise of an outstanding
warrant at an exercise price of $3.07 per share and 32,525 shares of Common
Stock issuable upon exercise of an outstanding warrant at an exercise price of
$5.53 per share and (iv) 1,950,000 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 1997 Plan and the Directors' Plan. In the
event that the initial public
20
<PAGE>
offering price is less than $10.76 per share, the Company will be required to
issue to BioChem, for no additional consideration, the number of additional
shares of Common Stock equal to the amount by which (a) 19,993,640 divided by
the initial public offering price, exceeds (b) 1,858,145. See "Certain
Transactions--BioChem Offering," "Management--Employment Agreement," "--Stock
Options," "Employee Benefit Plans--1997 Equity Incentive Plan," "--Non-Employee
Directors Stock Plan" and "--1994 Stock Option Plan," "Description of Capital
Stock--Warrants" and Notes 6, 8 and 10 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
PERIOD FROM YEAR ENDED
INCEPTION TO DECEMBER 31, SEPTEMBER 30,
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)
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
Net loss per share(1).................... $ (0.21) $ (0.98) $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding(1)....... 2,556 2,607 3,435 3,551 3,360 3,374 3,528
------ --------- --------- --------- --------- --------- ---------
------ --------- --------- --------- --------- --------- ---------
Pro forma net loss per share
(unaudited)(1)........................... $ (0.49) $ (0.53)
--------- ---------
--------- ---------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited)(1)........................... 8,186 9,069
--------- ---------
--------- ---------
</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 January 7, 1998, the Company has received approximately
$51,000,000 in funding through the sale of preferred stock and from payments
under the Company's collaborative agreements, and it expects to receive an
additional $3,000,000 upon the closing of the Private Placement. Additionally,
the Company has received approximately $2,500,000 in SBIR grants from the
National Institutes of Health of which approximately $1,300,000 remains
available as of September 30, 1997. 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 Arrangements" and "--Significant Fluctuations
in Quarterly and Annual 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 $3,800,000 funding limit described
above. Eligible grant-related costs which have been incurred in advance of cash
receipts are recorded as receivables.
23
<PAGE>
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 of revenue in
the nine months ended September 30, 1996 under a collaborative agreement with
Boehringer Ingelheim ("Boehringer") which was concluded in 1996 when Boehringer
elected not to continue developing the program to which such agreement related.
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 the collaborative
agreement with Boehringer. 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.
24
<PAGE>
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.
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 for
an initial term of three years, subject to earlier termination six months prior
to the end of such term. 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. The Company expects to
receive additional research and development payments under its collaborative
agreements. 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."
25
<PAGE>
On December 17, 1997 the Company issued to BioChem Pharma Inc. shares of its
Series D Preferred Stock (convertible into 1,858,145 shares of Common Stock) for
consideration of $20,000,000. The Company also issued to BioChem Pharma Inc. a
warrant to purchase 464,537 shares of Common Stock at an exercise price of
$13.47 per share. Subsequent to the closing of the BioChem Offering, such shares
and warrant were transferred to BioChem Pharma Holdings Inc., a wholly owned
subsidiary of Biochem Pharma Inc. The Company will record a non-cash charge of
approximately $2,200,000 associated with the value of such warrant in the fourth
quarter of 1997. The Company may also be required to record an additional
non-cash charge in the first quarter of 1998, the amount of which will be
dependent upon the market price of the Common Stock on the closing date of the
Offering. See "Certain Transactions-- BioChem Offering."
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 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 $300,000 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, the Private
Placement and the BioChem Offering, together with revenue 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. 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,
the Private Placement and the BioChem Offering, together with the Company's
revenue from collaborative agreements, 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."
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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 targets' 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, BioChem, 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, according to
sources cited in an article appearing in the October 1997 Pharmaceutical
Research and Manufacturing Association bulletin, averages 15 years from
inception to FDA approval at a cost of more than $500 million. The article also
states that 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.
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[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.
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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, BioChem, 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. The collaboration agreement with HMR
has an initial term of three
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years, subject to HMR's right to terminate the agreement by giving six months'
written notice at any time after the second year of the agreement. Under such
agreement, Scriptgen has 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 payments which include 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.
BIOCHEM. In December 1997, Scriptgen entered into a collaboration with
BioChem pursuant to which Scriptgen is using its technology to identify drug
candidates which are (i) active against the Hepatitis B virus and (ii) which act
as small molecule mimics of therapeutic proteins by activating dimerization of
certain receptors such as the erythropoietin receptor. The programs will involve
the use of SCAN, ATLAS and other technologies as well as Scriptgen's compound
library. The collaboration agreement with BioChem has an initial term of five
years. Scriptgen is responsible for all aspects of drug discovery and will
provide BioChem with small molecule drug candidates for novel molecular targets
in the HBV and Dimerescent Programs. BioChem is responsible for pre-clinical and
clinical development, and will retain worldwide commercialization rights.
BioChem has options to the Dimerescent Program, and is required to make a
milestone payment to Scriptgen when and if an option is exercised. Any profits
on any commercialized products emanating from the HBV and Dimerescent Programs
will be shared in accordance with the terms of the agreement. BioChem has
exclusive rights to these programs which continue as long as it performs certain
specified obligations under the agreement. In addition, BioChem acquired Series
D Preferred Stock for total consideration of $20 million and the BioChem
Warrant. See "Certain Transactions--BioChem Offering."
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. The collaboration agreement with Eli Lilly has an initial term
of 58 to 64 weeks. Under such agreement, 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 drug candidates
against a cancer-related target identified by Roche. The initial term of the
collaboration agreement with Roche runs through June 1998. 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 collaboration agreement with
Monsanto has an initial term of two years. 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
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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 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.
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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.
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.
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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.
- 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. The Company usually employs the Patent
Cooperation Treaty ("PCT") to file foreign counterparts to its pending U.S.
patent applications. Under the PCT it is possible to defer the filing of
national patent applications in the jurisdictions in which such protection is
being sought until 30 months after the filing date of the corresponding U.S.
patent application, at which time the Company has the option of filing the
national phase patent applications that would be prosecuted according to the
procedures and practices of the respective national patent offices.
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. A notice of
allowance is issued by the USPTO after a patent application has been examined
and it has been found that the applicant is entitled to a patent. The notice
calls for payment of a specified sum constituting the government issue fee which
must
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be paid within three months. The patent is generally granted (issued) several
months after the issue fee has been paid. 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 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 initially applies for patents on many of its inventions by
filing a provisional patent application in the USPTO. The Uruguay Round
Agreements Act (effective June 8, 1995) established a domestic priority system
and a mechanism to enable those seeking to quickly and inexpensively file
provisional applications for their inventions. Unlike regular (non-provisional)
U.S. patent applications, provisional applications do not need claims and no
oath or declaration is required. The specification of the provisional
application must describe the invention in sufficient detail to enable those
skilled in the art to practice the invention. Applicants are entitled to claim
the benefit of the priority of their provisional application in a subsequently
filed regular (non-provisional) U.S. patent application. The domestic priority
period (one year) during which the provisional patent application is pending
does not count in the measurement of the 20-year U.S. patent term. Thus, by
filing provisional applications domestic applicants are placed on an equal
footing with foreign applicants with respect to the patent term and can also
file initial patent applications for their inventions quickly and inexpensively.
Provisional applications are automatically abandoned by the USPTO 12 months
after their filing date. The Company generally converts those provisional
applications that cover subject matter of continuing commercial interest to the
Company
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into regular U.S. patent applications (which claim the priority of the
underlying provisional application) before the end of the 12-month priority
period.
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 a patent application
covering improvements to the synthesis of ST41590. The Company has obtained an
exclusive license to Boston University's rights under such patent application.
The Company acquired certain rights in its ATLAS screening technology
pursuant to an Assignment Agreement with the two inventors of ATLAS (the
"Assignors"), Andrew A. Pakula, Ph.D. and James Bowie, Ph.D. Dr. Pakula is the
Company's Director of Drug Discovery Technologies and Dr. Bowie is a consultant
to the Company. 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 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,
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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").
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.
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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 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.
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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 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
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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 December 31, 1997, the Company had 51 full time employees, 43 of whom
were engaged in research and development and eight of whom were engaged in
management, administration and finance. Doctorates are held by approximately 38%
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
approximately 85,000 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
Michael W. Heslop.................................... 38 Vice President of Business Development
Karen A. Hamlin...................................... 38 Senior Director of Operations, Secretary and
Treasurer
Barry Weinberg(1).................................... 59 Chairman of the Board
David Baltimore, Ph.D.(1)............................ 59 Director
Allan R. Ferguson(2)................................. 55 Director
Jason S. Fisherman, M.D.(2).......................... 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............................... 40 Director of Drug Discovery Technologies
C. Richard Wobbe, Ph.D............................... 40 Director of Drug Discovery
</TABLE>
- --------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
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 the 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.
MICHAEL W. HESLOP joined the Company in December 1997 as Vice President of
Business Development. From 1982 to December 1997, Mr. Heslop held various
Marketing and Sales positions at Glaxo Wellcome Inc., including Director of
Marketing-Anti-Infectives (1995-December 1997) and Director of Marketing-
Central Nervous System (1994-1995), and Director of Marketing-Corporate and
National Sales Manager for Burroughs Wellcome Inc. (Canada) (1990-1994). Mr.
Heslop received a B.S. in Biology from McGill University and an M.B.A. from
Concordia University.
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
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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 acting
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. Mr. Weinberg serves as a director of AutoImmune
Inc. and CareAdvantage, Inc.
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
Director of Drug Discovery Technologies. Dr. Pakula received a B.S. in Biology
and Chemistry from Tufts University and a
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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
Director of Drug Discovery. 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 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.
Pursuant to the terms of the stockholders' agreement which became effective
upon the closing of the BioChem Offering, BioChem has the right to designate one
member of the Board of Directors. Such stockholders' agreement also requires
certain stockholders to vote their shares of Common Stock in favor of such
nominee at any meeting of stockholders for the election of directors. BioChem's
right to designate a director will terminate in the event that BioChem and its
permitted transferees own less than 10% of the Series D Preferred Stock and any
Common Stock issued upon conversion of such stock, or December 17, 2007. It is
expected that following the completion of the Offering, the Board of Directors
will be increased to six members and a designee of BioChem will be elected to
the Board of Directors. See "Certain Transactions--BioChem Offering."
The Board of Directors has established an Audit Committee composed of Dr.
Baltimore and Mr. Weinberg and a Compensation Committee composed of Mr. Ferguson
and Dr. Fisherman. The Audit Committee is 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 recommends 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
44
<PAGE>
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.
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
45
<PAGE>
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.
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 Chief Executive
Officer and the next most highly compensated executive officers for services
rendered to the Company during the fiscal year ended December 31, 1997 (the
"Named Executive Officers"). No other executive officer of the Company earned in
excess of $100,000 during 1997.
46
<PAGE>
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>
Mark T. Weedon......................................... $ 90,673 $ 0 $ 6,770(2) 339,558 $ 0
President and Chief
Executive Officer(1)
Barry Weinberg......................................... $ 0 $ 0 $ 0 0 $ 0
Acting President and Chief Executive
Officer and Chairman of the Board(1)
Michael G. Palfreyman.................................. $ 175,000 $ 0 $ 14,583(3) 16,262 $ 0
Vice President of Research
and Development
Karen A. Hamlin........................................ $ 107,906 $ 0 $ 0 5,041 $ 0
Senior Director of Operations,
Secretary and Treasurer
</TABLE>
- --------------
(1) Mark T. Weedon became President and Chief Executive Officer of the Company
in August 1997. Mr. Weinberg acted as the Company's President and Chief
Executive Officer from December 1995 to August 1997. See "--Employment
Agreements."
(2) Represents reimbursement of relocation expenses of $6,770.
(3) Represents a housing allowance of $14,583.
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. Pursuant to his employment agreement, Mr. Weedon was awarded options to
purchase 339,558 shares of Common Stock exercisable at $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. 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. 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 will be reimbursed for relocation and other
expenses incurred as a result of his commencement of employment with the
Company, which are expected to total approximately $50,000. 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 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.
47
<PAGE>
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 exercisable at $0.15 per share. Twenty-five percent of such options
vested in September 1995 and the remaining shares vest in equal monthly
installments through September 1998. Pursuant to his employment agreement, Dr.
Palfreyman was reimbursed for relocation expenses aggregating approximately
$38,000 and temporary living expenses aggregating approximately $12,000. Dr.
Palfreyman also received housing allowances of approximately $21,000, $18,000
and $15,000 in 1995, 1996 and 1997, respectively, and he will receive a $6,000
housing allowance for 1998. Dr. Palfreyman also received a one-time cash payment
of $30,000 as compensation for lost bonus 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 November 1997, the Company entered into an employment agreement with
Michael W. Heslop, Vice President of Business Development for the Company. Mr.
Heslop's employment agreement provides for the payment of an annual base salary
of $165,000 and an annual performance bonus of up to 20% of his annual salary as
of January of such year. Pursuant to his employment agreement, Mr. Heslop was
awarded options to purchase 73,181 shares of Common Stock exercisable at $8.76
per share. Twenty-five percent of such options will vest in November 1998 and
the remaining shares will thereafter vest in equal monthly installments through
November 2001. Mr. Heslop also received a one-time cash payment of $40,000 as
compensation for lost bonus from his previous employer. Pursuant to his
employment agreement, Mr. Heslop will also be reimbursed for relocation and
temporary living expenses which are expected to total approximately $22,000.
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, twenty-five percent of the remaining
shares vested in December 1993, and the remaining shares vested in equal monthly
installments through December 1996. 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, 1997
to each of the Named Executive Officers:
48
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1997
<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 1997(2) SHARE DATE 0% 5% 10%
- ------------------------ ----------- ----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark T. Weedon.......... 339,558 60.9% $ 0.15 8/11/07 $ 2,349,741 $ 3,859,513 $ 6,175,799
Barry Weinberg.......... 0 0% -- -- -- -- --
Michael G. Palfreyman... 16,262 2.9% $ 0.15 6/18/07 112,533 184,839 295,769
Karen A. Hamlin......... 2,602 0.5% $ 0.15 6/18/07 18,006 29,575 47,325
2,439 0.4% $ 8.76 12/5/07 -- 13,437 34,051
</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 557,425 shares of Common Stock
granted to employees in 1997, including options granted to the Named
Executive Officers.
The following table sets forth at December 31, 1997 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 IN-THE-MONEY
YEAR END OPTIONS AT YEAR END(1)
-------------------------- --------------------------
SHARES ACQUIRED VALUE
NAME OR EXERCISED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- --------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark T.
Weedon....... 33,956 $ 234,976 305,602 -- $3,621,384 --
Barry
Weinberg..... 48,787 97,574 -- -- -- --
Michael G.
Palfreyman... -- -- 68,793 77,568 814,939 $ 918,892
Karen A.
Hamlin....... -- -- 1,306 6,663 15,466 57,932
</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, 1997 and the exercise prices of the options. Solely for purposes of
determining the value of options at December 31, 1997, the Company has
assumed that the fair market value of shares of Common Stock issuable upon
exercise of options was $12.00 per share, the assumed initial public
offering price, since the Common Stock was not traded in an established
market prior to the Offering.
49
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee in December 1997
composed of Mr. Ferguson and Dr. Fisherman. Prior to that time, matters
concerning executive officer compensation were addressed by the Board of
Directors. Mr. Ferguson is a general partner of Atlas Venture, and Dr. Fisherman
is a partner of Advent International Corporation. See "Certain
Transactions--Private Placements of Securities" and "Principal Stockholders."
EMPLOYEE BENEFIT PLANS
1997 EQUITY INCENTIVE PLAN
The Company adopted the 1997 Plan in December 1997. An aggregate of
1,700,000 shares of the Company's Common Stock have been reserved for issuance
pursuant to the exercise of stock awards granted to employees, directors,
consultants and advisers under the 1997 Plan (the "Stock Awards"). The 1997 Plan
will terminate in December 2007, unless sooner terminated by the Board of
Directors.
The 1997 Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees (including officers and employee directors), and options that do not
so qualify ("Nonstatutory Stock Options," and, together with Incentive Stock
Options, the "Options") to employees (including officers and employee
directors), non-employee directors, consultants and advisers. In addition, the
1997 Plan permits the granting of stock appreciation rights appurtenant to or
independently of other Stock Awards granted under the 1997 Plan, as well as the
granting of Common Stock based upon the attainment of specified performance
goals ("Performance Awards"), rights to purchase restricted stock and any form
of equity-based or equity-related awards that the Board of Directors determines
to be consistent with the 1997 Plan and in the interests of the Company. No
person is eligible to receive Stock Awards under the 1997 Plan covering more
than 200,000 shares of the Company's Common Stock in any calendar year.
The 1997 Plan will be administered by the Board of Directors or a committee
appointed by the Board of Directors. Subject to the limitations set forth in the
1997 Plan, the Board of Directors has the authority to select the person to whom
grants are to be made, to designate the number of shares to be covered by each
Stock Awards, to determine whether an Option is to be an Incentive Stock Option
or a Nonstatutory Stock Option, to establish vesting schedules, to specify the
Option exercise price and the type of consideration to be paid to the Company
upon exercise and, subject to certain restrictions, to specify other terms of
Stock Awards.
No Incentive Stock Option may be exercised later than ten years from the
date it was granted. The aggregate fair market value, determined at the time of
grant, of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by an optionee during any calendar
year (under all such plans of the Company and its affiliates) may not exceed
$100,000. Options granted under the 1997 Plan are generally non-transferable.
Options granted under the 1997 Plan vest at the rate specified in the option
agreement. The exercise price of Options granted under the 1997 Plan is
determined by the Board of Directors in accordance with the guidelines set forth
in the 1997 Plan. The exercise price of an Incentive Stock Option cannot be less
than 100% of the fair market value of the Common Stock on the date of the grant.
The exercise price of Incentive Stock Options granted to any person who at the
time of grant owns stock representing more than 10% of the total combined voting
power of all classes of the Company's capital stock must be at least 110% of the
fair market value of such stock on the date of grant and the term of such
Incentive Stock Options cannot exceed five years.
The Board of Directors shall determine the performance goals applicable to
Performance Awards, the period during which such goals are effective and all
other limitations and conditions applicable to the
50
<PAGE>
Performance Awards. The Board of Directors shall determine the purchase price,
if any, of restricted stock awarded pursuant to the 1997 Plan, as well as the
conditions under which shares of restricted stock may be forfeited to or
repurchased by the Company and any other terms and conditions applicable to
restricted stock.
Pursuant to the 1997 Plan, the Board of Directors has full authority to
determine and specify the effect, if any, that a participant's termination of
employment will have on the terms of an outstanding Stock Award. Shares subject
to Stock Awards that have expired or otherwise terminated without having been
exercised in full again become available for award under the 1997 Plan.
The terms and provisions of all Stock Awards must be set forth in an award
agreement made available to the participant following the grant. The Board of
Directors may accelerate (i) the vesting or payment of any Stock Award, (ii) the
lapse of restrictions on any Stock Award and (iii) the date on which any Option
or stock appreciation right first becomes exercisable.
Upon certain changes in control of the Company, all outstanding Stock Awards
under the 1997 Plan must either be made exercisable immediately prior to the
change in control or substituted by the surviving entity.
The Company has not granted any Stock Awards under the 1997 Plan as of the
date of this Prospectus.
NON-EMPLOYEE DIRECTORS STOCK PLAN
The Company adopted the Directors' Plan in December 1997 to provide for the
automatic grant of options to purchase shares of Common Stock to directors of
the Company who are not current or former employees of the Company
("Non-Employee Directors"). The Directors' Plan will become effective upon the
consummation of the Offering.
The maximum number of shares of Common Stock that may be issued pursuant to
the exercise of options granted under the Directors' Plan is 250,000. Pursuant
to the terms of the Directors' Plan, each Non-Employee Director on the date of
this Prospectus will receive options to purchase 10,000 shares of Common Stock.
Thereafter, on the date of each annual meeting of the stockholders of the
Company, each Non-Employee Director continuing in office will receive options to
purchase 4,000 shares of Common Stock and each newly elected Non-Employee
Director (including each Non-Employee Director elected to office since the then
last annual meeting of stockholders) will receive options to purchase 10,000
shares of Common Stock. Additionally, each Non-Employee Director who is a member
of a committee of the Company's Board of Directors will receive options to
purchase 250 shares of Common Stock on each one-year anniversary of his or her
appointment to such committee.
No options granted under the Directors' Plan may be exercised after the
expiration of ten years from the date they were granted. Options granted under
the Directors' Plan vest yearly over a three-year period. The exercise price of
options granted under the Directors' Plan on the date of this Prospectus will
equal the initial public offering price. Thereafter, the exercise price of
options granted under the Directors' Plan will equal 100% of the fair market
value of the Common Stock on the date of the grant. Options granted under the
Directors' Plan are generally non-transferable. If options granted under the
Directors' Plan terminate without having been exercised, the number of shares of
Common Stock underlying such options becomes available for future grant under
the Directors' Plan. All options outstanding under the Directors' Plan terminate
upon certain changes in control of the Company, provided that all such options
must be made immediately exercisable 20 days prior to the effective date of any
such change in control. The Compensation Committee may terminate the Directors'
Plan at any time.
1994 STOCK OPTION PLAN
During 1994, the Company adopted the 1994 Stock Option Plan, which provides
for the issuance of incentive stock options to officers and other employees of
the Company and nonstatutory stock options,
51
<PAGE>
awards of stock, and direct stock purchase opportunities to directors, officers,
employees and consultants of the Company. No shares remain available for
issuance under the Plan. 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
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
December 31, 1997, approximately 25,000 shares of the Company's outstanding
Common Stock were subject to these repurchase options.
52
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENTS OF SECURITIES
Since the Company's inception in September 1992 through December 1997, the
Company issued, in private placement transactions (not including the BioChem
Offering), 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): 935,507 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; 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, Series C Preferred Stock and Series D Preferred Stock will automatically
convert into 0.32525 shares of Common Stock upon the closing of the Offering.
53
<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).............................................. 23,678 329,256 196,995 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
54
<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.
BIOCHEM OFFERING
On December 17, 1997, the Company issued to BioChem 5,713,034 shares of its
newly created Series D Preferred Stock (convertible into 1,858,145 shares of
Common Stock) for consideration of $20 million. In addition, the Company issued
the BioChem Warrant. All of the outstanding shares of Series D Preferred Stock
will convert into shares of Common Stock upon the consummation of the Offering.
In the event that the initial public offering price is less than $10.76 per
share, the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of Common Stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145.
In connection with the BioChem Offering, the Company entered into a research
and license agreement, a stockholders' agreement, a registration rights
agreement and a warrant agreement with BioChem. See "Description of Capital
Stock--Warrants" and "--Registration Rights." The research and license agreement
relates to the Company's HBV and Dimerescent Programs. See
"Business--Collaborative Arrangements." The stockholders' agreement, to which
substantially all of the Company's existing significant stockholders are a
party, permits BioChem to designate a member of the Board of Directors upon the
first to occur of a "Qualified Public Offering" (which would include the
Offering) or February 16, 1998, and requires the other parties thereto to vote
their shares in favor of such nominee at any meeting of stockholders. BioChem's
right to designate a director will terminate in the event that BioChem and its
permitted transferees own less than 10% of the Series D Preferred Stock and any
Common Stock issued upon conversion of such stock, or December 17, 2007. The
stockholders' agreement also provides for certain affirmative and negative
covenants and restrictions on the transferability of shares owned by the parties
thereto which will terminate upon the consummation of the Offering.
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, Michael W. Heslop, its Vice
President of Business 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.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of December 31, 1997, after
giving effect to the Offering, the Private Placement and the BioChem Offering,
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
- --------------------------------------------------------------------------------- ----------- ----------- -----------
BioChem Pharma Holdings Inc. (3)................................................. 2,322,682 26.2% 19.1%
275 Armond-Frappier Boulevard
Laval, Quebec H7V4A7
Canada
CW Ventures II, L.P. (4)......................................................... 1,089,575 12.9% 9.3%
c/o CW Group, Inc.
1041 Third Avenue
New York, NY 10021
Atlas Venture Fund II, L.P....................................................... 831,385 9.9% 7.1%
c/o Atlas Venture
222 Berkeley Street, 19th Floor
Boston, MA 02166
New Enterprise Associates V...................................................... 672,092 8.0% 5.8%
c/o New Enterprise Associates
1119 St. Paul Street
Baltimore, MD 21202
Lombard Odier & Cie.............................................................. 903,536 10.7% 7.7%
11 rue de la Corraterie
Geneva Switzerland
Entities affiliated with Advent International Corporation (5).................... 592,709 7.0% 5.1%
101 Federal Street
Boston, MA 02110
Entities affiliated with Accel Partners (6)...................................... 672,094 8.0% 5.8%
428 University Avenue
Palo Alto, CA 94301
Venrock Associates and Venrock Associates II, L.P. (7)........................... 672,093 8.0% 5.8%
30 Rockefeller Plaza
New York, NY 10112
Mark T. Weedon (8)............................................................... 339,558 3.9% 2.8%
Michael G. Palfreyman (9)........................................................ 74,258 * *
Michael W. Heslop................................................................ -- * *
Karen A. Hamlin (10)............................................................. 12,813 * *
Barry Weinberg (11).............................................................. 1,089,575 12.9% 9.3%
David Baltimore (12)............................................................. 30,899 * *
Allan R. Ferguson (13)........................................................... 831,385 9.9% 7.1%
Jason S. Fisherman (14).......................................................... 592,709 7.0% 5.1%
All directors and executive officers as a group (8 persons) (15)................. 2,971,197 33.7% 24.6%
</TABLE>
- --------------
*Less than 1.0%
56
<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 December 31, 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 8,415,976 shares of
Common Stock outstanding as of December 31, 1997 (giving effect to the BioChem
Offering) and 11,665,976 shares of Common Stock outstanding after completion of
the Offering and the Private Placement (assuming an initial public offering
price of $12.00 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, Series C Preferred Stock and
Series D Preferred Stock into Common Stock upon the closing of the Offering).
(3) Includes warrants to purchase 464,537 shares of Common Stock at an
exercise price of $13.47.
(4) Includes 89,443 shares held by Barry Weinberg, Chairman of the Board of
Directors.
(5) 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.
(6) 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.
(7) Includes 460,389 shares held by Venrock Associates and 211,704 shares
held by Venrock Associates II, L.P.
(8) Includes 305,602 shares issuable upon the exercise of options.
(9) Includes 74,258 shares issuable upon the exercise of options.
(10) Includes 1,429 shares issuable upon the exercise of options.
(11) Includes 1,000,132 shares held by CW Ventures II, L.P.
(12) Includes 30,899 shares issuable upon the exercise of options.
(13) 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.
(14) 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
57
<PAGE>
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.
(15) See notes 8 through 14 above. The number of shares shown does not
reflect any shares beneficially owned by BioChem. It is expected that following
the Offering, a designee of BioChem will be elected to the Board of Directors.
See "Certain Transactions--BioChem Offering."
58
<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 35,000,000 shares of
Common Stock, $0.01 par value, and 4,000,000 shares of Preferred Stock, $0.01
par value.
As of December 31, 1997, there were 1,016,819 shares of Common Stock
outstanding, which were held of record by 54 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, 4,053,854 shares of Series C Preferred
Stock outstanding, which were held of record by 17 stockholders and 5,713,034
shares of Series D Preferred Stock outstanding, which were held of record by one
stockholder. Upon the closing of the Offering, and after giving effect to the
issuance of 3,000,000 shares of Common Stock offered by the Company hereby, the
issuance of 250,000 shares of Common Stock pursuant to the Private Placement
(assuming an initial public offering price of $12.00 per share) and the
conversion of each share of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock into 0.32525 shares
of Common Stock, there will be 11,665,976 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. The
Common Stock has been 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, Series C Preferred
Stock and Series D 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, Series C
Preferred Stock and Series D 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, Series C Preferred
Stock and Series D Preferred Stock will be converted automatically into an
aggregate of 7,399,133 shares of Common Stock. The holders of Common Stock,
Series A Preferred Stock, Series B Preferred Stock,
59
<PAGE>
Series C Preferred Stock and Series D Prefered 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 authorized
shares of Preferred Stock to 4,000,000, and will eliminate all references to
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D 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 December 31, 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.
In connection with the BioChem Offering, the Company issued to BioChem a
warrant to purchase 464,537 shares of Common Stock at an exercise price of
$13.47 per share. The warrant is exercisable for a period of five years from the
date of issuance, and contains anti-dilution rights in the event of stock
dividends, stock splits or similar transactions.
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
60
<PAGE>
factors. If such an underwriting is undertaken, a securityholder's right to
registration is conditioned upon such securityholder'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 underwritten due to marketing factors. If an
underwriting is undertaken, a securityholder's right to registration is
conditioned upon such securityholder's participation in the underwriting.
Pursuant to an agreement between the Company, BioChem and certain of the
Company's securityholders, BioChem will be entitled to certain rights with
respect to the registration of its 1,858,145 shares of Common Stock, and 464,537
shares of Common Stock issuable upon exercise of the BioChem Warrant, under the
Securities Act. If, at any time after the first anniversary of the Offering, the
Company receives from BioChem a written request to effect a registration with
respect to all or a part of its Common Stock, 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, BioChem may choose to
distribute securities by means of an underwriting. The agreement also provides
BioChem and other securityholders with piggyback registration rights.
The Company has granted certain piggyback registration rights to HMR 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
61
<PAGE>
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 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.
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.
Upon completion of the Offering and the Private Placement, the Company will
have 11,665,976 shares of Common Stock outstanding (assuming no exercise of
outstanding options or warrants). Of these shares, the 3,000,000 shares sold
pursuant to the Offering will be freely tradable without restriction or further
registration under 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 8,665,976 Restricted Shares (including the 250,000 shares of Common
Stock, based on an assumed initial public offering price of $12.00 per share,
sold in the Private Placement and the 1,858,145 shares sold pursuant to the
BioChem Offering) 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
62
<PAGE>
directors and holders of substantially all of the Common Stock 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, approximately 6,517,737 Restricted Shares will be eligible for sale in
the public market, subject to compliance with Rule 144. Of such shares,
approximately 5,155,584 will be eligible for sale without limitation, pursuant
to Rule 144(k) or Rule 701, including approximately 69,789 shares of Common
Stock not subject to lock-up agreements which will be eligible for sale
following the Offering. The remaining approximately 2,148,239 Restricted Shares
will become eligible for sale at various times over a period of six months from
the end of the Lock-Up Period. In addition, any shares issued upon exercise of
the Company's outstanding warrants may be eligible for sale pursuant to Rule 144
at various times following the expiration of the Lock-Up Period. The Company has
granted to certain security holders demand and piggyback registration rights
covering an aggregate of 8,113,670 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, Directors' 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.
63
<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............................................................... 3,000,000
-----------------
-----------------
</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 450,000 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 certain other
stockholders, who in the aggregate own substantially all of the 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 option to
sell
64
<PAGE>
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 securities convertible into or exchangeable for 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 Directors'
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.
65
<PAGE>
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 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.
66
<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, except as to
paragraphs two through five
of Note 10, which are as of January 6, 1998.
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 $ 858,176 $20,858,176
Short-term investments................................ 938,002 3,023,932 205,981 205,981
Accounts and other receivables........................ 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 21,242,913
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 $22,478,086
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (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' equity (deficit):
Common stock, $.01 par value, 6,504,932 shares
authorized at December 31, 1995, 30,000,000 shares
authorized at December 31, 1996 and September 30,
1997 (unaudited) and 35,000,000 shares authorized at
September 30, 1997 on a pro forma basis (unaudited);
1,112,330, 1,286,394, 1,373,378 and 8,413,763 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 8,413,763 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 84,139
Additional paid-in capital............................ 219,852 403,208 3,126,457 45,547,042
Unearned compensation................................. -- (93,744) (2,660,542) (2,660,542)
Accumulated deficit................................... (12,308,533) (16,393,533) (21,168,989) (23,435,780)
----------- ----------- ------------- -------------
(12,077,557) (16,071,204) (20,689,339) 19,534,859
Treasury stock, at cost, 297,845 shares at December 31,
1995 and 358,748 shares at December 31, 1996,
September 30, 1997 (unaudited) and none at September
30, 1997 on a pro forma basis (unaudited)............. (45,787) (55,150) (55,150) --
----------- ----------- ------------- -------------
Total stockholders' equity (deficit)................ (12,123,344) (16,126,354) (20,744,489) 19,534,859
----------- ----------- ------------- -------------
Commitments and contingencies (Note 8)
$ 2,689,167 $ 5,746,711 $ 2,478,086 $22,478,086
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
</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)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net loss per share.................... $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common and common
equivalent shares outstanding....... 3,435,084 3,590,895 3,360,458 3,374,007 3,528,007
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Pro forma net loss per share
(unaudited)......................... $ (0.49) $ (0.53)
------------- -------------
------------- -------------
Pro forma weighted average common and
common equivalent shares outstanding
(unaudited)......................... 8,186,013 9,068,995
------------- -------------
------------- -------------
</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 issuance of Series D
redeemable convertible preferred stock
(unaudited)............................. 5,713,034 20,000,000
Pro forma effect of the value associated
with the issuance of warrants
(unaudited)............................. 2,215,228 (2,215,228)
Pro forma effect of retirement of
treasury stock (unaudited).............. (358,748) (3,587) (51,563)
Pro forma effect of conversion of
redeemable preferred stock
(unaudited)............................. (22,749,299) (40,279,378) 7,399,133 73,991 40,205,357
---------- ----------- --------- ----------- ---------- ------------ ------------
-- $ -- 8,413,763 $ 84,139 $45,547,042 $(2,660,542) ($23,435,780)
---------- ----------- --------- ----------- ---------- ------------ ------------
---------- ----------- --------- ----------- ---------- ------------ ------------
<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 issuance of Series D
redeemable convertible preferred stock
(unaudited)............................. --
Pro forma effect of the value associated
with the issuance of warrants
(unaudited)............................. --
Pro forma effect of retirement of
treasury stock (unaudited).............. 55,150 --
Pro forma effect of conversion of
redeemable preferred stock
(unaudited)............................. 40,279,348
----------- ----------- ------------
$ -- $ -- $19,534,859
----------- ----------- ------------
----------- ----------- ------------
</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) (2,637,489)
Sale of short-term investments..................... 9,043,301 574,581 7,214,335 3,830,952 5,455,440
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) 2,752,898
---------- ---------- ---------- ---------- ----------
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..... 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) (456,129)
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 $ 858,176
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
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).
NET LOSS PER SHARE, UNAUDITED PRO FORMA NET LOSS PER SHARE AND UNAUDITED PRO
FORMA INFORMATION
Net loss per share and unaudited pro forma net loss per share are 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.
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 issuance of 5,713,034 shares of Series D
redeemable convertible preferred stock for $20,000,000, the value associated
with the issuance of a warrant to purchase 464,537 shares of common stock, the
retirement of 358,758 shares of treasury stock, all as discussed in Note 10, and
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 December 12, 1997, 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
approximately $400,000.
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 EVENTS
In October 1997, the Company entered into a collaboration agreement with
Hoechst Marion Roussel ("HMR") to identify new fungal targets and antifungal
drug candidates. The agreement requires HMR to pay initial technology access
fees in the amount of $6 million, certain payments for research and development
and additional payments upon the attainment of certain milestones, plus
royalties on sales of any new drug resulting from the collaboration. As part of
this agreement, HMR 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 HMR relating to such
shares.
In December 1997, the Company authorized and issued 5,713,034 shares of
Series D redeemable convertible preferred stock for $20,000,000 to BioChem
Pharma Inc. ("BioChem") which have similar terms to those of the Series A, B and
C redeemable convertible preferred stock, except that the Series D stock is
redeemable at the option of the holder at a price per share of $3.50. In the
event that the initial public offering price is less than $10.76 per share, then
the Company will be required to issue to BioChem, for no additional
consideration, the number of additional shares of common stock equal to the
amount by which (a) 19,993,640 divided by the initial public offering price,
exceeds (b) 1,858,145. The Company also entered into a collaboration agreement
with BioChem pursuant to which the Company is using its technologies to identify
drug candidates. The Company is responsible for all aspects of drug discovery
and BioChem is responsible for pre-clinical and clinical development, and will
retain worldwide commercialization rights. Any profits on any commercialized
products emanating from these programs will be shared in accordance with the
terms of the agreement. In addition, the Company issued to BioChem a warrant to
purchase 464,537 shares of common stock at an initial exercise price of $13.47
per share, which expire in December 2002. The initial exercise price may be
adjusted downward in the event the Company sells any shares of common stock at a
price below the current exercise price (with the exception of excluded stock, as
defined by the agreement, including shares being sold in the Offering). The
adjustment provisions will terminate upon the closing of an initial public
offering of the Company's common stock having an aggregate offering value of at
least $25 million. The Company has ascribed an initial value to the warrant
F-18
<PAGE>
SCRIPTGEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. SUBSEQUENT EVENTS (CONTINUED)
of approximately $2,200,000 which will be charged to research and development
expense in the fourth quarter of 1997. The amount of the charge will be adjusted
when the exercise price is fixed according to the adjustment provisions
described above.
In December 1997, the Company adopted the 1997 Equity Incentive Plan (the
"1997 Plan"). The 1997 Plan provides for the issuance of up to 1,700,000 shares
of the Company's common stock to eligible employees, directors, consultants and
advisors of the Company. Under the 1997 Plan, the Board of Directors may award
incentive and non-qualified stock options, stock appreciation rights,
performance shares and restricted and unrestricted stock. Incentive stock
options may not be granted at less than the fair market value of the Company's
common stock at the date of grant and for a term not to exceed ten years. 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
for a term not to exceed five years. The exercise price under each non-qualified
stock option shall be specified by the Board of Directors, or a committee
appointed by the Board of Directors, in accordance with the guidelines set forth
in the 1997 Plan. Grants of stock appreciation rights, performance shares,
restricted stock and unrestricted stock may be made at the discretion of the
Board of Directors with terms to be defined therein.
In December 1997, the Company adopted the Non-Employee Directors Stock Plan
(the "Directors' Plan") which provides for the issuance of up to 250,000 shares
of the Company's common stock to directors of the Company who are not current or
former employees of the Company ("Non-Employee Directors"). Under the Directors'
Plan, each Non-Employee Director will receive options to purchase 10,000 shares
of common stock on the date of the final prospectus used in connection with the
Company's initial public offering. Thereafter, on the date of each annual
meeting of the stockholders of the Company, each Non-Employee Director
continuing in office will receive options to purchase 4,000 shares of common
stock and each newly elected Non-Employee Director will receive options to
purchase 10,000 shares of common stock. In addition, each Non-Employee Director
who is a member of a committee of the Company's Board of Directors will receive
options to purchase 250 shares of common stock on each one year anniversary of
his or her appointment to such committee. Options granted under the Directors'
Plan will have exercise prices equal to the fair market value of the Company's
common stock on the date of the grant. The exercise price of options granted
under the Director's Plan on the date of the final prospectus used in connection
with the Company's initial public offering will equal the offering price to the
public. All options granted under the Directors' Plan vest in three annual
installments and expire ten years from the date of grant. All options
outstanding under the Directors' Plan will become immediately exercisable upon
the occurrence of a change in control as defined in the Directors' Plan.
In December 1997, the Company cancelled all of its treasury stock and such
shares resumed the status of authorized and unissued shares of common stock. In
addition, the Company increased the number of shares of common stock authorized
for issuance to 35,000,000.
F-19
<PAGE>
(This page has been left blank intentionally.)
<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.................................................... 3
Risk Factors.......................................................... 7
Use of Proceeds....................................................... 18
Dividend Policy....................................................... 18
Capitalization........................................................ 19
Dilution.............................................................. 20
Selected Financial Data............................................... 22
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 23
Business.............................................................. 27
Management............................................................ 42
Certain Transactions.................................................. 53
Principal Stockholders................................................ 56
Description of Capital Stock.......................................... 59
Shares Eligible for Future Sale....................................... 62
Underwriting.......................................................... 64
Legal Matters......................................................... 65
Experts............................................................... 65
Additional Information................................................ 66
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]
3,000,000 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.............................. 46,660
Printing Expenses............................................... 150,000
Legal Fees and Expenses......................................... 390,000
Accounting Fees and Expenses.................................... 270,000
Blue Sky Expenses and Counsel Fees.............................. 10,000
Transfer Agent and Registrar Fees............................... 1,000
Directors' and Officers' Insurance.............................. 95,000
Miscellaneous................................................... 68,764
---------
Total....................................................... $1,050,000
---------
---------
</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, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
II-1
<PAGE>
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 9 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 January 1995, the Company has sold unregistered securities in the
amounts, at the times, and for the aggregate amounts of consideration listed as
follows:
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.
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.
II-2
<PAGE>
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 (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 September 1997, the Company issued 326 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 $50.00.
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.
II-3
<PAGE>
In November 1997, the Company issued 578 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $88.75.
In December 1997, the Company issued 5,713,034 shares of Series D Preferred
Stock (convertible into 1,858,145 shares of Common Stock) to BioChem at $3.50
per share in cash for total consideration of $20,000,000. In addition, the
Company issued a warrant to purchase 464,537 shares of Common Stock at an
exercise price of $13.47 per share.
In December 1997, the Company issued 488 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $75.00.
In December 1997, the Company issued 248 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $38.00.
In December 1997, the Company issued 64 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $9.75.
In December 1997, the Company issued 58 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $8.90.
In December 1997, the Company issued 101 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $15.50.
In December 1997, the Company issued 245 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $37.60.
In December 1997, the Company issued 82 shares of Common Stock to an
employee upon the exercise of options at the exercise price of $0.15 per share
for total consideration of $12.50.
As of December 31, 1997, the Company has outstanding options to purchase an
aggregate of 792,877 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 (except for certain of the
purchasers described below) 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.
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 Amended and Restated Certificate of Incorporation
3.3 By-Laws**
3.4 Form of Amended By-Laws
3.5 Form of Amendment to Amended and Restated Certificate of Incorporation
3.6 Form of Amended and Restated Certificate of Incorporation
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, as amended
10.2 Loan and Stock Purchase Agreement among the Company and the purchasers listed on Schedule I thereto dated
July 13, 1994**
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<S> <C>
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**
10.22 Commercial Real Property Lease between the Company and Cummings Properties Management, Inc. dated November
2, 1993**
10.23 Stock Purchase Agreement by and between the Company and BioChem Pharma Inc. dated as of December 12, 1997
10.24 Research and License Agreement by and between the Company and BioChem Pharma Inc. dated as of December 12,
1997+
10.25 Registration Rights Agreement by and between the Company and BioChem Pharma Inc. dated as of December 12,
1997
10.26 Stockholders Agreement among the Company, BioChem Pharma Inc. and certain other security holders dated as
of December 12, 1997
10.27 Stock Purchase Warrant issued by the Company to BioChem Pharma Inc. dated December 12, 1997
10.28 Warrant Agreement between the Company and BioChem Pharma Inc. dated as of December 12, 1997
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<S> <C>
10.29 License Agreement by and between Trustees of Boston University and the Company dated January 1, 1998+
10.30 1995 Stockholders' Agreement by and among the Company and certain Stockholders dated April 19, 1995
10.31 Preferred Stockholders' Agreement by and among the Company and the Preferred Stock Purchasers dated May
17, 1996
10.32 Amendment No. 1 to Series B Preferred Stock Purchase Agreement and Series C Preferred Stock Purchase
Agreement by and among the Company and the persons and entities listed on the signature page thereto dated
August 8, 1997
10.33 Employment Agreement between the Company and Michael Heslop dated November 26, 1997
10.34 1997 Equity Incentive Plan
10.35 Non-Employee Directors Stock Plan
10.36 Form of Indemnification Agreement
11.1 Computation of Net Loss Per Share and 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
** PREVIOUSLY FILED.
+ 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 January 7, 1998.
SCRIPTGEN PHARMACEUTICALS, INC.
BY: /S/ MARK T. WEEDON
-----------------------------------------
Mark T. Weedon
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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 January 7, 1998
Officer and Director
(Principal Executive
Officer)
/s/ MARK T. WEEDON
- ------------------------------
Mark T. Weedon
Senior Director of January 7, 1998
Operations, Secretary
and Treasurer (Principal
Financial and Accounting
Officer)
* /s/ KAREN A.
HAMLIN
- ------------------------------
Karen A. Hamlin
* /s/ BARRY Chairman of the Board January 7, 1998
WEINBERG
- ------------------------------
Barry Weinberg
* /s/ DAVID BALTIMORE, Director January 7, 1998
PH.D.
- ------------------------------
David Baltimore, Ph.D.
* /s/ ALLAN R. Director January 7, 1998
FERGUSON
- ------------------------------
Allan R. Ferguson
* /s/ JASON S. FISHERMAN, Director January 7, 1998
M.D.
- ------------------------------
Jason S. Fisherman, M.D.
*By: /s/ MARK T. WEEDON
-------------------------
Mark T. Weedon
ATTORNEY-IN-FACT
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation, as amended**
3.2 Amended and Restated Certificate of Incorporation
3.3 By-Laws**
3.4 Form of Amended By-Laws
3.5 Form of Amendment to Amended and Restated Certificate of Incorporation
3.6 Form of Amended and Restated Certificate of Incorporation
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, as amended
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*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------------- ---------
<S> <C> <C>
10.21 1994 Employee Stock Option Plan**
10.22 Commercial Real Property Lease between the Company and Cummings Properties Management, Inc.
dated November 2, 1993**
10.23 Stock Purchase Agreement by and between the Company and BioChem Pharma Inc. dated as of
December 12, 1997
10.24 Research and License Agreement by and between the Company and BioChem Pharma Inc. dated as of
December 12, 1997+
10.25 Registration Rights Agreement by and between the Company and BioChem Pharma Inc. dated as of
December 12, 1997
10.26 Stockholders Agreement among the Company, BioChem Pharma Inc. and certain other security
holders dated as of December 12, 1997
10.27 Stock Purchase Warrant issued by the Company to BioChem Pharma Inc. dated December 12, 1997
10.28 Warrant Agreement between the Company and BioChem Pharma Inc. dated as of December 12, 1997
10.29 License Agreement by and between Trustees of Boston University and the Company dated January
1, 1998+
10.30 1995 Stockholders' Agreement by and among the Company and certain Stockholders dated April 19,
1995
10.31 Preferred Stockholders' Agreement by and among the Company and the Preferred Stock Purchasers
dated May 17, 1996
10.32 Amendment No. 1 to Series B Preferred Stock Purchase Agreement and Series C Preferred Stock
Purchase Agreement by and among the Company and the persons and entities listed on the
signature page thereto dated August 8, 1997
10.33 Employment Agreement between the Company and Michael Heslop dated November 26, 1997
10.34 1997 Equity Incentive Plan
10.35 Non-Employee Directors Stock Plan
10.36 Form of Indemnification Agreement
11.1 Computation of Net Loss Per Share and 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
** PREVIOUSLY FILED.
+ PORTIONS HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
<PAGE>
Exhibit 3.2
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-Five Million (35,000,000) shares of Common
Stock, with a par value of one cent ($.01) per share (the "Common Stock"), and
(ii) Twenty- Seven Million Two Hundred Fifty Thousand (27,250,000) 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 Seven Hundred Fifty Thousand (5,750,000)
shares of Preferred Stock shall be designated as Series D Preferred Stock (the
"Series D Preferred Stock"), 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 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
<PAGE>
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 D Preferred
Stock, 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 D PREFERRED STOCK. The holders of the Series
D 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 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; PROVIDED, HOWEVER, that no dividend shall be
declared or paid on the Series C Preferred Stock unless the Corporation shall
simultaneously declare and pay an equal dividend on each outstanding share of
Series D Preferred Stock (as calculated by assuming the conversion of all shares
of Series D Preferred Stock and Series C 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 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 D Preferred Stock and each
outstanding share of Series C Preferred Stock (as calculated by assuming the
conversion of all shares of Series D Preferred Stock, Series C Preferred Stock
and Series B 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 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 D Preferred Stock, 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 D Preferred Stock, 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).
-2-
<PAGE>
1.5. 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 D Preferred Stock, each outstanding share of Series D Preferred Stock,
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 D Preferred Stock, 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).
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 D 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 $3.50
per share of Series D 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 D Preferred Stock) held by each of
them, plus an amount equal to all declared but unpaid dividends on such
share of Series D 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 D Preferred Stock to the holder of such share of Series D
Preferred Stock, in connection with such liquidation, dissolution or
winding up (the "Series D Preferential Amount").
(b) 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").
-3-
<PAGE>
(c) 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").
(d) 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").
(e) If the assets of the Corporation legally available for
distribution to the holders of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D 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, Series C Preferred Stock and Series D Preferred Stock held
by each of them.
(f) If payment has been made to the holders of the Series D Preferred
Stock, 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), (c) and (d) of this ARTICLE FOURTH, the holders of the Series
A, B, C and D Preferred Stock (each share of which shall be treated for
purposes of this Section 2.1(f) 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
-4-
<PAGE>
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 D Preferred Stock shall receive, prior
and in preference to any payment for any share of Common Stock, the Series
D Preferential Amount, 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, Series C Preferred Stock and Series D Preferred Stock held
by each of them.
(b) If payment has been made to the holders of the Series D Preferred
Stock, 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 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 D Preferred
Stock, 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, C
and D 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
-5-
<PAGE>
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.
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 D Preferred Stock, 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
Stock, Series C Preferred Stock and Series D 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:
-6-
<PAGE>
(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
(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, Series C Preferred Stock and Series D
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, the Series C Preferred Stock or
the Series D 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, Series C
Preferred Stock or Series D Preferred Stock, or having other terms more
favorable than those of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D 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.
(c) 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 D
Preferred Stock, given in writing or by vote at a meeting, consenting or voting
(as the case may
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<PAGE>
be) separately as a class, amend, alter or repeal the preferences, special
rights or other powers of the Series D 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 D Preferred Stock, or reclassify any shares of Common Stock
into shares having preference to or special rights and other powers superior to
the Series D 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 D 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 $3.50 by the Current Conversion Price (as defined
in paragraph (c) below) in effect at the time of conversion. 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
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 D
Preferred Stock without the payment of additional consideration by the holder
thereof shall initially be $3.50, 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 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.
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(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.
(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
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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 D Preferred Stock, 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 "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,
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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 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
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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.
(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
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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.
(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
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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
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.
(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 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
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Preferred Stock, given in writing or by vote at a meeting, all shares of Series
D 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 $3.50 by the Current Conversion Price then in effect pursuant to
Section 4.1 of this ARTICLE FOURTH, subpart (b), 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,
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.
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(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 $3.50 for
each share of Series D Preferred Stock, $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 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
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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.
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
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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 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 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
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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 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
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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 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
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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 what 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
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
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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 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 attorney's 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.
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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).
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 3.4
BY-LAWS OF
SCRIPTGEN PHARMACEUTICALS, INC.
ARTICLE I
OFFICES
The registered office of Scriptgen Pharmaceuticals, Inc. (the
"Corporation") shall be in the City of Wilmington, County of New Castle, State
of Delaware, and the name of the resident agent in charge thereof is the
Corporation Service Company.
The Corporation may also have offices at such other places within or
without the State of Delaware as the Board of Directors may from time to time
appoint or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of stockholders for any
purpose shall be held at such place, within or without the State of Delaware, as
shall be designated by the Board of Directors and stated in the notice of the
meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders of the
Corporation, for the election of Directors to succeed those whose terms expire
and for the transaction of such other business as may properly come before the
meeting, shall be held on such date and at such time as shall be fixed from time
to time by the Board of Directors and stated in the notice of the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders may be
called by the Chairman of the Board, if any, the President or by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized Directors. Business transacted at any special meeting shall be
confined to the purpose or purposes stated in the notice of such meeting.
Section 4. NOTICE OF MEETING. Notice of the time and place of holding
each annual meeting and each special meeting of stockholders shall be given by
the Secretary, not less than ten nor more than sixty days before the meeting, to
each stockholder of record entitled to vote at such meeting. Notices of all
meetings of stockholders shall state the purposes for which the meetings are
held.
Section 5. LIST OF STOCKHOLDERS. At least ten days before every meeting
of stockholders a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the
<PAGE>
number of shares registered in the name of each stockholder, shall be prepared
by the Secretary, who shall have charge of the stock ledger. Such list shall be
open for said ten days to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, either at a place
specified in the notice of the meeting (which place shall be within the city
where the meeting is to be held) or, if no such other place has been so
specified, at the place where the meeting is to be held. Such list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder present at the meeting.
Section 6. QUORUM. At any meeting of stockholders, the holders of issued
and outstanding shares of capital stock which represent a majority of the votes
entitled to be cast thereat, present in person or represented by proxy, shall
constitute a quorum for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time until a
quorum shall be present or represented. Unless the adjournment is for more than
thirty days or a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting need not be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally called.
Section 7. VOTING. At any meeting of the stockholders, every stockholder
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder and bearing
a date not more than eleven months prior to said meeting. When a quorum is
present at any meeting, a plurality of the votes properly cast for election to
the Board of Directors shall elect to the Board of Directors and a majority of
the votes properly cast on any question other than election to the Board of
Directors shall decide the question unless the question is one upon which by
express provision of law or of the certificate of incorporation or of these
By-laws a different vote is required, in which case such express provision shall
govern and control the decision of such question.
Section 8. FIXING OF RECORD DATE. (a) In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action other than stockholder action by
written consent, the Board of Directors may fix a record date, which shall not
precede the date such record date is fixed and shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any such other action. 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 next preceding the day
on which notice is given. The record date for any other purpose other than
stockholder
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action by written consent shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto. 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.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors.
Section 9. NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the procedures set forth in the By-laws shall be eligible to
serve as Directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders (a) by or
at the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 9, who shall be entitled to vote for the election
of directors at the meeting and who complies with the notice procedures set
forth in this Section 9. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a Director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Corporation's books, of such stockholder and (ii) the class and number of shares
of the Corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors, any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible to
serve as a Director of the Corporation unless nominated in accordance with the
procedures set forth in this By-law. The Chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by the By-laws, and if he or
she should so
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determine, he or she shall so declare to the meeting and the defective
nomination shall be disregarded. Notwithstanding the foregoing provisions of
this Section 9, a stockholder shall also comply with all applicable requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder with respect to the matters set forth in this Section.
Section 10. NOTICE OF BUSINESS. At any meeting of the stockholders, only
such business shall be conducted as shall have been brought before the meeting
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of the Corporation who is a stockholder of record at the time of giving of the
notice provided for in this Section 10, who shall be entitled to vote at such
meeting and who complies with the notice procedures set forth in this Section
10. For business to be properly brought before a stockholder meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received no later than the close
of business on the 10th day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder and (d) any material interest in the stockholder in such business.
Notwithstanding anything in the By-laws to the contrary, no business shall be
conducted at a stockholder meeting except in accordance with the procedures set
forth in this Section 10. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of the By-laws,
and if he or she should so determine, he or she shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Section 10, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section.
ARTICLE III
DIRECTORS
Section 1. NUMBER. The Corporation shall have one or more Directors, the
number of Directors to be determined from time to time by vote of a majority of
the Directors then in office. Except in connection with the election of
Directors at the
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annual meeting of stockholders, the number of Directors may be decreased only to
eliminate vacancies by reason of death, resignation or removal of one or more
Directors. No Director need be a stockholder.
Section 2. POWERS OF DIRECTORS. The affairs, property and business of the
Corporation shall be managed by the Board of Directors which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by law or by the certificate of incorporation or these By-laws directed or
required to be exercised or done by the stockholders.
Section 3. VACANCIES. Vacancies and any newly created Directorships
resulting from any increase in the authorized number of Directors which occur
prior to an annual meeting of stockholders may only be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
Director, in each case elected by the particular class or series of stock
entitled to elect such Directors. When one or more Directors shall resign from
the Board, effective at a future date, a majority of the Directors then in
office, including those who have resigned, who were elected by the particular
class or series of stock entitled to elect such resigning Director or Directors
shall have the power to fill such vacancy or vacancies, the vote or action by
writing thereon to take effect when such resignation or resignations shall
become effective. The Directors shall have and may exercise all their powers
notwithstanding the existence of one or more vacancies in their number, subject
to any requirements of law or of the certificate of incorporation or of these
By-Laws as to the number of Directors required for a quorum or for any vote or
other action.
Section 4. ANNUAL MEETING OF DIRECTORS. The first meeting of each newly
elected Board of Directors may be held without notice immediately after an
annual meeting of stockholders (or a special meeting of stockholders held in
lieu of an annual meeting) at the same place as that at which such meeting of
stockholders was held; or such first meeting may be held at such place (within
or without the State of Delaware) and time as shall be fixed by the consent in
writing of all the Directors, or may be called in the manner hereinafter
provided with respect to the call of special meetings.
Section 5. REGULAR MEETINGS OF DIRECTORS. Regular meetings of the Board
of Directors may be held at such times and at such place or places (within or
without the State of Delaware) as the Board of Directors may from time to time
prescribe. No notice need be given of any regular meeting and a notice, if
given, need not specify the purposes thereof.
Section 6. SPECIAL MEETINGS OF DIRECTORS. Special meetings of the Board
of Directors may be called at any time by or under the authority of the Chairman
of the Board, if any, or the President and shall be called by him or her or by
the Secretary on written request of any two Directors or, if the Secretary fails
to do so, by two Directors in the name of the Secretary, to be held in each
instance at such place (within or without the State of Delaware) as the person
calling the meeting may designate in the call thereof. Notice of each special
meeting of the Board of Directors, stating the time
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and place thereof, shall be given to each Director by the Secretary not less
than twenty-four hours before the meeting. Such notice need not specify the
purposes of the meeting.
Section 7. QUORUM; VOTING. At any meeting of the Board of Directors a
majority of the Directors then in office shall constitute a quorum for the
transaction of business, but if a quorum shall not be present at any meeting of
Directors, the Directors present thereat may adjourn the meeting from time to
time without notice other than announcement at the meeting, until a quorum shall
be present. Except as otherwise provided by law or by the certificate of
incorporation or by the By-laws, the affirmative vote of at least a majority of
the Directors present at a meeting at which there is a quorum shall be the act
of the Board of Directors.
Section 8. MEETINGS BY TELEPHONE. Members of the Board of Directors or of
any committee thereof may participate in meetings of the Board of Directors or
of such committee by means of conference telephone or similar communications
equipment by means of which all person participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
Section 9. ACTION WITHOUT MEETING. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or of such
committee.
Section 10. COMPENSATION. By resolution of the Board of Directors, the
Directors, as such, may receive stated salaries for their services, and may be
allowed a fixed sum and expenses of attendance, if any, for attendance at each
regular or special meeting of the Board. Members of committees may also be
allowed a fixed sum and expenses of attendance, if any, for attending committee
meetings. Nothing herein contained shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation for such services.
ARTICLE IV
EXECUTIVE AND OTHER COMMITTEES
The Board of Directors may, by vote of a majority of the whole Board
(a) designate, change the membership of or terminate the existence of any
committee or committees, each committee to consist of one or more of the
Directors; (b) designate one or more Directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Corporation,
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including the power to authorize the seal of the Corporation to be affixed to
all papers which require it and the power and authority to declare dividends or
to authorize the issuance of stock; excepting, however, such powers which by
law, by the certificate of incorporation or by these By-Laws they are prohibited
from so delegating. In the absence or disqualification of any member of such
committee and his alternative, if any, the member or members thereof present at
any meeting and not disqualified from voting, whether or not constituting 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. 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 Board or
such rules, its business shall be conducted as nearly as may be in the same
manner as is provided by these By-Laws for the conduct of business by the Board
of Directors. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors upon request.
ARTICLE V
OFFICERS
Section 1. OFFICERS AND THEIR ELECTION, TERM OF OFFICE AND VACANCIES. The
officers of the Corporation shall be a President, a Secretary, a Treasurer and
such Executive Vice Presidents, Vice Presidents, Assistant Secretaries,
Assistant Treasurers and other officers as the Board of Directors may from time
to time determine and elect or appoint. All officers shall be elected annually
by the Board of Directors at their first meeting following the annual meeting of
stockholders or any special meeting held in lieu thereof and shall hold office
until their successors are duly elected and qualified. The Chairman of the
Board, if there is one, must be a Director. Any other officer may, but need not
be, a member of the Board of Directors. Two or more offices may be held by the
same person. Any officer elected by the Board of Directors may be removed at
any time by the Board of Directors. If any vacancy shall occur among the
officers, it shall be filled by the Board of Directors.
Section 2. CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT. The Chairman
of the Board, if any, shall have such duties and powers as shall be designated
from time to time by the Board of Directors. Unless the Board of Directors
otherwise specifies, the Chairman of the Board, or if there is none the chief
executive officer, shall preside, or designate the person who shall preside, at
all meetings of the stockholders and of the Board of Directors.
Unless the Board of Directors otherwise specifies, the President shall be
the chief executive officer and shall have direct charge of all business
operations of the Corporation and, subject to the control of the Directors,
shall have general charge and supervision of the business of the Corporation.
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Section 3. VICE PRESIDENTS. In the absence or disability of the
President, his or her powers and duties shall be performed by the Executive Vice
President, if only one, or, if more than one, by the one designated for the
purpose by the Board. Each Vice President shall have such other powers and
perform such other duties as the Board shall from time to time designate.
Section 4. TREASURER. The Treasurer shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositaries as shall be designated by the Board or in
the absence of such designation in such depositaries as he or she shall from
time to time deem proper. He or she shall disburse the funds of the Corporation
as shall be ordered by the Board, taking proper vouchers for such disbursements.
He or she shall promptly render to the President and to the Board such
statements of his or her transactions and accounts as the President and Board
respectively may from time to time require. The Treasurer shall perform such
duties and have such powers additional to the foregoing as the Board may
designate.
Section 5. ASSISTANT TREASURERS. In the absence or disability of the
Treasurer, his or her powers and duties shall be performed by the Assistant
Treasurer, if only one, or if more than one, by the one designated for the
purpose by the Board. Each Assistant Treasurer shall have such other powers and
perform such other duties as the Board shall from time to time designate.
Section 6. THE SECRETARY. The Secretary shall issue notices of all
meetings of stockholders and Directors and of the executive and other committees
where notices of such meetings are required by law or these By-laws. He or she
shall keep the minutes of meetings of stockholders and of the Board of Directors
and of the executive and other committees, respectively, unless such committees
appoint their own respective secretaries and be responsible for the custody
thereof. Unless the Board shall appoint a transfer agent and/or registrar, the
Secretary shall be charged with the duty of keeping, or causing to be kept,
accurate records of all stock outstanding, stock certificates issued and stock
transfers. He or she shall sign such instruments as require his or her
signature and shall perform such other duties and shall have such powers as the
Board of Directors shall designate from time to time, in all cases subject to
the control of the Board of Directors. The Secretary shall have custody of the
corporate seal, shall affix and attest such seal on all documents whose
execution under seal is duly authorized. In his or her absence at any meeting,
an Assistant Secretary or the Secretary pro tempore shall perform his or her
duties thereat.
Section 7. ASSISTANT SECRETARIES. In the absence or disability of the
Secretary, his or her powers and duties shall be performed by the Assistant
Secretary, if only one, or, if more than one, by the one designated for the
purpose by the Board. Each Assistant Secretary shall have such powers and
perform such other duties as the Board shall from time to time designate.
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Section 8. SALARIES. The salaries of officers, agents and employees shall
be fixed from time to time by or under authority from the Board of Directors.
ARTICLE VI
RESIGNATIONS AND REMOVALS
Section 1. OFFICERS, AGENTS, EMPLOYEES AND MEMBERS OF COMMITTEES. Any
officer, agent or employee of the Corporation may resign at any time by giving
written notice to the Board of Directors or to the Chairman of the Board, if
any, the President or the Secretary of the Corporation; and any member of any
committee may resign by giving written notice either as aforesaid or to the
committee of which he or she is a member or to the chairman thereof. Any such
resignation shall take effect at the time specified therein, or if the time be
not specified, upon receipt thereof, and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
The Board of Directors may at any time, with or without cause, remove from
office or discharge or terminate the employment of any officer, agent, employee
or member of any committee.
Section 2. DIRECTORS. Any Director of the Corporation may resign at any
time by giving written notice to the Board of Directors or to the Chairman of
the Board, if any, the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, or if the time be
not specified, upon receipt thereof; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
When one or more Directors shall resign from the Board of Directors, effective
at a future date, a majority of the Directors then in office, including those
who have so resigned, shall have power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as provided in these
By-laws in the filling of other vacancies. The stockholders of the Corporation
entitled to vote upon the election of Directors may, at any time, remove from
office any one or more Directors only with cause, and his or her successor or
their successors shall be elected by the remaining Directors as provided in
these By-laws with respect to the filling of other vacancies. A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him or her.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 1. The Corporation shall indemnify, to the fullest extent
permitted by the General Corporation Law of the State of Delaware as presently
in effect or as hereafter amended:
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(a) 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 and whether
external or internal to the Corporation (other than by action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
Director or officer of the Corporation, or is or was serving at the request
of the Corporation as a Director or officer of another Corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with such suit, action or proceeding if he or she acted in good faith and
in a manner which he or she 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 that 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 or she reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, that the person had
no reasonable cause to believe that his or her conduct was lawful.
(b) 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 or she is or was a Director or officer of the Corporation,
or is or was serving at the request of the Corporation as a Director or
officer of another Corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation and 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 the
State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 2. The Board of Directors, in its discretion, may authorize the
Corporation to indemnify to the fullest extent permitted by the General
Corporation Law of the State of Delaware (as presently in effect or as hereafter
amended):
(a) 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,
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criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he or she is or
was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection
with such suit, action or proceeding if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the
best interest of the 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 or she reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, that the person had no
reasonable cause to believe that his or her conduct was lawful.
(b) 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 or she is or was an employee or agent of the Corporation,
or is or was serving at the request of the Corporation as an employee or
agent of another Corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation and 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 the
State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 3. Any indemnification under this Article VII (unless required by
law or ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the Director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Sections l and 2 of this
Article VII. Such determination shall be made with respect to indemnification
of a Director or officer (i) by a majority vote of the Directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such Directors, or if such Directors so direct, by
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independent legal counsel in a written opinion, or (iii) by the stockholders of
the Corporation.
Section 4. Expenses incurred by a Director or officer in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the Director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this Article VII. Any advance
under this Section 4 shall be made promptly, and in any event within ninety
days, upon the written request of the person seeking the advance.
Section 5. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other Sections of this Article VII shall not be deemed
exclusive of any other rights to which any person, whether or not entitled to be
indemnified under this Article VII, may be entitled under any statute, by-law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office. Each person who is or becomes a Director or officer
as described in Section 1 shall be deemed to have served or to have continued to
serve in such capacity in reliance upon the indemnity provided for in this
Article VII. All rights to indemnification under this Article VII shall be
deemed to be provided by a contract between the Corporation and the person who
serves as a Director or officer of the Corporation at any time while these
By-laws and other relevant provisions of the General Corporation Law of the
State of Delaware and other applicable law, if any, are in effect. Any repeal
or modification thereof shall not affect any rights or obligations then
existing.
Section 6. The Board of Directors may at any time and from time to time
cause the Corporation to purchase and maintain insurance on behalf of any person
who 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, partnership, joint venture, trust or
other enterprise, against any liability asserted against him or her and incurred
by him or her 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 him or her
against such liability under the provisions of the General Corporation Law of
the State of Delaware (as presently in effect or hereafter amended), the
Certificate of Incorporation of the Corporation or these By-laws.
Section 7. The Corporation's indemnification under Sections 1 and 2 of
this Article VII of any person who 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,
partnership, joint venture, trust or other enterprise, shall be reduced by any
amounts such person receives as indemnification (i) under any policy of
insurance purchased and maintained on his or her behalf by the Corporation, (ii)
from such other Corporation, partnership, joint
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venture, trust or other enterprise, or (iii) under any other applicable
indemnification provision.
Section 8. In the discretion of the Board of Directors of the Corporation,
for the purposes of this Article VII, references to "the Corporation" may also
include any constituent Corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its Directors or
officers, so that any person who is or was a Director or officer of such
constituent Corporation, or is or was serving at the request of such constituent
Corporation as a Director or officer of another Corporation, partnership, joint
venture, trust or other enterprise, would stand in the same position under the
provisions of this Article VII with respect to the resulting or surviving
Corporation as he or she would have with respect to such other constituent
Corporation if its separate existence had continued.
Section 9. In addition to and without limiting the foregoing provisions of
this Article VII and except to the extent otherwise required by law, any person
seeking indemnification under or pursuant to Section 1 of this Article VII shall
be deemed and presumed to have met the applicable standard of conduct set forth
in Section l unless the contrary shall be established.
Section 10. For purposes of this Article VII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service by a Director or officer of the Corporation which
imposes duties on, or involves services by, such person with respect to any
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he or she reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VII.
Section 11. To the extent that a Director, officer, agent or employee of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or in Section 2, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
Section 12. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article VII shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
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ARTICLE VIII
CAPITAL STOCK
Section 1. STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates representing in the aggregate the shares owned by
him or her and certifying the number and class thereof, which shall be in such
form as this Board shall adopt. Each certificate of stock shall be signed by
the President or a Vice President, and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary. Any of or all the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate has ceased to be such officer, transfer agent or registrar
before the certificate is issued, such certificate may nevertheless be issued by
the Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 2. TRANSFER OF STOCK. Shares of stock shall be transferable on
the books of the Corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe.
Section 3. HOLDERS OF RECORD. Prior to due presentment for registration
of transfer the Corporation may treat the holder of record of a share of its
stock as the complete owner thereof exclusively entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice to the contrary.
Section 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may at
any time appoint a transfer agent or agents and/or registrar or registrars for
the transfer and/or registration of shares of stock.
Section 5. LOST, STOLEN, DESTROYED OR MUTILATED STOCK CERTIFICATES. The
Board of Directors may direct a new stock certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen, destroyed or mutilated, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, destroyed or mutilated. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, destroyed or mutilated certificate or certificates,
or his or her legal representative, to (a) advertise the same in such manner as
it shall require and/or (b) give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen, destroyed or
mutilated and/or (c) comply with any other reasonable requirements prescribed by
the Board.
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ARTICLE IX
SECURITIES OF OTHER CORPORATIONS
Subject to any limitations that may be imposed by the Board of Directors,
the Chairman of the Board of Directors, if any, the President or any person or
persons authorized by the Board may in the name and on behalf of the Corporation
(i) act or appoint any other person or persons (with or without powers of
substitution) to act in the name and on behalf of the Corporation (as proxy or
otherwise), at any meeting of the holders of stock or other securities of any
Corporation or other organization, securities of which shall be held by this
Corporation, or (ii) express consent or dissent, as a holder of such securities,
to corporate or other action by such other Corporation or organization.
ARTICLE X
CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS
Checks, notes, drafts and other instruments for the payment of money drawn
or endorsed in the name of the Corporation may be signed by any officer or
officers or person or persons authorized by the Board of Directors to sign the
same. No officer or person shall sign any such instrument as aforesaid unless
authorized by the Board to do so.
ARTICLE XI
DIVIDENDS AND RESERVES
Section 1. DIVIDENDS. Dividends upon the capital stock of the Corporation
may, subject to any provisions of the certificate of incorporation, be declared
pursuant to law by the Board of Directors. Dividends may be paid in cash, in
property or in shares of the capital stock.
Section 2. RESERVES. Before payment of any dividend there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
thinks proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Directors shall think conducive to the interest of
the Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
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ARTICLE XII
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors may from
time to time prescribe and the same may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE XIII
FISCAL YEAR
The fiscal year of the Corporation shall end on the 31st day of December of
each year.
ARTICLE XIV
BOOKS AND RECORDS
The books, accounts and records of the Corporation, except as may be
otherwise required by the laws of the State of Delaware, may be kept outside of
the State of Delaware, at such place or places as the Board of Directors may
from time to time appoint. Except as may otherwise be provided by law, the
Board of Directors shall determine whether and to what extent the books,
accounts, records and documents of the Corporation, or any of them, shall be
open to the inspection of the stockholders, and no stockholder shall have any
right to inspect any book, account, record or document of the Corporation,
except as conferred by law or by resolution of the stockholders or Board of
Directors.
ARTICLE XV
NOTICES
Section 1. MANNER OF GIVING OF NOTICE. Whenever the provisions of a law,
the certificate of incorporation, the By-laws or rules of a committee require
notice to be given to any Director, officer, stockholder or member of a
committee, they shall not be construed to mean personal notice; such notice may
be given by telegram or by depositing such notice in a post office or letter
box, in a postage paid, sealed wrapper, addressed to such Director, officer,
stockholder or member of a committee at his or her address as the same appears
in the books or records of the Corporation (unless he or she shall have filed
with the Secretary a written request that notice intended for him or her be sent
to some other address, in which case it shall be sent to the address designated
in the most recent such request); and the time when such telegram shall be
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transmitted or notice deposited shall be deemed to be the time of the giving of
such notice.
Section 2. WAIVER OF NOTICE. Whenever notice is required by law, the
certificate of incorporation, the By-laws, or as otherwise provided by law, a
written waiver thereof, signed by the person entitled to notice, shall be deemed
equivalent to notice, whether signed before or after the time required for such
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, Directors or members of a committee of directors need be
specified in any written waiver of notice.
ARTICLE XVI
SEVERABILITY
If any term or provision of the By-laws, or the application thereof to any
person or circumstance or period of time, shall to any extent be invalid or
unenforceable, the remainder of the By-laws, or the application of such term or
provision to persons or circumstances or periods of time other than those as to
which it is invalid or unenforceable, shall not be affected thereby and each
term and provision of the By-laws shall be valid and enforced to the fullest
extent permitted by law.
ARTICLE XVII
AMENDMENTS
The Board of Directors and the stockholders shall each have the power to
adopt, alter, amend and repeal these By-laws; and any By-laws adopted by the
Directors or the stockholders under the powers conferred hereby may be altered,
amended or repealed by the Directors or by the stockholders. Any adoption,
alteration, amendment or repeal of any By-laws by the stockholders shall require
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of capital stock entitled to vote therein.
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Exhibit 3.5
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 December 12, 1997, adopted the following
resolution:
RESOLVED, that, prior to the consummation of the
Corporation's proposed initial public offering, an amendment
to the Corporation's Amended and Restated Certificate of
Incorporation in substantially the following form be, and it
hereby is, proposed and declared advisable, which amendment
shall add to the end of the first full paragraph of ARTICLE
FOURTH the following sentence:
"Effective upon the filing of this amendment to the
Corporation's Certificate of Incorporation (the "Effective
Time"), all shares of Common Stock (the "Old Common Stock")
issued and outstanding (including any treasury shares)
immediately prior to the time of such filing shall be
automatically converted into a lesser number of fully paid
and non-assessable shares of Common Stock (the "New Common
Stock"), at a rate of 3.07459 shares of Old Common Stock for
each share of New Common Stock, subject to the treatment of
fractional share interests as described below. Each holder
of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Old
Common Stock (the "Old Certificates," whether one or more)
shall be entitled to receive upon surrender of such Old
Certificates to the Corporation or, following an initial
public offering of the Common Stock, the Corporation's
Transfer Agent, for cancellation, a certificate or
certificates (the "New Certificates," whether one or more)
representing the number of whole shares of the New Common
Stock into which and for which the shares of the Old Common
Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof, in
each case rounding up any fractional share interest in the
New Common Stock into one whole share of New Common
<PAGE>
Page 2
Stock. From and after the Effective Time, Old Certificates shall
represent only the right to receive New Certificates pursuant to the
provisions hereof. No certificates or script representing fractional
share interests in New Common Stock will be issued, and no such
fractional share interest will entitle the holder thereof to vote, or
to any rights of a stockholder of the Corporation. If more than one
Old Certificate shall be surrendered at one time for the account of
the same stockholder, the number of shares of New Common Stock for
which New Certificates shall be issued shall be computed on the basis
of the aggregate number of shares represented by the Old Certificates
so surrendered. In the event that the Corporation's Transfer Agent
determines that a holder of Old Certificates has not tendered all his
certificates for exchange, the Transfer Agent shall carry forward any
fractional share until all certificates of that holder have been
presented for exchange such that no stockholder shall receive more
than one share of New Common Stock due to rounding of fractional share
interests. If any New Certificate is to be issued in a name other
than that in which the Old Certificates surrendered for exchange are
issued, the Old Certificates so surrendered shall be properly endorsed
and otherwise in proper form for transfer, and the person or persons
requesting such exchange shall affix any requisite stock transfer tax
stamps to the Old Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the Transfer Agent that
such taxes are not payable. From and after the Effective Time the
amount of capital represented by the shares of the New Common Stock
into which and for which the shares of the Old Common Stock are
reclassified under the terms hereof shall be the same as the amount of
capital represented by the shares of Old Common Stock so reclassified,
until thereafter reduced or increased in accordance with applicable
law."
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 consents dated as of December 16, 1997, approved the amendment of the
Corporation's Amended and Restated Certificate of Incorporation as set forth
above.
<PAGE>
Page 3
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 President and attested by its Secretary
this day of , 1998.
By: ____________________________________
Mark T. Weedon, President
and Chief Executive Officer
Attest: ___________________________
Karen A. Hamlin, Secretary
<PAGE>
Exhibit 3.6
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 aggregate number of shares of stock which the
Corporation shall have authority to issue is 39 million (39,000,000) shares,
consisting of 35 million (35,000,000) shares of common stock, $.01 par value per
share (the "Common Stock"), and four million (4,000,000) shares of preferred
stock, $.01 par value per share (the "Preferred Stock"). Except as otherwise
provided by law, the shares of stock of the Corporation, regardless of class,
may be issued by the Corporation from time to time in such amounts, for such
consideration and for such corporate purposes as the Board of Directors may from
time to time determine. A description of the different classes and series of
the Corporation's capital stock and a statement of the designations and the
relative rights, preferences and limitations of the shares of each class and
series of capital stock are as follows:
<PAGE>
(a) COMMON STOCK
(i) VOTING RIGHTS. Except as otherwise provided by the General
Corporation Law of the State of Delaware or in this Article FOURTH (or
in any certificate of designation establishing a series of Preferred
Stock), the holders of Common Stock shall exclusively possess all
voting power. Each holder of record of issued and outstanding Common
Stock shall be entitled to one (1) vote on all matters for each share
so held.
(ii) DIVIDENDS. Subject to the rights and preferences, if any,
of the holders of Preferred Stock, each issued and outstanding share
of Common Stock shall entitle the record holder thereof to receive an
equal portion of cash dividends and distributions out of funds legally
available therefor, when, as and if declared by the Board of
Directors, in such amounts and at such times as the Board of Directors
shall determine.
(iii) LIQUIDATION. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, after there shall have
been paid to or set aside for the holders of any class of capital
stock having preference over the Common Stock in such circumstances
the full preferential amounts to which they are respectively entitled,
the holders of the Common Stock, and of any class or series of capital
stock entitled to participate in whole or in part therewith as to the
distribution of assets, shall be entitled, after payment or provision
for payment of all debts and liabilities of the Corporation, to
receive the remaining assets of the Corporation available for
distribution, in cash or in kind, in proportion to their holdings.
(b) PREFERRED STOCK
The Board of Directors of the Corporation is authorized by resolution
or resolutions, from time to time adopted, to provide for the issuance of
Preferred Stock in one or more series and to fix and state the voting
powers, designations, preferences and relative participating, optional or
other special rights of the shares of each series and the qualifications,
limitations and restrictions thereof, including, but not limited to,
determination of one or more of the following:
(i) the distinctive designations of each such series and the
number of shares which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors in creating such series) or decreased (but not below the
number of shares thereof then outstanding) from time to time by the
Board of Directors;
(ii) the annual rate or amount of dividends payable on shares of
such series, whether such dividends shall be cumulative or
non-cumulative, the conditions upon which and the dates when such
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<PAGE>
dividends shall be payable, the date from which dividends on
cumulative series shall accrue and be cumulative on all shares of such
series issued prior to the payment date for the first dividend of such
series, the relative rights of priority, if any, of payment of
dividends on shares of that class or series, and the participating or
other special rights, if any, with respect to such dividends;
(iii) whether such series will have any voting rights in addition
to those prescribed by law and, if so, the terms and conditions of the
exercise of such voting rights;
(iv) whether the shares of such series shall be redeemable or
callable and, if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed or called, which
price may vary under different conditions and at different redemption
or call dates;
(v) the amount or amounts payable upon the shares of such series
in the event of voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and the relative rights of priority, if
any, of payment of shares of such series;
(vi) whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase
or redemption of such shares, and if so entitled, the amount of such
fund and the manner of its application, including the price or prices
at which such shares may be redeemed or purchased through the
application of such fund;
(vii) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or of any
other series of the same or any other class or classes of stock of the
Corporation, and if so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(viii) whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of
Preferred Stock and whether such shares may be reissued as shares of
the same or any other series of stock;
(ix) the conditions and restrictions, if any, on the payment of
dividends or on the making of other distributions on, or the purchase,
redemption or other acquisition by the Corporation, or any subsidiary
thereof, of, the Common Stock or any other class (or other series of
the
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<PAGE>
same class) ranking junior to the shares of such series as to
dividends or upon liquidation, dissolution or winding up; and
(x) the conditions and restrictions, if any, on the creation of
indebtedness of the Corporation, the issue of any additional stock
ranking on parity with or prior to the shares of such series as to
dividends or upon liquidation, dissolution or winding up.
All shares within each series of Preferred Stock shall be alike in every
particular, except with respect to the dates from which dividends, if any, shall
commence to accrue.
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 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.
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<PAGE>
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: A director of the Corporation shall have no personal
liability to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director; provided, however, this Article 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 General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is hereafter amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitation on personal liability herein,
shall be limited to the fullest extent permitted by the amended General
Corporation Law of the State of Delaware. Any repeal or modification of this
Article 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: The Corporation shall provide indemnification to the
fullest extent permitted by the General Corporation Law of the State of
Delaware.
ARTICLE THIRTEENTH: If at any time the Corporation shall have a class of
stock registered pursuant to the provisions of the Securities Exchange Act of
1934, for so long as such class is so registered, any action by the stockholders
of such class must be taken at an annual or special meeting of stockholders and
may not be taken by written consent.
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<PAGE>
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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<PAGE>
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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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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<PAGE>
(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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<PAGE>
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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<PAGE>
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>
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
Amendment No. 1 made this 21st day of April, 1994, by and among Scrip Tech
Pharmaceuticals, Inc., a Delaware corporation (the "Corporation") and the
persons and entities listed on the signature page hereto, to Stock Purchase
Agreement ("Stock Purchase Agreement") dated September 16, 1993, by and among
the Corporation and the persons and entities listed on the Schedule of
Purchasers attached to said Stock Purchase Agreement.
WHEREAS, the Company desires to have the ability to issue more shares of
the Corporation's Common Stock to employees, directors and consultants than was
originally contemplated by the Section 7.14 of the Stock Purchase Agreement:
NOW, THEREFORE, in consideration of he premises and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 7.14 of the Stock Purchase Agreement is deleted in its
entirety and the following shall be inserted in its place:
7.14 STOCK OPTIONS AND OTHER STOCK PURCHASE RIGHTS. A soon as
possible after the Closing, the Company shall take all action
necessary (a) to adopt a stock option/stock purchase plan and/or
resolution(s) of the Board of Directors (and from time amendments
thereto) under which shares of Common Stock shall be available
for issuance pursuant to incentive stock options, non-qualified
stock options and other stock issuances, whether in the form of
restricted stock or otherwise, heretofore or hereafter to be
granted or made to employees, directors and consultants of the
Company, upon such terms and conditions as may be approved by the
Company's Board of Directors, and to issue such options or Common
Stock from time to time in accordance with the terms of such plan
or resolution(s), 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 Purchasers); 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 4,850,000 in the aggregate. The Purchasers agree to
vote their Shares and take all other action necessary in
furtherance of the foregoing.
2. That upon the purchase of shares of he Series A Preferred Stock of the
Corporation (the "Shares") by Thomas A. Bologna (the "Employee") pursuant to the
Stock Agreement dated February 28, 1994 (the "Bologna Agreement") between the
Employee and
<PAGE>
the Corporation, the Employee shall be deemed added to the Schedule of Purchases
attached to the Stock Purchase Agreement and the Employee shall, as of the date
of his purchase of the Shares, be deemed a "purchaser" under the Stock Purchase
Agreement and shall have the rights and benefits and be subject to the
obligations of a Purchase Agreement Stock thereunder as if he had been a party
to the Stock Purchase Agreement and had purchased shares of Series A Preferred
Stock on the date of the original execution of the Stock Purchase Agreement.
Notwithstanding anything to the contrary contained herein, for the purpose of
the Stock Purchase Agreement the term "Common Shares" shall not include the
share of Common Stock purchase by the Employee under the Bologna Agreement and,
in addition, any calculation of the Employee's "proportionate share" under
Section 9.1(b) of the Stock Purchase Agreement shall exclude the share of Common
Stock purchased by the Employee under the Bologna Agreement
3. Except as amended hereby, the Stock Purchase Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the undersigned have set their hands under seal as of
the date and year first above written.
SCRIPTECH PHARMACEUTICALS, INC.
By /s/ Thomas A. Bologna
--------------------------------
Its President
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By:/s/ Barry Weinberg By: /s/ Allan R. Ferguson
------------------------------ --------------------------------
General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accell 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
2
<PAGE>
ACCEL KEIRETSU L.P. ACCEL INVESTORS '93 L.P
By: Accel Parnters & Co., Inc.
Its General Partner
By:/s/ Illegible By: /s/ Illegible
------------------------------ --------------------------------
General Partner General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By:/s/ Arthur C. Patterson By: /s/ Illegible
------------------------------ --------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By:/s/ Nancy Dorman By: /s/ Anthony B. Evnin
------------------------------ --------------------------------
General Partner
/s/ Barry Weinberg /s/ Thomas A. Bologna
- --------------------------------- -----------------------------------
Barry Weinberg Thomas A. Bologna
3
<PAGE>
AMENDMENT NO. 2
TO
STOCK PURCHASE AGREEMENT
Amendment No. 2 made this 13th day of July, 1994, by and among ScripTech
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and the persons
and entities listed on the signature page hereto, to that certain Stock Purchase
Agreement dated September 16, 1993, as amended by Amendment No. 1 dated April
21, 1994 (as amended, the "Stock Purchase Agreement"), among the Company and the
persons and entities listed on the Schedule of Purchasers attached to the Stock
Purchase Agreement and identified in Amendment No. 1.
WHEREAS, the Company desires to enter into a certain Loan and Stock
Purchase Agreement of even date herewith (the "Loan Agreement"( with certain
persons and entities listed on the Schedule of Purchasers (the "Purchasers")
attached to the Loan Agreement.
WHEREAS, the Loan Agreement provides that the Purchasers will make loans to
the Company, the aggregate principal amount of which will not exceed $2,500,00
(the "Loans"), and the Company will execute and deliver certain convertible
promissory notes evidencing the Loans (the "Promissory Notes");
WHEREAS, each of the Promissory Notes, as provided by Section 4 of such
Promissory Note, is convertible into shares of the Company's convertible
preferred stock (the "Preferred Stock"), and each share of Preferred Stock will
be convertible into shares of Common Stock of the Company, $.01 par value per
share;
WHEREAS, in further consideration of the Purchaser's agreement to make the
Loas, the Company will issue, sell and deliver to each Purchaser making a Loan
shares of the Company's Common Stock (the "Shares"), at a price of $.05 per
share; and
WHEREAS, in consideration of the Purchasers making the Loans, the Company
has agreed to grant registration rights for the shares of Common Stock issuable
upon conversion of any shares of Preferred Stock issued upon the conversion of
the Promissory Noes and for the Shares;
NOW, THEREFORE, in consideration of the premises and convenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The definition of "Registrable Securities" contained in Section 8.1 of
the Stock Purchase Agreement is deleted in it entirety and replaced with the
following:
"Registrable Securities" shall mean (i) shares of Common Stock issued
or issuable pursuant to the conversion of the Preferred Shares, (ii) shares of
Common Stock issued or
Page 1 of 3
<PAGE>
issuable pursuant to the conversion of the Preferred Stock, (iii) shares of
Common Stock issued and sold pursuant to the Loan Agreement, and (iv) any Common
Stock issued in respect of the securities issued pursuant to the conversion of
the Preferred Shares or the Preferred Stock upon any stock split, stock
dividend, recapitalization or similar event. For the purpose of this
definition, "Preferred stock" shall mean shares of the Company's convertible
preferred stock issued upon conversion of the Company's Promissory Notes issued
pursuant to the Loan Agreement.
2. Except as amended hereby, the Stock Purchase agreement will remain in
full force and effect.
[Rest of Page Intentionally Left Blank]
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands under seal as of
the date and year first above written.
SCRIPTECH PHARMACEUTICALS, INC.
By: /s/ Thomas A. Bologna
-------------------------------
Its President and Chief Executive
Officer
CW VENTURES II, L.P. ATLAS VENTURE FUND II, L.P.
By: Atlas Venture
Associates II, L.P.
By:/s/ Barry Weinberg By: /s/ Allan R. Ferguson
------------------------------ -------------------------------
General Partner General Partner
ACCEL IV L.P. ACCEL JAPAN L.P.
By: Accell 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 Parnters & Co., Inc.
Its General Partner
By:/s/ Illegible By: /s/ Illegible
------------------------------ -------------------------------
General Partner
ELLMORE C. PATTERSON PROSPER PARTNERS
PARTNERS
By: /s/ Arthur C. Patterson By: /s/ Illegible
------------------------------ -------------------------------
General Partner Attorney-in-Fact
NEW ENTERPRISE ASSOCIATES 5 VENROCK ASSOCIATES
By: /s/ Nancy Dorman By: /s/ Anthony B. Evnin
------------------------------ -------------------------------
General Partner General Partner
/s/ Barry Weinberg /s/ Thomas A. Bolgna
- --------------------------------- ----------------------------------
Barry Weinberg Thomas A. Bologna
Page 3 of 3
<PAGE>
Exhibit 10.23
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SCRIPTGEN PHARMACEUTICALS, INC.
AND
BIOCHEM PHARMA INC.
DECEMBER 12, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS; INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 CERTAIN DEFINED TERMS. . . . . . . . . . . . . . . . . . 1
Section 1.2 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
PURCHASE AND SALE OF STOCK: CLOSING. . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 TRANSFER OF STOCK. . . . . . . . . . . . . . . . . . . . 5
Section 2.2 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.3 CONSIDERATION FOR STOCK. . . . . . . . . . . . . . . . . 5
Section 2.4 CLOSING DELIVERIES OF THE COMPANY. . . . . . . . . . . . 6
Section 2.5 CLOSING DELIVERIES BY BUYER. . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . . . . 7
Section 3.1 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. . 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . . . . . . 17
Section 4.1 ORGANIZATION OF BUYER. . . . . . . . . . . . . . . . . . 17
Section 4.2 AUTHORIZATION; VALIDITY. . . . . . . . . . . . . . . . . 17
Section 4.3 NO CONFLICT OR VIOLATION . . . . . . . . . . . . . . . . 17
Section 4.4 NO BROKERS . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
CONDITIONS TO THE COMPANY'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . 18
Section 5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . 18
Section 5.2 NO INJUNCTION. . . . . . . . . . . . . . . . . . . . . . 18
Section 5.3 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . 19
Section 5.4 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.5 CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.6 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.7 AMENDMENT OF RESTATED CERTIFICATE; AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT; REGISTRATION RIGHTS
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.8 ABSENCE OF LITIGATION. . . . . . . . . . . . . . . . . . 19
Section 5.9 SECURITIES LAW COMPLIANCE. . . . . . . . . . . . . . . . 19
Section 5.10 ALL PROCEEDINGS TO BE SATISFACTORY . . . . . . . . . . . 20
Section 5.11 CLOSING DATE.. . . . . . . . . . . . . . . . . . . . . . 20
Section 5.12 RESEARCH AGREEMENT.. . . . . . . . . . . . . . . . . . . 20
-ii-
<PAGE>
ARTICLE VI
CONDITIONS TO BUYER'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . 20
Section 6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . 20
Section 6.2 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.3 NO INJUNCTION. . . . . . . . . . . . . . . . . . . . . . 20
Section 6.4 DOCUMENTS TO BE DELIVERED BY COMPANY . . . . . . . . . . 21
Section 6.5 AMENDMENT OF RESTATED CERTIFICATE; AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT; REGISTRATION RIGHTS AGREEMENT. . 21
Section 6.6 ABSENCE OF LITIGATION. . . . . . . . . . . . . . . . . . 22
Section 6.7 SECURITIES LAW COMPLIANCE. . . . . . . . . . . . . . . . 22
Section 6.8 ALL PROCEEDINGS TO BE SATISFACTORY . . . . . . . . . . . 22
Section 6.9 CLOSING DATE.. . . . . . . . . . . . . . . . . . . . . . 22
Section 6.10 RESEARCH AGREEMENT.. . . . . . . . . . . . . . . . . . . 22
ARTICLE VII
POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.1 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . 22
Section 7.2 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . 22
Section 7.3 AVAILABILITY OF COMMON STOCK FOR CONVERSION AND
EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.1 SURVIVAL, REPRESENTATIONS AND WARRANTIES . . . . . . . . 23
Section 8.2 INDEMNIFICATION OBLIGATION OF THE COMPANY. . . . . . . . 23
Section 8.3 INDEMNIFICATION OBLIGATION OF BUYER. . . . . . . . . . . 24
Section 8.4 INDEMNIFICATION PROCEDURES . . . . . . . . . . . . . . . 24
Section 8.5 PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.1 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.3 CHOICE OF LAW. . . . . . . . . . . . . . . . . . . . . . 27
Section 9.4 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS . . . . . . . . 27
Section 9.5 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.6 INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.8 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.9 SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . 28
Section 9.10 TIME IS OF THE ESSENCE; COMPUTATION OF TIME. . . . . . . 28
Section 9.11 WAIVER OF JURY TRIAL.. . . . . . . . . . . . . . . . . . 28
Section 9.12 VOTING AGREEMENTS. . . . . . . . . . . . . . . . . . . . 29
Section 9.13 AMALGAMATION. . . . . . . . . . . . . . . . . . . . . . 29
Section 9.14 STANDSTILL AGREEMENT. . . . . . . . . . . . . . . . . . 29
-iii-
<PAGE>
EXHIBITS
Exhibit A - Financial Statements
Exhibit B - Intentionally Omitted
Exhibit C - Form of Restated Articles of Incorporation
Exhibit D - Form of Stockholders Agreement
Exhibit E - Form of Registration Rights Agreement
Exhibit F - Form of Warrant Agreement
Exhibit G - Form of Research and License Agreement
DISCLOSURE SCHEDULE
Section 3.1(a) - Directors and Officers
Section 3.1(b) - Capitalization
Section 3.1(d) - Consents
Section 3.1(f) - Title to Assets
Section 3.1(i) - Subsequent Events
Section 3.1(l) - Tax Matters
Section 3.1(m) - Intellectual Property
Section 3.1(n) - Contracts
Section 3.1(p) - Litigation
Section 3.1(r) - Transactions with Affiliates
Section 3.1(s) - Funded Debt
-iv-
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 12, 1997, by and
between SCRIPTGEN PHARMACEUTICALS, INC., a Delaware corporation (the "COMPANY"),
and BIOCHEM PHARMA INC., a Canadian corporation (the "BUYER"). The Company and
the Buyer are referred to collectively herein as the "PARTIES".
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to sell, transfer and convey to Buyer, 5,713,034 shares of Series D
Convertible Preferred Stock, par value $.01 per share, of the Company,
convertible, immediately following the Closing, into 20% of the shares of the
Company's Common Stock outstanding on a fully-diluted basis for a total
consideration of US$20 million (the "STOCK"), all subject to the terms and
conditions of this Agreement. The Stock shall have the rights, restrictions,
privileges and preferences as set forth in the form of the Amended and Restated
Articles of Incorporation, set forth as EXHIBIT C attached hereto.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1 CERTAIN DEFINED TERMS. As used herein, the terms below
shall have the following meanings:
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
"AFFILIATE" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"AFFILIATED GROUP" shall mean any affiliated group within the meaning
of Section 1504(a) of the Code or any similar group defined under a similar
provision of state, local or foreign law.
"ARTICLES" shall mean the Restated Articles of Incorporation attached
as EXHIBIT C hereto.
<PAGE>
"BALANCE SHEET" shall mean the audited consolidated balance sheet of
the Company as at December 31, 1996, together with the notes thereon, previously
delivered to Buyer and attached hereto as part of EXHIBIT A.
"BUYER GROUP" means any corporation or other entity controlling,
controlled by or under common control with the Buyer.
"CHANGE OF CONTROL" shall be deemed to have taken place if (i) any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the 1934 Act)
is or becomes the beneficial owner, directly or indirectly, of a majority of the
Common Stock or (ii) as the result of a contested election (a "Proxy Contest"),
the persons who were directors of the Company immediately before the Proxy
Contest or whose election was recommended by the Board of Directors of the
Company in the Proxy Contest do not constitute a majority of the Board of
Directors of the Company immediately after the Proxy Contest.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COMMON STOCK" means the Company's Common Stock, par value $.01 per
share.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock to be issued upon exercise of the Options or the
conversion or exchange of Convertible Securities (whether or not such securities
are actually exercisable at such time) but excluding the Warrant Shares (as that
term is defined in the Warrant Agreement (attached as Exhibit F hereto)).
"COMPANY PROPRIETARY RIGHTS" shall mean all Proprietary Rights owned
or used by the Company, along with all income, royalties, damages and payments
due or payable at the Closing or thereafter (including, without limitation,
damages and payments for past and future infringements or misappropriation
thereof), the right to sue and recover for past infringement or misappropriation
thereof, and all corresponding rights that, now or hereafter, may be secured
throughout the world and all copies and tangible embodiments of any such
Proprietary Rights.
"CONTROLLED GROUP" has the meaning set forth in Section 1563 of the
Code.
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"FINANCIAL STATEMENTS" has the meaning specified in SECTION 3.2(G).
-2-
<PAGE>
"FUNDED DEBT" of the Company shall mean, without duplication, all
obligations under indebtedness for borrowed money (including, without
limitation, principal, interest, overdrafts, penalties, premiums, fees,
expenses, indemnities and breakage costs), all obligations under capital leases,
notes payable, guaranties and drafts accepted representing extensions of credit.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date of this Agreement, applied on a consistent basis.
"INCOME TAXES" shall mean taxes measured by or with reference to net
income imposed by any federal, state, local or foreign governmental taxing
authority, including additions to tax and penalties related to such taxes, and
interest on such taxes and on such additions to tax and penalties.
"LIEN" shall mean any claim, lien, pledge, option, charge, security
interest, mortgage, right-of-way, encumbrance or other right of any third party.
"LOSSES" means any claims, liabilities, losses, damages (including
consequential damages and damages for lost profits), deficiencies, assessments,
judgments, remediations and costs or expenses (including reasonable attorneys',
consultants' and experts' fees and expenses).
"MOST RECENT BALANCE SHEET" has the meaning specified in
SECTION 3.1(H).
"MOST RECENT FINANCIAL STATEMENTS" has the meaning specified in
SECTION 3.1(H).
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PERSON" means an individual, partnership, corporation, limited
liability company, joint stock company, unincorporated organization or
association, trust, joint venture, association or
other organization, whether or not a legal entity, or a governmental authority.
"PRE-CLOSING PERIOD" shall mean any taxable period ending on or before
the Closing Date.
"PROPRIETARY RIGHTS" shall mean all (i) patents, patent applications,
patent disclosure and inventions (whether patentable or unpatentable and whether
or not reduced to practice), (ii) trademarks, service marks, trade dress, trade
names, logos, slogans, corporate names and Internet domain names, and
registrations and applications for registration thereof, together with all of
the goodwill associated
-3-
<PAGE>
therewith, (iii) copyrights and copyrightable works, and registrations and
applications for registration thereof, (iv) computer software, data bases and
documentation, and (v) trade secrets and other confidential information
(including ideas, formulae and compositions), know-how, processes, techniques,
research and development information, drawings, specifications, designs, plans,
proposals, data, financial, business and marketing plans and customer and
supplier lists and information.
"PROSPECTUS" means the prospectus included in the Company's
registration statement on Form S-1 filed with the Securities and Exchange
Commission on November 20, 1997.
"RELATED AGREEMENTS" means the Stockholders Agreement, Registration
Rights Agreement, Warrant Agreement and Research and License Agreement attached
as exhibits to this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" shall mean any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings and for which adequate reserves have been established on the Most
Recent Financial Statements, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing of
money.
"SUBSIDIARY" means any Person whose (a) securities having ordinary
voting power to elect a majority of its board of directors or managing or
general partners (or other persons having similar functions) or (b) other
ownership interests (including partnership and membership interests) ordinarily
constituting a majority interest in the capital, profits or cash flow of such
Person, are at the time, directly or indirectly, owned or controlled by such
other Person, or by one or more other Subsidiaries of such other Person, or by
such other Person and one or more of its other Subsidiaries.
"TAX" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, and any amounts payable
pursuant to the determination or settlement of an audit.
-4-
<PAGE>
"TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Section 1.2 INTERPRETATION. Unless otherwise indicated to the
contrary herein by the context or use thereof: (i) the words, "herein,"
"hereto," "hereof" and words of similar import refer to this Agreement as a
whole and not to any particular Section or paragraph hereof; (ii) the word
"including" means "including, but not limited to"; (iii) masculine gender shall
also include the feminine and neutral genders, and vice versa; and (iv) words
importing the singular shall also include the plural, and vice versa.
ARTICLE II
PURCHASE AND SALE OF STOCK: CLOSING
Section 2.1 TRANSFER OF STOCK. Upon the terms and subject to the
conditions contained herein, the Company shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall acquire and in reliance upon the
representations, warranties and covenants contained herein, at the Closing, the
Stock free and clear of all Liens or Security Interests, other than those which
may have been created by the Buyer.
Section 2.2 CLOSING. The closing of the transactions contemplated
herein shall be held at 10:00 a.m., local time, on the later of (i) December 19,
1997, and (ii) one (1) business day after the satisfaction or waiver of all
conditions to closing contained in Articles V and VI, (the "CLOSING" or the
"CLOSING DATE"), at the offices of Kirkland & Ellis, 153 East 53rd Street, New
York, NY, or such other time and/or place as the parties hereto otherwise agree.
Section 2.3 CONSIDERATION FOR STOCK. Upon the terms and subject to
the conditions contained herein, as consideration for the purchase of the Stock,
Buyer shall pay to the Company by wire transfer of immediately available funds,
the amount of twenty million dollars (US $20,000,000) (the "PURCHASE PRICE").
In the case of the sale of Common Stock in the First Listing (as that term is
defined in the Registration Rights Agreement attached hereto as EXHIBIT E), if
the Common Stock sold in the First Listing is sold for a consideration per share
which is less than the Current Conversion Price (as that term is defined in
Section 4.1(c) of the Articles) in effect immediately prior to the consummation
of such First Listing, then, upon consummation of the First Listing, the Company
shall issue an additional number of shares of Common Stock (rounding a
fractional share to the nearest whole share) to the Buyer for no consideration
in an amount equal to: (i)(A) the Current Conversion Price MULTIPLIED by the
number of shares of Common Stock issuable upon conversion of all of the Stock
held by Buyer immediately prior to the consummation of the First Listing (in
each case, after giving effect to any stock split, reverse stock split, share
combination or similar recapitalization affecting the Common Stock made or to be
made in connection with the First Listing), DIVIDED BY
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(B) the price per share at which the Common Stock is sold by the Company in the
First Listing LESS (ii) the number of shares of Common Stock issuable upon
exercise of all of the Stock held by the Buyer immediately prior to the
consummation of the First Listing (after giving effect to any stock split,
reverse stock split, share combination or similar recapitalization affecting the
Common Stock made or to be made in connection with the First Listing). The
Stock shall be convertible into the Common Stock pursuant to the terms and
conditions of the Articles. The Company hereby represents that nothing
contained in this Section 2.3 conflicts with the Articles.
Section 2.4 CLOSING DELIVERIES OF THE COMPANY. To effect the
transfer referred to in SECTION 2.1 hereof and the delivery of the consideration
described in SECTION 2.3 hereof, the Company shall, on the Closing Date, deliver
the following to Buyer:
(a) certificates evidencing the Stock, free and clear of any and all
Liens;
(b) all consents, approvals, releases, and waivers from governmental
authorities and other third parties required or necessary as a result of the
transactions contemplated hereby, reasonably satisfactory in form and substance
to Buyer and its counsel; and
(c) all other documents required to be delivered pursuant to Article
VI hereof not specifically mentioned in this Section.
All instruments and documents executed and delivered to Buyer pursuant hereto
shall be in form and substance, and shall be executed in a manner, reasonably
satisfactory to Buyer and its counsel.
Section 2.5 CLOSING DELIVERIES BY BUYER. To effect the transfer
referred to in SECTION 2.1 hereof and the delivery of the consideration
described in SECTION 2.3 hereof, Buyer shall, on the Closing Date, deliver the
following to the Company:
(a) Buyer shall have tendered to the Company the Purchase Price, by
wire transfer of immediately available funds to such account of which the
Company shall have given prior written notice to Buyer hereunder; and
(b) Buyer shall have tendered all other documents required to be
delivered pursuant to Article V hereof and not specifically mentioned in this
Section.
All instruments and documents executed and delivered to the Company pursuant
hereto shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to the Company and its counsel.
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ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Section 3.1 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
The Company represents and warrants to the Buyer that the statements contained
in this SECTION 3.1 are correct and complete as of the date of this Agreement,
except as set forth in the disclosure schedule delivered by the Company to the
Buyer on the date hereof (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule
will be arranged in paragraphs corresponding to the lettered and numbered
paragraphs contained in this SECTION 3.1.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the business,
condition (financial or otherwise), operations, results of operations, or future
prospects of the Company. The Company has full corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. SECTION 3.1(A) of the Disclosure Schedule lists the
directors and officers of the Company.
(b) CAPITALIZATION. The entire authorized, issued and outstanding
capital stock of the Company is set forth on SECTION 3.1(B) of the Disclosure
Schedule. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record free and clear of all Liens, claims,
encumbrances and restrictions whatsoever, except as set forth on SECTION 3.1(B)
of the Disclosure Schedule. Except as set forth on SECTION 3.1(B) of the
Disclosure Schedule, no shares of the Company's capital stock are reserved for
issuance or are held as treasury shares. Except as set forth on SECTION 3.1(B)
of the Disclosure Schedule, there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock, nor any stock
appreciation rights, phantom stock, or similar rights or instruments. The
shares of Common Stock issuable upon conversion of the Stock have been duly and
validly reserved, are currently subject to preemptive rights or rights of first
refusal (the waiver of which must be obtained as of the Closing Date in
connection with the transactions contemplated by this Agreement), and, upon
issuance, will be duly authorized, validly issued, fully paid, and
nonassessable. The Stock will represent twenty percent (20%) on a fully diluted
basis of the Common Stock Deemed Outstanding immediately after the Closing Date.
(c) AUTHORIZATION; VALIDITY. The Company has all necessary power and
authority to enter into this Agreement and the Related Agreements, and, subject
to obtaining requisite Stockholder approvals, waivers, and consents has taken
all action
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necessary to consummate the transactions contemplated hereby and to perform its
obligations hereunder and under the Related Agreements. This Agreement has been
duly executed and delivered by the Company, and this Agreement and each of the
Related Agreements when executed will be a legal, valid, and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
As of the Closing Date, the Company shall have authorized the issuance of the
Stock, with the rights and privileges described in the Articles.
(d) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the issuance of Common Stock upon conversion of the Stock and
execution and delivery of the Related Agreements), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, or other
restriction of any government, governmental agency, or court to which the
Company is subject or any provision of the charter or bylaws of the Company or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Company is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the business, condition (financial or otherwise),
operations, results of operations, or future prospects of the Company or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement (a "MATERIAL ADVERSE EFFECT"). Except as set forth on SECTION 3.1(D)
of the Disclosure Schedule, the Company does not need to obtain any
authorization, consent, or approval of, or make any declaration, filing or
registration with, any government or governmental agency or regulatory authority
in connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, except where the
failure to obtain such authorizations, consents, approvals, declarations,
filings or registrations would not have a Material Adverse Effect.
(e) BROKERS' FEES. The Company does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(f) TITLE TO ASSETS; SUFFICIENCY. Except as set forth on SECTION
3.1(F) of the Disclosure Schedule, the Company has good and marketable title to,
or a valid leasehold interest in, the material properties and assets used by it
or otherwise necessary to conduct its business, located on its premises, or
shown on the Most Recent Balance Sheet or acquired after the date thereof, free
and clear of all Security Interests, except for properties and assets disposed
of in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet. The assets currently owned by the Company or leased by the Company
pursuant to any lease agreement entered into in the Ordinary Course of Business
or otherwise disclosed to Buyer constitute all of the
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assets necessary to conduct the business of the Company in accordance with past
practices as of the Most Recent Fiscal Month End and as of the date hereof.
(g) SUBSIDIARIES. The Company has no Subsidiaries.
(h) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT A are the
following financial statements (collectively the "FINANCIAL STATEMENTS"): (i)
audited balance sheet and statements of operations, redeemable preferred stock
and stockholders' equity (deficit), and cash flow as of and for the fiscal year
ended December 31, 1996 (the "MOST RECENT FISCAL YEAR END") for the Company; and
(ii) unaudited consolidated and consolidating balance sheets (the "MOST RECENT
BALANCE SHEET") and statements of operations, redeemable preferred stock and
stockholders' equity (deficit), and cash flow (the "MOST RECENT FINANCIAL
STATEMENTS") as of and for the nine months ended September 30, 1997 (the "MOST
RECENT FISCAL MONTH END") for the Company. The Financial Statements (including
the notes thereto) have been prepared from the books and records of the Company,
are correct and complete, have been prepared in accordance with GAAP applied on
a consistent basis throughout the periods covered thereby and present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods; PROVIDED, HOWEVER, that the Most
Recent Financial Statements are subject to normal year-end adjustments (which
adjustments will not be material, either individually or in the aggregate) and
lack footnotes and other presentation items.
(i) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, condition (financial or otherwise), operations, results of operations,
or future prospects of the Company. Without limiting the generality of the
foregoing, since that date and except as set forth on SCHEDULE 3.1(I) of the
Disclosure Schedule:
(i) the Company has not sold, leased, transferred, or assigned
any material assets, tangible or intangible, outside the Ordinary Course of
Business;
(ii) the Company has not entered into any material agreement,
contract, lease, or license outside the Ordinary Course of Business;
(iii) no party (including the Company) has accelerated,
terminated, made material modifications to, or canceled any material agreement,
contract, lease, or license to which the Company is a party or by which the
Company is bound;
(iv) no Security Interest upon any of the assets, tangible or
intangible of the Company have been created or incurred;
(v) the Company has not made any capital expenditures in an
amount in excess of $50,000, either individually or in the aggregate;
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(vi) the Company has not made any capital investment in, or any
loan to, any other Person;
(vii) the Company has not created, incurred, assumed, or
guaranteed more than $50,000 in aggregate indebtedness for borrowed money and
capitalized lease obligations;
(viii) the Company has not granted any license or sublicense of any
material rights under or with respect to any Company Proprietary Rights;
(ix) there has been no change made or authorized in the charter
or bylaws of the Company;
(x) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(xi) the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xii) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees, other
than employment arrangements entered into in the Ordinary Course of Business and
disclosed in writing to Buyer;
(xiv) the Company has not granted any increase in the base
compensation of or made any other material change in the employment terms of any
of its directors, officers and employees;
(xv) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xvi) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees;
(xvii) the Company has not conducted its cash management customs
and practices other than in the usual and ordinary course of business in
accordance with past practice; and
(xviii) the Company has not committed to do any of the foregoing.
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(j) UNDISCLOSED LIABILITIES. The Company does not have any material
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes), except for (i) liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of
Business, none of which is a liability resulting from, arising out of, relating
to, in the nature of or caused by any breach of contract, breach of warranty,
tort, infringement, claim or lawsuit.
(k) LEGAL COMPLIANCE. The Company has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against any of them alleging any failure so to comply, except
where the failure to so comply would not have a Material Adverse Effect.
(l) TAX MATTERS.
(i) The Company has duly and timely filed all Tax Returns it was
required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Company (whether or not shown on any
Tax Return) have been timely paid. The Company is not currently the beneficiary
of any extension of time within which to file any Tax Return. The Company has
maintained adequate provision for, and adequate funds to pay, Taxes payable by
the Company as of September 30, 1997, and such provision and funds (as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practices of the Company in filing its Tax Returns) will be adequate
for Taxes payable by the Company as of the Closing Date.
(ii) There is no material dispute or claim concerning any Tax
liability of the Company either (A) claimed or raised by any authority in
writing or (B) as to which the Company has knowledge based upon contact with any
agent of such authority.
(iii) SECTION 3.1(L) of the Disclosure Schedule lists all Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit. The Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to any Tax assessment or deficiency.
(iv) The Company has not received, or expects to receive, from
any taxing authority any written notice of proposed adjustment, deficiency,
underpayment of Taxes or any other such notice which has not been satisfied by
payment or been withdrawn, and no claims have been asserted relating to such
Taxes against the Company;
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(v) The Company has withheld and paid all required Taxes in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other similar third party;
(vi) The Company has not filed a consent to the application of
Section 341(f) of the Code;
(vii) The Company will not be required, as a result of (A) a
change in accounting method for a Tax period beginning on or before the Closing
Date, to include any adjustment under Section 481(c) of the Code (or any
corresponding provision of state, local or foreign Tax law) in taxable income
for any Tax period beginning on or after the Closing Date, or (B) any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign Tax law), to include any item or income in
or exclude any item of deduction from any Tax period beginning on or after the
Closing Date;
(viii) The Company has disclosed on its income Tax Returns all
positions taken therein that could give rise to an accuracy-related penalty
under Section 6662 of the Code (or any corresponding provision of Tax law);
(ix) The Company has not made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Section
280G or Section 162(m) of the Code;
(x) No claim has ever been made by a taxing authority in a
jurisdiction where the Company does not pay Taxes or file Tax Returns that such
entity is or may be subject to Taxes assessed by such jurisdiction;
(xi) The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii);
(xii) The Company is not a party to any Tax allocation or sharing
agreement;
(xiii) All Taxes imposed by law (if any) in connection with the
issuance, sale, and delivery of the Stock 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; and
(xiv) The Company (A) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return and (B) has no liability for
the Taxes of any Person (other than the Company) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
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(m) INTELLECTUAL PROPERTY.
(i) The Company has not interfered with, infringed upon,
misappropriated, or violated any material Proprietary Rights of any third party,
in any material respect, and the Company has never received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company must license or refrain from using any Proprietary Rights of any third
party). To the knowledge of the Company, no third party has interfered with,
infringed upon, misappropriated, or violated any material Proprietary Rights of
the Company in any material respect.
(ii) SECTION 3.1(M)(II) of the Disclosure Schedule identifies
each patent or registration which has been issued to the Company with respect to
any of the Company Proprietary Rights, identifies each pending patent
application or application for registration which the Company has made with
respect to the Company Proprietary Rights, and identifies each material license,
agreement, or other permission which the Company has granted to any third party
with respect to the Company Proprietary Rights (together with any exceptions).
SECTION 3.1(M)(II) of the Disclosure Schedule also identifies each material
trade name or unregistered trademark used by the Company.
(iii) SECTION 3.1(M)(III) of the Disclosure Schedule identifies
each material item of the Company Proprietary Rights that any third party owns
and that the Company uses pursuant to license, sublicense, agreement, or
permission. With respect to each item of the Company Proprietary Rights
required to be identified in SECTION 3.2(M)(III) of the Disclosure Schedule:
(iv) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and effect in
all material respects;
(v) no party to the license, sublicense, agreement, or
permission is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default or permit termination, modification, or acceleration thereunder;
(vi) no party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof; and
(vii) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(viii) the Company owns or has a license to use all Proprietary
Rights necessary for the operation of its business as conducted as of the Most
Recent Fiscal Year End and as currently conducted.
(n) CONTRACTS. SECTION 3.1(N) of the Disclosure Schedule lists the
following contracts and other agreements to which the Company is a party:
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(i) any agreement (or group of related agreements) for the
consignment or lease of machinery, equipment or other personal property to or
from any Person providing for lease payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, products, machinery, equipment or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $50,000;
(iii) any capitalized lease, pledge, conditional sale or title
retention agreement involving the payment of more than $50,000 in the aggregate;
(iv) any agreement concerning a partnership or joint venture;
(v) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(vi) any agreement concerning confidentiality or noncompetition
or otherwise prohibiting the Company from freely engaging in any business;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, or
employees;
(viii) any license, royalty or other agreement relating to the
Company Proprietary Rights;
(ix) any agreement containing commitments of suretyship,
guarantee or indemnification (except for guarantees, warranties and indemnities
provided by the Company in the Ordinary Course of Business and those having a
contract value, individually or in the aggregate of $25,000 or less);
(x) any mortgage, indenture, note, bond or other agreement
relating to indebtedness incurred or provided by the Company;
(xi) any agreement involving a governmental body;
(xii) any collective bargaining agreement;
(xiii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $50,000 or providing material severance benefits;
(xiv) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect; and
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(xv) any commitment to do any of the foregoing described in
clauses (i) through (xiv).
The Company has made available to the Buyer a correct and complete redacted copy
of each written agreement listed in SECTION 3.1(N) of the Disclosure Schedule
and a written summary setting forth the material terms and conditions of each
oral agreement referred to in SECTION 3.1(N) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects and will
continue to be so following the Closing; (B) no party is in material breach or
default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification, or
acceleration, under the agreement; and (C) no party has repudiated any material
provision of the agreement. Except as specifically identified in SECTION 3.1(N)
of the Disclosure Schedule, the Company is not a party to any contract,
agreement or understanding which contains a "change in control", "potential
change in control" or similar provision which could be triggered by the
transactions contemplated by this Agreement
(o) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Company.
(p) LITIGATION.
(i) SECTION 3.1(P) of the Disclosure Schedule sets forth each
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
knowledge of the Company, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.
(ii) 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 similar law or statute of
the United States of America or any other jurisdiction.
(q) BOOKS AND RECORDS. The stock records of the Company fairly and
accurately reflect in all material respects the record ownership of all of the
outstanding shares of the Company's capital stock. The other books and records
of the Company, including financial records, minute books and books of account,
are complete and
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accurate in all material respects and have been maintained in accordance with
sound business practices.
(r) TRANSACTION WITH AFFILIATES. Except as set forth on in SECTION
3.1(R) of the Disclosure Schedule, none of the Company's shareholders,
directors, officers or employees nor any of their respective relatives or
Affiliates is involved in any business arrangement or relationship with the
Company (whether written or oral), and none of the Company's shareholders,
directors, officers or employees nor any of their respective relatives or
Affiliates owns any property or right, tangible or intangible, which is used by
the Company.
(s) FUNDED DEBT. Except as set forth in SECTION 3.1(S) of the
Disclosure Schedule the Company does not have outstanding any Funded Debt nor is
a guarantor or is otherwise responsible for any liability or obligation
(including indebtedness) of any other Person.
(t) OFFERING. Subject in part to the truth and accuracy of the
Buyer's representations and warranties set forth in this Agreement, the offer,
sale, and issuance of the Stock and the issuance of the Common Stock upon the
conversion of the Stock 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 of the
United States, and neither the Company nor anyone acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
(u) CONSENTS. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority of the United
States, 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 Stock by the Company 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.
(v) 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 that would materially 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) that materially
adversely affects the condition, financial or otherwise, business, or the
operations of the Company.
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(w) 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 its 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).
(x) DISCLOSURE. The representations and warranties contained in this
SECTION 3.1 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this SECTION 3.1 not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Company as follows:
Section 4.1 ORGANIZATION OF BUYER. Buyer is a company duly
organized, validly existing, and in good standing under the laws of Quebec. The
Buyer is duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required, except where the
lack of such qualification would not have a material adverse effect on the
business, condition (financial or otherwise), operations, results of operations,
or future prospects of the Buyer. The Buyer has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
Section 4.2 AUTHORIZATION; VALIDITY. The Buyer has all necessary
power and authority to enter into this Agreement and the Related Agreements, and
has taken all action necessary to consummate the transactions contemplated
hereby and to perform its obligations hereunder and under the Related
Agreements. This Agreement has been duly executed and delivered by the Buyer
and this Agreement and each of the Related Agreements when executed will be a
legal, valid, and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms.
Section 4.3 NO CONFLICT OR VIOLATION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby (including the execution and delivery of the Related
Agreements), will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, or other restriction of any government, governmental
agency, or court to which the Buyer is subject or any provision of the charter
or bylaws of the Buyer or (ii) conflict with, result in a breach
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of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
business, condition (financial or otherwise), operations, results of operations,
or future prospects of the Buyer or on the ability of the Parties to consummate
the transactions contemplated by this Agreement (a "BUYER MATERIAL ADVERSE
EFFECT"). The Buyer does not need to obtain any authorization, consent, or
approval of, or make any declaration, filing or registration with, any
government or governmental agency or regulatory authority in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except where the failure to obtain such
authorizations, consents, approvals, declarations, filings or registrations
would not have a Buyer Material Adverse Effect.
Section 4.4 NO BROKERS. Neither Buyer nor any affiliate of Buyer
has entered into or will enter into any agreement, arrangement or understanding
with any person or entity which will result in the obligation of the Company to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
Section 4.5 INVESTMENT. Buyer is acquiring the Stock, and will be
acquiring the shares of Common Stock issuable upon conversion of the Stock, for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof. Buyer understands that the Stock and
the shares of Common Stock issuable upon conversion of the Stock 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.
ARTICLE V
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to transfer the Stock to Buyer on the
Closing Date is subject to the satisfaction or waiver by the Company, on or
prior to the Closing Date, of each of the following conditions:
Section 5.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Buyer shall have
performed all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date.
Section 5.2 NO INJUNCTION. No injunction, stay or restraining
order shall be in effect prohibiting the consummation of the transactions
contemplated by this Agreement.
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Section 5.3 OPINION OF COUNSEL. Buyer shall have delivered to the
Company an opinion of the general counsel of Buyer, in form and substance
reasonably satisfactory to the Company and its counsel.
Section 5.4 PAYMENTS. Buyer shall have tendered the Purchase Price
to the Company in accordance with SECTION 2.3.
Section 5.5 CERTIFICATES. Buyer will furnish the Company with the
following certificates of its officers, directors and others to evidence
compliance with the conditions set forth in this Article V:
(a) COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of the Buyer that each of the representations and warranties
made by the Buyer in this Agreement is true and correct in all material respects
on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date, and that the Company has performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complies with on or prior to the Closing Date.
(b) CERTIFIED RESOLUTIONS. Certified copies of the resolutions of
the Board of Directors of the Buyer, authorizing and approving this Agreement
and the consummation of the transactions contemplated hereby.
(c) INCUMBENCY CERTIFICATE. Incumbency certificates relating to each
Person executing (as corporate officer or
otherwise on behalf of another Person) any document executed and delivered to
the Company pursuant to the terms hereof.
Section 5.6 CONSENTS. All consents, approvals, and waivers from
governmental authorities and other parties required or necessary as a result of
the transactions contemplated hereby, including, without limitation, those set
forth on SECTION 5.6 of the Disclosure Schedule, shall have been obtained.
Section 5.7 AMENDMENT OF RESTATED CERTIFICATE; AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT; REGISTRATION RIGHTS AGREEMENT; WARRANT AGREEMENT. The
Company shall have amended its Certificate of Incorporation in the form set
forth as EXHIBIT C attached hereto, and the Stockholders Agreement in the form
attached hereto as EXHIBIT D, the Registration Rights Agreement, in the form
attached hereto as EXHIBIT E, and the Warrant Agreement, in the form attached as
EXHIBIT F, shall have been executed by the parties thereto.
Section 5.8 ABSENCE OF LITIGATION. No action, suit, investigation
or proceeding shall have been commenced or threatened by a governmental agency
or third party against Buyer, the Company, or any of the Affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
Section 5.9 SECURITIES LAW COMPLIANCE. All such actions and steps
necessary to assure compliance with applicable Federal securities laws and the
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securities laws of any other jurisdiction of the United States, including all
authorizations, approvals, and permits, if any, of any governmental authority or
regulatory body in any jurisdiction where the Stock is being sold, that are
required in connection with the lawful issuance and sale of the Stock pursuant
to this Agreement, the conversion of the Stock 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.
Section 5.10 ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and
other proceedings to be taken by the Buyer in connection with the transactions
contemplated hereby, and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company and its counsel, and the
Company and said counsel shall have received all such counterpart originals or
certified or other copies of such documents as it or they may reasonably
request.
Section 5.11 CLOSING DATE. The Closing Date shall occur no later
than January 6, 1998, unless extended by the Company in its sole discretion.
Section 5.12 RESEARCH AGREEMENT. The Research and License Agreement
between the Company and Buyer, substantially in the form attached hereto as
EXHIBIT G shall have been executed.
ARTICLE VI
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Stock as provided hereby are
subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions:
Section 6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of the Company contained in this Agreement shall
be true and correct when made and, except as contemplated by this Agreement, at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, and the Company shall have performed all
agreements and covenants required hereby to be performed by either of them prior
to or at the Closing Date.
Section 6.2 CONSENTS. All consents, approvals and waivers from
governmental authorities and other parties required or necessary as a result of
the transactions contemplated hereby, including, without limitation, those set
forth in SECTION 6.2 of the Disclosure Schedule, shall have been obtained.
Section 6.3 NO INJUNCTION. No injunction, stay or restraining
order shall be in effect prohibiting the consummation of the transactions
contemplated by this Agreement.
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Section 6.4 DOCUMENTS TO BE DELIVERED BY COMPANY. At the Closing,
Company shall have delivered to Buyer the following documents, in each case duly
executed or otherwise in proper form:
(a) STOCK CERTIFICATE(S). Stock certificates representing all of the
Stock.
(b) COMPLIANCE CERTIFICATE. A certificate signed by the chief
executive officer of the Company that each of the representations and warranties
made by the Company in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date, and that the Company has performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complies with on or prior to the Closing Date.
(c) OPINION OF COUNSEL. A written opinion of Nutter, McClennen &
Fish, LLP, counsel to the Company, dated as of the Closing Date, addressed to
Buyer, in form and substance reasonably satisfactory to Buyer and its counsel.
(d) CERTIFIED RESOLUTIONS. Certified copies of the resolutions of
the Board of Directors, authorizing and approving this Agreement and the
consummation of the transactions contemplated hereby.
(e) CERTIFICATE; BYLAWS; GOOD STANDINGS. (i) A copy of the
certificate of incorporation of the Company certified as of a recent date by the
Secretary of State of the state of incorporation of the Company, (ii) a copy of
the bylaws of the Company certified by the secretary of the Company, and (iii)
certificates of good standing for the Company from the Secretary of State of the
state of incorporation of the Company and from each other jurisdiction in which
the Company is required to qualify to do business, in each case dated not more
than five (5) days prior to the Closing Date.
(f) INCUMBENCY CERTIFICATE. Incumbency certificates relating to each
person executing (as corporate officer or otherwise on behalf of another person)
any document executed and delivered to Buyer pursuant to the terms hereof.
(g) OTHER DOCUMENTS. All other documents, instruments or writings
required to be delivered to Buyer at or prior to the Closing pursuant to this
Agreement and such other certificates of authority and documents as Buyer may
reasonably request.
Section 6.5 AMENDMENT OF RESTATED CERTIFICATE; AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT; REGISTRATION RIGHTS AGREEMENT; WARRANT AGREEMENT. The
Company shall have amended its Certificate of Incorporation in the form set
forth as EXHIBIT C attached hereto, and the Stockholders Agreement, in the form
attached hereto as EXHIBIT D, the Registration Rights Agreement, in the form
attached hereto as EXHIBIT E, and the Warrant Agreement, in the form attached as
EXHIBIT F, shall have been executed by the parties thereto.
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Section 6.6 ABSENCE OF LITIGATION. No action, suit, investigation
or proceeding shall have been commenced or threatened by a governmental agency
or third party against Buyer, the Company, or any of the Affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby.
Section 6.7 SECURITIES LAW COMPLIANCE. All such actions and steps
necessary to assure compliance with applicable Federal securities laws and the
securities laws of any other jurisdiction of the United States, including all
authorizations, approvals, and permits, if any, of any governmental authority or
regulatory body in any jurisdiction where the Stock is being sold, that are
required in connection with the lawful issuance and sale of the Stock pursuant
to this Agreement, the conversion of the Stock 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.
Section 6.8 ALL PROCEEDINGS TO BE SATISFACTORY. All corporate and
other proceedings to be taken by the Company in connection with the transactions
contemplated hereby, and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Buyer and its counsel, and the Buyer
and said counsel shall have received all such counterpart originals or certified
or other copies of such documents as it or they may reasonably request.
Section 6.9 CLOSING DATE. The Closing Date shall occur no later
than January 6, 1998, unless extended by Buyer in its sole discretion.
Section 6.10 RESEARCH AGREEMENT. The Research and License
Agreement, between the Company and Buyer, substantially in the form attached
hereto as EXHIBIT G, shall have been executed.
ARTICLE VII
POST-CLOSING COVENANTS
Section 7.1 FURTHER ASSURANCES. On and after the Closing Date, the
Company and Buyer will take all appropriate action and execute (or cause to be
executed) all documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the provisions hereof.
Section 7.2 PUBLIC ANNOUNCEMENTS. The timing and content of all
announcements regarding any aspect of this Agreement or the transactions
contemplated hereto to the financial community, government agencies, employees
or the general public shall be mutually agreed upon in advance by the Parties
hereto; PROVIDED, that each party hereto may make any such announcement which it
in good faith believes, based on advice of counsel, is necessary or advisable in
connection with any requirement of law or regulation, it being understood and
agreed that each party shall promptly provide the other parties hereto with
copies of any such announcement; and PROVIDED FURTHER that Buyer, the Company,
or their respective Affiliates may make any announcement or disclosure to
current or future financing sources or subsequent purchasers or assignees of
substantially all of the capital stock or assets of Buyer, the
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Company or Affiliate thereof without consent of or disclosure to the Company or
the Buyer, as the case may be.
Section 7.3 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 Stock.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 SURVIVAL, REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties of the Company and Buyer contained
herein or in any certificates or other documents delivered at the Closing shall
not be deemed waived or otherwise affected by any investigation made by any
party hereto. The representations and warranties provided for in this Agreement
shall survive for 24 months beyond the Closing Date, except that the
representations and warranties set forth in SECTIONS 3.1(B) and 4.2 shall
survive indefinitely. The provisions of this SECTION 8.1 shall not limit any
covenant or agreement of the parties hereto which, by its terms, contemplates
performance after the Closing Date. The indemnification provisions contained in
this Article VIII are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any party hereto may have for any breach of any
representation, warranty, or covenant. The covenants and agreements in this
Article VIII shall survive until such time as any claim for indemnification is
finally settled in accordance with the terms hereof.
Section 8.2 INDEMNIFICATION OBLIGATION OF THE COMPANY.
(a) The Company agrees to indemnify Buyer and its Affiliates,
stockholders, officers, directors, employees, agents, representatives and
successors and assigns (collectively, the "BUYER INDEMNITEES") in respect of,
and save and hold each Buyer Indemnitee harmless against and pay on behalf of or
reimburse each Buyer Indemnitee as and when incurred, any Losses which any Buyer
Indemnitee suffers, sustains or becomes subject to as a result of or by virtue
of, without duplication:
(i) any facts or circumstances which constitute a
misrepresentation or breach by the Company set forth in this Agreement
(including any Schedule hereto), or any certificate delivered by the Company
pursuant to this Agreement (provided that the Company is given written notice
of such Loss during the survival period specified in SECTION 8.1 above);
(ii) any nonfulfillment or breach of any covenant of the Company
set forth in this Agreement; and
(iii) expenses of the Company incident to this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses and Taxes described in SECTION 9.8).
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(b) Notwithstanding the foregoing, the Company shall not be required
to indemnify the Buyer Indemnitees in respect of any Losses Buyer suffers,
sustains or becomes subject to as a result of or by virtue of any of the
occurrences referred to in SECTION 8.2(A)(I) above (other than losses arising
out of any misrepresentation or breach under any of Sections 3.1(b) and (d)
unless the aggregate of all such Losses exceeds $200,000; PROVIDED, that in such
event, the Company shall be responsible for the amount of all such Losses. In
no event shall the Company be obligated to indemnify the Buyer Indemnities under
this Article VIII in respect of any Losses Buyer suffers, sustains, or becomes
subject to, as a result of or by virtue of any of the occurrences referred to in
SECTION 8.2(A)(I) above in excess of $20,000,000 in the aggregate.
Section 8.3 INDEMNIFICATION OBLIGATION OF BUYER. Buyer will indemnify
the Company and its Affiliates, stockholders, officers, managers, directors,
employees, agents, representatives and successors and assigns (collectively, the
"COMPANY INDEMNITEES") in respect of, and save and hold each Company Indemnitee
harmless against any Losses which such Company Indemnitee suffers, sustains or
becomes subject to as a result of or by virtue of, without duplication:
(a) any facts or circumstances which constitute a misrepresentation
or breach of by Buyer set forth in this Agreement or any certificate delivered
by Buyer pursuant to this Agreement (provided that Buyer is given written notice
of such Loss during the applicable survival period specified in SECTION 8.1
above); or
(b) any nonfulfillment or breach of any covenant or agreement of the
Buyer set forth in this Agreement.
Section 8.4 INDEMNIFICATION PROCEDURES.
(a) Any Person making a claim for indemnification pursuant to
SECTION 8.2 OR 8.3 above (each, an "INDEMNIFIED PARTY") must give the party from
whom indemnification is sought (an "INDEMNIFYING PARTY") written notice of such
claim promptly after the Indemnified Party receives any written notice of any
action, lawsuit, proceeding, investigation or other claim (a "PROCEEDING")
against or involving the Indemnified Party by any Person or otherwise discovers
the liability, obligation or facts giving rise to such claim for
indemnification; PROVIDED, that the failure to notify or delay in notifying an
Indemnifying Party will not relieve the Indemnifying Party of its obligations
pursuant to SECTION 8.2 or 8.3 above, as applicable, except to the extent that
such failure actually harms the Indemnifying Party.
(b) With respect to the defense of any Proceeding against or
involving an Indemnified Party in which any Person in question seeks only the
recovery of a sum of money (and not for injunctive or equitable relief) for
which indemnification is provided in SECTION 8.2 OR 8.3 above, at its option an
Indemnifying Party may appoint as lead counsel of such defense any legal counsel
selected by the Indemnified Party; PROVIDED, that before the Indemnifying Party
assumes control of such defense it must first:
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(i) enter into an agreement with the Indemnified Party (in form
and substance satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no reservation of any
rights other than the right to be subrogated to the rights of the Indemnified
Party) for all Losses relating to such Proceeding and unconditionally guarantees
the payment and performance of any liability or obligation which may arise with
respect to such Proceeding or the facts giving rise to such claim for
indemnification; and
(ii) furnish the Indemnified Party with evidence that the
Indemnifying Party, in the Indemnified Party's sole judgment, is and will be
able to satisfy any such liability.
(c) Notwithstanding SECTION 8.4(B) above: (i) the Indemnified Party
will be entitled to participate in the defense of such claim and to employ
counsel of its choice for such purpose at its own expense (provided that the
Indemnifying Party will bear the reasonable fees and expenses of such separate
counsel incurred prior to the date upon which the Indemnifying Party effectively
assumes control of such defense), and (ii) the Indemnifying Party will not be
entitled to assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the Indemnified Party,
if:
(i) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be materially detrimental to or
materially injure the Indemnified Party's reputation or future business
prospects;
(ii) the Indemnified Party reasonably believes that there exists
or could arise a conflict of interest which, under applicable principles of
legal ethics, could prohibit a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such Proceeding; or
(iii) a court of competent jurisdiction rules that the
Indemnifying Party has failed or is failing to prosecute or defend vigorously
such claim.
(d) The Indemnifying Party must obtain the prior written consent of
the Indemnified Party (which the Indemnified Party will not unreasonably
withhold) prior to entering into any settlement of such claim or Proceeding or
ceasing to defend such claim or Proceeding, provided that any such settlement
shall provide for the full release of all claims against each Indemnified Party.
The Indemnified Party shall not settle any claim or proceeding without the
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld).
Section 8.5 PAYMENT. Upon the determination of the liability under
Article VIII or otherwise between the parties or by judicial proceeding, the
appropriate party shall pay to the other, as the case may be, within ten (10)
days after such determination, the amount of any claim for indemnification made
hereunder. In the event that the Indemnified Party is not paid in full for any
such claim pursuant to the foregoing provisions promptly after the other party's
obligation to indemnify has been determined in accordance herewith, it shall
have the right, notwithstanding any other rights that it may have against any
other Person, to setoff the unpaid amount of any
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such claim against any amounts owed by it under any instrument or agreement
entered into pursuant to this Agreement or otherwise. Upon the payment in full
of any claim, either by setoff or otherwise, the entity making payment shall be
subrogated to the rights of the Indemnified Party against any Person with
respect to the subject matter of such claim.
ARTICLE IX
MISCELLANEOUS
Section 9.1 ASSIGNMENT. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by the Company without the prior
written consent of Buyer, or by Buyer without the prior written consent of the
Company, except that Buyer may, without such consent, assign, directly or
indirectly, all of its rights and obligations under this Agreement to any of its
Affiliates, any Person which provides financing to the Buyer or any of its
Subsidiaries or any subsequent purchaser of the Buyer or its Affiliates (whether
by merger, consolidation, sale of stock, sale of assets or otherwise). Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns, including a successor by amalgamation, merger,
or otherwise. This Agreement shall be for the sole benefit of the parties
hereto and their respective heirs, successors (including successors created by
amalgamation, merger, or otherwise), permitted assigns and legal representatives
and is not intended, nor shall be construed, to give any Person, other than the
parties hereto and their respective heirs, successors, (including successors
created by amalgamation, merger, or otherwise assigns and legal representatives,
any legal or equitable right, remedy or claim hereunder.
Section 9.2 NOTICES. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing. All such notices shall be delivered personally, by telecopier,
by certified mail, return receipt requested, or by reputable overnight courier
(costs prepaid), and shall be deemed given or made upon receipt thereof. All
such notices are to be given or made to the parties at the following addresses
(or to such other address as any party may designate by a notice given in
accordance with the provisions of this Section):
IF TO BUYER:
BioChem Pharma Inc.
275 Armand-Frappier Boulevard
Laval, Quebec H7V4A7
Canada
Attention: Vice President, Legal Affairs
Telecopy No.: (514) 978-7755
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WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO BUYER) TO:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Luc A. Despins, Esq.
Telecopy No.: (212) 446-4900
IF TO THE COMPANY:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Mark T. Weedon
Telecopy No.: (617) 396-1028
WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE COMPANY) TO:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attention: Constantine Alexander, Esq.
Telecopy No.: (617) 973-9748
SECTION 9.3 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO THE CHOICE OF LAW OR CONFLICTS OF LAW PRINCIPLES THEREOF.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVE ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY FORUM NON CONVENIENS,
WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
Section 9.4 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, together with all Exhibits and Schedules hereto, constitutes the
entire agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
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Section 9.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 9.6 INVALIDITY. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
Section 9.7 HEADINGS. The headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
Section 9.8 EXPENSES. Except as otherwise provided herein, the
Company and Buyer will each be liable for their respective costs and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement and the consummation of the transactions
contemplated hereby; PROVIDED, that the Company shall pay any and all transfer,
gains, stamp and other similar Taxes, if any, assessed in connection with the
transactions contemplated by this Agreement and shall have delivered evidence
satisfactory to Buyer of the payment of such Taxes.
Section 9.9 SPECIFIC PERFORMANCE. Each of the Buyer and the
Company acknowledges and agrees that the other Party would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each Party agrees that the other Party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter (subject
to the terms and conditions of SECTION 9.3), in addition to any other remedy to
which they may be entitled, at law or in equity.
Section 9.10 TIME IS OF THE ESSENCE; COMPUTATION OF TIME. Buyer and
the Company agrees that time is of the essence with respect to every covenant,
condition to be satisfied, and action to be taken hereunder, and shall proceed
accordingly with respect to every action necessary, proper or advisable to make
effective the transactions contemplated by this Agreement. Whenever the last
day for the exercise of any privilege or the discharge of any duty hereunder
shall fall upon any day which is not a business day, the party having such
privilege or duty may exercise such privilege or discharge such duty on the next
succeeding business day.
Section 9.11 WAIVER OF JURY TRIAL. Each of the parties hereto
waives to the fullest extent permitted by law any right it may have to trial by
jury in respect of any claim, demand, action or cause of action based on, or
arising out of, under or in connection with this Agreement, or any course of
conduct, course of dealing, verbal or written statement or action of any party
hereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise. The parties to this
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Agreement each hereby agrees that any such claim, demand, action or cause of
action shall be decided by court trial without a jury and that the parties to
this Agreement may file an original counterpart of a copy of this Agreement with
any court as evidence of the consent of the parties hereto to the waiver of
their right to trial by jury.
Section 9.12 VOTING AGREEMENTS. With respect to the Company First
Listing (as that term is defined in the Registration Rights Agreement (attached
as EXHIBIT E hereto)), the Buyer agrees to (a) vote the Stock in favor of
adoption of the following proposals:
(i) approval of a blank check stock;
(ii) a reverse stock split;
(iii) elimination of stockholder action by unanimous written
consent; and
(iv) approval of the equity incentive plan described in the
Prospectus and indemnification agreements for officers and
directors of the Company,
and (b) to grant all waivers necessary under Section 3(b) and 4 of the
Stockholders Agreement (attached hereto as EXHIBIT D) reasonably necessary to
facilitate such Company First Listing. The Buyer further agrees not to
unreasonably withhold its vote in favor of all other proposals which require a
vote of the stockholders of the Company in connection with such Company First
Listing and as to which a majority of the votes cast by all of the holders of
capital stock of the Company have been cast in favor of. The foregoing
notwithstanding, the Buyer shall not be required to vote in favor of any such
other proposal if such other proposal will not affect all stockholders of the
Company (including Buyer) alike. Any approval granted under Subsection (a) of
this section shall automatically be deemed rescinded and of no force and effect
if the Company First Listing is not consummated on or before March 31, 1998.
This Section shall not apply to a Company First Listing consummated after March
31, 1998.
Section 9.13 AMALGAMATION. The Company acknowledges that Buyer has
advised it that it proposes to carry out a reorganization, including an
amalgamation, pursuant to which, among other things, a corporation named BioChem
Holdings Inc. (the "Successor") will own all of the assets and be liable for all
liabilities of Buyer (the "Amalgamation"). The Company hereby agrees that, upon
consummation of the Amalgamation, the Successor shall have all of the rights and
obligations of Buyer as if Successor had executed this Agreement on the date
hereof in lieu of Buyer, and that neither Buyer nor Successor shall be required
to send any notice of any kind regarding the Amalgamation nor seek the consent
of the Company to such Amalgamation.
Section 9.14 STANDSTILL AGREEMENT. For a period of five (5) years
from the Closing Date, neither Buyer nor any member of the Buyer Group will,
without prior approval of the Board of Directors of the Company, directly or
indirectly:
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(a) acquire, offer to acquire, or agree to acquire, by purchase, gift
or otherwise, any Common Stock or any securities which by the terms thereof are
convertible into or exchangeable or exercisable for Common Stock if the effect
of such acquisition will be to give the Buyer or any member of the Buyer Group,
individually or collectively assuming conversion, exchange or exercise of any
security convertible into or exchangeable or exercisable for Common Stock, the
right to cast more than twenty-five percent (25%) of the votes entitled to be
cast generally in the election of Directors of the Company on the date of
acquisition;
(b) make, or in any way participate in any "solicitation" of
"proxies" to vote (as such terms are defined in Rule 14a-1 under the 1934 Act),
solicit any consent or seek to advise or influence any person or entity with
respect to the voting of any Common Stock or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under the
1934 Act) with respect to a Change of Control;
(c) form, join or encourage the formation of, any "person" within the
meaning of Section 13(d)(3) of the 1934 Act with respect to any Common Stock to
effectuate a Change of Control;
(d) deposit any Common Stock into a voting trust or subject any such
Common Stock to any arrangement or agreement with respect to the voting thereof
with respect to a Change of Control;
(e) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals regarding a Change of Control with
respect to the Company as described in Rule 14a-8 under the 1934 Act, or induce
or attempt to induce any other person to initiate any such stockholder proposal;
(f) except as to the Investor Director (as that term is defined in
Section 1 of the Stockholder's Agreement, attached as EXHIBIT D hereof) seek
election to or seek to place a representative on the Board of Directors of the
Company;
(g) call or seek to have called any meeting of the stockholders of
the Company regarding a Change of Control;
(h) except through the Investor Director, act to seek to control of
the Company;
(i) solicit, seek to effect, negotiate with any other party with
respect to, or make any proposal, wither written or oral, to the Board of
Directors of the Company or any director or officer of the Company or otherwise
make any public proposal whatsoever with respect to, any form of business
combination transaction involving the Company and Buyer, including, without
limitation, a merger, exchange offer or liquidation of the Company's assets, or
any restructuring, recapitalization or similar transaction with respect to the
Company; or
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(j) instigate or assist any third party to do any of the foregoing
with respect to a Change of Control, PROVIDED, HOWEVER, that nothing herein
shall be deemed to prohibit or limit the sale by Buyer of the Stock to any other
party under any circumstances not otherwise prohibited under other sections of
this Agreement, the Related Agreements, or applicable securities' laws.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ Mark T. Weedon
------------------------------
Name: Mark T. Weedon
Title: President and Chief
Executive Officer
BIOCHEM PHARMA, INC.
By /s/ Francois Legault
------------------------------
Name: Francois Legault
Title: Executive Vice President
By /s/ Daniel Hetu
------------------------------
Name: Daniel Hetu
Title: Vice President
<PAGE>
Exhibit 10.24
RESEARCH AND LICENSE AGREEMENT
between
BIOCHEM PHARMA, INC.
and
SCRIPTGEN PHARMACEUTICALS, INC.
December 12, 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>
RESEARCH AND LICENSE AGREEMENT
This RESEARCH AND LICENSE AGREEMENT (the "Agreement") is made this 12th day
of December 1997 (the "Effective Date"), by and between Scriptgen
Pharmaceuticals, Inc. (SP), a company organized and existing under the laws of
the State of Delaware, and having its principal place of business at 200 Boston
Avenue, Medford, Massachusetts, and BioChem Pharma, Inc. (BIOCHEM), a company
organized and existing under the laws of Canada, and having its principal place
of business at 275 Armand-Frappier Blvd., Laval, Quebec. For the purpose of
this agreement SP and BIOCHEM shall also include the Affiliates of each.
R E C I T A L S
WHEREAS, SP has made substantial investment in high-throughput screening
technology for (i) the Hepatitis B Research Program ("HBV") [***] and (ii)
the Dimerescent Receptor Research Program;
WHEREAS, BIOCHEM possesses drug development, manufacturing and
commercialization expertise related to development and marketing of
pharmaceuticals;
WHEREAS, SP desires to provide certain drug candidates to BIOCHEM for the
purpose of further development and eventual commercial exploitation of Products
embodying the Technology;
WHEREAS, BIOCHEM desires to acquire the drug candidates and develop
Compounds provided by SP for commercial exploitation; and
WHEREAS, both BIOCHEM and SP desire to enter into a license agreement which
balances the relative contributions of each to the discovery, development and
commercialization of the Products and rewards each according to their relative
contributions;
NOW, THEREFORE, in consideration of the financial terms set forth herein,
as well as other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby covenant, and agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms, whether used in the
singular or plural, shall have the respective meanings set forth below:
<PAGE>
1.1 "AFFILIATE" shall mean any Person which, directly or indirectly, owns,
is owned by, or is under common ownership with a party to this Agreement or any
Person actually controlled by, controlling, or under control of a party to this
Agreement. For the purposes of this definition, "ownership" or "control" shall
mean a Person owns or controls the lesser of (i) fifty percent (50%) and (ii)
the maximum ownership interest permitted by law, of the equity conferring votes
or rights, and/or otherwise has the ability to direct the business affairs of
another Person.
1.2 "ANNUAL RESEARCH PLAN" shall mean the written plans describing the
research in the Field to be carried out during each year, of the Hepatitis B
Research Program and the Dimerescent Receptor Research Program pursuant to this
Agreement. Each Annual Research Plan will be set forth in a written document and
contain the mutually agreed criteria for determining a Drug Candidate.
1.3 "CALENDAR QUARTER" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.
1.4 "CALENDAR YEAR" shall mean each successive period of twelve (12)
months commencing on January 1 and ending on December 31.
1.5 "CLINICAL DEVELOPMENT PROGRAM" shall mean the drug development program
activities of BIOCHEM for the Drug Candidates to be described in SCHEDULE 1.5 as
amended from time to time including yearly updates.
1.6 "COMMERCIAL SALE" shall mean the transfer of title to a Product to an
independent third party in a country after the Product has received all
necessary approval for sale in such country by the appropriate Regulatory
Agency.
1.7 "CONFIDENTIAL INFORMATION" shall mean any proprietary and secret
ideas, technical information, trade secrets, know-how, commercial information,
techniques, data or other information, whether in written or verbal form, or any
other information marked as "Confidential," which relate to the Compound, the
Product, the manufacturing of the Product or Compound, or the Patent Rights, and
which are in the possession of or owned by either Party. The term "Confidential
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Information" does not include information which is or was: (i) in the public
domain or becomes public domain other than through a breach of this Agreement on
the part of the receiving Party; or (ii) received by the receiving Party from a
third party that is not under a confidential obligation to the disclosing Party;
or (iii) known to the receiving Party, as shown by its written records, prior to
execution of this Agreement; or (iv) developed by the receiving Party without
access to the Confidential Information; or (v) generally made available to the
public by the disclosing Party without restrictions or disclosure
1.8 "COMPOUNDS" shall mean any compounds which SP has identified in the
Hepatitis B Research Program and the Dimerescent Receptor Research Program [***]
1.9 "DIMERESCENT COMPOUNDS" shall mean compounds for the following
receptors: [***] and any other [***] subsequently identified.
1.10 "DIMERESCENT RECEPTOR RESEARCH PROGRAM" shall mean the research
program including acceptance criteria for a Drug Candidate described in
attached SCHEDULE 1.10 which shall be prepared and delivered within [***] of
the Effective Date and amended from time to time.
1.11 "DOLLARS" and the symbol "$" shall mean lawful money of the United
States of America.
1.12 "DRUG CANDIDATE" shall mean any and all Compounds, discovered by SP in
the course of conducting the Hepatitis B Research Program or the Dimerescent
Receptor Research Program including all formulations, mixtures or compositions
thereof discovered by SP in the Hepatitis B Research Program or the Dimerescent
Receptor Research Program that meets the criteria specified for acceptance in
SCHEDULES 1.10 AND 1.19.
1.13 "EFFECTIVE DATE" shall be the date set forth in the first paragraph of
this Agreement.
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1.14 "FDA" shall mean the United States Food and Drug Administration or any
replacement or successor entity thereto.
1.15 "FIELD" shall mean any application in human health care.
1.16 "FIRST COMMERCIAL SALE" shall mean the date of the first Commercial
Sale in a given country.
1.17 "GAAP" shall mean generally acceptable accounting principles for the
United States.
1.18 "GROSS PROFIT" shall mean Net Sales minus manufacturing cost all as
determined in accordance with GAAP.
1.19 "HEPATITIS B RESEARCH PROGRAM" shall mean the research program
including the acceptance criteria for an antiviral Drug Candidate described
in attached SCHEDULE 1.19 which shall be prepared and delivered within [***]
of the Effective Date and may be amended from time to time.
1.20 "IND" shall mean Investigational New Drug application as that term is
used in the FDA.
1.21 "NDA" shall mean New Drug Application as that term is used in the FDA.
1.22 "NET SALES" shall mean the amount of money (other than Sub-License
Receipts) received by BIOCHEM for BIOCHEM's Commercial Sale of a Product after
deducting:
(i) the normal or customary trade and/or quantity discounts and
allowances to customers;
(ii) refunds, rebates and allowances for returned, damaged goods or
outdated Product;
(iii) excise and sales taxes, customs duties, tariffs and other
governmental charges;
(iv) costs of transportation (including without limitation packing and
insurance) paid;
(v) retroactive price reductions applicable to sale of Product that
are actually allowed or granted;
(vi) royalties paid on a Drug Candidate to a third party.
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Notwithstanding the foregoing, if a Product is sold in conjunction with or
includes Royalty Bearing Components, Net Sales for purposes of determining
royalties payable under this Agreement shall be calculated as the product
obtained by using whichever of the following formulas is applicable:
[***]
[***]
1.23 "OTHER COMPENSATION" shall mean any and all compensation other than
Net Sales (no matter how classified) received by BIOCHEM from a third-party
sub-licensee of Compounds or Products.
1.24 "PARTY" shall mean SP or BIOCHEM and when used in the plural, shall
mean SP and BIOCHEM.
1.25 "PERSON" shall mean and include any individual, corporation,
partnership, joint venture, trust, unincorporated organization, university,
college or government or any agency or political subdivision thereof.
1.26 "PRODUCT" shall mean any therapeutic agent which is comprised, at
least in part, of a Drug Candidate.
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1.27 "PROFIT" shall mean Net Sales minus ( manufacturing cost plus
distribution and sales cost plus marketing cost plus any reasonable expenses
incurred under SECTION 12.12) all as determined in accordance with GAAP.
1.28 "R & D RECEIPTS" shall mean all value received, regardless of how
characterized, by a Party from a third party for the performance of research and
development on a Drug Candidate.
1.29 "R & D PROFIT" shall mean R & D Receipts minus (cost of supplies,
equipment, and salary directly attributable to the research and development
covered by the R & D Receipts).
1.30 "REGULATORY AGENCY" shall mean the FDA and any corresponding agencies
in other countries where Product is to be sold or used.
1.31 "RESEARCH INVENTIONS" shall have the meaning as set forth in SECTION
8.4.
1.32 "RESEARCH PROGRAMS" shall mean both the Hepatitis B Research Program
and the Dimerescent Receptor Research Program.
1.33 "ROYALTY BEARING COMPONENTS" shall mean all components, devices or
products which are sold in conjunction with or are included as part of a Product
and for which either (i) BIOCHEM must license and pay a royalty to an unrelated
third party or (ii) BIOCHEM owns a patent covering the component, device or
product in the appropriate territory where such component, product or device is
sold.
1.34 "SP PATENT RIGHTS" shall mean any and all patents and patent
applications licensed to or owned by SP during the term of this Agreement
which relate to the Compounds, Product or know-how of the Compounds and
Product and which are listed on SCHEDULE 1.34 as amended from time to time,
and any and all patents and patent applications which claim priority from any
such patent or application including without limitation all divisional,
reissue, re-examination, continuation, and continuations-in-part, extension
and renewal application and patent thereof and any and all other counterpart
application in any countries and patent and inventor certificates, utility
model and the like issuing therefrom; provided, however, SP Patent Rights
shall not include any rights to SP's proprietary Any Target Ligand Affinity
Screen ("ATLAS") and the proprietary Screen for Compounds with Affinity for
Nucleic Acid ("SCAN") technology.
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1.35 "SP TECHNOLOGY" shall include the SP Patent Rights, know-how,
Confidential Information, and any other technology, data, compounds, processes,
formulae, materials, devices, systems, notes, records, preparations, usage
information, procedures, regulatory information, manufacturing information and
other information all of which are related to the Compound, the Product or to
the Patent Rights; provided, however, SP Technology shall not include any rights
to SP's ATLAS and SCAN technology.
1.36 "SUB-LICENSE RECEIPTS" shall mean all value received by BIOCHEM,
including license or distribution fees, milestones fees or Other Compensation
regardless of how characterized. Any non-monetary consideration shall be
afforded at fair market value as of the date of receipt of such consideration as
calculated by the Parties acting reasonably and in good faith.
1.37 "TERRITORY" shall mean all of the countries in the world, including
their respective territories and possessions.
1.38 "TRANSFER DATE" shall mean the date on which SP sends notice to
BIOCHEM that it has transferred a Drug Candidate for clinical development. If
BIOCHEM disputes SP's claim of the Transfer Date, all such disagreement shall be
settled according to Section 13.1.
1.39 "VALID PATENT CLAIM" shall mean a claim of an issued and unexpired
patent included within the SP Patent Rights or pending patent applications
claiming an invention, which has not been revoked or held 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, and
which has not been disclaimed, denied or admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise.
ARTICLE II
LICENSE
2.1 LICENSE TO COMPOUNDS AND PRODUCTS. Subject to the terms and
conditions of this Agreement, effective as of the Effective Date, SP hereby
grants to BIOCHEM an exclusive, non-royalty bearing license in the Territory
under SP Technology (to the extent such SP Technology covers composition of
matter, methods of use, manufacturing and formulation of Compounds or Product
thereof) to seek governmental approvals, discover, develop, make, use, offer
to sell, sell, import and export and have developed, made, used, offered for
sale, sold, imported and exported
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<PAGE>
any of the Compounds and Products. Such license rights will remain in effect
until (i) the expiration of the last applicable patent in such country where
there is a Valid Patent Claim covering a Product in such county; or (ii) the
tenth (10th) anniversary after the First Commercial Sale of the Product in
such country.
2.2 LIMITED RIGHTS. Subject to the terms and conditions of this
Agreement, effective as of the Effective Date, and to the limited extent
necessary for BIOCHEM to seek governmental approvals, develop, have made, make,
use, offer to sell, sell, import and export and have developed, made, used,
offered for sale, sold, imported and exported Compounds and Products, SP agrees
not to sue BIOCHEM for infringement under any of SP's patents; provided,
however, nothing in this SECTION 2.2 shall be interpreted to allow BIOCHEM to
screen for Compounds or Products using ATLAS and SCAN.
ARTICLE III
CONSIDERATION
3.1 EQUITY. BIOCHEM shall purchase such number of shares of Series D
Convertible Preferred Stock of SP which are convertible into [***] of SP's
outstanding shares of common stock on a fully diluted basis immediately
following the purchase for a payment of U.S. $20,000,000 (TWENTY MILLION
DOLLARS) as per that certain Stock Purchase Agreement of even Date hereof which
is attached as SCHEDULE 3.1.
3.2 CONTINUING PAYMENTS. BIOCHEM and SP shall share Profit with [***]
going to BIOCHEM and [***] going to SP; provided, however, after the second
anniversary of the First Commercial Sale on a country-by-country basis, the
share of Profit payable to SP shall never be less than [***] of Gross Profit.
3.3 SUB-LICENSING. All Sub-License Receipts shall be split as follows:
(a) if at the time of sub-license BIOCHEM has completed, at its
expense, clinical development of the Product covered by the
sub-license through completion of the Phase III clinical trials
to be used for the NDA for such Product, the split shall be
[***] to BIOCHEM and [***] to SP without any deductions.
(b) If a Product is sub-licensed to a third party before the
completion of the Phase III trials related to such Product, the
split shall be [***] to BIOCHEM and [***] to SP; provided,
however, that the royalty portion of said Sub-License
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<PAGE>
Receipts payable to SP shall not exceed [***] [***] of the Net
Sales of the Product. Prior to BIOCHEM making any royalty or
milestone payments to SP under this SECTION 3.3(B), BIOCHEM
shall first be entitled to reimbursement in full for the
clinical development costs it has expended.
(c) Notwithstanding Section 3.3(b), if BIOCHEM sub-licenses its
rights under this Agreement to a related party or Affiliate of
BIOCHEM, any payments to BIOCHEM and any profit of such related
party or Affiliate shall be split [***] to BIOCHEM [***] to SP.
3.4 REDUCTION IN PROFIT SHARE. If the last of the SP Patent Rights expire
before the [***] anniversary of the First Commercial Sale of the Product, SP's
share of the Profit and Sub-Licensee Receipts after such expiration shall be
reduced by [***].
3.5 OPTION FEE. If BIOCHEM exercises its option under Section 5.2 it
shall pay SP:
[***]
[***]
Provided, however, the option fees under this section shall increase as
specified in Paragraph 5.2(ii).
3.6 R & D PROFITS. R & D Profits on a Drug Candidate which has not been
returned to SP by BIOCHEM shall be split in the same proportion as any Profits
or Sub-Licensee Receipts would be split on such Drug Candidate. If BIOCHEM
returns a Drug Candidate to SP, BIOCHEM shall not be entitled to any of the R &
D Profits which accumulate after the date of such return.
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<PAGE>
ARTICLE IV
SUB-LICENSING
4.1 TERMS. If BIOCHEM sub-licenses its rights under this Agreement to a
third party it shall provide SP written notification of such sub-license and
provide SP a copy of such sub-license agreement within [***] of execution of
such agreement by BIOCHEM.
ARTICLE V
CLINICAL DEVELOPMENT AND MANUFACTURING
5.1 CLINICAL DEVELOPMENT. BIOCHEM shall use its best efforts based on
reasonable commercial judgment to carry out the Clinical Development Program.
Illustrative of this, after acceptance of a Drug Candidate, BIOCHEM will have
[***] BIOCHEM shall be responsible for all costs of the Clinical Development
Program.
5.2 DIMERESCENT COMPOUNDS OPTION. BIOCHEM shall have [***] to exercise
the options to Dimerescent Compound under the following schedule.
[***]
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[***]
5.3 RETURN OF DRUG CANDIDATE. If a Drug Candidate, which has been
accepted by BIOCHEM is voluntarily returned to SP by BIOCHEM prior to any
default by BIOCHEM, SP shall be free to further develop such returned Drug
Candidate; provided, however, if SP further develops such returned Drug
Candidate, then SP shall pay to BIOCHEM a royalty according to the following
schedule:
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[***]
ARTICLE VI
ACCOUNTING AND RECORDS
6.1 ACCOUNTING. At the close of each calendar quarter, the Net Sales,
Profit, Gross Profit, R & D Receipts, R &D Profit and Sub-License Receipts shall
be computed by BIOCHEM, and the share of Profits, R & D Profits and Sub-License
Receipts or payments earned thereon shall be paid to SP within [***] after the
close of said quarter.
6.2 REPORTS. With each payment, BIOCHEM shall furnish to SP a written
accounting report for the closed quarter stating the Net Sales, Profit, Gross
Profit and Sub-License Receipts, the payments due and the payments made.
With each such report delivered, BIOCHEM shall pay to SP all amounts, if any,
due under this Agreement. If no payments are due, BIOCHEM shall so report.
6.3 PAYMENTS. All payments required in this Agreement shall be paid to SP
in United States dollars at the address specified in SECTION 11.1 of this
Agreement or to such other place as SP may reasonably designate consistent with
applicable laws and regulations.
6.4 RECORDS. For a period of [***] from the date covered by any report
provided under SECTION 6.2, BIOCHEM agrees to maintain written records with
respect to its operations for such period pursuant to this Agreement in
sufficient detail to enable SP or its designated accountants to compute the
amount of Gross Profit, Profit, R & D Profit, Sub-License Receipts and other
payments payable to SP, and further agrees to permit said records to be
audited from time to time, on reasonable notice during normal business hours
to the extent necessary to verify the amount of royalties or payments due
hereunder. Any such audit shall be conducted by an independent auditor
selected by SP and approved by BIOCHEM. Any such auditor shall execute a
confidentiality agreement satisfactory to BIOCHEM. Any report by such
auditor shall only state that the amounts of royalties or payments were
accurate or state the specific amount overpaid or underpaid. A copy of such
report shall be provided to both BIOCHEM and SP. SP shall pay the costs of
said
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examination unless an underpayment of greater than [***] in royalties due is
present, in which case BIOCHEM shall reimburse SP for the reasonable expenses
of the examination.
6.5 PROFIT CALCULATIONS. Profit, Gross Profit, Net Sales, R & D Profit or
Sub-License Receipts subject to payments in any country outside the United
States shall be calculated on Profits, Gross Profits, R & D Profits or Sub
License Receipts fees paid in such country as expressed in United States dollars
in accordance with BIOCHEM's standard accounting procedure used for BIOCHEM's
reporting of income to its stockholders and for other external reporting, which
procedure shall comply with GAAP.
6.6 FOREIGN CURRENCY. BIOCHEM and its Sub-Licensees shall use their best
efforts to convert the Profit, Gross Profits, R & D Profits or Sub-License
Receipts due SP on sales in any country to United States dollars; provided,
however, that if conversion to and transfer of United States dollars cannot be
made in any country for any reason, at the election of SP, all such payments (i)
may be made in the currency of the country in which such sales are made and
deposited in SP's name in a bank designated by SP in any such country; or (ii)
the obligation of BIOCHEM or its Sub-Licensees to make such payment shall be
suspended until such conversion and transfer of all funds by BIOCHEM or its
Sub-Licensees becomes possible.
6.7 INCOME TAXES. All income taxes assessed or imposed against or
required to be withheld from payments due SP shall be deducted from amounts
payable hereunder and shall be paid to appropriate fiscal or tax authorities
on behalf of SP. Tax receipts received by BIOCHEM evidencing payment of such
taxes shall be forwarded to SP.
6.8 LATE PAYMENT. Any payments due hereunder which are not paid when
due shall bear an interest at a rate of lesser of the prime as specified by
[***] and the maximum rate allowed under the law from the due date until paid
in full. Payment of such interest shall be in addition to any other rights
and remedies to which SP may be entitled for failure of BIOCHEM to make
timely payments.
ARTICLE VII
TERM AND TERMINATION
7.1 TERM OF THIS AGREEMENT. Unless sooner terminated as otherwise
provided herein, this Agreement shall terminate on the later of [***]
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[***] and BIOCHEM shall have a fully paid-up license to make, have made, use,
rent, sell, lease, market, and otherwise commercially exploit the Compounds and
Product in such country.
7.2 TERMINATION BY SP. SP may terminate this Agreement if BIOCHEM
fails to perform any of its material obligations under this Agreement and
fails to remedy said breach within [***] after being given written notice of
the specific failure or default and termination by SP.
7.3 TERMINATION BY BIOCHEM. BIOCHEM may terminate this Agreement if SP
fails to perform any of its material obligations under this Agreement and
fails to remedy said breach within [***] after being given written notice of
the specific failure or default and termination by BIOCHEM.
7.4 RIGHTS AFTER TERMINATION DUE TO BREACH BY SP. In the event this
Agreement is terminated under SECTION 7.3, then BIOCHEM shall have a fully
paid-up license under SP Technology (to the extent such SP Technology covers
composition of matter, methods of use, manufacturing and formulation of
Compounds or Product thereof) to make, use and sell the Compounds and Products.
7.5 RIGHTS AFTER TERMINATION DUE TO BREACH BY BIOCHEM. In the event that
this Agreement is terminated under SECTION 7.2, then BIOCHEM shall sign and turn
over to SP and SP shall solely own all developments, Compounds, Products,
information, preclinical and clinical trial results and data, government filings
and other items created by BIOCHEM during the carrying out of the Clinical
Development Plan.
7.6 RIGHTS AFTER TERMINATION. In the event this Agreement is terminated
under SECTIONS 7.2 or 7.3:
(a) BIOCHEM shall have [***] to complete the manufacture and
[***] to complete sale or license of any Products in
stock or in the course of manufacture at the time of
termination, all subject, however, to payments of Profits,
Gross Profits, R & D Profits or Sub-License Receipts and
accounting as provided herein, even if such Profits, Gross
Profits, R & D Profits or Sub-License Receipts obligations
arise from transactions subsequent to the effective date of
termination;
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(b) BIOCHEM's obligation to make payments and its obligation to
keep records and to allow a final audit will survive any
termination; and
(c) Except as expressly provided herein, no Party hereunder
shall be discharged or relieved from any liability or
obligation existing prior to such termination.
7.7 MUTUAL TERMINATION. The Parties can mutually agree to terminate this
Agreement at any time.
ARTICLE VIII
PROPRIETARY RIGHTS AND TECHNOLOGY ASSISTANCE
8.1 RIGHT TO SUE. Each Party shall promptly inform the other of any
suspected infringement of any SP Patent Rights or misuse, misappropriation,
theft or breach of confidence of other proprietary rights in the SP
Technology, Compounds or Products by a third party. With respect to such
activities as are suspected and if such activities are a violation of
BIOCHEM's rights, BIOCHEM may, but shall not have the obligation, to bring
suit against a third party for infringement, misuse, misappropriation, theft
or breach of confidence of the proprietary rights against such third party.
If BIOCHEM does not bring suit within [***] of notice under this section,
then SP shall have the right to bring suit. If SP brings suit all recovery
shall belong to SP. BIOCHEM, if required by law, shall join SP as a party to
the suit at BIOCHEM's expense. In the event that BIOCHEM prosecutes any such
lawsuit, then BIOCHEM shall be entitled to deduct its costs and expenses from
any damages it is awarded. Any remaining damage awarded shall be treated as
Profit and subject to payment under SECTION 3.2. Before any action is taken
that will affect the validity of any rights or before such lawsuit is settled
or compromised, the Parties shall consult and cooperate with one another to
insure that the rights granted by this Agreement are not materially affected
by any such acts, settlement or compromise. SP shall have final approval of
all settlements, such approval shall not be unreasonably withheld.
8.2 DILIGENT PROSECUTION OF EXISTING APPLICATIONS. SP shall diligently
file, prosecute and maintain all existing and future patents and patent
applications within the Patent Rights including all pending and new patent
applications and respond to oppositions filed by third parties against the
grant of letters patent for such applications; provided however, BIOCHEM
shall reimburse SP for [***] of any expenses including filing, prosecution and
maintenance or restoration under SECTION 8.10 of patents under the SP Patent
Rights after the Effective Date.
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8.3 FURNISHING OF TECHNOLOGY. SP shall provide BIOCHEM with all the
information and documents in its possession, and which are reasonably necessary
to develop and commercially exploit the Compounds and Products and all
information in its possession which is required by the Regulatory Agency. If
any new information related to the Compounds and Products is developed by, or
comes into the possession SP and SP is not prevented from disclosing such
information by an agreement with a third party, then SP shall provide such
information in a timely manner.
8.4 IMPROVEMENTS. If any new uses for or derivatives of any Compounds or
Products developed by SP under the Research Programs hereunder are developed or
discovered by SP or BIOCHEM during the term of this Agreement (the "Research
Inventions"), ownership of such uses or derivative Compounds shall be governed
by United States Patent laws and such new uses or derivative Compounds and any
patent derived therefrom shall be included within the scope of this Agreement.
8.5 LICENSE OF RESEARCH INVENTIONS. Each Party shall promptly disclose to
the other Party the making, conception or reduction to practice of Research
Inventions. When a Research Invention has been made which may reasonably be
considered to be patentable, a patent application shall be filed as soon as
reasonably possible in accordance with SECTION 8.2. Such Research Inventions
shall be deemed to be SP Patent Rights in accordance with SECTION 1.34 herein.
With respect to Research Inventions which are not patentable, such research
information shall be deemed to be SP Technology, and shall be licensed in
accordance with the terms and conditions contained in ARTICLE III herein.
8.6 RESEARCH TERM. Except as otherwise provided herein, the term of the
Research Programs shall commence on the Effective Date and continue for a period
of [***]. The Research Program can be extended by the mutual agreement
of the Parties.
8.7 PROVIDE COPIES. SP shall provide to BIOCHEM copies of all patent
applications pertaining to the Research Programs prior to filing for the purpose
of obtaining substantive comment of BIOCHEM patent counsel and consult with
BIOCHEM regarding countries in which such patent applications should be filed
and shall file patent applications in those countries where BIOCHEM requests
that SP file.
8.8 PROSECUTION. SP shall provide to BIOCHEM copies of all documents
relating to prosecution of all patent applications in a timely manner for the
purpose of obtaining substantive comment of BIOCHEM patent counsel.
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8.9 ABANDONMENT. SP shall notify BIOCHEM in a timely manner of any
decision to abandon a pending patent application or to stop maintaining an
issued patent at which point, BIOCHEM shall have the option, at its expense, of
continuing to prosecute any pending patent application or of keeping the issued
patent in force.
8.10 PATENT TERM RESTORATION. The Parties hereto shall cooperate with each
other in obtaining patent term restoration or supplemental protection
certificates or their equivalents in any country in the Territory where
applicable to Patent Rights. In the event that elections with respect to
obtaining such patent term restoration are to be made, each of BIOCHEM and SP
shall have the right to make the election and non-selecting Party agrees to
abide by such election.
ARTICLE IX
RESEARCH PROGRAM
9.1 RESEARCH OBLIGATIONS. SP shall use its best efforts based on its
reasonable business judgment to diligently conduct the Research Programs. If SP
elects not to pursue research under the Hepatitis B Research Program and/or the
Dimerescent Receptor Research Program, SP shall have no continuing right to
pursue any research and development work on any Compounds or Products for any
purpose either in the Field or outside the Field under any such Research
Program(s) so discontinued; provided, however, it shall not be considered an
abandonment of any Research Program if SP terminates research on a target after
the Transfer Date or by mutual agreement of the Parties.
9.2 TERMINATION RIGHTS. Upon termination of any of the Research Programs
in accordance with this ARTICLE IX, SP shall immediately transfer to BIOCHEM
and/or its Affiliates, all documents, records and SP Technology in its
possession which directly relate to Compounds or Products, the development of
which is so abandoned by SP and BIOCHEM shall have the right to continue to
develop and commercialize such Compounds or Products for HBV or Dimerescent
Receptor Research Program for which an option was exercised, whichever is
abandoned by SP. In such occurrence, BIOCHEM shall be responsible, at its cost
and expense, for the filing, prosecution and maintenance of all patent rights
associated with such abandonment.
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9.3 LICENSE. SP hereby grants to BIOCHEM a limited, irrevocable,
exclusive, non-royalty bearing license in the Territory under the SP Technology
(to the extent such SP Technology covers composition of matter, methods of use,
manufacturing and formulation of Compounds or Product thereof) to the abandoned
Compounds or Products to seek governmental approvals, discover, develop, make,
use offer to sell, sell, import and export and have developed, made, used,
offered for sale, sold, imported and exported any of the abandoned Compounds or
Products arising from the Research Program(s).
9.4 WITHOUT PREJUDICE. Any termination of the Research Program(s) shall
be without prejudice to the rights of either Party against the other then
accruing or otherwise accrued under this Agreement.
9.5 NO SHARE. SP will not receive any share of the Profit, Gross Profit
or Sub-License Receipts from the Commercial Sale of abandoned Compounds or
Product.
ARTICLE X
FORCE MAJEURE
10.1 FORCE MAJEURE. Except as otherwise provided in this Agreement
(except the obligation to make payments when properly due), any delay or
failure to perform under this Agreement arising from causes beyond the
reasonable control of the Party concerned shall not be deemed to be a default
and shall not put an end to this Agreement, so that the same shall continue
in suspense or part performance until such cause shall have ceased. For the
above purpose the following causes shall be deemed to be beyond the
reasonable control of the Parties, unless conclusive evidence to the contrary
is provided by the Party alleging control, namely: strikes, lockouts, civil
commotion, riot, invasion, war, sabotage, embargo, fire, explosion, storm,
flood, earthquake; or voluntary or mandatory compliance with any direction,
request or order of any Person having or appearing to have governmental
authority, or purpose of national defense or national heath emergency. The
Party affected by an event reasonably beyond its control shall notify the
other Party within [***] and specify the event. Such Party shall take its
best efforts based on its reasonable business judgement to eliminate the
cause of such event. If a condition constituting force majeure as defined
herein exists for more than [***] the Parties shall meet to negotiate a
mutually satisfactory solution to the problem, if practicable.
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ARTICLE XI
NOTICES
11.1 NOTICES. All notices, requests, demands and other communications
under this Agreement or in connection therewith to be effective shall be in
writing in English and unless otherwise expressly provided herein shall be
deemed to have been duly given or made (i) on the date delivered in person; (ii)
on the date transmitted by facsimile if confirmation is sent by Federal Express
within one (1) day; (iii) on the date received if sent by Federal Express or
other nationally recognized overnight carrier service with service charges
prepaid; in each case (except for personal delivery) such notices, requests,
demands or other communications shall be sent to a Party at its address or
facsimile number as follows, or as otherwise designated by the Party by notice
in accordance herewith:
(i) If to SP, to:
Scriptgen Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA
Attention: President
Facsimile No.: (617) 393-8354
with copies to:
Fulbright & Jaworski
1301 McKenney Street, Suite 5100
Houston, TX 77010-3095
Attention: Thomas D Paul
Facsimile No.: (713) 651-5325
(ii) If to BIOCHEM, to:
BioChem Pharma Inc.
Armand-Frappier Boulevard
Laval, Quebec, Canada
Attention: President
Facsimile No.: (514) 978-7755
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with copies to:
BioChem Pharma Inc.
Armand-Frappier Boulevard
Laval, Quebec, Canada
Attention: Jocelyne Surprenant
Senior Legal Counsel, Legal Affairs
Facsimile No.: (514) 978-7994
ARTICLE XII
WARRANTIES, REPRESENTATION AND INDEMNITY
12.1 RIGHT TO GRANT. SP represents and warrants that it has the legal
right to grant the license set forth in this Agreement.
12.2 AUTHORIZATION. Each Party represents and warrants to the other Party
that it is duly organized and has the authority to operate where it does
business and its execution, delivery, and performance of this Agreement and the
consideration set forth in this Agreement have been duly authorized by all
necessary corporate action and that this Agreement is not in conflict with any
other agreements to which it is party.
12.3 PATENT WARRANTY. To the best knowledge of the officers of SP (i) none
of the Drug Candidates for HBV infringe patents of third parties on the Transfer
Date unless written notice is otherwise provided to BIOCHEM by SP prior to the
Transfer Date and (ii) none of the Dimerescent Compounds infringe patents of
third parties on the date of execution of the option unless written notice is
otherwise provided to BIOCHEM prior to execution of the options.
12.4 COMPLIANCE WITH APPROPRIATE LAW. Each Party warrants that it shall
comply with any applicable national or local laws and regulations related to the
subject matter of this Agreement and that a Party shall indemnify and hold
harmless the other Party from actions related to a Party's violation of such
laws and regulations to the extent permitted by law.
12.5 RESPONSIBILITY FOR COMPLIANCE. Each Party shall be responsible for
compliance with laws applicable to any sale, manufacture or other use involving
the Technology or Product.
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12.6 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.
12.7 LIMITED LIABILITY.
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER
BIOCHEM NOR SP 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 INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OR LOST PROFITS OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES.
12.8 WARRANTY INDEMNITY. Each Party agrees to indemnify and hold the other
Party and its directors, officers, trustees, employees, agents and
representatives, harmless from any liabilities, costs and expenses (including
attorney's fees and expenses), obligations or causes of action arising out of or
related to any breach of the representations and warranties made by such Party
herein.
12.9 GENERAL INDEMNITY. BIOCHEM agrees to protect, defend, indemnify
and hold SP and its directors, officers, trustees, employees, agents and
representatives harmless from and against, and to pay any and all losses,
liabilities, claims, demands, causes of action, lawsuits, or other
proceedings (whether in contract, tort, strict liability or otherwise),
fines, assessments, damages or any other amounts of whatever nature which SP,
its directors, officers, trustees, employees, agents and representatives may
sustain or incur, including all attorney's fees and court costs, as a
consequence of any third party's (including, but not limited to, BIOCHEM's
officers, directors, employees, agents, consultants, representatives or
servants) claims and demands arising from the use, testing, operation,
marketing, sale or manufacture of the Compound or Products, or Products by
BIOCHEM or its sub-licensees to the extent such liability is not due to SP'S
actions or failure to take actions or to SP's performance of the Research
Programs.
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12.10 INDEMNITY PROCEDURE. SP will promptly notify BIOCHEM in writing of
notice of any claims or the commencement of any action, if a claim in respect
thereof is to be made against BIOCHEM under SECTION 12.9. SP's failure to
notify BIOCHEM will not relieve BIOCHEM from any liability to SP except to the
extent such liability results from the delay. After receiving notice of said
action, BIOCHEM provide the defense thereof by promptly notifying SP in writing.
After SP has received notice of BIOCHEM's assumption the defense of said action,
BIOCHEM will not be liable to SP under SECTION 12.9 for any legal or other
expenses subsequently incurred by SP in connection with the defense thereof.
12.11 SETTLEMENT. Neither SP nor BIOCHEM shall settle any action covered
by SECTION 12.10 without first obtaining the consent of the other Party, which
consent will not be unreasonably withheld.
12.12 INFRINGEMENT EXPENSE.Unless SP is in breach of its warranty under
SECTION 12.3, BIOCHEM shall be responsible for any expenses or damages resulting
from any patent infringement suit brought by a third party as a result of
BIOCHEM's development, manufacture, use or sale of Compounds or Products. If
BIOCHEM requests SP to provide reasonable assistance in any such infringement
suit, SP shall take reasonable efforts to provide such assistance and BIOCHEM
shall reimburse SP for any expenses incurred by SP in providing such assistance.
12.13 SURVIVAL. BIOCHEM's indemnity obligations under this Agreement
shall survive the termination of this Agreement, regardless of the reasons for
which this Agreement is terminated.
ARTICLE XIII
DISPUTE RESOLUTION
13.1 DISPUTE RESOLUTION. If a dispute arises out of or relates to this
Agreement or its breach (the "Matter"), the Parties agree to resolve the Matter
as follows:
(a) A Party shall submit written notice of the Matter to the other
Party and request negotiation;
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(b) The Parties shall attempt in good faith to resolve any Matter
arising out of or relating to this Agreement promptly by
negotiation between representatives which the Parties may
appoint; and
(c) If the Matter has not been resolved within [***] of a
Party's request for negotiation, either Party may request that
the Matter be submitted to a sole mediator selected by the
Parties for a mandatory [***] mediation;
(d) If the Matter has not been resolved by such mediation, either
Party may submit the Matter for binding arbitration in accordance
with the Commercial Rules of the American Arbitration Association
("AAA"). The panel shall be selected from the AAA's large
complex case panel, provided, however, if this panel is of
insufficient size to pick the arbitrator(s), then the regular
commercial panel shall be used to pick any additional
arbitrator(s). The award shall be made within [***] of
selection of an arbitrator(s).
The mediation and arbitration shall be held in New York, New York. The
Parties, their representatives, the mediator and the arbitrator shall hold the
existence, content and results of any negotiation, mediation or arbitration in
confidence unless disclosure is required by law or regulation, and in such case
the Parties shall take reasonable precautions to only disclose what is required
by law or governmental regulation.
Any award of the Arbitration shall be binding on the Parties and shall be
enforceable in any court having jurisdiction over the Party from whom
enforcement is requested.
ARTICLE XIV
MISCELLANEOUS
14.1 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been contained herein.
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14.2 ENTIRE AGREEMENT. This Agreement and attached Schedules sets forth
the entire agreement and understanding between the Parties as to the subject
matter of the Agreement, and merges and supersedes all prior discussions,
proposals, offers and agreements, if any, with respect to the subject matter
of this Agreement. However, the Confidentiality obligations contained in the
Non-Disclosure Agreement between the Parties dated November 13, 1997 shall
survive the termination of this Agreement for all confidential information
(as defined in the Non-Disclosure Agreement disclosed by either Party prior
to the Effective Date of this Agreement). There are no covenants, promises,
agreements, warranties, representations, conditions or understandings, either
oral or written, between the Parties other than as are set forth herein and
therein.
14.3 LIMITATION OF AUTHORITY. Neither BIOCHEM nor SP shall have any
authority arising out of this Agreement to create any implied or express
liability or obligation in the name or on behalf of the other Party, and neither
Party shall enter into any contract with any person or entity that purports to
bind the other Party.
14.4 CHOICE OF LAW. The validity and interpretation of this Agreement
shall be governed by the substantive law of the State of New York. Any national
law, United Nations treaty or convention, or law arising from any international
treaty is hereby waived in favor of the application of New York law. The
Parties hereby specifically exclude the application of The Convention for the
International Sale of Goods.
14.5 RECORDING. Each Party shall have the right, at any time, to record,
register, or otherwise notify this Agreement in appropriate governmental or
regulatory offices anywhere in the Territory, and SP or BIOCHEM, as the case may
be, shall provide reasonable assistance to the other in effecting such
recording, registering or notifying.
14.6 NO WAIVER. The failure of any Party to enforce or demand performance
of any term of this Agreement shall not be deemed a wavier of any said term or
right. A waiver may only be executed in writing and signed by the Party
granting such waiver.
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14.7 ASSIGNMENT. Except as otherwise specifically provided for herein,
neither this Agreement nor any or all of the rights and obligations of a Party
hereunder shall be assigned, delegated, sold, transferred, or otherwise disposed
of, by operation of law or otherwise, to any third party other than an Affiliate
of each Party, without the prior written consent of the other Party, any
attempted assignment, delegation, sale, transfer, or other disposition, by
operation of law or otherwise, of this Agreement or of any rights or obligations
hereunder contrary to this SECTION 14.7 shall be void and without force or
effect; provided, however, BIOCHEM or SP may, without such consent, assign the
Agreement and its rights and obligations hereunder to an Affiliate or in
connection with the transfer or sale of all or substantially all of its assets
related to the division or the subject business, or in the event of its merger
or consolidation or change in control or similar transaction. Nothing in this
SECTION 14.7 shall be construed to restrict (i) BIOCHEM's right to Sub-License;
or (ii) BIOCHEM's right to engage third Persons or Affiliates. Each Party shall
be responsible for the compliance by its Affiliates with the terms and
conditions of this Agreement.
14.8 AMALGAMATION. SP acknowledges that BioChem has advised it that it
proposes to carry out a reorganization, including an amalgamation, pursuant
to which, among other things, a corporation named BioChem Holdings Inc. (the
"Successor") will own all of the assets and be liable for all liabilities of
BioChem (the "Amalgamation"). SP hereby agrees that, upon consummation of
the Amalgamation, the Successor shall have all the rights and obligations of
BioChem as if Successor had executed this Agreement on the date hereof in
lieu of BioChem and that neither BioChem nor Successor shall be required to
send any notice of any kind regarding the Amalgamation nor seek the consent
of SP to such Amalgamation.
14.9 BINDING AGREEMENT. This Agreement is binding upon and shall inure to
the benefit of each Party's Affiliates, legal representatives, administrators,
successors, sub-licensees, and permitted assigns, of BIOCHEM or SP.
14.10 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.
14.11 EXPORT CONTROLS. This Agreement is made subject to any restrictions
concerning the export of Products or Compounds 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. BIOCHEM will not export, directly or
indirectly, any Compounds or any Products utilizing such Compounds to any
countries for which the United States Government or any agency thereof at the
time of export requires an export license or other governmental approval,
without first
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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.
14.12 HEADINGS. The headings contained in this Agreement are for
convenience of reference only and shall not be considered in construing this
Agreement.
14.13 NO PUBLICITY. A Party may not use the name of the other Party in
any publicity or advertising and, except as provided in this SECTION 14.12 may
not issue a press release or otherwise publicize or disclose any information
related to this Agreement or the terms or conditions hereof, without the prior
written consent of the other Party. The Parties shall agree on a form of
initial press release that may be used by either Party to describe this
Agreement. Nothing in the foregoing, however, shall prohibit a Party from
making such disclosures to the extent deemed necessary under applicable federal,
state or provincial securities laws or any rule or regulation of any nationally
recognized securities exchange; in such event, however, the disclosing Party
shall use good faith efforts to consult with the other Party prior to such
disclosure and, where applicable, shall request confidential treatment to the
extent available.
14.14 PUBLICATION. During the term of the Research Programs, each
Party recognizes the mutual interest in obtaining valid patent protection and
in protecting business interests and trade secret information. Consequently,
either Party, its employees or consultants wishing to make a publication
covering information arising from the Research Programs and in the Field
shall deliver to the other Party a copy of the proposed written publication
or an outline of an oral disclosure at least [***] prior to submission for
publication or presentation (the "Review Period"). If either Party
reasonably determines that the proposed disclosure would reveal an invention
or Confidential Information, then such Party shall notify the other of such
determination and its basis prior to the expiration of the Review Period.
With respect to disclosure of an invention, both Parties agree not to submit
the written publication or presentation of the oral public disclosure, or
otherwise disclose the results of the Research Programs in any manner that
would compromise SP's ability to obtain valid Patent Rights covering such
invention. Neither Party shall disclose results of the Research Programs
until one of the following events occurs: (i) BIOCHEM and SP agrees that no
patentable invention or protectable trade secret exists; (ii) BIOCHEM or SP
files a patent application claiming the relevant invention; or (iii) BIOCHEM
and SP jointly agree upon revisions that prevent disclosure of any invention.
The foregoing notwithstanding, in the event that either of BIOCHEM or SP
(hereinafter referred to
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as a "Notifying Party) notifies the other that a proposed publication of
results of the Research Programs contains information which is of substantial
commercial importance to the Notifying Party, the proposed publication shall be
delayed by the publishing Party (including any other form of public disclosure
of such information) for a period not to exceed [***] from the filing date of
the first patent application covering the information contained in the proposed
publication. In the event that the Notifying Party notifies the other of
evidence that an independent third Person is preparing to publish, or otherwise
publicly disclose, essentially the same information as that contained in the
proposed publication which has been delayed, the Notifying Party will seriously
consider a request by the publishing Party to allow such delayed publication
to occur on an expedited bases, provided that absent written approval from
the notifying Party no such expedited publication shall occur. Nothing in
this SECTION 14.13 shall allow one Party to disclose the other Party's
Confidential Information.
14.15 MEETINGS. The Parties agree that they shall meet approximately
[***] alternating between [***] or other mutually agreed location. [***]
The first such meeting shall take place in [***]
14.16 RESPONSIBILITY FOR EXPENSES. Each Party is responsible for its own
expenses related to the execution of this Agreement.
14.17 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
14.18 AMENDMENTS. No amendment or modification to this Agreement is
effective unless in writing and signed by the Parties.
14.19 INFORMED REVIEW. Each Party acknowledges that it and its counsel
have received and reviewed this Agreement and that normal rules of construction,
to the effect that ambiguities are to be resolved against the drafting Party,
shall not apply to this Agreement or to any amendments, modifications, exhibits
or attachments to this Agreement.
14.20 EFFECTIVENESS. Notwithstanding any terms in this Agreement, this
Agreement shall not be effective until the Stock Purchase Agreement referenced
in SECTION 3.1 is consummated.
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement in multiple originals by their duly authorized officers and
representatives on the respective dates shown below but effective as of the
Effective Date.
SCRIPTGEN PHARMACEUTICALS, INC. BIOCHEM PHARMA, INC.
By: /s/ Mark T. Weedon By: /s/ Daniel Hetu
-------------------------------- -------------------------------
Mark T. Weedon Daniel Hetu
President and Chief Executive Vice President of Corporate
Officer Development
Date: Date:
By: /s/ Francois Legault
-------------------------------
Francois Legault
Executive Vice President
Date:
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[***]
<PAGE>
[***]
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Exhibit 10.25
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of December 12, 1997 by
and among SCRIPTGEN Pharmaceuticals, Inc., a Delaware corporation (the
"COMPANY"), BioChem Pharma Inc. (the "INVESTOR"), and each of the stockholders
listed on the Schedule of Stockholders attached hereto.
The Company and Investor are parties to a Stock Purchase Agreement of
even date herewith (the "PURCHASE AGREEMENT"). In order to induce the Investor
to enter into the Purchase Agreement, the Company has agreed to provide to the
Investor the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the Closing under the Purchase
Agreement. Unless otherwise provided in this Agreement, capitalized terms used
herein shall have the meanings set forth in Section 8 hereof.
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. Subject to the provisions of Sections
1(b) and 1(c) below, (i) at any time and from time to time before the effective
date of the first Listing (the "FIRST LISTING"), the holders of a majority of
the then outstanding Registrable Securities, and (ii) at any time and from time
to time after the first anniversary of the First Listing (the "INVESTOR DEMAND
PERIOD"), the Investor, may request registration, whether underwritten or
otherwise, under the Securities Act of all or part of the Registrable Securities
held by such holders or the Investor, as the case may be, in each case on Form
S-1 or any similar long-form registration statement (collectively, "LONG-FORM
REGISTRATIONS") or on Form S-2 or S-3 or any similar short-form registration
statement ("SHORT-FORM REGISTRATIONS"), if available. Notwithstanding anything
to the contrary contained herein, if any holder of Registrable Securities other
than the Investor (the "NON-INVESTOR HOLDERS") exercise, prior to the
commencement of the Investor Demand Period, any demand registration rights
granted by the Company to such holder, the Company shall include in such
registration the number of Registrable Securities requested to be included
(which in the opinion of the underwriters can be sold in an orderly manner
within the price range of such offering, if such offering is an underwritten
offering), PRO RATA between the Investor and the Non-Investor Holders on the
basis of the amount of Registrable Securities owned by each such holder. All
registrations requested pursuant to this SECTION 1(A) are referred to herein as
"DEMAND REGISTRATIONS". Each request for a Demand Registration shall specify
the approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within ten days after
receipt of any such request for a Long-Form Registration or Short-Form
Registration, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and shall include
(subject to the provisions of this Agreement) in such registration, all
Registrable Securities with respect to which the Company has
<PAGE>
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.
(b) NUMBER OF DEMAND REGISTRATIONS. The Investor shall be entitled to
request two (2) Demand Registrations with respect to Registrable Securities held
by the Investor, in which the Company will pay all Registration Expenses as set
forth in Section 5 hereof; PROVIDED, that the Investor shall only be entitled to
request one (1) Demand Registration in any twelve-month period. A registration
shall not count as one of the permitted Demand Registrations until it has become
effective and unless the Investor is able to register and sell at least 90% of
the Registrable Securities that the Investor has requested to be included in
such registration.
(c) SHORT-FORM REGISTRATIONS. In addition to the Demand
Registrations provided pursuant to SECTION 1(B), the Investor shall be entitled
to request an unlimited number of Short-Form Registrations with respect to the
Registrable Securities held by it in which the Company shall pay all
Registration Expenses; PROVIDED, that the aggregate value of the securities to
be offered pursuant to such Short-Form Registration is at least $1 million.
Demand Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form. After the Company has become
subject to the reporting requirements of the Exchange Act, the Company shall use
its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not include
in any Demand Registration any securities that are not Registrable Securities
held by the Investor without the prior written consent of the Investor. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Securities and, if permitted hereunder by the Investor, other securities
requested to be included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold in an orderly manner
in such offering within a price range acceptable to the Investor, the Company
shall include in such registration, prior to the inclusion of any securities
which are not Registrable Securities, the number of Registrable Securities
requested to be included which in the opinion of such underwriters can be sold
in an orderly manner within the price range of such offering, PRO RATA among the
respective holders thereof on the basis of the amount of Registrable Securities
owned by each such holder. Any Persons other than holders of Registrable
Securities who participate in Demand Registrations that are not at the Company's
expense must pay their share of the Registration Expenses as provided in SECTION
5 hereof.
(e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company shall not be
obligated to effect any Demand Registration (i) within 90 days after the
effective date of a Listing occurring after the First Listing, unless (A) the
Investor holds less than 10% of the then outstanding Registrable Securities, or
(B) any Non-Investor Holders exercise any demand registration rights granted by
the Company to such holders, whereupon the Company shall include in such
registration the number of Registrable
<PAGE>
Securities requested to be included (which in the opinion of the underwriters
can be sold in an orderly manner within the price range of such offering, if
such offering is an underwritten offering) PRO RATA between the Investor and the
Non-Investor Holders on the basis of the amount of Registrable Securities owned
by each such holder, or (ii) if, at the time the Investor requests such Demand
Registration, (A) the Company has previously notified the Investor in writing
that the Company has determined to register any of its securities on its own
behalf, (B) the Investor has not responded in writing to the Company within
fourteen (14) days after receiving such notice stating that the Investor is
requesting a Demand Registration pursuant to the terms and conditions of this
Agreement, and (C) the Company has not abandoned its efforts to register its
securities. The Company may postpone for up to 60 days the filing or the
effectiveness of a registration statement for a Demand Registration if the
Company's board of directors determines in its reasonable good faith judgment
that such Demand Registration would reasonably be expected to interfere with any
proposal or plan by the Company or any of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer, reorganization or other material
transaction; PROVIDED, that in such event, the holders of Registrable Securities
initially requesting such Demand Registration shall be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration shall not
count as one of the permitted Demand Registrations hereunder and the Company
shall pay all Registration Expenses in connection with such registration. The
Company may delay a Demand Registration hereunder only once in any twelve-month
period.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of the
Registrable Securities initially requesting registration under this Section 1
shall have the right to select the investment banker(s) and manager(s) to
administer the offering, which investment banker(s) and manager(s) will be
nationally recognized; PROVIDED, that such investment banker(s) and manager(s)
are approved by the Company, which approval shall not be unreasonably withheld.
(g) OTHER REGISTRATION RIGHTS. Except as provided in this Agreement,
the Company shall not grant to any Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the Investor, unless such rights granted to such Persons are
subordinate to the rights granted to the Investor hereunder.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register
any of its securities under the Securities Act (other than pursuant to a Demand
Registration , other than pursuant to a registration statement on Form S-8 or
S-4 or any similar form or in connection with a registration the primary purpose
of which is to register debt securities (I.E., in connection with a so-called
"equity kicker")) and the registration form to be used may be used for the
registration of Registrable Securities
<PAGE>
(a "PIGGYBACK REGISTRATION"), the Company shall give prompt written notice (in
any event within three business days after its receipt of notice of any exercise
of demand registration rights other than under this Agreement) to all holders of
Registrable Securities of its intention to effect such a registration and shall
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 20 days
after the receipt of the Company's notice. Notwithstanding the foregoing, in
connection only with a First Listing initiated by the Company (a "Company First
Listing"), no Registrable Securities shall be included in such registration
without the prior written consent of the Company; PROVIDED, that if the Company
consents to include in such registration any Registrable Securities held by any
holder of Registrable Securities, the Company shall consent to include in such
registration the Registrable Securities of all holders of Registrable Securities
in accordance with the provisions of Section 2(c) below.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. Subject to the provisions of
Section 2(a) above, if a Piggyback Registration is an underwritten primary
registration on behalf of the Company, the Company will include in such
registration all Registrable Securities requested to be included in such
registration; PROVIDED, that if the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number that can be sold in such offering
without adversely affecting the marketability of the offering, the Company shall
include in such registration (i) first, the securities the Company proposes to
sell, (ii) second, the Registrable Securities requested to be included in such
registration, PRO RATA among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iii) third, other
securities requested to be included in such registration not covered by clause
(i) above.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities (which registration was consented to pursuant to Section 1(g) above),
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering without adversely affecting
the marketability of the offering, the Company shall include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration, (ii) second, the number of Registrable
Securities requested to be included in such registration, PRO RATA among the
holders of such securities on the basis of shares of Registrable Securities
owned by each such holder and (iii) third, other securities requested to be
included in such registration.
(e) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an
underwritten offering, the selection of investment banker(s) and manager(s) for
the offering must be approved by (i) the Company, and (ii) the holders of a
majority of the
<PAGE>
Registrable Securities included in such Piggyback Registration, which approvals
shall not be unreasonably withheld.
3. HOLDBACK AGREEMENTS. Each holder of Registrable Securities shall
not effect any public sale or distribution (including sales pursuant to Rule
144) of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the lesser of (i) the 180-day period beginning on the effective date of the
First Listing (except for sales of securities as part of such First Listing) or
the 90 day period beginning on the effective date of any Listing other than the
First Listing, and (ii) any other period applicable to any holders of
Registrable Securities (other than the Investor), unless the underwriters
managing the registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof (including the registration of Series D
Preferred Stock held by a holder of Registrable Securities requesting
registration as to which the Company has received reasonable assurances that
only Registrable Securities shall be distributed to the public), and pursuant
thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the counsel selected by the
holders of a majority of the Registrable Securities covered by such registration
statement copies of all such documents proposed to be filed, which documents
shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
<PAGE>
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such 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 contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent 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, directors, employees and independent accountants to supply all
information reasonably requested by any such
<PAGE>
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities; and
(n) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, and other Persons retained by the
Company (all such expenses being herein called "REGISTRATION EXPENSES"), shall
be borne as provided in this Agreement, except that the Company shall, in any
event, pay its internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing
<PAGE>
legal or accounting duties), the expense of any annual audit or quarterly
review, the expense of any liability insurance and the expenses and fees for
listing the securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed or on the NASD
automated quotation system.
(b) The holders of Registrable Securities included in each Demand
Registration and each Piggyback Registration shall pay all underwriting
discounts and selling commissions applicable to the sale of their securities and
all fees and disbursements of their counsel.
(c) To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder shall furnish to
the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or
<PAGE>
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the obligation
to indemnify shall be individual, not joint and several, for each holder and
shall be limited to the net amount of proceeds received by such holder from the
sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification obligations to the Company or the underwriters with respect
thereto, except as otherwise provided in Section 6 hereof.
<PAGE>
8. DEFINITIONS.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"LISTING" means the admission of the Company's Common Stock on any
stock exchange or the sale of the Company's Common Stock in an underwritten
public offering registered under the Securities Act.
"OTHER STOCKHOLDERS" means the holders of shares of the Company's
Series A Preferred Stock, par value $.01 per share, Series B Preferred Stock,
par value $.01 per share, and Series C Preferred Stock, par value $.01 per
share.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"REGISTRABLE SECURITIES" means (i) any shares of Common Stock issued
or issuable to the Investor or the Other Stockholders upon conversion of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, or
Series D Preferred Stock, or acquired by, or issued or issuable to, the
Investor, Hoechst Marion Roussel, or the Other Stockholders on or after the date
hereof, it being understood that neither the Investor nor the Other Stockholders
shall be obligated to convert their shares into shares of Common Stock in order
to make a Demand Registration or otherwise avail themselves of the rights
granted pursuant to this Agreement, (ii) any capital stock of the Company
acquired by the Investor including, without limitation, the Warrant Shares (as
that term is defined in the Warrant Agreement, dated of even date, between
Investor and the Company) or the Other Stockholders on or after the date hereof,
and (iii) any shares of capital stock of the Company issued or issuable with
respect to the securities referred to in clauses (i) or (ii) above by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, or other reorganization. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when they have been distributed to the public pursuant to a offering
registered under the Securities Act or sold to the public through a broker,
dealer or market maker in compliance with Rule 144 under the Securities Act (or
any similar rule then in force). For purposes of this Agreement, a Person shall
be deemed to be a holder of Registrable Securities, and the Registrable
Securities shall be deemed to be in existence, whenever such Person has the
right to acquire directly or indirectly such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected, and such
Person shall be entitled to exercise the rights of a holder of Registrable
Securities hereunder.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
<PAGE>
Unless otherwise stated, other capitalized terms contained herein have the
meanings set forth in the Purchase Agreement.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter
enter into any agreement with respect to its securities which is adverse or
superior to the rights granted to the Investor pursuant to the terms and
conditions of this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) REMEDIES. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, the Investor, and the Other Stockholders who
hold at least 50% of the Registrable Securities held by the Other Stockholders.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors (including successors created by
amalgamation, merger, or otherwise) and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
Notwithstanding anything to the contrary contained herein, holders of
Registrable Securities may not transfer or assign any rights granted to such
holders under the terms and conditions of this Agreement unless such holders
transfer or assign at least 50% of the Registrable Securities held by such
holders.
<PAGE>
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF NEW YORK SHALL
GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY
AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(j) NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the addresses indicated below:
TO THE COMPANY:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Mark T. Weedon
Telecopy No.: (617) 396-1028
WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE COMPANY) TO:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attention: Constantine Alexander, Esq.
Telecopy No.: (617) 973-9748
<PAGE>
TO THE INVESTOR:
BioChem Pharma, Inc.
275 Armand-Frappier Boulevard
Laval, Quebec H7V4A7
Canada
Attention: Vice President, Legal Affairs
Telecopy No. (514) 978-7755
WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE INVESTOR) TO:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Luc A. Despins, Esq.
Telecopy No.: (212) 446-4900
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) TERMINATION. The terms and conditions of this Agreement shall
terminate and be of no further force and effect upon the seventh anniversary of
the date of this Agreement; PROVIDED, that if a Listing has not been effected by
the second anniversary of the date of this Agreement, the terms and conditions
of this Agreement shall terminate and be of no further force and effect upon the
eighth anniversary of the date of this Agreement.
(l) AMALGAMATION. The Company acknowledges that Investor has advised
it that it proposes to carry out a reorganization, including an amalgamation,
pursuant to which, among other things, a corporation named BioChem Holdings Inc.
(the "Successor") will own all of the assets and be liable for all liabilities
of Investor (the "Amalgamation"). The Company hereby agrees that, upon
consummation of the Amalgamation, the Successor shall have all of the rights and
obligations of Investor as if Successor had executed this Agreement on the date
hereof in lieu of Investor, and that neither Investor nor Successor shall be
required to send any notice of any kind regarding the Amalgamation nor seek the
consent of the Company to such Amalgamation.
(m) OTHER AGREEMENT. The rights and obligations of the Other
Stockholders pursuant to Section 7 of the Series C Preferred Stock Purchase
Agreement, dated as of May 17, 1996 shall remain unaffected, provided, however,
that in the event of any conflict between this Agreement and said Preferred
Stock Purchase Agreement, the terms of this Agreement shall govern.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ Mark T. Weedon
-----------------------------
Name: Mark T. Weedon
Title: President and CEO
BIOCHEM PHARMA, INC.
By /s/ Francois Legault
-----------------------------
Name: Francois Legault
Title: Executive Vice President
By /s/ Daniel Hetu
-----------------------------
Name: Daniel Hetu
Title: Vice President
ACCEL IV L.P.
By: Accel IV Associates, L.P., its
General Partner
By: /s/
------------------------------
Name:
Title:
ACCEL INVESTORS '93 L.P.
By: /s/
------------------------------
Name:
<PAGE>
Title:
ACCEL JAPAN L.P.
By: Accel Japan Associates, L.P., its
General Partner
By: /s/
------------------------------
Name:
Title:
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc., its
General Partner
By: /s/
------------------------------
Name:
Title:
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
Title:
ADVENT PERFORMANCE MATERIALS LIMITED
PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
<PAGE>
Title:
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.,
its General Partner
By: /s/
------------------------------
Name:
Title:
---------------------------------
Thomas A. Bologna
CW VENTURES II, L.P.
By: CW Partners III, L.P., its General
Partner
By: /s/
------------------------------
Name:
Title:
ELLMORE C. PATTERSON PARTNERS
By:
------------------------------
Name:
Title:
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
<PAGE>
Name:
Title:
LOMBARD ODIER & CIE
By: /s/
------------------------------
Name:
Title:
---------------------------------
Bernard Mach
NEW ENTERPRISE ASSOCIATES 5
By: /s/
------------------------------
Name:
Title:
PROSPER PARTNERS
By:
------------------------------
Name:
Title:
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
Title:
<PAGE>
SCRIPT PARTNERS LIMITED PARTNERSHIP
By: /s/
------------------------------
Name:
Title:
VENROCK ASSOCIATES
By: /s/
------------------------------
Name:
Title:
VENROCK ASSOCIATES II, L.P.
By: /s/
------------------------------
Name:
Title: General Partner
<PAGE>
Exhibit 10.26
SCRIPTGEN PHARMACEUTICALS, INC.
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of December 12, 1997, among SCRIPTGEN
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), BioChem Pharma
Inc., a Quebec corporation (the "Investor") and each of the stockholders listed
on the Schedule of Stockholders attached hereto (the "Other Stockholders"). The
Investor and the Other Stockholders are collectively referred to as the
"Stockholders". Capitalized terms used herein are defined in Section 11 hereof.
The Investor shall purchase shares of the Company's Series D Preferred
Stock, per value $.01 per share (the "Series D Stock") pursuant to a Stock
Purchase Agreement between the Investor and the Company dated as of the date
hereof (the "Purchase Agreement").
The Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of (i) establishing the composition of the
Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company, and (iii) limiting the manner and terms
by which the Stockholders' Preferred Stock and Common Stock ("Stockholder
Shares") may be transferred. The execution and delivery of this Agreement is a
condition to the Investor's purchase of the Company's Series D Stock pursuant to
the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. BOARD OF DIRECTORS.
(a) From and after the date of this Agreement and until the
provisions of this Section 1 cease to be effective, each holder of Stockholder
Shares shall vote all of his Stockholder Shares which are voting shares and any
other voting securities of the Company over which such Stockholder has voting
control and shall take all other reasonably necessary or desirable actions
within his control (whether in his capacity as a stockholder, director, member
of a board committee or officer of the Company or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all reasonably necessary or desirable actions within its
control (including, without limitation, calling special board and stockholder
meetings), so that:
(i) one representative designated by Investor shall be elected
to the Board ("Investor Director");
<PAGE>
(ii) the composition of the board of directors of each of the
Company's Subsidiaries (if any) (a "Sub Board") shall be the same as that
of the Board;
(iii) the removal from the Board or a Sub Board (with or without
cause) of any Investor Director shall be at the Investor's written request,
but only upon such written request and under no other circumstances; and
(iv) in the event that any Investor Director ceases to serve as a
member of the Board or a Sub Board during his term of office, the resulting
vacancy on the Board or the Sub Board shall be filled by a representative
designated by the Investor as provided hereunder.
In all other respects, the rights and obligations of the Other Stockholders
pursuant to Section 1 of the Preferred Stockholders' Agreement, dated as of
May 17, 1996 (the "Prior Stockholders' Agreement") shall remain unaffected, and
the Investor hereby agrees to be bound by the provisions regarding voting
contained in said Section 1 of the Prior Stockholders' Agreement. The Investor
Director shall not be appointed until the earlier of (i) the consummation of a
Qualified Public Offering and (ii) February 16, 1998.
(b) The Company shall pay the reasonable out-of-pocket expenses
incurred by the Investor Director in connection with attending the meetings of
the Board, any Sub Board and any committee thereof. In addition, the Company
shall pay to the Investor Director, an annual fee not less than the amount of
any fee paid by the Company to any other director. Commencing upon consummation
of a Qualified Public Offering, the Company shall maintain directors and
officers indemnity insurance coverage in a minimum amount customary for a public
company with the Company's capitalization. The Company's certificate of
incorporation and bylaws shall provide for indemnification and exculpation of
directors to the fullest extent permitted under applicable law.
(c) The rights of the Investor under this Section 1 shall terminate
at such time as the Investor and its Permitted Transferees (as defined in
Section 7(d) hereof) hold in the aggregate less than 40% of the Series D Stock
and any Common Stock issued upon conversion of such stock (the "Series D
Minimum") held by such Persons on the date hereof; provided that the Investor
may assign its right to designate directors hereunder to any Person or group of
affiliated Persons who acquire more than 50% of the Series
D Stock and any Common Stock issued upon conversion of such stock held by the
Investor as of the date hereof.
(d) The provisions of this Section 1 shall terminate automatically
and be of no further force and effect upon the tenth anniversary of the date
hereof or at such time as the Investor owns less than 10% of the issued and
outstanding shares of (i) Series D Stock and, (ii) the Common Stock issued upon
conversion of such stock.
(e) If the Investor fails to designate the Investor Director to fill
a directorship pursuant to the terms of this Section 1, the election of an
individual to such directorship shall be accomplished in accordance with the
Company's bylaws and applicable law.
-2-
<PAGE>
2. MEETINGS. The Board shall hold a regularly scheduled meeting at
least once every fiscal quarter (at which such meeting the Company's financial
statements for the immediately preceding fiscal quarter or fiscal year, as the
case may be, will be discussed) at such time as may be fixed by resolution of
the Board. Special meetings of the Board may be held at any time upon the call
of the chairperson of the Board or at least one director. Notice of each
regularly scheduled and special meeting must be duly given or sent at least
three Business Days prior to such meeting by oral, telephonic, telegraphic or
facsimile notice or by written notice sent by express mail. All reasonable best
efforts shall be made to ensure that each director actually receives timely
notice of any such meeting.
3. ACTION BY THE BOARD; CERTAIN APPROVAL RIGHTS.
(a) A quorum of the Board shall consist of a majority of the persons
serving as members of the Board. All actions of the Board shall require the
affirmative vote of at least a majority of the directors at a duly convened
meeting of the Board at which a quorum is present or the unanimous written
consent of the Board; PROVIDED that, in the event there is a vacancy on the
Board and an individual has been nominated to fill such vacancy, the first order
of business shall be to fill such vacancy.
(b) Until such time as the aggregate number of shares of the Series D
Stock and any Common Stock issued upon conversion of such stock held by the
Investor and its Permitted Transferees at any time is less than the Series D
Minimum, the Company or any of its Subsidiaries (including but not limited to
any action by a Sub Board or committee thereof) shall be subject to the
following restrictive covenants:
(i) 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 D 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 (A) any repurchase of shares by the Company pursuant to any
stock option or restricted stock agreement with an employee of the Company
entered into by the Company and approved by the Board, and (B) the
redemption of any shares of Series D Stock, or the mandatory redemption of
the other Preferred Stock pursuant to the Amended and Restated Certificate
of Incorporation of the Company, as in effect as of the date hereof.
(ii) SALES OF SECURITIES. The Company will not (A) create or
issue any securities of the Company which have equity features and which
rank on a parity with or senior to the Series D 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 D Stock or terms more
favorable than those of the Series D Stock or (B) sell or issue any shares
of Common Stock of the Company for which the consideration is other than
cash, except as contemplated with respect to the conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Stock into Common Stock.
-3-
<PAGE>
(iii) 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.
(iv) 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 (A) to sell inventory or (B) to sell other assets, each in
the ordinary course of business.
(v) 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 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)
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 3(b)(v), 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.
(vi) INVESTMENTS, LOANS, GUARANTEES, JOINT VENTURES AND
SUBSIDIARIES. The Company will not, (A) 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
(B) 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.
(vii) CERTIFICATE OF INCORPORATION AND BY-LAW AMENDMENTS;
RECLASSIFICATION OF COMMON STOCK; CHANGES TO SERIES D STOCK. The Company
may not amend its Certificate of Incorporation or By-Laws so as to affect
adversely the Series D 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 D
Stock. The Company may not make any change to the rights, preferences or
privileges of the Series D Stock so as to affect adversely the rights,
preferences or privileges the Series D Stock.
(viii) CHANGE OF BUSINESS. The Company shall not enter into any
transaction or series of transactions which results in the Company engaging
in any material respect in any business other than the drug discovery,
agricultural,
-4-
<PAGE>
human healthcare and pharmaceutical fields and such business activities as
are incidental or related thereto.
(ix) 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 D Stock or which may otherwise restrict the
Company's ability to comply with and perform the terms of this Agreement.
(x) COMPLIANCE WITH ERISA. The Company will not:
(A) 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;
(B) 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;
(C) 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
(D) 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 3(b)(x), the term "accumulated funding deficiency" has
the meaning specified in section 302 of ERISA an 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.
(xi) 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, other than
indebtedness with respect to trade and operation 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
-5-
<PAGE>
validity thereof by appropriate proceedings, and then only to the extent it
has set aside on its books adequate reserves therefor.
(xii) CAPITAL EXPENDITURES; COMMITMENTS. The Company shall not,
and shall cause each of its Subsidiaries, if any, not to, 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 Company's yearly budget for any such capital
expenditure or commitment.
(xiii) 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 6.11(b) of the Series C
Purchase Agreement (as defined in Section 11 hereof).
The provisions of Section 2 and this Section 3 shall terminate automatically and
be of no further force and effect upon the first to occur of (i) the tenth
anniversary of the date hereof or (ii) a Qualified Public Offering (as defined
in Section 11 hereof). The failure of the Company to comply with this Section 3
shall only be waivable by written consent of the holders of a majority of the
outstanding Series D Stock and by the Requisite C Holders (as defined in Section
11).
4. AFFIRMATIVE COVENANTS. Until such time as the Investor and its
Permitted Transferees at any time hold less than 40% of the Series D Stock, the
Company shall be subject to the following affirmative covenants:
(a) BASIC FINANCIAL INFORMATION. The Company will furnish the
following reports to the Investor (or its representatives):
(i) 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 and approved by the Investor, and including a
Company prepared comparison to budget.
(ii) 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
-6-
<PAGE>
corresponding periods of the previous fiscal year, certified by the
principal financial or accounting officer of the Company.
(iii) 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 this Section 4(a)(i) and
(ii) 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.
(iv) 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 (A) its agreements
or covenants contained herein, (B) its material agreements or covenants
contained in any other agreement to which the Company or any of its
Subsidiaries is a party or (C) 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.
(v) 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 Investor and as approved by the Board, 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.
(vi) As soon as practicable after transmission or occurrence and
in any event within ten (10) days thereof, (A) 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 Investor'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., (B) 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 Investor's investment in the Series D Stock or in the Common
Stock issuable upon conversion of the Series D Stock, and (C) notice of
material breach or failure to comply with any representation, warranty,
covenant or agreement of the Company contained herein, including the
Exhibits hereto.
-7-
<PAGE>
(vii) 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 (A) "reportable event," as
such term is defined in section 4043 of ERISA, other than any such event
with respect to which the statutory thirty (30)-day notice requirement has
been waived by regulation, or (B) "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.
(viii) With reasonable promptness, such other information and data
with respect to the Company and its Subsidiaries, if any, as the Investor
may from time to time reasonably request.
(ix) The provisions of this Section 4(a)shall not be in
limitation of any rights which the Investor 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 this
Section 4(a), the Board 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 Investor at the Company's expense.
(b) VISITATION. The Company will permit the Investor (or
representatives of the Investor) 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. Any expenses incurred by the Investor in
connection with any such visitation and inspection shall be borne by the
Investor; 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.
(c) 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
-8-
<PAGE>
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.
(d) 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.
(e) 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.
(f) 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.
(g) 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 Investor and will request the
firm of independent public accountants whose services are terminated to deliver
to the Investor 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 Investor the Company shall state whether the change of
accountants was recommended or approved by the Board.
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(h) 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.
(i) 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.
(j) 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 D 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 Investor 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.
(k) 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 as EXHIBIT 6.13 to
the Series C Purchase Agreement.
(l) MEETINGS OF STOCKHOLDERS. The Investor shall be entitled to call
for a Stockholders' meeting upon five (5) days notice to the Company.
(m) COMPLIANCE WITH ERISA. The Company will file or cause 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.
(n) 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
biphenyls and petroleum products) in connection with or relating to the Company
or any of its businesses, operations or assets.
The provisions of this Section 4 shall terminate automatically and be of no
further force and effect upon the first to occur of (i) the tenth anniversary of
the date hereof or (ii)
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a Qualified Public Offering (as defined in Section 11 hereof). The failure of
the Company to comply with this Section 4 shall only be waivable by written
consent of the holders of a majority of the outstanding Series D Stock and the
Requisite C Holders.
5. CONFLICTING CHARTER OR BYLAW PROVISIONS. Each Stockholder shall
vote all of its shares, and shall take all other actions, to ensure that the
Company's Certificate of Incorporation and Bylaws and the certificate of
incorporation and bylaws of each of its Subsidiaries facilitate and do not at
any time conflict with any provision of this Agreement.
6. REPRESENTATIONS AND WARRANTIES. Each Stockholder represents and
warrants that (i) such Stockholder is the record owner of the number of
Stockholder Shares set forth opposite its name on the Schedule attached hereto,
(ii) this Agreement has been duly authorized, executed and delivered by such
Stockholder and constitutes the valid and binding obligation of such
Stockholder, enforceable in accordance with its terms, and (iii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement. No holder of Stockholder Shares shall grant any
proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
7. RESTRICTIONS ON TRANSFER OF STOCKHOLDER SHARES.
(a) TRANSFER OF STOCKHOLDER SHARES. No Stockholder shall either,
directly or indirectly, sell, assign, mortgage, transfer, pledge, create a
security interest in or lien upon, encumber, give, place in trust, hypothecate,
or otherwise in any manner voluntarily or involuntarily dispose of (hereinafter
"Transfer"), any or all of his, her or its Stockholder Shares, now owned or
hereafter acquired, unless such Stockholder (in such capacity, the "Offeror")
shall first offer to Transfer any or all of his, her or its Stockholder Shares
to all other Stockholders (in such capacity, such Stockholders are referred to
as the "Offerees"), in their respective proportionate shares (as defined below).
In the event any Offeror proposes to Transfer Stockholder Shares, he, she or it
shall give the Offerees written notice of his, her or its intention, describing
the type of Stockholder Shares, the price and the general terms upon which the
Offeror proposes to Transfer the same. Each Offeree shall have thirty (30) days
from the date such notice is given to agree to have transferred to him, her or
it any or all of such Stockholder Shares up to such Offeree's proportionate
share, for the price and upon the general terms specified in the notice by
giving written notice to the Offeror and stating the quantity of Stockholder
Shares such Offeree desires to have transferred to him, or it. As used in this
Section 7, and except as otherwise provided, the term "proportionate share"
shall mean, with respect to each Offeree who is entitled to receive the
particular offer, the total number of Stockholder Shares proposed to be
transferred, 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 Offeree and (ii)
the total number of shares of Common Stock into which the shares of Preferred
Stock and other convertible securities of the Company held by such Offeree are
then convertible, and the denominator of which shall be the sum of (i) the total
number of shares of Common Stock owned by all Offerees and (ii) the total number
of shares of Common Stock into which the shares of Preferred Stock and other
convertible securities of the Company held by all Offerees are then convertible;
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(b) OVER-ALLOTMENT. Each Offeree shall have a right of
over-allotment such that if any Offeree fails to exercise such Offeree's right
hereunder to have transferred to him, her or it such Offeree's full
proportionate share of the Stockholder Shares proposed to be transferred (in
such capacity, an "Incomplete Purchaser" and collectively, the "Incomplete
Purchasers"), the Offerees exercising their right to have transferred to them
their full respective proportionate share of such Stockholder Shares (in such
capacity, collectively, the "Complete Purchasers" and individually, a "Complete
Purchaser") may have transferred to them the portion of such Stockholder Shares
which has not been transferred to the Incomplete Purchasers as hereinafter
provided. Each Complete Purchaser shall have fifteen (15) days from the date
notice is given by the Offeror to the Complete Purchasers that the Incomplete
Purchaser(s) have rejected or failed to accept their right to have transferred
to them their proportionate share of Stockholder Shares, to agree to have
transferred to such Complete Purchaser up to such Complete Purchaser's
proportionate share of Stockholder Shares not transferred to the Incomplete
Purchaser(s). Notwithstanding anything in Section 7 to the contrary, as used in
this Section 7(b) 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 all
Incomplete Purchasers and the total number of shares of Common Stock into which
the shares of all such Incomplete Purchasers' Preferred Stock and other
convertible securities of the Company are convertible. In the event the
Offerees fail to exercise their rights pursuant to paragraphs (a) and (b) above
within said forty-five (45) day period for the full amount of Stockholder Shares
proposed to be transferred, the Offeror shall have sixty (60) days thereafter to
Transfer the Stockholder Shares with respect to which the Offeree's options were
not exercised, at a price and upon general terms no more favorable to the
transferees thereof than specified in the Offeror's notice to the Offerees. In
the event the Offer or has not transferred the Stockholder Shares within said
60-day period, he, she or it shall not thereafter Transfer any Stockholder
Shares without first offering such Stockholder Shares to the Offerees in the
manner provided above;
(c) TAG-ALONG RIGHTS. At least thirty (30) days prior to any
Transfer of Stockholder Shares (other than a Public Sale), including the
Transfer of Stockholder Shares to the Company, the Stockholder making such
Transfer (the "Transferring Stockholder") shall deliver a written notice (the
"Sale Notice") to the Company and the other Stockholders specifying in
reasonable detail the identity of the prospective transferee(s), the number of
shares to be transferred and the terms and conditions of the Transfer (which
notice may be the same notice and given at the same time as the offer notice
under Section 7(a)). The other Stockholders (the "Electing Holders") may elect
to participate in the contemplated Transfer at the same price per share and on
the same terms by delivering written notice to the Transferring Stockholder
within thirty (30) days after delivery of the Sale Notice. If the Electing
Holders have elected to participate in such Transfer, the Transferring
Stockholder and the Electing Holders shall be entitled to sell in the
contemplated Transfer, at the same price and on the same terms, a number of
Stockholder Shares (determined on a class-by-class basis) equal to the product
of (i) the quotient determined by dividing (A) the percentage of Stockholder
Shares in any class of Stockholder Shares owned by such Person by (B) the
aggregate percentage of Stockholder Shares in such class owned, respectively, by
the Transferring Stockholder and the Electing Holders, and (ii) the number of
Stockholder Shares in such class to be sold in the contemplated Transfer.
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FOR EXAMPLE, if the Sale Notice contemplated a sale of 100 Stockholder
Shares by the Transferring Stockholder, and if the Transferring
Stockholder at such time owns 35% of all Stockholder Shares and if the
Electing Holder elects to tag-along and owns 15% of all Stockholder
Shares, the Transferring Stockholder would be entitled to sell 70
shares (35% DIVIDED BY 50% x 100 shares) and the Electing Holder would
be entitled to sell 30 shares (15% DIVIDED BY 50% 100 shares).
Each Transferring Stockholder shall use best efforts to obtain the agreement of
the prospective transferee(s) to the participation of the Electing Holders in
any contemplated Transfer, and no Transferring Stockholder shall transfer any of
its Stockholder Shares to any prospective transferee if such prospective
transferee(s) declines to allow the participation of the Electing Holders.
(d) PERMITTED TRANSFERS. Notwithstanding anything to the contrary
contained herein, the procedures specified in this Section 7 shall not be
applicable to a Transfer by (i) a Stockholder to a Permitted Transferee (as
defined below) of such Stockholder, if such Permitted Transferee agrees in
writing with the parties hereto to be bound by and comply with all provisions of
this Agreement applicable to the individual or entity transferring the
Stockholder Shares immediately prior to such Transfer, (ii) a Stockholder to any
or all of the partners (general and/or limited) of such Stockholder in which
event such Stockholder Shares shall no longer be subject to this Agreement, or
(iii) to the Company pursuant to any repurchase Agreement, right of first
refusal or other right on the part of the Company to acquire Stockholder Shares
(provided that this sub-section (iii) shall not be deemed to authorize the
Company to repurchase any Stockholder Shares if otherwise prohibited). For
purposes of this Section 7(d), a "Permitted Transferee" shall mean (i) in the
case of a Stockholder that is an individual, the spouse or immediate family
member or any partnership, corporation or other entity wholly-owned by such
individual, and (ii) in the case of a Stockholder that is a partnership, any of
its partners (general and/or limited), employees or affiliates and any
partnership, corporation or other entity controlled by or under common control
with such partnership or the parties thereof.
(e) If any Transfer or attempted Transfer of the Stockholder Shares
is made contrary to the provisions of this Section 7, each Stockholder shall
have the right, in addition to any other legal or equitable remedies which it
may have, to enforce its rights hereunder by an action for specific performance;
the parties hereto recognize the rights set forth herein as unique, the
violation of which cannot be remedied by an award of monetary damages.
Notwithstanding the foregoing, no party hereto shall avoid the
provisions of this Agreement by making one or more transfers to one or more
Permitted Transferees and then disposing of all or any portion of such party's
interest in any such Permitted Transferee.
The provisions of Section 2.1 of the Preferred Stockholders' Agreement
dated May 17, 1996 are hereby terminated.
(f) TERMINATION OF RESTRICTIONS. The restrictions set forth in this
Section 7 shall continue with respect to each Stockholder Share until the
earlier of (i) the date on which such Stockholder Share has been transferred in
a Public Sale, (ii) the
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date on which such Stockholder Share has been transferred pursuant to this
Section 7 (other than subsection 7(d)), (iii) the fifth anniversary of the date
of this Agreement or (iv) the consummation of a Qualified Public Offering.
8. LEGEND. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares after such transfer) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate are subject
to a Stockholders Agreement dated as of _____________, among
the issuer of such securities (the "Company") and certain of
the Company's stockholders, as amended and modified from
time to time. A copy of such Stockholders Agreement shall
be furnished without charge by the Company to the holder
hereof upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding as of the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with Section 7 hereof.
9. TRANSFER. Prior to transferring any Stockholder Shares (other
than a Public Sale) to any Person, the Stockholders shall cause the prospective
transferee to be bound by this Agreement and to execute and deliver to the
Company, the Investor and the Other Stockholders a counterpart of this
Agreement.
10. PREEMPTIVE RIGHTS.
(a) The Company hereby grants to the Stockholders the right to
purchase any or all "New Securities" (as hereinafter defined) on a proportionate
basis as defined in Section 10(b). For purposes of this Section 10, "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,
directors or officers of the Company, (ii) shares of capital stock issued upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, or Series D 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 Board, (iv) warrants issued in connection with business
transactions, including corporate partnerships, approved by the Board or
securities issued pursuant to such warrants and (v) the sale of Series D Stock
pursuant to the Purchase Agreement.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Stockholders written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company
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proposes to issue the same. Each Stockholder 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 Stockholder'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 10, and except as otherwise provided, the term "proportionate
share" shall mean, with respect to any Stockholder, 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 the Stockholder (prior to such contemplated issuance), 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, Series D Stock and
other convertible securities of the Company (including the Warrant), if any,
held by the Stockholder (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 Stockholders (prior to such contemplated issuance),
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,
Series D Stock and other convertible securities of the Company (including the
Warrant) held by all Stockholders (prior to such contemplated issuance) are
convertible.
(c) Each Stockholder shall have a right of over-allotment such that
if any such Stockholder fails to exercise his right hereunder to purchase such
full proportionate share of the New Securities proposed to be issued (the
"Incomplete Holders"), the Stockholders purchasing their full respective
proportionate share of such New Securities (the "Complete Holders") may purchase
the portion of such New Securities which has not been purchased by the
Incomplete Holders as hereinafter provided. The Complete Holders shall have
fifteen (15) days from the date notice is given by the Company to the Complete
Holders that such Incomplete Holders have rejected or failed to accept their
right to purchase their proportionate share of New Securities, to agree to
purchase up to such Complete Holder's proportionate share of such New Securities
not purchased by the Incomplete Holders. Notwithstanding anything in Section
10(b) to the contrary, as used in this Section 10(c) with respect to the
Complete Holders only, each Complete Holder'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 Holder and the total number of shares
of Common Stock of any Incomplete Holder and the total number of shares of
Common Stock into which the shares of such Incomplete Holder's Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Stock or other convertible securities, if any, are convertible.
(d) In the event the Stockholders fail to exercise the preemptive
right 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 Stockholders' 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 Stockholders. In the event the Company has not sold
within said sixty (60)-day period or entered into an agreement to sell the New
Securities within said sixty (60)-day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the
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date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Stockholders in the
manner provided above.
(e) If, in connection with an offering of New Securities in which the
Stockholders have the right, pursuant to this Section 10, to purchase their
proportionate share of such New Securities, any Stockholder declines to purchase
such Stockholder's full proportionate share of such New Securities, then such
Stockholder's rights pursuant to this Section 10 shall terminate as to any
subsequent offering of New Securities. Any Stockholder's rights to purchase New
Securities pursuant to the Series C Purchase Agreement which has terminated
prior to the date hereof pursuant to Section 8.2 of the Series C Purchase
Agreement shall not be reinstated by reason of this Agreement, and any such
Stockholder shall have no rights under this Section 10.
(f) The preemptive right granted under this Section 10 shall expire
upon, and shall not be applicable to, the first sale of Common Stock of the
Company to the public in a Qualified Public Offering. Any preemptive rights
granted to the Other Stockholders pursuant to the Series C Purchase Agreement is
hereby terminated.
11. DEFINITIONS.
"BOARD" has the meaning set forth in the preamble.
"COMMON STOCK" means the Company's Common Stock, $.01 par value per
share.
"COMPANY" has the meaning set forth in the preamble.
"INVESTOR" has the meaning set forth in the preamble.
"INVESTOR DIRECTOR" has the meaning set forth in Section 1(a)(i).
"PERMITTED TRANSFEREE" has the meaning set forth in Section 7(d)
hereof.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED STOCK" means the Company's Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, and the Series D Stock.
"PUBLIC SALE" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble.
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"QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock having an aggregate offering value of at least $25 million.
"REQUISITE C HOLDERS" means the requisite holders of the issued and
outstanding Series C Preferred Stock pursuant to the Series C Purchase
Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SERIES C PURCHASE AGREEMENT" means the Series C Preferred Stock
Agreement dated as of May 17, 1996.
"STOCKHOLDER SHARES" means (i) any Common Stock purchased or otherwise
acquired by any Stockholder, (ii) any capital stock or other equity securities
issued or issuable directly or indirectly with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, and (iii) any other shares of any class or series of
capital stock of the Company held by a Stockholder; provided that Stockholder
Shares shall not include nonvoting stock described in (iii) for purposes of
Section 1 hereof. As to any particular shares constituting Stockholder Shares,
such shares shall cease to be Stockholder Shares when they have been (x)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (y) sold to the public through
a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
"SUB BOARD" has the meaning set forth in Section 1(a)(ii).
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing director or general partner
of such limited liability company, partnership, association or other business
entity.
"TRANSFER" has the meaning set forth in Section 7(a).
"WARRANT" means the Warrant issued to Investor pursuant to a Warrant
Agreement of even date.
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12. TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
13. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company, the Other Stockholders or the Investor unless
such modification, amendment or waiver is approved in writing by the Company,
85% in interest of the Other Stockholders and the holders of a majority of the
outstanding shares of Series D Stock. The failure of any party to enforce any
of the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The rights and obligations of the Other Stockholders pursuant to Section 6 of
the Series C Purchase Agreement shall not be affected by Sections 3(b) and 4 of
this Agreement.
14. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of any other provision of this
Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
15. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
16. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
18. REMEDIES. The Company, the Investor and the Other Stockholders
shall be entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages would not be an adequate remedy for any
breach of the provisions of this Agreement and that the Company, any Investor
and any Stockholder may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific
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performance and/or injunctive relief (without posting a bond or other security)
in order to enforce or prevent any violation of the provisions of this
Agreement.
19. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices shall be deemed to have been given hereunder when
delivered personally, three (3) days after deposit in the U.S. mail and one (1)
day after deposit with a reputable overnight courier service. The Company's
address is:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Mark T. Weedon
Telecopy No.: (617) 396-1028
20. GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF DELAWARE SHALL
GOVERN ALL ISSUES AND QUESTIONS CONCERNING THE RELATIVE RIGHTS OF THE COMPANY
AND ITS STOCKHOLDERS. ALL OTHER ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS AGREEMENT AND
THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF
NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. IN FURTHERANCE OF THE
FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND
EXHIBITS HERETO), EVEN THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR
CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD
ORDINARILY APPLY.
21. BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
22. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
23. MISCELLANEOUS. The Company and the Other Stockholders acknowledge
that Investor has advised them that it proposes to carry out a reorganization,
including an amalgamation, pursuant to which, among other things, a corporation
named BioChem Holdings Inc. (the "Successor") will own all of the assets and be
liable for all liabilities of Investor (the "Amalgamation"). The Company hereby
agrees that, upon consummation of the Amalgamation, the Successor shall have all
of the rights and obligations of Investor as if Successor had executed this
Agreement on the date hereof in lieu of Investor, and that neither Investor nor
Successor shall be
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<PAGE>
required to send any notice of any kind regarding the Amalgamation nor seek the
consent of the Company to such Amalgamation.
* * * *
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ Mark T. Weedon
-----------------------------
Name: Mark T. Weedon
Title: President and CEO
BIOCHEM PHARMA, INC.
By /s/ Francois Legault
-----------------------------
Name: Francois Legault
Title: Executive Vice President
By /s/ Daniel Hetu
-----------------------------
Name: Daniel Hetu
Title: Vice President
ACCEL IV L.P.
By: Accel IV Associates, L.P., its
General Partner
By: /s/
------------------------------
Name:
Title:
ACCEL INVESTORS '93 L.P.
By: /s/
------------------------------
Name:
<PAGE>
Title:
ACCEL JAPAN L.P.
By: Accel Japan Associates, L.P., its
General Partner
By: /s/
------------------------------
Name:
Title:
ACCEL KEIRETSU L.P.
By: Accel Partners & Co., Inc., its
General Partner
By: /s/
------------------------------
Name:
Title:
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
Title:
ADVENT PERFORMANCE MATERIALS LIMITED
PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
<PAGE>
Title:
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.,
its General Partner
By: /s/
------------------------------
Name:
Title:
---------------------------------
Thomas A. Bologna
CW VENTURES II, L.P.
By: CW Partners III, L.P., its General
Partner
By: /s/
------------------------------
Name:
Title:
ELLMORE C. PATTERSON PARTNERS
By:
------------------------------
Name:
Title:
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
<PAGE>
Name:
Title:
LOMBARD ODIER & CIE
By: /s/
------------------------------
Name:
Title:
---------------------------------
Bernard Mach
NEW ENTERPRISE ASSOCIATES 5
By: /s/
------------------------------
Name:
Title:
PROSPER PARTNERS
By:
------------------------------
Name:
Title:
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation,
its General Partner
By: /s/
------------------------------
Name:
Title:
<PAGE>
SCRIPT PARTNERS LIMITED PARTNERSHIP
By: /s/
------------------------------
Name:
Title:
VENROCK ASSOCIATES
By: /s/
------------------------------
Name:
Title:
VENROCK ASSOCIATES II, L.P.
By: /s/
------------------------------
Name:
Title: General Partner
<PAGE>
Exhibit 10.27
The security represented by this certificate was originally
issued on December 12, 1997, and has not been registered
under the Securities Act of 1933, as amended. The transfer
of such security is subject to the conditions specified in
the Warrant Agreement, dated as of December 12, 1997 (as
amended and modified from time to time), between the issuer
hereof (the "Company") and the initial holder hereof, and
the Company reserves the right to refuse the transfer of
such security until such conditions have been fulfilled with
respect to such transfer. Upon written request, a copy of
such conditions shall be furnished by the Company to the
holder hereof without charge.
SCRIPTGEN PHARMACEUTICALS, INC.
STOCK PURCHASE WARRANT
Date of Issuance: December 12, 1997 Certificate No. W-1
FOR VALUE RECEIVED, SCRIPTGEN PHARMACEUTICALS, INC., a Delaware
corporation (the "Company"), hereby grants to BIOCHEM PHARMA INC. or its
registered assigns (the "Registered Holder") the right to purchase from the
Company 1,428,258 shares of Warrant Stock at a price per share of US $4.38 (as
adjusted from time to time hereunder, the "Exercise Price"). This Warrant (the
"Warrant") in issued pursuant to the terms of the Warrant Agreement, dated as of
December 12, 1997 (the "Warrant Agreement"), between the Company and a certain
investor. Certain capitalized terms used herein are defined in Section 5
hereof. The amount and kind of securities obtainable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
1A. EXERCISE PERIOD. The Registered Holder may exercise, in whole or
in part (but not as to a fractional share of Warrant Stock), the purchase rights
represented by this Warrant at any time and from time to time after the Date of
Issuance to and including 5 p.m., New York time on December 12, 2002 (the
"Exercise Period").
<PAGE>
1B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase rights
represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser,
an Assignment or Assignments in the form set forth in EXHIBIT II hereto
evidencing the assignment of this Warrant to the Purchaser, in which case
the Registered Holder shall have complied with the provisions set forth in
Section 7 hereof; and
(d) a check payable to the Company in an amount equal to the product
of the Exercise Price multiplied by the number of shares of Warrant Stock
being purchased upon such exercise (the "Aggregate Exercise Price").
(ii) Certificates for shares of Warrant Stock purchased upon exercise
of this Warrant shall be delivered by the Company to the Purchaser within five
business days after the date of the Exercise Time. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, within such five-day period, deliver such
new Warrant to the Person designated for delivery in the Exercise Agreement.
(iii) The Warrant Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time, and
the Purchaser shall be deemed for all purposes to have become the record holder
of such Warrant Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Warrant Stock upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser 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 Warrant Stock. Each share of Warrant Stock issuable upon exercise of
this Warrant shall, upon payment of the Exercise Price therefor, be fully paid
and nonassessable and free from all liens and charges
-2-
<PAGE>
with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer of
this Warrant or of any share of Warrant Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant. The Company shall from time to time take all such action as
may be necessary to assure that the par value per share of the unissued Warrant
Stock acquirable upon exercise of this Warrant is at all times equal to or less
than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered Holder
or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including, without limitation, making any filings required to be made
by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with a registered public
offering or the sale of the Company, the exercise of any portion of this Warrant
may, at the election of the holder hereof, be conditioned upon the consummation
of the public offering or the sale of the Company in which case such exercise
shall not be deemed to be effective until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Warrant Stock solely for the purpose of
issuance upon the exercise of the Warrants, such number of shares of Warrant
Stock issuable upon the exercise of all outstanding Warrants. The Company shall
take all such actions as may be necessary to assure that all such shares of
Warrant Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Warrant Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance and except that the Company shall not be required to register under the
Securities Act of 1933, as amended, any issuance of Warrant Stock, provided,
that nothing herein shall affect the rights of the Investor under the
Registration Rights Agreement dated of even date). The Company shall not take
any action which would cause the number of authorized but unissued shares of
Warrant Stock to be less than the number of such shares required to be reserved
hereunder for issuance upon exercise of the Warrants.
1C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in EXHIBIT I
hereto, except that if the shares of Warrant Stock are not to be issued in the
name of the Person in whose name
-3-
<PAGE>
this Warrant is registered, the Exercise Agreement shall also state the name of
the Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable hereunder, it shall also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
1D. FRACTIONAL SHARES. If a fractional share of Warrant Stock would,
but for the provisions of paragraph 1A, be issuable upon exercise of the rights
represented by this Warrant, the Company shall, within five business days after
the date of the Exercise Time, deliver to the Purchaser a check payable to the
Purchaser in lieu of such fractional share in an amount equal to the difference
between the Market Price of such fractional share as of the date of the Exercise
Time and the Exercise Price of such fractional share.
Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In
order to prevent dilution of the rights granted under this Warrant, the Exercise
Price shall be subject to adjustment from time to time as provided in this
Section 2, and the number of shares of Warrant Stock obtainable upon exercise of
this Warrant shall be subject to adjustment from time to time as provided in
this Section 2. Capitalized terms not defined in this Section 2 shall have the
meanings ascribed to them in the Company's Restated Articles of Incorporation
(in the form attached as EXHIBIT C to the Stock Purchase Agreement dated of even
date).
2A. ADJUSTMENTS. The initial Exercise Price above shall be subject
to adjustment from time to time and such exercise prices as adjusted shall
likewise be subject to further adjustment, all as hereinafter set forth. The
term "Current Exercise Price" shall mean, as of any time, the Exercise Price in
case no adjustment shall have been required, or such conversion price as
adjusted pursuant to this Section 2A, as the case may be.
(i) If at any time after the date of issuance of the Warrant, the
Company shall issue (x) any shares of Common Stock other than (A) Excluded Stock
(as defined in (vi) below), (B) Common Stock issued or issuable upon conversion
of the Preferred Stock or exercise of this Warrant 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) below) less
than the Current Exercise Price in effect immediately
-4-
<PAGE>
prior to the issuance of such Securities, the Current Exercise Price in effect
immediately prior to each such issuance shall forthwith (except as provided in
subparagraph (ii) below) be reduced to a Current Exercise 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 Warrant and
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 Company 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 Warrant and
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 Subsection 2A(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
Company 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
-5-
<PAGE>
such Rights shall not be deemed to have been issued unless
such consideration per share would be less than the Current
Exercise Price in effect on the date of and immediately
prior to such issue. No further adjustment of the Current
Exercise 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 Company 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
Company 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 Exercise Price in
effect on the date of and immediately prior to such issue.
No further adjustment of the Current Exercise 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.
-6-
<PAGE>
(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 Exercise Price shall forthwith
be readjusted to such Current Exercise 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 Exercise Price shall
forthwith be readjusted to such Current Exercise 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 Company.
(iii)If the Company 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 Exercise Price in effect immediately prior to such
-7-
<PAGE>
dividend, other distribution, subdivision or combination, as the case may be,
shall forthwith be adjusted to that price determine 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 the event the Company 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 Company 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 Exercise Price in effect thereafter shall
be determined by multiplying the Current Exercise 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
(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
Company'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) Whenever the Current Exercise Price shall be adjusted as provided
in this Section 2A, the Company shall forthwith file, at the principal office of
the Company or at such other place as may be designated by the Company, a
statement, certified by the chief financial officer of the Company, show in
detail the facts requiring such adjustment and the Current Exercise Price that
shall be in effect after such adjustment. The Company shall also cause a copy
of such statement to be sent by first class mail, postage prepaid, to the
Registered Holder at such holder's address as shown in the records of the
Company.
(vi) "Excluded Stock" shall mean up to 4,850,000 shares (such amount
to be appropriately adjusted in the event of any stock
-8-
<PAGE>
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 Company 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 Company.
(vii)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 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 ad determined in good faith by the Board of Directors
of the Company.
(viii)If any event occurs of the type contemplated by the provisions
of this Section 2A but not expressly provided for by such provisions, then the
Board of Directors of the Company will make an appropriate adjustment in the
Current Exercise Price as to protect the rights of the holders of the Warrant;
provided that no such adjustment will increase the Current Exercise Price except
as otherwise permitted pursuant to subparagraph (iii) above or subparagraph
(c)(ii)(D) of this Section 2A or decrease the number of shares of Common Stock
issuable upon exercise of the Warrant.
2B. TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issue or sale of Common Stock.
2C. RECORD DATE. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Rights or in Related Rights or (B)
to subscribe for or purchase
-9-
<PAGE>
Common Stock, Rights or Related Rights, then such record date shall be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
2D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
which in each case is effected in such a way that the holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as "Organic Change." Prior to the consummation of any Organic Change,
the Company shall make appropriate provision (in form and substance reasonably
satisfactory to the Registered Holder) to insure that each of the Registered
Holder the shares of Warrant Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Warrant Stock immediately theretofore acquirable and
receivable upon exercise of such holder's Warrant had such Organic Change not
taken place. In any such case, the Company shall make appropriate provision (in
form and substance reasonably satisfactory to the Registered Holders of the
Warrants representing a majority of the Warrant Stock obtainable upon exercise
of all Warrants then outstanding) with respect to such holder's rights and
interests to insure that the provisions of this Section 2 and Sections 3 and 4
hereof which are then in effect shall thereafter be applicable to the Warrant.
The Company shall not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor entity (if other than the
Company) resulting from consolidation or merger or the entity purchasing such
assets assumes by written instrument (in form and substance reasonably
satisfactory to the Registered Holders of Warrants representing a majority of
the Warrant Stock obtainable upon exercise of all of the Warrants then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
2E. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
-10-
<PAGE>
(ii) The Company shall give written notice to the Registered Holder at
least 20 days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the Common Stock,
(B) with respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
2F. TERMINATION.
The provisions of Section 2A(i) and (ii), except to the extent
necessary to effectuate the other provisions of this Warrant, shall terminate
upon the closing of a Qualified Public Offering (as that term is defined in the
Stockholders' Agreement, dated of even date). The provisions of Section 2A(i)
and (ii) shall not apply to any securities issued by the Company in the
Qualified Public Offering.
Section 3. LIQUIDATING DIVIDENDS. If the Company declares a dividend
upon the Common Stock (except a dividend payable in shares of Common Stock
referred to in Section 2A(iii) payable otherwise than out of retained earnings,
the Current Exercise Price in effect immediately prior to the declaration of
such dividend shall be reduced (but not below par value) by an amount equal, in
the case of a dividend in cash, to the amount thereof payable per share of
Common Stock or, in the case of any other dividend, to the fair value thereof
per share of Common Stock as determined in good faith by the Board of Directors
of the Company. For the purposes of the foregoing, a dividend payable other
than in cash shall be considered payable out of retained earnings only to the
extent that such retained earnings are charged an amount equal to the fair value
of such dividend as determined by the Board of Directors of the Company. Such
reduction shall take effect as of the date on which a record is taken for the
purpose of such dividend or, if a record is not taken, the date as of which the
holders of the Common Stock of record entitled to such dividend are to be
determined. Appropriate readjustment of the per share Exercise Price shall be
made in the event that any dividend referred to in this Section 3 shall be
lawfully abandoned.
Section 4. DEFINITIONS. The following terms have meanings set forth
below:
"COMMON STOCK" means, collectively, the Company's Common Stock and any
capital stock of any class of the Company hereafter authorized which is not
limited to a fixed sum or percentage of par
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<PAGE>
or stated value in respect to the rights of the holders thereof to participate
in dividends or in the distribution of assets upon any liquidation, dissolution
or winding up of the Company.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"WARRANT STOCK" means the Company's Common Stock, par value $.01 per
share; provided that if there is a change such that the securities issuable upon
exercise of the Warrants are issued by an entity other than the Company or there
is a change in the type or class of securities so issuable, then the term
"Warrant Stock" shall mean one share of the security issuable upon exercise of
the Warrants if such security is issuable in shares, or shall mean the smallest
unit in which such security is issuable if such security is not issuable in
shares.
Other capitalized terms used in this Warrant but not defined herein
shall have the meanings set forth in the Purchase Agreement.
Section 5. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Warrant Stock, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of such holder for the Exercise Price of Warrant Stock acquirable
by exercise hereof or as a stockholder of the Company.
Section 6. WARRANT TRANSFERABLE. The Registered Holder, by
acceptance of this Warrant, agrees that this Warrant and the Warrant Stock
issued upon exercise of this Warrant are being acquired for investment and that
it will not offer, sell or otherwise dispose of this Warrant or any Warrant
Stock except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"). Upon exercise of this
Warrant, the Purchaser shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the Warrant Stock is being acquired
for investment and not with a view toward distribution or resale. The
certificates representing the Warrant Stock (unless registered under the
Securities Act) shall be stamped or imprinted with a legend substantially in the
form enclosed herein. Subject to the foregoing, this Warrant and all rights
hereunder are transferable, in whole or in part, without charge to the
Registered Holder, upon surrender of this Warrant with a properly executed
Assignment (in
-12-
<PAGE>
the form of EXHIBIT II hereto) at the principal office of the Company.
Section 7. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issues
this Warrant shall be deemed to be the "Date of Issuance" hereof regardless of
the number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
Section 8. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
reasonably satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at its expense) execute and deliver in lieu of
such certificate a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
Section 9. NOTICES. Except as otherwise expressly provided herein,
all notices referred to in this Warrant shall be in writing and shall be
delivered personally sent by reputable overnight courier service (charges
prepaid) and shall be deemed to have been given when so delivered or sent(i) to
the Company, at its principal executive offices and (ii) to the Registered
Holder of this Warrant, at such holder's address as it appears in the records of
the Company (unless otherwise indicated by any such holder).
Section 10. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing a majority of the shares of Warrant
Stock obtainable upon exercise of the Warrants; provided that no such action may
change the Exercise Price of the Warrants or the number
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<PAGE>
of shares or class of stock obtainable upon exercise of each Warrant without the
written consent of the Registered Holders of Warrants representing at least 60%
of the shares of Warrant Stock obtainable upon exercise of the Warrants.
Section 11. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporation
laws of the State of New York shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal law of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.
Section 12. AMALGAMATION. The Company acknowledges that Registered
Holder has advised it that it proposes to carry out a reorganization, including
an amalgamation, pursuant to which, among other things, a corporation named
BioChem Holdings Inc. (the "Successor") will own all of the assets and be liable
for all liabilities of Registered Holder (the "Amalgamation"). The Company
hereby agrees that, upon consummation of the Amalgamation, the Successor shall
have all of the rights and obligations of Registered Holder as if Successor had
executed this Agreement on the date hereof in lieu of Registered Holder, and
that neither Registered Holder nor Successor shall be required to send any
notice of any kind regarding the Amalgamation nor seek the consent of the
Company to such Amalgamation.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ Mark T. Weedon
----------------------------
Name: Mark T. Weedon
Title: President and Chief
Executive Officer
[Corporate Seal]
Attest:
/s/ Karen A. Hamlin
- ----------------------------
Secretary
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<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-1), hereby agrees to subscribe for the purchase of
______ shares of the Warrant Stock covered by such Warrant and makes payment
herewith in full therefor at the price per share provided by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (Certificate No. W-1) with respect to the number of shares of the
Warrant Stock covered thereby set forth below, unto:
Names of Assignee Address No. Of Shares
- ----------------- ------- -------------
Dated: Signature _______________________
_______________________
Witness _______________________
<PAGE>
Exhibit 10.28
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of December 12, 1997 by and between
BIOCHEM PHARMA INC., a Quebec corporation (the "PURCHASER"), and SCRIPTGEN
PHARMACEUTICALS, INC., a Delaware corporation (the "Company"). Capitalized
terms used herein shall have the meanings given to such terms in Section VII
hereof.
WHEREAS, on the date hereof, pursuant to that certain Stock Purchase
Agreement (the "PURCHASE AGREEMENT"), by and between the Purchaser and the
Company, the Purchaser is purchasing from the Company such number of shares of
Series D Convertible Preferred Stock, par value $.01 per share, of the Company,
convertible, immediately following the Closing, into 20% of the shares of the
Company's Common Stock outstanding on a fully-diluted basis. Capitalized terms
not defined herein shall have the meanings ascribed to such terms in the
Purchase Agreement; and
WHEREAS, the Purchaser is acquiring from the Company a warrant in the
form attached as Exhibit 1 hereto (the "WARRANT"), representing the right to
purchase from the Company 1,428,258 Warrant Shares (as adjusted from time to
time pursuant to the provisions of the Warrant) on the terms and conditions set
forth in the Warrant; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. PURCHASE PRICE AND CLOSING.
A. CLOSING. The closing of the issuance of the Warrant to the Purchaser
(the "CLOSING") shall take place simultaneously with the closing pursuant to the
Purchase Agreement. The date of such Closing is hereinafter referred to as the
"CLOSING DATE."
B. TRANSACTIONS ON CLOSING DATE. At the Closing, the Company shall
deliver to the Purchaser the duly issued Warrant.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Purchaser as follows:
A. GOOD STANDING. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
B. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and to issue and deliver the Warrant to the Purchaser. The
execution, delivery, and performance by the Company of its obligations under
this Agreement, including the issuance and delivery of the Warrant to the
Purchaser, have been duly authorized by all necessary corporate action on the
part of the Company. This
<PAGE>
Agreement has been duly executed and delivered by the Company and (assuming due
execution and delivery by the Purchaser) is a legal, valid, and binding
obligation of The Company and is enforceable against the Company in accordance
with its terms.
C. NO CONFLICT OR VIOLATION. The execution and delivery of this
Agreement by the Company, the performance by the Company of its terms and the
issuance and delivery of the Warrant to the Purchaser will not on the Closing
Date conflict with or result in a violation of (i) the Certificate of
Incorporation or By-Laws of the Company as in effect on the Closing Date, or
(ii) any agreement, instrument, law, rule, regulation, order, writ, judgment, or
decree to which the Company is a party or is subject, except for such conflicts
and violations which will not, in the aggregate, have a material adverse effect
on the business, operations, assets or condition (financial or otherwise) of the
Company and will not deprive the Purchaser of any material benefit under this
Agreement.
D. VALIDITY OF ISSUANCE. The Warrant to be issued to the Purchaser
pursuant to this Agreement and the Warrant Shares issued upon exercise of the
Warrant will, when issued, be duly and validly issued, fully paid and
nonassessable (assuming in the case of the Warrant Shares, payment of the
exercise price is made in accordance with the terms of the Warrant). The
Warrant Shares issuable upon exercise of the Warrant represent five percent (5%)
on a fully diluted basis of the Common Stock Deemed Outstanding immediately
after the Closing Date.
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company as follows:
A. INVESTMENT INTENTION. The Purchaser is acquiring the Warrant, and if
any portion of the Warrant is exercised, the Warrant Shares, for investment
solely for its own account and not with a view to, or for resale in connection
with, the distribution or other disposition thereof. The Purchaser agrees and
acknowledges that it will not, directly or indirectly, offer, transfer, or sell
the Warrant or any Warrant Shares, or solicit any offers to purchase or acquire
the Warrant or any Warrant Shares, unless the transfer or sale is (i) pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "SECURITIES ACT") and has
been registered under any applicable state securities or "blue sky" laws, or
(ii) pursuant to an exemption from registration under the Securities Act and
applicable state securities or "blue sky" laws.
B. LEGEND. The Purchaser has been advised by the Company that the
certificates representing the Warrant will bear the following legend and that
the certificates representing the Warrant Shares will bear a similar legend:
THE SECURITY REPRESENTED BY THIS CERTIFICATE WAS ORIGINALLY ISSUED ON
DECEMBER ___, 1997, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE TRANSFER OF SUCH SECURITY IS SUBJECT TO
-2-
<PAGE>
THE CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF DECEMBER __,
1997 (AS AMENDED AND MODIFIED FROM TIME TO TIME), BETWEEN THE ISSUER HEREOF
(THE "COMPANY") AND THE INITIAL HOLDER HEREOF, AND THE COMPANY RESERVES THE
RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY UNTIL SUCH CONDITIONS HAVE
BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY
OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
WITHOUT CHARGE.
Upon reasonable request of the Company in connection with any transfer of the
Warrant or any Warrant Shares (other than a transfer pursuant to a public
offering registered under the Securities Act, pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act (or any similar rules then in effect), or
to an affiliate of the Purchaser), the Purchaser will deliver, if requested by
the Company, an opinion of counsel knowledgeable in securities laws reasonably
satisfactory to the Company to the effect that such transfer may be effected
without registration under the Securities Act. The Company agrees to issue
certificates evidencing the Warrant Shares that do not contain such legend upon
receipt of an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company, to the effect that registration under the
Securities Act is not required because of the availability of an exemption from
such registration.
C. ADDITIONAL INVESTMENT REPRESENTATIONS. The Purchaser is an
"accredited investor" as such term is defined in Rule 501 promulgated under the
Securities Act.
IV. MISCELLANEOUS
A. DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the following meanings:
"COMMON STOCK" means the Company's Common Stock, par value $.01 per share,
and any securities into which such Common Stock is hereafter converted or
exchanged.
"WARRANT SHARES" means shares of the Common Stock obtained or obtainable
upon exercise of the Warrant; PROVIDED, that if there is a change such that the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
B. OTHER AGREEMENTS. The parties hereto acknowledge that upon the
exercise of the Warrant, the Warrant Shares and the holders thereof shall be
subject to the terms and conditions of each of the Stockholders Agreement and
the Registration
-3-
<PAGE>
Rights Agreement, each dated as of the date hereof, by and among the Company,
the Purchaser, and certain other stockholders of the Company, in each case as
may be amended, modified, or restated from time to time.
C. NOTICES. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given
(i) when delivered, if delivered personally, sent by registered or certified
mail, return receipt requested and postage prepaid, or sent via nationally
recognized overnight courier or via facsimile, and (ii) when received if
delivered otherwise, to the party to whom it is directed:
TO THE COMPANY:
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attention: Mark T. Weedon
Facsimile No.: (617) 396-1028
WITH COPIES (WHICH SHALL NOT CONSTITUTE NOTICE TO THE COMPANY) TO:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attention: Constantine Alexander, Esq.
Facsimile No.: (617) 973-9748
TO PURCHASER:
BioChem Pharma Inc.
275 Armand-Frappier Boulevard
Laval, Quebec H7V 4A7
Canada
Attention: Vice President, Legal Affairs
Facsimile No.: (514) 978-7755
WITH A COPY (WHICH SHALL NOT CONSTITUTE NOTICE TO PURCHASER) TO:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Luc A. Despins, Esq.
Facsimile No.: (212) 446-4900
or to such other address as either party hereto shall have specified by notice
in writing to the others.
-4-
<PAGE>
D. ASSIGNMENT. This Agreement and all the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any rights or obligations hereunder shall be assigned by the Company without
the prior written consent of the Purchaser.
E. AMENDMENT. This Agreement may be amended only by a written instrument
signed by the Company and the Purchaser.
F. WAIVER. Either party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid as to such party if
set forth in an instrument in writing signed by such party.
G. SEVERABILITY. In the event that any one or more of the provisions
hereof, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, it being intended
that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
H. AMALGAMATION. The Company acknowledges that Purchaser has advised it
that it proposes to carry out a reorganization, including an amalgamation,
pursuant to which, among other things, a corporation named BioChem Holdings Inc.
(the "Successor") will own all of the assets and be liable for all liabilities
of Purchaser (the "Amalgamation"). The Company hereby agrees that, upon
consummation of the Amalgamation, the Successor shall have all of the rights and
obligations of Purchaser as if Successor had executed this Agreement on the date
hereof in lieu of Purchaser, and that neither Purchaser nor Successor shall be
required to send any notice of any kind regarding the Amalgamation nor seek the
consent of the Company to such Amalgamation.
I. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS OR CHOICE OF LAWS OF THE STATE
OF NEW YORK OR ANY OTHER JURISDICTION WHICH WOULD RESULT IN THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THOSE OF THE STATE OF NEW YORK.
J. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement.
K. DESCRIPTIVE HEADINGS. The headings in this Agreement are for
convenience
-5-
<PAGE>
of reference only and shall not limit or otherwise affect the meaning of the
terms contained herein.
* * * * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be signed and attested by its duly authorized officers under its corporate
seal and to be dated as of the date hereof.
SCRIPTGEN PHARMACEUTICALS, INC.
By /s/ Mark T. Weedon
-----------------------------
Name: Mark T. Weedon
Title: President and Chief
Executive Officer
BIOCHEM PHARMA, INC.
By /s/ Francois Legault
------------------------------
Name: Francois Legault
Title: Executive Vice President
By /s/ Daniel Hetu
------------------------------
Name: Daniel Hetu
Title: Vice President
-7-
<PAGE>
Exhibit 10.29
LICENSE AGREEMENT
by and between
TRUSTEES OF BOSTON UNIVERSITY
and
SCRIPTGEN PHARMACEUTICALS, INC.
January 1, 1998
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>
LICENSE AGREEMENT
-----------------
This agreement ("AGREEMENT") is made as of January 1, 1998 ("EFFECTIVE
DATE"), by and between TRUSTEES OF BOSTON UNIVERSITY (hereinafter referred to as
"UNIVERSITY"), a corporation duly organized and existing under the laws of the
Commonwealth of Massachusetts and having a principal office at 147 Bay State
Road, Boston, Massachusetts 02215 and Scriptgen Pharmaceuticals, Inc.,
(hereinafter referred to as "LICENSEE"), a corporation duly organized and
existing under the laws of the State of Delaware having a principal place of
business at 200 Boston Avenue Medford, MA 02155
WHEREAS, UNIVERSITY and LICENSEE entered into a sponsored research
agreement ("SPONSORED RESEARCH AGREEMENT"), pursuant to which LICENSEE was
granted an exclusive option to an exclusive license to any inventions which
resulted from the research; and
WHEREAS, UNIVERSITY and LICENSEE warrant that they are co-owners by
assignment of an invention entitled [ * * * ] more fully described in EXHIBIT
A, having [ * * * ] which resulted from the SPONSORED RESEARCH AGREEMENT; and
WHEREAS, LICENSEE now wishes to exercise its OPTION and obtain a license to
UNIVERSITY'S undivided interest in PATENT RIGHTS rights upon the terms and
conditions hereinafter set forth; and
WHEREAS, UNIVERSITY desires to have such rights utilized to promote the
public interest by granting a license hereunder; and
<PAGE>
WHEREAS, LICENSEE has represented to UNIVERSITY, in order to induce
UNIVERSITY to enter into this AGREEMENT, that LICENSEE has the strategic
commitment to commercialize such technology; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and other good and valuable consideration, the receipt of which
is acknowledged, the parties agree as follows:
ARTICLE I -- DEFINITIONS
------------------------
1.1 "FIELD OF USE" shall mean all uses.
1.2 "LICENSED PRODUCT(s)" shall mean any product or part thereof, process, or
service:
(a) the manufacture, use or sale of which, but for the license granted
hereunder, would infringe any issued, unexpired claim or a pending
claim contained in the PATENT RIGHTS; or
(b) which is employed to practice a process which, but for the license
granted hereunder, would infringe any issued, unexpired claim or a
pending claim contained in the PATENT RIGHTS in the country in which
any LICENSED PROCESS is used or in which such product or part thereof
is used or sold.
1.3 "LICENSED PROCESS" shall mean any process which is covered in whole or in
part by an issued, unexpired claim or a pending claim contained in the
PATENT RIGHTS.
1.4 "LICENSEE" shall include any related company of Scriptgen Pharmaceuticals,
Inc., the voting stock of which is directly or indirectly at least fifty
percent (50%) owned or controlled by Scriptgen Pharmaceuticals, Inc., any
organization which directly or indirectly controls more than fifty percent
(50%) of the voting stock of Scriptgen Pharmaceuticals, Inc., and any
organization, the majority ownership of which is directly or indirectly
common to the ownership of Scriptgen Pharmaceuticals, Inc.
1.5 "NET SALES" shall mean all amounts billed or invoiced by LICENSEE or a
sublicensee for LICENSED PRODUCTS, less the following:
-Page 2 of 22-
<PAGE>
(a) allowances and adjustments customary in the trade separately and
actually credited to customers for spoiled, damaged, outdated, and
returned LICENSED PRODUCTS(s);
(b) transportation charges or allowances actually paid or granted;
(c) trade, quantity, cash or other discounts customary in the trade, if
any, allowed and paid by LICENSEE to independent parties in
arms-length transactions;
(d) credits or allowances made or given on account of rejects, returns or
retroactive price reductions;
(e) any tax or governmental charge directly on sale or transportation, use
or delivery of products paid by LICENSEE and not recovered from the
purchaser.
1.6 "PATENT RIGHTS" shall mean UNIVERSITY's undivided interest in the following
intellectual property:
(a) the United States and foreign patents and/or patent applications
listed in EXHIBIT A and B;
(b) United States and foreign patents issued from the applications listed
in EXHIBIT A and B and from divisionals and continuations of these
applications;
(c) claims of U.S. and foreign continuationinpart applications, and of the
resulting patents, which are directed to subject matter specifically
described in the U.S. and foreign applications listed in EXHIBIT A and
B;
(d) claims of all foreign patent applications, and of the resulting
patents, which are directed to subject matter specifically described
in the United States patents and/or patent applications described in
(a), (b) or (c) above; and
(e) any reissues of United States patents described in (a), (b) or (c)
above.
1.7 "TECHNOLOGY" shall mean any know-how, procedure, method, technique,
clinical data, technical data and the like which are owned or controlled by
UNIVERSITY, have been or can be documented as such in writing, and which
directly relate to the LICENSED PRODUCTS LICENSED PRODCESS and/or PATENT
RIGHTS, but which are not the subject of the PATENT RIGHTS.
1.8 "TERRITORY" shall mean worldwide.
-Page 3 of 22-
<PAGE>
ARTICLE II -- GRANT
-------------------
2.1 UNIVERSITY hereby grants to LICENSEE, subject to all the terms and
conditions of this AGREEMENT the exclusive right and license under the
PATENT RIGHTS and TECHNOLOGY to make, have made, import, use, lease and/or
sell LICENSED PRODUCT(s) for use in the FIELD OF USE within the TERRITORY.
2.2 UNIVERSITY hereby grants to LICENSEE, subject to all the terms and
conditions of this AGREEMENT, the nonexclusive right and license to use the
TECHNOLOGY in the FIELD OF USE within the TERRITORY under the PATENT RIGHTS
and TECHNOLOGY. TECHNOLOGY that is independently utilized by an independent
third party and that results in the manufacture of LICENSED PRODUCTS that
are not covered by a valid claim of PATENT RIGHTS, shall not cause
UNIVERSITY to be liable to LICENSEE for failure of UNIVERSITY to provide
exclusivity to LICENSEE.
2.3 Notwithstanding the provision of Section , UNIVERSITY shall retain the
right to practice under the PATENT RIGHTS solely for its own noncommercial
research.
2.4 LICENSEE agrees that LICENSED PRODUCTS leased or sold in the United States
shall be manufactured substantially in the United States, whether leased or
sold by LICENSEE or a sublicensee.
2.5 LICENSEE shall also have the right to grant exclusive or non-exclusive
sublicenses for the rights privileges and licenses granted hereunder;
provided, however, that LICENSEE shall remain primarily responsible for the
performance of all obligations herein.
2.6 LICENSEE hereby agrees that every sublicensing agreement to which it shall
be a part and which shall relate to the rights, privileges and license
granted hereunder shall contain a statement setting forth the date upon
which LICENSEE's exclusive rights, privileges and license hereunder shall
terminate.
2.7 LICENSEE shall furnish to UNIVERSITY a true and complete copy of each
sublicense agreement and each amendment thereto, promptly after the
sublicense or amendment has been executed and delivered.
-Page 4 of 22-
<PAGE>
2.8 LICENSEE agrees that any sublicenses granted by it shall provide that the
obligations to UNIVERSITY of ARTICLE II, Section 4.5 and 4.6,ARTICLE V,
ARTICLE VII, ARTICLE VIII, ARTICLE IX,
2.9 ARTICLE XI, ARTICLE XII, ARTICLE XIII and ARTICLE XIV of this Agreement
shall be binding upon the sublicensee as if it were a party to this
Agreement. LICENSEE further agrees to attach copies of these ARTICLES and
Sections to sublicense agreements.
2.10 LICENSEE shall not receive from sublicensees anything of material value in
lieu of royalties on sales under any sublicense under this Agreement,
without the express prior written permission of UNIVERSITY.
2.11 The license granted hereunder shall not be construed to confer any rights
upon LICENSEE by implication, estoppel or otherwise as to any technology
not specifically set forth in EXHIBITS A and B hereof or of any technology
which does not constitute TECHNOLOGY.
ARTICLE III -- DUE DILIGENCE
----------------------------
3.1 LICENSEE agrees to use best efforts to effect introduction of the use of
the LICENSED PRODUCTS(s) into the United States commercial market as soon
as practical, consistent with sound and reasonable business practices and
judgments.
3.2 UNIVERSITY shall have the right, at any time after [ * * * ] from the
date of this AGREEMENT, to terminate the exclusivity and sublicensing
provisions of this AGREEMENT if LICENSEE within [ * * * ] after
written notice from UNIVERSITY of such intended termination of exclusivity
fails to provide written evidence that it has commercialized or is actively
attempting to commercialize the use of LICENSED PRODUCTS(s). UNIVERSITY
shall have the further right at any time after [ * * * ] from the
date of this AGREEMENT to terminate the AGREEMENT in its entirety if
LICENSEE within [ * * * ] after written notice from UNIVERSITY of
such intended termination fails to provide written evidence that it has
commercialized or is actively attempting to commercialize LICENSED
PRODUCTS(s). Evidence that LICENSEE has an ongoing and active research
program or marketing program, as appropriate, directed toward development,
production or sale of such product under the
-Page 5 of 22-
<PAGE>
license shall be deemed satisfactory evidence. If LICENSEE has failed to
raise funding necessary to pursue an active research program or marketing
program, as appropriate, directed toward development, production or sale of
such product, whether raising of such funding is specified as a milestone
event pursuant to Section or not, UNIVERSITY may invoke the provisions of
this Section 3.2.
ARTICLE IV -- ROYALTIES AND PAYMENTS
------------------------------------
4.1 In partial consideration for the license granted hereunder, LICENSEE agrees
to pay UNIVERSITY [ * * * ] upon execution of this AGREEMENT.
4.2 In consideration of the license herein granted, LICENSEE agrees to pay
UNIVERSITY an earned royalty equal to [ * * * ] of NET
SALES by LICENSEE or its sublicensees with respect to sales of LICENSED
PRODUCTS for the [ * * * ] in which the LICENSED PRODUCTS(s) are first
sold and [ * * * ] thereafter. The obligation of LICENSEE to pay
royalties to UNIVERSITY shall terminate on a country-by-country basis at
such time as no pending patent applications or unexpired patents remain in
the PATENT RIGHTS.
4.3 In the event that a LICENSED PRODUCT under this AGREEMENT is sold in a
combination package or kit containing other active products, then NET SALES
for purposes of determining royalty payments on the combination package
shall be calculated using one of the following methods, but in no event
shall the royalties payable to UNIVERSITY be reduced to less than
[ * * * ] of that provided for in Section 4.2 hereof:
(a) By multiplying the net selling price of that combination package by
the fraction A/A+B, where A is the current gross selling price, during
the royalty-paying period in question, of the LICENSED PRODUCT sold
separately, and B is the gross selling price, during the royalty
period in question, of the other active products sold separately; or
(b) In the event that no such separate sales are made of the LICENSED
PRODUCT or any of the active products in such combination package
during the royalty-paying period in question, NET SALES for the
purposes of determining royalty payments, shall be calculated by
dividing the net selling price of the combination package by the
number of functions performed by the combination package sold
-Page 6 of 22-
<PAGE>
where such package contains active agents other than those licensed
under this AGREEMENT.
4.4 Only a single royalty shall be paid with respect to any LICENSED PRODUCT
irrespective of the number of claims of PATENT RIGHTS utilized.
4.5 Within [ * * * ] after March 31, June 30, September 30 and
December 31 of each year in which this AGREEMENT is in effect, LICENSEE
shall deliver to UNIVERSITY full, true and accurate reports of its
activities and those of its sublicensee(s), if any, relating to this
AGREEMENT during the preceding three month period. These reports shall
include at least the following:
(a) number of LICENSED PRODUCTS manufactured and sold;
(b) total billings for LICENSED PRODUCTS sold; where applicable,
(c) deductions applicable to a determination of NET SALES;
(d) total royalties due;
(e) activities of LICENSEE directed toward promoting the sale and use of
LICENSED PRODUCTS.
4.6 LICENSEE shall keep (or cause to be kept) and maintain complete and
accurate records of its sales of the LICENSED PRODUCTS(s) in accordance
with generally accepted accounting procedures. Such records shall be
accessible to an authorized representative selected and paid for by
UNIVERSITY and acceptable to LICENSEE, not more than [ * * * ] at any
reasonable time during business hours until [ * * * ] after the end
of the royalty period to which such records relate, for the purpose of
verifying NET SALES and any royalty due thereon. Such representative shall
disclose to UNIVERSITY only information relating to the accuracy of the
records kept and the payments made, and shall be under a duty to keep
confidential any other information gleaned from such records. Any
adjustment in the amount of royalties due the UNIVERSITY on account of
overpayment or underpayment of royalties shall be made at the next date
when royalty payments are to be made to the UNIVERSITY under Section 4.5
herein. If the verification on behalf of the UNIVERSITY results in an
upward adjustment of greater than [ * * * ] of royalties due to the
UNIVERSITY for the period of time in question, LICENSEE shall pay the
out-of-pocket expenses of the UNIVERSITY relating to such verification.
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<PAGE>
4.7 On or before the [ * * * ] following the close of LICENSEE's
fiscal year, LICENSEE shall provide UNIVERSITY with LICENSEE's certified
financial statements for the preceding fiscal year including, at a minimum,
a balance sheet and an operating statement.
4.8 All moneys to be paid to UNIVERSITY shall be made and computed in United
States Dollars, and LICENSEE shall use its best efforts to convert royalty
payments payable on NET SALES in any country to United States Dollars;
provided, however, that if conversion to and transfer of Dollars cannot be
made by LICENSEE in any country for any reason, LICENSEE may pay such sums
in the currency of the country in which such sales are made, deposited in
UNIVERSITY's name in a bank designated by UNIVERSITY in any such country.
The rate of exchange of local currencies to United States Dollars shall be
at the rate of exchange prevailing at the Bank of Boston on the day such
payment is made pursuant to the periods specified in Section .
4.9 In the event that any payment due hereunder is not made when due, the
payment shall accrue interest beginning on the first day following the due
date as herein specified, calculated at the annual rate of the sum of (a)
[ * * * ] plus (b) the prime interest rate quoted by the Bank of
Boston on the date said payment is due, the interest being compounded on
the last day of each calendar quarter, provided that in no event shall said
annual rate exceed the maximum legal interest rate in Massachusetts. The
payment of such interest shall not foreclose UNIVERSITY from exercising any
other rights it may have as a consequence of any overdue payment.
ARTICLE V -- WARRANTIES, LIMITATIONS, AND REGULATIONS
-----------------------------------------------------
5.1 Nothing herein contained shall be construed by either party hereto as a
guarantee or warranty on the part of the other party with respect to the
results to be obtained by use of the inventions, patented or otherwise, or
TECHNOLOGY licensed hereunder.
5.2 UNIVERSITY shall not be obligated to defend or save harmless LICENSEE or
any other person against any suit, damage, claim, or demand based on actual
or alleged infringement of any patent or other rights owned by a third
party, or any unfair trade practice resulting from the exercise or use of
any right or license granted hereunder.
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<PAGE>
5.3 UNIVERSITY MAKES NO WARRANTY, EXPRESS OR IMPLIED (OTHER THAN THIS AGREEMENT
HAS BEEN DULY EXECUTED BY IT AND THAT THIS AGREEMENT CONSTITUTES
UNIVERSITY'S DINDING AND ENFORCEABLE OBLIGATION), INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO ANY PATENT, TRADEMARK, SOFTWARE,
NONPUBLIC OR OTHER INFORMATION, OR TANGIBLE RESEARCH PROPERTY, LICENSED OR
OTHERWISE PROVIDED TO LICENSEE HEREUNDER AND HEREBY DISCLAIMS THE SAME.
5.4 UNIVERSITY DOES NOT WARRANT THE VALIDITY OF PATENT RIGHTS LICENSED
HEREUNDER AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD TO THE SCOPE
OF THE PATENT RIGHTS OR THAT SUCH PATENT RIGHTS MAY BE EXPLOITED BY
LICENSEE OR ANY SUBLICENSEE WITHOUT INFRINGING OTHER PATENTS. IF
BIOLOGICAL MATERIALS ARE LICENSED HEREUNDER, UNIVERSITY MAKES NO
REPRESENTATION THAT SUCH MATERIALS OR THE METHODS USED IN MAKING OR USING
SUCH MATERIALS ARE FREE FROM LIABILITY FOR PATENT INFRINGEMENT.
5.5 LICENSEE agrees to hold UNIVERSITY, its Trustees, officers, and employees
harmless against all liabilities, demands, damages, expenses, and losses
arising out of use by LICENSEE or its sublicensee(s) of LICENSED PRODUCT(s)
including without limitation the licensing, sale, or other distribution of
LICENSED PRODUCTS(s). LICENSEE agrees to require its sublicensee(s) to
hold UNIVERSITY harmless.
5.6 LICENSEE and its sublicensee(s) agree to comply with all regulations and
safety standards of government agencies such as the FDA.
5.7 LICENSEE shall defend, indemnify and hold harmless UNIVERSITY, and its
trustees, officers, employees and agents and their respective successors,
heirs and assigns (the "INDEMNITEES"), against any and all liability,
damage, loss or expense (including reasonable attorneys' fees and expenses
of litigation) that may be incurred by or imposed upon the INDEMNITEES, or
any of them, in connection with any claim, suit, demand, action or judgment
arising out of the following:
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<PAGE>
(a) the design, production, manufacture, sale, use in commerce, lease or
promotion by LICENSEE or by an Affiliate or sublicensee of LICENSEE of
any product, process or service relating to or developed pursuant to
this AGREEMENT; or
(b) any other activities of LICENSEE or a sublicensee to be carried out
pursuant to this AGREEMENT.
LICENSEE's indemnity under (a) shall apply to any liability, damage, loss
or expense whether or not it is attributable to the negligent activities of
the INDEMNITEES. LICENSEE's indemnification under (b) shall not apply to
any liability, damage, loss or expense to the extent that it is
attributable to the negligence or willful misconduct of the INDEMNITEES.
5.8 At such time as any product, process or service relating to, or developed
pursuant to, this AGREEMENT is being commercially distributed or sold
(other than for the purpose of obtaining regulatory approvals) by LICENSEE
or a sublicensee, LICENSEE shall at its sole expense, procure and maintain
policies of comprehensive general liability insurance in amounts not less
than [ * * * ] and naming the INDEMNITEES as additional insureds. Such
comprehensive general liability insurance shall provide (i) product
liability coverage and (ii) broad form contractual liability coverage for
LICENSEE's indemnification under Section 5.5 of this AGREEMENT. LICENSEE
shall provide UNIVERSITY with written evidence of such insurance upon
request of UNIVERSITY. LICENSEE shall provide UNIVERSITY with written
notice at least [ * * * ] prior to the cancellation, non-renewal or
material change in such insurance; if LICENSEE does not obtain replacement
insurance providing comparable coverage within such [ * * * ] period,
UNIVERSITY shall have the right to terminate this AGREEMENT effective at
the end of such [ * * * ] period without notice or any additional waiting
periods. In the event the product liability coverage aforesaid is not
occurrence liability, LICENSEE shall maintain such comprehensive general
liability insurance for a reasonable period of not less than [ * * * ]
after it has ceased commercial distribution or use of any product, process
or service relating to, or developed pursuant to, this AGREEMENT. If
LICENSEE is unable to obtain the required amounts of insurance at
commercially reasonable rates, UNIVERSITY will cooperate with LICENSEE to
either obtain a waiver of this provision, assist in identifying a carrier
to provide such insurance at commercially reasonable rates, or identify a
program for self-insurance or other alternative measures. This Section
shall survive the expiration or termination of this AGREEMENT.
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<PAGE>
5.9 LICENSEE agrees to comply, and to require its sublicensees to comply, with
all applicable laws and regulations relative to the manufacture and
marketing of LICENSED PRODUCTS.
5.10 Notwithstanding the provisions of Sections 5.1, 5.2 and 5.3, the liability
of UNIVERSITY for any and all breaches of this AGREEMENT by a party other
than UNIVERSITY, and for any and all failures of LICENSED PRODUCTS(s) in
the aggregate, shall be limited to [ * * * ] of the cumulative
royalties paid by LICENSEE and its sublicensee(s), and LICENSEE and its
sublicensee(s) hereby waive and disclaim the right to recover any damages
in excess of such amount for any and all such breaches and for any and all
such failures irrespective of whether such damages are direct, indirect,
consequential, incidental, or any other types of damages and irrespective
of whether based upon loss of investment, loss of production, lost profits,
interest on investment, interruption of business, or any other loss of any
character whatsoever. LICENSEE and its sublicensee(s) further agree that
their sole and exclusive remedy for any and all such breaches and any and
all such failures shall be to recover damages actually sustained up to, and
not in excess of, such amount. The foregoing notwithstanding, nothing in
this Section shall limit LICENSEE's right to seek equitable relief in the
event of UNIVERSITY's breach of this AGREEMENT.
ARTICLE VI -- PAYMENT OF PATENT COSTS
-------------------------------------
6.1 LICENSEE shall apply for, prosecute and maintain during the term of this
AGREEMENT the PATENT RIGHTS. The application filings, prosecution,
maintenance and payment of all fees and expenses, including legal fees,
relating to such PATENT RIGHTS shall be the sole responsibility of
LICENSEE. UNIVERSITY shall be entitled to review and comment upon all
actions undertaken in the prosecution of all patents and applications. If
LICENSEE decides not to apply for, prosecute or maintain any PATENT RIGHTS,
LICENSEE shall give sufficient and timely notice to UNIVERSITY so as to
permit UNIVERSITY to apply for, prosecute and maintain such PATENT RIGHTS.
ARTICLE VII -- INFRINGEMENT BY THIRD PARTY
------------------------------------------
7.1 LICENSEE will protect PATENT RIGHTS from infringement and prosecute
infringers when, in its judgment, such action may be reasonably necessary,
proper and justified. In
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<PAGE>
the event LICENSEE elects not to prosecute an infringer, UNIVERSITY shall
have the right to do so unless LICENSEE can demonstrate a reasonable basis
why an action against the infringer should not be pursued.
7.2 In the event one party shall initiate or carry on legal proceedings to
enforce any PATENT RIGHTS against any alleged infringer, the other party
shall fully cooperate with and supply all assistance reasonably requested
by the party initiating or carrying on such proceedings. The party which
institutes any suit to protect or enforce PATENT RIGHTS shall have sole
control of that suit and shall bear the reasonable expenses (excluding
legal fees) incurred by said other party in providing such assistance and
cooperation as is requested pursuant to this Section. The party initiating
or carrying on such legal proceedings shall keep the other party informed
of the progress of such proceedings and said other party shall be entitled
to counsel in such proceedings but at its own expense. Any award paid by
third parties as the result of such proceedings (whether by way of
settlement or otherwise) shall be divided between the parties as follows:
(a) (i) If the amount is based on lost profits, LICENSEE shall
receive an amount equal to the damages the court or the parties
determine LICENSEE has suffered as a result of the infringement less
the amount of any royalties that would have been due UNIVERSITY on
sales of LICENSED PRODUCT lost by LICENSEE as a result of the
infringement had LICENSEE made such sales; and
(ii) UNIVERSITY shall receive an amount equal to the royalties it
would have received if such sales had been made by LICENSEE; or
(b) As to awards other than those based on lost profits, [ * * * ] to the
party initiating such proceedings and [ * * * ] to the other party.
7.3 Should either party commence a suit under these provisions and thereafter
elect to abandon the same, it shall give timely notice to the other party
who, if it so desires, may continue prosecution of such suit; provided,
however, that the sharing of expenses and any recovery in such suit shall
be as agreed upon between the parties.
7.4 In the event a declaratory judgment action alleging invalidity or
non-infringement of any of the PATENT RIGHTS is brought against LICENSEE
and/or UNIVERSITY, LICENSEE shall have the right to control the defense and
settlement of the action,
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<PAGE>
provided that the expenses and costs of such action, including attorneys'
fees, shall be borne by LICENSEE.
7.5 In any infringement suit as either party may institute to enforce the
PATENT RIGHTS pursuant to this AGREEMENT, the other party hereto agrees, at
the request and expense of the party initiating the suit, to use its best
efforts to cooperate, to have its employees testify when requested and to
make available relevant records, papers, information, samples, specimens,
and the like.
7.6 No settlement or consent judgment or other voluntary and final disposition
of any suit affecting the PATENT RIGHTS may be entered into without the
consent of UNIVERSITY, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, the party controlling any suit referred to
in this shall have the right to settle any claims for infringement upon
such terms and conditions that shall be mutually agreed upon by UNIVERSITY
and LICENSEE.
7.7 In the event of an infringement or infringements by third parties of PATENT
RIGHTS on a scale that significantly affects LICENSEE's sales of LICENSED
PRODUCTS(s) and neither UNIVERSITY nor LICENSEE elect to bring an
infringement suit against such infringer, the royalties hereunder payable
by LICENSEE pursuant to shall be reduced by [ * * * ] of the sums
otherwise payable; provided, however, that LICENSEE presents information
to UNIVERSITY that such infringer has refused to enter into a
royalty-bearing, sublicensing agreement with LICENSEE on terms reasonably
acceptable to LICENSEE.
ARTICLE VIII -- BENEFITS OF LITIGATION, EXPIRATION, OR ABANDONMENT
------------------------------------------------------------------
8.1 In a case where one or more patents, or particular claims therein within
the PATENT RIGHTS expire, or are abandoned, or are declared invalid or
otherwise construed by a court of last resort, or by a lower court from
whose decree no appeal is taken, or certiorari is not granted within the
period allowed therefor, then the effect thereof hereunder shall be:
(a) that such patents or particular claims shall, as of the date of
expiration or abandonment or final decree of invalidity as the case
may be, cease to be included within the PATENT RIGHTS for the purpose
of this AGREEMENT and shall be henceforth included within TECHNOLOGY;
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<PAGE>
(b) that such construction so placed upon the PATENT RIGHTS by the courts
shall be followed from and after the date of entry of the judgment or
decree, and royalties shall thereafter be payable by LICENSEE only in
accordance with such construction; and
(c) in the event that LICENSEE challenges the validity of PATENT RIGHTS,
LICENSEE may not cease paying royalties as of the date validity of the
claims in issue are challenged, but rather may cease paying royalties
as to those claims only after a final adjudication of invalidity of
those claims.
8.2 In the event that any of the contingencies provided for in Section 8.1
herein occurs, UNIVERSITY agrees to renegotiate in good faith with
LICENSEE a reasonable royalty rate under the remaining PATENT RIGHTS which
are unexpired and in effect, and under which LICENSEE desires to retain a
license.
ARTICLE IX -- TERMINATION
-------------------------
9.1 The license granted hereunder shall continue until terminated pursuant to
one of the following events:
(a) If LICENSEE materially breaches this AGREEMENT or fails to account for
or pay royalties or minimum royalties as herein provided, UNIVERSITY
shall have the right to terminate this license including the right to
sublicense on [ * * * ] prior written notice; provided,
however, that if LICENSEE cures the said breach or default within said
[ * * * ] period, this license shall continue in full force and
effect.
(b) UNIVERSITY shall also have the right to terminate this License and the
right to sublicense forthwith by giving written notice to LICENSEE in
the event of bankruptcy, liquidation or insolvency of LICENSEE.
(c) LICENSEE may terminate this AGREEMENT at any time by giving
[ * * * ] prior written notice thereof to UNIVERSITY.
9.2 Upon termination of this AGREEMENT for any cause, nothing herein shall be
construed to release either party of any obligation matured prior to the
effective date of such termination, including, without limitation, payments
of accrued royalties, and LICENSEE may after the effective date of such
termination complete or sell all LICENSED PRODUCT(s) that it may have on
hand at the date of termination or which LICENSEE can clearly demonstrate
were in the process of manufacture at the time of such
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<PAGE>
termination, provided that it pays earned royalties thereon as provided in
this AGREEMENT and provided that at the time notice of termination is
provided by LICENSEE or within thirty days of receipt of notice by
LICENSEE, as the case may be, LICENSEE provides UNIVERSITY with an
accounting of LICENSED PRODUCTS then on hand and its best estimate of the
duration of such sales of LICENSED PRODUCTS.
9.3 Upon termination of this AGREEMENT for any reason, any sublicense not then
in default shall continue in full force and effect except that UNIVERSITY
shall be substituted in place of the LICENSEE.
9.4 Upon termination of this agreement for any reason, LICENSEE shall, upon
request by UNIVERSITY, make available to UNIVERSITY all non-proprietary
information then in LICENSEE's possession relevant to the commercialization
of LICENSED PRODUCTS, including, but not limited to, research results,
toxicology data, assays, preclinical data, prototypes, manufacturing
processes including cell lines and unused, unexpired amounts of LICENSED
PRODUCTS, clinical results, regulatory submissions, product licenses and
customer lists.
ARTICLE X -- NOTICE
-------------------
10.1 Any notice or communication authorized or required to be given hereunder
shall be in writing and be served by depositing the same either in the
United States mail, postage prepaid, receipt requested, or with a
recognized overnight courier service. addressed to the parties,
respectively, at the following addresses:
UNIVERSITY:
-----------
Boston University
Community Technology Fund
108 Bay State Road
Boston, MA 02215
Attn.: Director, Office of Technology Transfer
LICENSEE:
---------
SCRIPTGEN Pharmaceuticals, Inc.
200 Boston Avenue
Medford, MA 02155
Attn.: Vice President, Research & Development
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<PAGE>
ARTICLE XI -- NON-USE OF NAMES
------------------------------
11.1 LICENSEE shall not use the names of UNIVERSITY nor of any inventor of the
inventions covered by the PATENT RIGHTS nor any adaptation thereof, in any
advertising or promotional sales literature without the prior written
consent of UNIVERSITY in each case, except that LICENSEE may state that it
is licensed by UNIVERSITY under one or more patents and/or applications.
However, LICENSEE may make reference to technical publications by Dr. Panek
or his co-authors. LICENSEE shall submit to UNIVERSITY for its approval,
which approval shall not be unreasonably withheld or delayed, any
references to LICENSED PRODUCTS, this AGREEMENT, UNIVERSITY, and/or its
inventors in submissions required by the SEC and/or the rules of any stock
exchange on which its shares are listed or are being considered for
listing.
ARTICLE XII -- MEDIATION/ARBITRATION
------------------------------------
12.1 In the event a controversy or dispute arises between the parties relating
to any provision of this AGREEMENT or the breach thereof, the parties agree
to use the following procedure prior to either party pursuing other
available remedies.
(a) A meeting shall be held promptly between the parties, attended by
individuals with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the dispute.
(b) If, within [ * * * ] after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, they agree to
submit the dispute to mediation by the American Arbitration
Association and bear equally the cost of mediation.
(c) The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of [ * * * ]. If the
parties are not successful in resolving the dispute through mediation,
then the dispute shall be submitted for arbitration, unless the
parties agree to do otherwise.
12.2 Arbitration shall be subject to the following terms:
(a) The arbitration shall be held at a mutually agreeable location in the
Boston, Massachusetts metropolitan area.
(b) The arbitrator(s) shall be an independent, impartial third party(ies)
having no direct or indirect personal or financial relationship to any
of the parties to the
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<PAGE>
dispute, who has(have) agreed to accept the appointment as
arbitrator(s) on the terms set out in this .
(c) The arbitrator(s) shall be an active or retired attorney, law
professor, or judicial officer with at least [ * * * ]
experience in commercial technology transfer matters and a familiarity
with the laws governing proprietary rights in intellectual property.
(d) The arbitrator(s) shall be selected as follows:
Within [ * * * ] of the written notice set forth in Section
above, each party shall submit a description of the matter to be
arbitrated together with the terms of this to the American
Arbitration Association at its Regional Office in Boston,
Massachusetts. Said Association shall submit to the parties a list of
the qualified arbitrators available to arbitrate the matter. The
first arbitrator acceptable to both parties shall be deemed the
selected arbitrator with respect to the dispute then at issue under
this AGREEMENT. In the event of a failure to select a mutually
agreeable arbitrator, the parties will each select an arbitrator and
the two arbitrators will select a third arbitrator.
(e) Within [ * * * ] after selection of the arbitrator(s), each
party shall submit a description of the matter to be arbitrated to
said arbitrator(s).
(f) From the date the arbitrator(s) is in possession of both parties'
submitted material, the arbitrator(s) shall have [ * * * ] days
in which to hear oral testimony and render a decision. Each party
shall have a maximum of [ * * * ] during said [ * * * ] period in
which to present oral testimony.
(g) Time periods set forth in this may be altered only by mutual consent
of the parties;
(h) The arbitrator(s) shall announce the award in writing accompanied by
written findings explaining the facts determined in support of the
award and any relevant conclusions of law;
(i) The fees of the arbitrator(s) and any other costs and fees associated
with the arbitration shall be paid in accordance with the decision of
the arbitrator(s), except that the prevailing party shall pay no more
than [ * * *] of such costs.
(j) Except as provided in Section 12.2 (i) the decision of the
arbitrator(s) shall be final and binding on all parties, and judgment
may be entered thereon in any court having jurisdiction thereof.
(k) Nothing contained in this ARTICLE XII shall prohibit a party which has
complied with the provisions of Section 12.1 from seeking a
preliminary
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<PAGE>
injunction or other equitable relief without the need to post bond if,
in the party's judgement, such action is necessary to avoid
irreparable damage.
ARTICLE XIII -- EXPORT CONTROL RESTRICTIONS
-------------------------------------------
13.1 The Export Control Regulations of the United States Department of
Commerce (the "REGULATIONS") prohibit, except under a special validated
license, the exportation from the United States of technical data
relating to certain commodities listed in the REGULATIONS, unless the
exporter has received certain written assurances from the foreign
importer. In order to facilitate the exchange of technical information
under this AGREEMENT, LICENSEE therefore gives its assurance to
UNIVERSITY that LICENSEE will not knowingly, unless prior authorization
is obtained from the United States Office of Export Control, re-export
directly or indirectly any technical data received from UNIVERSITY under
this AGREEMENT and will not export directly the LICENSED PRODUCTS(s) or
such technical data to any country listed on either the Commodity Control
List or Militarily-Critical Technologies List.
13.2 UNIVERSITY neither represents that a license is not required nor that, if
required, it will be issued by the United States Department of Commerce.
ARTICLE XIV -- MISCELLANEOUS PROVISIONS
---------------------------------------
14.1 Neither party shall assign this AGREEMENT without the written consent of
the other party which consent shall not be unreasonably withheld;
provided, however, that either party, without such consent, may assign or
sell the same in connection with the transfer or sale of all or
substantially all of its business involving LICENSED PRODUCTS or in the
event of its merger, or consolidation with another company. Each
assignee shall assume all obligations of its assignor under this
AGREEMENT. No assignment shall relieve either party of responsibility
for the performance of any accrued obligations which such party then has
hereunder.
14.2 This AGREEMENT embodies the entire understanding between the parties as
to the subject matter hereof and may not be varied except by a document
in writing signed by an officer of LICENSEE and a person authorized to
sign on behalf of UNIVERSITY.
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<PAGE>
14.3 This AGREEMENT shall be construed, governed, interpreted, and applied in
accordance with the laws of the Commonwealth of Massachusetts without
regard to conflicts of laws principles except that questions affecting
the validity, construction, and effect of any foreign patent shall be
determined by the laws of the country in which the patents were granted.
14.4 The provisions of this AGREEMENT are severable, and in the event that any
of the provisions of this AGREEMENT are determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or
enforceability of the remaining provisions hereof.
14.5 LICENSEE shall mark the LICENSED PRODUCTS(s) sold in the United States
with all applicable patent numbers. All LICENSED PRODUCTS(s) shipped
and/or sold in other countries shall be marked in such a manner as to
conform with all of the laws of the country where the LICENSED
PRODUCTS(s) are shipped to and/or sold.
14.6 For the purpose of this AGREEMENT and all services to be provided
hereunder, both parties shall be, and shall be deemed to be, independent
contractors and not agents or employees of the other. Neither party
shall have authority to make any statements, representations or
commitments of any kind, or to take any action, that will be binding on
the other party.
14.7 The captions are provided for convenience and are not to be used in
construing this AGREEMENT.
14.8 The parties agree not to use the PATENT RIGHTS or TECHNOLOGY in a manner
which attempts to circumvent, avoid or bypass obligations to the other
party, directly or indirectly, or to avoid payment of fees or royalties
or other benefits, either financial or otherwise, due under this
AGREEMENT in connection with the use and commercialization of the PATENT
RIGHTS or TECHNOLOGY or related information.
14.9 The parties agree that they have participated equally in the formation of
this AGREEMENT and that the language herein should not be presumptively
construed against either of them.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and
seals and duly executed this AGREEMENT in duplicate original copies the day and
year first written above.
SCRIPTGEN PHARMACEUTICALS, INC. TRUSTEES OF BOSTON UNIVERSITY
(LICENSEE)
By: /s/ By: /s/
-------------------------------- --------------------------
Name:______________________________ Name: Matthew J. Burns
Title:_____________________________ Title: Assistant Treasurer
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<PAGE>
EXHIBIT A
[ * * *]
-i-
<PAGE>
EXHIBIT B
[ * * *]
-ii-
<PAGE>
Exhibit 10.30
EXECUTION COPY
1995 AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
This Agreement is made this 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,
each of the individuals severally listed on Schedule I hereto (collectively, the
"Existing Stockholders" and individually, an "Existing Stockholder"), each of
the individuals severally listed on Schedule IA hereto (collectively, the "New
Employee Stockholders", and individually a "New Employee Stockholder"), each of
the individuals and entities severally listed on Schedule II hereto
(collectively, the "Series A Purchasers" and individually, a "Series A
Purchaser"), each of individuals and entities severally listed on Schedule III
hereto (collectively, the "Original Series B Purchasers", and individually an
"Original Series B Purchaser"), each of individuals and entities that become
party to this Agreement pursuant to Section 6(a) hereof (colletively, the
"Subsequent Series B Purchasers", and individually a "Subsequent Series B
Purchaser"; the Original Series B Purchasers and Subsequent Series B Purchasers
are referred to herein colletively as the "Series B Purchasers", and
individually a "Series B Purchaser"; the Series A Purchasers and Series B
Purchasers are referred to herein collectively as the "Preferred Stock
Purchasers", and individually as a "Preferred Stock Purchaser"), and such
subsequent individuals and entities that become holders of the Company's
securities as become party to this Agreement pursuant to Section 6(b) hereof
(collectively, the "Subsequent Stockholders", and individually a "Subsequent
Stockholder"; the Subsequent Stockholders, the Preferred Stock Purchasers, the
Existing Stockholders and the New Employee Stockholders are referred to herein
collectively as the "Stockholders", and individually as a "Stockholder").
W I T N E S S E T H
WHEREAS, the Company, the Existing Stockholders and the Series A
Purchasers are party to a Stockholders' Agreement dated September 16, 1993 (the
"Original Stockholders' Agreement");
WHEREAS, simultaneous with the execution of this Agreement, the Company
and certain of the Preferred Stock Purchasers are entering into a Series B Stock
Purchase Agreement, dated the date hereof (the "Series B Purchase Agreement"),
pursuant to which certain of the Preferred Stock Purchasers are purchasing
certain securities of the Company, which purchase will inure to the benefit of
the Series A Purchasers, the Existing Stockholders and the New Employee
Stockholders; and
WHEREAS, the execution of this Agreement is a condition precedent to the
execution of the Series B Purchase Agreement; and
WHEREAS, the Series A Purchasers and the Existing Stockholders are
desirous of amending and restating the Original Stockholders' Agreement, and the
New Employee Stockholders and the Series B Purchasers wish to be joined as
parties to such Agreement as so amended and restated, in
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each case in order to provide for certain agreements among the Company's
stockholders and optionholders with respect to the election of the Company's
directors and restrictions with respect to the resale by the Stockholders of
shares of the Company's Common Stock, $.01 per value (the "Common Stock") owned
by or which may hereinafter be acquired by any of them (the "Securities"); and
WHEREAS, the Existing Stockholders and the New Employee Stockholders own
or have options or other rights to purchase shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto agree that the Original Stockholders' Agreement shall be, and hereby is,
amended and restated to read in its entirety as set forth below, and the New
Employee Stockholders and the Series B Purchasers shall be, and hereby are,
joined as parties to this Agreement, and the parties hereby further agree as
follows:
ARTICLE I
ELECTION OF DIRECTORS; REQUIREMENT FOR CERTAIN ACTIONS
1. Election; Removal.
(a) The Stockholders will vote their respective shares of capital stock of
the Company (whether now owned or hereafter acquired), and take all other
actions necessary to maintain the number of Directors comprising the Company's
Board of Directors (the "Board") at five (5).
(b) At any and all meetings (including any written action in lieu of a
meeting) of stockholders of the Company at which directors are to be elected,
each Stockholder shall vote all of the capital stock of the Company held by such
Stockholder, whether now owned or hereafter acquired, to elect to the Board (i)
two (2) designees of a majority in interest of the Series A Purchasers, (ii) one
(1) designee of Peter S. Kim ("Kim") and Michael R. Green ("Green") jointly,
which designee shall be selected by Kim and Green, with the advice and approval
of Allan Ferguson, Barry Weinberg, Thomas A. Bologna and Jason Fisherman (or
their respective successors on the Board), such approval not to be unreasonably
withheld, (iii) one (1) designee of a majority in interest of the Advent Series
B Purchasers (as defined below), and (iv) the Chief Executive Officer of the
Company then in office. At any time prior to any meeting (or written action in
lieu of a meeting) of the stockholders of the Company at or by which Directors
are to be elected, the Stockholders having the right to designate a Director or
Directors for election to the Board shall notify the other Stockholders of its
designee(s), but in the absence of any such notification it shall be presumed
that the incumbent designees have been redesignated.
(c) In the event any Director designated for election to the Board
pursuant to (b) (i), (ii) or (iii) above dies, resigns, is removed or otherwise
ceases to serve as a member of the Board, the
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Company shall give notice thereof, as appropriate, to the Stockholders that
designated such Director to designate a successor and notify the Company of such
designee's selection. If a vacancy on the Board is filled in the interim by the
remaining Directors with a Director who is not the successor designated by the
Stockholders having the right to designate such successor, each Stockholder
agrees to cast his, her or its votes for, or give his, her or its written
consent to, the removal of such Director at any time upon receipt of
instructions in writing to such effect, signed in the appropriate instance by a
majority in interest of the Stockholders having the right to designate such
successor.
(d) Each Stockholder agrees to vote his, her or its capital stock for, or
give his, her or its written consent to, the removal of a Director on the Board
at any time upon receipt of instructions in writing to such effect, signed by a
majority in interest of the Stockholders that designated such Director for
election to the Board.
(e) The "Advent Series B Purchasers" are Rovent II Limited Partnership,
Golden Gate Development and Investment Limited Partnership, and Advent
International Investors II Limited Partnership.
(f) Subject to earlier termination pursuant to Section 3 below, (a) the
right of the Series A Purchasers to designate two (2) Directors shall terminate
in the event no Series A Purchaser owns at least 50% of the aggregate of the
Series A Preferred Stock and Series B Preferred Stock originally issued to such
Series A Purchaser by the Company, and (b) the right of the Advent Series B
Purchasers to designate one (1) Director will terminate in the event no Advent
Series B Purchaser owns at least 50% of the Series B Preferred Stock originally
issued to such Advent Series B Purchasers by the Company. In the event the
rights of both the Series A Purchasers and Advent Series B Purchasers have
terminated pursuant to (a) and (b) above, the provisions of this Section 1.1
shall terminate in its entirety.
1.1. Initial Designees. The initial designees of the Series A Purchasers to the
Board are Barry Weinberg and Allan Ferguson. The initial designee of Kim and
Green to the Board is David Baltimore, and the initial designee of the Advent
Series B Purchasers to the Board is Jason Fisherman.
ARTICLE II
SALE OF SECURITIES
2. Sale of Securities.
(a) No Stockholder shall either, directly or indirectly, sell,
assign, mortgage, transfer, pledge, create a security interest in or lien upon,
encumber, give, place in trust, hypothecate, or otherwise in any manner
voluntarily or involuntarily dispose of (hereinafter "Transfer"), any or all of
his, her or its Securities, now owned or hereafter acquired, unless such
Stockholder (in such capacity, the "Offeror") shall first offer to Transfer any
or all of his, her or its Securities to all the
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Preferred Stock Purchasers (in such capacity, such Preferred Stock Purchasers
are referred to as the "Offerees"), in their respective proportionate shares (as
defined below). In the event any Offerer proposes to Transfer Securities, he,
she or it shall give the Offerees written notice of his, her or its intention,
describing the type of Securities, the price and the general terms upon which
the Offerer proposes to Transfer the same. Each Offeree shall have thirty (30)
days from the date such notice is given to agree to have Transferred to him, her
or it any or all of such Securities up to such Offeree's proportionate share,
for the price and upon the general terms specified in the notice by giving
written notice to the Offeror and stating the quantity of Securities such
Offeree desires to have Transferred to him, her or it. As used in this Section
2(a), and except as otherwise provided, the term "proportionate share" shall
mean, with respect to each Offeree who is entitled to receive the particular
offer, the total number of Securities proposed to be Transferred, 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 Offeree and (ii) the total number of shares
of Common Stock into which the shares of Preferred Stock and other convertible
securities of the Company held by such Offeree are then convertible, and the
denominator of which shall be the sum of (i) the total number of shares of
Common Stock owned by all Offerees and (ii) the total number of shares of Common
Stock into which the shares of Preferred Stock and other convertible securities
of the Company held by all Offerees are then convertible;
(b) Each Offeree shall have a right of over-allotment such that if
any Offeree fails to exercise such Offeree's right hereunder to have Transferred
to him, her or it such Offeree's full proportionate share of the Securities
proposed to be Transferred (in such capacity, an "Incomplete Purchaser" and
collectively, the "Incomplete Purchasers"), the Offerees exercising their right
to have Transferred to them their full respective proportionate share of such
Securities (in such capacity, collectively, the "Complete Purchasers" and
individually, a "Complete Purchaser") may have Transferred to them the portion
of such Securities which has not been Transferred to the Incomplete Purchasers
as hereinafter provided. Each Complete Purchaser shall have fifteen (15) days
from the date notice is given by the Offerer to the Complete Purchasers that the
Incomplete Purchaser(s) have rejected or failed to accept their right to have
Transferred to them their proportionate share of Securities, to agree to have
Transferred to such Complete Purchaser up to such Complete Purchaser's
proportionate share of such Securities not Transferred to the Incomplete
Purchaser(s). Notwithstanding anything in Section 2(a) to the contrary, as used
in this Section 2(b) 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 all
Incomplete Purchasers and the total number of shares of Common Stock into which
the shares of all such Incomplete Purchasers' Preferred Stock and other
convertible securities of the Company are convertible;
(c) In the event the Offerees fail to exercise their rights pursuant
to paragraphs (a) and (b) above within said forty-five (45) day period for the
full amount of Securities proposed to be Transferred, the Offerer shall have
sixty (60) days thereafter to Transfer the Securities with respect to which the
Offerees' options were not exercised, at a price and upon general terms no more
favorable to the transferees thereof than specified in the Offerer's notice to
the Offerees. In the event
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the Offeror has not Transferred the Securities within said 60-day period, he,
she or it shall not thereafter Transfer any Securities without first offering
such Securities to the Offerees in the manner provided above;
(d) Notwithstanding anything to the contrary contained herein, the
procedures specified in this Section 2 shall not be applicable to a Transfer by
(i) a Stockholder to a Permitted Transferee (as defined below) of such
Stockholder, if such Permitted Transferee agrees in writing with the parties
hereto to be bound by and comply with all provisions of this Agreement
applicable to the individual or entity Transferring the Securities immediately
prior to such Transfer, (ii) a Preferred Stock Purchaser to any or all of the
partners (general and/or limited) of such Preferred Stock Purchaser in which
event such Securities or Preferred Securities shall no longer be subject to this
Agreement as provided in Section 3 below, or (iii) to the Company pursuant to
any repurchase agreement, right of first refusal or other right on the part of
the Company to acquire Securities (provided that this sub-section (iii) shall
not be deemed to authorize the Company to repurchase any Securities if otherwise
prohibited). For purposes of this Section 2(d), a "Permitted Transferee" shall
mean (i) in the case of a Stockholder that is an individual, the spouse or
immediate family member of such individual, a trust for the benefit of such
individual, spouse or immediate family member or any partnership, corporation or
other entity wholly-owned by such individual, and (ii) in the case of a
Stockholder that is a partnership, any of its partners (general and/or limited),
employees or affiliates and any partnership, corporation or other entity
controlled by or under common control with such partnership or the partners
thereof;
(e) If any Transfer or attempted Transfer of the Securities is made
contrary to the provisions of this Section 2, each Preferred Stock Purchaser
shall have the right, in addition to any other legal or equitable remedies which
it may have, to enforce its rights hereunder by an action for specific
performance; the parties hereto recognize the rights set forth herein as unique,
the violation of which cannot be remedied by an award of monetary damages.
3. Termination. Except as otherwise provided herein, this Agreement and the
provisions hereof shall terminate on the earlier of (i) the closing of a
Qualified Public Offering (as defined below), or (ii) the liquidation,
dissolution or indefinite cessation of the business operations of the Company.
In addition, notwithstanding anything to the contrary contained herein, any
Securities Transferred or proposed to be Transferred by a Preferred Stock
Purchaser to any or all of the partners (general and/or limited) of such
Preferred Stock Purchaser shall no longer be subject to the terms and conditions
of this Agreement. For purposes of this Agreement, a "Qualified Public Offering"
shall mean a firm commitment underwritten registered public offering of the
Common Stock of the Company registered under the Securities Act of 1933, as
amended (the "Securities Act") in which (i) the per share public offering price
is not less than $5.00, and (ii) the net proceeds to the Company are at least
$10,000,000.
4. Legend. Each certificate representing any capital stock of the Company held
by a Stockholder, shall be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws or by any agreement
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<PAGE>
pursuant to which such certificate was issued by the Company):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND CERTAIN OBLIGATIONS WITH
RESPECT TO THE ELECTION OF DIRECTORS OF THE COMPANY SPECIFIED IN THE
1995 AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, DATED APRIL 19,
1995, AMONG SCRIPTGEN PHARMACEUTICALS, INC. AND THE INDIVIDUALS AND
ENTITIES NAMED THEREIN.
5. Separability. The invalidity or unenforceability of any provisions of this
Agreement shall not be deemed to affect the validity or enforceability of any
other provision of this Agreement.
6. Additional Parties.
(a) Any person or entity that, pursuant to the terms of the Series B
Purchase Agreement, purchases shares of the Company's Series B Preferred Stock,
$.01 par value per share (the "Series B Preferred Stock"), at a "Subsequent
Closing" (as that term is defined in the Series B Purchase Agreement) shall be
required, as a condition to such purchase, to become a party to this Agreement
by executing this Agreement or a counterpart, whereby such person or entity
agrees to be bound as a "Subsequent Series B Purchaser" by all of the terms of
this Agreement, as this Agreement may be amended from time to time in accordance
with its terms, and thereafter such person or entity shall have all the rights
of a "Subsequent Series B Purchaser".
(b) Any Permitted Transferee and, any person or entity (other then the
"Subsequent Series B Purchasers") after the date hereof, that becomes the owner
or holder of (i) any capital stock of the Company, or (ii) any other security of
the Company exercisable for, or convertible into, capital stock of the Company,
shall be required, as a condition to such ownership or holding, to become a
party to this Agreement by executing this Agreement or a counterpart, whereby
such Permitted Transferee, person, or entity agrees to be bound as a "Subsequent
Stockholder" by all of the terms of this Agreement, as this Agreement may be
amended from time to time in accordance with its terms, and thereafter such
Permitted Transferee, person or entity shall have all the rights and obligations
of a Subsequent Stockholder hereunder. The foregoing provisions of this Section
6 shall not apply to any securities transferred by a Preferred Stock Purchaser
in accordance with the second sentence of Section 3 above.
7. Miscellaneous. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
transferees, successors and assigns of the parties hereto, whether so expressed
or not. This Agreement is deemed to have been consummated in The Commonwealth of
Massachusetts and is to be governed by and interpreted under the laws of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
Each party hereto agrees that this Agreement constitutes the entire
agreement among the
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parties hereto with respect to the subject matter hereof. This Agreement may be
amended or modified, and compliance with any provision or condition of this
Agreement may be omitted or waived (either generally or in a particular instance
and either retroactively or prospectively) upon the written consent of (i) a 85%
interest of the Preferred Stock Purchasers, and (ii) a 50% interest of the
Existing Stockholders, the New Employee Stockholders, and the Subsequent
Stockholders collectively (each interest to be calculated on a fully diluted
basis, assuming conversion or exercise of the Company's outstanding securities
held by the Stockholders that are convertible into, or exercisable for, Common
Stock); provided that Article I and Section 7 of this Agreement may not be
amended or modified without the written consent of each of the Preferred Stock
Purchasers. No consent shall be required from any Stockholder which no longer
holds any Common Stock or any securities of the Company convertible into or
exercisable for Common Stock. No waiver of any provision of this Agreement shall
be valid unless it is expressed in a written instrument duly executed by the
party or parties making such waiver. The failure of any party to insist, in any
one or more instances, on performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment of any rights
granted hereunder or of the future performance of any such term, covenant or
condition but the obligation of any party with respect thereto shall continue in
full force and effect.
The parties hereby declare that it is impossible to measure in money the
damages which will accrue to a party hereto by reason of a failure to perform
any of the obligations under this Agreement. Therefore, all parties hereto shall
have the right to specific performance of the obligations of the other parties
under this Agreement, and if any party hereto shall institute any action or
proceeding to enforce the provisions hereof, any person (including the Company)
against whom such action or proceeding is brought hereby waives the claim or
defense therein that such party has an adequate remedy at law, and such person
shall not urge in any such action or proceeding the claim or defense that such
remedy at law exists.
Each Stockholder shall execute and deliver such other agreements and
instruments as from time to time are necessary to effect the intent and purpose
of this Agreement. The Stockholders agree to take all steps to cause the By-Laws
of the Company to be amended to effect the intent and purpose of this Agreement.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be deemed given when deposited in the United States
mails, registered or certified, postage prepaid and return receipt requested, or
when delivered personally or by overnight courier, addressed (i) to the Company,
at the address set forth at the beginning of this Agreement, (ii) to the
Stockholder to whom such notice, request, consent or other communication is
directed at such Stockholder's address on file with the Company (which addresses
the Company shall provide to any Stockholder upon request).
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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The headings of the sections of this Agreement have been inserted for the
convenience of reference only and shall in no way restrict or modify any of the
terms or provisions hereof.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned have set their hands as of the above
date.
SCRIPTGEN PHARMACEUTICALS, INC.
By: /s/ Thomas A. Bologna
----------------------------------
Thomas A. Bologna, President
CW VENTURES II, L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL IV L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL JAPAN L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL KEIRETSU L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
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IN WITNESS WHEREOF, the undersigned have set their hands as of the above
date.
SCRIPTGEN PHARMACEUTICALS, INC.
By:
----------------------------------
Thomas A. Bologna, President
CW VENTURES II, L.P.
By CW Partners III, L.P.
By: /s/ Barry Weinberg
----------------------------------
Print Name: Barry Weinberg
--------------------------
Title: General Partner
-------------------------------
ACCEL IV L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL JAPAN L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL KEIRETSU L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
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<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands as of the above
date.
SCRIPTGEN PHARMACEUTICALS, INC.
By:
----------------------------------
Thomas A. Bologna, President
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 JAPAN L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL KEIRETSU L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
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IN WITNESS WHEREOF, the undersigned have set their hands as of the above
date.
SCRIPTGEN PHARMACEUTICALS, INC.
By:
----------------------------------
Thomas A. Bologna, President
CW VENTURES II, L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL IV L.P.
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
ACCEL JAPAN L.P.
BY: ACCEL JAPAN ASSOCIATES L.P.
ITS GENERAL PARTNER
BY: /s/ G. Carter Sednaoui
------------------------------
GENERAL PARTNER
ACCEL KEIRETSU L.P.
BY: ACCEL PARTNERS & CO., INC.
ITS GENERAL PARTNER
BY: /s/ G. Carter Sednaoui
-------------------------------
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ACCEL INVESTORS '93 L.P.
BY: /s/ Arthur C. Patterson
-----------------------------------
GENERAL PARTNER
Ellmore C. Patterson Partners
By: /s/ Arthur C. Patterson
-----------------------------
Arthur C. Patterson
General Partner
PROSPER PARTNERS
By: /s/ G. Carter Sednaoui
-----------------------------------------
Print Name: G. CARTER SEDNAOUI
---------------------------------
Title: ATTORNEY-IN-FACT
--------------------------------------
ATLAS VENTURE FUND II, L.P.
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
NEW ENTERPRISE ASSOCIATES 5
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
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ACCEL INVESTORS '93 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
--------------------------------------
NEW ENTERPRISE ASSOCIATES 5
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
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ACCEL INVESTORS '93 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:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
NEW ENTERPRISE ASSOCIATES 5
By: /s/ Nancy Dorman
-----------------------------------------
Print Name: Nancy Dorman
---------------------------------
Title: General Partner
--------------------------------------
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VENROCK ASSOCIATES
By: /s/ Anthony B. Evnin
-----------------------------------------
Print Name: Anthony B. Evnin
---------------------------------
Title: General Partner
--------------------------------------
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
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
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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
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
SCRIPT PARTNERS LIMITED PARTNERSHIP
By: Medical Portfolio Management, Inc.,
General Partner
By:
-----------------------------------------
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SCRIPT PARTNERS LIMITED PARTNERSHIP
By: /s/ Ansbert S. Gadicke
-----------------------------------------
Print Name: Ansbert S. Gadicke
---------------------------------
Title: PRESIDENT
--------------------------------------
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By:
-----------------------------------------
Jason S. Fisherman, Senior Investment
Manager
--------------------------------------------
Barry Weinberg
--------------------------------------------
Thomas A. Bologna
--------------------------------------------
Michael Green
--------------------------------------------
Peter Kim
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ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By: /s/ J. S. Fisherman
-----------------------------------------
Jason S. Fisherman, Senior Investment
Manager
--------------------------------------------
Barry Weinberg
--------------------------------------------
Thomas A. Bologna
--------------------------------------------
Michael Green
--------------------------------------------
Peter Kim
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<PAGE>
SCRIPT PARTNERS LIMITED PARTNERSHIP
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By:
-----------------------------------------
Jason S. Fisherman, Senior Investment
Manager
/s/ Barry Weinberg
--------------------------------------------
Barry Weinberg
--------------------------------------------
Thomas A. Bologna
--------------------------------------------
Michael Green
--------------------------------------------
Peter Kim
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SCRIPT PARTNERS LIMITED PARTNERSHIP
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By:
-----------------------------------------
Jason S. Fisherman, Senior Investment
Manager
--------------------------------------------
Barry Weinberg
/s/ Thomas A. Bologna
--------------------------------------------
Thomas A. Bologna
--------------------------------------------
Michael Green
--------------------------------------------
Peter Kim
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SCRIPT PARTNERS LIMITED PARTNERSHIP
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By:
-----------------------------------------
Jason S. Fisherman, Senior Investment
Manager
--------------------------------------------
Barry Weinberg
--------------------------------------------
Thomas A. Bologna
/s/ Michael Green
--------------------------------------------
Michael Green
--------------------------------------------
Peter Kim
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SCRIPT PARTNERS LIMITED PARTNERSHIP
By:
-----------------------------------------
Print Name:
---------------------------------
Title:
--------------------------------------
ADVENT INTERNATIONAL INVESTORS
II LIMITED PARTNERSHIP
By: Advent International Corporation,
its General Partner
By:
-----------------------------------------
Jason S. Fisherman, Senior Investment
Manager
--------------------------------------------
Barry Weinberg
--------------------------------------------
Thomas A. Bologna
--------------------------------------------
Michael Green
/s/ Peter S. Kim
--------------------------------------------
Peter Kim
-12-
<PAGE>
---------------------------
Raksha Acharya
---------------------------
Barbara Brooks
---------------------------
Julianne Bryan-Rhadfi
---------------------------
Dr. Gary R. Gustafson
---------------------------
Dr. Karen A. Hamlin
---------------------------
Dr. Kelvin Lam
---------------------------
Dr. James Lillie
---------------------------
Maureen McCaffrey
---------------------------
Joseph F.X. McGuirl
---------------------------
Andrew Pakula
---------------------------
David G. Powers
-13-
<PAGE>
---------------------------
Karen Silber
---------------------------
Matthew Tomlinson
---------------------------
Michael R. Green
/s/ Peter S. Kim
---------------------------
Peter S. Kim
---------------------------
Thomas Alber
---------------------------
James Bowie
---------------------------
Michael Carey
---------------------------
Fred E. Cohen
---------------------------
Carol Prives
---------------------------
Robert T. Sauer
---------------------------
Kevin Struhl
-14-
<PAGE>
---------------------------
Karen Silber
---------------------------
Matthew Tomlinson
---------------------------
Michael R. Green
---------------------------
Peter S. Kim
---------------------------
Thomas Alber
---------------------------
James Bowie
---------------------------
Michael Carey
---------------------------
Fred E. Cohen
---------------------------
Carol Prives
---------------------------
Robert T. Sauer
---------------------------
Kevin Struhl
-14-
<PAGE>
---------------------------
Jamie Williamson
---------------------------
Maria Zapp
-15-
<PAGE>
SCHEDULE I
to Stockholders'
Agreement
Ms. Raksha Acharya
Thomas A. Bologna
Barbara Brooks
Julianne Bryan-Rhadfi
Gary R. Gustafson
Karen A. Hamlin
Kelvin Lam
James Lillie
Maureen McCaffrey
Joseph F.X. McGuirl
Andrew Pakula
<PAGE>
David G. Powers
Karen Silber
Matthew Tomlinson
Michael R. Green
Dr. Peter S. Kim
Thomas Alber
James Bowie
Michael Carey
Fred E. Cohen
Carol Prives
Robert T. Sauer
Kevin Struhl
-2-
<PAGE>
Dr. Jamie Williamson
Dr. Maria Zapp
-3-
<PAGE>
SCHEDULE II
List of Series A Purchasers
Name
----
CW Ventures II, L.P.
and Barry Weinberg
Atlas Venture Fund II, L.P.
Accel IV L.P.
Accel Japan L.P.
Accel Keiretsu L.P.
Accel Investors '93 L.P.
Prosper Partners
Ellmore C. Patterson Partners
New Enterprises Associates 5
Venrock Associates
Thomas A. Bologna
<PAGE>
SCHEDULE III
List of Series B Purchasers
Rovent II Limited Partnership
Golden Gate Development and Investment
Limited Partnership
Advent International Investors II Limited
Partnership
Script Partners Limited Partnership
<PAGE>
The undersigned hereby agrees to be bound as a "Subsequent Stockholder" by
all of the terms and conditions of the 1995 Amended and Restated Stockholders'
Agreement dated as of April __, 1995 among Scriptgen Pharmaceuticals, Inc. and
the other parties named therein, as such agreement may have been amended or
modified from time to time in accordance with its terms.
SUBSEQUENT STOCKHOLDER
Name:
By
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
The undersigned hereby agrees to be bound as a "Series B Purchaser" by all
of the terms and conditions of the 1995 Amended and Restated Stockholders'
Agreement dated as of April __, 1995 among Scriptgen Pharmaceuticals, Inc. and
the other parties named therein, as such agreement may have been amended or
modified from time to time in accordance with its terms.
SUBSEQUENT SERIES B PURCHASER
Name:
By
--------------------------------
Print Name:
-----------------------
Title:
----------------------------
-2-
<PAGE>
Exhibit 10.31
PREFERRED STOCKHOLDERS' AGREEMENT
This Agreement is made as of this 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, Medford, Massachusetts 02155,
each of the individuals and entities severally listed on SCHEDULE I hereto
(collectively, the "Series A Purchasers" and individually, a "Series A
Purchaser"), each of individuals and entities severally listed on SCHEDULE II
hereto (collectively, the "Series B Purchasers" and individually, a "Series B
Purchaser," and together with the Series A Purchasers, the "Existing Preferred
Stock Purchasers"), each of the individuals and entities severally listed on
SCHEDULE III hereto (collectively, the "Original Series C Purchasers" and
individually, an "Original Series C Purchaser"), each of individuals and
entities that become party to this Agreement pursuant to Section 7(a) hereof
(collectively, the "Subsequent Series C Purchasers," and individually, a
"Subsequent Series C Purchaser," and the Original Series C Purchasers and
Subsequent Series C Purchasers are referred to herein collectively as the
"Series C Purchasers," and individually, a "Series C Purchaser;" the Existing
Preferred Stock Purchasers and the Series C Purchasers are referred to herein
collectively as the "Preferred Stock Purchasers," and individually, a "Preferred
Stock Purchaser"), and such subsequent individuals and entities as become party
to this Agreement pursuant to Section 7(b) hereof (collectively, the "Subsequent
Stockholders," and individually, a "Subsequent Stockholder;" the Subsequent
Stockholders and the Preferred Stock Purchasers are referred to herein
collectively as the "Stockholders," and individually, a "Stockholder").
WHEREAS, the Company, the Existing Preferred Stock Purchasers and
certain other holders of the Company's securities are party to a 1995 Amended
and Restated Stockholders' Agreement dated as of April 19, 1995 ( the "1995
Stockholders' Agreement");
WHEREAS, the parties hereto and the parties hereto that are party to
the 1995 Stockholders' Agreement desire to amend and restate the 1995
Stockholders' Agreement to a form substantially similar to this Agreement (the
"1996 Stockholders' Agreement");
WHEREAS, the 1995 Stockholders' Agreement requires that 85% of the
Existing Preferred Stockholders and 50% of certain other stockholders of the
Company consent to amend such agreement;
WHEREAS, the parties hereto desire to enter into this Agreement
pending effectiveness, if ever, of the 1996 Stockholders' Agreement; and
WHEREAS, the Company and certain of the Preferred Stock Purchasers
have entered into a Series C Stock Purchase Agreement, dated the date hereof
(the "Series C Purchase Agreement"), pursuant to which certain of the Preferred
Stock Purchasers purchased certain securities of the Company, which purchase
will inure to
<PAGE>
the benefit of the Existing Preferred Stock Purchasers and the Subsequent
Stockholders; and
WHEREAS, the parties hereto are desirous of entering into this
Agreement in order to provide for certain agreements among the parties hereto
with respect to the election of the Company's directors and with respect to
rights to purchase shares of the Company's Common Stock, $.01 par value per
share (the "Common Stock") owned by or which may hereinafter be acquired by any
of them (the "Securities"); and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ELECTION OF DIRECTORS.
(a) The Stockholders will vote their respective shares of capital
stock of the Company (whether now owned or hereafter acquired), and take all
other actions necessary to maintain the number of Directors comprising the
Company's Board of Directors (the "Board") at six (6).
(b) At any and all meetings (including any written action in lieu of
a meeting) of stockholders of the Company at which directors are to be elected,
each Stockholder shall vote all of the capital stock of the Company held by such
Stockholder, whether now owned or hereafter acquired, to elect to the Board (i)
two (2) designees of a majority in interest of the Series A Purchasers, (ii) one
(1) designee of Michael R. Green and Peter S. Kim (collectively, the "Founders")
acting jointly, which designee shall be selected by the Founders, with the
advice and approval of Allan Ferguson, Barry Weinberg, the Chief Executive
Officer of the Company, if any, and Jason Fisherman (or their respective
successors on the Board), such approval not to be unreasonably withheld, (iii)
one (1) designee of a majority in interest of the Advent Series B Purchasers (as
defined below), (iv) the Chief Executive Officer of the Company then in office,
and (v) one (1) designee of the Series C Purchasers. At any time prior to any
meeting (or written action in lieu of a meeting) of the stockholders of the
Company at or by which Directors are to be elected, the Stockholders having the
right to designate a Director or Directors for election to the Board shall
notify the other Stockholders of its designee(s), but in the absence of any such
notification it shall be presumed that the incumbent designees have been
redesignated.
(c) In the event any Director designated for election to the Board
pursuant to (b) (i), (ii), (iii) or (v) above dies, resigns, is removed or
otherwise ceases to serve as a member of the Board, the Company shall give
notice thereof, as appropriate, to the Stockholders that designated such
Director to designate a successor and notify the Company of such designee's
selection. If a vacancy on the Board is filled in the interim by the remaining
Directors with a Director who is not the successor
-2-
<PAGE>
designated by the Stockholders having the right to designate such successor,
each Stockholder agrees to cast his, her or its votes for, or give his, her or
its written consent to, the removal of such Director at any time upon receipt of
instructions in writing to such effect, signed in the appropriate instance by a
majority in interest of the Stockholders having the right to designate such
successor.
(d) Each Stockholder agrees to vote his, her or its capital stock
for, or give his, her or its written consent to, the removal of a Director on
the Board at any time upon receipt of instructions in writing to such effect,
signed by a majority in interest of the Stockholders that designated such
Director for election to the Board.
(e) The "Advent Series B Purchasers" are Rovent II Limited
Partnership, Golden Gate Development and Investment Limited Partnership, and
Advent International Investors II Limited Partnership.
So long as both this Agreement and the 1995 Stockholders' Agreement
remain in effect, the Existing Preferred Stock Purchasers agree, and shall take
any action necessary so that one of the candidates for the Board designated by a
majority in interest of the Existing Preferred Stock Purchasers under the 1995
Stockholders' Agreement shall be the candidate for the Board designated by a
majority in interest of the Series C Purchasers as provided in Section 1.1(b)
above. The Existing Preferred Stock Purchasers agree to exercise their rights
to the fullest extent possible pursuant to the 1995 Stockholders' Agreement with
respect to the election of Directors of the Company.
The initial designees of the Series A Purchasers to the Board are
Barry Weinberg and Allan Ferguson. The initial designee of the Founders to the
Board is David Baltimore, and the initial designee of the Advent Series B
Purchasers to the Board is Jason Fisherman.
SALE OF SECURITIES
(a) No Stockholder shall either, directly or indirectly, sell,
assign, mortgage, transfer, pledge, create a security interest in or lien upon,
encumber, give, place in trust, hypothecate, or otherwise in any manner
voluntarily or involuntarily dispose of (hereinafter "Transfer"), any or all of
his, her or its Securities, now owned or hereafter acquired, unless such
Stockholder (in such capacity, the "Offeror") shall first offer to Transfer any
or all of his, her or its Securities to all the Preferred Stock Purchasers (in
such capacity, such Preferred Stock Purchasers are referred to as the
"Offerees"), in their respective proportionate shares (as defined below). In
the event any Offeror proposes to Transfer Securities, he, she or it shall give
the Offerees written notice of his, her or its intention, describing the type of
Securities, the price and the general terms upon which the Offeror proposes to
Transfer the same. Each Offeree shall have thirty (30) days from the date such
notice is given to agree to have Transferred to him, her or it any or all of
such Securities up to such Offeree's proportionate share, for the price and upon
the general terms specified in the notice by
-3-
<PAGE>
giving written notice to the Offeror and stating the quantity of Securities such
Offeree desires to have Transferred to him, her or it. As used in this Section
2.1(a), and except as otherwise provided, the term "proportionate share" shall
mean, with respect to each Offeree who is entitled to receive the particular
offer, the total number of Securities proposed to be Transferred, 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 Offeree and (ii) the total number of shares
of Common Stock into which the shares of Preferred Stock and other convertible
securities of the Company held by such Offeree are then convertible, and the
denominator of which shall be the sum of (i) the total number of shares of
Common Stock owned by all Offerees and (ii) the total number of shares of Common
Stock into which the shares of Preferred Stock and other convertible securities
of the Company held by all Offerees are then convertible;
(b) Each Offeree shall have a right of over-allotment such that if
any Offeree fails to exercise such Offeree's right hereunder to have Transferred
to him, her or it such Offeree's full proportionate share of the Securities
proposed to be Transferred (in such capacity, an "Incomplete Purchaser" and
collectively, the "Incomplete Purchasers"), the Offerees exercising their right
to have Transferred to them their full respective proportionate share of such
Securities (in such capacity, collectively, the "Complete Purchasers" and
individually, a "Complete Purchaser") may have Transferred to them the portion
of such Securities which has not been Transferred to the Incomplete Purchasers
as hereinafter provided. Each Complete Purchaser shall have fifteen (15) days
from the date notice is given by the Offeror to the Complete Purchasers that the
Incomplete Purchaser(s) have rejected or failed to accept their right to have
Transferred to them their proportionate share of Securities, to agree to have
Transferred to such Complete Purchaser up to such Complete Purchaser's
proportionate share of such Securities not Transferred to the Incomplete
Purchaser(s). Notwithstanding anything in Section 2.1(a) to the contrary, as
used in this Section 2.1(b) 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
all Incomplete Purchasers and the total number of shares of Common Stock into
which the shares of all such Incomplete Purchasers' Preferred Stock and other
convertible securities of the Company are convertible;
(c) In the event the Offerees fail to exercise their rights pursuant
to paragraphs (a) and (b) above within said forty-five (45) day period for the
full amount of Securities proposed to be Transferred, the Offeror shall have
sixty (60) days thereafter to Transfer the Securities with respect to which the
Offerees' options were not exercised, at a price and upon general terms no more
favorable to the transferees thereof than specified in the Offeror's notice to
the Offerees. In the event the Offeror has not Transferred the Securities
within said 60-day period, he, she or it shall not thereafter Transfer any
Securities without first offering such Securities to the Offerees in the manner
provided above;
-4-
<PAGE>
(d) Notwithstanding anything to the contrary contained herein, the
procedures specified in this Section 2.1 shall not be applicable to a Transfer
by (i) a Stockholder to a Permitted Transferee (as defined below) of such
Stockholder, if such Permitted Transferee agrees in writing with the parties
hereto to be bound by and comply with all provisions of this Agreement
applicable to the individual or entity Transferring the Securities immediately
prior to such Transfer, (ii) a Preferred Stock Purchaser to any or all of the
partners (general and/or limited) of such Preferred Stock Purchaser in which
event such Securities or Preferred Securities shall no longer be subject to
this Agreement as provided in Section 3 below, or (iii) to the Company pursuant
to any repurchase agreement, right of first refusal or other right on the part
of the Company to acquire Securities (provided that this sub-section (iii) shall
not be deemed to authorize the Company to repurchase any Securities if otherwise
prohibited). For purposes of this Section 2.1(d), a "Permitted Transferee"
shall mean (i) in the case of a Stockholder that is an individual, the spouse or
immediate family member of such individual, a trust for the benefit of such
individual, spouse or immediate family member or any partnership, corporation
or other entity wholly-owned by such individual, and (ii) in the case of a
Stockholder that is a partnership, any of its partners (general and/or limited),
employees or affiliates and any partnership, corporation or other entity
controlled by or under common control with such partnership or the partners
thereof;
(e) If any Transfer or attempted Transfer of the Securities is made
contrary to the provisions of this Section 2.1, each Preferred Stock Purchaser
shall have the right, in addition to any other legal or equitable remedies which
it may have, to enforce its rights hereunder by an action for specific
performance; the parties hereto recognize the rights set forth herein as unique,
the violation of which cannot be remedied by an award of monetary damages.
So long as the 1995 Stockholders' Agreement remains in effect, (i) if
an Existing Preferred Stock Purchaser receives a notice under the 1995
Stockholders' Agreement as an "Offeree" (as defined in the 1995 Stockholders'
Agreement) by a holder of Common Stock who is not a party to this Agreement
(each such notice herein referred to as a "1995 Transfer Notice"), such Existing
Preferred Stock Purchaser shall, as soon as possible, provide such 1995 Transfer
Notice to each Series C Purchaser (which notice shall be provided to each Series
C Purchaser by telecopy or telephone), and shall provide each Series C Purchaser
with the date such 1995 Transfer Notice was given (as calculated in accordance
with the provisions of the 1995 Stockholders' Agreement), (ii) each Series C
Purchaser, shall, not later than eight (8) days after such 1995 Transfer Notice
was given, inform each Existing Preferred Stock Purchaser whether such Series C
Purchaser desires to purchase any or all of such Series C Purchasers'
"proportionate share" (calculated in accordance with the provisions of this
Agreement) of the shares offered pursuant to such 1995 Transfer Notice, (iii)
the Existing Preferred Stock Purchasers shall then give notice to the "Offeror"
with respect to such 1995 Transfer Notice of the total number of shares offered
pursuant to such Offeror's 1995 Transfer Notice that the Existing Preferred
Stock Purchasers desire to purchase (which shall include the number of shares
thereof the Series C Purchasers
-5-
<PAGE>
desire to purchase). Following the purchase of such shares from such Offeror by
the Existing Preferred Stock Purchasers pursuant to the 1995 Stockholders'
Agreement, the Existing Preferred Stock Purchasers shall transfer to the Series
C Purchasers the number of such shares the Series C Purchasers requested to be
purchased, against the payment by the Series C Purchasers to the Existing
Preferred Stock Purchasers of the amount the Existing Preferred Stock Purchasers
paid to such Offeror in respect of the shares the Series C Purchasers requested
to be purchased. The Existing Preferred Stock Purchasers shall determine among
themselves which Existing Preferred Stock Purchasers shall purchase shares on
behalf of the Series C Purchasers. A procedure similar to the procedures set
forth above shall be followed if less than all of the shares proposed to be
transferred pursuant to a 1995 Transfer Notice are purchased by the Existing
Preferred Stock Purchasers, and the Offeror with respect to such shares gives a
notice to such of the Existing Preferred Stock Purchasers as are "Complete
Purchases" (as defined in the 1995 Stockholders' Agreement) with respect to such
proposed Transfer.
TERMINATION. Except as otherwise provided herein, this Agreement and
the provisions hereof shall terminate on the earlier of (i) the closing of a
Qualified Public Offering (as defined below), or (ii) the liquidation,
dissolution or indefinite cessation of the business operations of the Company,
or (iii) the effective date of the 1996 Stockholders' Agreement, which shall be
the earliest date that all parties to the 1995 Stockholders' Agreement have
executed the 1996 Stockholders' Agreement. In addition, notwithstanding
anything to the contrary contained herein, any Securities Transferred or
proposed to be Transferred by a Preferred Stock Purchaser to any or all of the
partners (general and/or limited) of such Preferred Stock Purchaser shall no
longer be subject to the terms and conditions of this Agreement. For purposes
of this Agreement, a "Qualified Public Offering" shall mean a firm commitment
underwritten registered public offering of the Common Stock of the Company
registered under the Securities Act of 1933, as amended (the "Securities Act")
in which (i) the per share public offering price is not less than $7.00, and
(ii) the net proceeds to the Company are at least $10,000,000. The parties
acknowledge that there is no assurance that the 1996 Stockholders' Agreement
will become effective, and in such event, the parties to the 1995 Stockholders'
Agreement that are also party to this Agreement will be party to, and bound by,
both this Agreement and the 1995 Stockholders' Agreement.
LEGEND. Each certificate representing any capital stock of the
Company held by a Stockholder, shall be stamped or otherwise imprinted with a
legend in substantially the following form (in addition to any legend required
under applicable state securities laws or by any agreement pursuant to which
such certificate was issued by the Company):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND CERTAIN OBLIGATIONS WITH RESPECT TO THE
ELECTION OF DIRECTORS OF THE COMPANY AS SPECIFIED IN THE PREFERRED
STOCKHOLDERS' AGREEMENT, DATED AS OF MAY
-6-
<PAGE>
17, 1996, AMONG SCRIPTGEN PHARMACEUTICALS, INC. AND THE INDIVIDUALS
AND ENTITIES NAMED THEREIN.
6. SEPARABILITY. The invalidity or unenforceability of any
provisions of this Agreement shall not be deemed to affect the validity or
enforceability of any other provision of this Agreement.
7. ADDITIONAL PARTIES.
(a) Any person or entity that, pursuant to the terms of the Series C
Purchase Agreement, purchases shares of the Company's Series C Preferred Stock,
$.01 par value per share (the "Series C Preferred Stock"), at a "Subsequent
Closing" (as that term is defined in the Series C Purchase Agreement) shall be
required, as a condition to such purchase, to become a party to this Agreement
by executing this Agreement or a counterpart, whereby such person or entity
agrees to be bound as a "Subsequent Series C Purchaser" by all of the terms of
this Agreement, as this Agreement may be amended from time to time in accordance
with its terms, and thereafter such person or entity shall have all the rights
of a Subsequent Series C Purchaser.
(b) Any Permitted Transferee and any person or entity (other then the
Subsequent Series C Purchasers) after the date hereof that becomes the owner or
holder of (i) any capital stock of the Company or (ii) any other security of
the Company exercisable for, or convertible into, capital stock of the Company,
shall be required, as a condition to such ownership or holding, to become a
party to this Agreement by executing this Agreement or a counterpart, whereby
such Permitted Transferee, person, or entity agrees to be bound as a Subsequent
Stockholder by all of the terms of this Agreement, as this Agreement may be
amended from time to time in accordance with its terms, and thereafter such
Permitted Transferee, person or entity shall have all the rights and obligations
of a Subsequent Stockholder hereunder. The foregoing provisions of this Section
6 shall not apply to any securities transferred by a Preferred Stock Purchaser
in accordance with the second sentence of Section 3 above.
8. MISCELLANEOUS. All the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the respective
transferees, successors and assigns of the parties hereto, whether so expressed
or not. This Agreement is deemed to have been consummated in The Commonwealth
of Massachusetts and is to be governed by and interpreted under the laws of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
Each party hereto agrees that this Agreement (including reference to
the 1995 Stockholders' Agreement, where appropriate) constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.
This Agreement may be amended or modified, and compliance with any provision or
condition of this Agreement may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) upon the written
consent of (i) a 85% interest of the Preferred Stock Purchasers, and (ii) a 50%
interest of the Subsequent Stockholders
-7-
<PAGE>
collectively (each interest to be calculated on a fully diluted basis, assuming
conversion or exercise of the Company's outstanding securities held by the
Stockholders that are convertible into, or exercisable for, Common Stock);
provided that Sections 1.1 and 7 of this Agreement may not be amended or
modified without the written consent of each of the Preferred Stock Purchasers.
No consent shall be required from any Stockholder which no longer holds any
Common Stock or any securities of the Company convertible into or exercisable
for Common Stock. No waiver of any provision of this Agreement shall be valid
unless it is expressed in a written instrument duly executed by the party or
parties making such waiver. The failure of any party to insist, in any one or
more instances, on performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment of any rights
granted hereunder or of the future performance of any such term, covenant or
condition but the obligation of any party with respect thereto shall continue in
full force and effect.
The parties hereby declare that it is impossible to measure in money
the damages which will accrue to a party hereto by reason of a failure to
perform any of the obligations under this Agreement. Therefore, all parties
hereto shall have the right to specific performance of the obligations of the
other parties under this Agreement, and if any party hereto shall institute any
action or proceeding to enforce the provisions hereof, any person (including the
Company) against whom such action or proceeding is brought hereby waives the
claim or defense therein that such party has an adequate remedy at law, and such
person shall not urge in any such action or proceeding the claim or defense that
such remedy at law exists.
Each Stockholder shall execute and deliver such other agreements and
instruments as from time to time are necessary to effect the intent and purpose
of this Agreement. The Stockholders agree to take all steps to cause the
By-Laws of the Company to be amended to effect the intent and purpose of this
Agreement.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed given when deposited in the United
States mails, registered or certified, postage prepaid and return receipt
requested, or when delivered personally or by overnight courier (or, in the case
of notices between Existing Preferred Stock Purchasers and Series C Purchasers
pursuant to Section 2.2, when delivered via telecopy to a number provided by
each Preferred Stock Purchaser), addressed (i) to the Company, at the address
set forth at the beginning of this Agreement, (ii) to the Stockholder to whom
such notice, request, consent or other communication is directed at such
Stockholder's address, on file with the Company (which addresses the Company
shall provide to any Stockholder upon request).
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
-8-
<PAGE>
The headings of the sections of this Agreement have been inserted for
the convenience of reference only and shall in no way restrict or modify any of
the terms or provisions hereof.
In the event of any conflict between the provisions of this Agreement
and the 1995 Stockholders' Agreement (so long as the 1995 Stockholder's
Agreement is in effect), the 1995 Stockholders' Agreement shall prevail.
[Rest of Page Intentionally Left Blank]
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands as of the above
date.
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/
------------------------------------------
Michael G. Palfreyman, Vice President
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
-10-
<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
-11-
<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
-12-
<PAGE>
By: /s/
------------------------------------------
Jason S. Fisherman,
Senior Investment Manager
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
SCRIPT PARTNERS LIMITED PARTNERSHIP
By: /s/
------------------------------------------
Print Name:
----------------------------------
Title:
---------------------------------------
LOMBARD, ODIER & CIE.
By: /s/
------------------------------------------
Print Name:
----------------------------------
Title:
---------------------------------------
---------------------------------------------
Bernard Mach
---------------------------------------------
Thomas A. Bologna
/s/
---------------------------------------------
Barry Weinberg
-13-
<PAGE>
SCHEDULE I
LIST OF SERIES A PURCHASERS
NAME
CW Ventures II, L.P. and Barry Weinberg
Atlas Venture Fund II, L.P.
Accel IV L.P.
Accel Japan L.P.
Accel Keiretsu L.P.
Accel Investors '93 L.P.
Ellmore C. Patterson Partners
Prosper Partners
New Enterprises Associates 5
Venrock Associates
Thomas A. Bologna
-14-
<PAGE>
SCHEDULE II
LIST OF SERIES B PURCHASERS
Each of the person listed in Schedule I and:
Rovent II Limited Partnership
Golden Gate Development and Investment Limited Partnership
Advent International Investors II Limited Partnership
Script Partners Limited Partnership
-15-
<PAGE>
SCHEDULE III
LIST OF SERIES C PURCHASERS
Each of the person listed in Schedule II (other than Script Partners Limited
Partnership) and:
Lombard, Odier & Cie.
Bernard Mach
Advent Performance Materials Limited Partnership
-16-
<PAGE>
The undersigned hereby agrees to be bound as a "Subsequent Stockholder" by
all of the terms and conditions of the Preferred Stockholders' Agreement dated
as of May 17, 1996 among SCRIPTGEN Pharmaceuticals, Inc. and the other parties
named therein, as such agreement may have been amended or modified from time to
time in accordance with its terms.
SUBSEQUENT STOCKHOLDER
Name:
By
----------------------------------
Print Name:
Title:
The undersigned hereby agrees to be bound as a "Series C Purchaser" by all
of the terms and conditions of the Preferred Stockholders' Agreement dated as of
May 17, 1996 among SCRIPTGEN Pharmaceuticals, Inc. and the other parties named
therein, as such agreement may have been amended or modified from time to time
in accordance with its terms.
SUBSEQUENT SERIES C PURCHASER
Name:
By
----------------------------------
Print Name:
Title:
-17-
<PAGE>
Exhibit 10.32
AMENDMENT NO. 1
TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
AND
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
Amendment No. 1 made this 8th day of August, 1997, by and among Scriptgen
Pharmaceuticals, Inc., a Delaware corporation (the "Corporation") and the
persons and entities listed on the signature page hereto (the "Stockholders"),
to (i) the Series B Preferred Stock Purchase Agreement, dated April 19, 1995
(the "Series B Agreement"), by and among the Corporation and the persons and
entities listed on the Schedule of Purchasers attached to the Series B
Agreement, and (ii) the Series C Preferred Stock Purchase Agreement, dated May
17, 1996 (the "Series C Agreement"), by and among the Corporation and the
persons and entities listed on the Schedule of Purchasers attached to the Series
C Agreement.
WHEREAS, the Corporation desires to have the ability to issue more shares
of the Corporation's Common Stock and options to purchase the Corporation's
Common Stock to employees, consultants, directors and officers than was
originally provided for in Section 6.31 of the Series B Agreement and Section
6.29 of the Series C Agreement; and
WHEREAS, each of the Stockholders has certain rights under the Series B
Agreement and/or the Series C Agreement by nature of being a holder of the
Corporation's Series B Preferred Stock or Series C Preferred Stock.
NOW, THEREFORE, in consideration of the promises and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Section 6.31 of the Series B Agreement and Section 6.29 of the Series C
Agreement are deleted in their entirety and the following shall be inserted in
their place:
6.31. STOCK OPTIONS AND OTHER STOCK PURCHASE RIGHTS. The
Corporation 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 Corporation or a
subsidiary thereof, except as follows: The Corporation
may issue or make available for issuance, pursuant to a
stock option/stock purchase plan and/or resolution(s)
of the Board of Directors (and from time to time
amendments thereto), a maximum of 4,850,000 shares of
Common Stock for issuance pursuant to incentive stock
options, non-qualified stock options and other stock
issuances, whether in the form of restricted stock or
otherwise, heretofore or hereafter to be granted or
made to employees, consultants, directors and officers
of the Corporation, upon such terms and conditions as
may be approved by the Company's Board of
<PAGE>
Directors. For the avoidance of doubt, issuances of shares
of restricted stock that has been repurchased by the Company
and stock options granted by Company and subsequently
terminated or cancelled shall become available for issuance
or grant by the Corporation without being counted toward the
maximum allowance of 4,850,000 shares.
2. Except as amended hereby, the Series B Agreement and the Series C
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have set their hand and seal as of the
date and year first above-written.
(1) * means in its capacity as a holder of
Series B Preferred Stock.
(2) ** means in its capacity as a holder of
Series C Preferred Stock.
(3) *** means in its capacity as a holder of
Series B Preferred Stock and Series C
Preferred Stock.
ACCEL IV L.P.***
By: Accel IV Associates, L.P., its General
Partner
By: /s/
---------------------------------
Name:
Title:
ACCEL INVESTORS '93 L.P.***
By: /s/
---------------------------------
Name:
Title:
-2-
<PAGE>
ACCEL JAPAN L.P.***
By: Accel Japan Associates, L.P., its
General Partner
By: /s/
---------------------------------
Name:
Title:
ACCEL KEIRETSU L.P.***
By: Accel Partners & Co., Inc., its General
Partner
By: /s/
---------------------------------
Name:
Title:
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP**
By: Advent International Corporation, its
General Partner
By: /s/
---------------------------------
Name:
Title:
ADVENT PERFORMANCE MATERIALS LIMITED
PARTNERSHIP**
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation, its
General Partner
By: /s/
---------------------------------
Name:
Title:
-3-
<PAGE>
ATLAS VENTURE FUND II, L.P.***
By: Atlas Venture Associates II, L.P.,
its General Partner
By: /s/
---------------------------------
Name:
Title:
CW VENTURES II, L.P.***
By: CW Partners III, L.P., its General
Partner
By: /s/
---------------------------------
Name:
Title:
ELLMORE C. PATTERSON PARTNERS***
By: /s/
---------------------------------
Name:
Title:
GOLDEN GATE DEVELOPMENT AND
INVESTMENT LIMITED PARTNERSHIP***
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation, its
General Partner
By: /s/
---------------------------------
Name:
Title:
-4-
<PAGE>
LOMBARD ODIER & CIE**
By: /s/
---------------------------------
Name:
Title:
------------------------------------
Bernard Mach**
NEW ENTERPRISE ASSOCIATES 5***
By: /s/
---------------------------------
Name:
Title:
PROSPER PARTNERS***
By: /s/
---------------------------------
Name:
Title:
ROVENT II LIMITED PARTNERSHIP***
By: Advent International Limited
Partnership, its General Partner
By: Advent International Corporation, its
General Partner
By: /s/
---------------------------------
Name:
Title:
-5-
<PAGE>
SCRIPT PARTNERS LIMITED PARTNERSHIP*
By: /s/
---------------------------------
Name:
Title: General Partner
VENROCK ASSOCIATES***
By: /s/
---------------------------------
Name:
Title: General Partner
VENROCK ASSOCIATES II, L.P.***
By: /s/
---------------------------------
Name:
Title: General Partner
ACCEPTED AND AGREED TO:
SCRIPTGEN PHARMACEUTICALS, INC., a
Delaware corporation
By: /s/
--------------------------------------
Mark T. Weedon
President and Chief Executive Officer
-6-
<PAGE>
Exhibit 10.33
SCRIPTGEN [LOGO]
November 26, 1997
Mr. Michael Heslop
1210 Deptford Court
Raleigh, NC 27609
Dear Mike:
On behalf of Scriptgen Pharmaceuticals, Inc. I am pleased to extend the
following final offer of employment to you which has been adjusted to account
for the previously agreed forgone bonus payment:
TITLE: Vice President, Business Development
RESPONSIBILITIES: The responsibilities will include business opportunity
assessment and planning for current and potential programs, and the policy
and implementation of corporate outlicensing.
SALARY: $6,875 paid 24 times per year, which if annualized, amounts to
$165,000 annually. Performance reviews are conducted annually at the end of
the first year.
BONUS: Annual bonus up to 20% of base salary based on performance consistent
with their practices for senior management.
INITIAL EQUITY: An option to purchase two hundred twenty five thousand
(225,000) shares of Scriptgen common stock (subject to a reverse split for
IPO purposes) at a purchase price equal to fair market value which is
determined by the Board of Directors at your time of hire. These options will
vest over a period of four years commencing on the first day of your
employment, in accordance with Scriptgen's stock option plan and are subject
to the execution of a Restricted Stock Option Agreement. Eligibility for
additional option grants as determined by the Company.
PAYMENT IN LIEU OF FORGONE BONUS: $40,000 upon commencement of job
BENEFITS: Medical, life insurance, long term disability, 401k participation,
vacation, and other benefits consistent with the current Scriptgen benefits
package.
RELOCATION: The Company will provide you with the following relocation
assistance:
1) Actual and reasonable costs associated with packing and movement of your
personal belongings and household goods. Drapes, blinds, carpets, etc. are
subject to reimbursement.
<PAGE>
2) Reasonable and customary closing costs on the sale of your home in North
Carolina, including attorney's fees.
3) One house hunting trip in the Boston area. This includes up to a one-week
stay in a hotel, round-trip transportation, reasonable & actual meals &
expenses, house hunting assistance with a Realtor, and an economy rental
car.
4) Reasonable & actual expenses for temporary living arrangements for up to
three (3) months.
5) Traveling expenses for your final trip to Boston.
CONTINGENCIES:
This offer is subject to the satisfactory completion of a physical
examination, confirmation of the strike rate of the stock options.
We will require, upon date of hire, proof of identity and eligibility to work
in the US, in the form of a passport, birth certificate, valid driver's
license and/or social security card, in compliance with Section I9 of the
Immigration Code.
The above offer is also 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.
This offer has been extended and is valid through Monday, December 1, 1997,
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.
We look forward to working with you and are excited about the prospects for
Scriptgen.
Best regards,
/s/ Mark T. Weedon
Mark T. Weedon
President and Chief Executive Officer
Accepted Terms as Stated Above:
/s/ Michael Heslop 11/27/97
-------------------------------
Michael Heslop
<PAGE>
Exhibit 10.34
SCRIPTGEN PHARMACEUTICALS, INC.
1997 EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE AND DURATION
1.1 PURPOSES. The purposes of the Plan are to attract, retain and
motivate employees and consultants of the Company, its Parent (if any), and any
present or future Subsidiaries and to enable them to participate in the growth
of the Company by providing for or increasing the proprietary interests of such
persons in the Company.
1.2 EFFECTIVE DATE. The Plan is effective as of the consummation of
the Company's proposed initial public offering.
1.3 EXPIRATION DATE. The Plan shall expire one day less than ten years
from the date of the adoption of the Plan by the Board. In no event shall any
Awards be made under the Plan after such expiration date, but Awards previously
granted may extend beyond such date.
SECTION 2. DEFINITIONS
As used in the Plan, the following capitalized words shall have the
meanings indicated below:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Award" means, individually or collectively, a grant under the Plan of
Options, SARs, Performance Shares, Restricted Stock or Stock Units.
"Award Agreement" means the written agreement setting forth the terms and
provisions applicable to an Award granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenues Code of 1986, as amended.
"Committee" means the committee of the Board appointed by the Board to
administer the Plan in accordance with Section 3.1.
"Company" means Scriptgen Pharmaceuticals, Inc., a Delaware corporation, or
any successor thereto.
"Director" means any individual who is a member of the Board.
<PAGE>
"Fair Market Value" means, with respect to a Share, the fair market thereof
as of the relevant date of determination, as determined in accordance with a
valuation methodology approved by the Board in good faith but in no event less
than, in the case of newly issued stock, the par value per Share; provided that
if the Board does not adopt or employ any such valuation methodology and Shares
are traded on an exchange or quoted on The Nasdaq National Market, fair market
value shall mean, on the relevant date of determination, the closing price of a
Share traded on the principal exchange for the Shares or, if the Shares are so
traded, the closing or last price quoted on The Nasdaq National Market.
"Grant Date" means the effective date of an Award as specified by the Board
and set forth in the applicable Award Agreement.
"Incentive Stock Option" or "ISO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code.
"Non-Employee Director" means a "non-employee director" as that term is
defined in Rule 16b-3 promulgated under the 1934 Act.
"Nonqualified Stock Option" or "NQO" means an option to purchase Shares
awarded to a Participant under Section 6 of the Plan that is not intended to be
an ISO.
"Option" means an ISO or an NQO.
"Parent" means a "parent corporation" as that term is defined in Section
424 of the Code.
"Participant" means an individual who has been selected by the Board to
receive an Award under the Plan.
"Performance Cycle" means the period of time selected by the Board during
which performance is measured for the purpose of determining the extent to which
an Award of Performance Shares has been earned. More than one Performance Cycle
may be in progress at any one time and the duration of Performance Cycles may
differ.
"Performance Share" means a Share awarded to a Participant under Section 8
of the Plan that entitles the Participant to acquire Shares upon the attainment
of specified performance goals.
"Plan" means the 1997 Equity Incentive Plan set forth in this document and
as hereafter amended from time to time in accordance with Section 13.
"Restricted Period" means the period of time selected by the Board during
which Shares of Restricted Stock are subject to forfeiture and/or restrictions
on transferability.
-2-
<PAGE>
"Restricted Stock" means Shares awarded to a Participant under Section 9 of
the Plan pursuant to an Award that entitles the Participant to acquire Shares
for a purchase price (which may be zero), subject to such conditions, including
a Company right during a specified period or periods to repurchase the Shares at
their original purchase price (or to require forfeiture of the Shares if the
purchase price was zero) upon the Participant's termination of employment.
"SAR" or "Stock Appreciation Right" means an Award that is designated as an
SAR pursuant to Section 7 of the Plan, granted alone or in connection with a
related Award, entitling a Participant to receive an amount in cash or Shares or
a combination thereof having a value equal to (or if the Board shall so
determine at time of grant, less than) the excess of the Fair Market Value of a
Share on the date of exercise over the Fair Market Value of a Share on the Grant
Date (or over the Option exercise price, if the Stock Appreciation Right was
granted in tandem with an Option) multiplied by the number of Shares with
respect to which the Stock Appreciation Right is exercised.
"Shares" means shares of the Company's common stock, par value $0.01 per
share.
"Stock Unit" means an Award of a Share or a unit valued in whole or in part
by reference to, or otherwise based on, the value of a Share, granted to a
Participant under Section 10 of the Plan.
"Subsidiary" means a "subsidiary corporation" as that term is defined in
Section 424 of the Code.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 THE BOARD. The Plan shall be administered by the Board. The Board
may, in its discretion, delegate some or all of its powers with respect to the
Plan to the Committee, in which event all references in the Plan to the Board
(except references in Section 13.1) shall be deemed to refer to the Committee.
The Committee, if one is appointed, shall consist of at least two Non-Employee
Directors.
3.2 AUTHORITY OF THE BOARD. The Board shall have the authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the operation of the Plan as it shall consider advisable from time to time, to
interpret the provisions of the Plan and any Award, and to decide all disputes
arising in connection with the Plan. The Board's decisions and interpretations
shall be final and binding.
SECTION 4. ELIGIBILITY OF PARTICIPANTS
The persons eligible to receive Awards under the Plan shall be all
executive officers of the Company, its Parent (if any), and any Subsidiaries and
other employees, consultants and advisers who, in the opinion of the Board, are
in a position to make a
-3-
<PAGE>
significant contribution to the success of the Company, its Parent (if any), and
any Subsidiaries. Directors, including directors who are not employees, of the
Company, its Parent (if any), and any Subsidiaries, shall be eligible to receive
Awards under the Plan.
SECTION 5. STOCK AVAILABLE FOR AWARDS
5.1 NUMBER OF SHARES. Awards may be made under the Plan for up to
5,226,803 Shares. Shares issued under the Plan may consist in whole or in part
of authorized but unissued Shares or treasury Shares.
5.2 LAPSED, FORFEITED OR EXPIRED AWARDS. If any Award in respect of
Shares expires or is terminated before exercise or is forfeited for any reason,
the Shares subject to such Award, to the extent of such expiration, termination,
or forfeiture, shall again be available for award under the Plan.
5.3 MAXIMUM NUMBER OF SHARES TO A SINGLE PARTICIPANT IN ANY CALENDAR YEAR.
In no event shall any Participant receive in any calendar year Awards under the
Plan and any other grants for more than 614,918 Shares.
SECTION 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
the Board may award Options and determine the number of shares to be covered by
each Option, the exercise price therefor, the term of the Option, and any other
conditions and limitations applicable to the exercise of the Option. The Board
may grant ISOs, NQOs or a combination thereof.
6.2 EXERCISE PRICE. Subject to the provisions of this Section 6, the
exercise price for each Option shall be determined by the Board in its sole
discretion.
6.3 RESTRICTIONS ON OPTION TRANSFERABILITY AND EXERCISABILITY. No Option
shall be transferable by the Participant other than by will or the laws of
descent and distribution, and all Options shall be exercisable, during the
Participant's lifetime, only by the Participant; provided, however, that the
Board may provide that an Option is transferable by the Participant and
exercisable by persons other than the Participant upon such terms and conditions
as the Board shall determine.
6.4 CERTAIN ADDITIONAL PROVISIONS FOR INCENTIVE STOCK OPTIONS
6.4.1 EXERCISE PRICE. In the case of an ISO, the exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value on
the Grant Date of the Shares subject to the Option; provided, however, that if
on the Grant Date the Participant (together with persons whose stock ownership
is attributed to the
-4-
<PAGE>
Participant pursuant to Section 424(d) of the Code) owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, its Parent (if any) or any Subsidiaries, the exercise
price shall be not less than one hundred and ten percent (110%) of the Fair
Market Value on the Grant Date of the Shares subject to the Option.
6.4.2 EXERCISABILITY. Subject to Section 12.3 and 12.4, the
aggregate Fair Market Value (determined on the Grant Date(s)) of the Shares with
respect to which ISOs are exercisable for the first time by any Participant
during any calendar year (under all plans of the Company, its Parent (if any)
and any Subsidiaries) shall not exceed $100,000.
6.4.3 ELIGIBILITY. ISOs may be granted only to persons who are
employees of the Company, its Parent (if any) or any Subsidiaries on the Grant
Date.
6.4.4 EXPIRATION. No ISO may be exercised later than ten (10)
years from the Grant Date; provided, however, that if the Option is granted to a
Participant who, together with persons whose stock ownership is attributed to
the Participant pursuant to Section 424(d) of the Code, owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, its Parent (if any) or any Subsidiaries, the ISO may not
be exercised later than five (5) years from the Grant Date.
6.4.5 COMPLIANCE WITH SECTION 422 OF THE CODE. The terms and
conditions of ISOs shall be subject to and comply with Section 422 of the Code
or any successor provision.
6.4.6 NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each
Participant who receives an ISO agrees to notify the Company in writing
immediately after the Participant makes a Disqualifying Disposition of any
Shares received pursuant to the exercise of an ISO. The term "Disqualifying
Disposition" means any disposition (including any sale) of Shares before the
later of (a) two years after the Participant was granted the ISO under which the
Participant acquired such Shares, or (b) one year after the Participant acquired
the Shares by exercising the ISO.
6.4.7 SUBSTITUTE OPTIONS. Notwithstanding the provisions of
Section 6.4.1, in the event that the Company, its Parent (if any) or any
Subsidiary consummates a transaction described in Section 424(a) of the Code
(relating to the acquisition of property or stock from an unrelated
corporation), individuals who become employees or consultants of the Company,
its Parent (if any) or any Subsidiary on account of such transaction may be
granted ISOs in substitution for options granted by their former employer. The
Board, in its sole discretion and consistent with Section 424(a) of the Code,
shall determine the exercise price of such substitute Options.
6.5 NQO PRESUMPTION. Options granted pursuant to the Plan shall be
presumed to be NQOs unless expressly designated ISOs in the Award Agreement.
-5-
<PAGE>
SECTION 7. GRANT OF STOCK APPRECIATION RIGHTS
Subject to the terms and provisions of the Plan, the Board may award SARs
in tandem with another Award (at or after the Grant Date of the other Award), or
alone and unrelated to another Award, and may determined the terms and
conditions applicable thereto, including the form of payment.
SECTION 8. PERFORMANCE SHARES
8.1 GRANT OF PERFORMANCE SHARES. The Board may award Performance Shares
to Participants and determine the performance goals applicable to each such
Award, the number of Shares for each Performance Cycle, the duration of each
Performance Cycle and all other limitations and conditions applicable to the
awarded Performance Shares. The payment value of each Performance Share shall
be equal to the Fair Market Value of one Share on the date the Performance Share
is earned or, in the discretion of the Board, on the date the Board determines
that the Performance Share has been earned.
8.2 ADJUSTMENT OF PERFORMANCE GOALS. Except as provided in an Award,
during any Performance Cycle, the Board may adjust the performance goals for the
Performance Cycle as it deems equitable in recognition of unusual or
non-recurring events affecting the Company or its Shares, changes in applicable
tax laws or accounting principles, or such other factors as the Board shall
determine.
8.3 WRITTEN CERTIFICATION. As soon as practical after the end of a
Performance Cycle, the Board shall certify in writing the extent to which the
performance goals applicable to each Participant for the Performance Cycle were
achieved or exceeded and the number of Performance Shares which have been earned
on the basis of performance in relation to the established performance goals.
SECTION 9. RESTRICTED STOCK
9.1 GRANT OF RESTRICTED STOCK. The Board may award Shares of Restricted
Stock and determine the purchase price, if any, therefor, the duration of the
Restricted Period, the conditions under which the Shares may be forfeited to or
repurchased by the Company and any other terms and conditions of the Awards.
The Board may modify or waive any restrictions, terms and conditions with
respect to any Restricted Stock. Shares of Restricted Stock may be issued for
whatever consideration is determined by the Board, subject to applicable law.
9.2 TRANSFERABILITY. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as permitted by
the Board, during the Restricted Period.
-6-
<PAGE>
9.3 EVIDENCE OF AWARD. Shares of Restricted Stock shall be evidenced in
such manner as the Board may determine. Any certificates issued in respect of
Shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Board, deposited by the Participant,
together with a stock power endorsed in blank, with the Company. At the
expiration of the Restricted Period, the Company shall deliver the certificates
and stock power to the Participant.
9.4 SHAREHOLDER RIGHTS. A Participant shall have all the rights of a
shareholder with respect to Restricted Stock awarded, including voting and
dividend rights, unless otherwise provided in the Award Agreement.
SECTION 10. STOCK UNITS
10.1 GRANT OF STOCK UNITS. Subject to the terms and provisions of the
Plan, the Board may award Stock Units subject to such terms, restrictions,
conditions, performance criteria, vesting requirements and payment rules as the
Board shall determine.
10.2 CONSIDERATION. Shares awarded in connection with a Stock Unit shall
be issued for whatever consideration is determined by the Board, subject to
applicable law.
SECTION 11. OTHER AWARDS
The Board shall have the authority to specify the terms and provisions of
other forms of equity-based or equity-related Awards not described above which
the Board determines to be consistent with the purposes of the Plan and the
interests of the Company, which Awards may provide for cash payments based in
whole or in part on the value or future value of Shares, for the acquisition or
future acquisition of Shares, or any combination thereof. Other Awards may also
include cash payments (including the cash payment of dividend equivalents) under
the Plan which may be based on one or more criteria determined by the Board that
are unrelated to the value of the Shares and that may be granted in tandem with,
or independent of, other Awards under the Plan.
SECTION 12. GENERAL PROVISIONS APPLICABLE TO AWARDS
12.1 LEGAL AND REGULATORY MATTERS. The delivery of Shares shall be subject
to compliance with (i) applicable federal and state laws and regulations, (ii)
if the outstanding Shares are listed at the time on any stock exchange or
automated quotation system, the listing requirements of such exchange or system,
and (iii) the Company's counsel's approval of all other legal matters in
connection with the issuance and delivery of the Shares. If the sale of the
Shares has not been registered under the 1933 Act, the Company may require, as a
condition to delivery of the Shares, such
-7-
<PAGE>
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing the Shares bear an appropriate legend restriction transfer.
12.2 AWARD AGREEMENT. The terms and provisions of an Award shall be set
forth in an Award Agreement approved by the Board and delivered or made
available to the Participant as soon as practicable following the Grant Date.
12.3 DETERMINATION OF RESTRICTIONS ON THE AWARD. The vesting,
exercisability, payment and other restrictions applicable to an Award (which may
include, without limitation, restrictions on transferability or provision for
mandatory resale to the Company) shall be determined by the Board and set forth
in the applicable Award Agreement. Notwithstanding the foregoing, the Board may
accelerate (i) the vesting or payment of any Award (including an ISO), (ii) the
lapse of restrictions on any Award (including an Award of Restricted Stock) and
(iii) the date on which any Option or SAR first becomes exercisable.
12.4 MERGERS, ETC. Notwithstanding any other provision of the Plan, in the
event of a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all the
Company's outstanding shares by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets, then if the Board so
determines, all outstanding Awards shall terminate, provided that at least
twenty (20) days prior to the effective date of any such merger, consolidation
or sale of assets, the Board shall either (i) make all outstanding Awards
exercisable immediately prior to the consummation of such merger, consolidation
or sale of assets or (ii) if there is a surviving or acquiring corporation,
arrange, subject to consummation of the merger, consolidation or sale of assets,
to have that corporation or an affiliate of that corporation grant to
Participants replacement Awards, which Awards in the case of ISOs shall satisfy,
in the discretion of the Board, the requirements of section 424(a) of the Code.
12.5 TERMINATION OF EMPLOYMENT. For purposes of the Plan, the following
events shall not be deemed a termination of employment of a Participant: (i) a
transfer to the employment of the Company from its Parent (if any) or from a
Subsidiary, or from the Company to its Parent (if any) or to a Subsidiary, from
one Subsidiary to another, or from the Company's Parent (if any) to a
Subsidiary, or from a Subsidiary to the Company's Parent (if any); or (ii) an
approved leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Participant's right to employment is
guaranteed either by a statute or by contract or under the policy pursuant to
which the leave of absence was granted or if the Board otherwise so provides in
writing. For purposes of the Plan, employees of a Subsidiary or Parent (if any)
shall be deemed to have terminated their employment on the date on which such
Subsidiary or Parent ceases to be a Subsidiary or Parent of the Company, as the
case may be.
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12.6 DATE OF AND EFFECT OF TERMINATION OF EMPLOYMENT. The date of a
Participant's termination of employment for any reason shall be determined in
the sole discretion of the Board. The Board shall have full authority to
determine and specify in the applicable Award Agreement the effect, if any, that
a Participant's termination of employment for any reason will have on the
vesting, exercisability, payment or lapse of restrictions applicable to an
outstanding Award.
12.7 GRANT OF AWARDS. Each Award may be made alone, in addition to or
in relation to any other Award. The terms of each Award need not be identical,
and the Board need not treat Participants uniformly.
12.8 SETTLEMENT OF AWARDS. No Shares shall be delivered pursuant to any
exercise of an Award until payment in full of the price therefor, if any, is
received by the Company. Such payment may be made in whole or in part in cash
or by certified or bank check or, to the extent permitted by the Board at or
after the Grant Date, by delivery of a note or Shares, including Restricted
Stock valued at their Fair Market Value on the date of delivery, or such other
lawful consideration as the Board shall determine.
12.9 WITHHOLDING REQUIREMENTS AND ARRANGEMENTS. The Participant shall
pay to the Company or make provision satisfactory to the Board for payment of
any taxes required by law to be withheld in respect of Awards under the Plan no
later than the date of the event creating the tax liability. In the Board's
discretion, such tax obligations may be paid in whole or in part in Shares,
including Shares retained from the Award creating the tax obligation, valued at
their Fair Market Value on the date of delivery. The Company may, to the extent
permitted by law, deduct any such tax obligations from any payment of any kind
otherwise due to the Participant.
12.10 NO EFFECT ON EMPLOYMENT. The Plan shall not give rise to any right
on the part of any Participant to continue in the employ of the Company, its
Parent (if any) or any Subsidiary. The loss of existing or potential profit in
Awards Granted under the Plan shall not constitute an element of damages in the
event of termination of the relationship of a Participant event if the
termination is in violation of an obligation of the Company to the Participant
by contract or otherwise.
12.11 NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the Plan
and the applicable Award Agreement, no Participant shall have any rights as a
shareholder with respect to any Shares to be distributed under the Plan until he
or she becomes the holder thereof.
12.12 ADJUSTMENTS. Upon the happening of any of the following described
events, a Participant's rights with respect to Awards granted hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
Award Agreement.
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12.12.1 STOCK SPLITS AND RECAPITALIZATIONS. In the event the
Company issues any of its Shares as a stock dividend upon or with respect to the
Shares, or in the event Shares shall be subdivided or combined into a greater or
smaller number of shares, or if, upon a merger or consolidation (except those
described in Section 12.4), reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, Shares shall be exchanged for other
securities of the Company, securities of another entity, cash or other property,
each Participant upon exercising an Award (for the aggregate purchase price to
be paid under the Award) shall be entitled to purchase such number of Shares,
other securities of the Company, securities of such other entity, cash or other
property as the Participant would have received if the Participant had been the
holder of the Shares with respect to which the Award is exercised at all times
between the Grant Date of the Award and the date of its exercise, and
appropriate adjustments shall be made in the purchase price per Share.
12.12.2 RESTRICTED STOCK. If any person owning Restricted
Stock receives new or additional or different shares or securities ("New
Securities") in connection with a corporate transaction described in Section
12.12.1 as a result of owning such Restricted Stock, the New Securities shall be
subject to all of the conditions and restrictions applicable to the Restricted
Stock with respect to which such New Securities were issued.
12.12.3 BOARD DETERMINATION. Notwithstanding any provision to
the contrary, no adjustments shall be made pursuant to this Section 12.12 with
respect to ISOs unless (i) the Board, after consulting with counsel for the
Company, determines that such adjustments would not constitute a "modification,"
"extension" or "renewal" of such ISOs as such terms are defined in Section 424
of the Code, (ii) would cause any adverse tax consequences for the holders of
such ISOs or (iii) the holders of such ISOs consent to the adjustment. No
adjustments to ISOs shall be made for dividends paid in cash or in property
other than securities of the Company.
12.12.4 FRACTIONAL SHARES. No fractional Shares shall be
issued under the Plan. Any fractional Shares which, but for this Section, would
have been issued shall be deemed to have been issued and immediately sold to the
Company for their Fair Market Value, and the Participant shall receive from the
Company cash in lieu of such fractional Shares.
12.12.5 OTHER DISTRIBUTIONS. The Board may adjust the number
of Shares subject to outstanding Awards and the exercise price and the terms of
outstanding Awards to take into consideration material changes in accounting
practices or principles, extraordinary dividends, acquisitions or dispositions
of stock or property, or any other event if it is determined by Board that such
adjustment is appropriate to avoid distortion in the operation of the Plan.
12.12.6 FURTHER ADJUSTMENT. Upon the happening of any of the
events described in Sections 12.12.1 or 12.12.5, the class and aggregate number
of Shares set forth in Sections 5.1 and 5.3 hereof that are subject to Awards
which
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previously have been or subsequently may be granted under the Plan shall be
appropriately adjusted to reflect to the events described in such Sections. The
Board shall determine the specific adjustments to be made under this Section
12.12.6.
SECTION 13. AMENDMENT AND TERMINATION
13.1 AMENDMENT, SUSPENSION, TERMINATION OF THE PLAN. The Board may
modify, amend, suspend, or terminate the Plan in whole or in part at any time;
provided, however, that no modification, amendment, suspension or termination of
the Plan shall be made without shareholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement; and
provided, further, that such modification, amendment, suspension or termination
shall not, without a Participant's consent, affect adversely the rights of such
Participant with respect to any Award previously made.
13.2 AMENDMENT, SUSPENSION, TERMINATION OF AN AWARD. The Board may
modify, amend or terminate any outstanding Award, including, without limitation,
substituting therefor another Award of the same or a different type, changing
the date of exercise or realization and converting an ISO to a NQO; provided,
however, that the Participant's consent to such action shall be required unless
the Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.
SECTION 14. LEGAL CONSTRUCTION
14.1 CAPTIONS. The captions provided herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan or serve as a basis for interpretation or construction of
the Plan.
14.2 SEVERABILITY. In the event any provision of the Plan is held
invalid or illegal for any reason, the illegality or invalidity shall not affect
the remaining provisions of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.3 GOVERNING LAW. The Plan and all rights under the Plan shall be
construed in accordance with and governed by the internal laws of the State of
Delaware.
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Exhibit 10.35
SCRIPTGEN PHARMACEUTICALS, INC.
NON-EMPLOYEE DIRECTORS STOCK PLAN
1. PURPOSE
The purpose of this Non-Employee Directors Stock Plan (the "Plan") is
to advance the interests of Scriptgen Pharmaceuticals, Inc. (the "Company") by
increasing the proprietary interest in the Company of non-employee members of
the Company's Board of Directors by providing their compensation in options to
acquire shares ("Shares") of the Company's common stock ("Common Stock").
2. ADMINISTRATION
The Plan shall be administered by the Stock Option Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall have authority, not inconsistent with the express provisions of
the Plan, (a) to administer the issuance of options granted in accordance with
the formula set forth in this Plan to such directors as are eligible to receive
options; (b) 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; (c) to adopt, amend and rescind rules and regulations for the
administration of the Plan; and (d) 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 Committee shall be conclusive and
shall bind all parties. Transactions under this plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors under Section 16
of the Securities Exchange Act of 1934 ("Rule 16b-3"). To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee.
3. EFFECTIVE DATE OF PLAN
The Plan is effective as of the consummation of the Company's proposed
initial public offering.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. The maximum number of Shares that may be
delivered upon the exercise of options granted under the Plan shall be 250,000
Shares (after giving effect to a proposed 1-for-3.07459 reverse split of the
Common Stock). If any option granted under the Plan terminates without having
been exercised in full, the number of Shares as to which such option was not
exercised shall be available for future grants and/or elections within the
foregoing limit.
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(b) Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Shares or, if the Board so decides in its sole
discretion, previously issued Shares acquired by the Company and held in
treasury. No fractional Shares shall be delivered under the Plan.
(c) Changes in Stock; Restructuring, etc. In the event of a stock
dividend, stock split or combination of shares, 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 Committee. In the event of
any other recapitalization, reorganization, extraordinary dividend or
distribution or restructuring transaction affecting the Common Stock, the number
of shares issuable under this Plan shall be subject to such adjustment as the
Committee may deem appropriate, and the number of shares issuable pursuant to
any option theretofore granted (whether or not then exercisable) and/or the
option price per share of such option shall be subject to such adjustment as the
Committee may deem appropriate with a view toward preserving the value or such
option.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive options under the Plan and to elect to
receive Shares in lieu of cash compensation ("Non-Employee Directors") shall be
those directors who are not present or former employees of the Company or of any
subsidiary of the Company.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Number of Options. On the date of the final Prospectus used in
connection with the Company's initial public offering (the "IPO") of Common
Stock, each of the Company's Non-Employee Directors, and each director nominee,
shall be awarded an option covering 10,000 Shares (after giving effect to a
proposed 1-for-3.07459 reverse split of the Common Stock). On the date of each
subsequent annual meeting of stockholders, each Non-Employee Director continuing
in office shall be awarded an option covering 4,000 Shares (after giving effect
to a proposed 1-for-3.07459 reverse split of the Common Stock) and each newly
elected Non-Employee Director shall be awarded an option covering 10,000 Shares
(after giving effect to a proposed 1-for-3.07459 reverse split of the Common
Stock). For purposes of this paragraph, each Non-Employee Director elected to
office at a special meeting of stockholders or by the Board since the then last
annual meeting shall be treated as a Non-Employee Director who has been
newly-elected at an annual meeting of stockholders. In addition, each member of
a committee of the Board shall receive, on each one-year anniversary of his or
her appointment to such committee, an option covering 250 Shares (after giving
effect to a proposed 1-for-3.07459 reverse split of the Common Stock).
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(b) Exercise Price. The exercise price of each option shall be the
fair market value per Share at the time the option is granted. In no event,
however, shall the option price be less, in the case of an original issue of
authorized stock, than par value per share. For purposes of this subsection,
the fair market value of a Share on any date shall be the last sale price of a
share of Common Stock on such day as reported on NASDAQ (or if the Common Stock
is then listed or admitted to unlisted trading privileges on a national
securities exchange, the last sale price of a share of Common Stock regular way
on the principal national securities exchange on which the Common Stock is then
listed or admitted to unlisted trading privileges) or, if there was no such
reported price on such day, the latest day prior thereto on which there was such
a reported price. Notwithstanding the foregoing, all options granted on the
date of the final Prospectus used in connection with the Company's IPO shall
have an exercise price equal to the offering price to the public of the Common
Stock in the IPO.
(c) Duration of Options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is 10 years from
the date the option was granted.
(d) Exercise of Options.
(1) Each option shall become exercisable to the extent of
one-third of the Shares covered thereby on each of the first
three anniversaries of the date of the grant.
(2) Any exercise of an option shall be in writing, signed by the
proper person and delivered or mailed to the Company,
accompanied by (i) any documentation required by the
Committee and (ii) payment in full for the number of Shares
for which the option is exercised.
(3) If an option is exercised by the executor or administrator
of a deceased director, or by the person or persons to whom
the option has been transferred by the director's will or
the applicable laws of descent and distribution, the Company
shall be under no obligation to deliver Shares pursuant to
such exercise until the Company is satisfied as to the
authority of the person or persons exercising the option.
(e) Payment for and Delivery of Shares. Shares purchased under the
Plan shall be paid for as follows: (i) by certified or bank check or other
instrument acceptable to the Committee (in accordance with guidelines
established for this purpose), (ii) through the delivery of shares of Common
Stock (which, in the case of shares acquired from the Company, have been
outstanding for at least six months) having a fair market value on the last
business day preceding the date of exercise equal to the purchase price, (iii)
by delivery of an unconditional and irrevocable
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undertaking by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price or (iv) by any combination of the permissible forms of
payment.
(f) Non-Transferability of Options. Except to the extent the
Committee shall otherwise determine, whether at the time the option is granted
or thereafter, no option may be transferred other than by will or by the laws of
descent and distribution; and during a director's lifetime an option may be
exercised only by him or her.
(g) Death, Retirement and Disability of a Director. Upon departure
from the Board by reason of death or disability (as determined by the
Committee), all options outstanding hereunder that are not otherwise exercisable
shall become immediately exercisable. All options held by such director may be
exercised by such director or 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 one year after such
departure. After completion of the one year period, such options shall
terminate to the extent not previously exercised. Notwithstanding the
foregoing, options held by a director who dies following departure by reason of
disability shall remain exercisable for one year following death. In no event
shall any option referred to in this paragraph 6(g) be exercisable beyond its
stated term, if earlier.
(h) Other Termination of Status of Director. If a director's service
with the Company terminates for any reason other than death or disability as
specified in paragraph 6(g), all options held by the director that are not then
exercisable shall terminate. Options that are exercisable on the date of
termination shall continue to be exercisable for a period of sixty days (but not
beyond their stated term if earlier). After completion of that sixty-day
period, such options shall terminate to the extent not previously exercised,
expired or terminated.
(i) Mergers, etc. In the event of a consolidation or merger in which
the Company is not the surviving corporation or which results in the acquisition
of substantially all the Company's outstanding Stock by a single person or
entity or by a group or persons and/or entities acting in concert, or in the
event of a sale of all or substantially all assets or a dissolution or
liquidation of the Company, all options hereunder will terminate; provided, that
20 days prior to the effective date of any such merger, consolidation, sale,
dissolution, or liquidation, all options outstanding hereunder that are not
otherwise exercisable shall become immediately exercisable.
7. MISCELLANEOUS
(a) Rights as a Shareholder. Any option holder shall not have the
rights of a shareholder with regard to awards under the Plan except as to Shares
actually received by him or her under the Plan.
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(b) Compliance with Securities Laws. The Company shall not be
obligated to deliver any Shares until (1), in the opinion of the Company's
counsel, all applicable federal, state and foreign laws and regulations have
been complied with, (2) if the Company's common stock outstanding is at the time
listed on any stock exchange, the Shares to be delivered have been listed or
authorized to be listed on such exchange upon official notice of issuance, and
(3) all other legal matters in connection with the issuance and delivery of such
Shares have been approved by the Company's counsel. If the sale of Shares 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
Shares bear an appropriate legend restricting transfer.
8. EFFECT, TERMINATION AND AMENDMENT
The Committee may at any time terminate the Plan, but options previously
granted shall not be affected thereby. The Board may at any time or times amend
the Plan for any purpose which may at the time be permitted by law; provided,
that except to the extent expressly required or permitted by the Plan, no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify under Rule 16b-3.
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Exhibit 10.36
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of __________ __, 1997
between Scriptgen Pharmaceuticals, Inc., a Delaware corporation ("Scriptgen"),
and _______________________ (collectively with such person's heirs, executors,
administrators and other personal representatives, the "Indemnitee"), an officer
or director of Scriptgen.
WHEREAS, the Board of Directors has concluded that Scriptgen's
officers, directors, employees and agents should be provided with reasonable
and appropriate protection against inordinate risks in order to insure that the
most capable persons will be attracted to such positions; and, therefore, has
determined to contractually obligate itself to indemnify in a reasonable and
adequate manner its officers and directors, and to assume for itself liability
for expenses and damages in connection with claims lodged against such persons
as a result of their service to Scriptgen;
WHEREAS, applicable law empowers corporations to indemnify a person
who serves as a director, officer, employee or agent of a corporation or a
person who serves at the request of a corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise; and
WHEREAS, the parties believe it appropriate to memorialize and
reaffirm Scriptgen's indemnification obligations to Indemnitee and, in addition,
to set forth the agreements contained herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:
1. INDEMNIFICATION. Indemnitee shall be indemnified and held
harmless by Scriptgen against any judgments, penalties, fines, amounts paid in
settlement and Expenses (as hereinafter defined) incurred in connection with any
actual or threatened Proceeding (as hereinafter defined) to the fullest extent
permitted by Scriptgen's Certificate of Incorporation (the "Certificate"),
by-laws ("By-Laws") and the General Corporation Law of the State of Delaware
("Delaware Law") as in effect on the date hereof and to such greater extent as
Delaware Law may hereafter from time to time permit. In addition, Scriptgen
agrees to advance to Indemnitee Expenses incurred in connection with the
foregoing. "Proceeding" includes, without limitation, any action, suit,
arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other actual, threatened or contemplated
proceeding, whether civil, criminal, administrative or investigative, whether by
a third party, by
<PAGE>
or in the right of Scriptgen or by Indemnitee to enforce any rights under this
Agreement or otherwise against Scriptgen or its affiliates.
2. INTERIM EXPENSES. Expenses (including attorneys' fees) incurred
by Indemnitee in defending any civil, criminal, administrative, or investigative
action, suit or proceeding for which Indemnitee may be entitled to
indemnification hereunder shall be paid by Scriptgen in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of Indemnitee to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by Scriptgen
hereunder. "Expenses" means all attorneys' fees and expenses, retainers, court
costs, transcript costs, duplicating costs, fees of experts, fees of witnesses,
travel expenses, printing and binding costs, telephone charges, postage and
delivery fees, service fees, all other costs and expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating or being or preparing to be a witness in a
Proceeding, and per diem payments to Indemnitee in an amount equal to the last
annual salary payable under any employment agreement between the Company and
Indemnitee divided by 365 for each day spent by Indemnitee in connection with
prosecuting, defending, preparing to prosecute or defend, investigating or being
or preparing to be a witness in a Proceeding.
3. EXCEPTIONS TO INDEMNIFICATIONS. Notwithstanding the foregoing,
no indemnity pursuant to Sections 1 or 2 shall be paid by Scriptgen:
(a) on account of any suit in which judgment is rendered against
Indemnitee for an accounting of profits made from the purchase or sale by
Indemnitee of securities of Scriptgen pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(b) on account of Indemnitee's conduct which is finally adjudged
to have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(c) on account of Indemnitee's conduct which is finally adjudged
to have constituted a breach of Indemnitee's duty of loyalty to Scriptgen or
resulted in any personal profit or advantage to which Indemnitee was not legally
entitled;
(d) for which payment is actually made to Indemnitee under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreements;
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(e) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful; or
(f) in connection with any proceeding (or part thereof)
initiated by Indemnitee, or any proceeding by Indemnitee against Scriptgen or
its directors, officers, employees or other indemnitees, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of Scriptgen, (iii) such indemnification is
provided by Scriptgen, in its sole discretion, pursuant to the powers vested in
Scriptgen under applicable law, or (iv) the proceeding is initiated pursuant to
Section 4 hereof.
4. FAILURE TO INDEMNIFY. (a) If a claim under this Agreement,
under any statute, or under any provision of the Certificate or By-Laws
providing for indemnification, is not paid in full by Scriptgen within 45 days
after a written request for payment thereof has first been received by
Scriptgen, Indemnitee may, but need not, at any time thereafter bring an action
against Scriptgen to recover the unpaid amount of the claim and, if successful
in whole or in part, Indemnitee shall also be entitled to be paid for
Indemnitee's reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with successfully establishing the right to
indemnification, in whole or in part, in any such action shall also be
indemnified by Scriptgen.
(b) It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in connection with any
action, suit or proceeding in advance of its final disposition) that Indemnitee
has not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for Scriptgen to indemnify Indemnitee
for the amount claimed, but the burden of proving such defense shall be on
Scriptgen and Indemnitee shall be entitled to receive interim payments of
Interim Expenses pursuant to Paragraph 2 unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists.
5. CERTAIN AGREEMENTS OF INDEMNITEE.
(i) Indemnitee agrees to do all things reasonably requested by the
Board of Directors of Scriptgen to enable Scriptgen to coordinate Indemnitee's
defense with, if applicable, Scriptgen's defense, provided, however, that
Indemnitee shall not be required to take any action that would in any way
prejudice his or her defense or waive any defense or position available to him
or her in connection with any action;
(ii) Indemnitee agrees to do all things reasonably requested by the
Board of Directors of Scriptgen to subrogate to Scriptgen any rights of recovery
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(including rights to insurance or indemnification from persons other than
Scriptgen) which Indemnitee may have with respect to any action;
(iii) Indemnitee agrees to be represented in any action by a law firm
mutually acceptable to Scriptgen and Indemnitee; and
(iv) Indemnitee agrees to cooperate with Scriptgen and its counsel and
maintain any confidences revealed to him or her by Scriptgen in connection with
Scriptgen's defense of any action. Scriptgen agrees to cooperate with
Indemnitee and his or her counsel and maintain any confidences revealed to it by
Indemnitee in connection with Indemnitee's defense of any action.
6. SUCCESSORS. This Agreement establishes contract rights which
shall be binding upon, and shall inure to the benefit of, the successors,
assigns, heirs and legal representatives of the parties hereto.
7. CONTRACT RIGHTS NOT EXCLUSIVE. The contract rights conferred by
this Agreement shall be in addition to, but not exclusive of, any other right
which Indemnitee may have or may hereafter acquire under any statute, provision
of the Certificate or By-Laws, agreement, vote of shareholders or disinterested
directors or otherwise.
8. INDEMNITEE'S OBLIGATIONS. Indemnitee shall advise Scriptgen in
writing of the institution of any investigation, claim, action, suit, or
proceeding which is or may be subject to this Agreement and generally keep
Scriptgen informed of, and consult with Scriptgen with respect to, the status of
any such investigation, claim action, suit or proceeding.
9. SEVERABILITY. Should any provision or paragraph of this
Agreement, or any clause hereof, be held to be invalid, illegal or
unenforceable, in whole or in part, the remaining provisions, paragraphs and
clauses of this Agreement shall remain fully enforceable and binding on the
parties.
10. CHOICE OF LAW. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware.
11. CONTINUATION OF INDEMNIFICATION. The indemnification under this
Agreement shall continue as to Indemnitee even though he or she may have ceased
to be a director, officer, employee and/or agent of Scriptgen and shall inure to
the benefit of the heirs and personal representatives of Indemnitee. Scriptgen
acknowledges that, in providing services to Scriptgen, Indemnitee is relying on
this Agreement. Accordingly, Scriptgen agrees that its obligations hereunder
will survive (i) any actual
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or purported termination of this Agreement by Scriptgen or its successors or
assigns whether by operation of law or otherwise, (ii) any change in Scriptgen's
certificate of incorporation or by-laws and (iii) termination of the
Indemnitee's services to Scriptgen (whether such services were terminated by
Scriptgen or the Indemnitee), whether or not a claim is made or an action or
Proceeding is threatened or commenced before or after the actual or purported
termination of this Agreement, change in the certificate of incorporation or
by-laws or termination of Indemnitee's services.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and signed as of the day and year first above written.
_____________________________________________
SCRIPTGEN PHARMACEUTICALS, INC.
By:__________________________________________
-6-
<PAGE>
EXHIBIT 11.1
SCRIPTGEN PHARMACEUTICALS, INC.
COMPUTATION OF NET LOSS PER SHARE AND UNAUDITED PRO FORMA NET LOSS PER SHARE
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE MONTHS
ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss...................................... $ (4,300,974) $ (4,578,927) $ (4,044,019) $ (2,613,508) $ (4,775,456)
Weighted average shares outstanding:
a. Shares attributable to common stock
outstanding............................... 879,251 1,035,062 804,625 818,174 972,174
b. Shares attributable to certain common
stock options, warrants and redeemable
convertible preferred stock (1)........... 2,555,833 2,555,833 2,555,833 2,555,833 2,555,833
------------- ------------- ------------- ------------- -------------
Weighted average common and common equivalent
shares outstanding.......................... 3,435,084 3,590,895 3,360,458 3,374,007 3,528,007
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net loss per share............................ $ (1.25) $ (1.28) $ (1.20) $ (0.77) $ (1.35)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
<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)
Unaudited pro forma weighted average
shares outstanding:
a. Shares attributable to common stock outstanding............................ 804,625 972,174
b. Shares attributable to certain common stock options, warrants and
redeemable convertible preferred stock (1).................................. 2,555,833 2,555,833
c. Shares attributable to the assumed conversion of Series A, B, C and D
redeemable convertible preferred stock outstanding upon closing of initial
public offering............................................................. 4,825,555 5,540,988
------------- -----------------
Unaudited pro forma weighted average common and common equivalent shares
outstanding................................................................... 8,186,013 9,068,995
------------- -----------------
------------- -----------------
Unaudited pro forma net loss per share.......................................... $ (0.49) $ (0.53)
------------- -----------------
------------- -----------------
</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 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 above computation as
if outstanding for all periods presented.
<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, except
as to paragraphs two through five of Note 10, which are as of January 6, 1998,
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."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
January 8, 1998
